The Southern Company (SO) Earnings Call Transcript & Summary

Ladies and gentlemen, please welcome Tom Fanning.

What a fabulous day this is. I see now we have standing room only for our annual meeting. I think so many people are excited to elect a new CEO Anyway, it's so great having you folks here, and I -- it's so fun. As I circulated before the meeting, so many people have been here for so many years, and we always appreciate your attendance and your loyalty to this great company. And I'll say we have a retired director here with us, Juanita Baranco. Juanita, please stand. And I always said that when the bullets start flying, I want to get back-to-back with that one. She's tough as a $2 steak, let me tell you. So anyway, it's great being here, and these are always so much fun. And this is a unique experience. I'm going to be your CEO now for another 15 minutes. But Chris Womack is going to do such a great job, and I'm so excited to have this day come to bear. All right. So officially, let me welcome you to the opening of our 2023 Annual Meeting. And the folks that do the videos, the folks that set up the room, the folks that make sure that we have breakfast and lunch afterwards, I want to thank them. Please give them a round of applause. This stuff doesn't happen. Got a lot of help. And the cool thing that you just saw in the video is that the folks that were in that video are not actors, those are actual Southern company employees. And they are here with us today, and I just want to call them out real quick. If you would just stand as I call your name, Nisha Patel. Nisha, where are you? There you are. She is the environmental affairs lab analyst for Georgia Power. Thank you, Nisha. Lauren Latham, principal engineer and research and development at Southern Company Services. And I know I say this all the time, but Southern Company is the only company in an industry that does robust proprietary research and development. Our role is not to take what comes, but to invent the future. You guys do a great job. Benny Ratnagaran, risk engineer for Southern Nuclear. The guys in Southern Nuclear killing it. Great job. Chris, I'm only going to steal some of your thunder right now, but we're at 90% power today at Vogtle 3 and within a week we will be at 100% power, isn't that a wonderful conclusion at the moment. And you folks at Southern Nuclear not only have done a great job on Vogtle 3 and 4, but you run a wonderful fleet, and we were recognized recently as one of the top nuclear fleets in America. Kody Sloan, distribution line crew leader for Georgia Power. Those of you from the Atlanta area be extra nice to him. He'll keep your lights on, I guarantee you. And then Jason Watters, workforce development coordinator for Alabama Power. Thank you. And I can tell you, it's so important that kind of role. And I'm always impressed when I talk to the folks that have been here for so many years, and you get a chance to mingle and see the folks that are going to carry this company forward for decades after I'm gone. We're so proud of the work you do and the work that the folks do that come here and really drive this company forward. The other thing is, along that line, we have with us this morning, another big group of people, I don't know, 25 or so of distinguished employees who have been selected to be here as part of their professional development that represent just a small sampling of our up and coming leaders of tomorrow. If you guys would please stand. Look at that. You guys are terrific. And I can tell you, we always have this saying that Southern Company is, I think, remarkable in that we have thousands of good people that make thousands of good decisions every day for the benefit of the customers we're privileged to serve. Those are the kind of folks that are going to continue to drive this company forward. And we're so appreciative. We did a little bit of a rehearsal just to make sure that today goes seamlessly, and at the end of it, we spent about, I don't know, a couple of hours together, me and then some other folks, just talking in a very candid way about the vision of this company and how it's going to move forward. And we talked not about the what, the making, moving and selling of energy, but also the hows, and I think the culture, the behaviors, how we treat each other, how we work with customers, how we work with our external publics, how we assure ourselves that this company will remain committed to the idea that the communities must be better off because we're here. The idea is we want to be citizens wherever we serve. And so they're going to carry that ideal forward. I'm so proud of that. Okay. And now as is our custom, this annual meeting is held right around Memorial Day. What I'd like to do is recognize all the military veterans and active military to stand and be recognized. If you've been in the military or -- thank you. And I know Chris is going to take you through some of the accolades, but one of the accolades this company consistently get is we're one of the very top employers of veterans in this country, and we get recognized for it every day. They do a great job for us outside Southern and when they're inside Southern, they understand teamwork and commitment and selflessness. So we thank you for your service. Okay. Before we dive into official business, the man of the hour, Chris Womack, great friend of mine, was unanimously selected by our Board to be the next CEO of Southern Company. And at the conclusion of the business portion of the meeting, Chris will be the CEO. So Chris, please stand and let our shareholders recognize you. Chris will share some thoughts about 2022 accomplishments in just a short while. And after that, we're changing it up just a little bit in this annual meeting to honor the transition. We'll have a wee bit of a fireside chat. I don't know what we're going to do. But Chris and I don't follow agendas worth a d***. So we'll have a chat together and then we will jointly address your questions and answers. Sloane Drake, our Executive Vice President, Chief Human Resources Officer, will now deliver our safety briefing.

Good morning. If there's an emergency, we will dial 911 from a house or cellphone. EMTs are on standby outside the ballroom. In the event that we need to evacuate the building, we will exit this meeting room, congregate at the front entrance of the hotel and hotel and security personnel will direct us to the designated area in the parking lot. There are 2 fire extinguishers and an AED located in the prefunction area outside this meeting room. Please raise your hand if you were trained in CPR. Great. Tom, back to you.

