Energy Auction FAQs

The Southern Company Energy Auction is a process whereby Southern Company Services ("SCS"), acting as agent for the four Southern Company operating companies (Alabama Power, Georgia Power, Mississippi Power and Southern Power), will administer both a day-ahead and an hour-ahead energy auction.

The Southern Company Energy Auction will offer three products: firm-LD energy, recallable energy, and non-firm energy.

As with the other operating companies, Southern Power will participate in the auction to the extent that it has resources under the IIC from which energy may be made available. None of the operating companies will participate as bidders/purchasers.

The operating companies are implementing the energy auction in order to resolve potential or alleged horizontal market power concerns related to perceptions of generation dominance in the Southern BAA.

The Southern Company Energy Auction addresses these horizontal market power concerns by eliminating any ability to engage in physical or economic withholding of uncommitted electricity.

As part of its conditional acceptance of the energy auction proposal, FERC ordered Southern Company to expand the energy auction within 12 months to allow participation by other sellers. This expansion is scheduled to go into effect on January 6, 2010. At that time, anyone who is authorized to sell wholesale electricity into the Southern BAA and has completed the registration process can sell into the Energy Auction.

Southern Company's participation in the Energy Auction is mandated for sales, not for purchases. However, to the extent SCS determines that it is beneficial to the Southern Company operating companies to purchase through the Energy Auction, it will do so.

Any entity that has authority to buy or sell wholesale electricity in the Southern BAA is eligible to participate in the Southern Company Energy Auction. However, in order to participate, an eligible entity must also execute a Participant Agreement and a nondisclosure agreement with Southern's third-party software vendor.

The purpose of the Participant Agreement is to address certain legal requirements associated with the administration of the energy auction and to lay out certain administrative charges to which Participants will agree to pay for participating in the auction.

Southern Company's mitigated participation in the Energy Auction requires that all available capacity be made available to the auction. In order to comply with this "must-offer" requirement and still maintain a reliable system, Southern must offer a certain amount of the energy on a recallable basis.

Recallable energy is more firm than non-firm energy, but not as firm as firm-LD energy. For Southern Company, recallable energy carries the right, but not the obligation, to be curtailed in the event that Southern Company experiences certain qualifying supply disruptions. Specifically, the disruption (i.e., the loss or duration) of resources that were considered to be available when the calculation of available capacity was made. Once such a disruption occurs, SCS will evaluate whether the continuation of the recallable energy transactions will either jeopardize the reliable operation of the system or otherwise harm the operating companies' native load customers. If so, a curtailment will be issued.

The day-ahead energy auction is intended to supplement, not replace or compete with, the existing bi-lateral markets in the Southeast. Accordingly, this aspect of the energy auction was designed to clear prior to the normal day-ahead bi-lateral markets. This is also necessary in order for the day-ahead auction results to be incorporated in the operating companies' unit commitment process, which must take place in advance of the delivery day.

Yes. Subject to the terms of the energy auction, the Southern Company operating companies will maintain their existing market-based rate authority. Therefore, Southern Company Services will continue to be able to negotiate bi-lateral contracts on their behalf in both the short-term as well as the long-term markets. During the bid period of any given auction, however, Southern Company Services will not be able to sell the same product(s) offered by that auction. In other words, the Southern Company operating companies will not compete with their own auction as long as that auction is active.

The choice is yours. The Southern Company Energy Auction is intended to address perceptions that the Southern Company operating companies could potentially exercise market power by withholding generation. Wholesale market participants are free to either participate as a buyer in the Southern Company Energy Auction, negotiate directly with Southern Company's energy traders, or both.