0000092122 so:GeorgiaPowerMember so:OtherNaturalGasOtherNaturalGasRevenuesMember 2019-04-01 2019-06-30 0000092122 us-gaap:ShortTermDebtMember us-gaap:FairValueHedgingMember 2020-06-300000092122us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FixedIncomeFundsMemberso:SouthernCompanyGasMember2021-03-31
    Table of Contents                                Index to Financial Statements

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to            
Commission

File Number
Registrant,

State of Incorporation,

Address and Telephone Number
I.R.S. Employer

Identification No.
1-3526The Southern Company58-0690070
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta,, Georgia30308
(404) (404) 506-5000
1-3164Alabama Power Company63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham,, Alabama35203
(205) (205) 257-1000
1-6468Georgia Power Company58-0257110
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta,, Georgia30308
(404) (404) 506-6526
001-11229Mississippi Power Company64-0205820
(A Mississippi Corporation)
2992 West Beach Boulevard
Gulfport,, Mississippi39501
(228) (228) 864-1211
001-37803Southern Power Company58-2598670
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta,, Georgia30308
(404) (404) 506-5000
1-14174Southern Company Gas58-2210952
(A Georgia Corporation)
Ten Peachtree Place, N.E.
Atlanta, Georgia 30309
(404) 584-4000

Atlanta, GeorgiaTable of Contents                                30309
(404) 584-4000

Table of ContentsIndex to Financial Statements

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of Each Class
Trading

Symbol(s)
Name of Each Exchange

on Which Registered
The Southern CompanyCommon Stock, par value $5 per shareSONew York Stock Exchange
(NYSE)
The Southern CompanySeries 2015A 6.25% Junior Subordinated Notes due 2075SOJANYSE
The Southern CompanySeries 2016A 5.25% Junior Subordinated Notes due 2076SOJBNYSE
The Southern CompanySeries 2017B 5.25% Junior Subordinated Notes due 2077SOJCNYSE
The Southern Company2019 Series A Corporate UnitsSOLNNYSE
The Southern CompanySeries 2020A 4.95% Junior Subordinated Notes due 2080SOJDNYSE
The Southern CompanySeries 2020C 4.20% Junior Subordinated Notes due 2060SOJENYSE
Alabama Power Company5.00% Series Class A Preferred StockALP PR QNYSE
Georgia Power CompanySeries 2017A 5.00% Junior Subordinated Notes due 2077GPJANYSE
Southern Power CompanySeries 2016A 1.000% Senior Notes due 2022SO/22BNYSE
Southern Power CompanySeries 2016B 1.850% Senior Notes due 2026SO/26ANYSE
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
RegistrantLarge Accelerated Filer
Accelerated

Filer
Non-accelerated Filer
Smaller

Reporting

Company
Emerging

Growth

Company
The Southern CompanyX
Alabama Power CompanyX
Georgia Power CompanyX
Mississippi Power CompanyX
Southern Power CompanyX
Southern Company GasX
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ (Response applicable to all registrants.)
RegistrantDescription of Common StockShares Outstanding at June 30, 2020
March 31, 2021
The Southern CompanyPar Value $5 Per Share1,056,130,7481,058,630,385 
Alabama Power CompanyPar Value $40 Per Share30,537,500
Georgia Power CompanyWithout Par Value9,261,500
Mississippi Power CompanyWithout Par Value1,121,000
Southern Power CompanyPar Value $0.01 Per Share1,000
Southern Company GasPar Value $0.01 Per Share100
This combined Form 10-Q is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Mississippi Power Company, Southern Power Company, and Southern Company Gas. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
2
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TABLE OF CONTENTS
Page
4
8
PART I—FINANCIAL INFORMATION
Page
Item 1.
410
Item 2.
8
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
10
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
10185
Item 3.
177132
Item 4.
177132
PART II—OTHER INFORMATION
Item 1.
178133
Item 1A.
178133
Item 2.Unregistered Sales of Equity Securities and Use of ProceedsInapplicable
Item 3.Defaults Upon Senior SecuritiesInapplicable
Item 4.Mine Safety DisclosuresInapplicable
Item 5.Other InformationInapplicable
Item 6.
179133
182136
3
    Table of Contents                                Index to Financial Statements

DEFINITIONS

TermMeaning
2013 ARPAlternate Rate Plan approved by the Georgia PSC in 2013 for Georgia Power for the years 2014 through 2016 and subsequently extended through 2019
2019 ARPAlternate Rate Plan approved by the Georgia PSC in 2019 for Georgia Power for the years 2020 through 2022
AFUDCAllowance for funds used during construction
Alabama PowerAlabama Power Company
Amended and Restated Loan Guarantee AgreementLoan guarantee agreement entered into by Georgia Power with the DOE in 2014, as amended and restated in March 2019, under which the proceeds of borrowings may be used to reimburse Georgia Power for Eligible Project Costs incurred in connection with its construction of Plant Vogtle Units 3 and 4
AROAsset retirement obligation
ASUAccounting Standards Update
Atlanta Gas LightAtlanta Gas Light Company, a wholly-owned subsidiary of Southern Company Gas
Atlantic Coast PipelineAtlantic Coast Pipeline, LLC, a joint venture to construct and operate a natural gas pipeline in which Southern Company Gas held a 5% interest through March 24, 2020
Autauga Combined Cycle AcquisitionBechtelThe purchase and sale agreement entered into in September 2019 by Alabama Power to acquire all of the equity interest in Tenaska Alabama Partners, L.P., the owner and operator of an approximately 885-MW combined cycle generation facility in Autauga County, Alabama
BechtelBechtel Power Corporation, the primary contractor for the remaining construction activities for Plant Vogtle Units 3 and 4
Bechtel AgreementThe October 23, 2017 construction completion agreement between the Vogtle Owners and Bechtel
CCRCoal combustion residuals
CCR RuleDisposal of Coal Combustion Residuals from Electric Utilities final rule published by the EPA in 2015
Chattanooga GasChattanooga Gas Company, a wholly-owned subsidiary of Southern Company Gas
CODCommercial operation date
Contractor Settlement AgreementThe December 31, 2015 agreement between Westinghouse and the Vogtle Owners resolving disputes between the Vogtle Owners and the EPC Contractor under the Vogtle 3 and 4 Agreement
COVID-19The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
CWIPConstruction work in progress
DaltonCity of Dalton, Georgia, an incorporated municipality in the State of Georgia, acting by and through its Board of Water, Light, and Sinking Fund Commissioners
Dalton PipelineA pipeline facility in Georgia in which Southern Company Gas has a 50% undivided ownership interest
DOEU.S. Department of Energy
ECO PlanMississippi Power's environmental compliance overview plan
Eligible Project CostsCertain costs of construction relating to Plant Vogtle Units 3 and 4 that are eligible for financing under the loan guarantee program established under Title XVII of the Energy Policy Act of 2005
EPAU.S. Environmental Protection Agency
EPC ContractorWestinghouse and its affiliate, WECTEC Global Project Services Inc.; the former engineering, procurement, and construction contractor for Plant Vogtle Units 3 and 4
FASBFERCFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FFBFederal Financing Bank
FFB Credit FacilitiesNote purchase agreements among the DOE, Georgia Power, and the FFB and related promissory notes which provide for two multi-advance term loan facilities
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DEFINITIONS
(continued)

Fitch
TermMeaning
FitchFitch Ratings, Inc.
Form 10-KAnnual Report on Form 10-K of Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas for the year ended December 31, 2019,2020, as applicable
GAAPU.S. generally accepted accounting principles
Georgia PowerGeorgia Power Company
GRAMAtlanta Gas Light's Georgia Rate Adjustment Mechanism
Guarantee Settlement AgreementThe June 9, 2017 settlement agreement between the Vogtle Owners and Toshiba related to certain payment obligations of the EPC Contractor guaranteed by Toshiba
4
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DEFINITIONS
(continued)
TermMeaning
Gulf PowerGulf Power Company, until January 1, 2019 a wholly-owned subsidiary of Southern Company; effective January 1, 2021, Gulf Power Company merged with and into Florida Power and Light Company, with Florida Power and Light Company remaining as the surviving company
Heating Degree DaysA measure of weather, calculated when the average daily temperatures are less than 65 degrees Fahrenheit
Heating SeasonThe period from November through March when Southern Company Gas' natural gas usage and operating revenues are generally higher
HLBVHypothetical liquidation at book value
IGCCIntegrated coal gasification combined cycle, the technology originally approved for Mississippi Power's Kemper County energy facility
IICIntercompany Interchange Contract
ITAACIRPIntegrated resource plan
ITAACInspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC
ITCInvestment tax credit
JEAJacksonville Electric Authority
KWHJefferson IslandKilowatt-hourJefferson Island Storage and Hub, L.L.C, which owns a natural gas storage facility in Louisiana consisting of two salt dome caverns; a subsidiary of Southern Company Gas through December 1, 2020
LIBORKWHKilowatt-hour
LIBORLondon Interbank Offered Rate
LIFOLast-in, first-out
LOCOMLower of weighted average cost or current market price
LTSALong-term service agreement
MarketersMarketers selling retail natural gas in Georgia and certificated by the Georgia PSC
MEAG PowerMunicipal Electric Authority of Georgia
Mississippi PowerMississippi Power Company
mmBtuMississippi Power Rate Case Settlement AgreementSettlement agreement between Mississippi Power and the Mississippi Public
Utilities Staff approved by the Mississippi PSC in March 2020 related to Mississippi Power's base rate case filed in 2019
mmBtuMillion British thermal units
Moody'sMoody's Investors Service, Inc.
MRAMunicipal and Rural Associations
MWMegawatt
natural gas distribution utilitiesSouthern Company Gas' natural gas distribution utilities (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas)
NCCRGeorgia Power's Nuclear Construction Cost Recovery
NDRAlabama Power's Natural Disaster Reserve
NextEra EnergyNextEra Energy, Inc.
Nicor GasNorthern Illinois Gas Company, a wholly-owned subsidiary of Southern Company Gas
NRCU.S. Nuclear Regulatory Commission
NYMEXNew York Mercantile Exchange, Inc.
OCIOther comprehensive income
PennEast PipelinePennEast Pipeline Company, LLC, a joint venture to construct and operate a natural gas pipeline in which Southern Company Gas has a 20% ownership interest
PEPMississippi Power's Performance Evaluation Plan
Pivotal LNGPivotal LNG, Inc., through March 24, 2020, a wholly-owned subsidiary of Southern Company Gas
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DEFINITIONS
(continued)

PowerSecure
TermMeaning
PowerSecurePowerSecure, Inc., a wholly-owned subsidiary of Southern Company
PPAPowerSouthPowerSouth Energy Cooperative
PPAPower purchase agreements, as well as, for Southern Power, contracts for differences that provide the owner of a renewable facility a certain fixed price for the electricity sold to the grid
5
Table of ContentsIndex to Financial Statements

DEFINITIONS
(continued)
PSCTermMeaning
PSCPublic Service Commission
PTCProduction tax credit
Rate CNPAlabama Power's Rate Certificated New Plant, consisting of Rate CNP New Plant, Rate CNP Compliance, and Rate CNP PPA
Rate ECRAlabama Power's Rate Energy Cost Recovery
Rate NDRAlabama Power's Rate Natural Disaster Reserve
Rate RSEAlabama Power's Rate Stabilization and Equalization
RegistrantsSouthern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power Company, and Southern Company Gas
ROEReturn on equity
S&PS&P Global Ratings, a division of S&P Global Inc.
SCSSouthern Company Services, Inc., the Southern Company system service company and a wholly-owned subsidiary of Southern Company
SECU.S. Securities and Exchange Commission
SNGSEGCOSouthern Electric Generating Company, 50% owned by each of Alabama Power and Georgia Power
SequentSequent Energy Management, L.P. and Sequent Energy Canada Corp., wholly-owned subsidiaries of Southern Company Gas
SNGSouthern Natural Gas Company, L.L.C., a pipeline system in which Southern Company Gas has a 50% ownership interest
Southern CompanyThe Southern Company
Southern Company GasSouthern Company Gas and its subsidiaries
Southern Company Gas CapitalSouthern Company Gas Capital Corporation, a 100%-owned subsidiary of Southern Company Gas
Southern Company power poolThe operating arrangement whereby the integrated generating resources of the traditional electric operating companies and Southern Power (excluding subsidiaries) are subject to joint commitment and dispatch in order to serve their combined load obligations
Southern Company systemSouthern Company, the traditional electric operating companies, Southern Power, Southern Company Gas, Southern Electric Generating Company, Southern Nuclear, SCS, Southern Communications Services, Inc., PowerSecure, and other subsidiaries
Southern HoldingsSouthern Company Holdings, Inc., a wholly-owned subsidiary of Southern Company
Southern NuclearSouthern Nuclear Operating Company, Inc., a wholly-owned subsidiary of Southern Company
Southern PowerSouthern Power Company and its subsidiaries
SouthStarSouthStar Energy Services, LLC (a Marketer), a wholly-owned subsidiary of Southern Company Gas
SP SolarSP Solar Holdings I, LP, a limited partnership indirectly owning substantially all of Southern Power's solar facilities, in which Southern Power has a 67% ownership interest
SP WindSP Wind Holdings II, LLC, a holding company owning a portfolio of eight operating wind facilities, in which Southern Power is the controlling partner in a tax equity arrangement
Subsidiary RegistrantsAlabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas
Tax ReformThe impact of the Tax Cuts and Jobs Act, which became effective on January 1, 2018
ToshibaToshiba Corporation, the parent company of Westinghouse
traditional electric operating companiesAlabama Power, Georgia Power, and Mississippi Power
TritonVCMTriton Container Investments, LLC, an investment of Southern Company Gas through May 29, 2019
VCMVogtle Construction Monitoring
VIEVariable interest entity
Virginia CommissionVirginia State Corporation Commission
Virginia Natural GasVirginia Natural Gas, Inc., a wholly-owned subsidiary of Southern Company Gas
Table of ContentsIndex to Financial Statements

DEFINITIONS
(continued)

TermMeaning
Vogtle 3 and 4 AgreementAgreement entered into with the EPC Contractor in 2008 by Georgia Power, acting for itself and as agent for the Vogtle Owners, and rejected in bankruptcy in July 2017, pursuant to which the EPC Contractor agreed to design, engineer, procure, construct, and test Plant Vogtle Units 3 and 4
6
Table of ContentsIndex to Financial Statements

DEFINITIONS
(continued)
TermMeaning
Vogtle OwnersGeorgia Power, Oglethorpe Power Corporation, MEAG Power, and Dalton
Vogtle Services AgreementThe June 2017 services agreement between the Vogtle Owners and the EPC Contractor, as amended and restated in July 2017, for the EPC Contractor to transition construction management of Plant Vogtle Units 3 and 4 to Southern Nuclear and to provide ongoing design, engineering, and procurement services to Southern Nuclear
WACOGWeighted average cost of gas
WestinghouseWestinghouse Electric Company LLC
XcelXcel Energy Inc.
7
    Table of Contents                                Index to Financial Statements

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements include, among other things, the potential and expected effects of the COVID-19 pandemic, statements concerning regulated rates, the strategic goals for the business, customer and sales growth, economic conditions, fuel and environmental cost recovery and other rate actions, projected equity ratios, current and proposed environmental regulations and related compliance plans and estimated expenditures, pending or potential litigation matters, access to sources of capital, financing activities, completion dates and costs of construction projects, matters related to the abandonment of the Kemper IGCC, completion of announced acquisitions, filings with state and federal regulatory authorities, and estimated construction plans and expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

the impact of recent and future federal and state regulatory changes, including tax, environmental, and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;
the potential effects of the continued COVID-19 pandemic, including, but not limited to, those described in Item 1A "Risk Factors" herein;
the extent and timing of costs and legal requirements related to CCR;
current and future litigation or regulatory investigations, proceedings, or inquiries, including litigation and other disputes related to the Kemper County energy facility;
the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate, including from the development and deployment of alternative energy sources;
variations in demand for electricity and natural gas;
available sources and costs of natural gas and other fuels;
the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities;
transmission constraints;
effects of inflation;
the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects, including Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale, and including changes in labor costs, availability, and productivity; challenges with management of contractors or vendors; subcontractor performance; adverse weather conditions; shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; delays due to judicial or regulatory action; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems; design and other licensing-based compliance matters, including, for nuclear units, the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance;
•
the ability to overcome or mitigate the current challenges at Plant Vogtle Units 3 and 4, including, but not limited to, those related to COVID-19, as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" in Item 1 herein, that could further impact the cost and schedule for the project;
legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4 and pipeline projects, including PSC approvals and FERC and NRC actions;
under certain specified circumstances, a decision by holders of more than 10% of the ownership interests of Plant Vogtle Units 3 and 4 not to proceed with construction and the ability of other Vogtle Owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases;
Table of ContentsIndex to Financial Statements

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements include, among other things, statements concerning the potential and expected effects of the COVID-19 pandemic, regulated rates, the strategic goals for the business, customer and sales growth, economic conditions, cost recovery and other rate actions, projected equity ratios, current and proposed environmental regulations and related compliance plans and estimated expenditures, pending or potential litigation matters, access to sources of capital, financing activities, completion dates and costs of construction projects, matters related to the abandonment of the Kemper IGCC, completion of announced dispositions, filings with state and federal regulatory authorities, and estimated construction plans and expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential," or "continue" or the negative of these terms or other similar terminology. There are various factors that could cause actual results to differ materially from those suggested by the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include:

•the impact of recent and future federal and state regulatory changes, including tax, environmental, and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;
•the potential effects of the continued COVID-19 pandemic, including, but not limited to, those described in Item 1A "Risk Factors" of the Form 10-K;
•the extent and timing of costs and legal requirements related to CCR;
•current and future litigation or regulatory investigations, proceedings, or inquiries, including litigation and other disputes related to the Kemper County energy facility;
•the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate, including from the development and deployment of alternative energy sources;
•variations in demand for electricity and natural gas;
•available sources and costs of natural gas and other fuels;
•the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities;
•transmission constraints;
•effects of inflation;
•the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects, including Plant Vogtle Units 3 and 4 (which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale) and Plant Barry Unit 8, due to current and future challenges which include, but are not limited to, changes in labor costs, availability, and productivity; challenges with management of contractors or vendors; subcontractor performance; adverse weather conditions; shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; delays due to judicial or regulatory action; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems; design and other licensing-based compliance matters, including, for nuclear units, inspections and the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance; and challenges related to the COVID-19 pandemic;
•the ability to overcome or mitigate the current challenges at Plant Vogtle Units 3 and 4, as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" in Item 1 herein, that could further impact the cost and schedule for the project;
•legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4, Plant Barry Unit 8, and pipeline projects, including PSC approvals and FERC and NRC actions;
•under certain specified circumstances, a decision by holders of more than 10% of the ownership interests of Plant Vogtle Units 3 and 4 not to proceed with construction and the ability of other Vogtle Owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases;
8
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
(continued)
•in the event Georgia Power becomes obligated to provide funding to MEAG Power with respect to the portion of MEAG Power's ownership interest in Plant Vogtle Units 3 and 4 involving JEA, any inability of Georgia Power to receive repayment of such funding;
•the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;
•investment performance of the employee and retiree benefit plans and nuclear decommissioning trust funds;
•advances in technology;technology, including the pace and extent of development of low- to no-carbon energy technologies and negative carbon concepts;
•performance of counterparties under ongoing renewable energy partnerships and development agreements;
•state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to ROE, equity ratios, additional generating capacity, and fuel and other cost recovery mechanisms;
•the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;
•the inherent risks involved in operating and constructing nuclear generating facilities;
•the inherent risks involved in transporting and storing natural gas;
•the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;
•internal restructuring or other restructuring options that may be pursued;
•potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;
•the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;
•the ability to obtain new short- and long-term contracts with wholesale customers;
•the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;
•interest rate fluctuations and financial market conditions and the results of financing efforts;
•access to capital markets and other financing sources;
•changes in Southern Company's and any of its subsidiaries' credit ratings;
•changes in the method of determining LIBOR or the replacement of LIBOR with an alternative reference rate;
•the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;
•catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, political unrest, or other similar occurrences;
•the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;
•impairments of goodwill or long-lived assets;
•the effect of accounting pronouncements issued periodically by standard-setting bodies; and
•other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Registrants from time to time with the SEC.
The Registrants expressly disclaim any obligation to update any forward-looking statements.
9
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PART I
Item 1. Financial Statements (Unaudited).
Page
11
12
13
14
16
1817
1817
1918
2019
2221
2322
2322
2423
2524
2726
2827
Condensed Statements of Comprehensive Income
28
2928
3029
3231
3332
3332
3433
3534
3736
3937
3937
4038
4139
4341
4442
10
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended June 30, For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 2020 2019 20212020
(in millions) (in millions) (in millions)
Operating Revenues:       Operating Revenues:
Retail electric revenues$3,182
 $3,540
 $6,260
 $6,623
Retail electric revenues$3,342 $3,078 
Wholesale electric revenues472
 542
 889
 1,041
Wholesale electric revenues545 418 
Other electric revenues168
 161
 320
 331
Other electric revenues170 151 
Natural gas revenues (includes alternative revenue programs of
$(2), $1, $7, and $-, respectively)		636
 689
 1,885
 2,163
Natural gas revenues (includes alternative revenue programs of $2 and $9, respectively)Natural gas revenues (includes alternative revenue programs of $2 and $9, respectively)1,694 1,249 
Other revenues162
 166
 284
 352
Other revenues159 122 
Total operating revenues4,620
 5,098
 9,638
 10,510
Total operating revenues5,910 5,018 
Operating Expenses:       Operating Expenses:
Fuel621
 914
 1,257
 1,764
Fuel848 636 
Purchased power200
 201
 381
 371
Purchased power207 181 
Cost of natural gas144
 191
 583
 877
Cost of natural gas583 439 
Cost of other sales74
 84
 129
 203
Cost of other sales82 55 
Other operations and maintenance1,203
 1,320
 2,498
 2,634
Other operations and maintenance1,372 1,296 
Depreciation and amortization873
 755
 1,730
 1,506
Depreciation and amortization871 857 
Taxes other than income taxes298
 299
 629
 628
Taxes other than income taxes345 330 
Estimated loss on Plant Vogtle Units 3 and 4149
 —
 149
 —
Estimated loss on Plant Vogtle Units 3 and 448 0 
(Gain) loss on dispositions, net—
 (8) (39) (2,506)(Gain) loss on dispositions, net(44)(39)
Total operating expenses3,562
 3,756
 7,317
 5,477
Total operating expenses4,312 3,755 
Operating Income1,058
 1,342
 2,321
 5,033
Operating Income1,598 1,263 
Other Income and (Expense):       Other Income and (Expense):
Allowance for equity funds used during construction35
 31
 68
 63
Allowance for equity funds used during construction46 34 
Earnings from equity method investments30
 33
 72
 81
Earnings from equity method investments45 42 
Interest expense, net of amounts capitalized(444) (429) (900) (859)Interest expense, net of amounts capitalized(450)(456)
Impairment of leveraged lease(154) —
 (154) —
Other income (expense), net101
 99
 204
 176
Other income (expense), net58 103 
Total other income and (expense)(432) (266) (710) (539)Total other income and (expense)(301)(277)
Earnings Before Income Taxes626
 1,076
 1,611
 4,494
Earnings Before Income Taxes1,297 986 
Income taxes5
 145
 150
 1,505
Income taxes190 145 
Consolidated Net Income621
 931
 1,461
 2,989
Consolidated Net Income1,107 841 
Dividends on preferred stock of subsidiaries4
 3
 7
 7
Dividends on preferred stock of subsidiaries4 4 
Net income (loss) attributable to noncontrolling interests5
 29
 (26) —
Net loss attributable to noncontrolling interestsNet loss attributable to noncontrolling interests(32)(31)
Consolidated Net Income Attributable to
Southern Company		$612
 $899
 $1,480
 $2,982
Consolidated Net Income Attributable to
Southern Company		$1,135 $868 
Common Stock Data:       Common Stock Data:
Earnings per share -       Earnings per share -
Basic$0.58
 $0.86
 $1.40
 $2.86
Basic$1.07 $0.82 
Diluted$0.58
 $0.85
 $1.39
 $2.84
Diluted$1.06 $0.81 
Average number of shares of common stock outstanding (in millions)       Average number of shares of common stock outstanding (in millions)
Basic1,058
 1,044
 1,057
 1,041
Basic1,060 1,057 
Diluted1,063
 1,052
 1,065
 1,049
Diluted1,066 1,067 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
11
    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended June 30, For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 2020 2019 20212020
(in millions) (in millions) (in millions)
Consolidated Net Income$621
 $931
 $1,461
 $2,989
Consolidated Net Income$1,107 $841 
Other comprehensive income (loss):       Other comprehensive income (loss):
Qualifying hedges:       Qualifying hedges:
Changes in fair value, net of tax of
$4, $(11), $(26), and $(21), respectively		10
 (32) (75) (60)
Reclassification adjustment for amounts included in net income,
net of tax of $(3), $(1), $10, and $8, respectively		(9) (3) 29
 24
Changes in fair value, net of tax of $(10) and $(30), respectivelyChanges in fair value, net of tax of $(10) and $(30), respectively(30)(86)
Reclassification adjustment for amounts included in net income,
net of tax of $18 and $13, respectively
Reclassification adjustment for amounts included in net income,
net of tax of $18 and $13, respectively
55 38 
Pension and other postretirement benefit plans:       Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,
net of tax of $1, $-, $2, and $-, respectively		3
 —
 3
 1
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $2, respectively
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $2, respectively
3 1 
Total other comprehensive income (loss)4
 (35) (43) (35)Total other comprehensive income (loss)28 (47)
Comprehensive Income625
 896
 1,418
 2,954
Comprehensive Income1,135 794 
Dividends on preferred stock of subsidiaries4
 3
 7
 7
Dividends on preferred stock of subsidiaries4 4 
Comprehensive income (loss) attributable to noncontrolling interests5
 29
 (26) —
Comprehensive loss attributable to noncontrolling interestsComprehensive loss attributable to noncontrolling interests(32)(31)
Consolidated Comprehensive Income Attributable to
Southern Company		$616
 $864
 $1,437
 $2,947
Consolidated Comprehensive Income Attributable to
Southern Company		$1,163 $821 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

12
    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 20212020
(in millions) (in millions)
Operating Activities:   Operating Activities:
Consolidated net income$1,461
 $2,989
Consolidated net income$1,107 $841 
Adjustments to reconcile consolidated net income to net cash provided from operating activities —   Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization, total1,916
 1,623
Depreciation and amortization, total964 949 
Deferred income taxes(218) 274
Deferred income taxes140 (58)
Utilization of federal investment tax credits—
 427
Allowance for equity funds used during construction(68) (63)Allowance for equity funds used during construction(46)(34)
Pension, postretirement, and other employee benefits(119) (65)Pension, postretirement, and other employee benefits(78)(67)
Settlement of asset retirement obligations(193) (143)Settlement of asset retirement obligations(109)(86)
Stock based compensation expense84
 75
Stock based compensation expense83 72 
Estimated loss on Plant Vogtle Units 3 and 4149
 —
Estimated loss on Plant Vogtle Units 3 and 448 0 
Storm damage reserve accruals117
 23
Impairment charges154
 32
Storm damage accrualsStorm damage accruals54 56 
(Gain) loss on dispositions, net(35) (2,512)(Gain) loss on dispositions, net(41)(38)
Natural gas cost under recovery – long-termNatural gas cost under recovery – long-term(185)0 
Other, net43
 (3)Other, net114 55 
Changes in certain current assets and liabilities —   Changes in certain current assets and liabilities —
-Receivables292
 653
-Receivables308 317 
-Prepayments(102) (53)-Prepayments(98)(110)
-Natural gas for sale182
 255
-Natural gas for sale, net of temporary LIFO liquidation-Natural gas for sale, net of temporary LIFO liquidation456 246 
-Natural gas cost under recovery-Natural gas cost under recovery(487)0 
-Other current assets(253) (18)-Other current assets63 (67)
-Accounts payable(467) (1,045)-Accounts payable(216)(504)
-Accrued taxes258
 511
-Accrued taxes(212)(102)
-Accrued compensation(347) (312)-Accrued compensation(417)(473)
-Retail fuel cost over recovery174
 2
-Accrued interest-Accrued interest(90)(60)
-Customer refunds(223) (35)-Customer refunds0 (103)
-Other current liabilities42
 (102)-Other current liabilities(116)60 
Net cash provided from operating activities2,847
 2,513
Net cash provided from operating activities1,242 894 
Investing Activities:   Investing Activities:
Business acquisitions, net of cash acquiredBusiness acquisitions, net of cash acquired(345)0 
Property additions(3,202) (3,484)Property additions(1,678)(1,560)
Nuclear decommissioning trust fund purchases(524) (405)Nuclear decommissioning trust fund purchases(550)(254)
Nuclear decommissioning trust fund sales519
 400
Nuclear decommissioning trust fund sales546 249 
Proceeds from dispositions and asset sales983
 5,000
Proceeds from dispositionsProceeds from dispositions20 982 
Cost of removal, net of salvage(130) (197)Cost of removal, net of salvage(85)(69)
Change in construction payables, net(103) (107)Change in construction payables, net(116)(141)
Investment in unconsolidated subsidiaries(78) (134)
Payments pursuant to LTSAs(91) (64)Payments pursuant to LTSAs(60)(26)
Other investing activities(29) (7)Other investing activities25 (70)
Net cash provided from (used for) investing activities(2,655) 1,002
Net cash used for investing activitiesNet cash used for investing activities(2,243)(889)
Financing Activities:   Financing Activities:
Increase (decrease) in notes payable, net(1,170) 83
Increase (decrease) in notes payable, net182 (685)
Proceeds —   Proceeds —
Long-term debt4,293
 1,390
Long-term debt2,150 2,653 
Common stock59
 452
Common stock14 52 
Short-term borrowings615
 250
Short-term borrowings325 565 
Redemptions and repurchases —   Redemptions and repurchases —
Long-term debt(2,444) (2,560)Long-term debt(384)(1,481)
Short-term borrowings(190) (1,850)Short-term borrowings(25)(100)
Capital contributions from noncontrolling interestsCapital contributions from noncontrolling interests313 16 
Distributions to noncontrolling interests(118) (82)Distributions to noncontrolling interests(46)(48)
Capital contributions from noncontrolling interests172
 5
Payment of common stock dividends(1,332) (1,269)Payment of common stock dividends(678)(655)
Other financing activities(170) (67)Other financing activities(117)(132)
Net cash used for financing activities(285) (3,648)
Net cash provided from financing activitiesNet cash provided from financing activities1,734 185 
Net Change in Cash, Cash Equivalents, and Restricted Cash(93) (133)Net Change in Cash, Cash Equivalents, and Restricted Cash733 190 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period1,978
 1,519
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period1,068 1,978 
Cash, Cash Equivalents, and Restricted Cash at End of Period$1,885
 $1,386
Cash, Cash Equivalents, and Restricted Cash at End of Period$1,801 $2,168 
Supplemental Cash Flow Information:   Supplemental Cash Flow Information:
Cash paid (received) during the period for —   Cash paid (received) during the period for —
Interest (net of $41 and $36 capitalized for 2020 and 2019, respectively)$852
 $844
Interest (net of $21 and $20 capitalized for 2021 and 2020, respectively)Interest (net of $21 and $20 capitalized for 2021 and 2020, respectively)$519 $490 
Income taxes, net(8) 210
Income taxes, net(51)(16)
Noncash transactions —   Noncash transactions —
Accrued property additions at end of period828
 988
Accrued property additions at end of period872 733 
Right-of-use assets obtained under operating leases87
 55
Right-of-use assets obtained under finance leases7
 33
Contributions from noncontrolling interestsContributions from noncontrolling interests89 0 
Contributions of wind turbine equipmentContributions of wind turbine equipment82 17 
Right-of-use assets obtained under leasesRight-of-use assets obtained under leases76 28 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
13
    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Assets At June 30, 2020 At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
 (in millions) (in millions)
Current Assets:    Current Assets:
Cash and cash equivalents $1,879
 $1,975
Cash and cash equivalents$1,770 $1,065 
Receivables —    Receivables —
Customer accounts receivable 1,613
 1,614
Energy marketing receivables 273
 428
Customer accountsCustomer accounts1,716 1,753 
Energy marketingEnergy marketing412 516 
Unbilled revenues 553
 599
Unbilled revenues544 672 
Other accounts and notes receivable 549
 817
Other accounts and notesOther accounts and notes478 512 
Accumulated provision for uncollectible accounts (89) (49)Accumulated provision for uncollectible accounts(124)(118)
Materials and supplies 1,490
 1,388
Materials and supplies1,504 1,478 
Fossil fuel for generation 609
 521
Fossil fuel for generation494 550 
Natural gas for sale 282
 479
Natural gas for sale197 460 
Prepaid expenses 502
 314
Prepaid expenses657 276 
Assets from risk management activities, net of collateral 120
 183
Assets from risk management activities, net of collateral100 147 
Regulatory assets – asset retirement obligations 252
 287
Regulatory assets – asset retirement obligations214 214 
Natural gas cost under recoveryNatural gas cost under recovery487 0 
Other regulatory assets 846
 885
Other regulatory assets788 810 
Assets held for sale —
 188
Other current assets 190
 188
Other current assets232 282 
Total current assets 9,069
 9,817
Total current assets9,469 8,617 
Property, Plant, and Equipment:    Property, Plant, and Equipment:
In service 107,320
 105,114
In service111,579 110,516 
Less: Accumulated depreciation 31,477
 30,765
Less: Accumulated depreciation32,887 32,397 
Plant in service, net of depreciation 75,843
 74,349
Plant in service, net of depreciation78,692 78,119 
Nuclear fuel, at amortized cost 835
 851
Nuclear fuel, at amortized cost820 818 
Construction work in progress 8,351
 7,880
Construction work in progress9,525 8,697 
Total property, plant, and equipment 85,029
 83,080
Total property, plant, and equipment89,037 87,634 
Other Property and Investments:    Other Property and Investments:
Goodwill 5,280
 5,280
Goodwill5,280 5,280 
Nuclear decommissioning trusts, at fair valueNuclear decommissioning trusts, at fair value2,346 2,303 
Equity investments in unconsolidated subsidiaries 1,363
 1,303
Equity investments in unconsolidated subsidiaries1,368 1,362 
Other intangible assets, net of amortization of $304 and $280
at June 30, 2020 and December 31, 2019, respectively		 511
 536
Nuclear decommissioning trusts, at fair value 2,014
 2,036
Other intangible assets, net of amortization of $339 and $328, respectivelyOther intangible assets, net of amortization of $339 and $328, respectively477 487 
Leveraged leases 647
 788
Leveraged leases562 556 
Miscellaneous property and investments 379
 391
Miscellaneous property and investments463 398 
Total other property and investments 10,194
 10,334
Total other property and investments10,496 10,386 
Deferred Charges and Other Assets:    Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization 1,776
 1,800
Operating lease right-of-use assets, net of amortization1,821 1,802 
Deferred charges related to income taxes 797
 798
Deferred charges related to income taxes803 796 
Unamortized loss on reacquired debt 290
 300
Unamortized loss on reacquired debt274 280 
Regulatory assets – asset retirement obligations, deferred 4,586
 4,094
Regulatory assets – asset retirement obligations, deferred4,966 4,934 
Other regulatory assets, deferred 6,606
 6,805
Other regulatory assets, deferred7,263 7,198 
Assets held for sale, deferred —
 601
Other deferred charges and assets 1,384
 1,071
Other deferred charges and assets1,264 1,288 
Total deferred charges and other assets 15,439
 15,469
Total deferred charges and other assets16,391 16,298 
Total Assets $119,731
 $118,700
Total Assets$125,393 $122,935 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

14
    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholders' Equity At June 30, 2020 At December 31, 2019Liabilities and Stockholders' EquityAt March 31, 2021At December 31, 2020
 (in millions) (in millions)
Current Liabilities:    Current Liabilities:
Securities due within one year $1,596
 $2,989
Securities due within one year$3,535 $3,507 
Notes payable 1,185
 2,055
Notes payable1,092 609 
Energy marketing trade payables 284
 442
Energy marketing trade payables475 494 
Accounts payable 1,787
 2,115
Accounts payable2,058 2,312 
Customer deposits 490
 496
Customer deposits470 487 
Accrued taxes —    Accrued taxes —
Accrued income taxes 27
 —
Accrued income taxes71 130 
Other accrued taxes 517
 659
Other accrued taxes412 699 
Accrued interest 499
 474
Accrued interest423 513 
Accrued compensation 666
 992
Accrued compensation584 1,025 
Asset retirement obligations 575
 504
Asset retirement obligations642 585 
Operating lease obligationsOperating lease obligations244 241 
Other regulatory liabilities 558
 756
Other regulatory liabilities462 509 
Liabilities held for sale —
 5
Operating lease obligations 235
 229
Other current liabilities 915
 830
Other current liabilities1,118 968 
Total current liabilities 9,334
 12,546
Total current liabilities11,586 12,079 
Long-term Debt 45,138
 41,798
Long-term Debt46,727 45,073 
Deferred Credits and Other Liabilities:    Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 8,298
 7,888
Accumulated deferred income taxes8,839 8,175 
Deferred credits related to income taxes 5,860
 6,078
Deferred credits related to income taxes5,676 5,767 
Accumulated deferred ITCs 2,271
 2,291
Accumulated deferred ITCs2,214 2,235 
Employee benefit obligations 1,789
 1,814
Employee benefit obligations2,091 2,213 
Operating lease obligations, deferred 1,611
 1,615
Operating lease obligations, deferred1,652 1,611 
Asset retirement obligations, deferred 9,699
 9,282
Asset retirement obligations, deferred10,043 10,099 
Accrued environmental remediation 220
 234
Accrued environmental remediation208 216 
Other cost of removal obligations 2,258
 2,239
Other cost of removal obligations2,215 2,211 
Other regulatory liabilities, deferred 371
 256
Other regulatory liabilities, deferred226 251 
Other deferred credits and liabilities 630
 609
Other deferred credits and liabilities557 480 
Total deferred credits and other liabilities 33,007
 32,306
Total deferred credits and other liabilities33,721 33,258 
Total Liabilities 87,479
 86,650
Total Liabilities92,034 90,410 
Redeemable Preferred Stock of Subsidiaries 291
 291
Redeemable Preferred Stock of Subsidiaries291 291 
Total Stockholders' Equity (See accompanying statements)
 31,961
 31,759
Total Stockholders' Equity (See accompanying statements)
33,068 32,234 
Total Liabilities and Stockholders' Equity $119,731
 $118,700
Total Liabilities and Stockholders' Equity$125,393 $122,935 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
15
    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

Southern Company Common Stockholders' Equity
 Number of
Common Shares		Common StockAccumulated
Other
Comprehensive Income
(Loss)
 IssuedTreasuryPar ValuePaid-In CapitalTreasuryRetained EarningsNoncontrolling InterestsTotal
 (in millions)
Balance at December 31, 20191,054 (1)$5,257 $11,734 $(42)$10,877 $(321)$4,254 $31,759 
Consolidated net income (loss)— — — — — 868 — (31)837 
Other comprehensive income (loss)— — — — — — (47)— (47)
Stock issued3 — 9 43 — — — — 52 
Stock-based compensation— — — 5 — — — — 5 
Cash dividends of $0.62 per share— — — — — (655)— — (655)
Capital contributions from
   noncontrolling interests		— — — — — — — 16 16 
Distributions to noncontrolling interests— — — — — — — (48)(48)
Other— — — — (2)(2)1 — (3)
Balance at March 31, 20201,057 (1)$5,266 $11,782 $(44)$11,088 $(367)$4,191 $31,916 
 Southern Company Common Stockholders' Equity    
 Number of
Common Shares		 Common Stock   Accumulated
Other
Comprehensive Income
(Loss)		    
 Issued Treasury Par Value Paid-In Capital Treasury Retained Earnings  Noncontrolling Interests Total
 (in millions)
Balance at December 31, 20181,035
 (1) $5,164
 $11,094
 $(38) $8,706
 $(203) $4,316
 $29,039
Consolidated net income (loss)—
 —
 —
 —
 —
 2,084
 —
 (29) 2,055
Stock issued6
 —
 28
 196
 —
 —
 —
 —
 224
Stock-based compensation—
 —
 —
 24
 —
 —
 —
 —
 24
Cash dividends of $0.60 per share—
 —
 —
 —
 —
 (623) —
 —
 (623)
Contributions from noncontrolling interests—
 —
 —
 —
 —
 —
 —
 3
 3
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (41) (41)
Other—
 —
 —
 7
 (2) —
 —
 1
 6
Balance at March 31, 20191,041
 (1) 5,192
 11,321
 (40) 10,167
 (203) 4,250
 30,687
Consolidated net income—
 —
 —
 —
 —
 899
 —
 29
 928
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 (35) —
 (35)
Stock issued5
 —
 25
 203
 —
 —
 —
 —
 228
Stock-based compensation—
 —
 —
 11
 —
 —
 —
 —
 11
Cash dividends of $0.62 per share—
 —
 —
 —
 —
 (646) —
 —
 (646)
Contributions from noncontrolling interests—
 —
 —
 —
 —
 —
 —
 2
 2
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (47) (47)
Other—
 —
 —
 5
 (1) —
 —
 (1) 3
Balance at June 30, 20191,046
 (1) $5,217
 $11,540
 $(41) $10,420
 $(238) $4,233
 $31,131
Table of ContentsIndex to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

 Southern Company Common Stockholders' Equity    
 Number of
Common Shares		 Common Stock   Accumulated
Other
Comprehensive Income
(Loss)		    
 Issued Treasury Par Value Paid-In Capital Treasury Retained Earnings  Noncontrolling Interests Total
 (in millions)
Balance at December 31, 20191,054
 (1) $5,257
 $11,734
 $(42) $10,877
 $(321) $4,254
 $31,759
Consolidated net income (loss)—
 —
 —
 —
 —
 868
 —
 (31) 837
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 (47) —
 (47)
Stock issued3
 —
 9
 43
 —
 —
 —
 —
 52
Stock-based compensation—
 —
 —
 5
 —
 —
 —
 —
 5
Cash dividends of $0.62 per share—
 —
 —
 —
 —
 (655) —
 —
 (655)
Contributions from noncontrolling interests—
 —
 —
 —
 —
 —
 —
 16
 16
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (48) (48)
Other—
 —
 —
 —
 (2) (2) 1
 —
 (3)
Balance at March 31, 20201,057
 (1) 5,266
 11,782
 (44) 11,088
 (367) 4,191
 31,916
Consolidated net income—
 —
 —
 —
 —
 612
 —
 5
 617
Other comprehensive income—
 —
 —
 —
 —
 —
 4
 —
 4
Stock issued—
 —
 —
 7
 —
 —
 —
 —
 7
Stock-based compensation—
 —
 —
 11
 —
 —
 —
 —
 11
Cash dividends of $0.64 per share—
 —
 —
 —
 —
 (677) —
 —
 (677)
Contributions from noncontrolling interests—
 —
 —
 —
 —
 —
 —
 165
 165
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (70) (70)
Other—
 —
 —
 (13) —
 1
 —
 —
 (12)
Balance at June 30, 20201,057
 (1) $5,266
 $11,787
 $(44) $11,024
 $(363) $4,291
 $31,961

Balance at December 31, 20201,058 (1)$5,268 $11,834 $(46)$11,311 $(395)$4,262 $32,234 
Consolidated net income (loss)— — — — — 1,135 — (32)1,103 
Other comprehensive income— — — — — — 28 — 28 
Stock issued2 — 5 9 — — — — 14 
Stock-based compensation— — — 9 — — — — 9 
Cash dividends of $0.64 per share— — — — — (678)— — (678)
Capital contributions from
   noncontrolling interests		— — — — — — — 403 403 
Distributions to noncontrolling interests— — — — — — — (46)(46)
Other— — — 2 — — — (1)1 
Balance at March 31, 20211,060 (1)$5,273 $11,854 $(46)$11,768 $(367)$4,586 $33,068 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements


ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Revenues:
Retail revenues$1,352 $1,205 
Wholesale revenues, non-affiliates92 56 
Wholesale revenues, affiliates32 19 
Other revenues83 71 
Total operating revenues1,559 1,351 
Operating Expenses:
Fuel291 215 
Purchased power, non-affiliates50 40 
Purchased power, affiliates30 18 
Other operations and maintenance361 350 
Depreciation and amortization211 200 
Taxes other than income taxes103 106 
Total operating expenses1,046 929 
Operating Income513 422 
Other Income and (Expense):
Allowance for equity funds used during construction12 10 
Interest expense, net of amounts capitalized(84)(88)
Other income (expense), net32 24 
Total other income and (expense)(40)(54)
Earnings Before Income Taxes473 368 
Income taxes110 84 
Net Income363 284 
Dividends on Preferred Stock4 4 
Net Income After Dividends on Preferred Stock$359 $280 

 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Operating Revenues:       
Retail revenues$1,223
 $1,378
 $2,427
 $2,592
Wholesale revenues, non-affiliates54
 62
 111
 123
Wholesale revenues, affiliates7
 4
 26
 63
Other revenues81
 69
 152
 143
Total operating revenues1,365
 1,513
 2,716
 2,921
Operating Expenses:       
Fuel199
 252
 415
 553
Purchased power, non-affiliates49
 47
 89
 84
Purchased power, affiliates30
 69
 49
 90
Other operations and maintenance342
 402
 690
 812
Depreciation and amortization202
 200
 402
 399
Taxes other than income taxes102
 98
 208
 200
Total operating expenses924
 1,068
 1,853
 2,138
Operating Income441
 445
 863
 783
Other Income and (Expense):       
Allowance for equity funds used during construction11
 14
 22
 28
Interest expense, net of amounts capitalized(83) (82) (171) (165)
Other income (expense), net26
 11
 48
 25
Total other income and (expense)(46) (57) (101) (112)
Earnings Before Income Taxes395
 388
 762
 671
Income taxes93
 89
 177
 151
Net Income302
 299
 585
 520
Dividends on Preferred Stock4
 3
 7
 7
Net Income After Dividends on Preferred Stock$298
 $296
 $578
 $513

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended March 31,
2020 2019 2020 2019 20212020
(in millions) (in millions) (in millions)
Net Income$302
 $299
 $585
 $520
Net Income$363 $284 
Other comprehensive income (loss):       Other comprehensive income (loss):
Qualifying hedges:       Qualifying hedges:
Reclassification adjustment for amounts included in net income,
net of tax of $-, $-, $1, and $1, respectively		1
 1
 2
 2
Reclassification adjustment for amounts included in net income,
net of tax of $0 and $0, respectively
Reclassification adjustment for amounts included in net income,
net of tax of $0 and $0, respectively
1 1 
Total other comprehensive income (loss)1
 1
 2
 2
Total other comprehensive income (loss)1 1 
Comprehensive Income$303
 $300
 $587
 $522
Comprehensive Income$364 $285 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
17
    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 20212020
(in millions) (in millions)
Operating Activities:   Operating Activities:
Net income$585
 $520
Net income$363 $284 
Adjustments to reconcile net income to net cash provided from operating activities —   Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total484
 493
Depreciation and amortization, total248 241 
Deferred income taxes38
 138
Deferred income taxes33 10 
Allowance for equity funds used during construction(22) (28)
Pension, postretirement, and other employee benefits(50) (13)Pension, postretirement, and other employee benefits(29)(25)
Settlement of asset retirement obligations(100) (43)Settlement of asset retirement obligations(49)(46)
Other, net45
 (1)Other, net(15)10 
Changes in certain current assets and liabilities —   Changes in certain current assets and liabilities —
-Receivables-Receivables40 93 
-Fossil fuel stock-Fossil fuel stock38 (15)
-Prepayments(62) (59)-Prepayments(73)(80)
-Materials and supplies(38) 5
-Materials and supplies(4)(22)
-Other current assets(65) (4)-Other current assets(11)(14)
-Accounts payable(232) (246)-Accounts payable(299)(305)
-Accrued taxes197
 8
-Accrued taxes104 100 
-Accrued compensation(75) (88)-Accrued compensation(105)(111)
-Retail fuel cost over recovery66
 —
-Retail fuel cost over recovery(18)47 
-Customer refunds(64) (1)
-Other current liabilities(33) 14
-Other current liabilities(9)(12)
Net cash provided from operating activities674
 695
Net cash provided from operating activities214 155 
Investing Activities:   Investing Activities:
Property additions(686) (833)Property additions(466)(340)
Nuclear decommissioning trust fund purchases(160) (139)Nuclear decommissioning trust fund purchases(310)(81)
Nuclear decommissioning trust fund sales160
 139
Nuclear decommissioning trust fund sales310 81 
Cost of removal, net of salvage(29) (48)Cost of removal, net of salvage(23)(15)
Change in construction payables(53) (103)Change in construction payables32 (65)
Other investing activities(15) (18)Other investing activities(9)(4)
Net cash used for investing activities(783) (1,002)Net cash used for investing activities(466)(424)
Financing Activities:   Financing Activities:
Proceeds —   
Redemptions — Pollution control revenue bondsRedemptions — Pollution control revenue bonds0 (87)
Capital contributions from parent company610
 1,254
Capital contributions from parent company600 610 
Pollution control revenue bonds87
 —
Redemptions —   
Pollution control revenue bonds(87) —
Senior notes—
 (200)
Payment of common stock dividends(479) (422)Payment of common stock dividends(246)(239)
Other financing activities(15) (15)Other financing activities(13)(11)
Net cash provided from financing activities116
 617
Net cash provided from financing activities341 273 
Net Change in Cash, Cash Equivalents, and Restricted Cash7
 310
Net Change in Cash, Cash Equivalents, and Restricted Cash89 4 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period894
 313
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period530 894 
Cash, Cash Equivalents, and Restricted Cash at End of Period$901
 $623
Cash, Cash Equivalents, and Restricted Cash at End of Period$619 $898 
Supplemental Cash Flow Information:   Supplemental Cash Flow Information:
Cash paid during the period for —   Cash paid during the period for —
Interest (net of $7 and $10 capitalized for 2020 and 2019, respectively)$161
 $154
Income taxes, net—
 63
Interest (net of $3 capitalized for both 2021 and 2020)Interest (net of $3 capitalized for both 2021 and 2020)$93 $92 
Noncash transactions —   Noncash transactions —
Accrued property additions at end of period147
 168
Accrued property additions at end of period198 135 
Right-of-use assets obtained under operating leases2
 5
Right-of-use assets obtained under finance leases1
 1
Right-of-use assets obtained under leasesRight-of-use assets obtained under leases1 3 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
18
    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At June 30, 2020 At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
 (in millions)(in millions)
Current Assets:    Current Assets:
Cash and cash equivalents $901
 $894
Cash and cash equivalents$619 $530 
Receivables —    Receivables —
Customer accounts receivable 407
 425
Customer accountsCustomer accounts394 429 
Unbilled revenues 153
 134
Unbilled revenues124 152 
Affiliated 37
 37
Affiliated35 31 
Other accounts and notes receivable 51
 72
Other accounts and notesOther accounts and notes71 66 
Accumulated provision for uncollectible accounts (21) (22)Accumulated provision for uncollectible accounts(33)(43)
Fossil fuel stock 250
 212
Fossil fuel stock197 235 
Materials and supplies 545
 512
Materials and supplies550 546 
Prepaid expenses 101
 50
Prepaid expenses114 42 
Other regulatory assets 226
 242
Other regulatory assets224 226 
Other current assets 55
 30
Other current assets43 33 
Total current assets 2,705
 2,586
Total current assets2,338 2,247 
Property, Plant, and Equipment:    Property, Plant, and Equipment:
In service 30,619
 30,023
In service32,015 31,816 
Less: Accumulated provision for depreciation 9,647
 9,540
Less: Accumulated provision for depreciation10,123 10,009 
Plant in service, net of depreciation 20,972
 20,483
Plant in service, net of depreciation21,892 21,807 
Nuclear fuel, at amortized cost 275
 296
Nuclear fuel, at amortized cost268 270 
Construction work in progress 830
 890
Construction work in progress1,052 866 
Total property, plant, and equipment 22,077
 21,669
Total property, plant, and equipment23,212 22,943 
Other Property and Investments:    Other Property and Investments:
Nuclear decommissioning trusts, at fair valueNuclear decommissioning trusts, at fair value1,198 1,157 
Equity investments in unconsolidated subsidiaries 63
 66
Equity investments in unconsolidated subsidiaries63 63 
Nuclear decommissioning trusts, at fair value 978
 1,023
Miscellaneous property and investments 131
 128
Miscellaneous property and investments128 131 
Total other property and investments 1,172
 1,217
Total other property and investments1,389 1,351 
Deferred Charges and Other Assets:    Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization 113
 132
Operating lease right-of-use assets, net of amortization140 151 
Deferred charges related to income taxes 243
 244
Deferred charges related to income taxes237 235 
Deferred under recovered regulatory clause revenues 41
 40
Regulatory assets – asset retirement obligations 1,491
 1,019
Regulatory assets – asset retirement obligations1,446 1,441 
Other regulatory assets, deferred 1,922
 1,976
Other regulatory assets, deferred2,161 2,162 
Other deferred charges and assets 362
 269
Other deferred charges and assets282 273 
Total deferred charges and other assets 4,172
 3,680
Total deferred charges and other assets4,266 4,262 
Total Assets $30,126
 $29,152
Total Assets$31,205 $30,803 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

19
    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's Equity At June 30, 2020 At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
 (in millions) (in millions)
Current Liabilities:    Current Liabilities:
Securities due within one year $496
 $251
Securities due within one year$815 $311 
Accounts payable —    Accounts payable —
Affiliated 261
 316
Affiliated220 316 
Other 312
 514
Other392 545 
Customer deposits 103
 100
Customer deposits105 104 
Accrued taxes 274
 78
Accrued taxes257 152 
Accrued interest 93
 92
Accrued interest75 90 
Accrued compensation 156
 216
Accrued compensation113 212 
Asset retirement obligations 254
 195
Asset retirement obligations275 254 
Other regulatory liabilities 73
 193
Other regulatory liabilities98 108 
Other current liabilities 101
 105
Other current liabilities108 107 
Total current liabilities 2,123
 2,060
Total current liabilities2,458 2,199 
Long-term Debt 8,028
 8,270
Long-term Debt8,055 8,558 
Deferred Credits and Other Liabilities:    Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 3,325
 3,260
Accumulated deferred income taxes3,318 3,273 
Deferred credits related to income taxes 1,932
 1,960
Deferred credits related to income taxes2,006 2,016 
Accumulated deferred ITCs 97
 100
Accumulated deferred ITCs92 94 
Employee benefit obligations 200
 206
Employee benefit obligations187 214 
Operating lease obligations 91
 107
Operating lease obligations112 119 
Asset retirement obligations, deferred 3,722
 3,345
Asset retirement obligations, deferred3,688 3,720 
Other cost of removal obligations 392
 412
Other cost of removal obligations320 335 
Other regulatory liabilities, deferred 217
 146
Other regulatory liabilities, deferred98 124 
Other deferred credits and liabilities 38
 40
Other deferred credits and liabilities54 50 
Total deferred credits and other liabilities 10,014
 9,576
Total deferred credits and other liabilities9,875 9,945 
Total Liabilities 20,165
 19,906
Total Liabilities20,388 20,702 
Redeemable Preferred Stock 291
 291
Redeemable Preferred Stock291 291 
Common Stockholder's Equity (See accompanying statements)
 9,670
 8,955
Common Stockholder's Equity (See accompanying statements)
10,526 9,810 
Total Liabilities and Stockholder's Equity $30,126
 $29,152
Total Liabilities and Stockholder's Equity$31,205 $30,803 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
20
    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

Number of
Common
Shares
Issued		Common
Stock		Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
(in millions)
Balance at December 31, 2019Balance at December 31, 201931 $1,222 $4,755 $3,001 $(23)$8,955 
Net income after dividends on
preferred stock		Net income after dividends on
preferred stock		— — — 280 — 280 
Capital contributions from parent companyCapital contributions from parent company— — 612 — — 612 
Other comprehensive incomeOther comprehensive income— — — — 1 1 
Cash dividends on common stockCash dividends on common stock— — — (239)— (239)
Balance at March 31, 2020Balance at March 31, 202031 $1,222 $5,367 $3,042 $(22)$9,609 
Number of
Common
Shares
Issued		 Common
Stock		 Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income (Loss)		 Total
(in millions)
Balance at December 31, 201831
 $1,222
 $3,508
 $2,775
 $(28) $7,477
Balance at December 31, 2020Balance at December 31, 202031 $1,222 $5,413 $3,194 $(19)$9,810 
Net income after dividends on
preferred stock		—
 —
 —
 217
 —
 217
Net income after dividends on
preferred stock		— — — 359 — 359 
Capital contributions from parent company—
 —
 1,236
 —
 —
 1,236
Capital contributions from parent company— — 602 — — 602 
Other comprehensive income—
 —
 —
 —
 1
 1
Other comprehensive income— — — — 1 1 
Cash dividends on common stock—
 —
 —
 (211) —
 (211)Cash dividends on common stock— — — (246)— (246)
Balance at March 31, 201931
 1,222
 4,744
 2,781
 (27) 8,720
Net income after dividends on
preferred stock		—
 —
 —
 296
 —
 296
Capital contributions from parent company—
 —
 23
 —
 —
 23
Other comprehensive income—
 —
 —
 —
 1
 1
Cash dividends on common stock—
 —
 —
 (211) —
 (211)
Balance at June 30, 201931
 $1,222
 $4,767
 $2,866
 $(26) $8,829
           
Balance at December 31, 201931
 $1,222
 $4,755
 $3,001
 $(23) $8,955
Net income after dividends on
preferred stock		—
 —
 —
 280
 —
 280
Capital contributions from parent company—
 —
 612
 —
 —
 612
Other comprehensive income—
 —
 —
 —
 1
 1
Cash dividends on common stock—
 —
 —
 (239) —
 (239)
Balance at March 31, 202031
 1,222
 5,367
 3,042
 (22) 9,609
Net income after dividends on
preferred stock		—
 —
 —
 298
 —
 298
Capital contributions from parent company—
 —
 1
 —
 —
 1
Other comprehensive income—
 —
 —
 —
 1
 1
Cash dividends on common stock—
 —
 —
 (239) —
 (239)
Balance at June 30, 202031
 $1,222
 $5,368
 $3,101
 $(21) $9,670
Balance at March 31, 2021Balance at March 31, 202131 $1,222 $6,015 $3,307 $(18)$10,526 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

21
    Table of Contents                                Index to Financial Statements


GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Revenues:
Retail revenues$1,787 $1,675 
Wholesale revenues43 26 
Other revenues140 124 
Total operating revenues1,970 1,825 
Operating Expenses:
Fuel313 231 
Purchased power, non-affiliates144 129 
Purchased power, affiliates136 129 
Other operations and maintenance474 465 
Depreciation and amortization338 352 
Taxes other than income taxes116 113 
Estimated loss on Plant Vogtle Units 3 and 448 0 
Total operating expenses1,569 1,419 
Operating Income401 406 
Other Income and (Expense):
Interest expense, net of amounts capitalized(104)(111)
Other income (expense), net72 52 
Total other income and (expense)(32)(59)
Earnings Before Income Taxes369 347 
Income taxes18 16 
Net Income$351 $331 
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Operating Revenues:       
Retail revenues$1,760
 $1,946
 $3,435
 $3,614
Wholesale revenues25
 36
 51
 67
Other revenues143
 135
 268
 270
Total operating revenues1,928
 2,117
 3,754
 3,951
Operating Expenses:       
Fuel226
 390
 458
 689
Purchased power, non-affiliates133
 124
 262
 242
Purchased power, affiliates122
 134
 251
 310
Other operations and maintenance463
 463
 928
 913
Depreciation and amortization354
 244
 707
 483
Taxes other than income taxes108
 115
 221
 220
Estimated loss on Plant Vogtle Units 3 and 4149
 —
 149
 —
Total operating expenses1,555
 1,470
 2,976
 2,857
Operating Income373
 647
 778
 1,094
Other Income and (Expense):       
Interest expense, net of amounts capitalized(105) (105) (216) (201)
Other income (expense), net51
 35
 103
 77
Total other income and (expense)(54) (70) (113) (124)
Earnings Before Income Taxes319
 577
 665
 970
Income taxes11
 129
 27
 211
Net Income$308
 $448
 $638
 $759
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For the Three Months Ended June 30, For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 2020 2019 20212020
(in millions) (in millions) (in millions)
Net Income$308
 $448
 $638
 $759
Net Income$351 $331 
Other comprehensive income (loss):       Other comprehensive income (loss):
Qualifying hedges:       Qualifying hedges:
Changes in fair value, net of tax of $-, $(9), $(1), and $(9), respectively—
 (28) (2) (28)
Reclassification adjustment for amounts included in net income,
net of tax of $1, $-, $1, and $-, respectively		2
 1
 3
 1
Changes in fair value, net of tax of $0 and $(1), respectivelyChanges in fair value, net of tax of $0 and $(1), respectively0 (2)
Reclassification adjustment for amounts included in net income,
net of tax of $0 and $1, respectively
Reclassification adjustment for amounts included in net income,
net of tax of $0 and $1, respectively
2 1 
Total other comprehensive income (loss)2
 (27) 1
 (27)Total other comprehensive income (loss)2 (1)
Comprehensive Income$310
 $421
 $639
 $732
Comprehensive Income$353 $330 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
22
    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 20212020
(in millions) (in millions)
Operating Activities:   Operating Activities:
Net income$638
 $759
Net income$351 $331 
Adjustments to reconcile net income to net cash provided from operating activities —   Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total800
 583
Depreciation and amortization, total384 396 
Deferred income taxes(202) 153
Deferred income taxes(86)(73)
Allowance for equity funds used during construction(40) (31)
Pension, postretirement, and other employee benefits(55) (56)Pension, postretirement, and other employee benefits(43)(40)
Settlement of asset retirement obligations(78) (76)Settlement of asset retirement obligations(49)(33)
Storm damage reserve accruals107
 15
Storm damage accrualsStorm damage accruals53 53 
Retail fuel cost over recovery – long-termRetail fuel cost over recovery – long-term0 90 
Estimated loss on Plant Vogtle Units 3 and 4149
 —
Estimated loss on Plant Vogtle Units 3 and 448 0 
Other, net19
 17
Other, net(19)(52)
Changes in certain current assets and liabilities —   Changes in certain current assets and liabilities —
-Receivables(73) (43)-Receivables176 22 
-Fossil fuel stock(52) (26)-Fossil fuel stock10 (42)
-Prepaid income taxes—
 63
-Materials and supplies(61) 2
-Other current assets(26) 19
-Other current assets(7)(15)
-Accounts payable—
 (94)-Accounts payable(74)(69)
-Accrued taxes87
 (139)-Accrued taxes(110)(156)
-Accrued compensation(69) (32)-Accrued compensation(68)(87)
-Retail fuel cost over recovery109
 —
-Customer refunds(159) (19)-Customer refunds0 (107)
-Other current liabilities30
 17
-Other current liabilities(77)(5)
Net cash provided from operating activities1,124
 1,112
Net cash provided from operating activities489 213 
Investing Activities:   Investing Activities:
Property additions(1,650) (1,712)Property additions(775)(849)
Nuclear decommissioning trust fund purchases(365) (266)Nuclear decommissioning trust fund purchases(241)(173)
Nuclear decommissioning trust fund sales359
 260
Nuclear decommissioning trust fund sales236 167 
Cost of removal, net of salvage(62) (107)Cost of removal, net of salvage(40)(34)
Change in construction payables, net of joint owner portion(48) (5)Change in construction payables, net of joint owner portion(103)(46)
Payments pursuant to LTSAs(41) (9)
Proceeds from dispositions and asset sales143
 9
Proceeds from dispositionsProceeds from dispositions1 142 
Other investing activities5
 (4)Other investing activities9 (2)
Net cash used for investing activities(1,659) (1,834)Net cash used for investing activities(913)(795)
Financing Activities:   Financing Activities:
Increase (decrease) in notes payable, net(25) 11
Increase in notes payable, netIncrease in notes payable, net145 11 
Proceeds —   Proceeds —
FFB loan519
 835
Senior notes1,500
 —
Senior notes750 1,500 
Pollution control revenue bonds53
 513
Pollution control revenue bonds0 53 
Short-term borrowings250
 250
Short-term borrowings0 200 
Capital contributions from parent company500
 46
Redemptions and repurchases —   Redemptions and repurchases —
Senior notes(950) —
Senior notes(325)(950)
Pollution control revenue bonds(148) (223)Pollution control revenue bonds0 (148)
FFB loan(32) —
FFB loan(25)(16)
Capital contributions from parent companyCapital contributions from parent company330 500 
Payment of common stock dividends(771) (788)Payment of common stock dividends(412)(385)
Other financing activities(27) (24)Other financing activities(19)(23)
Net cash provided from financing activities869
 620
Net cash provided from financing activities444 742 
Net Change in Cash, Cash Equivalents, and Restricted Cash334
 (102)Net Change in Cash, Cash Equivalents, and Restricted Cash20 160 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period52
 112
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period9 52 
Cash, Cash Equivalents, and Restricted Cash at End of Period$386
 $10
Cash, Cash Equivalents, and Restricted Cash at End of Period$29 $212 
Supplemental Cash Flow Information:   Supplemental Cash Flow Information:
Cash paid (received) during the period for —   
Interest (net of $22 and $16 capitalized for 2020 and 2019, respectively)$180
 $179
Income taxes, net—
 (6)
Cash paid during the period for —Cash paid during the period for —
Interest (net of $15 and $11 capitalized for 2021 and 2020, respectively)Interest (net of $15 and $11 capitalized for 2021 and 2020, respectively)$128 $122 
Noncash transactions —   Noncash transactions —
Accrued property additions at end of period478
 650
Accrued property additions at end of period445 472 
Right-of-use assets obtained under operating leases29
 13
Right-of-use assets obtained under operating leases3 10 
Right-of-use assets obtained under finance leases—
 28
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
23
    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At June 30, 2020 At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
 (in millions) (in millions)
Current Assets:    Current Assets:
Cash and cash equivalents $386
 $52
Cash and cash equivalents$29 $9 
Receivables —    Receivables —
Customer accounts receivable 580
 533
Customer accountsCustomer accounts532 621 
Unbilled revenues 261
 203
Unbilled revenues196 233 
Joint owner accounts receivable 104
 136
Joint owner accountsJoint owner accounts124 123 
Affiliated 28
 21
Affiliated22 21 
Other accounts and notes receivable 42
 209
Other accounts and notesOther accounts and notes35 67 
Accumulated provision for uncollectible accounts (28) (2)Accumulated provision for uncollectible accounts(26)(26)
Fossil fuel stock 324
 272
Fossil fuel stock268 278 
Materials and supplies 558
 501
Materials and supplies610 592 
Prepaid expenses 58
 63
Regulatory assets – storm damage reserves 213
 213
Regulatory assets – storm damageRegulatory assets – storm damage213 213 
Regulatory assets – asset retirement obligations 215
 254
Regulatory assets – asset retirement obligations175 166 
Other regulatory assets 276
 263
Other regulatory assets250 248 
Other current assets 62
 77
Other current assets114 143 
Total current assets 3,079
 2,795
Total current assets2,542 2,688 
Property, Plant, and Equipment:    Property, Plant, and Equipment:
In service 38,852
 38,137
In service39,857 39,682 
Less: Accumulated provision for depreciation 11,964
 11,753
Less: Accumulated provision for depreciation12,421 12,251 
Plant in service, net of depreciation 26,888
 26,384
Plant in service, net of depreciation27,436 27,431 
Nuclear fuel, at amortized cost 560
 555
Nuclear fuel, at amortized cost553 548 
Construction work in progress 6,254
 5,650
Construction work in progress7,394 6,857 
Total property, plant, and equipment 33,702
 32,589
Total property, plant, and equipment35,383 34,836 
Other Property and Investments:    Other Property and Investments:
Nuclear decommissioning trusts, at fair valueNuclear decommissioning trusts, at fair value1,149 1,145 
Equity investments in unconsolidated subsidiaries 50
 52
Equity investments in unconsolidated subsidiaries51 51 
Nuclear decommissioning trusts, at fair value 1,036
 1,013
Miscellaneous property and investments 65
 64
Miscellaneous property and investments66 63 
Total other property and investments 1,151
 1,129
Total other property and investments1,266 1,259 
Deferred Charges and Other Assets:    Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization 1,382
 1,428
Operating lease right-of-use assets, net of amortization1,273 1,308 
Deferred charges related to income taxes 519
 519
Deferred charges related to income taxes532 527 
Regulatory assets – asset retirement obligations, deferred 2,894
 2,865
Regulatory assets – asset retirement obligations, deferred3,310 3,291 
Other regulatory assets, deferred 2,610
 2,716
Other regulatory assets, deferred2,609 2,692 
Other deferred charges and assets 488
 500
Other deferred charges and assets434 479 
Total deferred charges and other assets 7,893
 8,028
Total deferred charges and other assets8,158 8,297 
Total Assets $45,825
 $44,541
Total Assets$47,349 $47,080 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

24
    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's Equity At June 30, 2020 At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
 (in millions) (in millions)
Current Liabilities:    Current Liabilities:
Securities due within one year $536
 $1,025
Securities due within one year$87 $542 
Notes payable 465
 365
Notes payable205 60 
Accounts payable —    Accounts payable —
Affiliated 493
 512
Affiliated472 597 
Other 672
 711
Other732 753 
Customer deposits 284
 283
Customer deposits272 276 
Accrued taxes 442
 407
Accrued taxes239 407 
Accrued interest 133
 118
Accrued interest96 130 
Accrued compensation 152
 233
Accrued compensation123 233 
Operating lease obligations 150
 144
Operating lease obligations151 151 
Asset retirement obligations 279
 265
Asset retirement obligations304 287 
Over recovered fuel clause revenues 109
 —
Over recovered fuel clause revenues83 113 
Other regulatory liabilities 290
 447
Other regulatory liabilities235 228 
Other current liabilities 206
 187
Other current liabilities242 254 
Total current liabilities 4,211
 4,697
Total current liabilities3,241 4,031 
Long-term Debt 12,337
 10,791
Long-term Debt13,278 12,428 
Deferred Credits and Other Liabilities:    Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 3,190
 3,257
Accumulated deferred income taxes3,303 3,272 
Deferred credits related to income taxes 2,730
 2,862
Deferred credits related to income taxes2,517 2,588 
Accumulated deferred ITCs 273
 255
Accumulated deferred ITCs271 273 
Employee benefit obligations 500
 540
Employee benefit obligations539 586 
Operating lease obligations, deferred 1,258
 1,282
Operating lease obligations, deferred1,149 1,156 
Asset retirement obligations, deferred 5,556
 5,519
Asset retirement obligations, deferred5,971 5,978 
Other deferred credits and liabilities 333
 273
Other deferred credits and liabilities306 267 
Total deferred credits and other liabilities 13,840
 13,988
Total deferred credits and other liabilities14,056 14,120 
Total Liabilities 30,388
 29,476
Total Liabilities30,575 30,579 
Common Stockholder's Equity (See accompanying statements)
 15,437
 15,065
Common Stockholder's Equity (See accompanying statements)
16,774 16,501 
Total Liabilities and Stockholder's Equity $45,825
 $44,541
Total Liabilities and Stockholder's Equity$47,349 $47,080 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
25
    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

Number of
Common
Shares
Issued		Common
Stock		Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
(in millions)
Balance at December 31, 2019Balance at December 31, 20199 $398 $10,962 $3,756 $(51)$15,065 
Net incomeNet income— — — 331 — 331 
Capital contributions from parent companyCapital contributions from parent company— — 502 — — 502 
Other comprehensive income (loss)Other comprehensive income (loss)— — — — (1)(1)
Cash dividends on common stockCash dividends on common stock— — — (385)— (385)
Balance at March 31, 2020Balance at March 31, 20209 $398 $11,464 $3,702 $(52)$15,512 
Number of
Common
Shares
Issued		 Common
Stock		 Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income (Loss)		 Total    
(in millions)
Balance at December 31, 20189
 $398
 $10,322
 $3,612
 $(9) $14,323
Balance at December 31, 2020Balance at December 31, 20209 $398 $12,361 $3,789 $(47)$16,501 
Net income—
 —
 —
 311
 —
 311
Net income— — — 351 — 351 
Capital contributions from parent company—
 —
 29
 —
 —
 29
Capital contributions from parent company— — 332 — — 332 
Other comprehensive income—
 —
 —
 —
 1
 1
Other comprehensive income— — — — 2 2 
Cash dividends on common stock—
 —
 —
 (394) —
 (394)Cash dividends on common stock— — — (412)— (412)
Other—
 —
 (1) —
 —
 (1)
Balance at March 31, 20199
 398
 10,350
 3,529
 (8) 14,269
Net income—
 —
 —
 448
 —
 448
Capital contributions from parent company—
 —
 20
 —
 —
 20
Other comprehensive income (loss)—
 —
 —
 —
 (27) (27)
Cash dividends on common stock—
 —
 —
 (394) —
 (394)
Other—
 —
 1
 (1) —
 —
Balance at June 30, 20199
 $398
 $10,371
 $3,582
 $(35) $14,316
           
Balance at December 31, 20199
 $398
 $10,962
 $3,756
 $(51) $15,065
Net income—
 —
 —
 331
 —
 331
Capital contributions from parent company—
 —
 502
 —
 —
 502
Other comprehensive income (loss)—
 —
 —
 —
 (1) (1)
Cash dividends on common stock—
 —
 —
 (385) —
 (385)
Balance at March 31, 20209
 398
 11,464
 3,702
 (52) 15,512
Net income—
 —
 —
 308
 —
 308
Capital contributions from parent company—
 —
 1
 —
 —
 1
Other comprehensive income—
 —
 —
 —
 2
 2
Cash dividends on common stock—
 —
 —
 (386) —
 (386)
Balance at June 30, 20209
 $398
 $11,465
 $3,624
 $(50) $15,437
Balance at March 31, 2021Balance at March 31, 20219 $398 $12,693 $3,728 $(45)$16,774 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

26
    Table of Contents                                Index to Financial Statements


MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Revenues:
Retail revenues$204 $199 
Wholesale revenues, non-affiliates63 51 
Wholesale revenues, affiliates33 21 
Other revenues7 6 
Total operating revenues307 277 
Operating Expenses:
Fuel101 79 
Purchased power5 5 
Other operations and maintenance68 76 
Depreciation and amortization47 42 
Taxes other than income taxes31 29 
Total operating expenses252 231 
Operating Income55 46 
Other Income and (Expense):
Interest expense, net of amounts capitalized(14)(16)
Other income (expense), net8 8 
Total other income and (expense)(6)(8)
Earnings Before Income Taxes49 38 
Income taxes4 6 
Net Income and Comprehensive Income$45 $32 
27
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Operating Revenues:       
Retail revenues$199
 $215
 $398
 $418
Wholesale revenues, non-affiliates52
 57
 103
 114
Wholesale revenues, affiliates25
 37
 47
 58
Other revenues7
 4
 11
 10
Total operating revenues283
 313
 559
 600
Operating Expenses:       
Fuel83
 105
 162
 198
Purchased power7
 6
 12
 9
Other operations and maintenance67
 72
 142
 133
Depreciation and amortization46
 48
 88
 95
Taxes other than income taxes30
 28
 59
 55
Total operating expenses233
 259
 463
 490
Operating Income50
 54
 96
 110
Other Income and (Expense):       
Interest expense, net of amounts capitalized(15) (17) (31) (35)
Other income (expense), net6
 5
 14
 11
Total other income and (expense)(9) (12) (17) (24)
Earnings Before Income Taxes41
 42
 79
 86
Income taxes2
 5
 8
 12
Net Income$39
 $37
 $71
 $74
Table of ContentsIndex to Financial Statements
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOMECASH FLOWS (UNAUDITED)
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Net Income$39
 $37
 $71
 $74
Other comprehensive income (loss):       
Qualifying hedges:       
Changes in fair value, net of tax of $-, $-, $-, and $-, respectively—
 —
 (1) —
Reclassification adjustment for amounts included in net income,
net of tax of $-, $-, $-, and $-, respectively		—
 —
 1
 1
Total other comprehensive income (loss)—
 —
 —
 1
Comprehensive Income$39
 $37
 $71
 $75
For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Activities:
Net income$45 $32 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total53 44 
Other, net(10)(3)
Changes in certain current assets and liabilities —
-Receivables7 14 
-Other current assets1 (10)
-Accounts payable(30)(24)
-Accrued taxes(75)(54)
-Accrued compensation(16)(19)
-Other current liabilities(13)3 
Net cash used for operating activities(38)(17)
Investing Activities:
Property additions(45)(50)
Construction payables(8)(10)
Payments pursuant to LTSAs(7)(5)
Other investing activities(7)(6)
Net cash used for investing activities(67)(71)
Financing Activities:
Increase in notes payable, net29 0 
Proceeds —
Short-term borrowings0 40 
Other long-term debt0 100 
Redemptions — Senior notes0 (275)
Capital contributions from parent company100 75 
Return of capital to parent company0 (37)
Payment of common stock dividends(39)0 
Other financing activities0 (1)
Net cash provided from (used for) financing activities90 (98)
Net Change in Cash, Cash Equivalents, and Restricted Cash(15)(186)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period39 286 
Cash, Cash Equivalents, and Restricted Cash at End of Period$24 $100 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $0 and $0 capitalized for 2021 and 2020, respectively)$16 $18 
Noncash transactions — Accrued property additions at end of period26 25 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
28
    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWSBALANCE SHEETS (UNAUDITED)
 For the Six Months Ended June 30,
 2020 2019
 (in millions)
Operating Activities:   
Net income$71
 $74
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total92
 98
Deferred income taxes(13) (16)
Settlement of asset retirement obligations(9) (17)
Other, net9
 12
Changes in certain current assets and liabilities —   
-Receivables(7) (8)
-Other current assets(6) (3)
-Accounts payable(19) (28)
-Accrued taxes(21) (43)
-Accrued compensation(15) (15)
-Other current liabilities(11) 6
Net cash provided from operating activities71
 60
Investing Activities:   
Property additions(111) (95)
Construction payables(14) (12)
Payments pursuant to LTSAs(10) (11)
Other investing activities(10) (10)
Net cash used for investing activities(145) (128)
Financing Activities:   
Proceeds —   
Capital contributions from parent company75
 7
Short-term borrowings40
 —
Pollution control revenue bonds34
 43
Other long-term debt100
 —
Redemptions —   
Senior notes(275) —
Short-term borrowings(40) —
Pollution control revenue bonds(41) —
Return of capital to parent company(74) (75)
Other financing activities3
 (1)
Net cash used for financing activities(178) (26)
Net Change in Cash, Cash Equivalents, and Restricted Cash(252) (94)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period286
 293
Cash, Cash Equivalents, and Restricted Cash at End of Period$34
 $199
Supplemental Cash Flow Information:   
Cash paid during the period for —   
Interest (net of $- and $(1) capitalized for 2020 and 2019, respectively)$33
 $36
Income taxes, net—
 23
Noncash transactions — Accrued property additions at end of period21
 23
AssetsAt March 31, 2021At December 31, 2020
 (in millions)
Current Assets:
Cash and cash equivalents$24 $39 
Receivables —
Customer accounts, net50 34 
Unbilled revenues33 38 
Affiliated17 32 
Other accounts and notes29 32 
Fossil fuel stock17 24 
Materials and supplies67 65 
Other regulatory assets49 60 
Other current assets20 20 
Total current assets306 344 
Property, Plant, and Equipment:
In service5,037 5,011 
Less: Accumulated provision for depreciation1,579 1,545 
Plant in service, net of depreciation3,458 3,466 
Construction work in progress163 146 
Total property, plant, and equipment3,621 3,612 
Other Property and Investments149 151 
Deferred Charges and Other Assets:
Deferred charges related to income taxes32 32 
Regulatory assets – asset retirement obligations211 201 
Other regulatory assets, deferred386 388 
Accumulated deferred income taxes126 129 
Other deferred charges and assets64 55 
Total deferred charges and other assets819 805 
Total Assets$4,895 $4,912 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

29
    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At June 30, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $34
 $286
Receivables —    
Customer accounts receivable 39
 35
Unbilled revenues 41
 39
Affiliated 31
 27
Other accounts and notes receivable 24
 26
Fossil fuel stock 24
 26
Materials and supplies 62
 61
Other regulatory assets 73
 99
Other current assets 8
 10
Total current assets 336
 609
Property, Plant, and Equipment:    
In service 4,948
 4,857
Less: Accumulated provision for depreciation 1,522
 1,463
Plant in service, net of depreciation 3,426
 3,394
Construction work in progress 132
 126
Total property, plant, and equipment 3,558
 3,520
Other Property and Investments 129
 131
Deferred Charges and Other Assets:    
Deferred charges related to income taxes 32
 32
Regulatory assets – asset retirement obligations 200
 210
Other regulatory assets, deferred 376
 360
Accumulated deferred income taxes 134
 139
Other deferred charges and assets 56
 34
Total deferred charges and other assets 798
 775
Total Assets $4,821
 $5,035
Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
 (in millions)
Current Liabilities:
Securities due within one year$421 $406 
Notes payable54 25 
Accounts payable —
Affiliated50 63 
Other84 109 
Accrued taxes39 114 
Accrued interest14 15 
Accrued compensation18 34 
Asset retirement obligations40 27 
Over recovered regulatory clause liabilities26 34 
Other regulatory liabilities36 49 
Other current liabilities38 40 
Total current liabilities820 916 
Long-term Debt996 1,013 
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes463 447 
Deferred credits related to income taxes285 287 
Employee benefit obligations107 113 
Asset retirement obligations, deferred134 150 
Other cost of removal obligations194 194 
Other regulatory liabilities, deferred14 15 
Other deferred credits and liabilities34 35 
Total deferred credits and other liabilities1,231 1,241 
Total Liabilities3,047 3,170 
Common Stockholder's Equity (See accompanying statements)
1,848 1,742 
Total Liabilities and Stockholder's Equity$4,895 $4,912 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

30
    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETSSTATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
Liabilities and Stockholder's Equity At June 30, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $—
 $281
Notes payable 4
 —
Accounts payable —    
Affiliated 75
 76
Other 44
 75
Accrued taxes 84
 105
Accrued interest 15
 15
Accrued compensation 21
 35
Asset retirement obligations 28
 33
Over recovered regulatory clause liabilities 29
 29
Other regulatory liabilities 47
 21
Other current liabilities 59
 64
Total current liabilities 406
 734
Long-term Debt 1,404
 1,308
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 422
 424
Deferred credits related to income taxes 310
 352
Employee benefit obligations 97
 99
Asset retirement obligations, deferred 157
 157
Other cost of removal obligations 193
 189
Other regulatory liabilities, deferred 66
 76
Other deferred credits and liabilities 42
 44
Total deferred credits and other liabilities 1,287
 1,341
Total Liabilities 3,097
 3,383
Common Stockholder's Equity (See accompanying statements)
 1,724
 1,652
Total Liabilities and Stockholder's Equity $4,821
 $5,035
 Number of
Common
Shares
Issued		Common
Stock		Paid-In
Capital		Retained
Earnings (Accumulated Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Total
 (in millions)
Balance at December 31, 20191 $38 $4,449 $(2,832)$(3)$1,652 
Net income— — — 32 — 32 
Capital contributions from parent company— — 76 — — 76 
Return of capital to parent company— — (37)— — (37)
Other— — (1)— — (1)
Balance at March 31, 20201 $38 $4,487 $(2,800)$(3)$1,722 
Balance at December 31, 20201 $38 $4,460 $(2,754)$(2)$1,742 
Net income— — — 45 — 45 
Capital contributions from parent company— — 100 — — 100 
Cash dividends on common stock— — — (39)— (39)
Balance at March 31, 20211 $38 $4,560 $(2,748)$(2)$1,848 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

31
    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

 Number of
Common
Shares
Issued		 Common
Stock		 Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income (Loss)		 Total    
 (in millions)
Balance at December 31, 20181
 $38
 $4,546
 $(2,971) $(4) $1,609
Net income—
 —
 —
 37
 —
 37
Return of capital to parent company—
 —
 (38) —
 —
 (38)
Capital contributions from parent company—
 —
 2
 —
 —
 2
Balance at March 31, 20191
 38
 4,510
 (2,934) (4) 1,610
Net income after dividends on
preferred stock		—
 —
 —
 37
 —
 37
Return of capital to parent company—
 —
 (38) —
 —
 (38)
Capital contributions from parent company—
 —
 8
 —
 —
 8
Balance at June 30, 20191
 $38
 $4,480
 $(2,897) $(4) $1,617
            
Balance at December 31, 20191
 $38
 $4,449
 $(2,832) $(3) $1,652
Net income—
 —
 —
 32
 —
 32
Return of capital to parent company—
 —
 (37) —
 —
 (37)
Capital contributions from parent company—
 —
 76
 —
 —
 76
Other—
 —
 (1) —
 —
 (1)
Balance at March 31, 20201
 38
 4,487
 (2,800) (3) 1,722
Net income—
 —
 —
 39
 —
 39
Return of capital to parent company—
 —
 (37) —
 —
 (37)
Balance at June 30, 20201
 $38
 $4,450
 $(2,761) $(3) $1,724
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of ContentsIndex to Financial Statements


SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Revenues:
Wholesale revenues, non-affiliates$355 $286 
Wholesale revenues, affiliates81 86 
Other revenues4 3 
Total operating revenues440 375 
Operating Expenses:
Fuel141 107 
Purchased power20 14 
Other operations and maintenance101 79 
Depreciation and amortization119 117 
Taxes other than income taxes12 9 
(Gain) loss on dispositions, net(39)(39)
Total operating expenses354 287 
Operating Income86 88 
Other Income and (Expense):
Interest expense, net of amounts capitalized(38)(39)
Other income (expense), net7 2 
Total other income and (expense)(31)(37)
Earnings Before Income Taxes55 51 
Income taxes (benefit)(10)7 
Net Income65 44 
Net loss attributable to noncontrolling interests(32)(31)
Net Income Attributable to Southern Power$97 $75 
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Operating Revenues:       
Wholesale revenues, non-affiliates$343
 $390
 $629
 $743
Wholesale revenues, affiliates92
 117
 178
 204
Other revenues4
 3
 7
 6
Total operating revenues439
 510
 814
 953
Operating Expenses:       
Fuel102
 139
 209
 284
Purchased power18
 32
 32
 55
Other operations and maintenance77
 79
 156
 166
Depreciation and amortization121
 119
 239
 237
Taxes other than income taxes10
 11
 19
 21
(Gain) loss on dispositions, net—
 (23) (39) (23)
Total operating expenses328
 357
 616
 740
Operating Income111
 153
 198
 213
Other Income and (Expense):       
Interest expense, net of amounts capitalized(38) (41) (77) (84)
Other income (expense), net1
 40
 4
 41
Total other income and (expense)(37) (1) (73) (43)
Earnings Before Income Taxes74
 152
 125
 170
Income taxes (benefit)6
 (51) 13
 (60)
Net Income68
 203
 112
 230
Net income (loss) attributable to noncontrolling interests5
 29
 (26) —
Net Income Attributable to Southern Power$63
 $174
 $138
 $230
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Net Income$68
 $203
 $112
 $230
Other comprehensive income (loss):       
Qualifying hedges:       
Changes in fair value, net of tax of
$4, $(1), $(17), and $(10), respectively		11
 (1) (50) (30)
Reclassification adjustment for amounts included in net income,
net of tax of $(5), $(2), $5, and $6, respectively		(15) (7) 13
 17
Pension and other postretirement benefit plans:       
Reclassification adjustment for amounts included in net income,
net of tax of $-, $-, $-, and $-, respectively		1
 —
 1
 —
Total other comprehensive income (loss)(3) (8) (36) (13)
Comprehensive Income65
 195
 76
 217
Comprehensive income (loss) attributable to noncontrolling interests5
 29
 (26) —
Comprehensive Income Attributable to Southern Power$60
 $166
 $102
 $217
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
Table of ContentsIndex to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Six Months Ended June 30,
 2020 2019
 (in millions)
Operating Activities:   
Net income$112
 $230
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total251
 251
Deferred income taxes(34) (63)
Utilization of federal investment tax credits—
 427
Amortization of investment tax credits(30) (122)
(Gain) loss on dispositions, net(39) (23)
Other, net(31) (46)
Changes in certain current assets and liabilities —   
-Receivables(67) (9)
-Prepaid income taxes73
 93
-Other current assets(8) 4
-Accounts payable(29) (17)
-Accrued taxes16
 19
-Other current liabilities(19) (25)
Net cash provided from operating activities195
 719
Investing Activities:   
Business acquisitions, net of cash acquired(81) (2)
Property additions(101) (123)
Proceeds from dispositions and asset sales660
 540
Investment in unconsolidated subsidiaries—
 (116)
Payments pursuant to LTSAs(31) (31)
Other investing activities43
 (14)
Net cash provided from investing activities490
 254
Financing Activities:   
Decrease in notes payable, net(357) —
Redemptions —   
Short-term borrowings(100) (100)
Senior notes(300) —
Return of capital to parent company—
 (505)
Distributions to noncontrolling interests(118) (82)
Capital contributions from noncontrolling interests172
 5
Payment of common stock dividends(100) (103)
Other financing activities(5) 1
Net cash used for financing activities(808) (784)
Net Change in Cash, Cash Equivalents, and Restricted Cash(123) 189
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period279
 181
Cash, Cash Equivalents, and Restricted Cash at End of Period$156
 $370
Supplemental Cash Flow Information:   
Cash paid (received) during the period for —   
Interest (net of $7 capitalized for both 2020 and 2019)$96
 $106
Income taxes, net(5) (421)
Noncash transactions —   
Accrued property additions at end of period38
 31
Right-of-use assets obtained under operating leases30
 —
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
Table of ContentsIndex to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Assets At June 30, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $154
 $279
Receivables —    
Customer accounts receivable 160
 107
Affiliated 46
 30
Other 55
 73
Materials and supplies 203
 191
Prepaid income taxes 402
 36
Other current assets 23
 43
Total current assets 1,043
 759
Property, Plant, and Equipment:    
In service 13,634
 13,270
Less: Accumulated provision for depreciation 2,689
 2,464
Plant in service, net of depreciation 10,945
 10,806
Construction work in progress 314
 515
Total property, plant, and equipment 11,259
 11,321
Other Property and Investments:    
Intangible assets, net of amortization of $79 and $69
at June 30, 2020 and December 31, 2019, respectively		 312
 322
Equity investments in unconsolidated subsidiaries 19
 28
Total other property and investments 331
 350
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 397
 369
Prepaid LTSAs 140
 128
Accumulated deferred income taxes 156
 551
Income taxes receivable, non-current 11
 5
Assets held for sale —
 601
Other deferred charges and assets 220
 216
Total deferred charges and other assets 924
 1,870
Total Assets $13,557
 $14,300
 For the Three Months Ended March 31,
 20212020
 (in millions)
Net Income$65 $44 
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $(11) and $(21), respectively(33)(62)
Reclassification adjustment for amounts included in net income,
   net of tax of $15 and $10, respectively
48 28 
Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,
   net of tax of $0 and $0, respectively
1 1 
Total other comprehensive income (loss)16 (33)
Comprehensive Income81 11 
Comprehensive loss attributable to noncontrolling interests(32)(31)
Comprehensive Income Attributable to Southern Power$113 $42 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
32
    Table of Contents                                Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF CASH FLOWS (UNAUDITED)
 
Liabilities and Stockholders' Equity At June 30, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $525
 $824
Notes payable 92
 549
Accounts payable —    
Affiliated 52
 56
Other 59
 85
Accrued taxes —    
Accrued income taxes 10
 —
Other accrued taxes 26
 26
Accrued interest 23
 32
Other current liabilities 127
 132
Total current liabilities 914
 1,704
Long-term Debt 3,572
 3,574
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 114
 115
Accumulated deferred ITCs 1,701
 1,731
Operating lease obligations 404
 376
Other deferred credits and liabilities 193
 178
Total deferred credits and other liabilities 2,412
 2,400
Total Liabilities 6,898
 7,678
Total Stockholders' Equity (See accompanying statements)
 6,659
 6,622
Total Liabilities and Stockholders' Equity $13,557
 $14,300
 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Activities:
Net income$65 $44 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total125 123 
Deferred income taxes(8)(36)
Amortization of investment tax credits(15)(14)
(Gain) loss on dispositions, net(39)(39)
Other, net(4)(10)
Changes in certain current assets and liabilities —
-Receivables23 5 
-Prepaid income taxes16 51 
-Other current assets3 (2)
-Accounts payable19 (34)
-Accrued taxes5 8 
-Other current liabilities(3)(13)
Net cash provided from operating activities187 83 
Investing Activities:
Business acquisitions, net of cash acquired(345)0 
Property additions(147)(47)
Proceeds from dispositions17 660 
Change in construction payables(7)(15)
Payments pursuant to LTSAs(27)(15)
Other investing activities5 17 
Net cash provided from (used for) investing activities(504)600 
Financing Activities:
Increase (decrease) in notes payable, net140 (449)
Proceeds — Senior notes400 0 
Redemptions — Short-term borrowings0 (100)
Return of capital to parent company(271)0 
Capital contributions from noncontrolling interests313 16 
Distributions to noncontrolling interests(46)(48)
Payment of common stock dividends(51)(50)
Other financing activities(7)(1)
Net cash provided from (used for) financing activities478 (632)
Net Change in Cash, Cash Equivalents, and Restricted Cash161 51 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period182 279 
Cash, Cash Equivalents, and Restricted Cash at End of Period$343 $330 
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $1 and $4 capitalized for 2021 and 2020, respectively)$26 $28 
Income taxes, net(2)(5)
Noncash transactions —
Contributions from noncontrolling interests89 0 
Contributions of wind turbine equipment82 17 
Accrued property additions at end of period60 27 
Right-of-use assets obtained under operating leases65 0 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
33
    Table of Contents                                Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYBALANCE SHEETS (UNAUDITED)

 Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income (Loss)		 Total Common
Stockholders' Equity		 Noncontrolling Interests Total
 (in millions)
Balance at December 31, 2018$1,600
 $1,352
 $16
 $2,968
 $4,316
 $7,284
Net income (loss)—
 56
 —
 56
 (29) 27
Capital contributions from parent company1
 —
 —
 1
 —
 1
Other comprehensive income (loss)—
 —
 (4) (4) —
 (4)
Cash dividends on common stock—
 (51) —
 (51) —
 (51)
Capital contributions from
noncontrolling interests		—
 —
 —
 —
 3
 3
Distributions to noncontrolling interests—
 —
 —
 —
 (41) (41)
Other(1) (1) —
 (2) 1
 (1)
Balance at March 31, 20191,600
 1,356
 12
 2,968
 4,250
 7,218
Net income—
 174
 —
 174
 29
 203
Return of capital to parent company(505) —
 —
 (505) —
 (505)
Capital contributions from parent company7
 —
 —
 7
 —
 7
Other comprehensive income (loss)—
 —
 (8) (8) —
 (8)
Cash dividends on common stock—
 (52) —
 (52) —
 (52)
Capital contributions from
noncontrolling interests		—
 —
 —
 —
 2
 2
Distributions to noncontrolling interests—
 —
 —
 —
 (47) (47)
Other—
 1
 —
 1
 (1) —
Balance at June 30, 2019$1,102
 $1,479
 $4
 $2,585
 $4,233
 $6,818

Table of ContentsIndex to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
 Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income (Loss)		 Total Common
Stockholders' Equity		 Noncontrolling Interests Total
 (in millions)
Balance at December 31, 2019$909
 $1,485
 $(26) $2,368
 $4,254
 $6,622
Net income (loss)—
 75
 —
 75
 (31) 44
Other comprehensive income (loss)—
 —
 (33) (33) —
 (33)
Cash dividends on common stock—
 (50) —
 (50) —
 (50)
Capital contributions from
noncontrolling interests		—
 —
 —
 —
 16
 16
Distributions to noncontrolling interests—
 —
 —
 —
 (48) (48)
Balance at March 31, 2020909
 1,510
 (59) 2,360
 4,191
 6,551
Net income—
 63
 —
 63
 5
 68
Other comprehensive income (loss)—
 —
 (3) (3) —
 (3)
Cash dividends on common stock—
 (50) —
 (50) —
 (50)
Capital contributions from
noncontrolling interests		—
 —
 —
 —
 165
 165
Distributions to noncontrolling interests—
 —
 —
 —
 (70) (70)
Other(2) —
 —
 (2) —
 (2)
Balance at June 30, 2020$907
 $1,523
 $(62) $2,368
 $4,291
 $6,659
AssetsAt March 31, 2021At December 31, 2020
 (in millions)
Current Assets:
Cash and cash equivalents$314 $182 
Receivables —
Customer accounts, net123 125 
Affiliated17 37 
Other18 27 
Materials and supplies157 157 
Prepaid income taxes368 11 
Other current assets31 36 
Total current assets1,028 575 
Property, Plant, and Equipment:
In service14,313 13,904 
Less: Accumulated provision for depreciation2,916 2,842 
Plant in service, net of depreciation11,397 11,062 
Construction work in progress219 127 
Total property, plant, and equipment11,616 11,189 
Other Property and Investments:
Intangible assets, net of amortization of $94 and $89, respectively297 302 
Equity investments in unconsolidated subsidiaries84 19 
Total other property and investments381 321 
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization478 415 
Prepaid LTSAs178 155 
Accumulated deferred income taxes0 262 
Income taxes receivable, non-current28 25 
Other deferred charges and assets286 293 
Total deferred charges and other assets970 1,150 
Total Assets$13,995 $13,235 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
34
    Table of Contents                                Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Liabilities and Stockholders' EquityAt March 31, 2021At December 31, 2020
 (in millions)
Current Liabilities:
Securities due within one year$300 $299 
Notes payable315 175 
Accounts payable —
Affiliated44 65 
Other127 92 
Accrued taxes —
Accrued income taxes10 8 
Other accrued taxes15 22 
Accrued interest35 32 
Other current liabilities132 132 
Total current liabilities978 825 
Long-term Debt3,730 3,393 
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes230 123 
Accumulated deferred ITCs1,658 1,672 
Operating lease obligations487 426 
Other deferred credits and liabilities168 165 
Total deferred credits and other liabilities2,543 2,386 
Total Liabilities7,251 6,604 
Total Stockholders' Equity (See accompanying statements)
6,744 6,631 
Total Liabilities and Stockholders' Equity$13,995 $13,235 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
35
Table of ContentsIndex to Financial Statements
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total Common
Stockholders' Equity		Noncontrolling InterestsTotal
(in millions)
Balance at December 31, 2019$909 $1,485 $(26)$2,368 $4,254 $6,622 
Net income (loss)— 75 — 75 (31)44 
Other comprehensive income (loss)— — (33)(33)— (33)
Cash dividends on common stock— (50)— (50)— (50)
Capital contributions from
   noncontrolling interests		— — — — 16 16 
Distributions to noncontrolling interests— — — — (48)(48)
Balance at March 31, 2020$909 $1,510 $(59)$2,360 $4,191 $6,551 
Balance at December 31, 2020$914 $1,522 $(67)$2,369 $4,262 $6,631 
Net income (loss)— 97 — 97 (32)65 
Return of capital to parent company(271)— — (271)— (271)
Other comprehensive income— — 16 16 — 16 
Cash dividends on common stock— (51)— (51)— (51)
Capital contributions from
   noncontrolling interests		— — — — 403 403 
Distributions to noncontrolling interests— — — — (46)(46)
Other(2)1 (1)(2)(1)(3)
Balance at March 31, 2021$641 $1,569 $(52)$2,158 $4,586 $6,744 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
36
Table of ContentsIndex to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Revenues:
Natural gas revenues (includes revenue taxes of $54 and $47, respectively)$1,692 $1,240 
Alternative revenue programs2 9 
Total operating revenues1,694 1,249 
Operating Expenses:
Cost of natural gas583 439 
Other operations and maintenance299 258 
Depreciation and amortization130 120 
Taxes other than income taxes81 72 
Total operating expenses1,093 889 
Operating Income601 360 
Other Income and (Expense):
Earnings from equity method investments41 43 
Interest expense, net of amounts capitalized(60)(58)
Other income (expense), net(63)9 
Total other income and (expense)(82)(6)
Earnings Before Income Taxes519 354 
Income taxes121 79 
Net Income$398 $275 
 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2020 2019 2020 2019
 (in millions) (in millions)
Operating Revenues:       
Natural gas revenues (includes revenue taxes of
$22, $23, $69, and $78, respectively)		$638
 $688
 $1,878
 $2,163
Alternative revenue programs(2) 1
 7
 —
Total operating revenues636
 689
 1,885
 2,163
Operating Expenses:       
Cost of natural gas144
 191
 583
 877
Other operations and maintenance220
 199
 479
 433
Depreciation and amortization123
 119
 243
 238
Taxes other than income taxes47
 46
 118
 128
Total operating expenses534
 555
 1,423
 1,676
Operating Income102
 134
 462
 487
Other Income and (Expense):       
Earnings from equity method investments30
 31
 72
 80
Interest expense, net of amounts capitalized(57) (59) (114) (118)
Other income (expense), net12
 6
 21
 10
Total other income and (expense)(15) (22) (21) (28)
Earnings Before Income Taxes87
 112
 441
 459
Income taxes16
 6
 95
 83
Net Income$71
 $106
 $346
 $376
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended June 30, For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 2020 2019 20212020
(in millions) (in millions) (in millions)
Net Income$71
 $106
 $346
 $376
Net Income$398 $275 
Other comprehensive income (loss):       Other comprehensive income (loss):
Qualifying hedges:       Qualifying hedges:
Changes in fair value, net of tax of
$(1), $(1), $(8), and $(1), respectively		(1) (3) (21) (3)
Reclassification adjustment for amounts included in net income,
net of tax of $-, $-, $2, and $-, respectively		1
 —
 6
 —
Pension and other postretirement benefit plans:       
Reclassification adjustment for amounts included in net income,
net of tax of $-, $(1), $1, and $(1), respectively		—
 —
 —
 (1)
Changes in fair value, net of tax of $0 and $(7), respectivelyChanges in fair value, net of tax of $0 and $(7), respectively1 (20)
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $2, respectively
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $2, respectively
3 5 
Total other comprehensive income (loss)—
 (3) (15) (4)Total other comprehensive income (loss)4 (15)
Comprehensive Income$71
 $103
 $331
 $372
Comprehensive Income$402 $260 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
37
    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, For the Three Months Ended March 31,
2020 2019 20212020
(in millions) (in millions)
Operating Activities:   Operating Activities:
Net income$346
 $376
Net income$398 $275 
Adjustments to reconcile net income to net cash provided from operating activities —   Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total243
 238
Depreciation and amortization, total130 120 
Deferred income taxes40
 59
Deferred income taxes160 22 
Mark-to-market adjustments34
 30
Mark-to-market adjustments64 13 
Natural gas cost under recovery – long-termNatural gas cost under recovery – long-term(185)0 
Other, net11
 (26)Other, net5 (19)
Changes in certain current assets and liabilities —   Changes in certain current assets and liabilities —
-Receivables344
 717
-Receivables74 112 
-Natural gas for sale182
 256
-Natural gas for sale, net of temporary LIFO liquidation-Natural gas for sale, net of temporary LIFO liquidation456 246 
-Natural gas cost under recovery-Natural gas cost under recovery(487)0 
-Other current assets6
 29
-Other current assets(34)33 
-Accounts payable(176) (604)-Accounts payable(7)(185)
-Accrued taxes26
 (54)-Accrued taxes10 27 
-Accrued compensation(31) (34)-Accrued compensation0 (42)
-Other current liabilities21
 (56)-Other current liabilities(34)41 
Net cash provided from operating activities1,046
 931
Net cash provided from operating activities550 643 
Investing Activities:   Investing Activities:
Property additions(647) (603)Property additions(251)(261)
Cost of removal, net of salvage(31) (33)Cost of removal, net of salvage(16)(15)
Change in construction payables, netChange in construction payables, net(47)(18)
Investment in unconsolidated subsidiaries(78) (18)Investment in unconsolidated subsidiaries(1)(77)
Proceeds from dispositions and asset sales178
 32
Proceeds from dispositionsProceeds from dispositions0 178 
Other investing activities8
 36
Other investing activities7 0 
Net cash used for investing activities(570) (586)Net cash used for investing activities(308)(193)
Financing Activities:   Financing Activities:
Decrease in notes payable, net(321) (158)Decrease in notes payable, net(127)(39)
Proceeds — Capital contributions from parent company186
 38
Proceeds — Short-term borrowingsProceeds — Short-term borrowings300 0 
Redemptions — Medium-term notesRedemptions — Medium-term notes(30)0 
Capital contributions from parent companyCapital contributions from parent company39 0 
Payment of common stock dividends(266) (235)Payment of common stock dividends(132)(133)
Net cash used for financing activities(401) (355)
Other financing activitiesOther financing activities0 (13)
Net cash provided from (used for) financing activitiesNet cash provided from (used for) financing activities50 (185)
Net Change in Cash, Cash Equivalents, and Restricted Cash75
 (10)Net Change in Cash, Cash Equivalents, and Restricted Cash292 265 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period49
 70
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period19 49 
Cash, Cash Equivalents, and Restricted Cash at End of Period$124
 $60
Cash, Cash Equivalents, and Restricted Cash at End of Period$311 $314 
Supplemental Cash Flow Information:   Supplemental Cash Flow Information:
Cash paid (received) during the period for —   Cash paid (received) during the period for —
Interest (net of $4 and $3 capitalized for 2020 and 2019, respectively)$119
 $125
Interest (net of $2 capitalized for both 2021 and 2020)Interest (net of $2 capitalized for both 2021 and 2020)$52 $49 
Income taxes, net(4) 96
Income taxes, net(1)(12)
Noncash transactions — Accrued property additions at end of period123
 123
Noncash transactions — Accrued property additions at end of period95 104 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
38
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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Assets At June 30, 2020 At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
 (in millions)(in millions)
Current Assets:    Current Assets:  
Cash and cash equivalents $120
 $46
Cash and cash equivalents$309 $17 
Receivables —    Receivables —  
Energy marketing receivables 273
 428
Customer accounts receivable 269
 323
Energy marketingEnergy marketing412 516 
Customer accountsCustomer accounts452 353 
Unbilled revenues 57
 183
Unbilled revenues161 219 
Affiliated 5
 5
Affiliated2 4 
Other accounts and notes receivable 117
 114
Other accounts and notesOther accounts and notes43 51 
Accumulated provision for uncollectible accounts (35) (18)Accumulated provision for uncollectible accounts(51)(40)
Natural gas for sale 282
 479
Natural gas for sale197 460 
Prepaid expenses 60
 65
Prepaid expenses97 48 
Assets from risk management activities, net of collateral 103
 177
Assets from risk management activities, net of collateral68 118 
Natural gas cost under recoveryNatural gas cost under recovery487 0 
Other regulatory assets 86
 92
Other regulatory assets84 102 
Assets held for sale —
 171
Other current assets 49
 41
Other current assets39 38 
Total current assets 1,386
 2,106
Total current assets2,300 1,886 
Property, Plant, and Equipment:    Property, Plant, and Equipment:  
In service 16,718
 16,344
In service17,866 17,611 
Less: Accumulated depreciation 4,704
 4,650
Less: Accumulated depreciation4,893 4,821 
Plant in service, net of depreciation 12,014
 11,694
Plant in service, net of depreciation12,973 12,790 
Construction work in progress 770
 613
Construction work in progress636 648 
Total property, plant, and equipment 12,784
 12,307
Total property, plant, and equipment13,609 13,438 
Other Property and Investments:    Other Property and Investments:
Goodwill 5,015
 5,015
Goodwill5,015 5,015 
Equity investments in unconsolidated subsidiaries 1,308
 1,251
Equity investments in unconsolidated subsidiaries1,290 1,290 
Other intangible assets, net of amortization of $186 and $176
at June 30, 2020 and December 31, 2019, respectively		 60
 70
Other intangible assets, net of amortization of $199 and $195, respectivelyOther intangible assets, net of amortization of $199 and $195, respectively47 51 
Miscellaneous property and investments 20
 20
Miscellaneous property and investments20 19 
Total other property and investments 6,403
 6,356
Total other property and investments6,372 6,375 
Deferred Charges and Other Assets:    Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization 88
 93
Operating lease right-of-use assets, net of amortization80 81 
Other regulatory assets, deferred 581
 618
Other regulatory assets, deferred786 615 
Other deferred charges and assets 258
 207
Other deferred charges and assets230 235 
Total deferred charges and other assets 927
 918
Total deferred charges and other assets1,096 931 
Total Assets $21,500
 $21,687
Total Assets$23,377 $22,630 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

39
    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Liabilities and Stockholder's Equity At June 30, 2020 At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
 (in millions)(in millions)
Current Liabilities:    Current Liabilities:
Securities due within one year $31
 $—
Securities due within one year$302 $333 
Notes payable 329
 650
Notes payable497 324 
Energy marketing trade payables 284
 442
Energy marketing trade payables475 494 
Accounts payable —    Accounts payable —
Affiliated 50
 41
Affiliated49 56 
Other 290
 315
Other346 373 
Customer deposits 86
 96
Customer deposits76 90 
Accrued taxes —    
Accrued income taxes 32
 —
Other accrued taxes 65
 71
Accrued taxesAccrued taxes94 83 
Accrued interest 53
 52
Accrued interest68 58 
Accrued compensation 68
 100
Accrued compensation107 106 
Liabilities from risk management activities, net of collateral 39
 21
Other regulatory liabilities 146
 94
Other regulatory liabilities92 122 
Temporary LIFO liquidationTemporary LIFO liquidation194 0 
Other current liabilities 122
 128
Other current liabilities166 150 
Total current liabilities 1,595
 2,010
Total current liabilities2,466 2,189 
Long-term Debt 5,796
 5,845
Long-term Debt6,286 6,293 
Deferred Credits and Other Liabilities:    Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,256
 1,219
Accumulated deferred income taxes1,427 1,265 
Deferred credits related to income taxes 859
 874
Deferred credits related to income taxes839 847 
Employee benefit obligations 253
 265
Employee benefit obligations273 283 
Operating lease obligations 73
 78
Operating lease obligations65 67 
Other cost of removal obligations 1,639
 1,606
Other cost of removal obligations1,668 1,649 
Accrued environmental remediation 220
 233
Accrued environmental remediation208 216 
Other deferred credits and liabilities 40
 51
Other deferred credits and liabilities51 54 
Total deferred credits and other liabilities 4,340
 4,326
Total deferred credits and other liabilities4,531 4,381 
Total Liabilities 11,731
 12,181
Total Liabilities13,283 12,863 
Common Stockholder's Equity (See accompanying statements)
 9,769
 9,506
Common Stockholder's Equity (See accompanying statements)
10,094 9,767 
Total Liabilities and Stockholder's Equity $21,500
 $21,687
Total Liabilities and Stockholder's Equity$23,377 $22,630 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.


40
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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)

Paid-In
Capital		Retained
Earnings
(Accumulated Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Total
(in millions)
Balance at December 31, 2019Balance at December 31, 2019$9,697 $(198)$7 $9,506 
Net incomeNet income— 275 — 275 
Return of capital to parent companyReturn of capital to parent company(2)— — (2)
Other comprehensive income (loss)Other comprehensive income (loss)— — (15)(15)
Cash dividends on common stockCash dividends on common stock— (133)— (133)
Balance at March 31, 2020Balance at March 31, 2020$9,695 $(56)$(8)$9,631 
Paid-In
Capital		 
Retained
Earnings
(Accumulated Deficit)
 Accumulated
Other
Comprehensive
Income (Loss)		 Total    
(in millions)
Balance at December 31, 2018$8,856
 $(312) $26
 $8,570
Balance at December 31, 2020Balance at December 31, 2020$9,930 $(141)$(22)$9,767 
Net income—
 270
 —
 270
Net income— 398 — 398 
Capital contributions from parent company17
 —
 —
 17
Capital contributions from parent company57 — — 57 
Other comprehensive income (loss)—
 —
 (1) (1)
Other comprehensive incomeOther comprehensive income— — 4 4 
Cash dividends on common stock—
 (118) —
 (118)Cash dividends on common stock— (132)— (132)
Balance at March 31, 20198,873
 (160) 25
 8,738
Net income—
 106
 —
 106
Capital contributions from parent company35
 —
 —
 35
Other comprehensive income (loss)—
 —
 (3) (3)
Cash dividends on common stock—
 (117) —
 (117)
Balance at June 30, 2019$8,908
 $(171) $22
 $8,759
       
Balance at December 31, 2019$9,697
 $(198) $7
 $9,506
Net income—
 275
 —
 275
Return of capital to parent company(2) —
 —
 (2)
Other comprehensive income (loss)—
 —
 (15) (15)
Cash dividends on common stock—
 (133) —
 (133)
Balance at March 31, 20209,695
 (56) (8) 9,631
Net income—
 71
 —
 71
Capital contributions from parent company200
 —
 —
 200
Cash dividends on common stock—
 (133) —
 (133)
Balance at June 30, 2020$9,895
 $(118) $(8) $9,769
Balance at March 31, 2021Balance at March 31, 2021$9,987 $125 $(18)$10,094 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

41
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
MISSISSIPPI POWER COMPANY
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
(UNAUDITED)


INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NotePage
A
4543
B
4846
C
5854
D
6357
E
6960
F
7162
G
7363
H
7464
I
7866
J
8371
K
9480
L
9682



INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT
The following unaudited notes to the condensed financial statements are a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants. The list below indicates the Registrants to which each footnote applies.
RegistrantApplicable Notes
Southern CompanyA, B, C, D, E, F, G, H, I, J, K, L
Alabama PowerA, B, C, D, F, G, H, I, J K
Georgia PowerA, B, C, D, F, G, H, I, J
Mississippi PowerA, B, C, D, F, G, H, I, J
Southern PowerA, C, D, E, F, G, H, I, J, K
Southern Company GasA, B, C, D, E, F, G, H, I, J, K, L

42
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(A) INTRODUCTION
The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 20192020 have been derived from the audited financial statements of each Registrant. In the opinion of each Registrant's management, the information regarding such Registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended June 30, 2020March 31, 2021 and 2019.2020. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy and other factors, including the impacts of the COVID-19 pandemic, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.
Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the overall results of operations, financial position, or cash flows of any Registrant.
Goodwill and Other Intangible Assets
Goodwill at June 30, 2020March 31, 2021 and December 31, 20192020 was as follows:
 Goodwill
 (in millions)
Southern Company$5,280
Southern Company Gas: 
Gas distribution operations$4,034
Gas marketing services981
Southern Company Gas total$5,015

Goodwill
(in millions)
Southern Company$5,280 
Southern Company Gas:
Gas distribution operations$4,034 
Gas marketing services981 
Southern Company Gas total$5,015 
Goodwill is not amortized but is subject to an annual impairment test in the fourth quarter of the year and on an interim basis as events and changes in circumstances occur, including, but not limited to, a significant change in operating performance, the business climate, legal or regulatory factors, or a planned sale or disposition of a significant portion of the business. The continued COVID-19 pandemic and related responses continue to disrupt supply chains and capital markets, reduce labor availability and productivity, and reduce economic activity. These effects could have a variety of adverse impacts on Southern Company and its subsidiaries, including the $263 million of goodwill recorded at PowerSecure. If the impact of the COVID-19 pandemic becomes significant to the operating results of PowerSecure and its businesses, a portion of the associated goodwill may become impaired. The ultimate outcome of this matter cannot be determined at this time.occur.
43
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Other intangible assets were as follows:
At March 31, 2021At December 31, 2020
Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net		Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net
(in millions)(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships$212 $(139)$73 $212 $(135)$77 
Trade names64 (33)31 64 (31)33 
Storage and transportation contracts64 (64)0 64 (64)0 
PPA fair value adjustments390 (94)296 390 (89)301 
Other11 (9)2 10 (9)1 
Total other intangible assets subject to amortization$741 $(339)$402 $740 $(328)$412 
Other intangible assets not subject to amortization:
Federal Communications Commission licenses75 — 75 75 — 75 
Total other intangible assets$816 $(339)$477 $815 $(328)$487 
Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments$390 $(94)$296 $390 $(89)$301 
Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships$156 $(122)$34 $156 $(119)$37 
Trade names26 (13)13 26 (12)14 
Wholesale gas services
Storage and transportation contracts64 (64)0 64 (64)0 
Total other intangible assets subject to amortization$246 $(199)$47 $246 $(195)$51 
 At June 30, 2020 At December 31, 2019
 Gross Carrying AmountAccumulated Amortization
Other
Intangible Assets, Net
 Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net
 (in millions) (in millions)
Southern Company       
Other intangible assets subject to amortization:       
Customer relationships$212
$(126)$86
 $212
$(116)$96
Trade names64
(28)36
 64
(25)39
Storage and transportation contracts64
(63)1
 64
(62)2
PPA fair value adjustments390
(79)311
 390
(69)321
Other10
(8)2
 11
(8)3
Total other intangible assets subject to amortization$740
$(304)$436

$741
$(280)$461
Other intangible assets not subject to amortization:       
Federal Communications Commission licenses75
—
75
 75
—
75
Total other intangible assets$815
$(304)$511
 $816
$(280)$536
        
Southern Power       
Other intangible assets subject to amortization:       
PPA fair value adjustments$390
$(79)$311
 $390
$(69)$321
        
Southern Company Gas       
Other intangible assets subject to amortization:       
Gas marketing services       
Customer relationships$156
$(112)$44
 $156
$(104)$52
Trade names26
(11)15
 26
(10)16
Wholesale gas services       
Storage and transportation contracts64
(63)1
 64
(62)2
Total other intangible assets subject to amortization$246
$(186)$60
 $246
$(176)$70
44

    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Amortization associated with other intangible assets was as follows:
 Three Months EndedSix Months Ended
 June 30, 2020
 (in millions)
Southern Company(a)
$13
$25
Southern Power(b)
$5
$10
Southern Company Gas

 
Gas marketing services$5
$9
Wholesale gas services(b)
—
1
Southern Company Gas total$5
$10

(a)Includes $5 million and $11 million for the three and six months ended June 30, 2020, respectively, recorded as a reduction to operating revenues.Three Months Ended
March 31, 2021
(in millions)
Southern Company(a)
$11 
Southern Power(b)
Recorded as a reduction to operating revenues.5 
Southern Company Gas(c)
4 
(a)Includes $5 million recorded as a reduction to operating revenues.
(b)Recorded as a reduction to operating revenues.
(c)Relates to gas marketing services.
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that total to the amountsamount shown in the condensed statements of cash flows for the Registrants that had restricted cash at June 30, 2020March 31, 2021 and/or December 31, 2019:2020:
Southern
Company		Southern PowerSouthern
Company Gas
March 31, 2021December 31, 2020March 31, 2021March 31, 2021December 31, 2020
(in millions)(in millions)(in millions)
Cash and cash equivalents$1,770 $1,065 $314 $309 $17 
Restricted cash(a):
Other current assets2 2 0 2 2 
Other deferred charges and assets29 0 29 0 0 
Total cash, cash equivalents, and restricted cash$1,801 $1,068 (b)$343 $311 $19 
 
Southern
Company
 Southern Power 
Southern
Company Gas
 
At June
30, 2020
At December 31, 2019 At June 30, 2020 At June
30, 2020		At December 31, 2019
 (in millions) (in millions) (in millions)
Cash and cash equivalents$1,879
$1,975
 $154
 $120
$46
Restricted cash(*):
       
Other accounts and notes receivable—
3
 —
 —
3
Other current assets4
—
 —
 4
—
Other deferred charges and assets2
—
 2
 —
—
Total cash, cash equivalents, and restricted cash$1,885
$1,978
 $156
 $124
$49
(a)For Southern Company Gas, reflects restricted cash held as collateral for workers' compensation, life insurance, and long-term disability insurance. For Southern Power, reflects restricted cash held for construction payables.
(*)For Southern Company Gas, reflects restricted cash held as collateral for workers' compensation, life insurance, and long-term disability insurance. For Southern Power, reflects restricted cash held for construction payables.
(b)Total does not add due to rounding.
Natural Gas for Sale
Southern Company Gas, withWith the exception of Nicor Gas, carriesSouthern Company Gas' natural gas inventorydistribution utilities record natural gas inventories on a WACOG basis. For any declines in market prices below the WACOG considered to be other than temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Southern Company Gas recorded no material adjustments for the three and six months ended June 30, 2020 and recorded adjustments of $7 million and $10 million for the three and six months ended June 30, 2019, respectively.
Nicor Gas' natural gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during the year that are restored prior to year end are charged to cost of natural gas at the estimated annual replacement cost. Inventory decrements that are not restored prior to year end are charged to cost of natural gas at the actual LIFO cost of the inventory layers liquidated.
Southern Company Gas recorded no material adjustments to natural gas inventories for either period presented. Nicor Gas' inventory decrement at March 31, 2021 is expected to be restored prior to year end.
45
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

cost of the inventory layers liquidated. Nicor Gas' inventory decrement at June 30, 2020 is expected to be restored prior to year end.
Asset Retirement Obligations
See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Details of changes in AROs for Southern Company and Alabama Power during the first six months of 2020 are shown in the following table. There were no material changes in AROs for the other Registrants during the first six months of 2020.
 Southern CompanyAlabama Power
 (in millions)
Balance at December 31, 2019$9,786
$3,540
Liabilities incurred15
—
Liabilities settled(193)(100)
Accretion204
74
Cash flow revisions462
462
Balance at June 30, 2020$10,274
$3,976

In June 2020, Alabama Power recorded an increase of approximately $462 million to its AROs related to the CCR Rule and the related state rule primarily due to management's completion of a feasibility study and the related cost estimates during the second quarter 2020 for 1 of its ash ponds. Alabama Power's increase also reflects costs associated with the addition of a water treatment system to the design of another ash pond. The additional estimated costs to close these ash ponds under the planned closure-in-place methodology primarily relate to inputs from contractor bids, design revisions, and changes in the expected volume of ash handling.
The traditional electric operating companies expect to continue updating their cost estimates and ARO liabilities periodically as additional information related to ash pond closure methodologies, schedules, and/or costs becomes available. Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costs through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted. See Note (B) under "Georgia Power – Integrated Resource Plan" for additional information. The ultimate outcome of these matters cannot be determined at this time.
Depreciation and Amortization
See Note 5 to the financial statements under "Depreciation and Amortization – Southern Power" in Item 8 of the Form 10-K for additional information.
Effective January 1, 2020, Southern Power revised the depreciable lives of its natural gas generating facilities from up to 45 years to up to 50 years. This revision resulted in an immaterial decrease in depreciation for the three and six months ended June 30, 2020 and is expected to result in an immaterial decrease in annual depreciation for 2020.
(B) REGULATORY MATTERS
See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information relating to regulatory matters.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at June 30, 2020March 31, 2021 and December 31, 20192020 were as follows:
Regulatory ClauseBalance Sheet Line ItemMarch 31,
2021		December 31, 2020
(in millions)
Alabama Power
Rate CNP ComplianceOther regulatory liabilities, current$33 $28 
Rate CNP PPAOther regulatory assets, deferred58 58 
Retail Energy Cost RecoveryOther regulatory liabilities, current0 18 
Other regulatory assets, deferred15 0 
Natural Disaster ReserveOther regulatory liabilities, deferred52 77 
Georgia Power
Fuel Cost RecoveryOver recovered fuel clause revenues$83 $113 
Mississippi Power
Fuel Cost RecoveryOver recovered regulatory clause liabilities$18 $24 
Ad Valorem TaxOther regulatory assets, current12 11 
Other regulatory assets, deferred45 41 
Property Damage ReserveOther regulatory liabilities, deferred0 4 
Other regulatory assets, deferred1 0 
Southern Company Gas
Natural Gas Cost Recovery(*)
Other regulatory liabilities$12 $88 
Natural gas cost under recovery487 0 
Other regulatory assets, deferred185 0 
Regulatory ClauseBalance Sheet Line ItemJune 30,
2020		December 31,
2019
  (in millions)
Alabama Power   
Rate CNP ComplianceOther regulatory liabilities, current$25
$55
 Other regulatory liabilities, deferred—
7
Rate CNP PPADeferred under recovered regulatory clause revenues41
40
Retail Energy Cost RecoveryOther regulatory liabilities, current22
32
 Other regulatory liabilities, deferred93
17
Natural Disaster ReserveOther regulatory liabilities, current16
37
 Other regulatory liabilities, deferred96
113
Georgia Power   
Fuel Cost RecoveryOther current liabilities$109
$—
 Other deferred credits and liabilities95
73
Mississippi Power   
Fuel Cost RecoveryOver recovered regulatory clause liabilities$22
$23
Ad Valorem TaxOther regulatory assets11
47
 Other regulatory assets, deferred39
—
Property Damage ReserveOther regulatory liabilities, deferred50
54
Southern Company Gas   
Natural Gas Cost RecoveryOther regulatory liabilities$100
$74