Thank you so much. And something else we want to begin this year, we do this regularly at our management council meetings and officer forms and a variety of other things, we've always tried to recognize the concept of the whats that we do make, move and sell, and the hows. And I just kind of referenced that a second ago. It's been a passion of mine my entire career to understand the notion that we've got to allow people to bring their best selves to work. And we want to assure ourselves that we pay attention to the concept of moving to equity for all people, race, gender, sexual orientation, religion, age, country of national origin, all of the wonderful differences that make us individuals that can work together for a common purpose. And so we put in place a Moving to Equity initiative. And what we do is we're going to take a moment before we begin any job or gathering or meeting at Southern Company as part of our day-to-day culture. We thought it would be appropriate to show you that same kind of concept. And so what I'm going to ask right now is Jim Kerr, formerly Chief Counsel and now CEO, President of our Gas business to give us a moment on Moving to Equity.

Thanks, Tom, and good morning. So many of us you might have noticed today are wearing green ribbons. May is mental health awareness month and so we're wearing green ribbons in support of that concept. And as I've traveled across the Southern Company Gas footprint this last month, the month of May, I have participated in a number of these moving to equity moments where the topic has been mental health. The challenges we face in maintaining good mental health, sometimes the awareness about -- the resources that we have available to us. And it's -- and most importantly, probably breaking down the stigma, to really engage in the conversation amongst your peers and realize that it's okay to raise your hand if you or someone you know needs help. And to check on your neighbor. We talk about see something, say something as a matter of -- as a function of physical safety out in the workplace. We've adopted that concept at Gas this month as we talk about mental health. If you see somebody needs help, say something. Check on them. So with that, what I'd like to ask all of you all to do is to think about May as Mental Health Awareness Month. Please prioritize caring for your own mental health. Please be aware that many who we encounter every day are struggling. Please educate yourself about the many resources that are available within our company as well as within our communities. And please reach out if you or someone you know needs help. Tom, that's our Moving to Equity moment. Thanks.

Outstanding, Jim, thank you very much. Okay. Now we're going to start getting official folks. Here we go. So please note that this meeting will be conducted as set forth in the order of business in accordance with the rules of conduct posted at the check-in desk that you passed by this morning and made available to each of you at your seats. I would ask that the members of our management team who are here with us today, the officers of Southern Company and the officers of our subsidiary companies please stand and let our shareholders recognize you. Please stand, folks. Awesome. That is a wonderful team of folks. So the order of the meeting will be as follows. First, we will conduct the formal business portion of the meeting in which we will introduce the director nominees, present the items being voted on today and including allowing the persons that are here today at the meeting to present their shareholder proposals, distribute ballots for those that have not yet voted or want to change their votes and provide preliminary voting results. Then Chris Womack and I, as I said, will provide a CEO update and talk about the leadership transition. We will conclude, as always, with our wonderful question-and-answer period, and then we'll have lunch together at the end of the business portion of the meeting. We're webcasting our meeting live on the Internet, and you will also be able to find a replay of this meeting on our website. We respectfully request that no cameras, sound or video recording equipment be used during the meeting in accordance with our rules of conduct. So now we will move to the formal business portion of the meeting. This meeting is called to order and the polls are open. Deloitte & Touche has been appointed by the Audit Committee as the company's independent registered public accounting firm for 2023. Tim Gillam, my great friend of Deloitte & Touche is present at today's meeting. Mr. Gillam, please stand. And if you'd like to make a statement, you may now take the opportunity to do so. No comments, fantastic. Thank you, Tim. The Board has appointed Broadridge Financial Solutions to serve as the independent inspector of the elections for today's meeting. Deborah Baker, on behalf of Broadridge, is participating in today's meeting as the independent inspector. Ms. Baker, please stand. Where are you? Well, there you go. Thank you for being here. Anything you want to say? You good? All right. Take care of that leg of yours. Holy smokes. Myra Bierria, Corporate Secretary of the company has confirmed that approximately 924 million shares representing about 84% of the issued and outstanding common stock as of March 27, the record date for this meeting, are represented in person or by proxy at the meeting. So we have a quorum necessary to conduct business. There's 8 items that we're voting on today. The first item is the election of 16 directors. I will now present those individuals who, along with me, have been nominated for election to the Southern Company Board of Directors, and they are a great team. As I call your name folks, please stand, face the audience and remain standing until everybody has been introduced. Janaki Akella, former Digital Transformation Leader of Google; Hal Clark, retired Senior Adviser of Evercore; Tony Earley, retired Chairman, President and Chief Executive Officer of PG&E Corporation; David Grain, Chief Executive Officer and Managing Director of Grain Management and David is our Lead Independent Director. Colette Honorable, partner at Reed Smith and former Commissioner of the Federal Energy Regulatory Commission; Don James, retired Chairman of the Board and Chief Executive Officer of Vulcan Materials Company; Johnny Johns, Senior Adviser at Blackstone, Inc. and former Chairman and Chief Executive Officer of Protective Life Corporation; Dale Klein, Associate Vice Chancellor of Research at the University of Texas System and former Commissioner and Chairman of the United States Nuclear Regulatory Commission; Dave Meador, retired Vice Chairman and Chief Administrative Officer, DTE Energy. Ernie Moniz, Cecil and Ida Green Professor of Physics and Engineering Systems Emeritus, Special Adviser to the MIT President and former United States Secretary of Energy; Bill Smith, Chairman of the Board, President and Chief Executive Officer of Capital City Bank Group; Kristine Svinicki, Adjunct Professor at the University of Michigan and former Commissioner and Chairman of the United States Nuclear Regulatory Commission; Lizanne Thomas, Of counsel, Jones Day; Chris Womack, President of the Southern Company and upon conclusion of today's meeting, the Chief Executive Officer of Southern Company; and Jenner Wood, retired Corporate Executive Vice President, Wholesale Banking of the SunTrust Banks. These individuals and I have been nominated for election to the Board of Directors. Please give them a round of applause, and we'll let them sit down. Thank you, folks. I can't imagine a better team to work with, and thank you for all of your teamwork over the past 13 years or so. The second item is an advisory vote on the executive officer compensation. It's often called a say-on-pay vote. The third item is an advisory vote to approve the frequency of the votes on executive compensation, and that's referred to often as a say-on-frequency vote. The fourth item is the ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2023. The fifth item is an amendment to the restated certificate of incorporation to reduce the supermajority vote requirement to a majority vote. The sixth, seventh and eighth items are shareholder proposals. For Item 6, the stockholder proposal regarding simple majority vote, Kaylea Noce, is here today on behalf of Mr. John Chevedden to present the proposal. Kaylea, you have 3 minutes to present the proposal. Here you go, and welcome.

