Southern Co.'s (SO) second-quarter earnings rose a better-than-expected 15% on a prior-year charge.

But the electric utility continued to see reduced demand, especially from industrial customers, where sales volume dropped 18%. Chief Executive David Ratcliffe said, "It is clear that as this challenging economy continues, our revenue erosion is significant, particularly among our industrial and manufacturing customers."

Power companies have been using cost cuts as one way to balance the demand drop-off, but reductions are getting harder, prompting them to turn to state regulators to raise rates.

Southern Co., whose business is focused in the Southeast, reported a profit of $478.6 million, or 61 cents a share, up from $416.4 million, or 54 cents a share, a year earlier. The prior-year included 9 cents in charges. The company in April projected earnings of 55 cents to 60 cents for the latest quarter, below analysts' forecasts at the time.

Revenue decreased 7.8% to $3.89 billion. Analysts polled by Thomson Reuters most recently were looking for $4.28 billion.

Total retail energy sales fell 6.5%, with kilowatt-hour sales down 0.9% for residential customers and 0.6% for commercial users. Total sales including its wholesale business dropped 8%.

Southern Co., among the biggest U.S. coal-burning utilities, like other power generators is in transition amid pushes to reduce carbon-dioxide emissions. Southern was one of four power companies expected to split $18.5 billion in federal financing to build the next generation of nuclear reactors. The company also is involved in efforts to capture and store greenhouse-gas emissions from coal-fired power plants and is planning to expand its presence in industrial-scale plants that burn wood and other plant material - or "biomass."

Shares closed at $32 on Tuesday and didn't trade premarket. The stock is down 14% this year.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481;