Fitch Downgrades Georgia Power to 'F1'; Affirms L-T Rtgs Southern and Subs.

NEW YORK -- Fitch has downgraded the short-term Issuer Default Rating (IDR) of Georgia Power Company (GPC) to 'F1' from 'F1+'. The rating action reflects GPC's higher than usual commercial paper balances from under-recovered fuel and equalizes the short-term ratings of GPC with the short-term ratings of affiliates, Southern Company Funding Corp., Alabama Power Company (APC), and Gulf Power Company (Gulf). GPC's under-recovered fuel balance was $850 million as of June 30, 2006. An 'F1' rating typically correlates with an 'A+' senior unsecured rating and indicates the strongest capacity for timely payment of financial commitments. The former 'F1+' rating denoted exceptionally strong liquidity in excess of that expected of 'F1'. The long-term ratings of GPC are affirmed by Fitch.

The ratings of Southern Company (Southern), APC, Mississippi Power Company, (MPC), Gulf, and Southern Power Company (SPC) are also affirmed. The Rating Outlook of Southern and subsidiaries is Stable. The Stable Outlook of Southern and subsidiaries includes Fitch's expectations of stable cash flow coverage and leverage ratios, strong operations, and timely recovery of costs. The Stable Outlook of MPC assumes funds relating to the estimated $299 million of storm costs will be received prior to year-end 2006 and the proceeds will be used to reduce debt. A full list of affected ratings is below.

The ratings of the Southern Company (Southern) are supported by strong consolidated cash flow coverage ratios, steady dividend payments from subsidiaries with solid operating performance in supportive state regulatory environments, modest double leverage at the holding company level, and skillful execution of the relatively low-risk business strategy. The consolidated FFO interest coverage ratio was 5.2 times (x) for the 12 months ended June 30, 2006 (including Plant Daniel lease adjustments). Holding company long-term debt and trust preferred securities (including Southern Company Capital Funding issues with parent guarantees) total approximately $1.2 billion, which represents 8.1% of Southern's consolidated long term debt and trust preferred securities as of June 30, 2006. Fitch expects that dividends from subsidiaries will be the primary source of funding for shareholder dividends and equity investments in subsidiaries in 2006 and 2007. Southern has a satisfactory liquidity position and good access to the capital markets.

Fitch's rating concerns include: increasing working capital needs resulting from under-recovered fuel, storm and other costs; growing capital spending for environmental compliance mandates; the risks associated with any adverse decisions in regulatory proceedings or litigation; and vulnerability to disruptions and damage in the hurricane-prone Gulf Coast region. While Southern's utilities benefit from constructive rate adjustment mechanisms including fuel, environmental, storm and purchased power costs, unrecovered fuel costs continue to grow because fuel prices are increasing at rates that are higher than those in fuel billing adjustments. In addition, there are substantial deferred repair and restoration costs related to the hurricanes of 2005. Storm cost settlements were reached in FL and AL, and Southern anticipates resolution of the storm costs in MS prior to year-end 2006, which will reduce deferrals. The relatively higher growth planned for SPC or potential cost over-runs on construction projects will require additional capital funding to maintain the current credit ratings.

Georgia Power Company:

-- Issuer Default Rating (IDR) affirmed at 'A';

-- Short-term rating downgraded to 'F1' from 'F1+';

-- Senior unsecured debt affirmed at 'A+';

-- Preferred securities affirmed at 'A';

-- Trust preferred securities (issued thru various trusts) affirmed at 'A'

Southern Company:

-- IDR affirmed at 'A';

-- Senior unsecured debt affirmed at 'A';

-- Short-term affirmed at 'F1';

Southern Company Capital Funding Inc. (guaranteed by Southern Co.):

-- Senior unsecured notes Affirmed 'A'

-- Trust preferred securities (issued through various trusts) affirmed at 'A-'

Southern Company Funding Corp.:

-- Commercial paper affirmed at 'F-1';

Alabama Power Company:

-- Short-term affirmed at 'F-1';

-- IDR affirmed at 'A';

-- First mortgage bonds 'AA-' rating is withdrawn, the bonds were repaid and the mortgage discharged in June 2006;

-- Senior unsecured notes and PCBs affirmed at 'A+';

-- Trust preferred securities (issued through various trusts) affirmed at 'A'.

Mississippi Power Company:

-- Short-term affirmed at 'F1+';

-- IDR affirmed at 'A+';

-- Senior unsecured affirmed at 'AA-';

-- Trust preferred securities (issued through various trusts) affirmed at 'A+;

-- Preferred securities affirmed at A+'.

Gulf Power Company:

-- Short-term affirmed at 'F1';

-- IDR affirmed at 'A-';

-- First mortgage bonds and secured PCBs affirmed at 'A+';

-- Senior unsecured notes and unsecured PCBs affirmed at 'A';

-- Subordinated notes affirmed at 'A-';

-- Preferred decurities affirmed at 'A-'.

Southern Power Company:

-- Short term affirmed at 'F2';

-- IDR affirmed at 'BBB+';

-- Senior unsecured debt and bank facility affirmed at 'BBB+'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.