(*)The significant change during the three months ended March 31, 2021 was primarily driven by an increase in the cost of gas purchased in February 2021 resulting from Winter Storm Uri.
Alabama Power
Petition for Certificate of Convenience and Necessity
On June 9, 2020,Energy Alabama, Gasp, Inc., and the Sierra Club filed requests for reconsideration and rehearing with the Alabama PSC approved in part Alabama Power's petition for aregarding the certificate of convenience and necessity (CCN) which authorizesissued to Alabama Power to (i) construct an approximately 720-MW combined cycle facility at Alabama Power's Plant Barry (Plant Barry Unit 8),in August 2020, which is expected to be placed in service by the end of 2023, (ii) complete the Autauga Combined Cycle Acquisition, which was approved by the FERC on April 22, 2020 and is expected to close by September 1, 2020, (iii) purchase approximately 240 MWs of combined cycle generation under a long-term PPA expected to begin later in 2020 and (iv) pursue up to approximately 200 MWs of certain demand-side management and distributed energy resource programs.
The Alabama PSC authorized, the recovery of actual costs foramong other things, the construction of Plant Barry Unit 8 up to 5% aboveand the estimated in-service costacquisition of $652 million.the Central Alabama Generating Station. In so doing, it recognized the potential for developments that could cause the project costs to exceed the capped amount, in which case Alabama Power would provide documentation toDecember 2020, the Alabama PSC to explainissued an order denying the requests. On January 7, 2021, Energy Alabama and justify potential recovery of the additional costs.
The Alabama PSC further directed that the proposed solar generation of approximately 400 MWs, coupled with battery energy storage systems (solar/battery systems), be evaluated under an existing Renewable Generation Certificate issued byGasp, Inc. filed judicial appeals regarding both the Alabama PSCPSC's August 2020 CCN order and the December 2020 order denying reconsideration and rehearing. On February 23, 2021, Alabama Power filed a motion to intervene in September 2015.the appeal and, on March 9, 2021, the Circuit Court of Montgomery County, Alabama granted the motion. At March 31, 2021, expenditures associated with the construction of Plant Barry Unit 8 included in CWIP totaled approximately $161 million. The ultimate outcome of this matter cannot be determined at this time.
Plant Greene County
Alabama Power expectsjointly owns Plant Greene County with an affiliate, Mississippi Power. See Note 5 under "Joint Ownership Agreements" in Item 8 of the Form 10-K for additional information.
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On April 15, 2021, Mississippi Power filed its 2021 IRP with the Mississippi PSC, which includes a schedule to retire its 40% ownership interest in Plant Greene County Units 1 and 2 in December 2025 and 2026, respectively, consistent with each unit's remaining useful life. Mississippi Power's IRP is subject to a review period during which the Mississippi PSC may note any deficiencies which could require re-evaluation or resubmission of the IRP. If no deficiencies are noted, the Mississippi PSC's review will conclude on August 13, 2021.
The Plant Greene County unit retirements identified by Mississippi Power require the completion of transmission and system reliability improvements, as well as agreement by Alabama Power. Alabama Power will continue to monitor the status of Mississippi Power's IRP and associated regulatory processes, as well as the transmission and system reliability improvements. Currently, Alabama Power plans to retire Plant Greene County Units 1 and 2 at the dates indicated. The ultimate outcome of this matter cannot be determined at this time.
Georgia Power
Rate Plan
Effective January 1, 2021, Georgia Power reduced its amortization of costs associated with CCR AROs by approximately $90 million as approved by the CCN through existing rate mechanisms as outlinedGeorgia PSC in conjunction with Georgia Power's annual compliance filings.
In February 2020, the Georgia PSC denied a motion for reconsideration filed by the Sierra Club regarding the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs, and, in December 2020, the Superior Court of Fulton County affirmed the decision of the Georgia PSC. On January 5, 2021, the Sierra Club filed a notice of appeal with the Georgia Court of Appeals. The ultimate outcome of this matter cannot be determined at this time.
See Note 26 to the financial statements in Item 8 of the Form 10-K.10-K for additional information regarding Georgia Power's AROs.
Nuclear Construction
In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4, in which Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the 2 AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement.
In connection with the EPC Contractor's bankruptcy filing in March 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into several transitional arrangements to allow construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Alabama PSC's approval in partVogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are complete and electricity is generated and sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.
In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement, a cost reimbursable plus fee arrangement, whereby Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, which is subject to adjustment based on Bechtel's performance against cost and schedule targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay amounts related to work performed prior to the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work,
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certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.
See Note 8 to the CCNfinancial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, mandatory prepayment events, and conditions to borrowing.
Cost and Schedule
Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4 by December 2021 and November 2022, respectively, is as follows:
(in millions)
Base project capital cost forecast(a)(b)
$8,619 
Construction contingency estimate136 
Total project capital cost forecast(a)(b)
8,755 
Net investment as of March 31, 2021(b)
(7,560)
Remaining estimate to complete(a)
$1,195
(a)    Excludes financing costs expected to be capitalized through AFUDC of approximately $250 million, of which $118 million had been accrued through March 31, 2021.
(b)    Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.
Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will be followedtotal approximately $3.0 billion, of which $2.7 billion had been incurred through March 31, 2021.
As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers and related test results, and workforce statistics. Southern Nuclear establishes aggressive target values for monthly construction production and system turnover activities as part of a strategy that was designed to maintain margin to the regulatory-approved in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4.
In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures. Since March 2020, the number of active cases at the site has fluctuated and impacted productivity levels and pace of activity completion. The lower productivity levels and slower pace of activity completion contributed to a backlog to the aggressive site work plan established at the beginning of 2020. Georgia Power estimates the productivity impacts of the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embedded in the site work plan for Unit 3 and Unit 4. In addition, the project continued to face challenges including, but not limited to, higher than expected absenteeism; overall construction and subcontractor labor productivity; system turnover and testing activities; and electrical equipment and commodity installation. As a result of these factors, in January 2021, Southern Nuclear further extended certain milestone dates, including the start of hot functional testing and fuel load for Unit 3, from those established in October 2020.
Following the January 2021 milestone extensions, Southern Nuclear has been performing additional construction remediation work, primarily related to electrical commodity installations, necessary to ensure quality and design standards are met as system turnovers are completed to support hot functional testing and fuel load for Unit 3. Hot functional testing commenced in late April 2021 and the site work plan currently targets fuel load for Unit 3 in the third quarter 2021 and an in-service date of December 2021. As the site work plan includes minimal margin to these milestone dates, any delay could result in an in-service date in the first quarter 2022 for Unit 3. Achievement of the
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extended milestone dates established in January 2021 for Unit 4, which are expected to support a regulatory-approved in-service date of November 2022, primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, being added and maintained.
Considering the factors above, during the first quarter 2021, approximately $84 million of the construction contingency established in the fourth quarter 2020 was assigned to the base capital cost forecast for costs primarily associated with the schedule extension for Unit 3 to December 2021, construction productivity, support resources, and construction remediation work. Georgia Power increased its total capital cost forecast as of March 31, 2021 by a written order whichadding $48 million to the remaining construction contingency.
After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to any rehearingthe outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded a pre-tax charge to income of $48 million ($36 million after tax) for the increase in the total project capital cost forecast as of March 31, 2021. As and when these amounts are spent, Georgia Power may request or judicial appeal filed within 30 daysthe Georgia PSC to evaluate those expenditures for rate recovery.
In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction and testing activities at Plant Vogtle Units 3 and 4. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $150 million and $190 million and is included in the total project capital cost forecast. Estimated costs associated with near-term COVID-19 mitigation actions and related impacts on construction productivity are also included in the total project capital cost forecast described above.
As construction, including subcontract work, continues and testing and system turnover activities increase, challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularly in the installation of electrical, mechanical, and instrumentation and controls commodities, ability to attract and retain craft labor, and/or related cost escalation; procurement, fabrication, delivery, assembly, installation, system turnover, and the initial testing and start-up, including any required engineering changes or any remediation related thereto, of plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale), any of which may require additional labor and/or materials; or other issues could arise and change the projected schedule and estimated cost.
There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. In connection with the additional construction remediation work described above, Southern Nuclear reviewed the project's construction quality programs and, where needed, is implementing improvement plans consistent with these processes. Findings resulting from such inspections could require additional remediation and/or further NRC oversight. In addition, certain license amendment requests have been filed and approved or are pending before the NRC. On March 15, 2021, the NRC issued an appealable order denying the Blue Ridge Environmental Defense League's (BREDL) December 2020 motion to reopen proceedings on BREDL's petition challenging a license amendment request. The staff of the NRC has issued the requested amendment.
In September 2020, Southern Nuclear notified the NRC of its intent to load fuel for Unit 3 in 2021. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, may arise, which may result in additional license amendments or require other resolution. If any license amendment requests or other licensing-based compliance issues, including inspections and ITAACs, are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.
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The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond December 2021 for Unit 3 or November 2022 for Unit 4 is currently estimated to result in additional base capital costs for Georgia Power of approximately $25 million per month for Unit 3 and approximately $15 million per month for Unit 4, as well as the related AFUDC. While Georgia Power is not precluded from seeking recovery of any future capital cost forecast increase, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.
Joint Owner Contracts
In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.
As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.
Amendments to the Vogtle Joint Ownership Agreements
In connection with the vote to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).
As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such order.costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests. If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is
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so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.
In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more over the most recently approved schedule.
The ultimate outcome of these matters cannot be determined at this time.
Regulatory Matters
In 2009, the Georgia Power
DeferralPSC voted to certify construction of Incremental COVID-19 Costs
On April 7, 2020Plant Vogtle Units 3 and June 2, 2020,4 with a certified capital cost of $4.418 billion. In addition, in response to the COVID-19 pandemic,2009 the Georgia PSC approved orders directinginclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to continue its previous, voluntary suspensionrecover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of customer disconnections$4.418 billion. At March 31, 2021, Georgia Power had recovered approximately $2.6 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through July 14, 2020AFUDC and are expected to deferbe recovered through retail rates over the resulting incremental bad debt as a regulatory asset. On June 16, 2020life of Plant Vogtle Units 3 and July 7,4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In November 2020, the Georgia PSC approved orders establishing a methodology for identifying incremental bad debt and allowingGeorgia Power's request to decrease the deferral of other incremental costs associatedNCCR tariff by $142 million annually, effective January 1, 2021.
Georgia Power is required to file semi-annual VCM reports with the COVID-19 pandemic.Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.
In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The period over whichVogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap
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and that prudence decisions on cost recovery will be recovered is expectedmade at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be determined inless than Georgia Power's nextaverage cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that upon Unit 3 reaching commercial operation, retail base rate case. Atrates would be adjusted to include the costs related to Unit 3 and common facilities deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $150 million in 2020 and are estimated to have negative earnings impacts of approximately $265 million and $200 million in 2021 and 2022, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.
The Georgia PSC has approved 23 VCM reports covering periods through June 30, 2020, including total construction capital costs incurred through that date of $8.1 billion (before $1.7 billion of payments received under the incrementalGuarantee Settlement Agreement and approximately $188 million in related customer refunds). The Georgia PSC's order approving the twenty-third VCM report also instructed Georgia Power and the staff of the Georgia PSC to develop a mutually-agreeable recommendation to the Georgia PSC by the end of March 2021 regarding the procedure for and the timing, form, and substance of the rate adjustment filing related to the Unit 3 and common facility costs. On March 31, 2021, the staff of the Georgia PSC, on behalf of itself and Georgia Power, requested an extension through April 30, 2021. Georgia Power filed its twenty-fourth VCM report with the Georgia PSC on February 18, 2021, covering the period from July 1, 2020 through December 31, 2020, requesting approval of $670 million of construction capital costs deferred totaledincurred during that period.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
Performance Evaluation Plan
On March 15, 2021, Mississippi Power submitted its annual retail PEP filing for 2021 to the Mississippi PSC, which requested a 1.8%, or approximately $34 million.$16 million, annual increase in revenues, primarily due to increased investment and amortization and lower sales. In accordance with the PEP rate schedule, the rate increase became effective with the first billing cycle of April 2021, subject to refund. The ultimate outcome of this matter cannot be determined at this time.
Integrated Resource Plan
On March 5, 2020, the Sierra Club filed a petition for judicial review in the Superior Court of Fulton County to appeal the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. Georgia Power intervened in the appeal on June 22, 2020. The ultimate outcome of this matter cannot be determined at this time.
Fuel Cost Recovery
On May 28, 2020, the Georgia PSC approved a stipulation agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors to lower total fuel billings by approximately $740 million over a two-year period effective June 1, 2020. In addition, Georgia Power will further lower fuel billings by approximately $44 million under an interim fuel rider effective June 1, 2020 through September 30, 2020. Georgia Power continues to be allowed to adjust its fuel cost recovery rates under an interim fuel rider prior to its next fuel case if the under or over recovered fuel balance exceeds $200 million. Georgia Power is scheduled to file its next fuel case no later than February 28, 2023.
Nuclear ConstructionRegulatory Matters
In 2009, the Georgia PSC certifiedvoted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in which2009 the Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full constructionPSC approved inclusion of the 2 AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued underrelated CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At March 31, 2021, Georgia Power had recovered approximately $2.6 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In November 2020, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $142 million annually, effective January 1, 2021.
Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 Agreement, which wascertificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.
In 2016, the Georgia PSC voted to approve a substantially fixed price agreement. In March 2017, the EPC Contractor filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.
Insettlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the EPC Contractor's bankruptcy filing,fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power acting for itselfwould have the burden to show that any capital costs above $5.68 billion were prudent, and as agent for(c) a revised capital cost forecast of $7.3 billion (after reflecting the other Vogtle Owners, entered into several transitional arrangements to allowimpact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Vogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are completeshould be completed, with Southern Nuclear serving as project manager and electricity is generatedBechtel as primary contractor; (v) approved and sold from both units. Thedeemed reasonable Georgia Power's revised schedule placing Plant Vogtle Services Agreement is terminable byUnits 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the Vogtle Owners upon 30 days' written notice.
In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement,revised cost forecast does not represent a cost reimbursable plus fee arrangement, whereby Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, which is subject to adjustment based on Bechtel's performance against cost and schedulecap
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targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, basedand that prudence decisions on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Ownerscost recovery will be requiredmade at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to pay amounts related to work performed prior tocalculate the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel AgreementNCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.
See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, mandatory prepayment events, and conditions to borrowing.
Cost and Schedule
Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4 by the expected in-service dates of November 2021 and November 2022, respectively, is as follows:
 (in billions)
Base project capital cost forecast(a)(b)
$8.4
Construction contingency estimate0.1
Total project capital cost forecast(a)(b)
8.5
Net investment as of June 30, 2020(b)
(6.6)
Remaining estimate to complete(a)
$1.9
(a)Excludes financing costs expected to be capitalized through AFUDC of approximately $260 million, of which $52 million had been accrued through June 30, 2020.
(b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.
Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.0 billion, of which $2.4 billion had been incurred through June 30, 2020.
As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers, and workforce statistics.
During the second quarter 2020, approximately $194 million of construction contingency was assigned to the base capital cost forecast for cost risks including, among other things, construction productivity, including the April 2020 reduction in workforce designed to mitigate impacts of the COVID-19 pandemic described below, field support, subcontracts, engineering resources, and procurement. The second quarter 2020 assignment of contingency exceeded the remaining balance of the $366 million construction contingency originally established in the second quarter 2018 by approximately $34 million. Through June 30, 2020, assignments of contingency for cost risks also have included, among other factors, construction productivity; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement. As a result of these factors, Southern Nuclear recommended establishing additional construction contingency, of which Georgia Power's share is approximately $115 million, for further potential risks including, among other factors, construction productivity and expected impacts of the COVID-19 pandemic; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement.
After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded a total pre-tax charge to income
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of $149 million ($111 million after tax) for the increase in the total project capital cost forecast as of June 30, 2020. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.
In April 2019, Southern Nuclear established aggressive target values for monthly construction production and system turnover activities as part of a strategy to maintain and, where possible, build margin to the regulatory-approved in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. Through early 2020, the project faced challenges with the April 2019 aggressive strategy targets including, but not limited to, electrical and pipefitting labor productivity and work package closure rates, which resulted in a backlog of activities and completion percentages below the April 2019 aggressive strategy targets.
In February 2020, Southern Nuclear updated its cost and schedule forecast, which, at that time, did not change the total project capital cost forecast and confirmed the expected in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. This update included initiatives to improve productivity while refining and extending system turnover plans and certain near-term milestone dates. Other milestone dates did not change. Achievement of the February 2020 aggressive site work plan relied on meeting increased monthly production and activity target values during 2020.
In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures.
In April 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4, which totaled approximately 20% of the then-existing site workforce. This reduction in workforce was a mitigation action intended to address the impact of the COVID-19 pandemic on the Plant Vogtle Units 3 and 4 workforce and construction site, including challenges with labor productivity that were exacerbated by the impact of the COVID-19 pandemic. The April 2020 workforce reduction was intended to provide operational efficiencies by increasing productivity of the remaining workforce and reducing workforce fatigue and absenteeism. Further, it was also intended to allow for increased social distancing by the workforce and facilitate compliance with the recommendations from the Centers for Disease Control and Prevention. The April 2020 workforce reduction did reduce absenteeism, providing an improvement in operational efficiency and allowing for increased social distancing. From the initial peak in April 2020, the number of active cases at the site declined significantly during May and early June, but began increasing again in mid-June and continues to impact productivity levels and pace of activity completion. As a result of these factors, overall production improvements have not been achieved at the levels anticipated, contributing to the allocation of, and increase in, construction contingency described above. Through mid-July 2020, Unit 3 mechanical, electrical, and subcontract activities continued to build a backlog to Southern Nuclear's February 2020 aggressive site work plan.
To address these issues, in July 2020, Southern Nuclear updated its aggressive site work plan for both Unit 3 and Unit 4. To meet the targets in the July2013 alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, aggressive site work plan, absenteeism rates must continueand (c) from 8.30% to normalize and overall construction productivity and production levels, including subcontractors, must significantly improve and5.30%, effective January 1, 2021 (provided that the ROE in no case will be sustained above pre-pandemic levels. In addition, appropriate levelsless than Georgia Power's average cost of craft laborers, particularly electrical and pipefitter craft labor, must be added and maintained. While Southern Nuclear's July 2020 aggressive site work plan extended milestone dates fromlong-term debt); (viii) reduced the February 2020 aggressive site work plan, Georgia Power still expects to achieve the regulatory-approved in-service dates of November 2021 and November 2022ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 respectively. Southern Nuclearfrom 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and Georgia Power continue(ix) agreed that upon Unit 3 reaching commercial operation, retail base rates would be adjusted to believe that pursuit of an aggressive site work plan is an appropriate strategyinclude the costs related to achieve completion of the units by their regulatory-approved in-service dates.
As construction, including subcontract work, continuesUnit 3 and testing and system turnover activities increase, challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularlycommon facilities deemed prudent in the installation of electrical, mechanical, and instrumentation and controls commodities, ability to attract and retain craft labor, and/or related cost escalation; procurement, fabrication,
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delivery, assembly, installation, system turnover, and the initial testing and start-up, including any required engineering changes or any remediation related thereto, of plant systems, structures, or components (some of which are based on new technologyVogtle Cost Settlement Agreement. The January 11, 2018 order also stated that only within the last few years began initial operation in the global nuclear industry at this scale), any of which may require additional labor and/or materials; or other issues could arise and change the projected schedule and estimated cost.
In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $70 million and $115 million, which is included in the total project capital cost forecast and assumes (i) absenteeism rates continue to normalize and (ii) the intended productivity efficiencies and production targets assumed in Southern Nuclear's July 2020 aggressive site work plan are realized in the coming months. However, the ultimate impact of the COVID-19 pandemic on the construction schedule and budget forif Plant Vogtle Units 3 and 4 cannot be determined at this time.
There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, may arise, which may result in additional license amendments or require other resolution. As part of the aggressive site work plan, in January 2020, Southern Nuclear notified the NRC of its intent to load fuel in 2020. On May 11, 2020, the Blue Ridge Environmental Defense League filed a petition with the NRC that challenges a license amendment request. On June 15, 2020, the NRC issued an appealable order rejecting Nuclear Watch South's April 20, 2020 petition requesting a hearing and challenging the closure of certain ITAAC. If any license amendment requests or other licensing-based compliance issues are not resolvedcommercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $150 million in a timely manner, there may be delays in the project schedule that could result in increased costs.
The ultimate outcome of these matters cannot be determined at this time. However, any extension of the regulatory-approved project schedule is currently2020 and are estimated to result in additional base capital costshave negative earnings impacts of approximately $50 million per month, based on Georgia Power's ownership interests, and AFUDC of approximately $10 million per month. While Georgia Power is not precluded from seeking recovery of any future capital cost forecast increase, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.
Joint Owner Contracts
In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.
As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue
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construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.
Amendments to the Vogtle Joint Ownership Agreements
In connection with the vote to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).
As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800$265 million and $1.6 billion over the EAC$200 million in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests;2021 and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests. If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is so revised to tender a portion of2022, respectively. In its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.
In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 orJanuary 11, 2018 order, the Georgia PSC determines that any ofalso stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.
The Georgia PSC has approved 23 VCM reports covering periods through June 30, 2020, including total construction capital costs relatingincurred through that date of $8.1 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). The Georgia PSC's order approving the twenty-third VCM report also instructed Georgia Power and the staff of the Georgia PSC to develop a mutually-agreeable recommendation to the constructionGeorgia PSC by the end of Plant Vogtle UnitsMarch 2021 regarding the procedure for and the timing, form, and substance of the rate adjustment filing related to the Unit 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid bycommon facility costs. On March 31, 2021, the staff of the Georgia PowerPSC, on behalf of the other Vogtle Owners pursuant to the Global Amendments described aboveitself and the first 6% of costs during any six-monthGeorgia Power, requested an extension through April 30, 2021. Georgia Power filed its twenty-fourth VCM reporting period that are disallowed byreport with the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery,on February 18, 2021, covering the period from July 1, 2020 through retail rates; and (iv) an incremental extensionDecember 31, 2020, requesting approval of one year or more over the most recently approved schedule.$670 million of construction capital costs incurred during that period.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
Performance Evaluation Plan
On March 15, 2021, Mississippi Power submitted its annual retail PEP filing for 2021 to the Mississippi PSC, which requested a 1.8%, or approximately $16 million, annual increase in revenues, primarily due to increased investment and amortization and lower sales. In accordance with the PEP rate schedule, the rate increase became effective with the first billing cycle of April 2021, subject to refund. The ultimate outcome of this matter cannot be determined at this time.
Regulatory Matters
In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all
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applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At June 30, 2020,March 31, 2021, Georgia Power had recovered approximately $2.4$2.6 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In December 2019,November 2020, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $62$142 million annually, effective January 1, 2020.2021.
Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.
In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the amounts$0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap
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and that prudence decisions on cost recovery will be made at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 ARP)alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that upon Unit 3 reaching commercial operation, retail base rates would be adjusted to include carryingthe costs on those capital costsrelated to Unit 3 and common facilities deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $75$150 million in 20192020 and are estimated to have negative earnings impacts of approximately $145 million, $255$265 million and $200 million in 2020, 2021 and 2022, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.
In February 2018, Georgia Interfaith Power & Light, Inc. (GIPL) and Partnership for Southern Equity, Inc. (PSE) filed a petition appealing the Georgia PSC's January 11, 2018 order with the Fulton County Superior Court. In March 2018, Georgia Watch filed a similar appeal to the Fulton County Superior Court for judicial review of the Georgia PSC's decision and denial of Georgia Watch's motion for reconsideration. In December 2018, the Fulton County Superior Court granted Georgia Power's motion to dismiss the 2 appeals. In January 2019, GIPL, PSE,
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and Georgia Watch filed an appeal of this decision with the Georgia Court of Appeals. In October 2019, the Georgia Court of Appeals issued an opinion affirming the Fulton County Superior Court's ruling that the Georgia PSC's January 11, 2018 order was not a final, appealable decision. In addition, the Georgia Court of Appeals remanded the case to the Fulton County Superior Court to clarify its ruling as to whether the petitioners showed that review of the Georgia PSC's final order would not provide them an adequate remedy. On April 21, 2020, the Fulton County Superior Court granted Georgia Power's motion to dismiss the 2 appeals. The petitioners filed a notice of appeal of the dismissal on May 20, 2020. Georgia Power believes the petitions have no merit; however, an adverse outcome in the litigation combined with subsequent adverse action by the Georgia PSC could have a material impact on Southern Company's and Georgia Power's results of operations, financial condition, and liquidity.
The Georgia PSC has approved 2123 VCM reports covering the periods through June 30, 2019,2020, including total construction capital costs incurred through that date of $6.7$8.1 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). On August 18, 2020,The Georgia PSC's order approving the twenty-third VCM report also instructed Georgia Power and the staff of the Georgia PSC is scheduled to votedevelop a mutually-agreeable recommendation to the Georgia PSC by the end of March 2021 regarding the procedure for and the timing, form, and substance of the rate adjustment filing related to the Unit 3 and common facility costs. On March 31, 2021, the staff of the Georgia PSC, on behalf of itself and Georgia Power's twenty-secondPower, requested an extension through April 30, 2021. Georgia Power filed its twenty-fourth VCM report which requestedwith the Georgia PSC on February 18, 2021, covering the period from July 1, 2020 through December 31, 2020, requesting approval of $674$670 million of construction capital costs incurred from July 1, 2019 through December 31, 2019.
Georgia Power expects to file its twenty-third VCM report with the Georgia PSC by August 31, 2020, which will reflect the revised capital cost forecast discussed above and request approval of $701 million of construction capital costs incurred from January 1, 2020 through June 30, 2020.during that period.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
2019 Base Rate Case
On March 17, 2020, the Mississippi PSC approved a settlement agreement between Mississippi Power and the Mississippi Public Utilities Staff related to Mississippi Power's base rate case filed in November 2019 (Mississippi Power Rate Case Settlement Agreement).
Under the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%, effective for the first billing cycle of April 2020, based on a test year period of January 1, 2020 through December 31, 2020, a 53% average equity ratio, an allowed maximum actual equity ratio of 55% by the end of 2020, and a 7.57% return on investment.
Additionally, the approved Mississippi Power Rate Case Settlement Agreement: (i) established common amortization periods of four years for regulatory assets and three years for regulatory liabilities included in the approved revenue requirement, including those related to unprotected deferred income taxes; (ii) established new depreciation rates reflecting an annual increase in depreciation of approximately $10 million; and (iii) excluded certain compensation costs totaling approximately $3.9 million. It also eliminated separate rates for costs associated with Plant Ratcliffe and energy efficiency initiatives and includes such costs in the PEP, ECO Plan, and ad valorem tax adjustment factor, as applicable. In accordance with the previous order of the Mississippi PSC suspending the operation of PEP and the ECO Plan for 2018 through 2020, Mississippi Power plans to resume PEP proceedings and ECO Plan filings for 2021.
Performance Evaluation Plan
On July 24, 2020,March 15, 2021, Mississippi Power submitted its annual retail PEP filing for 2021 to the Mississippi PSC, approved Mississippi Power's July 14, 2020 filing of its PEP compliance rate clause reflecting revisions agreedwhich requested a 1.8%, or approximately $16 million, annual increase in revenues, primarily due to inincreased investment and amortization and lower sales. In accordance with the Mississippi Power Rate Case Settlement Agreement. These revisions include, among other things, changing the filing date for the annual PEP rate filing from Novemberschedule, the rate increase became effective with the first billing cycle of the immediately preceding yearApril 2021, subject to March of the current year, utilizing a historic test year adjusted for "known and measurable" changes, using discounted cash flow and regression formulas to determine base return on equity, and moving all embedded ad valorem property taxes currently collected in PEP to the ad valorem tax adjustment clause.
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Deferral of Incremental COVID-19 Costs
On April 14, 2020 and May 12, 2020, in order to mitigate the economic impact of the COVID-19 pandemic on customers, the Mississippi PSC approved orders directing Mississippi Power to continue its previous, voluntary suspension of customer disconnections through May 25, 2020 and to defer as a regulatory asset all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system during the COVID-19 pandemic. The period over which such costs will be recovered is expected to be determined in a future PEP filing. At June 30, 2020, the incremental costs deferred totaled approximately $2 million.refund. The ultimate outcome of this matter cannot be determined at this time.
Municipal and Rural Associations TariffIntegrated Resource Plan
On June 25,In December 2020, the FERC acceptedMississippi PSC issued an order in the Reserve Margin Plan docket requiring Mississippi Power to incorporate into its 2021 IRP a schedule reflecting the retirement of 950 MWs of fossil-steam generation by year-end 2027 to reduce Mississippi Power's excess reserve margin. On April 27, 2020 request for an increase in wholesale base revenues under the MRA tariff as agreed upon in a settlement agreement reached with15, 2021, Mississippi Power filed its wholesale customers. The MRA settlement agreement resulted in a $2 million annual increase in base rates effective June 1, 2020.
Southern Company Gas
Rate Proceedings
On June 1, 2020, Virginia Natural Gas filed a general rate case2021 IRP with the Virginia Commission seeking an increaseMississippi PSC. The filing includes a schedule to retire Plant Watson Unit 4 (268 MWs) and Mississippi Power's 40% ownership interest in ratesPlant Greene County Units 1 and 2 (103 MWs each) in December 2023, 2025, and 2026, respectively, consistent with each unit's remaining useful life in the most recent approved depreciation studies. In addition, the schedule reflects the early retirement of Mississippi Power's 50% undivided ownership interest in Plant Daniel Units 1 and 2 (502 MWs) by the end of 2027. The Plant Greene County unit retirements require the completion by Alabama Power of transmission and system reliability improvements, as well as agreement by Alabama Power.
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The remaining net book value of Plant Daniel Units 1 and 2 was approximately $531 million primarilyat March 31, 2021. Mississippi Power expects to recover investmentsreclassify the net book value remaining at retirement to a regulatory asset to be amortized over a period to be determined by the Mississippi PSC in future proceedings, consistent with the December 2020 order. The Plant Watson and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month test year beginning November 1, 2020, a ROE of 10.35%, and an equity ratio of 54%. Rate adjustmentsGreene County units are expected to be effective November 1, 2020,fully depreciated upon retirement.
The 2021 IRP is subject to refund. The Virginia Commission is expected to rule ona review period during which the requested increase in the second quarter 2021.
On July 1, 2020, Atlanta Gas Light filed its 2020 GRAM filing with the Georgia PSC. The filing requests an annual base rate increase of $37.6 million based on the projected 12-month period beginning January 1, 2021,Mississippi PSC may note any deficiencies which does not exceed the 5% limitation established by the Georgia PSC in its December 2019 approval of Atlanta Gas Light's general base rate case. Resolutioncould require re-evaluation or resubmission of the 2020 GRAM filing is expected by December 31, 2020, with rates effective January 1,IRP. If no deficiencies are noted, the Mississippi PSC's review will conclude on August 13, 2021.
The ultimate outcome of these matters cannot be determined at this time.
Deferral of Incremental COVID-19 Costs
Atlanta Gas Light
On April 30, 2020, in response to the COVID-19 pandemic, the Georgia PSC approved orders directing Atlanta Gas Light to continue its previous, voluntary suspension of customer disconnections. On June 22, 2020, the Georgia PSC ordered Atlanta Gas Light to resume customer disconnections beginning July 1, 2020, with exceptions for customers still covered by a shelter-in-place order. The orders provide the Marketers, including SouthStar, with a mechanism to receive credits from Atlanta Gas Light for the base rates it charged to the Marketers of non-paying customers during the suspension. Atlanta Gas Light expects to recover these credits through the annual revenue true-up process within its 2021 GRAM filing, which would impact rates effective January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
NicorAd Valorem Tax Adjustment
On April 6, 2021, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2021, which requested an annual increase in revenues of approximately $28 million, including approximately $19 million of ad valorem taxes previously recovered through PEP in accordance with the Mississippi Power Rate Case Settlement Agreement. The rate became effective with the first billing cycle of May 2021.
Southern Company Gas
Infrastructure Replacement Programs and Capital Projects
Capital expenditures incurred under specific infrastructure replacement programs during the first three months of 2021 were as follows:
UtilityProgramThree Months Ended
March 31, 2021
(in millions)
Nicor GasInvesting in Illinois$45 
Virginia Natural GasSteps to Advance Virginia's Energy9 
Total$54 
Atlanta Gas Light
On March 18, 2020,April 28, 2021, Atlanta Gas Light filed its first Integrated Capacity and Delivery Plan (i-CDP) with the Illinois Commission issued an order directing utilitiesGeorgia PSC, which includes a series of ongoing and proposed pipeline safety, reliability, and growth programs for the next 10 years (2022 through 2031), as well as the required capital investments and related costs to cease disconnections for non-payment andimplement the programs. The i-CDP reflects capital investments totaling approximately $0.5 billion to suspend the imposition of late payment fees or penalties until the Governor of Illinois announces the end$0.6 billion annually.
Recovery of the COVID-19 state of emergency. In responserelated revenue requirements will be included in either subsequent annual GRAM filings or the new System Reinforcement Rider for authorized large pressure improvement and system reliability projects. The i-CDP is subject to this order, on March 27, 2020, Nicor Gas and other utilities in Illinois filed their plans seeking cost recovery and more flexible credit and collection plans.
On June 18, 2020, the Illinois Commission approved a stipulation pursuant tofive-month review period, which the utilities will provide more flexible credit and collection procedures to assist customers with financial hardship and which authorizes a special
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purpose rider for recovery of the following COVID-19 pandemic-related impacts: incremental costs directly associated with the COVID-19 pandemic, net of the offset for COVID-19 pandemic-related credits received, foregone late fees, foregone reconnection charges, and the costs associated with a bill payment assistance program. The special purpose rider is proposed tomay be effective on October 1, 2020 and continue over a 24-month period. At June 30, 2020, Nicor Gas' related regulatory asset was $12 million.extended. The ultimate outcome of this matter cannot be determined at this time.
Virginia Natural Gas
In response to the COVID-19 pandemic,On April 6, 2021, the Virginia State Corporation Commission issued orders requiringapproved a motion filed by Virginia Natural Gas to suspend disconnections beginning on March 16, 2020 and alsowithdraw the application for its 9.5-mile interconnect project due to suspend late payment and reconnection fees beginning on April 9, 2020, botha change in the capacity needs of which continue in effect through August 31, 2020. On April 29, 2020, the Virginia Commission authorized Virginia Natural Gas to defer the following COVID-19 pandemic-related costs as a regulatory asset: incremental uncollectible expense incurred, suspended late fees, suspended reconnection charges, carrying costs, and other incremental prudently incurred costs associated with the COVID-19 pandemic. Specific recovery of the amounts deferred in a regulatory asset will be addressed in a future rate proceeding. At June 30, 2020, Virginia Natural Gas' related regulatory asset was $1 million. The ultimate outcome of this matter cannot be determined at this time.
Infrastructure Replacement Programs and Capital Projects
In December 2019, Virginia Natural Gas filed an application with the Virginia Commission for a 24.1-mile header improvement project to improve resiliency and increase the supply of natural gas delivered to energy suppliers, including Virginia Natural Gas. On June 26, 2020, the Virginia Commission issued an order requiring Virginia Natural Gas to submit additional information by December 31, 2020 related to the financing plansone of the project's primary customer before ruling on the December 2019 application. The ultimate outcome ofcustomers. No further action is necessary and this matter cannot be determined at this time.is now concluded.
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Deferral of Incremental COVID-19 Costs
Nicor Gas
On March 18, 2021, the Illinois Commission approved a phased-in schedule for disconnections related to non-payment. Nicor Gas began certain disconnections in late April 2021 and will resume normal disconnections in June 2021. Nicor Gas will continue certain flexible credit and collection procedures until mid-2021.
(C) CONTINGENCIES
See Note 3 to the financial statements in Item 8 of the Form 10-K for information relating to various lawsuits and other contingencies.
General Litigation Matters
The Registrants are involved in various other matters being litigated and regulatory matters. The ultimate outcome of such pending or potential litigation or regulatory matters against each Registrant and any subsidiaries cannot be determined at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on such Registrant's financial statements.
The Registrants believe the pending legal challenges discussed below have no merit; however, the ultimate outcome of these matters cannot be determined at this time.
Southern Company
In January 2017, a securities class action complaint was filed in the U.S. District Court for the Northern District of Georgia by Monroe County Employees' Retirement System on behalf of all persons who purchased shares of Southern Company's common stock between April 25, 2012 and October 29, 2013. The complaint names as defendants Southern Company, certain of its current and former officers, and certain former Mississippi Power officers and alleges that the defendants made materially false and misleading statements regarding the Kemper County energy facility in violation of certain provisions under the Securities Exchange Act of 1934, as amended. The complaint seeks, among other things, compensatory damages and litigation costs and attorneys' fees. In 2017, the plaintiffs filed an amended complaint that provided additional detail about their claims, increased the purported class period by one day, and added certain other former Mississippi Power officers as defendants. Also in 2017, the defendants filed a motion to dismiss the plaintiffs' amended complaint with prejudice, to which the plaintiffs filed an
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opposition. In 2018, the court issued an order dismissing certain claims against certain officers of Southern Company and Mississippi Power and dismissing the allegations related to a number of the statements that plaintiffs challenged as being false or misleading. In 2018, the court denied the defendants' motion for reconsideration and also denied a motion to certify the issue for interlocutory appeal. In the third quarter 2019, the court certified the plaintiffs' proposed class and the defendants filed a petition for interlocutory appeal of the class certification order with the U.S. Court of Appeals for the Eleventh Circuit. In December 2019, the U.S. District Court for the Northern District of Georgia entered an order staying all deadlines in the case pending mediation. The stay automatically expired on March 31, 2020; however, in light of the COVID-19 pandemic, the U.S. District Court for the Northern District of Georgia vacated all existing discovery deadlines until June 15, 2020. On June 30, 2020, the court entered a revised scheduling order, which resumed discovery and set out remaining case deadlines.
In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. In 2017, these 2 shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of Georgia. The complaints allege that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints allege that the defendants were unjustly enriched and caused the waste of corporate assets and also allege that the individual defendants violated their fiduciary duties. Each plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. Each plaintiff also seeks certain changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action.
In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint alleges that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleges that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. The plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and disgorgement of profits and, on its behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiff also seeks certain unspecified changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.
The plaintiffs in each of these cases seek to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiffs also seek certain changes to Southern Company's corporate governance and internal processes. In 2018, the court in each case entered an order staying each lawsuit until 30 days after the settlement of a securities class action filed in January 2017 against Southern Company, certain of its current and former officers, and certain former Mississippi Power officers. In September 2020, the plaintiffs in each case filed a status report noting the settlement of the securities class action and informing the court that the parties had scheduled mediation, which occurred in November 2020. The parties in each case did not reach settlement but continue to explore possible resolution. Each case is stayed while the parties discuss potential resolution.
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Georgia Power
In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state law claims. This case has been ruled upon and appealed numerous times over the last several years. In one recent appeal, the Georgia Supreme Court remanded the case and noted that the trial court could refer the matter to the Georgia PSC to interpret its tariffs. Following a motion by Georgia Power, in February 2019, the Superior Court of Fulton County ordered the parties to submit petitions to the Georgia PSC for a declaratory ruling and also conditionally certified the proposed class. In March 2019, Georgia Power and the plaintiffs filed petitions with the Georgia PSC seeking confirmation of the proper application of the municipal franchise fee schedule pursuant to the Georgia PSC's orders. Also in March 2019, Georgia Power appealed the class certification decision to the Georgia Court of Appeals. In October 2019, the Georgia PSC issued an order that found Georgia Power has appropriately implemented the municipal franchise fee schedule. OnIn March 11, 2020, the Georgia Court of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification. The Court of
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Appealscertification and remanded the case to the Superior Court of Fulton County for further proceedings. In September 2020, the plaintiffs and Georgia Power each filed motions for summary judgment and the plaintiffs renewed their motion for class certification. On March 16, 2021, the Superior Court of Fulton County granted class certification and Georgia Power's motion for summary judgment. On March 22, 2021, the plaintiffs filed a notice of appeal, and, on April 2, 2021, Georgia Power filed a notice of cross appeal on the issue of class certification. The amount of any possible losses cannot be calculatedestimated at this time because, among other factors, it is unknown whether a class will be certified, the ultimate composition of any class, and whether any losses would be subject to recovery from any municipalities.
OnIn July 29, 2020, a group of individual plaintiffs filed a complaint in the Superior Court of Fulton County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater, surface water, and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages, a medical monitoring fund, and injunctive relief. In September 2020, Georgia Power filed a motion to dismiss. The amount of any possible losses cannot be estimated at this time.
Mississippi Power
In May 2018, Southern Company and Mississippi Power received a notice of dispute and arbitration demand filed by Martin Product Sales, LLC (Martin) based on 2 agreements, both related to Kemper IGCC byproducts for which Mississippi Power provided termination notices in 2017. Martin alleges breach of contract, breach of good faith and fair dealing, fraud and misrepresentation, and civil conspiracy and makes a claim for damages in the amount of approximately $143 million, as well as additional unspecified damages, attorney's fees, costs, and interest. A portion of the claim for damages was on behalf of Martin Transport, Inc. (Martin Transport), an affiliate of Martin. In May 2019, the arbitration panel denied Mississippi Power's and Southern Company's motions to dismiss. In September 2019, Martin Transport filed a separate complaint against Mississippi Power in the Circuit Court of Kemper County, Mississippi alleging claims of fraud, negligent misrepresentation, promissory estoppel, and equitable estoppel, each arising out of the same alleged facts and circumstances that underlie Martin's arbitration demand. Martin Transport seeks compensatory damages of $5 million and punitive damages of $50 million. In November 2019, Martin Transport's claim was combined with the Martin arbitration case and the separate court case was dismissed. In December 2019, Southern Company and Mississippi Power each filed motions for summary judgment on all claims. On February 17, 2020, the arbitration panel granted Southern Company's motion and dismissed Southern Company from the arbitration. On March 12, 2020, the arbitration panel denied Mississippi Power's motions for summary judgment. An adverse outcome in this proceeding could have a material impact on Southern Company's and Mississippi Power's financial statements.
In November 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and the 3 then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. In response to Mississippi Power and the Mississippi PSC each filing a motion to dismiss, the plaintiffs filed an amended complaint in March 2019. The amended complaint included 4 additional plaintiffs and additional claims for gross negligence, reckless conduct, and intentional wrongdoing. Mississippi Power and the Mississippi PSC have each filed a motion to dismiss the amended complaint. Oncomplaint, which occurred in May 2020 and March 27, 2020, the Mississippi PSC's motion to dismiss was granted.respectively. Also onin March 27, 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants based on a dormant commerce clause theory under the U.S. Constitution. On April 9, 2020 and April 10, 2020, Mississippi Power and the Mississippi PSC, respectively, filed responses opposing the motion for leave to file a second amended complaint. On May 26, 2020, Mississippi Power's motion to dismiss the first amended complaint filed in 2019 was granted. OnIn July 6, 2020, the plaintiffs filed a motion for revision of the court's decision. The plaintiffs' motion for leave to file a third amended complaint, which included the same federal claims as the proposed second amended complaint, also remainsas well as several additional state law claims based on the allegation that Mississippi Power failed to disclose the annual percentage rate of interest applicable to refunds. In November 2020, the court denied each of the plaintiffs' pending beforemotions and entered final judgment in favor of Mississippi Power. On January 22, 2021, the court.court denied further motions by the plaintiffs to vacate the judgment and to file a revised second
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amended complaint. On February 19, 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.
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See Note 23 to the financial statements under "Mississippi"Other Matters – Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
Environmental Remediation
The Southern Company system must comply with environmental laws and regulations governing the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Southern Company system could incur substantial costs to clean up affected sites. The traditional electric operating companies and the natural gas distribution utilities in Illinois and Georgia have each received authority from their respective state PSCs or other applicable state regulatory agencies to recover approved environmental complianceremediation costs through regulatory mechanisms. These regulatory mechanisms are adjusted annually or as necessary within limits approved by the state PSCs or other applicable state regulatory agencies.
Georgia Power's environmental remediation liability was $14$16 million and $15 million as of June 30, 2020at March 31, 2021 and December 31, 2019,2020, respectively. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.
In December 2019, Mississippi Power entered into an agreement with the Mississippi Commission on Environmental Quality related to groundwater conditions arising from the closed ash pond at Plant Watson. Mississippi Power will complete an assessment and remediation consistent with the requirements of the agreement and the CCR Rule. Potential remediation activities and related cost estimates are pending the result of further site assessment and cannot be determined at this time. Mississippi Power expects to recover the retail portion of remedial costs through the ECO Plan and the wholesale portion through MRA rates.
Southern Company Gas' environmental remediation liability was $253$240 million and $269$245 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, based on the estimated cost of environmental investigation and remediation associated with known current and former manufactured gas plant operating sites. These environmental remediation expenditures are generally recoverable from customers through rate mechanisms approved by the applicable state regulatory agencies of the natural gas distribution utilities.
The ultimate outcome of these matters cannot be determined at this time; however, as a result of the regulatory treatment for environmental remediation expenses described above, the final disposition of these matters is not expected to have a material impact on the financial statements of the applicable Registrants.
Other Matters
Southern Company
See Notes 1 and 3 under "Leveraged Leases" and "Other Matters – Southern Company," respectively, in Item 8 of the Form 10-K for discussion of challenges associated with a leveraged lease agreement with a subsidiary of Southern Holdings. While all required lease payments through June 30, 2020 have been paid in full, the operational and remarketing risks and the resulting cash liquidity challenges persist and significant concerns continue regarding the lessee's ability to make the remaining required semi-annual lease payments to the Southern Holdings subsidiary through the term of the lease.
In its annual impairment analysis of the expected residual value of the generation assets and the overall collectability of the related lease receivable, Southern Company uses multiple scenarios of long-term market energy prices to estimate the cash flows expected to be received from remarketing the generation assets following the expiration of the existing PPA in 2032 and the residual value of the generation assets at the end of the lease in 2047. Southern Company received the latest annual forecasts of natural gas prices during the second quarter 2020 and considered the significant decline in forecasted prices to be an indicator of potential impairment that required an interim impairment assessment. Accordingly, consistent with prior years, Southern Company evaluated the recoverability of the lease receivable and the expected residual value of the generation assets under various natural gas price scenarios. Based on the current forecasts of energy prices in the years following the expiration of the
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existing PPA, Southern Company concluded that it is no longer probable that any of the associated rental payments will be received, because it is no longer probable the generation assets will be successfully remarketed and continue to operate after that date. During the second quarter 2020, Southern Company revised the estimated cash flows to be received under the leveraged lease to reflect this conclusion, which resulted in a full impairment of the lease investment and a pre-tax charge to earnings of $154 million ($74 million after tax).
If any future lease payment due prior to the expiration of the associated PPA is not paid in full, the Southern Holdings subsidiary may be unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. Failure to make the required payment to the debtholders could represent an event of default that would give the debtholders the right to foreclose on, and take ownership of, the generation assets, in effect terminating the lease. As the full amount of the lease investment has been charged against earnings as of June 30, 2020, termination would not be expected to result in additional charges. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to make the required lease payments and meet its obligations associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.
Mississippi Power
Kemper County Energy Facility
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
As the mining permit holder, Liberty Fuels Company, LLC has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities related to the lignite mine and equipment and mineral reserves located around the Kemper County energy facility site. As a result of the abandonment of the Kemper IGCC, final mine reclamation began in 2018 and is expected to be substantially completed in 2020, with monitoring expected to continue through 2027. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Dismantlement of the abandoned gasifier-related assets and site restoration activities are expected to be completed in 2025. The additional pre-tax period costs associated with dismantlement and site restoration activities, including related costs for compliance and safety, ARO accretion, and property taxes, are estimated to total $5 million for the remainder of 2020, $16 million in 2021, and $11 million to $13 million annually in 2022 through 2025. In addition, closure costs for the mine and gasifier-related assets, currently estimated at up to $6 million pre-tax (excluding dismantlement costs, net of salvage), may be incurred during the remainder of 2020.
In December 2019, Mississippi Power transferred ownership of the CO2 pipeline to an unrelated gas pipeline company, with no resulting impact on income. In conjunction with the transfer of the CO2 pipeline, the parties agreed to enter into a 15-year firm transportation agreement, which is expected to be signed by the end of 2020, providing for the conversion by the pipeline company of the CO2 pipeline to a natural gas pipeline to be used for the delivery of natural gas to Plant Ratcliffe. The agreement will be treated as a finance lease for accounting purposes upon commencement.
In 2018, Mississippi Power filed with the DOE its request for property closeout certification under the contract related to the $387 million of grants received for the Kemper County energy facility. Mississippi Power expects to close out the DOE contract in 2020. In connection with the DOE closeout discussions, in April 2019, the Civil Division of the Department of Justice informed Southern Company and Mississippi Power of an investigation related to the Kemper County energy facility. The ultimate outcome of this matter cannot be determined at this time; however, it could have a material impact on Southern Company's and Mississippi Power's financial statements.
Plant Daniel
In conjunction with Southern Company's sale of Gulf Power, Mississippi Power and Gulf Power agreed to seek a restructuring of their 50% undivided ownership interests in Plant Daniel such that each of them would, after the restructuring, own 100% of a generating unit. On April 24, 2020, Mississippi Power and Gulf Power amended the
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terms of the agreement to extend the deadline from May 1, 2020 to August 1, 2020 for Mississippi Power to notify Gulf Power of which generating unit it has selected for 100% ownership. Mississippi Power and Gulf Power are continuing negotiations on a mutually acceptable revised operating agreement for Plant Daniel and, as a result, the parties have agreed not to select a specific unit on August 1, 2020. The impacts of operating the units on an individual basis continue to be evaluated by Mississippi Power and any transfer of ownership would be subject to approval by the FERC and the Mississippi PSC. The ultimate outcome of this matter cannot be determined at this time.
Southern Company Gas
See Notes 3PennEast Pipeline Project
Work continues with state and 7federal agencies to obtain the financial statements in Item 8required permits to begin construction of the Form 10-K under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, and Note (E) under "Southern Company Gas" for additional information.
On March 24, 2020, Southern Company Gas completed the sale of its interest in Atlantic CoastPennEast Pipeline. See Note (K) under "Southern Company Gas" for additional information.
On February 20, 2020, the FERC approved a two-year extension for PennEast Pipeline to complete the project by January 19, 2022.
In September 2019, an appellate court ruled that the PennEast Pipeline does not have federal eminent domain authority over lands in which a state has property rights interests. On June 29, 2020, the U.S. Supreme Court requested the U.S. Solicitor General to provide an opinion on PennEast Pipeline's petition for a writ of certiorari seeking its review of the appellate court's decision.
Expected project costs related to the PennEast Pipeline for Southern Company Gas total approximately $300 million, excluding financing costs. The ultimate outcome of the PennEast Pipeline construction project cannot be determined at this time; however, any work delays, whether caused by judicial or regulatory action, abnormal weather, or other conditions, may result in additional cost or schedule modifications or, ultimately, in project cancellation, any of which could result in impairment of Southern Company Gas' investment ($93 million at March 31, 2021) and could have a significant impact on Southern Company's financial statements and a material impact on Southern Company Gas' financial statements. See Note (E) under "Southern Company Gas" for additional information.
SNG
As a 50% equity investor in SNG, Southern Company Gas is required to make additional capital contributions as necessary pursuant to the terms of its operating agreement with SNG. SNG has $300 million of debt maturing in June 2021 that it anticipates refinancing prior to its maturity. If SNG is unable to refinance or otherwise satisfy this debt obligation, Southern Company Gas has committed to fund up to $150 million as a contingent capital contribution. See Note (E) under "Southern Company Gas" for additional information.
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(D) REVENUE FROM CONTRACTS WITH CUSTOMERS AND LEASE INCOME
Revenue from Contracts with Customers
The Registrants generate revenues from a variety of sources, some of which are not accounted for as revenue from contracts with customers, such as leases, derivatives, and certain cost recovery mechanisms. See Note 1 to the financial statements under "Revenues" in Item 8 of the Form 10-K for additional information on the revenue policies of the Registrants. See "Lease Income""Lease Income" herein and Note (J) for additional information on revenue accounted for under lease and derivative accounting guidance, respectively.
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The following table disaggregates revenue from contracts with customers for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended March 31, 2021
Operating revenues
Retail electric revenues
Residential$1,468 $628 $776 $64 $0 $0 
Commercial1,117 372 686 59 0 0 
Industrial668 320 284 64 0 0 
Other24 5 17 2 0 0 
Total retail electric revenues3,277 1,325 1,763 189 0 0 
Natural gas distribution revenues
Residential614 0 0 0 0 614 
Commercial170 0 0 0 0 170 
Transportation288 0 0 0 0 288 
Industrial16 0 0 0 0 16 
Other97 0 0 0 0 97 
Total natural gas distribution revenues1,185 0 0 0 0 1,185 
Wholesale electric revenues
PPA energy revenues212 43 13 4 156 0 
PPA capacity revenues119 29 13 3 75 — 
Non-PPA revenues67 32 9 88 61 0 
Total wholesale electric revenues398 104 35 95 292 0 
Other natural gas revenues
Wholesale gas services1,590 0 0 0 0 1,590 
Gas marketing services194 0 0 0 0 194 
Other natural gas revenues7 0 0 0 0 7 
Total natural gas revenues1,791 0 0 0 0 1,791 
Other revenues249 46 113 8 4 0 
Total revenue from contracts with customers6,900 1,475 1,911 292 296 2,976 
Other revenue sources(a)
1,306 84 59 15 144 1,014 
Other adjustments(b)
(2,296)0 0 0 0 (2,296)
Total operating revenues$5,910 $1,559 $1,970 $307 $440 $1,694 
57
 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Three Months Ended June 30, 2020      
Operating revenues      
Retail electric revenues      
Residential$1,430
$549
$817
$64
$—
$—
Commercial1,103
353
689
61
—
—
Industrial642
302
273
67
—
—
Other23
6
15
2
—
—
Total retail electric revenues3,198
1,210
1,794
194
—
—
Natural gas distribution revenues      
Residential239
—
—
—
—
239
Commercial58
—
—
—
—
58
Transportation234
—
—
—
—
234
Industrial5
—
—
—
—
5
Other49
—
—
—
—
49
Total natural gas distribution revenues585
—
—
—
—
585
Wholesale electric revenues      
PPA energy revenues167
28
7
2
134
—
PPA capacity revenues108
25
13
1
71
—
Non-PPA revenues50
5
2
73
59
—
Total wholesale electric revenues325
58
22
76
264
—
Other natural gas revenues      
Wholesale gas services341
—
—
—
—
341
Gas marketing services57
—
—
—
—
57
Other natural gas revenues8
—
—
—
—
8
Total natural gas revenues406
—
—
—
—
406
Other revenues251
44
119
6
4
—
Total revenue from contracts with customers4,765
1,312
1,935
276
268
991
Other revenue sources(a)
728
53
(7)7
171
518
Other adjustments(b)
(873)—
—
—
—
(873)
Total operating revenues$4,620
$1,365
$1,928
$283
$439
$636
       