Thank you. Can you hear me?

Yes.

Good morning. My name is Kaylea Noce. I am presenting shareholder Proposal 6 sponsored by John Chevedden. Shareholders request that our Board take the necessary steps so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be replaced by a requirement for a majority of the votes cast for and against such proposals or a simple majority. It is not necessary to stress the importance of Proposal 6 because the topic of Proposal 6 was approved by 98% of the Southern Company shareholders who voted in 2021. However, the topic of this proposal require the approval of 67% of all the Southern Company's shares outstanding, including the Southern Company shares that never vote. The problem is that not enough Southern Company shareholders vote and Mr. Anthony Earley, who chairs the Southern Company Corporate Governance Committee believes in pinching pennies regarding any effort to encourage more Southern Company shareholders to vote. Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements, which this proposal will remove, have been found to be 1 of 6 entrenching mechanisms that are negatively related to company performance, according to What Matters in Corporate Governance by Lucian Bebchuk of the Harvard Law School. Due to the high market capitalization of the Southern Company, even a fraction of a 1% increase in the capitalization of the Southern Company means a $250 million increase. Thus, the topic of this proposal has the potential to increase the market capitalization of the Southern Company by $250 million. If the Southern Company spent $1 million to make sure more Southern Company shareholders voted in order to adopt Proposal 6 as a Board of Directors' proposal, the Southern Company Board of Directors would be getting a $250 return for every $1 invested. A $250 return for every $1 invested is an incredible opportunity for Mr. Anthony Earley, who chairs the Southern Company Corporate Governance Committee. A simple majority vote standard will facilitate the adoption of further improvements in the corporate governance of the Southern Company. The principle of a simple majority vote standard is a win for shareholders, the Board and management. Please vote yes on Proposal 6.

Thank you, Ms. Noce. We really appreciate that. After careful consideration, the Board has recommended a vote against the proposal, and you can read the Board's statement in response beginning on Page 111 of the proxy statement. For Item 7, the stockholder proposal regarding setting Scope 3 GHG targets, Ms. Noce will also present the proposal on behalf of As You Sow. Kaylea, you have the floor.

Thank you. Again, my name is Kaylea Noce, a shareholder representative from As You Sow. Thank you for the opportunity to present Proposal #7 on the Southern proxy. This proposal asks Southern to set short- and long-term Paris-aligned targets across its full range of value chain emissions. Investors are concerned that failure to fully account for material Scope 3 emissions in net zero target setting and planning will lead to ill-informed strategic investment decisions that can lock in large sources of emissions for decades to come, limit the company's progress on reducing emissions rapidly and cost effectively and exacerbate company-level climate transition risk. Energy utilities that generate power and distribute natural gas have a critical role play in achieving the Paris Agreement's goal of limiting global temperature rise to 1.5 degrees Celsius. However, net zero targets that address only Scope 1 emissions from generating electricity and other direct operations missed a significant portion of utilities' climate impact. Currently, Southern excludes downstream emissions from the sale of natural gas to 4.4 million customers from its net zero target. Furthermore, Southern also does not include the upstream emissions from the production of coal and natural gas that it procures or the power it purchases from the grid. Together, these 3 material sources of emissions account for approximately 30% of Southern's total emissions and represent a major source of exposure to disruptive climate risk. The lack of inclusion of these material Scope 3 emissions means Southern fails to align with key climate benchmarks, including the Climate Action 100+ net zero benchmark endorsed by 700 investors, representing $68 trillion in assets and the Science Based Targets initiative, widely considered a global gold standard in corporate climate target validation. Finally, Southern also lags peers on target setting for these emissions. Duke, Dominion, Sempra, Xcel and CMS have all announced the expansion of their net zero emission reduction targets to include the sale of natural gas to customers from their gas distribution businesses. These demonstrate the U.S. energy utility industry's acceleration to better account for its climate impact and risk and to incorporate them into clean transition strategies. Southern must follow suit. We look forward to working with Southern to address this vital issue, and we ask for your support in voting yes for Proposal 7. Thank you.

Kaylea, thank you so much. As You Sow has been a great friend of this company over the years. Thank you very much. After careful consideration, the Board has recommended a vote against this proposal and you can read our statement in response, beginning on Page 113 of the proxy statement. For Item 8, the stockholder proposal regarding issuing an annual report on the feasibility of reaching net zero, Mr. Steven Milloy is here today to present the proposal. Is Steven here? Okay. He's not here. So for Item 8, therefore, if neither Mr. Milloy nor an authorized representative representing him is here to present this proposal as required by SEC rules, as a result, this proposal will not be considered at this meeting. You need to be here or have a person, a representative. And since they're not here, we will not consider that proposal. So now we'll take questions specific to the items up for vote. Are there any questions. Laura, where are you? Where's Laura? There you go. Are there any questions? Got it. Okay. So now we'll proceed with the balloting. If you've already voted, there's nothing else you need to do at this time. If you have not voted or if you want to change your vote, please raise your hand and a representative will provide you with a ballot. So please raise your hand if you want to take advantage. We got one here, here, back there. Anyone over there? No. And we'll just take a pause for a second. [Voting]

