A A abama Pgwer Philip c. Raymond 600 North 18th Street Executive Vice President, Post Office Box 2641

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1 A A abama Pgwer Philip c. Raymond 600 North 18th Street Executive Vice President, Post Office Box 2641 Chief Financial Officer & Treasurer Birmingham, Alabama tel fax November 30, 2018 Alabama Public Service Commission RSA Union Building 100 North Union Street, Suite 850 Montgomery, Alabama Attention: Mr. Walter L. Thomas, Jr. Secretary Subject: Submittal of Information and Calculations Required by Appendix and the Special Rules Governing Operation of s and CNP B to Dear Commissioners: In accordance with the provisions of and the Special Rules Governing Operation of s and CNP (Special Rules), we are submitting the information and calculations required by Appendix B to. The calculations a yield weighted retail return on common projected average equity (WRRCE) of 6.12% for the 12month period ending December 31, There will be no operation of the rate for the upcoming year. Consequently, the calculation specied by Appendix A is not required and Appendix no A is included with this submittal. By means of this letter, we are providing the enclosed information to the Staff of the Commission and the Office of the Attorney General as required by the Special Rules. If further information or supporting materials are needed, please contact Mr. Richard Hutto, who is the designated Company individual under Rule 10 of the Special Rules. The Company is available to meet with the Commission or its Staff to discuss the enclosed materials. Sincerely, Enclosures

2 Alabama Public Service Commission November 30, 2018 Page 2 cc: Commissioner Twinkle Andress Cavanaugh Commissioner Jeremy H. Oden Commissioner Chris Chip Beeker, Jr. Secretary of the Alabama Public Service Commission Mr. Walter L. Thomas, Jr. (1 1) Executive Director and Chief Administrative Law Judge The Honorable John A. Garner Director, ity Policy Division Mr. John D. Free (4) Ofce of the Attorney General Ms. Olivia W. Martin

3 + Col. :j Appendix B Page 1 Determination of Projected Average Retail Common Equity (RCE) as of December 31, 2019: (In Thousands of Dollars) Column 1 Column 2 Total Amount Non Investment 1 Plant in Service (Account 101) 2. Plant Held for Future Use (Account 105) 3. Construction Work in Progress (Account 107) 12mo. avg. (Projec1ed12mo.Ivg.bnl.) (Projected bal.) $ 29,392,429 (E) $ 58,095 50, ,809 10,024 4 Accumulated Provision for Depreciation and Amortization of Utility Plant Net (Accounts 114 and 115) (10,577,694) (E) 1,678 (1,674) Net (Account 120) 9. Nonutility Property (Account 121) 322, , , Accumulated Provision for Depreciation and Amortization of Nonutility Property Credit (Account 122) (5,448) (5,448) 72,106 17,872 1,582 1, , ,524 4,374 5,950 5, ,097 $ S I I 18. Investment Percent (Line 17, [CoI. 1 Col. 2 less UPS Investment of $0] 1) 98.97% (0) 96.17% 20. Retail Investment Separation Factor (Line 18 x Line 19) 95.18% Common Equity Percentage of Capital Structure Common Equity (Accounts 201, 211, and 216) Debt (Accounts and 231) Preferred Stock (Accounts and 214) Total 21 Line 22 Line 23) $ 8,708,657 7,994, $ 16l994l Common Equity Percentage of Capital Structure (CEP) (Line 21ILine 24) Retail Common Equity (RCE) 26. Retail Common Equity (Line 20 x Line 21) 51.24% 5 8l288l900

4 5 Line Determination of Projected Retail Net Income for the 12 Months Ending December 31, 2019: (In Thousands of Dollars) Appendix B Page 2 Total Retail (Projected 12 mm. lntai) (Projeaed 12 mos. total) 5,783,722 5,576,924 (A) 31,835 31,835 (B) 5,815,557 5,608,759 Expenses: 4. Operation and Maintenance Expenses (Accounts 401 and 402) 5. Depreciation and Amortization Expenses (Accounts ) 6. Taxes Other than Income Taxes (Account 408.1) 3,234, , , Operating income before Income Taxes (Line Income Taxes (Accounts Retail Expense Allocation Factor 411) Line 8) a j. a :. Ijlj._ (A), (B) , % 12. Retail Expenses Other Than Income Taxes (Line 8 UPS Expenses of$ 0 ) x Line Retail Operating Income before income Taxes (Line Retail Income Taxes (Line 13 9) x Line 10 Allowance for Funds Used During Construction Line 12) a 4 015,809 (D) 1,592, ,300,508 43, % 18. Retail AFUDC (Line 16 UPS lnvestrnentafudc of $0) x Line 17 41,728 (D) Interest income 2, % (C) 360,876 14, % (C) 2, % 2, ,437 2, Weighted Return on Average Retail Common Equity RNl x CEP=WRRCE RCE 6.12%

5 Appendix B Page 3 s: (A): To conform with costof service procedures, amounts included in Account 447 (Sales for Resale) associated with NonTerritorial Sales for Resale (subaccounts 44702)o(x and )o<x) Line 1 and included in Line 7. are excluded from (B): To conform with costofservice procedures, the total of Accounts 450 (Forfeited Discounts), 451 (Miscellaneous Service Revenues), 453 (Sales of Water and Water Power), subaccount (Rent from Leased Property on Customers Premises Other), and subaccount (Miscellaneous RevenuesReturn Check Charge) is included on Line 2. The remaining subaccounts for Accounts 454 (Rent from Property) and 456 (Other Revenues) are included in Line 7. (C): Developed on Line 20 of retail common equity computation. (D): To conform with costofservice procedures and to afford proper recognition of investment and associated allowance for funds and expenses associated with Unit Power Sales to Nonassociated Utilities, the investment and associated allowance for funds and expenses associated with such sales have been accounted for on Line 18 of RCE calculation and on Lines 12 and 18 of RNI calculation. (E): of asset retirement costs For purposes of, the capitalization shall be excluded from Account 101 ( Plant in Service) and the associated depreciation shall be excluded from Account 108 (Accumulated Provision for Depreciation of Utility Plant) pursuant to Accounting for Asset Retirement Obligations.