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Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended March 31, 2020
Operating revenues
Retail electric revenues
Residential$1,370 $553 $760 $57 $0 $0 
Commercial1,146 364 720 62 0 0 
Industrial680 321 281 78 0 0 
Other23 5 16 2 0 0 
Total retail electric revenues3,219 1,243 1,777 199 0 0 
Natural gas distribution revenues
Residential496 0 0 0 0 496 
Commercial130 0 0 0 0 130 
Transportation264 0 0 0 0 264 
Industrial12 0 0 0 0 12 
Other97 0 0 0 0 97 
Total natural gas distribution revenues999 0 0 0 0 999 
Wholesale electric revenues
PPA energy revenues159 27 9 2 125 0 
PPA capacity revenues105 27 12 1 66 0 
Non-PPA revenues51 19 2 69 58 0 
Total wholesale electric revenues315 73 23 72 249 0 
Other natural gas revenues
Wholesale gas services396 0 0 0 0 396 
Gas marketing services163 0 0 0 0 163 
Other natural gas revenues7 0 0 0 0 7 
Total natural gas revenues566 0 0 0 0 566 
Other revenues192 37 95 5 3 0 
Total revenue from contracts with customers5,291 1,353 1,895 276 252 1,565 
Other revenue sources(a)
868 (2)(70)1 123 825 
Other adjustments(b)
(1,141)0 0 0 0 (1,141)
Total operating revenues$5,018 $1,351 $1,825 $277 $375 $1,249 
(a)Other revenue sources relate to revenues from customers accounted for as derivatives and leases, alternative revenue programs at Southern Company Gas, and cost recovery mechanisms and revenues that meet other scope exceptions for revenues from contracts with customers at the traditional electric operating companies.
(b)Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.
58
 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Six Months Ended June 30, 2020      
Operating revenues      
Retail electric revenues      
Residential$2,801
$1,103
$1,577
$121
$—
$—
Commercial2,247
717
1,409
121
—
—
Industrial1,323
623
555
145
—
—
Other46
11
31
4
—
—
Total retail electric revenues6,417
2,454
3,572
391
—
—
Natural gas distribution revenues      
Residential736
—
—
—
—
736
Commercial188
—
—
—
—
188
Transportation499
—
—
—
—
499
Industrial17
—
—
—
—
17
Other144
—
—
—
—
144
Total natural gas distribution revenues1,584
—
—
—
—
1,584
Wholesale electric revenues      
PPA energy revenues326
55
15
4
259
—
PPA capacity revenues213
52
25
2
136
—
Non-PPA revenues100
24
4
142
117
—
Total wholesale electric revenues639
131
44
148
512
—
Other natural gas revenues      
Wholesale gas services737
—
—
—
—
737
Gas marketing services220
—
—
—
—
220
Other natural gas revenues15
—
—
—
—
15
Total natural gas revenues972
—
—
—
—
972
Other revenues441
78
214
13
7
—
Total revenue from contracts with customers10,053
2,663
3,830
552
519
2,556
Other revenue sources(a)
1,599
53
(76)7
295
1,343
Other adjustments(b)
(2,014)—
—
—
—
(2,014)
Total operating revenues$9,638
$2,716
$3,754
$559
$814
$1,885
       
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Three Months Ended June 30, 2019      
Operating revenues      
Retail electric revenues      
Residential$1,491
$592
$831
$68
$—
$—
Commercial1,264
422
770
72
—
—
Industrial766
369
327
70
—
—
Other25
7
15
3
—
—
Total retail electric revenues3,546
1,390
1,943
213
—
—
Natural gas distribution revenues      
Residential229
—
—
—
—
229
Commercial65
—
—
—
—
65
Transportation213
—
—
—
—
213
Industrial5
—
—
—
—
5
Other45
—
—
—
—
45
Total natural gas distribution revenues557
—
—
—
—
557
Wholesale electric revenues      
PPA energy revenues208
35
17
3
163
—
PPA capacity revenues109
25
13
1
81
—
Non-PPA revenues53
3
1
89
68
—
Total wholesale electric revenues370
63
31
93
312
—
Other natural gas revenues      
Wholesale gas services444
—
—
—
—
444
Gas marketing services55
—
—
—
—
55
Other natural gas revenues12
—
—
—
—
12
Total natural gas revenues511
—
—
—
—
511
Other revenues238
37
95
4
3
—
Total revenue from contracts with customers5,222
1,490
2,069
310
315
1,068
Other revenue sources(a)
1,050
23
48
3
195
795
Other adjustments(b)
(1,174)—
—
—
—
(1,174)
Total operating revenues$5,098
$1,513
$2,117
$313
$510
$689
       
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Six Months Ended June 30, 2019      
Operating revenues      
Retail electric revenues      
Residential$2,818
$1,151
$1,539
$128
$—
$—
Commercial2,390
790
1,463
137
—
—
Industrial1,474
707
623
144
—
—
Other44
13
25
6
—
—
Total retail electric revenues6,726
2,661
3,650
415
—
—
Natural gas distribution revenues      
Residential830
—
—
—
—
830
Commercial235
—
—
—
—
235
Transportation469
—
—
—
—
469
Industrial22
—
—
—
—
22
Other161
—
—
—
—
161
Total natural gas distribution revenues1,717
—
—
—
—
1,717
       
Wholesale electric revenues      
PPA energy revenues398
67
28
5
314
—
PPA capacity revenues217
52
27
2
163
—
Non-PPA revenues108
62
3
164
109
—
Total wholesale electric revenues723
181
58
171
586
—
Other natural gas revenues      
Wholesale gas services1,165
—
—
—
—
1,165
Gas marketing services276
—
—
—
—
276
Other natural gas revenues22
—
—
—
—
22
Total natural gas revenues1,463
—
—
—
—
1,463
Other revenues502
83
186
10
6
—
Total revenue from contracts with customers11,131
2,925
3,894
596
592
3,180
Other revenue sources(a)
2,413
(4)57
4
361
2,017
Other adjustments(b)
(3,034)—
—
—
—
(3,034)
Total operating revenues$10,510
$2,921
$3,951
$600
$953
$2,163
(a)Other revenue sources primarily relate to revenues from customers accounted for as derivatives and leases, as well as alternative revenue programs at Southern Company Gas and other cost recovery mechanisms at the traditional electric operating companies.
(b)
Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Contract Balances
The following table reflects the closing balances of receivables, contract assets, and contract liabilities related to revenues from contracts with customers at June 30, 2020March 31, 2021 and December 31, 2019:2020:
Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Accounts Receivable
As of March 31, 2021$2,375 $567 $679 $87 $85 $778 
As of December 31, 20202,614 632 806 77 112 788 
Contract Assets
As of March 31, 2021$106 $1 $47 $0 $0 $0 
As of December 31, 2020158 2 71 0 0 0 
Contract Liabilities
As of March 31, 2021$75 $4 $34 $1 $1 $1 
As of December 31, 202061 6 27 1 1 1 
 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Accounts Receivables      
As of June 30, 2020$2,283
$592
$796
$84
$115
$523
As of December 31, 20192,413
586
688
79
97
749
Contract Assets      
As of June 30, 2020$103
$—
$54
$1
$—
$—
As of December 31, 2019117
—
69
—
—
—
Contract Liabilities      
As of June 30, 2020$57
$6
$23
$—
$1
$2
As of December 31, 201952
10
13
—
1
1
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, Georgia Power had contract assets primarily related to unregulated service agreements, where payment is contingent on project completion, and fixed retail customer bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over a one-year contract term. Contract liabilities for Georgia Power relate to cash collections recognized in advance of revenue for certain unregulated service agreements. Alabama Power had contract liabilities for outstanding performance obligations primarily related to pole attachment and extended service agreements. Southern Company's unregulated distributed generation business had $41$55 million and $40$81 million of contract assets and $26$34 million and $28$27 million of contract liabilities at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, for outstanding performance obligations.
Revenues recognized by Southern Company in the three and six months ended June 30, 2020,March 31, 2021, which were included in contract liabilities at December 31, 2019,2020, were $11 million and $21 million, respectively, and immaterial for all other applicable Registrants.
Remaining Performance Obligations
The traditional electric operating companies and Southern Power have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. These contracts primarily relate to PPAs whereby the traditional electric operating companies and Southern Power provide electricity and generation capacity to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. RevenueRevenues from contracts with customers related to these performance obligations remaining at June 30, 2020March 31, 2021 are expected to be recognized as follows:
 
2020
(remaining)
2021202220232024
2025 and
Thereafter
 (in millions)
Southern Company$319
$432
$362
$339
$319
$3,062
Alabama Power12
33
31
24
7
5
Georgia Power37
70
39
34
23
62
Southern Power156
290
292
282
290
3,013
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

2021 (remaining)2022202320242025Thereafter
(in millions)
Southern Company$485 $408 $340 $327 $307 $2,666 
Alabama Power24 31 24 7 5 0 
Georgia Power57 51 36 24 21 41 
Southern Power213 287 280 296 280 2,644 
Revenue expected to be recognized for performance obligations remaining at June 30, 2020 was March 31, 2021 was immaterial for Mississippi Power.Power and Southern Company Gas.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Lease Income
Lease income for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 is as follows:
 
Southern
Company
Alabama PowerGeorgia Power
Mississippi
Power
Southern PowerSouthern Company Gas
 (in millions)
For the Three Months Ended June 30, 2020      
Lease income - interest income on sales-type leases$3
$—
$—
$3
$—
$—
Lease income - operating leases47
6
15
—
21
9
Variable lease income126
—
—
—
136
—
Total lease income$176
$6
$15
$3
$157
$9
       
For the Six Months Ended June 30, 2020      
Lease income - interest income on sales-type leases$6
$—
$—
$5
$—
$—
Lease income - operating leases97
13
30
—
45
17
Variable lease income200
—
—
—
215
—
Total lease income$303
$13
$30
$5
$260
$17
       
For the Three Months Ended June 30, 2019      
Lease income - interest income on sales-type leases$2
$—
$—
$2
$—
$—
Lease income - operating leases67
7
19
—
44
9
Variable lease income115
—
—
—
129
—
Total lease income$184
$7
$19
$2
$173
$9
       
For the Six Months Ended June 30, 2019      
Lease income - interest income on sales-type leases$5
$—
$—
$5
$—
$—
Lease income - operating leases139
13
39
—
90
17
Variable lease income182
—
—
—
204
—
Total lease income$326
$13
$39
$5
$294
$17

Southern
Company		Alabama PowerGeorgia PowerMississippi
Power		Southern PowerSouthern Company Gas
 (in millions)
For the Three Months Ended March 31, 2021
Lease income - interest income on sales-type leases$3 $0 $0 $3 $0 $0 
Lease income - operating leases55 21 10 0 21 9 
Variable lease income84 0 0 0 90 0 
Total lease income$142 $21 $10 $3 $111 $9 
For the Three Months Ended March 31, 2020
Lease income - interest income on sales-type leases$3 $0 $0 $3 $0 $0 
Lease income - operating leases51 6 16 0 24 9 
Variable lease income74 0 0 0 80 0 
Total lease income$128 $6 $16 $3 $104 $9 
Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income for Alabama Power and Southern Power is included in wholesale revenues.
(E) CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS
See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information.
Southern Power
Variable Interest Entities
Southern Power has certain subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

SP Solar and SP Wind
At June 30, 2020March 31, 2021 and December 31, 2019,2020, SP Solar had total assets of $6.2$6.1 billion, and $6.4 billion, respectively, and total liabilities of $381 million. Noncontrolling$377 million and $387 million, respectively, and noncontrolling interests totaledof $1.1 billion at both June 30, 2020 and December 31, 2019.billion. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.
At June 30, 2020March 31, 2021 and December 31, 2019,2020, SP Wind had total assets of $2.4 billion, and $2.5 billion, respectively, total liabilities of $125$171 million and $128$138 million, respectively, and noncontrolling interests of $44$42 million and $45$43 million, respectively. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the 3 financial investors in accordance with the limited liability agreement.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.
Other Variable Interest Entities
Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax-equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.
At June 30, 2020March 31, 2021 and December 31, 2019,2020, the other VIEs had total assets of $1.5$1.9 billion and $1.1 billion, respectively, total liabilities of $160$260 million and $104$110 million, respectively, and noncontrolling interests of $557$926 million and $409$454 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.
Equity Method Investments
At June 30, 2020March 31, 2021 and December 31, 2019,2020, Southern Power had equity method investments in wind and battery storage projects totaling $19$84 million and $28$19 million, respectively.
Southern Company Gas
Equity Method Investments
The carrying amounts of Southern Company Gas' equity method investments as of March 31, 2021 and December 31, 2020 and related income from those investments for the three months ended March 31, 2021 and 2020 were as follows:
Investment BalanceMarch 31, 2021December 31, 2020
(in millions)
SNG$1,164 $1,167 
PennEast Pipeline(*)
93 91 
Other33 32 
Total$1,290 $1,290 
(*)See Note (C) under "Other Matters – Southern Company Gas" for additional information.
Earnings from Equity Method InvestmentsThree Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
(in millions)
SNG$38 $37 
PennEast Pipeline(a)
2 2 
Other(a)(b)
1 4 
Total$41 $43 
(a)Earnings primarily result from AFUDC equity recorded by the project entity.
(b)On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline.Pipeline and Pivotal LNG. See Note (K)15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The carrying amounts of Southern Company Gas' equity method investments as of June 30, 2020 and December 31, 2019 and related income from those investments for the three and six months ended June 30, 2020 and 2019 were as follows:
Investment BalanceJune 30, 2020
December 31, 2019(a)
 (in millions)
SNG(b)
$1,189
$1,137
PennEast Pipeline(c)
87
82
Other32
32
Total$1,308
$1,251

(a)Excludes investments in Atlantic Coast Pipeline and Pivotal JAX LNG classified as held for sale at December 31, 2019. See Note 15 to the financial statements under "Assets Held for Sale" in Item 8 of the Form 10-K for additional information.
(b)Increase primarily relates to a capital contribution, partially offset by the continued amortization of deferred tax assets established upon acquisition.
(c)See Note (C) under "Other Matters – Southern Company Gas" for additional information on the PennEast Pipeline.
Earnings from Equity Method InvestmentsThree Months Ended June 30, 2020Three Months Ended June 30, 2019Six Months Ended June 30, 2020Six Months Ended June 30, 2019
 (in millions)
SNG$28
$32
$65
$74
Atlantic Coast Pipeline(a)(b)
—
3
3
6
PennEast Pipeline(a)
1
1
3
3
Other1
(5)1
(3)
Total$30
$31
$72
$80

(a)Amounts primarily result from AFUDC equity recorded by the project entity.
(b)On March 24, 2020, Southern Company Gas completed the sale of its interest in Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.
SNG
Selected financial information of SNG for the three and six months ended June 30, 2020 and 2019 is as follows:
Income Statement InformationThree Months Ended June 30, 2020Three Months Ended June 30, 2019Six Months Ended June 30, 2020Six Months Ended June 30, 2019
 (in millions)
Revenues$149
$155
$307
$321
Operating income78
86
176
192
Net income55
64
130
148

(F) FINANCING
Bank Credit Arrangements
See Note 8 to the financial statements under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

At June 30, 2020,March 31, 2021, committed credit arrangements with banks were as follows:
Expires
Company2021202220232024TotalUnusedDue within One Year
(in millions)
Southern Company parent$0 $0 $0 $2,000 $2,000 $1,999 $0 
Alabama Power3 525 0 800 1,328 1,328 3 
Georgia Power0 0 0 1,750 1,750 1,728 0 
Mississippi Power0 150 125 0 275 250 0 
Southern Power(a)
0 0 0 600 600 568 0 
Southern Company Gas(b)
0 0 0 1,750 1,750 1,745 0 
SEGCO30 0 0 0 30 30 30 
Southern Company$33 $675 $125 $6,900 $7,733 $7,648 $33 
 Expires   
Company20202021202220232024 Total UnusedDue within One Year
 (in millions)
Southern Company parent$—
$—
$—
$—
$2,000
 $2,000
 $1,999
$—
Alabama Power3
—
525
—
800
 1,328
 1,328
3
Georgia Power—
—
—
—
1,750
 1,750
 1,733
—
Mississippi Power—
—
150
125
—
 275
 250
—
Southern Power(a)
—
—
—
—
600
 600
 590
—
Southern Company Gas(b)
—
—
—
—
1,750
 1,750
 1,745
—
SEGCO—
30
—
—
—
 30
 30
30
Southern Company$3
$30
$675
$125
$6,900
 $7,733
 $7,675
$33

(a)Does not include Southern Power Company's $75 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2023, of which $12 million and $1 million, respectively, was unused at March 31, 2021. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(a)Does not include Southern Power Company's $120 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2021 and 2023, respectively, of which $19 million and $60 million, respectively, was unused at June 30, 2020. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(b)
(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.25 billion of this arrangement. Southern Company Gas' committed credit arrangement also includes $500 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to this multi-year credit arrangement, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted.
As reflected in the table above, in March 2020, Mississippi Power entered into a $125parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.05 billion of this arrangement. Southern Company Gas' committed credit arrangement also includes $700 million revolvingfor which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to this multi-year credit facility that matures in March 2023.arrangement, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted.
Subject to applicable market conditions, Southern Company and its subsidiaries expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, Southern Company and its subsidiaries may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
These bank credit arrangements, as well as the term loan arrangements of the Registrants, Nicor Gas, and SEGCO, contain covenants that limit debt levels and contain cross-acceleration or, in the case of Southern Power, cross-default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross-default provisions to other indebtedness would trigger an event of default if Southern Power defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross-acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. At June 30, 2020,March 31, 2021, the Registrants, Nicor Gas, and SEGCO were in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.
A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants and Nicor Gas, and SEGCO.Gas. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at June 30, 2020March 31, 2021 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $34 million at Mississippi Power). In addition, at June 30, 2020,March 31, 2021, Georgia Power and Mississippi Power had approximately $257$174 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Earnings per Share
For Southern Company, the only differences in computing basic and diluted earnings per share are attributable to awards outstanding under stock-based compensation plans and as a result of stock price volatility in the first six months of 2020, the equity units issued in August 2019. Earnings per share dilution resulting from stock-based
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

compensation plans and the equity units issuance is determined using the treasury stock method. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on the August 2019 equity units issuance and Note 12 to the financial statements in Item 8 of the Form 10-K for information on stock-based compensation plans. Shares used to compute diluted earnings per share were as follows:
 Three Months Ended June 30, 2020Three Months Ended June 30, 2019Six Months Ended June 30, 2020Six Months Ended June 30, 2019
 (in millions)
As reported shares1,058
1,044
1,057
1,041
Effect of stock-based compensation5
8
7
8
Effect of equity units—
—
1
—
Diluted shares1,063
1,052
1,065
1,049

Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
 (in millions)
As reported shares1,060 1,057 
Effect of stock-based compensation6 7 
Effect of equity units0 3 
Diluted shares1,066 1,067 
An immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive for the three and six months ended June 30,March 31, 2021 and 2020. There were 0 such amounts for the three and six months ended June 30, 2019.
(G) INCOME TAXES
See Note 10 to the financial statements in Item 8 of the Form 10-K for additional tax information.
Current and Deferred Income Taxes
Tax Credit and Net Operating Loss Carryforwards
The utilization of each Registrants'Registrant's estimated tax credit and state net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, potential impacts of the COVID-19 pandemic, and changes in taxable income projections.projections, and potential income tax rate changes. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.
Effective Tax Rate
Details of significant changes in the effective tax rate for the applicable Registrants are provided herein.
Southern Company
Southern Company's effective tax rate is typically lower than the statutory rate due to employee stock plans' dividend deduction, non-taxable AFUDC equity at the traditional electric operating companies, flowback of excess deferred income taxes at the regulated utilities, and federal income tax benefits from ITCs and PTCs primarily at Southern Power.
Southern Company'sDetails of significant changes in the effective tax rate for the applicable Registrants are provided herein.
Mississippi Power
Mississippi Power's effective tax rate was 9.3%8.4% for the sixthree months ended June 30, 2020March 31, 2021 compared to 33.5%16.2% for the corresponding period in 2019. The effective tax rate decrease was primarily due to the tax impact from the sale of Gulf Power in 2019, as well as an increase in the flowback of excess deferred income taxes in 2020 primarily at Georgia Power. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.
Georgia Power
Georgia Power's effective tax rate was 4.0% for the six months ended June 30, 2020 compared to 21.7% for the corresponding period in 2019.2020. The effective tax rate decrease was primarily due to an increase in the flowback of excess deferred income taxes beginning in 2020 as authorized in the 2019 ARP, as well as the second quarter 2020 charge to
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

earnings associated with the construction of Plant Vogtle Units 3 and 4. See Note (B) under "Georgia Power – Nuclear Construction" and Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.
Mississippi Power
Mississippi Power's effective tax rate was 10.6% for the six months ended June 30, 2020 compared to 14.0% for the corresponding period in 2019. The effective tax rate decrease was primarily due to an increase in the flowback of excess deferred income taxes inApril 2020 as authorized in the Mississippi Power Rate Case Settlement Agreement. See Note (B)2 to the financial statements under "Mississippi"Mississippi Power – 2019 Base Rate Case" for additional information.
Southern Power
Southern Power's effective tax rate was 10.5% for the six months ended June 30, 2020 compared to a benefit rate of (35.5)% for the corresponding period in 2019. The effective tax rate increase was primarily due to tax benefits resulting from ITCs recognized upon the sale of Plant Nacogdoches in 2019. See Note (K) under "Southern Power" for additional information.
Southern Company Gas
Southern Company Gas' effective tax rate was 21.5% for the six months ended June 30, 2020 compared to 18.0% for the corresponding period in 2019. The effective tax rate increase was primarily due to higher flowback of excess deferred income taxes in 2019, primarily at Atlanta Gas Light as previously authorized by the Georgia PSC, and the reversal of a federal tax valuation allowance in connection with Southern Company Gas' sale of its investment in Triton in 2019. See Notes 2 and 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
63
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Power
Southern Power's effective tax benefit rate was (17.3)% for the three months ended March 31, 2021 compared to an effective tax rate of 13.5% for the corresponding period in 2020. The effective tax rate decrease was primarily due to changes in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in February 2021, as well as the tax impact from the sale of Plant Mankato in January 2020. See Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K for additional information.
(H) RETIREMENT BENEFITS
The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). NaN mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2020.2021. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.
See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.
Effective January 1, 2020, Southern Company adopted a change in method of calculating the market-related value of the liability-hedging securities included in its pension plan assets. The market-related value is used to determine the expected return on plan assets component of net periodic pension cost. Southern Company previously used the calculated value approach for all plan assets, which smoothed asset returns and deferred gains and losses by amortizing them into the calculation of the market-related value over five years. Southern Company changed to the fair value approach for liability-hedging securities, which includes measuring the market-related value of that portion of the plan assets at fair value for purposes of determining the expected return on plan assets. The remaining asset classes of plan assets will continue to use the calculated value approach in determining the market-related value. Southern Company considers the fair value approach to be preferable because it results in a current reflection of changes in the value of plan assets in the measurement of net periodic pension cost. Southern Company evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements of all Registrants and therefore did not account for the change retrospectively. The change in accounting principle was recorded through earnings as a prior period adjustment for the amounts related to the unregulated
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

businesses of Southern Company and Southern Power. Amounts related to the traditional electric operating companies and the natural gas distribution utilities have been reflected as adjustments to regulatory assets as appropriate, consistent with the expected regulatory treatment.
On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 are presented in the following tables.
Three Months Ended June 30, 2020
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$94
 $22
 $24
 $4
 $2
 $8
Interest cost108
 25
 34
 5
 2
 7
Expected return on plan assets(275) (66) (87) (12) (3) (20)
Amortization:           
Prior service costs—
 —
 1
 —
 —
 —
Regulatory asset—
 —
 —
 —
 —
 4
Net (gain)/loss67
 18
 21
 3
 —
 3
Net periodic pension cost (income)$(6) $(1) $(7) $—
 $1
 $2
Postretirement Benefits
Service cost$6
 $1
 $2
 $1
 $—
 $1
Interest cost14
 3
 5
 1
 —
 4
Expected return on plan assets(18) (7) (6) (1) —
 (2)
Amortization:           
Prior service costs(1) —
 —
 —
 —
 —
Regulatory asset—
 —
 —
 —
 —
 1
Net (gain)/loss—
 —
 —
 —
 —
 (1)
Net periodic postretirement benefit cost$1
 $(3) $1
 $1
 $—
 $3
Three Months Ended
March 31, 2021		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
 (in millions)
Pension Plans
Service cost$109 $26 $28 $4 $2 $9 
Interest cost87 20 26 4 1 6 
Expected return on plan assets(298)(72)(94)(14)(3)(21)
Amortization:
Prior service costs0 0 0 0 0 (1)
Regulatory asset0 0 0 0 0 4 
Net (gain)/loss78 21 25 4 1 3 
Net periodic pension cost (income)$(24)$(5)$(15)$(2)$1 $0 
Postretirement Benefits
Service cost$6 $1 $2 $0 $0 $0 
Interest cost8 2 3 0 0 1 
Expected return on plan assets(19)(7)(7)0 0 (2)
Amortization:
Regulatory asset0 0 0 0 0 2 
Net (gain)/loss1 0 1 0 0 (1)
Net periodic postretirement benefit cost (income)$(4)$(4)$(1)$0 $0 $0 
64
Six Months Ended June 30, 2020
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$188
 $44
 $48
 $8
 $4
 $16
Interest cost216
 50
 67
 10
 3
 15
Expected return on plan assets(550) (132) (174) (25) (6) (39)
Amortization:           
Prior service costs1
 —
 1
 —
 —
 (1)
Regulatory asset—
 —
 —
 —
 —
 8
Net (gain)/loss134
 36
 43
 6
 1
 5
Net periodic pension cost (income)$(11) $(2) $(15) $(1) $2
 $4
            
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Three Months Ended
March 31, 2020		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
 (in millions)
Pension Plans
Service cost$94 $22 $24 $4 $2 $8 
Interest cost108 25 33 5 1 8 
Expected return on plan assets(275)(66)(87)(13)(3)(19)
Amortization:
Prior service costs1 0 0 0 0 (1)
Regulatory asset0 0 0 0 0 4 
Net (gain)/loss67 18 22 3 1 2 
Net periodic pension cost (income)$(5)$(1)$(8)$(1)$1 $2 
Postretirement Benefits
Service cost$5 $2 $1 $0 $0 $0 
Interest cost13 3 5 0 0 2 
Expected return on plan assets(18)(7)(7)0 0 (2)
Amortization:
Regulatory asset0 0 0 0 0 2 
Net (gain)/loss1 0 1 0 0 (1)
Net periodic postretirement benefit cost (income)$1 $(2)$0 $0 $0 $1 
65
Six Months Ended June 30, 2020
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Postretirement Benefits
Service cost$11
 $3
 $3
 $1
 $—
 $1
Interest cost27
 6
 10
 1
 —
 6
Expected return on plan assets(36) (14) (13) (1) —
 (4)
Amortization:           
Prior service costs(1) —
 —
 —
 —
 —
Regulatory asset—
 —
 —
 —
 —
 3
Net (gain)/loss1
 —
 1
 —
 —
 (2)
Net periodic postretirement benefit cost$2
 $(5) $1
 $1
 $—
 $4
Three Months Ended June 30, 2019
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$73

$17

$18

$3

$1

$6
Interest cost123

29

39

5

2

9
Expected return on plan assets(221)
(52)
(73)
(10)
(3)
(15)
Amortization:           
Prior service costs1

1

1

—

—

—
Regulatory asset—
 —
 —
 —
 —
 4
Net (gain)/loss30

9

11

2

—

—
Net periodic pension cost (income)$6

$4

$(4)
$—

$—

$4
Postretirement Benefits
Service cost$4
 $1
 $1
 $—
 $—
 $—
Interest cost17
 4
 6
 1
 —
 3
Expected return on plan assets(17) (7) (6) (1) —
 (1)
Amortization:           
Prior service costs1
 1
 —
 —
 —
 —
Regulatory asset—
 —
 —
 —
 —
 1
Net (gain)/loss—
 —
 —
 —
 —
 (1)
Net periodic postretirement benefit cost$5
 $(1) $1
 $—
 $—
 $2
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Six Months Ended June 30, 2019
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$146
 $34
 $37
 $6
 $3
 $12
Interest cost246
 57
 78
 11
 3
 18
Expected return on plan assets(442) (103) (146) (20) (5) (30)
Amortization:           
Prior service costs1
 1
 1
 —
 —
 (1)
Regulatory asset—
 —
 —
 —
 —
 7
Net (gain)/loss60
 18
 22
 3
 —
 1
Net periodic pension cost (income)$11
 $7
 $(8) $—
 $1
 $7
Postretirement Benefits
Service cost$9
 $2
 $2
 $—
 $—
 $1
Interest cost34
 8
 13
 2
 —
 5
Expected return on plan assets(33) (13) (12) (1) —
 (3)
Amortization:           
Prior service costs2
 2
 —
 —
 —
 —
Regulatory asset—
 —
 —
 —
 —
 3
Net (gain)/loss(1) —
 —
 —
 —
 (2)
Net periodic postretirement benefit cost$11
 $(1) $3
 $1
 $—
 $4

Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

(I) FAIR VALUE MEASUREMENTS
As of June 30, 2020,March 31, 2021, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:
Fair Value Measurements Using:
As of March 31, 2021:Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Net Asset Value as a Practical Expedient (NAV)Total
(in millions)
Southern Company
Assets:
Energy-related derivatives(a)
$372 $179 $34 $— $585 
Interest rate derivatives0 10 0 — 10 
Foreign currency derivatives0 41 0 — 41 
Investments in trusts:(b)(c)
Domestic equity782 214 0 — 996 
Foreign equity145 197 0 — 342 
U.S. Treasury and government agency securities0 325 0 — 325 
Municipal bonds0 45 0 — 45 
Pooled funds – fixed income0 18 0 — 18 
Corporate bonds5 436 0 — 441 
Mortgage and asset backed securities0 81 0 — 81 
Private equity0 0 0 83 83 
Other50 7 0 — 57 
Cash equivalents1,121 11 0 — 1,132 
Other investments9 33 0 — 42 
Total$2,484 $1,597 $34 $83 $4,198 
Liabilities:
Energy-related derivatives(a)
$359 $158 $6 $— $523 
Foreign currency derivatives0 23 0 — 23 
Contingent consideration0 0 16 — 16 
Total$359 $181 $22 $— $562 
66
 Fair Value Measurements Using:  
As of June 30, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Southern Company         
Assets:         
Energy-related derivatives(a)
$388
 $181
 $143
 $—
 $712
Interest rate derivatives—
 23
 —
 —
 23
Investments in trusts:(b)(c)
         
Domestic equity703
 128
 —
 —
 831
Foreign equity65
 202
 —
 —
 267
U.S. Treasury and government agency securities—
 268
 —
 —
 268
Municipal bonds—
 106
 —
 —
 106
Pooled funds – fixed income—
 16
 —
 —
 16
Corporate bonds19
 369
 —
 —
 388
Mortgage and asset backed securities—
 75
 —
 —
 75
Private equity—
 —
 —
 61
 61
Other26
 3
 —
 —
 29
Cash equivalents1,315
 13
 —
 —
 1,328
Other investments9
 21
 —
 —
 30
Total$2,525
 $1,405
 $143
 $61
 $4,134
Liabilities:         
Energy-related derivatives(a)
$468
 $187
 $63
 $—
 $718
Interest rate derivatives—
 23
 —
 —
 23
Foreign currency derivatives—
 49
 —
 —
 49
Contingent consideration—
 —
 19
 —
 19
Total$468
 $259
 $82
 $—
 $809
          
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Fair Value Measurements Using:
As of March 31, 2021:Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Net Asset Value as a Practical Expedient (NAV)Total
(in millions)
Alabama Power
Assets:
Energy-related derivatives$0 $12 $0 $— $12 
Nuclear decommissioning trusts:(b)
Domestic equity448 205 0 — 653 
Foreign equity145 15 0 — 160 
U.S. Treasury and government agency securities0 20 0 — 20 
Municipal bonds0 1 0 — 1 
Corporate bonds5 235 0 — 240 
Mortgage and asset backed securities0 26 0 — 26 
Private equity0 0 0 83 83 
Other27 0 0 — 27 
Cash equivalents401 11 0 — 412 
Other investments0 33 0 — 33 
Total$1,026 $558 $0 $83 $1,667 
Liabilities:
Energy-related derivatives$0 $4 $0 $— $4 
Georgia Power
Assets:
Energy-related derivatives$0 $17 $0 $— $17 
Nuclear decommissioning trusts:(b)(c)
Domestic equity334 1 0 — 335 
Foreign equity0 179 0 — 179 
U.S. Treasury and government agency securities0 305 0 — 305 
Municipal bonds0 44 0 — 44 
Corporate bonds0 201 0 — 201 
Mortgage and asset backed securities0 55 0 — 55 
Other23 7 0 — 30 
Total$357 $809 $0 $— $1,166 
Liabilities:
Energy-related derivatives$0 $8 $0 $— $8 
67
 Fair Value Measurements Using:  
As of June 30, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Alabama Power         
Assets:         
Energy-related derivatives$—
 $11
 $—
 $—
 $11
Nuclear decommissioning trusts:(b)
        

Domestic equity442
 117
 —
 —
 559
Foreign equity65
 59
 —
 —
 124
U.S. Treasury and government agency securities—
 22
 —
 —
 22
Municipal bonds—
 1
 —
 —
 1
Corporate bonds19
 155
 —
 —
 174
Mortgage and asset backed securities—
 28
 —
 —
 28
Private equity—
 —
 —
 61
 61
Other8
 —
 —
 —
 8
Cash equivalents692
 13
 —
 —
 705
Other investments—
 21
 —
 —
 21
Total$1,226
 $427
 $—
 $61
 $1,714
Liabilities:         
Energy-related derivatives$—
 $19
 $—
 $—
 $19
          
Georgia Power         
Assets:         
Energy-related derivatives$—
 $10
 $—
 $—
 $10
Nuclear decommissioning trusts:(b)(c)
         
Domestic equity261
 1
 —
 —
 262
Foreign equity—
 141
 —
 —
 141
U.S. Treasury and government agency securities—
 246
 —
 —
 246
Municipal bonds—
 105
 —
 —
 105
Corporate bonds—
 214
 —
 —
 214
Mortgage and asset backed securities—
 47
 —
 —
 47
Other18
 3
 —
 —
 21
Cash equivalents349
 —
 —
 —
 349
Total$628
 $767
 $—
 $—
 $1,395
Liabilities:         
Energy-related derivatives$—
 $40
 $—
 $—
 $40
          
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Fair Value Measurements Using:
As of March 31, 2021:Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Net Asset Value as a Practical Expedient (NAV)Total
(in millions)
Mississippi Power
Assets:
Energy-related derivatives$0 $11 $0 $— $11 
Liabilities:
Energy-related derivatives$0 $6 $0 $— $6 
Southern Power
Assets:
Energy-related derivatives$0 $1 $0 $— $1 
Foreign currency derivatives0 41 0 — 41 
Cash equivalents115 0 0 — 115 
Total$115 $42 $0 $— $157 
Liabilities:
Energy-related derivatives$0 $1 $0 $— $1 
Foreign currency derivatives0 23 0 — 23 
Contingent consideration0 0 16 — 16 
Total$0 $24 $16 $— $40 
Southern Company Gas
Assets:
Energy-related derivatives(a)
$372 $138 $34 $— $544 
Non-qualified deferred compensation trusts:
Domestic equity0 8 0 — 8 
Foreign equity0 3 0 — 3 
Pooled funds – fixed income0 18 0 — 18 
Cash equivalents and restricted cash284 0 0 — 284 
Total$656 $167 $34 $— $857 
Liabilities:
Energy-related derivatives(a)
$359 $139 $6 $— $504 
(a)Excludes cash collateral of $27 million.
(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of March 31, 2021, approximately $34 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
68
 Fair Value Measurements Using:  
As of June 30, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Mississippi Power         
Assets:         
Energy-related derivatives$—
 $6
 $—
 $—
 $6
Liabilities:         
Energy-related derivatives$—
 $22
 $—
 $—
 $22
          
Southern Power         
Assets:         
Energy-related derivatives$—
 $2
 $—
 $—
 $2
Liabilities:         
Energy-related derivatives$—
 $3
 $—
 $—
 $3
Foreign currency derivatives—
 49
 —
 —
 49
Contingent consideration—
 —
 19
 —
 19
Total$—

$52

$19

$—

$71
          
Southern Company Gas         
Assets:         
Energy-related derivatives(a)
$388
 $152
 $143
 $—
 $683
Non-qualified deferred compensation trusts:         
Domestic equity—
 10
 —
 —
 10
Foreign equity—
 2
 —
 —
 2
Pooled funds – fixed income—
 16
 —
 —
 16
Cash equivalents and restricted cash40
 —
 —
 —
 40
Total$428

$180

$143

$—

$751
Liabilities:         
Energy-related derivatives(a)
$468
 $103
 $63
 $—
 $634
Interest rate derivatives—
 23
 —
 —
 23
Total$468

$126

$63

$—

$657
(a)Energy-related derivatives exclude cash collateral of $114 million.
(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of June 30, 2020, approximately $45 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.
Fair value increases (decreases)Three Months Ended June 30, 2020Three Months Ended June 30, 2019Six Months Ended June 30, 2020Six Months Ended June 30, 2019
 (in millions)
Southern Company$223
$75
$(23)$227
Alabama Power124
38
(42)125
Georgia Power99
37
19
102

Fair value increases (decreases)Three Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
(in millions)
Southern Company$39 $(247)
Alabama Power41 (167)
Georgia Power(2)(80)
Valuation Methodologies
The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note (J) for additional information on how these derivatives are used.
For fair value measurements of the investments within the nuclear decommissioning trusts and the non-qualified deferred compensation trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.
The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.
Southern Power has contingent payment obligations related to certain acquisitions whereby Southern Powerit is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligation isobligations are categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of
69
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The fair value of contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.
"Other investments" include investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.
As of June 30, 2020,At March 31, 2021, the fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $61$83 million and unfunded commitments related to the private equity investments totaled $72$68 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.
As of June 30, 2020,At March 31, 2021, other financial instruments for which the carrying amount did not equal fair value were as follows:
Southern
Company		Alabama PowerGeorgia PowerMississippi PowerSouthern Power
Southern Company Gas(*)
(in millions)
Long-term debt, including securities due within one year:
Carrying amount$50,035 $8,866 $13,220 $1,398 $4,030 $6,588 
Fair value54,113 9,821 14,291 1,507 4,347 7,264 
 
Southern
Company
Alabama PowerGeorgia PowerMississippi PowerSouthern Power
Southern Company Gas(*)
 (in millions)
Long-term debt, including securities due within one year:    
Carrying amount$46,513
$8,519
$12,720
$1,404
$4,097
$5,827
Fair value53,079
10,008
15,092
1,571
4,423
6,817

(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.
(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the lives of the respective bonds.
The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.
Commodity Contracts with Level 3 Valuation Inputs
As of June 30, 2020,March 31, 2021, the fair value of Southern Company Gas' Level 3 physical natural gas forward contracts was $80$28 million. Since commodity contracts classified as Level 3 typically include a combination of observable and unobservable components, the changes in fair value may include amounts due in part to observable market factors, or changes to assumptions on the unobservable components. The following table includes transfers to Level 3, which represent the fair value of Southern Company Gas' commodity derivative contracts that include a significant unobservable component for the first time during the period.
 Three Months Ended June 30, 2020Six Months Ended June 30, 2020
 (in millions)
Beginning balance$76
$14
Transfers to Level 3—
70
Transfers from Level 3—
(3)
Instruments realized or otherwise settled during period(6)(7)
Changes in fair value10
6
Ending balance$80
$80

Three Months Ended
March 31, 2021
(in millions)
Beginning balance$28 
Instruments realized or otherwise settled during period(2)
Changes in fair value2 
Ending balance$28 
Changes in fair value of Level 3 instruments represent changes in gains and losses for the periods that are reported on Southern Company Gas' statements of income in natural gas revenues.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The valuation of certain commodity contracts requires the use of certain unobservable inputs. All forward pricing used in the valuation of such contracts is directly based on third-party market data, such as broker quotes and exchange settlements, when that data is available. If third-party market data is not available, then industry standard
70