Please raise your hand, and we'll take them up and then we will move on to the rest of the meeting. How are we doing? There we go. We're good back there? We're good? Yes? Is anybody still filling out a ballot? Have all the ballots been collected? Love the hat, by the way, Make Earth Cool Again. That's cool. I like that. So we're all good. All the ballots have been submitted. Very good. Thank you. So the polls are now closed, and I'll provide a preliminary voting report that reflects the votes submitted prior to this meeting. So for item 1, all 16 nominees for Director have been elected with each director having received at least 94% of the votes in favor, well done folks. For Item 2, say-on-pay, vote has been approved, receiving 93% of votes in favor. For Item 3, for say-on-frequency vote, the frequency of 1 year has been approved, receiving 98% of the votes submitted. For Item 4, the appointment of Deloitte & Touche, the company's independent registered public accounting firm for 2023 has been ratified, receiving 98% of the votes. Way to go, Tim. For Item 5, the amendment to the restated certificate of incorporation to reduce the supermajority vote to a simple majority vote has not been approved. It has received 66.3% of the issued and outstanding shares in favor. Remember, we needed 66 and 2/3. And of course, I want to remind you that the Board supports this proposal. And as has been pointed out, I'll just confirm that the shares that were voted were overwhelmingly positive, 98% for the amendment, but we needed 66 and 2/3. We hit 66.3%. For Item 6, the shareholder proposal regarding the simple majority vote that was presented here has not been approved, receiving 38% of the votes in favor. For Item 7, the shareholder proposal regarding setting Scope 3 GHG targets has not been approved, receiving 20% of the votes in favor. And finally, for Item 8, as I said before, the shareholder proposal regarding issuing an annual report on the feasibility of reaching net zero has not been approved, receiving 2% of the votes. But because Mr. Milloy didn't show -- this proposal was not presented and therefore, has not been considered at this meeting. But I did want to let you know that it did get about 2% of the votes. So the shares represented by the votes submitted during this meeting will be included in the final voting report, which will be filed with the Securities and Exchange Commission in the next few days. And with that, the formal business portion of the 2023 Annual Meeting of Stockholders is hereby adjourned. And Chris Womack, is now the CEO of Southern Company. Please give a standing O.

