BIRMINGHAM, Ala – After months of negotiations, Alabama Power and the U.S. Justice Department have agreed to end a longstanding dispute over work performed at five of the company’s coal-fired power plants.

The parties filed papers today that both sides expect to result in a court order finding for Alabama Power on four of the five claims in the case, and resulting in the fifth claim being resolved through a consent decree. The newly filed agreement is in line with orders entered by U.S. District Judge Virginia Hopkins last June. In those orders, Judge Hopkins agreed with Alabama Power on the correct legal tests governing the case and sent the parties to mediation to see if they could resolve the case.

“We’re pleased that Judge Hopkins affirmed our position on the legal issues, and we’ve worked very hard since then to bring the case to a close,” said Willard Bowers, Alabama Power vice president of environmental affairs. “We hope now to put this case behind us, and we will continue to move forward on doing our part to improve air quality in the state.”

In the case, which was filed back in 1999, the government claimed that Alabama Power had violated the “New Source Review” provisions of the federal Clean Air Act by taking too long to build two of the four generating units at Plant Miller and by performing work at Plants Barry, Gaston, Gorgas and Greene County that allegedly turned those plants into new sources of emissions – assertions that, if true, would have required additional permitting and the installation of specific emissions controls.

Alabama Power maintained from the start, and continues to maintain, that the company fully complied with the Clean Air Act.

In June 2005 Judge Hopkins agreed with the company on the claims regarding Plants Barry, Gaston, Gorgas, and Greene County. The judge directed both parties into mediation in an attempt to resolve the remaining issues related to the construction at Plant Miller, and to bring closure to the entire case.

As a result of mediation, the government agreed to make specific statements designed to result in a judgment being entered in favor of the company on the claims related to Plants Barry, Gaston, Gorgas and Greene County. The statements were filed today. In turn, the company agreed to the filing of a proposed consent decree on the Miller issues that, upon court approval, would require the company to pay $100,000. The company has also volunteered to retire $4.9 million worth of sulfur dioxide (SO2) emissions allowances by donating them to a nonprofit organization. Customers will not be charged for either expenditure. The consent decree also formalizes specific emissions reductions to be accomplished by Alabama Power. These reductions are consistent with other Clean Air Act programs that will require emissions reductions.

The agreement is subject to public review, and any decision by the judge could be appealed.

“Our company has always met or done better than the standards set by the federal government to protect human health and the environment,” Bowers said. “We’re happy to have reached an agreement in the case. We can now focus on meeting the growing energy needs in our state while continuing to reduce our impact on the environment.”

Alabama Power is committed to improving air quality in Alabama. Since the 1970s, the company has spent more than $1.3 billion on environmental improvements, technology and research. Since 1990, the company has reduced emission rates of nitrogen oxide and SO2 by 57 percent and 41 percent respectively. Alabama Power is now in the midst of spending an additional $2 billion on improvements designed to further reduce emissions.

Records from the U.S. Environmental Protection Agency and the Alabama Department of Environmental Management show that air quality in the state has improved over the past decade – at the same time that Alabama Power has increased generation to meet the growing energy needs of the state

“We’re striking the right balance,” Bowers said. “We’re producing more power, with fewer emissions – and we’ll be reducing emissions even further in the coming years.”
 

Forward Looking Statements Note: Certain information contained in this release is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning the final resolution of the court proceedings discussed in the release. Alabama Power Company cautions that there are certain factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of Alabama Power Company; accordingly, there can be no assurance that such suggested results will be realized. The reader is directed to the risk factors described in Alabama Power Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and subsequent securities filings. Alabama Power Company expressly disclaims any obligation to update any forward-looking information.