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
methodologies are used to develop inputs that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Observable inputs, including some forward prices used for determining fair value, reflect the best available market information. Unobservable inputs are updated using industry standard techniques such as extrapolation, combining observable forward inputs supplemented by historical market and other relevant data. Level 3 physical natural gas forward contracts include unobservable forward price inputs (ranging from $(0.91)$(0.07) to $0.99$0.30 per mmBtu). Forward price increases (decreases) as of June 30, 2020March 31, 2021 would have resulted in higher (lower) values on a net basis.
(J) DERIVATIVES
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas are exposed to market risks, including commodity price risk, interest rate risk, weather risk, and occasionally foreign currency exchange rate risk. To manage the volatility attributable to these exposures, each company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to each company's policies in areas such as counterparty exposure and risk management practices. Southern Company Gas' wholesale gas operations use various contracts in its commercial activities that generally meet the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with the classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information.
Energy-Related Derivatives
The traditional electric operating companies, Southern Power, and Southern Company Gas enter into energy-related derivatives to hedge exposures to electricity, natural gas, and other fuel price changes. However, due to cost-based rate regulations and other various cost recovery mechanisms, the traditional electric operating companies and the natural gas distribution utilities have limited exposure to market volatility in energy-related commodity prices. Each of the traditional electric operating companies and certain of the natural gas distribution utilities of Southern Company Gas manage fuel-hedging programs, implemented per the guidelines of their respective state PSCs or other applicable state regulatory agencies, through the use of financial derivative contracts, which are expected to continue to mitigate price volatility. The traditional electric operating companies (with respect to wholesale generating capacity) and Southern Power have limited exposure to market volatility in energy-related commodity prices because their long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, the traditional electric operating companies and Southern Power may be exposed to market volatility in energy-related commodity prices to the extent any uncontracted capacity is used to sell electricity. Southern Company Gas retains exposure to price changes that can, in a volatile energy market, be material and can adversely affect its results of operations.
Southern Company Gas also enters into weather derivative contracts as economic hedges of operating margins in the event of warmer-than-normal weather. Exchange-traded options are carried at fair value, with changes reflected in operating revenues. Non-exchange-traded options are accounted for using the intrinsic value method. Changes in the intrinsic value for non-exchange-traded contracts are reflected in operating revenues.
71
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Energy-related derivative contracts are accounted for under one of three methods:
•
Regulatory Hedges — Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses.
•
Cash Flow Hedges — Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
•
Not Designated —
•Regulatory Hedges – Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through an approved cost recovery mechanism.
•Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
•Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.
Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric and natural gas industries. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered.
At June 30, 2020,March 31, 2021, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:
Net
Purchased
mmBtu		Longest
Hedge
Date		Longest
Non-Hedge
Date
(in millions)
Southern Company(*)
90720302031
Alabama Power732024—
Georgia Power1252024—
Mississippi Power852024—
Southern Power920302021
Southern Company Gas(*)
61520232031
 
Net
Purchased
mmBtu
 
Longest
Hedge
Date
 
Longest
Non-Hedge
Date
 (in millions)    
Southern Company(*)
944 2024 2031
Alabama Power85 2024 —
Georgia Power152 2023 —
Mississippi Power91 2024 —
Southern Power15 2022 2021
Southern Company Gas(*)
601 2022 2031
(*)(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 4.6 billion mmBtu and short natural gas positions of 4.0 billion mmBtu as of June 30, 2020, which is also included in Southern Company's total volume.
At June 30, 2020, the net volume of long natural gas positions of 4.4 billion mmBtu and short natural gas positions of 3.8 billion mmBtu as of March 31, 2021, which is also included in Southern Power's energy-related derivative contracts for power to be sold was 1 million MWHs, all of which expire in 2020.Company's total volume.
In addition to the volumes discussed above, the traditional electric operating companies and Southern Power enter into physical natural gas supply contracts that provide the option to sell back excess natural gas due to operational constraints. The maximum expected volume of natural gas subject to such a feature is 1639 million mmBtu for Southern Company, which includes 410 million mmBtu for Alabama Power, 512 million mmBtu for Georgia Power, 25 million mmBtu for Mississippi Power, and 512 million mmBtu for Southern Power.
For cash flow hedges of energy-related derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to earnings for the 12-month period ending June 30, 2021March 31, 2022 are immaterial for all Registrants.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Interest Rate Derivatives
Southern Company and certain subsidiaries may enter into interest rate derivatives to hedge exposure to changes in interest rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow
72

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and presented on the same income statement line item as the earnings effect of the hedged transactions. Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives' fair value gains or losses and hedged items' fair value gains or losses are both recorded directly to earnings on the same income statement line item. Fair value gains or losses on derivatives that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.
At June 30, 2020,March 31, 2021, the following interest rate derivatives were outstanding:
 
Notional
Amount
 
Interest
Rate
Received
Weighted
Average
Interest
Rate Paid
Hedge
Maturity
Date
 Fair Value Gain (Loss) at June 30, 2020
 (in millions)     (in millions)
Cash Flow Hedges of Forecasted Debt      
Southern Company Gas$200
 3-month LIBOR1.81%September 2030 $(23)
Cash Flow Hedges of Existing Debt      
Mississippi Power60
 1-month LIBOR0.58%December 2021 —
Fair Value Hedges of Existing Debt      
Southern Company parent1,500
 2.35%1-month LIBOR + 0.87%July 2021 23
Southern Company$1,760
     $—

Notional
Amount		Interest
Rate
Received		Weighted
Average
Interest
Rate Paid		Hedge
Maturity
Date		Fair Value Gain (Loss) at March 31, 2021
 (in millions)   (in millions)
Cash Flow Hedges of Existing Debt
Mississippi Power$60 1-month LIBOR0.58%December 2021$0 
Fair Value Hedges of Existing Debt
Southern Company parent1,500 2.35%1-month LIBOR + 0.87%July 202110 
Southern Company$1,560 $10 
TheFor cash flow hedge interest rate derivatives, the estimated pre-tax gains (losses) related to interest rate derivatives expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending June 30, 2021March 31, 2022 total $(25) million for Southern Company and are immaterial for all other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 2046 for the Southern Company parent entity, 2035 for Alabama Power, 2044 for Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.
Foreign Currency Derivatives
Southern Company and certain subsidiaries, including Southern Power, may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars. Derivatives related to forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and on the same income statement line as the earnings effect of the hedged transactions, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

At June 30, 2020,March 31, 2021, the following foreign currency derivatives were outstanding:
 Pay NotionalPay RateReceive NotionalReceive RateHedge
Maturity Date		Fair Value Gain (Loss) at June 30, 2020
 (in millions) (in millions)  (in millions)
Cash Flow Hedges of Existing Debt     
Southern Power$677
2.95%€600
1.00%June 2022$(18)
Southern Power564
3.78%500
1.85%June 2026(31)
Total$1,241
 €1,100
  $(49)

Pay NotionalPay RateReceive NotionalReceive RateHedge
Maturity Date		Fair Value Gain (Loss) at March 31, 2021
(in millions)(in millions) (in millions)
Cash Flow Hedges of Existing Debt
Southern Power$677 2.95%€600 1.00%June 2022$9 
Southern Power564 3.78%500 1.85%June 20269 
Total$1,241 €1,100 $18 
The estimated pre-tax gains (losses) related to Southern Power's foreign currency derivatives expected to be reclassified from accumulated OCI to earnings for the 12-month period ending June 30, 2021March 31, 2022 are $(24)$2 million.
73

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Derivative Financial Statement Presentation and Amounts
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas enter into derivative contracts that may contain certain provisions that permit intra-contract netting of derivative receivables and payables for routine billing and offsets related to events of default and settlements. Southern Company and certain subsidiaries also utilize master netting agreements to mitigate exposure to counterparty credit risk. These agreements may contain provisions that permit netting across product lines and against cash collateral. The fair value amounts of derivative assets and liabilities on the balance sheet are presented net to the extent that there are netting arrangements or similar agreements with the counterparties.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:
As of March 31, 2021As of December 31, 2020
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
(in millions)(in millions)
Southern Company
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$30 $4 $24 $11 
Other deferred charges and assets/Other deferred credits and liabilities16 15 18 19 
Total derivatives designated as hedging instruments for regulatory purposes$46 $19 $42 $30 
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$2 $1 $3 $5 
Interest rate derivatives:
Assets from risk management activities/Other current liabilities10 0 20 0 
Foreign currency derivatives:
Assets from risk management activities/Other current liabilities0 23 0 23 
Other deferred charges and assets/Other deferred credits and liabilities41 0 87 0 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$53 $24 $110 $28 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$265 $265 $388 $331 
Other deferred charges and assets/Other deferred credits and liabilities272 237 270 232 
Total derivatives not designated as hedging instruments$537 $502 $658 $563 
Gross amounts recognized$636 $545 $810 $621 
Gross amounts offset(a)
(450)(477)(529)(557)
Net amounts recognized in the Balance Sheets(b)
$186 $68 $281 $64 
74
 As of June 30, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Southern Company    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$19
$64
$3
$70
Other deferred charges and assets/Other deferred credits and liabilities13
28
6
44
Total derivatives designated as hedging instruments for regulatory purposes$32
$92
$9
$114
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Other current assets/Other current liabilities$3
$6
$1
$6
Interest rate derivatives:    
Other current assets/Other current liabilities12
23
2
23
Other deferred charges and assets/Other deferred credits and liabilities10
—
—
1
Foreign currency derivatives:    
Other current assets/Other current liabilities—
24
—
24
Other deferred charges and assets/Other deferred credits and liabilities—
25
16
—
Total derivatives designated as hedging instruments in cash flow and fair value hedges$25
$78
$19
$54
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Other current assets/Other current liabilities$361
$367
$461
$358
Other deferred charges and assets/Other deferred credits and liabilities316
253
207
225
Total derivatives not designated as hedging instruments$677
$620
$668
$583
Gross amounts recognized$734
$790
$696
$751
Gross amounts offset(a)
(520)(634)(463)(562)
Net amounts recognized in the Balance Sheets(b)
$214
$156
$233
$189
     
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

As of March 31, 2021As of December 31, 2020
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
(in millions)(in millions)
Alabama Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities$7 $0 $7 $2 
Other deferred charges and assets/Other deferred credits and liabilities5 4 5 5 
Total derivatives designated as hedging instruments for regulatory purposes$12 $4 $12 $7 
Gross amounts recognized$12 $4 $12 $7 
Gross amounts offset(4)(4)(7)(7)
Net amounts recognized in the Balance Sheets$8 $0 $5 $0 
Georgia Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities$11 $2 $7 $5 
Other deferred charges and assets/Other deferred credits and liabilities6 6 8 8 
Total derivatives designated as hedging instruments for regulatory purposes$17 $8 $15 $13 
Gross amounts recognized$17 $8 $15 $13 
Gross amounts offset(7)(7)(12)(12)
Net amounts recognized in the Balance Sheets$10 $1 $3 $1 
Mississippi Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities$6 $1 $4 $3 
Other deferred charges and assets/Other deferred credits and liabilities5 5 5 6 
Total derivatives designated as hedging instruments for regulatory purposes$11 $6 $9 $9 
Gross amounts recognized$11 $6 $9 $9 
Gross amounts offset(5)(5)(7)(7)
Net amounts recognized in the Balance Sheets$6 $1 $2 $2 
75
 As of June 30, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Alabama Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$7
$12
$2
$14
Other deferred charges and assets/Other deferred credits and liabilities4
7
2
10
Total derivatives designated as hedging instruments for regulatory purposes$11
$19
$4
$24
Gross amounts recognized$11
$19
$4
$24
Gross amounts offset(8)(8)(2)(2)
Net amounts recognized in the Balance Sheets$3
$11
$2
$22
     
Georgia Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$5
$28
$1
$32
Other deferred charges and assets/Other deferred credits and liabilities5
12
3
21
Total derivatives designated as hedging instruments for regulatory purposes$10
$40
$4
$53
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Interest rate derivatives:    
Other current assets/Other current liabilities$—
$—
$—
$17
Total derivatives designated as hedging instruments in cash flow and fair value hedges$—
$—
$—
$17
Gross amounts recognized$10
$40
$4
$70
Gross amounts offset(10)(10)(3)(3)
Net amounts recognized in the Balance Sheets$—
$30
$1
$67
     
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

As of March 31, 2021As of December 31, 2020
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
(in millions)(in millions)
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities$1 $0 $2 $2 
Foreign currency derivatives:
Other current assets/Other current liabilities0 23 0 23 
Other deferred charges and assets/Other deferred credits and liabilities41 0 87 0 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$42 $23 $89 $25 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities$0 $0 $0 $1 
Total derivatives not designated as hedging instruments$0 $0 $0 $1 
Net amounts recognized in the Balance Sheets$42 $23 $89 $26 
Southern Company Gas
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$6 $1 $6 $1 
Total derivatives designated as hedging instruments for regulatory purposes$6 $1 $6 $1 
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$1 $1 $1 $3 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$1 $1 $1 $3 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities$265 $265 $388 $330 
Other deferred charges and assets/Other deferred credits and liabilities272 237 270 232 
Total derivatives not designated as hedging instruments$537 $502 $658 $562 
Gross amounts of recognized$544 $504 $665 $566 
Gross amounts offset(a)
(434)(461)(503)(531)
Net amounts recognized in the Balance Sheets(b)
$110 $43 $162 $35 
(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $27 million and $28 million as of March 31, 2021 and December 31, 2020, respectively.
(b)Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for both periods presented.
76
 As of June 30, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Mississippi Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$3
$13
$—
$15
Other deferred charges and assets/Other deferred credits and liabilities3
9
1
12
Total derivatives designated as hedging instruments for regulatory purposes$6
$22
$1
$27
Gross amounts recognized$6
$22
$1
$27
Gross amounts offset(6)(6)(1)(1)
Net amounts recognized in the Balance Sheets$—
$16
$—
$26
     
Southern Power    
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Other current assets/Other current liabilities$2
$3
$1
$2
Foreign currency derivatives:    
Other current assets/Other current liabilities—
24
—
24
Other deferred charges and assets/Other deferred credits and liabilities—
25
16
—
Total derivatives designated as hedging instruments in cash flow and fair value hedges$2
$52
$17
$26
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Other current assets/Other current liabilities$—
$—
$2
$1
Total derivatives not designated as hedging instruments$—
$—
$2
$1
Gross amounts recognized$2
$52
$19
$27
Gross amounts offset(1)(1)—
—
Net amounts recognized in the Balance Sheets$1
$51
$19
$27
     
    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

 As of June 30, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Southern Company Gas    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$4
$11
$—
$9
Other deferred charges and assets/Other deferred credits and liabilities1
—
—
1
Total derivatives designated as hedging instruments for regulatory purposes$5
$11
$—
$10
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$1
$3
$—
$4
Interest rate derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current—
23
2
—
Total derivatives designated as hedging instruments in cash flow and fair value hedges$1
$26
$2
$4
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$361
$367
$459
$357
Other deferred charges and assets/Other deferred credits and liabilities316
253
207
225
Total derivatives not designated as hedging instruments$677
$620
$666
$582
Gross amounts of recognized$683
$657
$668
$596
Gross amounts offset(a)
(495)(609)(456)(555)
Net amounts recognized in the Balance Sheets(b)
$188
$48
$212
$41
(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $114 million and $99 million as of June 30, 2020 and December 31, 2019, respectively.
(b)Net amounts of derivative instruments outstanding exclude premium and intrinsic value associated with weather derivatives of $4 million as of December 31, 2019.
Energy-relatedThe traditional electric operating companies had immaterial energy-related derivatives not designated as hedging instruments were immaterial for the traditional electric operating companies at June 30, 2020March 31, 2021 and no such instruments at December 31, 2020.
At March 31, 2021 and December 31, 2019.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

At June 30, 2020, and December 31, 2019, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:
Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance SheetRegulatory Hedge Unrealized Gain (Loss) Recognized in the Balance SheetRegulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet
Location
Southern
Company(*)
Alabama
Power
Georgia
Power
Mississippi
Power
Southern Company Gas(*)
Derivative Category and Balance Sheet
Location		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern Company Gas
(in millions) (in millions)
At June 30, 2020: 
At March 31, 2021:At March 31, 2021:
Energy-related derivatives: Energy-related derivatives:
Other regulatory assets, current$(42)$(8)$(23)$(10)$(1)
Other regulatory assets, deferredOther regulatory assets, deferred$(2)$0 $(1)$(1)$0 
Other regulatory liabilities, currentOther regulatory liabilities, current24 7 9 5 3 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred3 1 1 1 0 
Total energy-related derivative gains (losses)Total energy-related derivative gains (losses)$25 $8 $9 $5 $3 
At December 31, 2020:At December 31, 2020:
Energy-related derivatives:Energy-related derivatives:
Other regulatory assets, deferred(16)(3)(7)(6)—
Other regulatory assets, deferred$(2)$0 $(1)$(1)$0 
Other regulatory liabilities, current10
3
—
—
7
Other regulatory liabilities, current12 5 2 1 4 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred2 1 1 0 0 
Total energy-related derivative gains (losses)$(48)$(8)$(30)$(16)$6
Total energy-related derivative gains (losses)$12 $6 $2 $0 $4 
 
At December 31, 2019: 
Energy-related derivatives: 
Other regulatory assets, current$(63)$(14)$(31)$(15)$(3)
Other regulatory assets, deferred(37)(8)(18)(11)—
Other regulatory liabilities, current6
2
—
—
4
Total energy-related derivative gains (losses)$(94)$(20)$(49)$(26)$1

(*)Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $12 million and $11 million at June 30, 2020 and December 31, 2019, respectively.
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of cash flow hedge accounting on accumulated OCI were as follows:
Gain (Loss) Recognized in OCI on DerivativeFor the Three Months Ended June 30,For the Six Months Ended June 30,
2020201920202019
 (in millions)(in millions)
Southern Company    
Energy-related derivatives$(2)$(6)$(6)$(6)
Interest rate derivatives(1)(37)(28)(37)
Foreign currency derivatives17
(1)(65)(39)
Total$14
$(44)$(99)$(82)
Georgia Power    
Interest rate derivatives$—
$(37)$(3)$(37)
Southern Power    
Energy-related derivatives$(2)$(2)$(2)$(2)
Foreign currency derivatives$17
$(1)(65)(39)
Total$15
$(3)$(67)$(41)
Southern Company Gas    
Energy-related derivatives$—
$(4)$(4)$(4)
Interest rate derivatives(1)—
(25)—
Total$(1)$(4)$(29)$(4)
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Gain (Loss) Recognized in OCI on DerivativeFor the Three Months Ended March 31,
20212020
(in millions)
Southern Company
Energy-related derivatives$5 $(4)
Interest rate derivatives3 (26)
Foreign currency derivatives(47)(83)
Total$(39)$(113)
Southern Power
Energy-related derivatives$4 $0 
Foreign currency derivatives(47)(83)
Total$(43)$(83)
Southern Company Gas
Energy-related derivatives$1 $(4)
Interest rate derivatives0 (23)
Total$1 $(27)
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.
77

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:
 Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended June 30,For the Six Months Ended June 30,
 
 2020201920202019
  (in millions)(in millions)
 Southern Company    
 Total cost of natural gas$144
$191
$583
$877
 
Gain (loss) on energy-related cash flow hedges(a)
(1)—
(8)—
 Total depreciation and amortization873
755
1,730
1,506
 
Gain (loss) on energy-related cash flow hedges(a)
(1)(1)(2)(4)
 Total interest expense, net of amounts capitalized(444)(429)(900)(859)
 
Gain (loss) on interest rate cash flow hedges(a)
(6)(5)(13)(9)
 
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)(12)(12)
 
Gain (loss) on interest rate fair value hedges(b)
1
19
30
33
 Total other income (expense), net101
99
204
176
 
Gain (loss) on foreign currency cash flow hedges(a)(c)
27
16
(4)(8)
 Southern Power    
 Total depreciation and amortization$121
$119
$239
$237
 
Gain (loss) on energy-related cash flow hedges(a)
(1)(1)(2)(4)
 Total interest expense, net of amounts capitalized(38)(41)(77)(84)
 
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)(12)(12)
 Total other income (expense), net1
40
4
41
 
Gain (loss) on foreign currency cash flow hedges(a)(c)
27
16
(4)(8)
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended March 31,
20212020
(in millions)
Southern Company
Total cost of natural gas$583 $439 
Gain (loss) on energy-related cash flow hedges(a)
(3)(7)
Total depreciation and amortization871 857 
Gain (loss) on energy-related cash flow hedges(a)
3 (1)
Total interest expense, net of amounts capitalized(450)(456)
Gain (loss) on interest rate cash flow hedges(a)
(7)(6)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
Gain (loss) on interest rate fair value hedges(b)
(10)29 
Total other income (expense), net58 103 
Gain (loss) on foreign currency cash flow hedges(a)(c)
(60)(31)
Southern Power
Total depreciation and amortization$119 $117 
Gain (loss) on energy-related cash flow hedges(a)
3 (1)
Total interest expense, net of amounts capitalized(38)(39)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
Total other income (expense), net7 2 
Gain (loss) on foreign currency cash flow hedges(a)(c)
(60)(31)
(a)Reclassified from accumulated OCI into earnings.
(b)For fair value hedges, changes in the fair value of the derivative contracts are generally equal to changes in the fair value of the underlying debt and have no material impact on income.
(c)The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record the euro-denominated notes.
(a)Reclassified from accumulated OCI into earnings.
(b)For fair value hedges, changes in the fair value of the derivative contracts are generally equal to changes in the fair value of the underlying debt and have no material impact on income.
(c)The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record the euro-denominated notes.
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income for energy-related derivatives and interest rate derivatives were immaterial for the traditional electric operating companies and Southern Company Gas.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:
Carrying Amount of the Hedged ItemCumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged ItemsAs of March 31, 2021As of December 31, 2020As of March 31, 2021As of December 31, 2020
(in millions)(in millions)
Southern Company
Securities due within one year$(1,505)$(1,509)$(5)$(10)

Carrying Amount of the Hedged Item Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged ItemsAs of June 30, 2020As of December 31, 2019
As of June 30, 2020As of December 31, 2019

(in millions) (in millions)
Southern Company     
Securities due within one year$—
$(599) $—
$—
Long-term debt(1,517)(1,494) (20)3
78

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:
Gain (Loss)
Three Months Ended March 31,
Derivatives in Non-Designated Hedging RelationshipsStatements of Income Location20212020
(in millions)
Energy-related derivatives:
Natural gas revenues(*)
$(17)$70 
Cost of natural gas7 7 
Total derivatives in non-designated hedging relationships$(10)$77 
  Gain (Loss)
  Three Months Ended June 30, Six Months Ended June 30,
Derivatives in Non-Designated Hedging RelationshipsStatements of Income Location20202019 20202019
  (in millions) (in millions)
Energy-related derivatives:
Natural gas revenues(*)
$14
$50
 $84
$83
 Cost of natural gas5
(5) 13
3
Total derivatives in non-designated hedging relationships$19
$45
 $97
$86
(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.
(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives not designated as hedging instruments were immaterial for all other Registrants.
Contingent Features
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. At June 30, 2020,March 31, 2021, the Registrants had 0 collateral posted with derivative counterparties to satisfy these arrangements.
ForAt March 31, 2021, the Registrants with interest rate derivatives at June 30, 2020, the fair value ofhad no interest rate derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, was immaterial.features. At June 30, 2020,March 31, 2021, the fair value of energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial for all Registrants. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Inc., Gulf Power is continuing to participate in the Southern Company power pool for a defined transition period that, subject to certain potential adjustments, is scheduled to end on January 1, 2024.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivatives executed with the same counterparty.
Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions. Basedtransactions and they may be required to post collateral based on the value of the positions in these accounts and the associated margin requirements, Alabama Power and Southern Power may be required to post collateral.requirements. At June 30, 2020,March 31, 2021, cash collateral posted in these accounts was immaterial. Southern Company Gas maintains accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Southern Company Gas may be required to deposit cash into these accounts. At June 30, 2020,March 31, 2021, cash collateral held on deposit in broker margin accounts was $114$27 million.
The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk.
79

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Company Gas uses established credit policies to determine and monitor the creditworthiness of counterparties, including requirements to post collateral or other credit security, as well as the quality of pledged collateral. Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade financial institution, but may also include cash or U.S. government securities held by a trustee. Prior to entering into a physical transaction, Southern Company Gas assigns physical wholesaleits counterparties an internal credit rating and credit limit based on the counterparties' Moody's, S&P, and Fitch ratings, commercially available credit reports, and audited financial statements. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.
In addition, Southern Company Gas conducts credit evaluations and obtains appropriate internal approvals for the counterparty's line of credit before any transaction with the counterparty is executed. In most cases, the counterparty must have an investment grade rating, which includes a minimum long-term debt rating of Baa3 from Moody's and BBB- from S&P. Generally, Southern Company Gas requires credit enhancements by way of a guaranty, cash deposit, or letter of credit for transaction counterparties that do not have investment grade ratings.
Southern Company Gas also utilizes master netting agreements whenever possible to mitigate exposure to counterparty credit risk. When Southern Company Gas is engaged in more than one outstanding derivative transaction with the same counterparty and it also has a legally enforceable netting agreement with that counterparty, the "net" mark-to-market exposure represents the netting of the positive and negative exposures with that counterparty and a reasonable measure of Southern Company Gas' credit risk. Southern Company Gas also uses other netting agreements with certain counterparties with whom it conducts significant transactions. Master nettingNetting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty. Southern Company Gas also netscounterparty across product lines and against cash collateral, provided the master netting and cash collateral agreements include such provisions. Southern Company Gas may requireWhile the amounts due from, or owed to, counterparties to pledge additional collateral when deemed necessary.are settled net, they are recorded on a gross basis on the balance sheet as energy marketing receivables and energy marketing payables.
The Registrants do not anticipate a material adverse effect on their respective financial statements as a result of counterparty nonperformance.
(K) ACQUISITIONS AND DISPOSITIONS
See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information, including detailsinformation.
Southern Company
The following table provides Southern Company's major classes of assets and liabilitiesclassified as held for sale at March 31, 2021 and December 31, 2019 for 2020:
Southern Company
At March 31,At December 31,
20212020
(in millions)
Assets Held for Sale:
Total property, plant, and equipment$7 $8 
Leveraged leases52 52 
Total Assets Held for Sale$59 $60 
Southern Company, Southern Power,Company's asset sales, both individually and Southern Company Gas. The Registrants had no material assetscombined, do not represent a strategic shift in operations that has, or liabilities held for sale at June 30, 2020.
Alabama Power
On April 22, 2020 and June 9, 2020, the FERC and the Alabama PSC, respectively, approved the Autauga Combined Cycle Acquisition, which is expected to close by September 1, 2020. See Note (B) under "Alabama Power"have, a major effect on operations and financial results; therefore, none of the assets have been classified as discontinued operations for additional information. The ultimate outcomeany of this matter cannot be determined at this time.the periods presented.
Table of ContentsIndex to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Southern Power
Asset AcquisitionsAcquisition
During the sixthree months ended June 30, 2020,March 31, 2021, Southern Power acquired a controlling membership interest in the wind facility listed below. Acquisition-related costs were expensed as incurred and were not material.
Project FacilityResourceSeller
Approximate Nameplate Capacity (MW)
Location
Southern Power
Ownership Percentage
CODPPA Contract Period
Beech Ridge II
Deuel Harvest(*)
WindInvenergy Renewables, LLC56300Deuel County, SD
Greenbrier County,100% of
West VirginiaClass B
100% of Class AFebruary 2021
(*)25 years
May 202012
and
15 years
(*)In May 2020, Southern Power purchased 100% of the Class A membership interests and now owns the controlling interest in the project, with the Class B member, Invenergy Renewables LLC, owning the noncontrolling interest.
In(*)On March 2020,26, 2021, Southern Power entered into an agreement to acquireacquired a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility and consolidates the project's operating results in its financial statements. On March 30, 2021, Southern Power completed a tax equity transaction whereby it received $220 million. The tax equity partner, which is expectedthe Class A member, and Invenergy Renewables, LLC each own a noncontrolling interest.
80

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Construction Projects
During the sixthree months ended June 30, 2020,March 31, 2021, Southern Power completed construction of and placed in service the Reading wind facility, continued construction of the Skookumchuck wind facility, and commenced construction of the Garland and Tranquillity battery energy storage facilities.facilities and the Glass Sands wind facility. Total aggregate construction costs, excluding acquisition costs, are expected to be between $475$392 million and $545$460 million for the facilities under construction. At June 30, 2020,March 31, 2021, total costs of construction incurred for these projects were $232$158 million and are included in CWIP. The ultimate outcome of these matters cannot be determined at this time.
Project FacilityResource
Approximate Nameplate Capacity (MW)
LocationActual/Expected CODPPA Contract Period
Projects Completed During the Six Months Ended June 30, 2020
Reading(a)
Wind200Osage and Lyon Counties, KSMay 202012 years
Projects Under Construction as of June 30, 2020
Skookumchuckat March 31, 2021(b)
Wind136Lewis and Thurston Counties, WAFourth quarter 202020 years
Garland Solar Storage(c)(a)
Battery energy storage system88Kern County, CASecondThird quarter 202120 years
Tranquillity Solar Storage(c)(a)
Battery energy storage system72Fresno County, CASecondFourth quarter 202120 years
Glass Sands(b)
Wind118Murray County, OKFourth quarter 202112 years

(a)In December 2020, Southern Power restructured its ownership of the project by contributing the Class A membership interests to an existing partnership and selling 100% of the Class B membership interests while retaining the controlling interest. Prior to commercial operation, Southern Power may restructure the project ownership again and enter into additional partnerships, but expects to retain the controlling interest. The ultimate outcome of this matter cannot be determined at this time.
(a)
In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. At the time the facility was placed in service, Southern Power recorded an operating lease right-of-use asset and an operating lease liability, each in the amount of $24 million. In June 2020, Southern Power completed a tax equity transaction whereby it received $156 million and now owns 100% of the Class B membership interests.
(b)In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. Southern Power expects to complete a tax equity transaction upon commercial operation and retain the Class B membership interests. Shortly after commercial operation, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. The ultimate outcome of these matters cannot be determined at this time.
(c)Prior to commercial operation, Southern Power may enter into one or more partnerships, in which case it would ultimately own less than 100% of the Class B membership interests, but would retain ownership of the controlling interest. The PPAs for these facilities are pending approval from the California Public Utilities Commission. The ultimate outcome of these matters cannot be determined at this time.

Development Projects
Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 to development and construction projects. During the sixthree months ended June 30, 2020, certainMarch 31, 2021, gains on wind turbine equipment was sold, resulting incontributed to various equity method investments totaled approximately $37 million.
Southern Company Gas
Sale of Sequent
On April 28, 2021, certain affiliates of Southern Company Gas entered into an immaterial gain.
Sales of Natural Gas and Biomass Plants
On January 17, 2020, Southern Power completedagreement for the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of XcelSequent for a purchase price of approximately $663$50 million,, including final plus working capital and certain other adjustments. The net book value of Sequent at March 31, 2021, excluding working capital, was $46 million; however, any potential gain or loss on the sale resultedwill be based, in a gainlarge part, on the fair value of approximately $39 million ($23 million after tax). The assetsthe open derivative positions as of the date of closing. See Notes (I) and liabilities of Plant Mankato were classified as held(J) for saleinformation on Southern Company'sfair value and Southern Power's balance sheetsderivatives outstanding at DecemberMarch 31, 2019.
Plants Nacogdoches (sold in June 2019) and Mankato represented individually significant components of Southern Power; therefore, pre-tax income for these components for the three months ended June 30, 2019 and the six months ended June 30, 2020 and 2019 is presented below:
 
Three Months Ended
June 30, 2019
Six Months Ended June 30,
 20202019
 (in millions)
Southern Power's earnings before income taxes:(*)
   
Plant Nacogdoches$9
N/A
$16
Plant Mankato$6
$2
$8
(*)Earnings before income taxes for components reflect the cessation of depreciation and amortization on the long-lived assets being sold upon classification as held for sale in November 2018 and April 2019 for Plant Mankato and Plant Nacogdoches, respectively.
2021.
Southern Company Gas
On March 24, 2020, has existing agreements in place in which it guarantees the payment performance of Sequent. Southern Company Gas will continue to guarantee payment performance for Sequent after the transaction closes for a period of time as the buyer obtains releases from these obligations. As of March 31, 2021, the obligations subject to the payment performance guarantee totaled $279 million. Changes in the price of natural gas, market conditions, and the number of open contracts will change the amount that Southern Company Gas is required to guarantee for Sequent each month. The maximum potential exposure over the period of the payment performance guarantee generally is capped at $1 billion. At closing, the buyer (an investment-grade entity) will issue a payment performance guarantee to Southern Company Gas, equal to the outstanding guarantee obligation throughout this period. Further, Southern Company Gas will retain responsibility for certain potential obligations that may arise from transactions during Winter Storm Uri. The completion of the transaction is subject to the satisfaction or waiver of certain conditions, including, among other customary closing conditions, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to be completed during the third quarter 2021; however, the ultimate outcome of this matter cannot be determined at this time.
81

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Sale of Pivotal LNG
In connection with its March 2020 sale of its interests in Pivotal LNG, and Atlantic Coast PipelineSouthern Company Gas was entitled to 2 $5 million payments contingent upon Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceeds of $178 million, including working capital adjustments. The preliminary loss associated with the transactions was immaterial. Southern Company Gas may also receive 2 future payments of $5 million each, contingent uponmeeting certain milestones related to Pivotal LNG being met by Dominion Modular LNG Holdings, Inc. The assets and liabilities of Pivotal LNG and the interest in Atlantic Coast Pipeline were classified as held for sale at December 31, 2019. See Notes 3 and 7 under "Other Matters –LNG. Southern Company Gas – Gas Pipeline Projects"received the first payment on April 22, 2021 and "Southern Company Gas – Equity Method Investments," respectively,expects to receive the second payment in Item 8 of the Form 10-K and Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively.August 2021.
(L) SEGMENT AND RELATED INFORMATION
Southern Company
The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The traditional electric operating companies – Alabama Power, Georgia Power, and Mississippi Power – are vertically integrated utilities providing electric service in 3 Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy and battery energy storage projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through its natural gas distribution utilities and is involved in several other complementary businesses including gas pipeline investments, wholesale gas services, and gas marketing services.
Southern Company's reportable business segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $92 million and $178$81 million for the three and six months ended June 30, 2020, respectively,March 31, 2021 and $117 million and $204$86 million for the three and six months ended June 30, 2019, respectively.March 31, 2020. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for all periods presented.the three months ended March 31, 2021 and 2020. Revenues from sales of natural gas from Southern Company Gas to Southern Power were $3 million and $13$12 million for the three and six months ended June 30, 2020, respectively,March 31, 2021 and $16 million and $33$10 million for the three and six months ended June 30, 2019, respectively.March 31, 2020. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency, as well as investments in telecommunications and leveraged lease projects. All other inter-segment revenues are not material.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Financial data for business segments and products and services for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 was as follows:
Electric Utilities
Traditional
Electric Operating
Companies		Southern
Power		EliminationsTotalSouthern Company GasAll
Other		EliminationsConsolidated
(in millions)
Three Months Ended March 31, 2021
Operating revenues$3,764 $440 $(87)$4,117 $1,694 $134 $(35)$5,910 
Segment net income (loss)(a)(b)(c)
756 97 0 853 398 (108)(8)1,135 
At March 31, 2021
Goodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 
Total assets86,053 13,995 (637)99,411 23,377 3,392 (787)125,393 
Three Months Ended March 31, 2020
Operating revenues$3,407 $375 $(87)$3,695 $1,249 $114 $(40)$5,018 
Segment net income (loss)(a)(d)
642 75 0 717 275 (121)(3)868 
At December 31, 2020
Goodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 
Total assets85,486 13,235 (680)98,041 22,630 3,168 (904)122,935 
 Electric Utilities    
 
Traditional
Electric Operating
Companies
Southern
Power
EliminationsTotalSouthern Company Gas
All
Other
EliminationsConsolidated
 (in millions)
Three Months Ended June 30, 2020       
Operating revenues$3,539
$439
$(94)$3,884
$636
$135
$(35)$4,620
Segment net income (loss)(a)(b)(c)
645
63
—
708
71
(177)10
612
Six Months Ended June 30, 2020   

   
Operating revenues$6,946
$814
$(181)$7,579
$1,885
$248
$(74)$9,638
Segment net income (loss)(a)(b)(c)(d)
1,287
138
—
1,425
346
(299)8
1,480
At June 30, 2020        
Goodwill$—
$2
$—
$2
$5,015
$263
$—
$5,280
Total assets83,158
13,557
(713)96,002
21,500
3,325
(1,096)119,731
Three Months Ended June 30, 2019       
Operating revenues$3,899
$510
$(119)$4,290
$689
$186
$(67)$5,098
Segment net income (loss)(a)(e)(f)
782
174
—
956
106
(154)(9)899
Six Months Ended June 30, 2019       
Operating revenues$7,343
$953
$(211)$8,085
$2,163
$368
$(106)$10,510
Segment net income (loss)(a)(e)(f)
1,346
230
—
1,576
376
1,041
(11)2,982
At December 31, 2019        
Goodwill$—
$2
$—
$2
$5,015
$263
$—
$5,280
Total assets81,063
14,300
(713)94,650
21,687
3,511
(1,148)118,700
(a)Attributable to Southern Company.
(a)Attributable to Southern Company.
(b)
Segment net income (loss) for the traditional electric operating companies includes a pre-tax charge of $149 million ($111 million after tax) related to Plant Vogtle Units 3 and 4 for the three and six months ended June 30, 2020. See Note (B) under "Georgia Power – Nuclear Construction"
(b)For the traditional electric operating companies, includes a $48 million pre-tax charge ($36 million after tax) at Georgia Power for estimated loss on Plant Vogtle Units 3 and 4. See Note (B) under "Georgia Power – Nuclear Construction" for additional information.
(c)For Southern Power, includes gains on wind turbine equipment contributed to various equity method investments totaling approximately $37 million pre-tax ($28 million after tax). See Notes (E) and (K) under "Southern Power" for additional information.
(d)For Southern Power, includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Power" for additional information.
(c)Segment net income (loss) for the "All Other" column includes a pre-tax impairment charge of $154 million ($74 million after tax) related to a leveraged lease investment for the three and six months ended June 30, 2020. See Note (C) under "Other Matters – Southern Company" for additional information.
(d)
Segment net income (loss) for Southern Power includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato for the six months ended June 30, 2020. See Note (K) under "Southern Power" for additional information.
(e)Segment net income (loss) for the "All Other" column includes the preliminary pre-tax gain associated with the sale of Gulf Power of $2.5 billion ($1.3 billion after tax) for the six months ended June 30, 2019, of which $(15) million ($(11) million after tax) was recorded in the three months ended June 30, 2019, as well as a goodwill impairment charge of $32 million for the three and six months ended June 30, 2019 in contemplation of the sale of 1 of PowerSecure's business units. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company" for additional information.
(f)Segment net income (loss) for Southern Power includes a $23 million pre-tax gain ($88 million gain after tax) on the sale of Plant Nacogdoches for the three and six months ended June 30, 2019. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Power – Sale of Natural Gas and Biomass Plants" for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Products and Services
 Electric Utilities' Revenues
RetailWholesaleOtherTotal
(in millions)
Three Months Ended March 31, 2021$3,342 $545 $230 $4,117 
Three Months Ended March 31, 20203,078 418 199 3,695 
 Southern Company Gas' Revenues
Gas
Distribution
Operations
Wholesale
Gas
Services(*)
Gas
Marketing
Services		OtherTotal
(in millions)
Three Months Ended March 31, 2021$1,192 $298 $195 $9 $1,694 
Three Months Ended March 31, 20201,013 51 177 8 1,249 
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein for additional information.
83
 Electric Utilities' Revenues
 RetailWholesaleOtherTotal
 (in millions)
Three Months Ended June 30, 2020$3,182
$472
$230
$3,884
Three Months Ended June 30, 20193,540
542
208
4,290
Six Months Ended June 30, 2020$6,260
$889
$430
$7,579
Six Months Ended June 30, 20196,623
1,041
421
8,085