Thank you. Thank you very much, Tom. Thank you, Board for this wonderful opportunity. Ladies and gentlemen, I stand before you with a great degree of humility and honor. Thinking back, knowing that having grown up in South Alabama in the 1960s and now where I stand is a very humbling experience, humbling time for me and my life, and I say Board, thank you very much. As I also stand here, I think about the legacy of this company, and the legacy of the leadership of this company that has been defined by incredible visionary leadership, an incredible focus on results and success, not being afraid to innovate and change things, but in also relentless commitment to serving customers and communities. And so for that, I also thank Tom Fanning, who has fully embraced the legacy of this company. And so Tom, I thank you. Also, I need to let you know that there will be some forward-looking statements that we'll make. You get the drift. I kind of got ahead of myself there. I probably got -- moving a little faster, and we're going to try to slow it down. But again, as I think about the legacy and as I said, with that visionary leadership and the focus on successor results and all the wonderful things, Tom Fanning fully embrace that legacy and made it better. And we are so fortunate to have had his leadership over the past 13 years. Tom came in, in 2010. One of the things he did was he put -- you know Tom, sports fans, this is how we're going to do this. And all of the wonderful references that he makes. Then, Tom brought great simplicity to the business model that has served this company so very well, and we knew it. But in Tom's own very unique way and how he does things, he brought great clarity to his business model that is providing success for this company for over 100 years. And he calls it the circle of life, customers being at the center of everything that we do. And if we do that, we will maintain this constructive regulatory environment. We'll work with our commissions and have this healthy capital spending that will bring about the reliability, resiliency, the price and the levels of satisfaction that we need to serve our customers and make them feel good about doing business with us. He did that in 2010. Shortly thereafter, this small little book but with great power, with great references, with great language, that he called Leadership Perspectives. He brought this to this company to give us a roadmap, to give us a path of how we must lead, to challenging us to be leaders, to leaning in, to supporting each other, for working hard and how to do this. Tom Fanning brought this to us. As a result of Tom Fanning's leadership, because of Tom Fanning's embracing and leaning into the legacy of this great company, we are better. And ladies and gentlemen, let's give Tom Fanning a big round of applause. Southern Company is a great company. Southern Company is a great company. We have a team of incredibly passionate people that are not afraid to do hard things and not afraid to do big things. We are a great company. We've got incredible challenges ahead. We got incredible hurdles in front of us, but we have an incredibly bright future. We are so thrilled with the cards that we have. I wouldn't have anybody else's cards. I mean we are in a wonderful place. And I am so proud of where we are. Southern Company is a great company. Let me go through a few things that further speak to that. If you look at making a $1,000 investment in the stock some 22 years ago, you see what returns are and how Southern has outperformed the Philadelphia Index, how Southern has performed. That is great value contributions that has been made by investing in this company. Look at it a little bit further and Tom always talks about values and function, risk and return. You look at the risk profile of our company. It used to be we were right next to Hormel and Spam. We've moved up a little bit more, but we're still down below in the first quartile. But you also look at the total shareholder return 1, 3, 5, 10, 15, up to 25 years, you see kind of the results that we have delivered, a wonderful investment, a wonderful return by this company. And you look at our dividend tracker, we paid a dividend for 76 years. The last 22 years has been either flat or increased. This has been a remarkable success of this company. And then you look at the appreciation of the stock, 7% of it has been through dividends. One -- again, just a wonderful metric to say what a good investment in Southern is and the return that it provides to our shareholders. One of the things we think about, as Dan and I think about going forward, as our earning profile increases, as we see earnings grow, that also gives us the opportunity to go to the Board and ask them to consider increases in the dividend. It puts us in a wonderful place going forward. Tom talked about plant Vogtle. Plant Vogtle, we are proud of where we are. Things are going incredibly well. As he said, just yesterday, we achieved the 90% power plateau on Unit 3. We've got about 10 tests, I think, to go through over the next couple of days, and we look to move to 100% power. It could be as early as Saturday, but could be sometime next week. But just wonderful success there. Then if you look at Unit 4, we've transferred learnings from Unit 3 over to Unit 4, as you saw that during hot functional testing. It took us some 96 days -- 92 days, I think, for Unit 3. It took us about 46 days for Unit 4. So we've seen lessons transferred from Unit 3 over to Unit 4 as we go through the completion of Plant Vogtle. We're receiving fuel now at Unit 4. Then we're moving to ITAACs, and you see we're moving down that list, down to 102 to go. Then we'll get the 103(g) letter from the NRC, then we'll begin to fuel load sometime as early as mid-July. So wonderful progress there. Yes, we've had our challenges. I'm confident that the state of Georgia and our customers, our company, the world would be so proud of the work that we've done in bringing Vogtle online. This is going to be an incredible success for a lot of stakeholders. And we thank you all for standing with us as we have gone through this process. This is going to be a wonderful success story for this company. We talk a lot about fleet transition, and this speaks to kind of how we have transitioned the fleet. Looking back from 2007. You look at the makeup of the fleet at that time, some 69% coal back in 2007, to first quarter of this year, some 14%. Just incredible economic transition that we have made. This has been good for the companies, but also has been incredibly good for our customers, but also good for the environment. You look at the coal plant reductions, the number of units, 91% reductions in the number of units, some 87% reduction in coal capacity. We've made this through -- we're making the best economic decisions for our customers. This is a wonderful result and a wonderful accomplishment for our company. At the same time, you've seen our renewable percentages grow as well, from 2015 up to now, going from less than 5,000 megawatts to some 17,000 megawatts into the 2030s. A wonderful success by this company, not being driven by any renewable portfolio standard, but us, again, making the best economic choices of generation for our customers. A clear demonstration of our commitment toward net zero, a clear demonstration of our commitment to make the transition in our fleet. We're also thrilled to have the Southern Company Gas company to be a part of our team, as we did the merger with AGL. As you can see, some 4.4 million customers across Georgia, Virginia, Tennessee and Illinois. They too, with this focus on net zero, working toward zero methane emissions, delivering customer solutions, enriching their communities and investing in innovation. You see the CNG truck outside the ballroom, can burn on CNG or natural gas. Once again, the embracing of the technology, the embracing of leadership, the embracing of innovation in all parts of our business. We are so proud of the team at Southern Company Gas and the contribution there, making through this family. It is a wonderful add, a wonderful contributor to the success of this company. We received a number of accolades, which I think is another reflection of the greatness of this company. Alabama has been a leader in doing things that others don't do as they have been a part of a number of the Alabama Rural Broadband Coalition. I mean as they do trenching, as they do line work, as they do their grid improvements, they are now a partner saying, how do we make sure that all parts of the state have access to rural broadband, making sure families and students and children can have access -- full access to technology. This is innovation. But more importantly, just peoples. This is leadership. This is stepping out, doing things that others don't do. In Georgia, just last year, we had the largest blend of hydrogen and a combined cycle gas plant, some 20%. We saw CO2 emissions reduced,, normal operations maintained at a stable level. We had to make some modifications on burner tips and other things. But once again, working with partners at EPRI, working with Mitsubishi, we did this test to demonstrate that it is doable, and this will support a lot of other work that we will do as we pursue more hydrogen utilization in our system. And then lastly, SEEM, this energy exchange system that we led with other companies now in terms of trading on intra-hour, once again, providing opportunities to maximize the use of renewables, but meeting the needs of companies in this group to meet their needs on an hourly basis. A wonderful, I think, reflection of innovation led by Noel Black and a lot of member of our team who put all this together. We can go on and on. And Tom talked a lot about our proprietary research and development. We do this with pride. This is a part of our legacy. We continue to embrace that legacy. We continue to lean into that legacy and we'll continue to invest more and do more in R&D as we go forward. Just wonderful, exciting things that we are doing. Jim talked about Moving to Equity. This is our framework. This demonstrates our ongoing commitment to make sure that our commitment to equity, our commitment to inclusion, our commitment to belonging is not episodic. We are not giving up. We're not moving on. We will continue to focus on this framework around equity, making sure that we're talking, making sure that we're listening, making sure that we're getting to know each other. This is not binary just about black and white, male and female. This is all aspects of diversity being included into the culture and the fabric fully of our company. But then also making sure that we're making commitments, we're holding ourselves accountable to the work that we commit ourselves to, but we start the process all over again. This never ends. Our commitment to equity is longstanding and forever more. And we're excited about the work that we've accomplished and the work that we will do going forward into the future. Talking about accolades. This is a long list. We got probably 3 or 4 or 5 more pages more. But these are some of the ones that we're excited about, from DiversityInc being a top 50 company, Fortune 2023 World's Most Admired Company. You can see the list. I think, once again, this reflects the elements, the aspects of a great company. Southern Company is a great company, and we'll continue to do things to make this company even greater. As we go forward, there's a lot of questions about what we do after Plant Vogtle goes online. We'll continue to embrace customers being at the center of everything that we do. If we stay grounded around the customer, everything else will fall in line. Yes, we have to do hard work. We have to get it done, but we must keep the interest and the best interest of customers at the center of everything that we do. We'll excel at the fundamentals, all the blocking and tackling. We'll make sure that we continue to focus on innovation, how we make, move and serve energy. And then how we make sure we're partnering with our communities, partnering with our companies to make sure that our communities are better because we live and work there. Some of the elements that -- what does that look like? It means maintaining a balanced, clean, safe and reliable affordable energy solutions for all of our customers. Making sure we continue to engage ourselves and advancing the fleet transition. Making sure we're meeting all our financial targets and having the level of financial integrity that you expect from us in being regular, predictable and sustainable in our financial performance. Transition operations to net zero. We have a goal to be net zero by 2050. The interim goal is 2025. We think we'll be at the interim goals sooner than 2025. As a result, Stan Connally and a lot of us are going to look at, do we adjust our goals? Do we move faster? Do we set earlier targets for our net zero goal as we go forward because of the success, because of the transition that we've already gone through and the reduction that we've experienced. I think there's an opportunity for us to advance our targets and advance our goals. Then growing our communities, we're blessed to be in a region that is still experiencing some wonderful economic success. That also puts pressure on making sure that we have the workforce to support the economic activity that we're experiencing. Seeking equitable outcomes for all of our people and investing capital to generate additional strong returns for this company going forward. Just a wonderful platform we have as we look to go forward, as we move into the future. Southern Company is a great company. We had the opportunity to make this company even better. We are in a wonderful place. We've got great cards. We've got a wonderful team leading this company. And together, working together, we will take this company to higher heights and better results and continue to make this company even greater. So with that, Tom, do you want to join me?

