Q4 2010 Earnings Call
January 26, 2011 1:00 pm ET
Glen Kundert - Vice President of Investor Relations
Art Beattie - Chief Financial Officer and Executive Vice President
Thomas Fanning - Chairman of the Board, Chief Executive Officer and President
Michael Lapides - Goldman Sachs Group Inc.
Dan Eggers - Crédit Suisse AG
Terran Miller - UBS
Paul Patterson - Glenrock Associates
Paul Ridzon - KeyBanc Capital Markets Inc.
Ali Agha - SunTrust Robinson Humphrey Capital Markets
Jonathan Arnold - Deutsche Bank AG
Ashar Khan - SAC Capital
Nathan Judge - Atlantic Equities LLP
Dan Jenkins - State of Wisconsin Investment Board
Daniele Seitz - Dahlman Rose
Previous Statements by SO
» Southern CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Southern Q2 2010 Earnings Call Transcript
» Southern Co.Q1 2010 Earnings Call Transcript
Good afternoon. My name is Celeste, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn today's call over to Mr. Glen Kundert, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Celeste, and welcome to Southern Company's Fourth Quarter 2010 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 on 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, such as our three-year forecast for capital expenditures. In addition, these slides provide reconciliations for certain non-GAAP financial information that will be discussed on 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.
At this time, I'll turn the call over to Tom Fanning, Southern Company's Chairman, President and Chief Executive Officer.
Thank you, Glen. Good afternoon, and thank you for joining us. As you can see from the information we released this morning, we had a solid year of business results. Despite an economy that was still in a recovery phase, we continue to provide industry-leading reliability and the best customer service at affordable prices. We also continue to set operational, regulatory and financial milestones, which will benefit our customers and shareholders.
On the operational side of our business, we experienced record customer demand for electricity in 2010 of more than 209 million megawatt hours. This record demand, coupled with sustained low prices for natural gas, meant that our gas fleet increased its generation output more than 16% from 2009, and served approximately one quarter of our total demand during 2010. A buff on hydro generation organization achieved an industry-leading peak season equivalent forced outage rating of 1.67%. This compares favorably against the industry average EFOR of approximately 7%.
During 2010, we completed eight major environmental construction projects, including five scrubber installations with an average in-service cost 18% below the industry average, which reflects the capability of our in-house engineering and construction services organization.
On the Transmission and Distribution side of our business, 2010 was once again a strong year. For the second year in a row, our Distribution business posted its best reliability performance in our history. We also made significant progress on the installation of automated meters, installing more than 1.2 million smart meters, bringing the total number deployed to more than 3.1 million by year end, with a target of 4.5 million meters installed by 2012.
In our Nuclear business, the early site work for Units 3 and 4 at Plant Vogtle continues on schedule and on budget. The site excavation and subsequent backfill for the nuclear island areas are currently at the level which supports foundational and other infrastructure work to begin. The first nuclear components, the containment vessel plates, arrived on site in September and the first two licensing classes were underway to train future operators of the new units.
In December, the advisory committee on reactor safeguards, an independent group of technical advisors provided its opinion to the NRC that the AP1000 design is robust in protecting public health and safety. Earlier this month, the NRC staff formally requested that the commission vote to publish the proposed rule in the Federal Register. This clears the way for the NRC to proceed with rule-making on the design certification.
In addition, on Monday of this week, the advisory committee on reactor safeguards formalized their approval of our COL through a letter to the commission, recommending that the Plant Vogtle combined construction and operating license application proceed. With the completion of these two licensing milestones, the regulatory process to receive the combined construction and operating license is on schedule. Finally, the Georgia Public Service Commission approved our first two semiannual construction monitoring reports, which detailed the first $608 million of investment in the new Vogtle units.
On the regulatory side of our Retail business, we had a constructive year. The Alabama Public Service Commission granted Alabama Power the ability to increase accruals to its natural disaster reserve. The intent is use additional accruals for either reliability and/or storm-related expenses, and to defer are perhaps even avoid higher charges to customers.
In Georgia, the state Public Service Commission staff, Georgia Power, and a host of other parties reached an agreement on the sixth successive three-year rate plan, which was approved by the Georgia Public Service Commission on December 21. Under the new alternative rate plan, which took effect on January 1, Georgia Power's base revenues will increase by $562.3 million in 2011.
In addition, in 2012, the company's base revenues will increase approximately $190 million and by approximately $93 million in 2013 to provide primarily for the recovery of expenses for the new gas-fired units at plant McDonough. The company's allowed retail return on equity range remains at 10.25% to 12.25%. The alternative rate plan helps ensure that customers will have a reliable supply of energy and that the state will be able to meet projected economic growth in the years ahead.