 Southern Company Gas' Revenues
 Gas
Distribution
Operations
Wholesale
Gas
Services(*)
Gas
Marketing
Services		OtherTotal
 (in millions)
Three Months Ended June 30, 2020$583
$(19)$56
$16
$636
Three Months Ended June 30, 2019563
48
58
20
689
Six Months Ended June 30, 2020$1,596
$32
$233
$24
$1,885
Six Months Ended June 30, 20191,724
134
287
18
2,163
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein for additional information.
(UNAUDITED)
Southern Company Gas
Southern Company Gas manages its business through 4 reportable segments – gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. The non-reportable segments are combined and presented as all other. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company Gas" for additional information on the disposition activities described herein.
Gas distribution operations is the largest component of Southern Company Gas' business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in 4 states.
Gas pipeline investments consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG, a 20% ownership interest in the PennEast Pipeline construction project, and a 50% joint ownership interest in the Dalton Pipeline, and a 5% ownership interest in the Atlantic Coast Pipeline construction project through its sale on March 24, 2020.Pipeline. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas. Gas pipeline investments also included a 5% ownership interest in the Atlantic Coast Pipeline construction project prior to its sale on March 24, 2020.
Wholesale gas services provides natural gas asset management and/or related logistics services for each of Southern Company Gas' utilities except Nicor Gas as well as for non-affiliated companies. The Virginia Natural Gas asset management agreement ended on March 31, 2021 and was not extended. Additionally, wholesale gas services engages in natural gas storage and gas pipeline arbitrage and related activities. See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent, which is expected to be completed during the third quarter 2021.
Gas marketing services provides natural gas marketing to end-use customers primarily in Georgia and Illinois through SouthStar.
The all other column includes segments below the quantitative threshold for separate disclosure, including natural gas storage businesses, fuels operations through the sale of Southern Company Gas' interest in Pivotal LNG on March 24, 2020, the investment in Triton through its sale on May 29, 2019, and other subsidiaries that fall below the quantitative threshold for separate disclosure. See Notes (E)disclosure, including storage and (K) under "Southern Company Gas" for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

fuels operations. The all other column included Jefferson Island through its sale on December 1, 2020 and Pivotal LNG through its sale on March 24, 2020.
Business segment financial data for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 was as follows:
Gas Distribution OperationsGas Pipeline Investments
Wholesale Gas Services(*)
Gas Marketing ServicesTotalAll OtherEliminationsConsolidated
(in millions)
Three Months Ended March 31, 2021
Operating revenues$1,200 $8 $298 $195 $1,701 $7 $(14)$1,694 
Segment net income (loss)183 29 126 56 394 4 0 398 
Total assets at
March 31, 2021
20,161 1,596 939 1,553 24,249 11,477 (12,349)23,377 
Three Months Ended March 31, 2020
Operating revenues$1,020 $8 $51 $177 $1,256 $8 $(15)$1,249 
Segment net income (loss)164 30 23 57 274 1 0 275 
Total assets at
December 31, 2020
19,090 1,597 850 1,503 23,040 11,336 (11,746)22,630 
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.
Third Party Gross RevenuesIntercompany RevenuesTotal Gross RevenuesLess Gross Gas CostsOperating Revenues
(in millions)
Three Months Ended March 31, 2021$2,588 $63 $2,651 $2,353 $298 
Three Months Ended March 31, 20201,185 29 1,214 1,163 51 
84
 Gas Distribution OperationsGas Pipeline Investments
Wholesale Gas Services(*)
Gas Marketing ServicesTotalAll OtherEliminationsConsolidated
 (in millions)
Three Months Ended June 30, 2020      
Operating revenues$587
$8
$(19)$56
$632
$8
$(4)$636
Segment net income (loss)74
21
(23)5
77
(6)—
71
Six Months Ended June 30, 2020      
Operating revenues$1,607
$16
$32
$233
$1,888
$16
$(19)$1,885
Segment net income (loss)238
51
—
62
351
(5)—
346
Total assets at June 30, 202018,276
1,617
637
1,480
22,010
10,645
(11,155)21,500
Three Months Ended June 30, 2019      
Operating revenues$568
$8
$48
$58
$682
$13
$(6)$689
Segment net income (loss)58
25
23
(3)103
3
—
106
Six Months Ended June 30, 2019       
Operating revenues$1,740
$16
$134
$287
$2,177
$24
$(38)$2,163
Segment net income (loss)191
57
70
58
376
—
—
376
Total assets at December 31, 201918,204
1,678
850
1,496
22,228
10,759
(11,300)21,687
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.
 Third Party Gross RevenuesIntercompany RevenuesTotal Gross RevenuesLess Gross Gas CostsOperating Revenues
 (in millions)
Three Months Ended June 30, 2020$854
$18
$872
$891
$(19)
Three Months Ended June 30, 20191,223
63
1,286
1,238
48
Six Months Ended June 30, 2020$2,039
$47
$2,086
$2,054
$32
Six Months Ended June 30, 20193,148
151
3,299
3,165
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Page
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
10286
Results of Operations
10488
Southern Company
10488
Alabama Power
11394
Georgia Power
11798
Mississippi Power
123102
Southern Power
128105
Southern Company Gas
132108
Future Earnings Potential
143116
Accounting Policies
163119
Financial Condition and Liquidity
164120
The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW
Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power), as well as Southern Power and Southern Company Gas, and owns other direct and indirect subsidiaries. The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. Southern Company's reportable segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.
The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. For Southern Power, these indicators include, but are not limited to, the equivalent forced outage rate and contract availability to evaluate operating results and help ensure its ability to meet its contractual commitments to customers. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share and net income, respectively, as a key performance indicator.
Recent Developments
COVID-19
During March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the United States. The Southern Company system provides a critical service to its customers; therefore, it is essential that Southern Company system employees are able to continue to perform their critical duties safely and effectively. The Southern Company system has implemented applicable business continuity plans, including teleworking, canceling non-essential business travel, increasing cleaning frequency at business locations, implementing applicable safety and health guidelines issued by federal and state officials, and establishing protocols for required work on customer premises. To date, these procedures have been effective in maintaining the Southern Company system's critical operations. As a result of the COVID-19 pandemic, there have been economic disruptions in the Registrants' operating territories. The traditional electric operating companies and the natural gas distribution utilities temporarily suspended disconnections for non-payment by customers and waived late fees for certain periods. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters" herein for information regarding deferral of certain incremental COVID-19-related costs, including bad debt, to a regulatory asset by certain of the traditional electric operating companies and the natural gas distribution utilities. In addition, the COVID-19 pandemic has resulted in a reduction in workforce at Plant Vogtle Units 3 and 4, as discussed further herein. Additional information regarding COVID-19 and its potential impacts on the Registrants is provided throughout Management's Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A herein.
Alabama Power
On June 9, 2020, the Alabama PSC approved in part Alabama Power's petition for a certificate of convenience and necessity (CCN) filed in September 2019 to procure additional capacity. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Alabama Power" herein for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Georgia Power
Plant Vogtle Units 3 and 4 Status
In 2009, the Georgia PSC certified construction ofConstruction continues on Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in which Georgia Power holds a 45.7% ownership interest. Georgia Power's share of the total project capital cost forecast to complete Plant Vogtle Units 3 and 4 by December 2021 and November 2022, respectively, is $8.76 billion.
DuringGeorgia Power estimates the secondproductivity impacts of the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embedded in the site work plan for Unit 3 and Unit 4. In addition, throughout 2020, the project continued to face challenges as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein. As a result of these factors, in January 2021, Southern Nuclear further extended certain milestone dates, including the start of hot functional testing and fuel load for Unit 3, from those established in October 2020.
Following the January 2021 milestone extensions, Southern Nuclear has been performing additional construction remediation work, primarily related to electrical commodity installations, necessary to ensure quality and design standards are met as system turnovers are completed to support hot functional testing and fuel load for Unit 3. Hot functional testing commenced in late April 2021 and the site work plan currently targets fuel load for Unit 3 in the third quarter 2021 and an in-service date of December 2021. As the site work plan includes minimal margin to these milestone dates, any delay could result in an in-service date in the first quarter 2022 for Unit 3. Achievement of the extended milestone dates established in January 2021 for Unit 4, which are expected to support a regulatory-approved in-service date of November 2022, primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, being added and maintained.
Considering the factors above, during the first quarter 2021, approximately $84 million of the construction contingency established in the fourth quarter 2020 approximately $194 million of construction contingency was assigned to the base capital cost forecast which exceededfor costs primarily associated with the schedule extension for Unit 3 to December 2021, construction productivity, support resources,
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
and construction remediation work. Georgia Power increased its total capital cost forecast as of March 31, 2021 by adding $48 million to the remaining balance of the construction contingency originally established in the second quarter 2018. As a result, Southern Nuclear recommended establishing additional construction contingency, of which Georgia Power's share is $115 million, for potential risks including, among other factors, construction productivity and expected impacts of the COVID-19 pandemic; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement.contingency.
After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded a total pre-tax charge to income of $149$48 million ($11136 million after tax) for the increase in the total project capital cost forecast as of June 30, 2020.March 31, 2021. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.
In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site. In April 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4, which totaled approximately 20% of the then-existing site workforce. This workforce reduction lowered absenteeism, providing an improvement in operational efficiency and allowing for increased social distancing. From the initial peak in April 2020, the number of active cases at the site declined significantly during May and early June, but began increasing again in mid-June and continues to impact productivity levels and pace of activity completion. As a result, overall production improvements have not been achieved at the levels anticipated, contributing to the allocation of, and increase in, construction contingency described above.
To address these issues, in July 2020, Southern Nuclear updated its aggressive site work plan for both Unit 3 and Unit 4. While Southern Nuclear's July 2020 aggressive site work plan extended milestone dates from its February 2020 aggressive site work plan, Georgia Power still expects to achieve the regulatory-approved in-service dates of November 2021 and November 2022 for Plant Vogtle Units 3 and 4, respectively.
The continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $70 million and $115 million. However, the ultimate impact of the COVID-19 pandemic and other factors on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.
See FUTURE EARNINGS POTENTIALNote (B) to the Condensed Financial Statements under "Georgia Power – "Construction Programs – Nuclear Construction"Construction" herein for additional information.
Mississippi Power
On March 17, 2020,15, 2021, Mississippi Power submitted its annual retail PEP filing for 2021 to the Mississippi PSC, approvedwhich requested a settlement agreement between Mississippi Power and1.8%, or approximately $16 million, annual increase in revenues. In accordance with the Mississippi Public Utilities Staff related to Mississippi Power's basePEP rate case filed in November 2019 (Mississippi Power Rate Case Settlement Agreement). Underschedule, the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%,rate increase became effective forwith the first billing cycle of April 2020. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Mississippi Power – 2019 Base Rate Case" herein for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Southern Power
During the six months ended June 30, 2020, Southern Power completed construction of and placed in service the 200-MW Reading wind facility, continued construction of the 136-MW Skookumchuck wind facility, and commenced construction of the Garland and Tranquillity battery energy storage facilities. See FUTURE EARNINGS POTENTIAL – "Construction Programs – Southern Power" herein for additional information.
On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments.
In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is2021, subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, whichrefund.The Mississippi PSC is expected to occurrule on this request later in late 2020 or earlythe second quarter 2021. The facility's output is contracted under two long-term PPAs.ultimate outcome of this matter cannot be determined at this time.
On April 6, 2021, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2021, which requested an annual increase in revenues of approximately $28 million. The rate became effective with the first billing cycle of May 2021.
On April 15, 2021, Mississippi Power filed its 2021 IRP with the Mississippi PSC. The filing includes a schedule to retire Plant Watson Unit 4 (268 MWs) and Mississippi Power's 40% ownership interest in Plant Greene County Units 1 and 2 (103 MWs each) in December 2023, 2025, and 2026, respectively, consistent with each unit's remaining useful life in the most recent approved depreciation studies. In addition, the schedule reflects the early retirement of Mississippi Power's 50% undivided ownership interest in Plant Daniel Units 1 and 2 (502 MWs) by the end of 2027. The ultimate outcome of this matter cannot be determined at this time.
See Note (B) to the Condensed Financial Statements under "Mississippi Power" herein for additional information.
Southern Power
During the three months ended March 31, 2021, Southern Power continued construction of the 88-MW Garland and 72-MW Tranquillity battery energy storage facilities and the 118-MW Glass Sands wind facility. On May 1, 2020,March 26, 2021, Southern Power purchased a controlling membership interest in the 56-MW Beech Ridge IIapproximately 300-MW Deuel Harvest wind facility located in GreenbrierDeuel County, West VirginiaSouth Dakota from Invenergy Renewables, LLC. The facility's output is contracted under a 12-year PPA. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
At June 30, 2020,March 31, 2021, Southern Power's average investment coverage ratio for its generating assets, including those owned with various partners, based on the ratio of investment under contract to total investment using the respective generation facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 94%93% through 20242025 and 92%90% through 2029,2030, with an average remaining contract duration of approximately 14 years.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas
On March 24, 2020,April 28, 2021, Atlanta Gas Light filed its first Integrated Capacity and Delivery Plan (i-CDP) with the Georgia PSC, which includes a series of ongoing and proposed pipeline safety, reliability, and growth programs for the next 10 years, as well as the required capital investments and related costs to implement the programs. The i-CDP is subject to a five-month review period, which may be extended. See Note (B) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
Also on April 28, 2021, certain affiliates of Southern Company Gas completedentered into an agreement for the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline with aggregate proceeds of $178 million, including working capital adjustments.Sequent. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
On June 1, 2020, Virginia Natural Gas filed a general rate case with the Virginia Commission seeking an increase in rates ofapproximately $49.6 million based on a ROE of 10.35% and an equity ratio of 54%. The Virginia Commission is expected to rule on the requested increase in the second quarter 2021.
On July 1, 2020, Atlanta Gas Light filed its 2020 GRAM filing with the Georgia PSC requesting an increase in annual base rates of $37.6 million. Resolution of the 2020 GRAM filing is expected by December 31, 2020, with rates effective January 1, 2021.
See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Southern Company Gas" herein for additional information regarding Southern Company Gas' regulatory filings. The ultimate outcome of these matters cannot be determined at this time.
RESULTS OF OPERATIONS
Southern Company
Net Income
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(287) (31.9) $(1,502) (50.4)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$26730.8
Consolidated net income attributable to Southern Company was $612 million$1.1 billion ($0.581.07 per share) forin the secondfirst quarter 20202021 compared to $899 million$0.9 billion ($0.860.82 per share) for the corresponding period in 2019.2020. The decreaseincrease was primarily due to increases in both natural gas revenues and retail electric revenues primarily associated with colder weather in the first quarter 2021 as compared to the first quarter 2020, partially offset by higher cost of natural gas.
Retail Electric Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2648.6
In the first quarter 2021, retail electric revenues were $3.3 billion compared to $3.1 billion for the corresponding period in 2020.
Details of the changes in retail electric revenues were as follows:
 First Quarter 2021
(in millions)(% change)
Retail electric – prior year$3,078 
Estimated change resulting from –
Rates and pricing25 0.8 %
Sales decline(15)(0.5)
Weather89 2.9 
Fuel and other cost recovery165 5.4 
Retail electric – current year$3,342 8.6 %
Revenues associated with changes in rates and pricing increased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to an increase in Alabama Power's Rate RSE effective January 1, 2021, partially offset by decreases in Georgia Power's NCCR tariff effective January 1, 2021 and in Mississippi Power's base rates effective in April 2020. See Note 2 to the financial statements under "Alabama Power – Rate RSE" and
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

primarily due to decreases in retail revenues associated with milder weather and lower customer usage in the second quarter 2020 compared to the corresponding period in 2019, a $111 million after-tax charge in the second quarter 2020 related to Georgia Power's construction of Plant Vogtle Units 3 and 4, an $88 million after-tax gain on the sale of Plant Nacogdoches in the second quarter 2019, higher depreciation and amortization, and a $74 million after-tax leveraged lease impairment in the second quarter 2020. These decreases to net income were partially offset by increases in retail revenues associated with rates and pricing and lower other operations and maintenance expenses. See Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K for additional information regarding the disposition of Plant Nacogdoches, Note (B) to the Condensed Financial Statements under "Georgia"Mississippi Power – Nuclear Construction" herein for additional information on the construction of Plant Vogtle Units 3 and 4, and Note (C) to the Condensed Financial Statements under "Other Matters – Southern Company" herein for additional information on the leveraged lease impairment.
Consolidated net income attributable to Southern Company was $1.5 billion ($1.40 per share) for year-to-date 2020 compared to $3.0 billion ($2.86 per share) for the corresponding period in 2019. The decrease was primarily due to the $2.5 billion ($1.3 billion after tax) gain on the sale of Gulf Power recorded in 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information regarding the sale of Gulf Power.
Retail Electric Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(358) (10.1) $(363) (5.5)
In the second quarter 2020, retail electric revenues were $3.2 billion compared to $3.5 billion for the corresponding period in 2019. For year-to-date 2020, retail electric revenues were $6.3 billion compared to $6.6 billion for the corresponding period in 2019.
Details of the changes in retail electric revenues were as follows:
 Second Quarter 2020 Year-to-Date 2020
 (in millions) (% change) (in millions) (% change)
Retail electric – prior year$3,540
   $6,623
  
Estimated change resulting from –       
Rates and pricing124
 3.5 % 267
 4.0 %
Sales decline(107) (3.0) (99) (1.5)
Weather(132) (3.7) (159) (2.4)
Fuel and other cost recovery(243) (6.9) (372) (5.6)
Retail electric – current year$3,182
 (10.1)% $6,260
 (5.5)%
Revenues associated with changes in rates and pricing increased in the second quarter and year-to-date 2020 when compared to the corresponding periods in 2019 primarily due to an increase in revenue at Georgia Power and Alabama Power related to the recovery of environmental compliance costs andBase Rate CNP Compliance costs, respectively, as well as the impacts of Georgia Power accruals for customer refunds in the first quarter and year-to-date 2019 related to Tax Reform and the rate pricing effects of decreased customer usage at Georgia Power. Partially offsetting these increases were lower contributions from commercial and industrial customers with variable demand-driven pricing at Georgia Power. Additionally, the year-to-date increase was due to Alabama Power customer bill credits in the first quarter 2019 related to Tax Reform. See Note 2 to the financial statements under "Alabama Power" and "Georgia Power"Case" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein for additional information.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Revenues attributable to changes in sales decreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely due to social distancing and shelter-in-place guidelines related to2020 primarily driven by continued impacts of the COVID-19 pandemic. Weather-adjusted residential KWH sales increased 4.7% and 3.8%1.1% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to customer growth and an increase in average customer usage, primarily due to the temporary suspension of customer disconnections for nonpayment and shelter-in-place orders.growth. Weather-adjusted commercial KWH sales decreased 11.5% and 6.3%3.1% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from shelter-in-place orderschanges in consumer and restrictions on business operationsbehavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 14.0% and 8.0%3.0% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily as a result of disruptions in supply chain and business operations related to the COVID-19 pandemic, non-pandemic related customer closures, and the overall decrease in business activity due to the resulting recession.maintenance outages.
Fuel and other cost recovery revenues decreased $243 million and $372increased $165 million in the secondfirst quarter and year-to-date 2020, respectively,2021 compared to the corresponding periodsperiod in 20192020 primarily due to decreases in generation and the average cost ofhigher fuel and purchased power.power costs. Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses,expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs.
Wholesale Electric Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(70) (12.9) $(152) (14.6)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$12730.4
Wholesale electric revenues consist of revenues from PPAs and short-term opportunity sales. Wholesale electric revenues from PPAs (other than solar and wind PPAs) have both capacity and energy components. Capacity revenues generally represent the greatest contribution to net income and are designed to provide recovery of fixed costs plus a return on investment. Energy revenues will vary depending on fuel prices, the market prices of wholesale energy compared to the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Energy sales from solar and wind PPAs do not have a capacity charge and customers either purchase the energy output of a dedicated renewable facility through an energy charge or through a fixed price related to the energy. As a result, the ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors. Wholesale electric revenues at Mississippi Power include FERC-regulated municipal and rural association sales under cost-based tariffs as well as market-based sales. Short-term opportunity sales are made at market-based rates that generally provide a margin above the Southern Company system's variable cost to produce the energy.
In the secondfirst quarter 2020,2021, wholesale electric revenues were $472$545 million compared to $542$418 million for the corresponding period in 2019. For year-to-date 2020, wholesale electric2020. The increase reflects an increase of $102 million in energy revenues were $889 millionprimarily resulting from higher natural gas prices when compared to $1.0 billion for the corresponding period in 2019. These decreases reflect decreases of $46 million and $103 million in energy revenues for the second quarter and year-to-date 2020, respectively, and $24 million and $49 million2020. In addition, an increase in capacity revenues for the second quarterof $25 million was primarily due to a power sales agreement at Alabama Power which began in September 2020 and year-to-date 2020, respectively. The decreases in energy revenues include $24 million and $67 million for the second quarter and year-to-date 2020, respectively, from Southern Power, with the remainder from the traditional electric operating companies. These decreases primarily result from lowernew natural gas prices and a net decrease in the volume of KWHs sold, primarily as a result of milder weather inPPAs at Southern Power.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Other Electric Revenues
the Southeast U.S. when compared to the corresponding periods in 2019. The decrease in capacity revenues was primarily related to Southern Power's sales of Plant Nacogdoches in the second quarter 2019 and Plant Mankato in
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1912.6
In the first quarter 2020. See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K for additional information.
Natural Gas Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(53) (7.7) $(278) (12.9)
In the second quarter 2020, natural gas2021, other electric revenues were $636$170 million compared to $689$151 million for the corresponding period in 2019. For year-to-date 2020,2020. The increase was primarily due to increases of $9 million in transmission services, $3 million in customer fees at the traditional electric operating companies, and $3 million in outdoor lighting at Georgia Power.
Natural Gas Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$44535.6
In the first quarter 2021, natural gas revenues were $1.9$1.7 billion compared to $2.2$1.2 billion for the corresponding period in 2019.2020.
Details of the changes in natural gas revenues were as follows:
Second Quarter 2020 Year-to-Date 2020First Quarter 2021
(in millions) (% change) (in millions) (% change)(in millions)(% change)
Natural gas revenues – prior year$689
   $2,163
  Natural gas revenues – prior year$1,249 
Estimated change resulting from –       Estimated change resulting from –
Infrastructure replacement programs and base rate changes43
 6.2 % 119
 5.5 %Infrastructure replacement programs and base rate changes38 3.0 %
Gas costs and other cost recovery(38) (5.5) (287) (13.3)Gas costs and other cost recovery152 12.2 
Weather3
 0.4
 (8) (0.4)
Wholesale gas services(67) (9.7) (102) (4.7)Wholesale gas services247 19.8 
Other6
 0.9
 —
 —
Other8 0.6 
Natural gas revenues – current year$636
 (7.7)% $1,885
 (12.9)%Natural gas revenues – current year$1,694 35.6 %
Revenues attributable tofrom infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 20192020 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investments recovered throughinvestment in infrastructure replacement programs.replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.
Revenues attributable toassociated with gas costs and other cost recovery decreasedincreased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 20192020 primarily due to lower naturalhigher volumes sold and higher gas prices and decreased volumes of natural gas sold.cost recovery. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.
Revenues attributable tofrom Southern Company Gas' wholesale gas services business decreasedincreased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 2019 primarily2020 due to decreasedhigher commercial activityactivities as a result of warmer weather and a decrease inWinter Storm Uri, partially offset by derivative gains.losses. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding the sale of Sequent, which is expected to be completed during the third quarter 2021.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Other Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(4) (2.4) $(68) (19.3)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$3730.3
In the secondfirst quarter 2020,2021, other revenues were $162$159 million compared to $166$122 million for the corresponding period in 2019. For year-to-date 2020, other revenues were $2842020. The increase primarily relates to a $24 million compared to $352 million for the corresponding periodincrease in 2019. These decreases primarily relate to changes in PowerSecure's business, including the sale of its utility infrastructure services business in June 2019 and the wind-down of a segment of its distributed infrastructure businessand energy efficiency projects at PowerSecure and an increase of $10 million in the first quarter 2020, partially offset by unregulated sales at Georgia Power largely associated with power delivery construction and maintenance contracts. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.contracts at Georgia Power.
Fuel and Purchased Power Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019 First Quarter 2021 vs. First Quarter 2020
(change in millions) (% change) (change in millions) (% change) (change in millions)(% change)
Fuel$(293) (32.1) $(507) (28.7)Fuel$212 33.3
Purchased power(1) (0.5) 10
 2.7Purchased power26 14.4
Total fuel and purchased power expenses$(294) $(497) Total fuel and purchased power expenses$238 
In the secondfirst quarter 2020,2021, total fuel and purchased power expenses were $0.8$1.1 billion compared to $1.1$0.8 billion for the corresponding period in 2019.2020. The decreaseincrease was primarily the result of a $118$159 million decreaseincrease in the average cost of fuel and purchased power and a $176$79 million net decrease in the volume of KWHs generated and purchased.
For year-to-date 2020, total fuel and purchased power expenses were $1.6 billion compared to $2.1 billion for the corresponding period in 2019. The decrease was primarily the result of a $285 million decrease in the average cost of fuel and purchased power and a $212 million net decreaseincrease in the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters" hereinNote 2 to the financial statements in Item 8 of the Form 10-K for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.
Details of the Southern Company system's generation and purchased power were as follows:
First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)(a)
4342
Total purchased power (in billions of KWHs)
45
Sources of generation (percent)(a) —
Gas4653
Coal2414
Nuclear1718
Hydro58
Wind, Solar, and Other87
Cost of fuel, generated (in cents per net KWH)—
Gas(a)
2.551.95
Nuclear0.750.78
Coal2.822.88
Average cost of fuel, generated (in cents per net KWH)(a)
2.261.86
Average cost of purchased power (in cents per net KWH)(b)
5.103.90
(a)First quarter 2021 excludes Central Alabama Generating Station KWHs and associated cost of fuel as its fuel is provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
(b)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Details of the Southern Company system's generation and purchased power were as follows:
 Second Quarter 2020Second Quarter 2019Year-to-Date 2020Year-to-Date 2019
Total generation (in billions of KWHs)
41468290
Total purchased power (in billions of KWHs)
4498
Sources of generation (percent) —
    
Gas55525450
Nuclear19221922
Coal12161316
Hydro5365
Other9787
Cost of fuel, generated (in cents per net KWH)—
    
Gas1.892.391.922.47
Nuclear0.780.800.780.80
Coal2.963.042.922.98
Average cost of fuel, generated (in cents per net KWH)
1.792.261.822.29
Average cost of purchased power (in cents per net KWH)(*)
4.744.814.304.73
(*)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.
Fuel
In the secondfirst quarter 2020,2021, fuel expense was $621$848 million compared to $914$636 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 49.3% decrease79.2% increase in the volume of KWHs generated by coal, a 20.9%43.4% decrease in the volume of KWHs generated by hydro, and a 30.8% increase in the average cost of natural gas per KWH generated, partially offset by a 2.6%9.1% decrease in the volume of KWHs generated by natural gas and a 2.1% decrease in the average cost of coal per KWH generated, andgenerated.
Purchased Power
In the first quarter 2021, purchased power expense was $207 million compared to $181 million for the corresponding period in 2020. The increase was primarily due to a 5.2%30.8% increase in the average cost per KWH purchased primarily due to higher natural gas prices, partially offset by an 8.4% decrease in the volume of KWHs generated by natural gas.purchased.
For year-to-date 2020, fuel expense was $1.3 billionEnergy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to $1.8 billion for the corresponding period in 2019. The decrease was primarily due to a 44.1% decrease in the volume of KWHs generated by coal, a 22.3% decrease in the average cost of natural gas per KWH generated, a 2.0% decrease in the average costSouthern Company system's generation, and the availability of coal per KWH generated, and a 0.5% decrease in the volume of KWHs generated by natural gas.Southern Company system's generation.
Cost of Natural Gas
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(47) (24.6) $(294) (33.5)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14432.8
Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 86% of total cost of natural gas for both the secondfirst quarter and year-to-date 2020.2021.
In the secondfirst quarter 2020, cost of natural gas was $144 million compared to $191 million for the corresponding period in 2019. The decrease reflects a 34.9% decrease in natural gas prices in the second quarter 2020 compared to the corresponding period in 2019.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

For year-to-date 2020,2021, cost of natural gas was $583 million compared to $877$439 million for the corresponding period in 2019.2020. The decreaseincrease reflects a 36.6% decreasehigher volumes sold due to colder weather and higher gas cost recovery in natural gas prices compared to 2019 and decreased volumes primarily as a result of warmer weather, as determined by Heating Degree Days, for year-to-date 2020the first quarter 2021 compared to the corresponding period in 2019.2020. The increase also reflects a 38% increase in natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
Cost of Other Sales
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(10) (11.9) $(74) (36.5)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2749.1
In the secondfirst quarter 2020,2021, cost of other sales was $74$82 million compared to $84$55 million for the corresponding period in 2019. For year-to-date 2020, cost of other sales was $1292020. The increase primarily relates to a $14 million compared to $203 million for the corresponding periodincrease in 2019. These decreases primarily relate to changes in PowerSecure's business, including the sale of its utility infrastructure services business in June 2019 and the wind-down of a segment of its distributed infrastructure business in the first quarter 2020, partially offset byand energy efficiency projects at PowerSecure and an increase of $8 million in expenses related to unregulated sales at Georgia Power largely associated with power delivery construction and maintenance contracts. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.contracts at Georgia Power.
Other Operations and Maintenance Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(117) (8.9) $(136) (5.2)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$765.9
In the secondfirst quarter 2020,2021, other operations and maintenance expenses were $1.2$1.37 billion compared to $1.3$1.30 billion for the corresponding period in 2019.2020. The decreaseincrease reflects the impacts of cost containment activities implemented in 2020 to help offset the effects of the recessionary economy resulting from the COVID-19 pandemic, as well as a $32 million goodwill impairment charge in the second quarter 2019 associated with the sale of PowerSecure's utility infrastructure services business unit. The decrease primarily results from decreases of $82 million in scheduled generation outage and maintenance expenses and $17 million in compliance and environmental expenses at the traditional electric operating companies. The decrease also reflects decreases of $14 million in transmission and distribution maintenance expenses, primarily at Alabama Power and Georgia Power, including $11 million of reliability NDR credits at Alabama Power, partially offset by a $46$55 million increase in storm damage recovery at Georgia Power as authorized in its 2019 ARP.employee compensation and
For year-to-date 2020, other operations and maintenance expenses were $2.5 billion compared to $2.6 billion for the corresponding period in 2019. The decrease reflects the impacts of cost containment activities implemented in 2020 to help offset the effects of the recessionary economy resulting from the COVID-19 pandemic, as well as a $32 million goodwill impairment charge in the second quarter 2019 associated with the sale of PowerSecure's utility infrastructure services business unit. The decrease primarily results from decreases of $111 million in scheduled generation outage and maintenance expenses and $42 million in transmission and distribution expenses at the traditional electric operating companies, including $22 million of reliability NDR credits at Alabama Power, partially offset by a $92 million increase in storm damage recovery at Georgia Power as authorized in its 2019 ARP.
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See Note 2 to the financial statements under "Alabama Power – Rate NDR" and " – Rate CNP Compliance" and "Georgia Power – Storm Damage Recovery" and Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.
    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

benefit expenses, primarily at Southern Company Gas, and a $15 million decrease in nuclear property insurance refunds at Alabama Power and Georgia Power.
Depreciation and Amortization
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$118 15.6 $224 14.9
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$141.6
In the secondfirst quarter 2020,2021, depreciation and amortization was $873$871 million compared to $755$857 million for the corresponding period in 2019. For year-to-date 2020,2020. The increase primarily reflects a $37 million increase in depreciation and amortization was $1.7 billion compared to $1.5 billion for the corresponding periodassociated with additional plant in 2019. These increases primarily reflect increasedservice, partially offset by decreased amortization of regulatory assets related to CCR AROs of $63$22 million and $127 million forunder the second quarter and year-to-date 2020, respectively, and higher depreciationterms of $44 million and $89 million for the second quarter and year-to-date 2020, respectively, as authorized in Georgia Power's 2019 ARP. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and Note 2 to the financial statements under "Georgia Power – Rate Plans" and "Plans – Integrated Resource Plan"2019 ARP" in Item 8 of the Form 10-K for additional information.information regarding Georgia Power's recovery of costs associated with CCR AROs.
Taxes Other Than Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$154.5
In the first quarter 2021, taxes other than income taxes were $345 million compared to $330 million for the corresponding period in 2020. The increase primarily reflects increased property taxes and an increase in revenue tax expenses as a result of higher natural gas revenues at Southern Company Gas.
Estimated Loss on Plant Vogtle Units 3 and 4
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$149 N/M $149 N/M
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$48N/M
N/M - Not meaningful
In the secondfirst quarter 2020,2021, an estimated probable loss of $149$48 million was recorded at Georgia Power to reflect its revised total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under ""Georgia Power – Nuclear Construction"Construction" herein for additional information.
(Gain) Loss on Dispositions, Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$512.8
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(8) N/M $(2,467) N/M
N/M - Not meaningful
For year-to-date 2020, gainIn the first quarter 2021, (gain) loss on dispositions, net was $39$44 million compared to $2.5 billion$39 million for the corresponding period in 2019.2020. The decrease wasfirst quarter 2021 amount includes $39 million in gains at Southern Power, primarily duefrom contributions of wind turbine equipment to various equity method investments, and $4 million in gains from property sales at Alabama Power. In the $2.5 billion ($1.3 billion after tax) preliminaryfirst quarter 2020, Southern Power recorded a $39 million gain onrelated to the sale of Gulf Power recorded inPlant Mankato. See Notes (E) and (K) to the first quarter 2019. SeeCondensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Company"Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K for additional information.
Interest Expense, Net of Amounts Capitalized
93
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$15 3.5 $41 4.8
In the second quarter 2020, interest expense, net of amounts capitalized was $444 million compared to $429 million for the corresponding period in 2019. For year-to-date 2020, interest expense, net of amounts capitalized was $900 million compared to $859 million for the corresponding period in 2019. These increases were primarily due to an increase in average outstanding long-term borrowings primarily at the parent company. Additionally, the year-to-date 2020 increase was due to an increase in average outstanding long-term borrowings primarily at Georgia Power. See FINANCIAL CONDITION AND LIQUIDITY – "Financing Activities" herein and Note 8 to the financial statements in Item 8 of the Form 10-K for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Allowance for Equity Funds Used During Construction
Impairment of Leveraged Lease
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1235.3
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$154 N/M $154 N/M
N/M - Not meaningful
In the secondfirst quarter 2020,2021, allowance for equity funds used during construction was $46 million compared to $34 million for the corresponding period in 2020. The increase was primarily due to an impairment chargeincrease in AFUDC equity associated with the construction of $154 million was recorded related to a leveraged lease investment at Southern Holdings.Plant Vogtle Units 3 and 4. See Note (C)(B) to the Condensed Financial Statements under "Other Matters"Georgia Power – Southern Company"Nuclear Construction" herein for additional information.information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$2 2.0 $28 15.9
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(45)(43.7)
In the secondfirst quarter 2020,2021, other income (expense), net was $101$58 million compared to $99$103 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net2020. The decrease was $204primarily due to $75 million compared to $176in charitable contributions at Southern Company Gas in the first quarter 2021, partially offset by a $27 million for the corresponding period in 2019. These increases were primarily related to an increase in non-service cost-related retirement benefits income, partially offset by a gain at Southern Power from a litigation settlement in the second quarter 2019.income. See Note 3 to the financial statements under "General Litigation Matters – Southern Power" in Item 8 of the Form 10-K and Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4531.0
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(140) (96.6) $(1,355) (90.0)
In the secondfirst quarter 2020,2021, income taxes were $5$190 million compared to $145 million for the corresponding period in 2019. For year-to-date 2020, income taxes were $150 million compared to $1.5 billion for the corresponding period in 2019.2020. The second quarter 2020 decreaseincrease was primarily due to the tax impacts of charges associated with a leveraged lease impairment and the construction of Plant Vogtle Units 3 and 4, as well as the flowback of excess deferred income taxes in 2020 as authorized in Georgia Power's 2019 ARP,higher pre-tax earnings, partially offset by ITCs recognized upon$16 million in tax benefits resulting from new legislation that changed Southern Power's sale of Plant Nacogdoches in the second quarter 2019. The year-to-date 2020 decrease also reflects the tax impacts of the sale of Gulf Power in 2019.state apportionment methodology. See Notes 2 and 15 to the financial statements under "Georgia Power – Rate Plans – Tax Reform Settlement Agreement" and "Southern Company," respectively, in Item 8 of the Form 10-K and Notes (B), (C), andNote (G) to the Condensed Financial Statements under "Georgia Powerherein and MANAGEMENT'S DISCUSSION AND ANALYSIS – Nuclear Construction," "OtherFUTURE EARNINGS POTENTIAL – "Income Tax Matters – Southern Company," and "EffectiveAlabama State Tax Rate," respectively, hereinReform Legislation" in Item 7 of the Form 10-K for additional information.
Alabama Power
Net Income (Loss) Attributable to Noncontrolling Interests
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$7928.2
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(24) N/M $(26) N/M
N/M - Not meaningful
In the second quarter 2020,Alabama Power's net income attributable to noncontrolling interestsafter dividends on preferred stock for the first quarter 2021 was $5$359 million compared to $29$280 million for the corresponding period in 2019. For year-to-date 2020, net loss attributable2020. The increase was primarily due to noncontrolling interestsan increase in retail revenues associated with an increase in Rate RSE effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Retail Revenues
was $26 million
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14712.2
In the first quarter 2021, retail revenues were $1.35 billion compared to an immaterial amount$1.21 billion for the corresponding period in 2019. The2020.
Details of the changes in retail revenues were primarily due to an allocation of approximately $26 million of income to the noncontrolling interest partner related to a litigation settlement at Southern Poweras follows:
 First Quarter 2021
(in millions)(% change)
Retail – prior year$1,205 
Estimated change resulting from –
Rates and pricing50 4.1 %
Sales decline(4)(0.3)
Weather39 3.2 
Fuel and other cost recovery62 5.2 
Retail – current year$1,352 12.2 %
Revenues associated with changes in rates and pricing increased in the secondfirst quarter 2019. See Note 3 to the financial statements in Item 8 of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
Alabama Power
Net Income
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)
(% change)
(change in millions)
(% change)
$2 0.7 $65 12.7
Alabama Power's net income after dividends on preferred stock for the second quarter 2020 was $298 million2021 when compared to $296 million for the corresponding period in 2019. This increase was2020 primarily due to a decrease in operations and maintenance expenses and anRate RSE increase in Rate CNP Compliance-related revenues associated with increased capital investments. These increases to income were partially offset by decreases in retail revenues associated with milder weather in the second quarter 2020 compared to the same period in 2019 and lower customer usage.
Alabama Power's net income after dividends on preferred stock for year-to-date 2020 was $578 million compared to $513 million for the corresponding period in 2019. This increase was primarily due to a decrease in operations and maintenance expenses and an increase in retail revenues associated with the impact of customer bill credits issued in 2019 related to Tax Reform. These increases to income were partially offset by decreases in retail revenues associated with milder weather in the first and second quarters 2020 compared to the same periods in 2019 and lower customer usage.effective January 1, 2021. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K for additional information.
Retail Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(155) (11.2) $(165) (6.4)
In the second quarter 2020, retail revenues were $1.22 billion compared to $1.38 billion for the corresponding period in 2019. For year-to-date 2020, retail revenues were $2.43 billion compared to $2.59 billion for the corresponding period in 2019.
Details of the changes in retail revenues were as follows:
 Second Quarter 2020
Year-to-Date 2020
 (in millions)
(% change)
(in millions)
(% change)
Retail – prior year$1,378
   $2,592
  
Estimated change resulting from –       
Rates and pricing12
 0.9 % 63
 2.4 %
Sales decline(39) (2.8) (46) (1.8)
Weather(39) (2.8) (53) (2.0)
Fuel and other cost recovery(89) (6.5) (129) (5.0)
Retail – current year$1,223
 (11.2)% $2,427
 (6.4)%
Revenues associated with changes in rates and pricing increased in the second quarter and year-to-date 2020 when compared to the corresponding periods in 2019. The second quarter increase was primarily due to an increase in
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Rate CNP Compliance-related revenue. The year-to-date increase was primarily due to customer bill credits issued in the first quarter 2019 related to Tax Reform and Rate CNP Compliance-related revenue.
Revenues attributable to changes in sales decreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely due to social distancing and shelter-in-place guidelines related to the COVID-19 pandemic.2020. Weather-adjusted residential KWH sales increased 4.6% and 3.5%were relatively flat in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 2019 primarily due to customer growth and an increase in average customer usage as a result of shelter-in-place orders and the temporary suspension of customer disconnections.2020. Weather-adjusted commercial KWH sales decreased 12.2% and 7.3%2.1% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from shelter-in-place orderschanges in consumer and restrictions on business operationsbehavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 15.5% and 8.7%5.4% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily as a result of disruptions in supply chaincustomer closures and business operations driven bymaintenance outages, as well as continued consumer responses to the COVID-19 pandemic and the overall decrease in business activity due to the resulting recession.pandemic.
Fuel and other cost recovery revenues decreasedincreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 20192020 primarily due to decreasesincreases in generation and the average cost of fuel.
Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the natural disaster reserve. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Wholesale Revenues – Non-Affiliates
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(8) (12.9) $(12) (9.8)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$3664.3
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale
energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for
energy within the Southern Company system's electric service territory, and the availability of the Southern Company
system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by
an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also
included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that
generally provide a margin above Alabama Power's variable cost to produce the energy.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
In the secondfirst quarter 2020,2021, wholesale revenues from sales to non-affiliates were $54$92 million compared to $62$56 million for the corresponding period in 2019. For year-to-date 2020, wholesale2020. The increase consisted of a $19 million increase in energy revenues from sales to non-affiliates were $111 million compared to $123 million for the corresponding period in 2019. These decreases were primarily due to decreases of 16.0% and 9.8% in the price of energy in the second quarter and year-to-date 2020, respectively, primarily due to lowerhigher natural gas prices and a $17 million increase in 2020 comparedcapacity revenues primarily related to the corresponding periodsa power sales agreement that began in 2019. Also contributing to the increase for the second quarter 2020 was a 3.2% decrease in KWH sales as a result of lower market demand.September 2020.
Wholesale Revenues – Affiliates
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$3 75.0 $(37) (58.7)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1368.4
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.
For year-to-date 2020,In the first quarter 2021, wholesale revenues from sales to affiliates were $26$32 million compared to $63$19 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 46.6% decrease in KWH sales as a result of decreased coal generation largely due to lower natural gas prices and a 25.9% decrease40.5% increase in the price of energy and an 18.7% increase in KWH sales due to lowerincreased coal generation as the result of higher natural gas prices in 2020the first quarter 2021 compared to the corresponding period in 2019.2020.
Other Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$12 17.4 $9 6.3
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1216.9
In the secondfirst quarter 2020,2021, other revenues were $81$83 million compared to $69$71 million for the corresponding period in 2019. This2020. The increase was primarily due to an increaseincreases of $7 million in transmission and energy service revenues associated with the timing ofand $2 million in customer refunds and an increase in unregulated sales of products and services associated with energy efficiency and equipment upgrade projects.fees.
Fuel and Purchased Power Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019First Quarter 2021 vs. First Quarter 2020
(change in millions)
(% change) (change in millions) (% change)(change in millions)(% change)
Fuel$(53) (21.0) $(138) (25.0)Fuel$76 35.3 
Purchased power – non-affiliates2
 4.3
 5
 6.0
Purchased power – non-affiliates10 25.0 
Purchased power – affiliates(39) (56.5) (41) (45.6)Purchased power – affiliates12 66.7 
Total fuel and purchased power expenses$(90)   $(174)  Total fuel and purchased power expenses$98 
In the secondfirst quarter 2020,2021, total fuel and purchased power expenses were $278$371 million compared to $368$273 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a $77$59 million decrease inincrease related to the volume of KWHs generated (excluding hydro) and purchased and a $13$39 million net decreaseincrease in the average cost of generation and purchased power.
For year-to-date 2020, fuel and purchased power expenses were $553 million compared to $727 million for the corresponding period in 2019. The decrease was primarily due to a $140 million decrease in the volume of KWHs generated (excluding hydro) and purchased and a $34 million net decrease in the average cost of generation and purchased power.
Fuel and purchased power energy transactions do not have a significant impact on earnings, since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Details of Alabama Power's generation and purchased power were as follows:
First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)(a)
1514
Total purchased power (in billions of KWHs)
11
Sources of generation (percent)(a) —
Coal4634
Nuclear2528
Gas1920
Hydro1018
Cost of fuel, generated (in cents per net KWH) —
Coal2.752.64
Nuclear0.720.76
Gas(a)
2.512.19
Average cost of fuel, generated (in cents per net KWH)(a)
2.141.88
Average cost of purchased power (in cents per net KWH)(b)
6.524.86
 Second Quarter 2020 Second Quarter 2019 Year-to-Date 2020
Year-to-Date 2019
Total generation (in billions of KWHs)
12 12 26 29
Total purchased power (in billions of KWHs)
2 3 3 4
Sources of generation (percent) —
       
Coal33 43 33 43
Nuclear32 26 30 24
Gas24 23 22 21
Hydro11 8 15 12
Cost of fuel, generated (in cents per net KWH) —
       
Coal2.82 2.86 2.72 2.82
Nuclear0.75 0.78 0.75 0.78
Gas1.95 2.48 2.07 2.53
Average cost of fuel, generated (in cents per net KWH)
1.85 2.18 1.86 2.19
Average cost of purchased power (in cents per net KWH)(*)
4.29 4.01 4.51 4.45
(a)First quarter 2021 excludes Central Alabama Generating Station KWHs and associated cost of fuel as its fuel is provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
(*)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
(b)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
Fuel
In the secondfirst quarter 2020,2021, fuel expense was $199$291 million compared to $252$215 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 25.6% decrease44.6% increase in the volume of KWHs generated by coal, a 21.4%44.0% decrease in the average cost of natural gas per KWH generated, which excludes fuel associated with tolling agreements, and increases of 23.5% and 18.9% in the volume of KWHs generated by hydro, and nuclear, respectively.a 14.6% increase in the average cost of KWHs generated by natural gas, which excludes tolling agreements.
For year-to-date 2020, fuelPurchased Power – Non-Affiliates
In the first quarter 2021, purchased power expense from non-affiliates was $415$50 million compared to $553$40 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 29.6% decrease31.1% increase in the average cost per KWH purchased as a result of higher natural gas prices and a 12.9% increase in the volume of KWHs generated by coal, an 18.2% decreasepurchased due to a PPA which began in September 2020.
Energy purchases from non-affiliates will vary depending on the averagemarket prices of wholesale energy as compared to
the cost of natural gas per KWH generated, which excludes fuel associated with tolling agreements,the Southern Company system's generation, demand for energy within the Southern Company system's
electric service territory, and increasesthe availability of 11.9% and 11.0% in the volume of KWHs generated by nuclear and hydro, respectively.Southern Company system's generation.
Purchased Power – Affiliates
In the secondfirst quarter 2020,2021, purchased power expense from affiliates was $30 million compared to $69$18 million for the corresponding period in 2019. For year-to-date 2020,2020. The increase was primarily due to a 39.9% increase in the average cost per KWH purchased power expense from affiliates was $49 millionas a result of higher natural gas prices and a 17.9% increase in the volume of KWHs purchased due to colder weather in the first quarter 2021 when compared to $90 million for the corresponding period in 2019. The second quarter and year-to-date 2020 decreases were primarily due to reductions of 50.8% and 43.7%, respectively, in the amount of energy purchased due to milder weather during 2020 as compared to 2019 and decreases of 10.7% and 4.3%, respectively, in the average cost of purchased power per KWH as a result of lower natural gas prices in 2020 compared to the corresponding periods in 2019.2020.
Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, all as approved by the FERC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(60) (14.9) $(122) (15.0)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$113.1
In the secondfirst quarter 2020,2021, other operations and maintenance expenses were $342$361 million compared to $402$350 million for the corresponding period in 2019. For year-to-date 2020, other operations and maintenance expenses were $690 million compared2020. The increase was primarily due to $812 million for the corresponding period in 2019. These decreases reflect the impactsan increase of cost containment activities implemented to help offset the effects of the recessionary economy resulting from the COVID-19 pandemic. The decreases primarily result from $43 million and $78 million decreases in generation expenses associated with scheduled outages and CNP Compliance-related expenses for the second quarter and year-to-date 2020, respectively, as well as $10 million and $29 million decreases in transmission and distribution maintenance expenses primarily related to reliability NDR credits for the second quarterapplied in 2020 and year-to-date 2020, respectively. Also contributing to the year-to-date 2020 decrease was a $12$6 million increasereduction in nuclear property insurance refunds.
These increases were partially offset by a $3 million decrease in Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate NDR" and " – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$115.5
In the first quarter 2021, depreciation and amortization was $211 million compared to $200 million for the corresponding period in 2020. The increase was primarily due to additional plant in service, including the purchase of the Central Alabama Generating Station in August 2020. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Other Income (Expense), Net
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$15 136.4 $23 92.0
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$833.3
In the secondfirst quarter 2020,2021, other income (expense), net was $26$32 million compared to $11$24 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net2020. The increase was $48 million compared to $25 million for the corresponding period in 2019. These increases were primarily due to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2631.0
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$4 4.5 $26 17.2
For year-to-date 2020,In the first quarter 2021, income taxes were $177$110 million compared to $151$84 million for the corresponding period in 2019. This2020. The increase was primarily due to higher pre-tax earnings.
Georgia Power
Net Income
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(140) (31.3) $(121) (15.9)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$206.0
Georgia Power's net income for the secondfirst quarter 20202021 was $308$351 million compared to $448$331 million for the corresponding period in 2019. For year-to-date 2020, net income2020. The increase was $638 millionprimarily due to higher retail revenues associated with colder weather in the first quarter 2021 compared to $759 million for the corresponding period in 2019. These decreases were primarily due to2020, partially offset by a $111$36 million after-tax charge in the secondfirst quarter 20202021 related to the construction of Plant Vogtle Units 3 and 4 and impacts of the 2019 ARP effective January4. See Note (B) to
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