Yes, sir.

As you come -- so 13 years of whatever you want to call it, I mean what's the -- I mean, what have you enjoyed most? I mean what is -- I mean what's been your experience? How have you felt about doing this for 13 years?

By the time I finish -- so I'm not retiring, staying on as Executive Chair of the Board means I'm still an employee, and that will carry on for some time, I'll have been the longest guy in this seat in Southern's history. So I'm very proud of that. I'm very proud of the idea that these folks in the office are core. And as you know, one of the first things I did when I got this role was to move his office right next to mine. I always admired him and...

What a wonderful opportunity that presented.

Yes, he laughed and bought it all the time. He enjoyed it. But I learned so much from him. And I think there was this idea of personal growth and the company's growth. And I think as I assume this role, I had David handed off, the coal plant in Mississippi, Kemper County, Plant Ratcliffe, we call it now. And then the nuclear plant, which now we're finishing up. The tenacity to stay with those things and make them as successful as they possibly can be. But more importantly, not to let the company get distracted. It would be so easy to say, "Oh, they're just focused on Vogtle and what I do isn't important." Put back up the slide on accolades, if you would. But if you look at the whats of this company and you look at some of the challenges that the rest of our industry has had through ice storms and blackouts and all kinds of stuff, knock on wood, right, because it could happen to us, but this company has performed like champions. And on the basics, making, moving, selling and I like your service nuance. That's a great thing.

Because as you know, from a service standpoint, we've done it traditionally based on central station generation, but as there are more distributed infrastructure, serving will be different in how it gets served. So that's the transition we're making in terms of how we deliver energy to our customers.

But those are the whats. But here's the other thing that I'm really proud of, and I think this is a sustaining legacy issue. We've talked a lot about Moving to Equity. It's not the sign waves of public consciousness that we're concerned with. It's not when the headlines say, pay attention to this. Our focus on this is those days where nobody cares, we care deeply, and where it's not in the headlines. We will maintain a commitment to that ideal. But the other thing, look at this, I mentioned the vets. #1 in our industry on vets. See, they are #2 GI jobs. Most admired. Where is the diversity one up here? 8 consecutive year, #1 for black executives, #3 for veterans, #5 for supplier diversity. And here's the thing. When you treat people well and the very first thing you do in treating people well is listen. So my job as CEO was not to take tablets from the mountain and hand them down. Rather, it is to engage the employees, to make sure that they're part of the decision process and all the credit of this company, over at least my tenure, goes to them, not to me. And when those people feel that value, that investment in them personally, you get this Forbes thing up here. 2023 America's Best Large Employee, #15 overall. Last year, we were #2 overall of all companies in America. And I think we were 100 places better than the next best utility.

And so after the killing of George Floyd and we begin this work on Moving to Equity, one of your admonitions was this work cannot be episodic.

That's right.

I mean what was your thinking there? I mean what were you feeling? What was your...

It's been a passion of mine forever. And look, when the headlines happen, everybody jumps on -- they want to lead the parade, right? This isn't about a parade and it isn't about, oh, in this moment, I'm going to show everybody what I do.

Not a PR campaign.

No. H***, no. This is about a cultural commitment to making sure that every employee here, no matter what their element of diversity may be, feels valued and can contribute to the best of their ability. I'm an old sports guy. And I remember, under Paul Johnson, Georgia Tech football, man, we ran the ball 90% of the time. And so what do defenses want to do? They want to make you stop the run. They want to make you play so-called left-handed. They want to take away what you do well and make you do something you're uncomfortable with. What we want to do is increase the bandwidth. So that we get people here. They are not necessarily black and white, male and female and gay and straight and Christian and whatever it is. We get people here. The value of diversity is breadth of background, of context, of skill set, of judgment. So that we live not only in the moment, but we live for the future. So that these unseen corners of the future, we have better vision and courage in which to adapt to whatever comes. And the final admonition is -- greatest movie ever made, Casablanca, one of the great lines in there is the police chief says, "Well, I just take what comes." To heck with that at Southern. Our job is not to take what comes, but influence the future and make it as good as it can be for you, our shareholders.

