Increased operations and maintenance expenditures compounded declining revenue imposed by decreased overall demand for electricity in the Southeast, massive US utility Southern Company said in its first-quarter earnings released today.

The company reported $422 million in profit in the first quarter of 2011, down from $495 million in the same period a year ago.

Reduced retail and residential electricity sales as more-normal temperatures predominated in the first three months of 2011 compared to the cold winter of 2010 in the utility operating region were blamed by the firm.

In a reminder that the results of large utilities are often closely linked to macroeconomic trends, the company said its industrial customers had demanded significantly more electricity to support manufacturing operations in the first quarter than they had a year ago. Full-year industrial sales for 2010 increased 7.7% from 2009 to 2010, and a further increase of 6.7% built on that growth during the first quarter of 2011.

“Activity among our industrial customers has nearly reached pre-recession levels, ad we expect that momentum to continue as the year progresses,” Southern Co. chairman, president and CEO Thomas Fanning said in announcing the results. Fanning said the economic recovery remained “measured”.

A recent company survey shows one-third of industrial companies in Georgia expecting to increase employment, with 60% expecting to increase production.

Operations and maintenance expenses rose for the second quarter in a row, reflecting the firm’s aging fleet of power plants even as it works to open new facilities and upgrade existing ones. Maintenance and operations costs rose to $944 million in Q1 2011, up $36 million from the same period a year earlier.