Businessmodel of Southern Company

Customer Segments

Southern Company provides energy and energy services to more than four million customers, including general consumers, commercial business, and industrial entities. The Company’s customers can be divided into two principal categories:

• Retail Customers, comprising commercial and industrial businesses across multiple sectors, as well as general electricity consumers across various residential buildings; and
• Wholesale Customers, comprising independent power producers, power transmission companies, competitive suppliers and marketers of electricity, and energy retailers. The top three customers of Southern Power, which principally sells energy on the wholesale market, include Georgia Power, Florida Power and Light Company, and Duke Energy Corporation, which accounted for 15.8%, 10.7%, and 8.2%, respectively, of Southern Power’s total revenues for 2015.

Southern Company exclusively serves a domestic customer base across the US. The Company’s four traditional operating companies supply electric service in the states of Alabama, Georgia, Florida, and Mississippi, while the Company’s Southern Power business is permitted to do business in the States of Alabama, California, Florida, Georgia, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, and Texas.

Value Propositions

Southern Company provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company established as a reliable and efficient energy provider across a number of US states, and being one of only two companies named in the top three Most Admired Electric and Gas Utilities in the US by Fortune in the last seven years;
• Its growth in renewable energy, with the Company controlling approximately 3,800 megawatts of renewable capacity, including facilities under development, including the largest voluntary solar portfolio in the US;
• Its high-quality customer service, with the Company providing efficient and effective customer service to its customers, being consistently named among the top US electric service providers in terms of customer satisfaction;
• Its energy mix, with the Company being the only electric utility in the US committed to a full portfolio of carbon-free nuclear, 21st Century coal gasification, natural gas, solar, wind, biomass and energy efficiency; and
• Its specialist personnel and industry experience, with the Company employing highly-trained technical staff across its operating divisions, as well as an experienced team of industry executives. ### Channels

Southern Company operates a website at www.southerncompany.com, through which it provides information on its various services, facilities, and operating regions. The Company does not operate an online sales channel, however, it does provide an online customer care portal, through which customers are able to access resources and information, manage account details, and pay utility bills.

Southern Company makes its retail sales through a dedicated in-house sales force, organised by geographic region. The Company’s four traditional operating companies – Alabama Power, Georgia Power, Gulf Power, and Mississippi Power – operated independently, serving customers in their respective operating states. Each of these operating companies owns and operates its generation, transmission, and distribution facilities.

Southern Power also operates its own power generation and transmission assets, selling its energy across multiple states through regional wholesale electricity markets, through which it serves power retailers.

Customer Relationships

Southern Company does not make sales to customers on a self-service basis. The Company, however, does operate an online customer care portal, through which customers are able to access information, manage their account details, and pay utility bills online without interacting with members of the Company’s sales and support personnel.

Southern Company makes its sales through a direct sales force to retail customers, with its individual operating companies consulting with customers directly before finalising purchases. Sales are typically made under fixed-term power purchase agreements that can last several years. The Company works closely with its large commercial, industrial, and wholesale customers, with a view to establishing longstanding customer relationships.

Southern Company provides a range of support services to its customers. This includes a range of support resources that can be access through the Company’s online customer care portal, including FAQs and guides. Customers can also access personalised responses to queries and concerns by contacting the Company’s customer care teams directly over the phone or online.

Additionally, Southern Company is able to interact directly with its customers through its social media accounts, including with Twitter, Facebook, and LinkedIn.

Key Activities

Southern Company is an energy utility holding company. The Company operates through four traditional energy providers and Southern Power, as well as through several other direct and indirect subsidiaries.

The Company’s operations are organised into two business segments: Traditional Operating Companies, comprising the activities of Alabama Power, Georgia Power, Gulf Power, and Mississippi Power, which generate and sell electricity to retail customers; and Southern Power, which develops and manages energy generating assets, and sell s electricity on the wholesale market.

The Company’s traditional operating companies are vertically integrated and serve customer in four Southeastern US states, while Southern Power is permitted to serve customers across multiple states, including Alabama, California, Florida, Georgia, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, and Texas.

Key Partners

Southern Company works closely with a range of companies and organisations in the process of generating and distributing energy to customers. These partners include:

• Supplier and Vendor Partners, comprising suppliers of materials, tools, equipment, and services that are utilised across the Company’s various operating division in support of the Company’s overall generation and distribution activities;
• Energy Generation and Distribution Partners, comprising various energy and transmission companies that work with the Company on various power generation and distribution projects, both through joint ventures and strategic partnerships;
• Technology Partners, comprising various technology and software companies that support the Company’s IT and communications infrastructure, as well as provide technologies that can be utilised as part of the Company’s power solutions; and
• Environmental and Community Partners, comprising various non-profit and charitable organisations that collaborate with the Company on social and community projects, with a focus on the environment and sustainability. Southern Company has launched a number of partnerships in recent years. This includes a partnership with Bloom Energy to utilise its fuel cells as part of power generation and storage solutions for commercial entities, and a natural gas transmission tie-up with Kinder Morgan.

Key Resources

Southern Company’s key resources are its intellectual properties and technologies, its supply chain, its power generation facilities, its energy distribution infrastructure, its online customer portal, its IT and communications infrastructure, its sales and marketing channels, its partnerships, and its personnel.

Southern Company relies on its various energy production facilities and distribution infrastructure to operate effectively. This includes numerous fossil steam, nuclear steam, combustion turbine, combined cycle, hydroelectric, solar, wind, landfill gas, and biomass power plants, as well as its network of distribution cables.

Searches of records published by the US Patent and Trademark Office identified several patent applications filed in Southern Company’s name, including applications entitled ‘Gasification of high ash, high ash fusion temperature bituminous coals’, ‘Systems and methods for commissioning lighting fixtures’ and ‘Apparatus and methods for regeneration of precipitating solvent’.

Cost Structure

Southern Company incurs costs in relation to the acquisition and operation of its power generation facilities, its procurement of supplies – notably fuel, the development and maintenance of its power distribution infrastructure, the maintenance of its It and communications infrastructure, the operation of its sales and marketing channels, the management of its partnerships, and the retention of its personnel.

In 2015 Southern Company accrued total electric operating expenses in the amount of $13.07 billion. This included fuel costs totalling $4.75 billion and other operations and maintenance costs in the amount of $4.29 billion. The Company also recorded costs of $645 million in relation to purchased power.

Revenue Streams

Southern Company generates revenue through the generation and sale of energy to retail customers – including residential, commercial, and industrial customers – as well as wholesale customers through dedicated regional wholesale energy markets.

In 2015 Southern Company generated operating revenue of $17.49 billion, down slightly on the $18.47 billion recorded by the Company in 2014. The majority of this revenue as attributed to the Company’s retail revenue, which amounted to $14.99 billion for the year, with wholesale revenue totalling $1.80 billion. The largest portion of the Company’s retail revenue is attributed to its residential customers, which accounted for $6.38 billion in revenue.