So last question. What's your old man advice to the company as we go forward. I mean the wisdom, the experience and as you look around corners of being, what is your advice to the company? What's your advice to the team?

I'm going to keep this one short. When -- the very...

Can you -- how do you spell short? They asked us where we're going to be...

You know what it is. When I got this thing, I celebrated -- we were right at the 100-year anniversary, remember that? And we created the book Big Bets. Isn't that so ironic? Big bets. We've had a few of those. I think the issue is this, honor the past, build for the future. And we've been so successful. But one of the greatest harbingers of future failure is past success. If you look at it, people get addicted to what they've done in the past because they were successful. You can't do that. You must continually have the courage to reinvent yourself, to attack conventional wisdom. And I tried to celebrate people in our company that were so-called revolutionaries, people that thought differently and ask why and why not. And I can tell you there were so many people in the past that were so successful, they want to kill the revolutionaries. You don't understand, this is the way we did it last year. Raising up the value of the revolutionaries has been so valuable and instilling in this culture the courage to be different and to innovate and to continue to improve. Fire in your belly to make today better than yesterday, tomorrow better than today. And now even more playing offense, fire in your mind to be inventive, innovative and have courage.

So shall we take some questions?

Please.

So we're going to do this, we got lunch at noontime. So we're going to go until noon.

And that is a little bit of a departure, right? We went 2 hours and 45 minutes last year.

45 minutes.

Yes, 2:45.

2:45.

Yes.

Yes. 2:45.

And we've got a lot of feedback. And so we are going to try and be respectful of everybody's physical condition in here and try and end around noon. We're not going to be nerds about it, but we do want to be respectful of everybody here. So we're trying to consolidate. We're doing something a little different. You filled out cards out front. Laura has collected the cards, and we're trying to categorize them so that we don't have duplication and we're efficient. So please bear with us in this experiment this year.

Yes, Laura?

Great. The first question is from Sam Booher, and it is about Tom Fanning's retirement.

Big Sam has been here -- Sam, how many years?

About 7 years before you came...

So that would be 20.

20. Yes, 20 years. that's fabulous. Sam we always appreciate you coming. He's working his way to the mic. But again, a great friend of the company, and he's always urged us to do better and do more. And I think, Sam, through your efforts and others, we're better.

Sam, where is [ Ronnie? Just coats you have ]? Where is Ronnie, just his coat.

He took it back. I wish to thank Mr. Fanning for agreeing to put solar panels on my house. The 2 previous Chairman before him refused to even acknowledge my concern when I stood up and asked him. Mr. Fanning initially told me he would look into it, and he did. Every year, he kept us informed about the solar energy. After a few years, he had my solar panels installed on 12 April 2015. As retired military, I was especially pleased to learn when Mr. Fanning was Chair of a presidential committee. He was asked by the President to come up for a way to safeguard our military bases in the event of an enemy attacking the national power grid. Mr. Fanning has solar panels installed on all of our military bases in the Southern Company's area of responsibility and recommended across America that all the major power companies do the same. Yes, we pay Southern Company for the power they use as they always have. Thank you for reaching out and listening to the concerns of your shareholders. Again, it has been a pleasure for my wife and I knowing you and attending shareholder meetings.

Thank you, Sam. Appreciate it.

Thank you, Sam. Thank you.

And you all may know I have solar panels on my last house. So anyway, good stuff. And I've always been an advocate of solar. Solar makes so much sense for Southern Company in the renewables sector. We do have some wind, but we import it from Kansas and Oklahoma, via long-haul transmission line. So solar is a big deal to us.

Laura, next question?

So we've got several questions on fuel cost and fuel cost recovery. So we have selected Charline Whyte, representing Sierra Club, to come present her question on that topic.

Charline, where are you? There you are. Charline, another longtime friend of the company. And I can tell you, Charline, I bet you could speak for this, but Sierra Club, we've had kind of an interesting history. If you go way back, but I would argue over the past 10, 13 years, we've had a terrific constructive relationship, personal friends in the Sierra Club. And you guys, again, made us better.

So I'm going to sprinkle a little bit of equity here. I'm Charlene White, I come from Costa Rica. Whose's been in Costa Rica? Raise hands. Right. So some of you know what pura vida is, right, full of life. I wish both Chris and Tom the best in the next process that you're going through, change is constant, change is inevitable. I think I butchered that. But English obviously is not my first language. I wish you the best. And thank you for this opportunity. I'm going to frame my question in -- as a fact, problem and a solution. So fact, the last 40 years or so, fuel costs have been 100% passed through the customers, fact. [indiscernible] Southern Company does not profit from fuel management, fact. The problem, fuel costs are one of the biggest line items in customers' bills and people are feeling the brunt. Solutions. A modernized fuel cost share mechanism that centers around customers' needs by reducing their electrical bill and if done right, can yield earnings, yes, you heard me right, earnings to the company. So my question to both of you gentlemen is, would Southern Company consider supporting an earning incentive for fuel sharing where the utilities, fuel cost management, net gains and losses are shared between the company and rate payers, especially since so many nonfuel cost technologies are now available at scale?

Chris, why don't you...

Yes. I'll start by saying I think it's something worthy to consider. I'll also say to you as we make fuel decisions, once again, we're making economic decisions in terms of fuel sources, buying fuel, coal, gas, and we're making significant economic decisions as we make those choices. The other thing is, as we talk about this balanced portfolio and all the arrows in the quiver, once again, I think that helps us mitigate some fuel cost, volatility and exposure as we have this diverse portfolio. In some places, we do have hedging opportunities around fuel. So we continue to find ways to minimize the cost impact and the volatility impact on our customers through a lot of different strategies and programs that we have at our companies. Is there some more we can do? I mean, I think we'll talk to [ Jeff Botson ] and some others at our companies to say, are there some other sharing mechanisms we should consider? We'd be glad to take a look at it. But once again, I know that we have a sensitivity around pricing and the cost of our product. And as we look at the portfolio, we're always trying to find ways to minimize and mitigate volatility and price impact to customers. We know that impacts the total bill, and we want to keep that total bill as low as possible.

And Chris has done a heck of a lot of work since you've come on. So your background is most of the external affairs, a Washington guy, a national leader. But we're so gratified that as he's come into this new role, became President at the end of March, one of his very first things was affordability and really focusing on keeping cost low and understanding that particularly for the people on the lower end of the economic spectrum, their energy share of their household disposable income is really big in the Southeast. That's a big deal to us. We want to reduce as much of that pressure as we can. One last comment, and I so appreciate you raising the issue. About half of America is in the so-called organized markets. And in those organized markets, let's just use Texas as an example, people make money off of fuel. They love it when you see spikes and they profit from that. And that's not what you're saying. Your suggestion is different than these flawed organized markets that really don't work very well. Your idea, I think, and I'm asking is to assure that if there are savings, if there are benefits by doing something different in the fuel regime area that we profit from going lower, not higher.

Correct. We're not even closely saying, let's split 50-50. That's irrational, not even 80/20, our experts say that a small risk can actually benefit and make a difference, both for customers and potentially for shareholders. So I appreciate the opportunity. And on behalf of the Sierra Club, I love that we are able to make this connection and as you know, I am a woman of my words. I will follow up with Jeff and Chris and pura vida.

Because of that, I think we're going to put the next topic as market reform. And we have Brian Jacobs here with a question about market reform.

Yes. Brian Jacob, representing Southern Alliance for Clean Energy. And I do want to talk about market reform. Your last comment sort of touched on that already. So thanks, Laura, for reshuffling. And the context for this is that over to our East, in South Carolina, the General Assembly commissioned a study of market reform. And that it was done by Brattle and it was published just about 3 or 4 weeks ago. The conclusion over there was that an organized market with the same footprint as SEEM. So Chris, you had mentioned the leadership that The Southern Company exhibited on setting up SEEM. So same footprint as SEEM would generate between $115 million and $187 million in benefits for South Carolina alone, and that's net of costs. So we can reasonably estimate that for the broader footprint, for this business would be somewhere in excess of $400 million a year, considerably higher than the savings from SEEM itself. And so since you exhibited leadership on SEEM, my question is, can Southern Company continue that legacy of leadership and champion this market reform effort?

You want to start that?

I love this. I really do. So you guys know that in addition to my role now as Executive Chairman of the Board, I have a whole lot of external things that I do, that I think are helpful for America and helpful for Southern Company as a result. One of the things I do is I chair the advisory Board to CSA. This is the cybersecurity agency inside Homeland Security. I've also been on the Cyberspace Solarium Commission, which is reimagining national security in a digital environment. One of the things that we are very conscious about in America right now is the notion of resilience. We have seen the damaging effects of if we lose a gas pipeline with Colonial. We have seen attacks on our system. I'm now -- I used to never say this, but now I say it pretty frequently. Southern Company gets attacked in a cyber sense, 3 million times a day and we were able to fight those things off. There is the notion of integrating, collaborating the private sector with the federal government in order to assure that we have a resilient system. And with all due respect, I think the organized markets are fatally flawed in this regard. As you point out, people will do studies that will show, oh, there are savings in the short term by maximizing your electricity supply function around a short run, they call it marginal cost basis. That's how organized markets are typically structured, short run. Do you guys remember Silicon Valley Bank went bankrupt, okay? What was their fundamental problem? They had a mismatch of short term and long term based on their assets and their liabilities. There is no organized market that is built off the short term that will support the viability of long-term assets. None. Doesn't exist. When we think about how you should structure our business, we say clean, safe, reliable and affordable. That is an and proposition, not an or. You can't construct a market on short-run profitability or cost. We must take into account building a long-term portfolio that maximizes the union of those qualities. There is no short-term market, no organized market that pays sufficiently for resilience. Look at Winter Storm Uri in Texas, they went black. Look at some of the recent, what is it, Elliott? Some parts of the United States had rolling blackouts. When you think about the resilience required to support the attacks on our electricity grid, we need more than a short-run marginal cost signal to make sure that Americans are protected on the worst of days. Our integrated regulated market in the Southeast is absolutely the right way to approach balancing short and long run benefits. I absolutely believe, and I certainly appreciate the viewpoint of others. So different people can respectfully disagree. I absolutely believe that the organized market approached the United States, which was founded on the basis of Texas many years ago, is a flawed science experiment and they need to figure out how to get back into providing for value on long-run assets. They don't do that now. One last example, as wonderful as we're going to celebrate Vogtle 3 and 4, tell me how many new nuclear plants are surviving in these organized markets. Some of the most valuable assets we have as a nation are getting shut down. And that's because the short-run marginal cost signals don't support long-run assets. It is a bad flaw and bad for America.

Thank you, [ Mark ]. Thanks for your question. Laura?

Yes. So we've had a number of questions addressing energy efficiency and IRA, including carbon capture and other benefits of IRA, I think Norman Slawsky might have a good representative question on the topic.

Norman, now you've been here 100 times, too, right? How many years?