1, 2020, including higher depreciation and amortization, largely offset by increased retail rates and lower income tax expense. Also contributing to the decreases were lower retail revenues associated with milder weather as compared to the corresponding periods in 2019 and decreased customer usage resulting from the COVID-19 pandemic, partially offset by related cost containment activities. See Note (B) to the Condensed Financial Statements under ""Georgia Power – Nuclear Construction"Construction" herein for additional information on the construction ofregarding Plant Vogtle Units 3 and 4 and Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information on the 2019 ARP.4.
Retail Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(186) (9.6) $(179) (5.0)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1126.7
In the secondfirst quarter 2020,2021, retail revenues were $1.76$1.79 billion compared to $1.95$1.68 billion for the corresponding period in 2019. For year-to-date 2020, retail revenues were $3.44 billion compared to $3.61 billion for the corresponding period in 2019.2020.
Details of the changes in retail revenues were as follows:
Second Quarter 2020 Year-to-Date 2020 First Quarter 2021
(in millions) (% change) (in millions) (% change)(in millions)(% change)
Retail – prior year$1,946
   $3,614
  Retail – prior year$1,675 
Estimated change resulting from –       Estimated change resulting from –
Rates and pricing116
 5.9 % 209
 5.8 %Rates and pricing(18)(1.1)%
Sales decline(63) (3.2) (47) (1.3)Sales decline(6)(0.4)
Weather(88) (4.5) (107) (3.0)Weather42 2.5 
Fuel cost recovery(151) (7.8) (234) (6.5)Fuel cost recovery94 5.7 
Retail – current year$1,760
 (9.6)% $3,435
 (5.0)%Retail – current year$1,787 6.7 %
Revenues associated with changes in rates and pricing increaseddecreased in the secondfirst quarter and year-to-date 2020,2021 when compared to the corresponding periodsperiod in 2019. These increases were2020. The decrease was primarily due to an increasea decrease in revenue recognized under the ECCRNCCR tariff effective January 1, 2020 as authorized in the 2019 ARP, the impacts of accruals in 2019 for customer refunds related to Tax Reform, and the rate pricing effects of decreased customer usage in 2020. Partially offsetting these increases were lower contributions from commercial and industrial customers with variable demand-driven pricing.2021. See Note 2(B) to the financial statementsCondensed Financial Statements under "Georgia Power" in Item 8 of the Form 10-KPower – Nuclear Construction – Regulatory Matters" herein for additional information.
Revenues attributable to changes in sales decreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely2020 primarily due to social distancing and shelter-in-place guidelines related tocontinued impacts of the COVID-19 pandemic.pandemic, partially offset by customer growth. Weather-adjusted residential KWH sales increased 4.7% and 4.1%2.0% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to corresponding periodsperiod in 20192020 primarily due to customer growth and an increase in average customer usage, primarily due to the temporary suspension of customer disconnections for nonpayment and shelter-in-place orders.growth. Weather-adjusted commercial KWH sales decreased 11.3% and 5.8%3.3% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from shelter-in-place orderschanges in consumer and restrictions on business operationsbehavior in response to the COVID-19 pandemic.pandemic, partially offset by customer growth. Weather-adjusted industrial KWH sales decreased 13.4% and 8.4%increased 1.1% in the secondfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily as a result of increases in the pipeline and lumber segments, partially offset by reductions in the textiles, transportation, and chemicals segments as a result of disruptions in supply chain and business operations related to the COVID-19 pandemic and the overall decrease in business activity due to the resulting recession.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

pandemic.
Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreasedincreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 20192020 due to lowerhigher fuel and purchased power costs. Electric rates include provisions to periodically adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – GeorgiaNote 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 78 of the Form 10-K for additional information.
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Wholesale RevenuesPurchased Power
In the first quarter 2021, purchased power expense was $207 million compared to $181 million for the corresponding period in 2020. The increase was primarily due to a 30.8% increase in the average cost per KWH purchased primarily due to higher natural gas prices, partially offset by an 8.4% decrease in the volume of KWHs purchased.
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(11) (30.6) $(16) (23.9)
Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.
WholesaleCost of Natural Gas
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14432.8
Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 86% of total cost of natural gas for the first quarter 2021.
In the first quarter 2021, cost of natural gas was $583 million compared to $439 million for the corresponding period in 2020. The increase reflects higher volumes sold due to colder weather and higher gas cost recovery in the first quarter 2021 compared to the corresponding period in 2020. The increase also reflects a 38% increase in natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
Cost of Other Sales
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2749.1
In the first quarter 2021, cost of other sales was $82 million compared to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity$55 million for the corresponding period in 2020. The increase primarily relates to a $14 million increase in distributed infrastructure and energy components. Wholesale capacity revenues from PPAs are recognized either onefficiency projects at PowerSecure and an increase of $8 million in unregulated power delivery construction and maintenance contracts at Georgia Power.
Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$765.9
In the first quarter 2021, other operations and maintenance expenses were $1.37 billion compared to $1.30 billion for the corresponding period in 2020. The increase reflects a levelized basis over$55 million increase in employee compensation and
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
benefit expenses, primarily at Southern Company Gas, and a $15 million decrease in nuclear property insurance refunds at Alabama Power and Georgia Power.
Depreciation and Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$141.6
In the appropriate contractfirst quarter 2021, depreciation and amortization was $871 million compared to $857 million for the corresponding period or the amounts billablein 2020. The increase primarily reflects a $37 million increase in depreciation associated with additional plant in service, partially offset by decreased amortization of regulatory assets related to CCR AROs of $22 million under the contract terms of Georgia Power's 2019 ARP. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and provideNote 2 to the financial statements under "Georgia Power – Rate Plans – 2019 ARP" in Item 8 of the Form 10-K for additional information regarding Georgia Power's recovery of fixed costs associated with CCR AROs.
Taxes Other Than Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$154.5
In the first quarter 2021, taxes other than income taxes were $345 million compared to $330 million for the corresponding period in 2020. The increase primarily reflects increased property taxes and an increase in revenue tax expenses as a returnresult of higher natural gas revenues at Southern Company Gas.
Estimated Loss on investment. Plant Vogtle Units 3 and 4
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$48N/M
N/M - Not meaningful
In the first quarter 2021, an estimated probable loss of $48 million was recorded at Georgia Power to reflect its revised total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
(Gain) Loss on Dispositions, Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$512.8
In the first quarter 2021, (gain) loss on dispositions, net was $44 million compared to $39 million for the corresponding period in 2020. The first quarter 2021 amount includes $39 million in gains at Southern Power, primarily from contributions of wind turbine equipment to various equity method investments, and $4 million in gains from property sales at Alabama Power. In the first quarter 2020, Southern Power recorded a $39 million gain related to the sale of Plant Mankato. See Notes (E) and (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Allowance for Equity Funds Used During Construction
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1235.3
In the first quarter 2021, allowance for equity funds used during construction was $46 million compared to $34 million for the corresponding period in 2020. The increase was primarily due to an increase in AFUDC equity associated with the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(45)(43.7)
In the first quarter 2021, other income (expense), net was $58 million compared to $103 million for the corresponding period in 2020. The decrease was primarily due to $75 million in charitable contributions at Southern Company Gas in the first quarter 2021, partially offset by a $27 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4531.0
In the first quarter 2021, income taxes were $190 million compared to $145 million for the corresponding period in 2020. The increase was primarily due to higher pre-tax earnings, partially offset by $16 million in tax benefits resulting from new legislation that changed Southern Power's state apportionment methodology. See Note (G) to the Condensed Financial Statements herein and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters – Alabama State Tax Reform Legislation" in Item 7 of the Form 10-K for additional information.
Alabama Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$7928.2
Alabama Power's net income after dividends on preferred stock for the first quarter 2021 was $359 million compared to $280 million for the corresponding period in 2020. The increase was primarily due to an increase in retail revenues associated with an increase in Rate RSE effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Retail Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14712.2
In the first quarter 2021, retail revenues were $1.35 billion compared to $1.21 billion for the corresponding period in 2020.
Details of the changes in retail revenues were as follows:
 First Quarter 2021
(in millions)(% change)
Retail – prior year$1,205 
Estimated change resulting from –
Rates and pricing50 4.1 %
Sales decline(4)(0.3)
Weather39 3.2 
Fuel and other cost recovery62 5.2 
Retail – current year$1,352 12.2 %
Revenues associated with changes in rates and pricing increased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to a Rate RSE increase effective January 1, 2021. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales decreased in the first quarter 2021 when compared to the corresponding period in 2020. Weather-adjusted residential KWH sales were relatively flat in the first quarter 2021 when compared to the corresponding period in 2020. Weather-adjusted commercial KWH sales decreased 2.1% in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to changes in consumer and business behavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 5.4% in the first quarter 2021 when compared to the corresponding period in 2020 primarily as a result of customer closures and maintenance outages, as well as continued consumer responses to the COVID-19 pandemic.
Fuel and other cost recovery revenues increased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to increases in generation and the average cost of fuel. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the natural disaster reserve. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Wholesale Revenues – Non-Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$3664.3
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of GeorgiaAlabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact onaffect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above GeorgiaAlabama Power's variable cost to produce the energy.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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In the first quarter 2021, wholesale revenues from sales to non-affiliates were $92 million compared to $56 million for the corresponding period in 2020. The increase consisted of a $19 million increase in energy revenues primarily due to higher natural gas prices and a $17 million increase in capacity revenues primarily related to a power sales agreement that began in September 2020.
Wholesale Revenues – Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1368.4
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal costs.cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.
In the secondfirst quarter 2020,2021, wholesale revenues from sales to affiliates were $25$32 million compared to $36$19 million for the corresponding period in 2019. For year-to-date 2020, wholesale2020. The increase was primarily due to a 40.5% increase in the price of energy and an 18.7% increase in KWH sales due to increased coal generation as the result of higher natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
Other Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1216.9
In the first quarter 2021, other revenues were $51$83 million compared to $67$71 million for the corresponding period in 2019. These decreases were primarily due to lower market demand largely resulting from the expiration of a non-affiliate PPA and lower energy prices.
Other Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$8 5.9 $(2) (0.7)
In the second quarter 2020, other revenues were $143 million compared to $135 million for the corresponding period in 2019.2020. The increase was primarily due to an increase of $14 million in unregulated sales associated with power delivery construction and maintenance contracts, partially offset by a decreaseincreases of $7 million in pole attachment revenues.
For year-to-date 2020, other revenues were $268 million compared to $270 million for the corresponding period in 2019. The decrease was primarily due to a $13 million decrease in pole attachmenttransmission and energy service revenues and an $8 million decrease in retail customer fees largely resulting from the temporary suspension of customer disconnections and late fees related to the COVID-19 pandemic, substantially offset by an increase of $20$2 million in unregulated sales associated with power delivery construction and maintenance contracts and outdoor lighting.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

customer fees.
Fuel and Purchased Power Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019First Quarter 2021 vs. First Quarter 2020
(change in millions) (% change) (change in millions) (% change)(change in millions)(% change)
Fuel$(164) (42.1) $(231) (33.5)Fuel$76 35.3 
Purchased power – non-affiliates9
 7.3
 20
 8.3
Purchased power – non-affiliates10 25.0 
Purchased power – affiliates(12) (9.0) (59) (19.0)Purchased power – affiliates12 66.7 
Total fuel and purchased power expenses$(167)   $(270)  Total fuel and purchased power expenses$98 
In the secondfirst quarter 2020,2021, total fuel and purchased power expenses were $481$371 million compared to $648$273 million for the corresponding period in 2019. For year-to-date 2020, total fuel and purchased power expenses were $971 million compared to $1.24 billion for the corresponding period in 2019. These decreases were2020. The increase was primarily due to decreases of $101a $59 million and $193 million related to the average cost of fuel and purchased power and net decreases of $66 million and $77 millionincrease related to the volume of KWHs generated and purchased and a $39 million increase in second quarterthe average cost of fuel and year-to-date 2020, respectively.purchased power.
Fuel and purchased power energy transactions do not have a significant impact on earnings, since these fuelenergy expenses are generally offset by fuelenergy revenues through GeorgiaAlabama Power's fuelenergy cost recovery mechanism.clause. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – GeorgiaNote 2 to the financial statements under "Alabama Power – Fuel Cost Recovery"Rate ECR" in Item 78 of the Form 10-K for additional information.
Details of Georgia Power's generation and purchased power were as follows:
96
 Second Quarter 2020 Second Quarter 2019 Year-to-Date 2020 Year-to-Date 2019
Total generation (in billions of KWHs)
13 16 25 29
Total purchased power (in billions of KWHs)
8 6 16 15
Sources of generation (percent) —
       
Gas56 45 57 47
Nuclear32 26 30 26
Coal7 26 7 23
Hydro and other5 3 6 4
Cost of fuel, generated (in cents per net KWH) —
       
Gas2.11 2.48 2.11 2.53
Nuclear0.81 0.81 0.80 0.81
Coal3.37 3.18 3.60 3.20
Average cost of fuel, generated (in cents per net KWH)
1.76 2.23 1.82 2.22
Average cost of purchased power (in cents per net KWH)(*)
3.58 4.59 3.36 4.23
(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.
Fuel
In the second quarter 2020, fuel expense was $226 million compared to $390 million for the corresponding period in 2019. For year-to-date 2020, fuel expense was $458 million compared to $689 million for the corresponding period in 2019. The decreases for the second quarter and year-to-date 2020 were primarily due to decreases of 21.1% and 18.0%, respectively, in the average cost of fuel primarily related to lower cost of natural gas and decreases of 9.2% and 6.9%, respectively, in the volume of KWHs generated largely due to lower customer demand.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Details of Alabama Power's generation and purchased power were as follows:
First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)(a)
1514
Total purchased power (in billions of KWHs)
11
Sources of generation (percent)(a) —
Coal4634
Nuclear2528
Gas1920
Hydro1018
Cost of fuel, generated (in cents per net KWH) —
Coal2.752.64
Nuclear0.720.76
Gas(a)
2.512.19
Average cost of fuel, generated (in cents per net KWH)(a)
2.141.88
Average cost of purchased power (in cents per net KWH)(b)
6.524.86
(a)First quarter 2021 excludes Central Alabama Generating Station KWHs and associated cost of fuel as its fuel is provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
(b)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
Fuel
In the first quarter 2021, fuel expense was $291 million compared to $215 million for the corresponding period in 2020. The increase was primarily due to a 44.6% increase in the volume of KWHs generated by coal, a 44.0% decrease in the volume of KWHs generated by hydro, and a 14.6% increase in the average cost of KWHs generated by natural gas, which excludes tolling agreements.
Purchased Power – Non-Affiliates
In the secondfirst quarter 2020,2021, purchased power expense from non-affiliates was $133$50 million compared to $124$40 million for the corresponding period in 2019. For year-to-date 2020, purchased power expense from non-affiliates2020. The increase was $262 million compared to $242 million for the corresponding period in 2019. The increases for the second quarter and year-to-date 2020 were primarily due to increases of 11.0% and 24.6%, respectively, in the volume of KWHs purchased primarily due to the availability of lower cost market resources, largely offset by decreases of 6.0% and 12.4%, respectively,a 31.1% increase in the average cost per KWH purchased primarilyas a result of higher natural gas prices and a 12.9% increase in the volume of KWHs purchased due to lower energy prices.a PPA which began in September 2020.
Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to
the cost of the Southern Company system's generation, demand for energy within the Southern Company system's
electric service territory, and the availability of the Southern Company system's generation.
Purchased Power – Affiliates
In the secondfirst quarter 2020,2021, purchased power expense from affiliates was $122$30 million compared to $134$18 million for the corresponding period in 2019. For year-to-date 2020, purchased power expense from affiliates2020. The increase was $251 million compared to $310 million for the corresponding period in 2019. The decreases for the second quarter and year-to-date 2020 were primarily due to decreases of 32.8% and 29.0%, respectively,a 39.9% increase in the average cost per KWH purchased primarily resulting from lower energyas a result of higher natural gas prices and the expiration of a PPA. Partially offsetting the decrease in the second quarter 2020 was a 10.4%17.9% increase in the volume of KWHs purchased as Georgia Power units generally dispatched at a higher cost than other Southern Company system resources.due to colder weather in the first quarter 2021 when compared to the corresponding period in 2020.
Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, all as approved by the FERC.
Other Operations and Maintenance Expenses
97
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$— — $15 1.6
In the second quarter 2020 and 2019, other operations and maintenance expenses were $463 million. Increases of $46 million in storm damage recovery as authorized in the 2019 ARP and $10 million in expenses from unregulated sales associated with power delivery construction and maintenance contracts were substantially offset by decreases of $22 million associated with generation maintenance and scheduled outages, $8 million associated with generation environmental projects, $7 million in customer accounts and sales costs, and $7 million in transmission-related expenses. These decreases reflect the impacts of cost containment activities implemented to help offset the effects of the recessionary economy resulting from the COVID-19 pandemic. Also contributing to the offset was a decrease of $8 million related to an adjustment in 2019 for FERC fees following the conclusion of a multi-year audit of headwater benefits associated with hydro facilities.
For year-to-date 2020, other operations and maintenance expenses were $928 million compared to $913 million for the corresponding period in 2019. The increase was primarily due to increases of $92 million in storm damage recovery as authorized in the 2019 ARP and $9 million in expenses from unregulated sales associated with power delivery construction and maintenance contracts, partially offset by decreases of $26 million associated with generation maintenance and scheduled outages, $18 million in distribution- and transmission-related expenses, and $9 million associated with generation environmental projects. These decreases reflect the impacts of cost containment activities implemented to help offset the effects of the recessionary economy resulting from the COVID-19 pandemic. Other expense reductions include a decrease of $15 million related to an adjustment in 2019 for FERC fees following the conclusion of a multi-year audit of headwater benefits associated with hydro facilities and an $11 million increase in nuclear property insurance refunds.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$113.1
In the first quarter 2021, other operations and maintenance expenses were $361 million compared to $350 million for the corresponding period in 2020. The increase was primarily due to an increase of $10 million related to reliability NDR credits applied in 2020 and a $6 million reduction in nuclear property insurance refunds. These increases were partially offset by a $3 million decrease in Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Georgia"Alabama Power – Storm Damage Recovery"Rate NDR" and " – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$110 45.1 $224 46.4
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$115.5
In the secondfirst quarter 2020,2021, depreciation and amortization was $354$211 million compared to $244$200 million for the corresponding period in 2019. For year-to-date 2020, depreciation and amortization2020. The increase was $707 million comparedprimarily due to $483 million foradditional plant in service, including the corresponding periodpurchase of the Central Alabama Generating Station in 2019. These increases primarily reflect increased amortization of regulatory assets of $63 million and $127 million for the second quarter and year-to-date 2020, respectively, and higher depreciation of $44 million and $89 million for the second quarter and year-to-date 2020, respectively, as authorized in the 2019 ARP.August 2020. See Note 215 to the financial statements under "Georgia Power – Rate Plans" and " – Integrated Resource Plan""Alabama Power" in Item 8 of the Form 10-K for additional information.
Estimated Loss on Plant Vogtle Units 3 and 4Other Income (Expense), Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$833.3
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$149 N/M $149 N/M
N/M - Not meaningful
In the secondfirst quarter 2020,2021, other income (expense), net was $32 million compared to $24 million for the corresponding period in 2020. The increase was primarily due to an estimated probable loss of $149increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2631.0
In the first quarter 2021, income taxes were $110 million compared to $84 million for the corresponding period in 2020. The increase was recordedprimarily due to reflect higher pre-tax earnings.
Georgia Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$206.0
Georgia Power's revised total project capital cost forecastnet income for the first quarter 2021 was $351 million compared to complete$331 million for the corresponding period in 2020. The increase was primarily due to higher retail revenues associated with colder weather in the first quarter 2021 compared to the corresponding period in 2020, partially offset by a $36 million after-tax charge in the first quarter 2021 related to the construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Nuclear Construction" herein for additional information.
Interest Expense, Net of Amounts Capitalized
98
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$— — $15 7.5
In the second quarter 2020 and 2019, interest expense, net of amounts capitalized was $105 million. For year-to-date 2020, interest expense, net of amounts capitalized was $216 million compared to $201 million for the corresponding period in 2019. The increase for year-to-date 2020 was primarily due to a $25 million increase in interest expense associated with an increase in average outstanding long-term borrowings, partially offset by an $11 million increase in amounts capitalized in connection with the construction of Plant Vogtle Units 3 and 4. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings and Note (B) to the Condensed Financial Statements under "Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$16 45.7 $26 33.8
In the second quarter 2020, other income (expense), net was $51 million compared to $35 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net was $103 million compared to $77 million for the corresponding period in 2019. The second quarter and year-to-date 2020 increases were
    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

primarily due to increases of $11 million and $21 million, respectively, in non-service cost-related retirement benefits income and increases in AFUDC equity of $5 million and $9 million, respectively, primarily associated with the construction of Plant Vogtle Units 3 and 4. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits and Note (B) to the Condensed Financial Statements under ""Georgia Power – Nuclear Construction"Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Income TaxesRetail Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1126.7
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(118) (91.5) $(184) (87.2)
In the secondfirst quarter 2020, income taxes2021, retail revenues were $11 million$1.79 billion compared to $129 million$1.68 billion for the corresponding period in 2019. For year-to-date 2020, income taxes were $27 million compared to $211 million for the corresponding period in 2019. These decreases were primarily due to the flowback of excess deferred income taxes in 2020 as authorized in the 2019 ARP and lower pre-tax earnings primarily due to the second quarter 2020 charge associated with the construction of Plant Vogtle Units 3 and 4. See Note (B) under "Nuclear Construction" and Note (G) to the Condensed Financial Statements herein and Note 2 to the financial statements under "Georgia Power – Rate Plans – Tax Reform Settlement Agreement" in Item 8 of the Form 10-K for additional information.
Mississippi Power
Net Income
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$2 5.4 $(3) (4.1)
Mississippi Power's net income for the second quarter 2020 was $39 million compared to $37 million for the corresponding period in 2019. The increase was primarily due to a decrease in amortization associated with ECO Plan regulatory assets and a decrease in scheduled generation outage costs, partially offset by a decrease in base rates that became effective for the first billing cycle of April 2020 and a decrease in revenues due to the COVID-19 pandemic.
For year-to-date 2020, net income was $71 million compared to $74 million for the corresponding period in 2019. The decrease was primarily due to a decrease in base rates that became effective for the first billing cycle of April 2020, a decrease in revenues due to the COVID-19 pandemic, and an increase in scheduled generation outage costs, partially offset by a decrease in amortization associated with ECO Plan regulatory assets.
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Mississippi Power – 2019 Base Rate Case" herein and Note 2 to the financial statements under "Mississippi Power – Environmental Compliance Overview Plan" in Item 8 of the Form 10-K for additional information.
Retail Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(16) (7.4) $(20) (4.8)
In the second quarter 2020, retail revenues were $199 million compared to $215 million for the corresponding period in 2019. For year-to-date 2020, retail revenues were $398 million compared to $418 million for the corresponding period in 2019.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

2020.
Details of the changes in retail revenues were as follows:
 First Quarter 2021
(in millions)(% change)
Retail – prior year$1,675 
Estimated change resulting from –
Rates and pricing(18)(1.1)%
Sales decline(6)(0.4)
Weather42 2.5 
Fuel cost recovery94 5.7 
Retail – current year$1,787 6.7 %
 Second Quarter 2020 Year-to-Date 2020
 (in millions) (% change) (in millions) (% change)
Retail – prior year$215
   $418
  
Estimated change resulting from –       
Rates and pricing(4) (1.9)% (5) (1.2)%
Sales decline(5) (2.3) (7) (1.7)
Weather(4) (1.9) 1
 0.2
Fuel and other cost recovery(3) (1.3) (9) (2.1)
Retail – current year$199
 (7.4)% $398
 (4.8)%
Revenues associated with changes in rates and pricing decreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 20192020. The decrease was primarily due to decreasesa decrease in PEP and ECO Plan rates that becamethe NCCR tariff effective forJanuary 1, 2021. See Note (B) to the first billing cycle of April 2020, partially offset by revenue associated with a tolling arrangement. See FUTURE EARNINGS POTENTIALCondensed Financial Statements under "Georgia Power – "Nuclear Construction – Regulatory Matters – Mississippi Power – 2019 Base Rate Case"Matters" herein for additional information.
Revenues attributable to changes in sales decreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely2020 primarily due to lower overall customer usage resulting from shelter-in-place orders and restrictions on business operations in response tocontinued impacts of the COVID-19 pandemic.
pandemic, partially offset by customer growth. Weather-adjusted residential KWH sales increased 5.4% and 2.3%2.0% in the secondfirst quarter and year-to-date2021 when compared to corresponding period in 2020 respectively, primarily due to customer growth and an increase in average customer usage as a result of shelter-in-place orders and the temporary suspension of customer disconnections.growth. Weather-adjusted commercial KWH sales decreased 11.6% and 7.9%3.3% in the secondfirst quarter and year-to-date2021 when compared to the corresponding period in 2020 respectively, primarily due to lower customer usage resulting from shelter-in-place orderschanges in consumer and restrictions on business operations, including the temporary closure of casinos,behavior in response to the COVID-19 pandemic. Industrialpandemic, partially offset by customer growth. Weather-adjusted industrial KWH sales decreased 7.0% and 1.3%increased 1.1% in the secondfirst quarter 2021 when compared to the corresponding period in 2020 primarily as a result of increases in the pipeline and year-to-date 2020, respectively,lumber segments, partially offset by reductions in the textiles, transportation, and chemicals segments as a result of disruptions in supply chain and business operations driven byrelated to the COVID-19 pandemic and the overall decrease in business activity due to the resulting recession.pandemic.
Fuel revenues and othercosts are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreasedincreased in the secondfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 primarily as a result of lower recoverable fuel costs. Recoverable fuel costs include2020 due to higher fuel and purchased power expenses reduced by the fuel portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory.costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses including the energy component of purchased power costs, and do not affect net income.
Wholesale Revenues – Non-Affiliates
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(5) (8.8) $(11) (9.6)
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared See Note 2 to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availabilityfinancial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associationsForm 10-K for additional information.
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AND RESULTS OF OPERATIONS (Continued)

and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Mississippi Power" in Item 7 of the Form 10-K for additional information.
In the second quarter 2020, wholesale revenues from sales to non-affiliates were $52 million compared to $57 million for the corresponding period in 2019. For year-to-date 2020, wholesale revenues from sales to non-affiliates were $103 million compared to $114 million for the corresponding period in 2019. These decreases were primarily due to decreases in revenue from MRA customers as a result of lower fuel costs and milder weather, as well as fewer opportunity sales.
Wholesale Revenues – Affiliates
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(12) (32.4) $(11) (19.0)
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.
In the second quarter 2020, wholesale revenues from sales to affiliates were $25 million compared to $37 million for the corresponding period in 2019. For year-to-date 2020, wholesale revenues from sales to affiliates were $47 million compared to $58 million for the corresponding period in 2019. These decreases were primarily due to decreases of $18 million and $26 million in the second quarter and year-to-date 2020, respectively, associated with lower natural gas prices, partially offset by increases of $6 million and $14 million in the second quarter and year-to-date 2020, respectively, associated with higher KWH sales due to the dispatch of Mississippi Power's lower cost generation resources to serve the Southern Company system's territorial load.
Fuel and Purchased Power Expenses
 Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
 (change in millions) (% change) (change in millions) (% change)
Fuel$(22) (21.0) $(36) (18.2)
Purchased power1
 16.7 3
 33.3
Total fuel and purchased power expenses$(21)   $(33)  
In the second quarter 2020, total fuel and purchased power expenses were $90 million compared to $111 million for the corresponding period in 2019. The decrease was primarily due to a $20 million decrease related to the cost of fuel primarily due to the lower average cost of natural gas.
For year-to-date 2020, total fuel and purchased power expenses were $174 million compared to $207 million for the corresponding period in 2019. The decrease was primarily due to a $42 million decrease related to the cost of fuel and purchased power primarily due to the lower average cost of natural gas, partially offset by a $9 million increase associated with the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Details of Mississippi Power's generation and purchased power were as follows:
 Second Quarter 2020 Second Quarter 2019 Year-to-Date 2020 Year-to-Date 2019
Total generation (in millions of KWHs)
4,484 4,621 8,651 8,570
Total purchased power (in millions of KWHs)
208 152 396 243
Sources of generation (percent) –
       
Coal4 8 4 6
Gas96 92 96 94
Cost of fuel, generated (in cents per net KWH) –
       
Coal3.82 3.92 4.02 4.06
Gas1.88 2.29 1.92 2.37
Average cost of fuel, generated (in cents per net KWH)
1.97 2.43 2.00 2.48
Average cost of purchased power (in cents per net KWH)
3.27 3.78 2.97 3.76
Fuel
In the second quarter 2020, fuel expense was $83 million compared to $105 million for the corresponding period in 2019. This decrease was due to a 19.0% decrease in the average cost of fuel per KWH generated and a 2.6% decrease in the volume of KWHs generated.
For year-to-date 2020, fuel expense was $162 million compared to $198 million for the corresponding period in 2019. This decrease was due to a 19.5% decrease in the average cost of fuel per KWH generated, partially offset by a 1.8% increase in the volume of KWHs generated.
Purchased Power
In the secondfirst quarter 2020,2021, purchased power expense was $7$207 million compared to $6$181 million for the corresponding period in 2019. For year-to-date 2020, purchased power expense2020. The increase was $12 million comparedprimarily due to $9 million for the corresponding period in 2019. These increases were primarily the result of 36.3% and 63.2% increases in the volume of KWHs purchased in the second quarter and year-to-date 2020, respectively, largely offset by 13.5% and 20.9% decreasesa 30.8% increase in the average cost per KWH purchased primarily due to higher natural gas prices, partially offset by an 8.4% decrease in the second quarter and year-to-date 2020, respectively.volume of KWHs purchased.
Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.
Cost of Natural Gas
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14432.8
Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 86% of total cost of natural gas for the first quarter 2021.
In the first quarter 2021, cost of natural gas was $583 million compared to $439 million for the corresponding period in 2020. The increase reflects higher volumes sold due to colder weather and higher gas cost recovery in the first quarter 2021 compared to the corresponding period in 2020. The increase also reflects a 38% increase in natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
Cost of Other Sales
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2749.1
In the first quarter 2021, cost of other sales was $82 million compared to $55 million for the corresponding period in 2020. The increase primarily relates to a $14 million increase in distributed infrastructure and energy efficiency projects at PowerSecure and an increase of $8 million in unregulated power delivery construction and maintenance contracts at Georgia Power.
Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$765.9
In the first quarter 2021, other operations and maintenance expenses were $1.37 billion compared to $1.30 billion for the corresponding period in 2020. The increase reflects a $55 million increase in employee compensation and
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benefit expenses, primarily at Southern Company Gas, and a $15 million decrease in nuclear property insurance refunds at Alabama Power and Georgia Power.
Depreciation and Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$141.6
In the first quarter 2021, depreciation and amortization was $871 million compared to $857 million for the corresponding period in 2020. The increase primarily reflects a $37 million increase in depreciation associated with additional plant in service, partially offset by decreased amortization of regulatory assets related to CCR AROs of $22 million under the terms of Georgia Power's 2019 ARP. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and Note 2 to the financial statements under "Georgia Power – Rate Plans – 2019 ARP" in Item 8 of the Form 10-K for additional information regarding Georgia Power's recovery of costs associated with CCR AROs.
Taxes Other Than Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$154.5
In the first quarter 2021, taxes other than income taxes were $345 million compared to $330 million for the corresponding period in 2020. The increase primarily reflects increased property taxes and an increase in revenue tax expenses as a result of higher natural gas revenues at Southern Company Gas.
Estimated Loss on Plant Vogtle Units 3 and 4
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$48N/M
N/M - Not meaningful
In the first quarter 2021, an estimated probable loss of $48 million was recorded at Georgia Power to reflect its revised total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
(Gain) Loss on Dispositions, Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$512.8
In the first quarter 2021, (gain) loss on dispositions, net was $44 million compared to $39 million for the corresponding period in 2020. The first quarter 2021 amount includes $39 million in gains at Southern Power, primarily from contributions of wind turbine equipment to various equity method investments, and $4 million in gains from property sales at Alabama Power. In the first quarter 2020, Southern Power recorded a $39 million gain related to the sale of Plant Mankato. See Notes (E) and (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K for additional information.
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Allowance for Equity Funds Used During Construction
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1235.3
In the first quarter 2021, allowance for equity funds used during construction was $46 million compared to $34 million for the corresponding period in 2020. The increase was primarily due to an increase in AFUDC equity associated with the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(45)(43.7)
In the first quarter 2021, other income (expense), net was $58 million compared to $103 million for the corresponding period in 2020. The decrease was primarily due to $75 million in charitable contributions at Southern Company Gas in the first quarter 2021, partially offset by a $27 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4531.0
In the first quarter 2021, income taxes were $190 million compared to $145 million for the corresponding period in 2020. The increase was primarily due to higher pre-tax earnings, partially offset by $16 million in tax benefits resulting from new legislation that changed Southern Power's state apportionment methodology. See Note (G) to the Condensed Financial Statements herein and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters – Alabama State Tax Reform Legislation" in Item 7 of the Form 10-K for additional information.
Alabama Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$7928.2
Alabama Power's net income after dividends on preferred stock for the first quarter 2021 was $359 million compared to $280 million for the corresponding period in 2020. The increase was primarily due to an increase in retail revenues associated with an increase in Rate RSE effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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Retail Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14712.2
In the first quarter 2021, retail revenues were $1.35 billion compared to $1.21 billion for the corresponding period in 2020.
Details of the changes in retail revenues were as follows:
 First Quarter 2021
(in millions)(% change)
Retail – prior year$1,205 
Estimated change resulting from –
Rates and pricing50 4.1 %
Sales decline(4)(0.3)
Weather39 3.2 
Fuel and other cost recovery62 5.2 
Retail – current year$1,352 12.2 %
Revenues associated with changes in rates and pricing increased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to a Rate RSE increase effective January 1, 2021. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales decreased in the first quarter 2021 when compared to the corresponding period in 2020. Weather-adjusted residential KWH sales were relatively flat in the first quarter 2021 when compared to the corresponding period in 2020. Weather-adjusted commercial KWH sales decreased 2.1% in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to changes in consumer and business behavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 5.4% in the first quarter 2021 when compared to the corresponding period in 2020 primarily as a result of customer closures and maintenance outages, as well as continued consumer responses to the COVID-19 pandemic.
Fuel and other cost recovery revenues increased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to increases in generation and the average cost of fuel. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the natural disaster reserve. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Wholesale Revenues – Non-Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$3664.3
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.
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In the first quarter 2021, wholesale revenues from sales to non-affiliates were $92 million compared to $56 million for the corresponding period in 2020. The increase consisted of a $19 million increase in energy revenues primarily due to higher natural gas prices and a $17 million increase in capacity revenues primarily related to a power sales agreement that began in September 2020.
Wholesale Revenues – Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1368.4
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.
In the first quarter 2021, wholesale revenues from sales to affiliates were $32 million compared to $19 million for the corresponding period in 2020. The increase was primarily due to a 40.5% increase in the price of energy and an 18.7% increase in KWH sales due to increased coal generation as the result of higher natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
Other Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1216.9
In the first quarter 2021, other revenues were $83 million compared to $71 million for the corresponding period in 2020. The increase was primarily due to increases of $7 million in transmission and energy service revenues and $2 million in customer fees.
Fuel and Purchased Power Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
Fuel$76 35.3 
Purchased power – non-affiliates10 25.0 
Purchased power – affiliates12 66.7 
Total fuel and purchased power expenses$98 
In the first quarter 2021, total fuel and purchased power expenses were $371 million compared to $273 million for the corresponding period in 2020. The increase was primarily due to a $59 million increase related to the volume of KWHs generated and purchased and a $39 million increase in the average cost of fuel and purchased power.
Fuel and purchased power energy transactions do not have a significant impact on earnings, since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.
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Details of Alabama Power's generation and purchased power were as follows:
First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)(a)
1514
Total purchased power (in billions of KWHs)
11
Sources of generation (percent)(a) —
Coal4634
Nuclear2528
Gas1920
Hydro1018
Cost of fuel, generated (in cents per net KWH) —
Coal2.752.64
Nuclear0.720.76
Gas(a)
2.512.19
Average cost of fuel, generated (in cents per net KWH)(a)
2.141.88
Average cost of purchased power (in cents per net KWH)(b)
6.524.86
(a)First quarter 2021 excludes Central Alabama Generating Station KWHs and associated cost of fuel as its fuel is provided by the purchaser under a power sales agreement. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
(b)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
Fuel
In the first quarter 2021, fuel expense was $291 million compared to $215 million for the corresponding period in 2020. The increase was primarily due to a 44.6% increase in the volume of KWHs generated by coal, a 44.0% decrease in the volume of KWHs generated by hydro, and a 14.6% increase in the average cost of KWHs generated by natural gas, which excludes tolling agreements.
Purchased Power – Non-Affiliates
In the first quarter 2021, purchased power expense from non-affiliates was $50 million compared to $40 million for the corresponding period in 2020. The increase was primarily due to a 31.1% increase in the average cost per KWH purchased as a result of higher natural gas prices and a 12.9% increase in the volume of KWHs purchased due to a PPA which began in September 2020.
Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to
the cost of the Southern Company system's generation, demand for energy within the Southern Company system's
electric service territory, and the availability of the Southern Company system's generation.
Purchased Power – Affiliates
In the first quarter 2021, purchased power expense from affiliates was $30 million compared to $18 million for the corresponding period in 2020. The increase was primarily due to a 39.9% increase in the average cost per KWH purchased as a result of higher natural gas prices and a 17.9% increase in the volume of KWHs purchased due to colder weather in the first quarter 2021 when compared to the corresponding period in 2020.
Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.
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Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$113.1
In the first quarter 2021, other operations and maintenance expenses were $361 million compared to $350 million for the corresponding period in 2020. The increase was primarily due to an increase of $10 million related to reliability NDR credits applied in 2020 and a $6 million reduction in nuclear property insurance refunds. These increases were partially offset by a $3 million decrease in Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate NDR" and " – Rate CNP Compliance" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$115.5
In the first quarter 2021, depreciation and amortization was $211 million compared to $200 million for the corresponding period in 2020. The increase was primarily due to additional plant in service, including the purchase of the Central Alabama Generating Station in August 2020. See Note 15 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Other Income (Expense), Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$833.3
In the first quarter 2021, other income (expense), net was $32 million compared to $24 million for the corresponding period in 2020. The increase was primarily due to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2631.0
In the first quarter 2021, income taxes were $110 million compared to $84 million for the corresponding period in 2020. The increase was primarily due to higher pre-tax earnings.
Georgia Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$206.0
Georgia Power's net income for the first quarter 2021 was $351 million compared to $331 million for the corresponding period in 2020. The increase was primarily due to higher retail revenues associated with colder weather in the first quarter 2021 compared to the corresponding period in 2020, partially offset by a $36 million after-tax charge in the first quarter 2021 related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to
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the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Retail Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1126.7
In the first quarter 2021, retail revenues were $1.79 billion compared to $1.68 billion for the corresponding period in 2020.
Details of the changes in retail revenues were as follows:
 First Quarter 2021
(in millions)(% change)
Retail – prior year$1,675 
Estimated change resulting from –
Rates and pricing(18)(1.1)%
Sales decline(6)(0.4)
Weather42 2.5 
Fuel cost recovery94 5.7 
Retail – current year$1,787 6.7 %
Revenues associated with changes in rates and pricing decreased in the first quarter 2021 when compared to the corresponding period in 2020. The decrease was primarily due to a decrease in the NCCR tariff effective January 1, 2021. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein for additional information.
Revenues attributable to changes in sales decreased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to continued impacts of the COVID-19 pandemic, partially offset by customer growth. Weather-adjusted residential KWH sales increased 2.0% in the first quarter 2021 when compared to corresponding period in 2020 primarily due to customer growth. Weather-adjusted commercial KWH sales decreased 3.3% in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to lower customer usage resulting from changes in consumer and business behavior in response to the COVID-19 pandemic, partially offset by customer growth. Weather-adjusted industrial KWH sales increased 1.1% in the first quarter 2021 when compared to the corresponding period in 2020 primarily as a result of increases in the pipeline and lumber segments, partially offset by reductions in the textiles, transportation, and chemicals segments as a result of disruptions in supply chain and business operations related to the COVID-19 pandemic.
Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues increased in the first quarter 2021 when compared to the corresponding period in 2020 due to higher fuel and purchased power costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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Wholesale Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1765.4
Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.
In the first quarter 2021, wholesale revenues were $43 million compared to $26 million for the corresponding period in 2020. The increase was primarily due to higher natural gas prices.
Other Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1612.9
In the first quarter 2021, other revenues were $140 million compared to $124 million for the corresponding period in 2020. The increase was primarily due to an increase of $13 million in unregulated sales associated with power delivery construction and maintenance contracts and outdoor lighting.
Fuel and Purchased Power Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
Fuel$82 35.5 
Purchased power – non-affiliates15 11.6 
Purchased power – affiliates7 5.4 
Total fuel and purchased power expenses$104 
In the first quarter 2021, total fuel and purchased power expenses were $593 million compared to $489 million for the corresponding period in 2020. The increase was due to a $77 million increase related to the average cost of fuel and purchased power and a $27 million net increase related to the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K for additional information.
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AND RESULTS OF OPERATIONS (Continued)
Details of Georgia Power's generation and purchased power were as follows:
First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)
1413
Total purchased power (in billions of KWHs)
79
Sources of generation (percent) —
Gas4758
Nuclear2727
Coal228
Hydro and other47
Cost of fuel, generated (in cents per net KWH) —
Gas2.582.12
Nuclear0.780.80
Coal2.913.83
Average cost of fuel, generated (in cents per net KWH)
2.151.87
Average cost of purchased power (in cents per net KWH)(*)
4.223.17
(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.
Fuel
In the first quarter 2021, fuel expense was $313 million compared to $231 million for the corresponding period in 2020. The increase was primarily due to an increase of 232.9% in the volume of KWHs generated by coal and an increase of 21.7% in the average cost of natural gas per KWH generated.
Purchased Power – Non-Affiliates
In the first quarter 2021, purchased power expense from non-affiliates was $144 million compared to $129 million in the corresponding period in 2020. The increase was primarily due to a 24.1% increase in the average cost per KWH purchased primarily due to higher natural gas prices, partially offset by a 9.8% decrease in the volume of KWHs purchased as Georgia Power units generally dispatched at a lower cost than available market resources.
Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.
Other Operations and Maintenance Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(5) (6.9) $9 6.8
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$91.9
In the secondfirst quarter 2020,2021, other operations and maintenance expenses were $67$474 million compared to $72$465 million for the corresponding period in 2019. The decrease was primarily due to a decrease of $5 million in scheduled generation outage costs.
For year-to-date 2020, other operations and maintenance expenses were $142 million compared to $133 million for the corresponding period in 2019.2020. The increase was primarily due to increasesa $9 million decrease in nuclear property insurance refunds and an increase in expenses of $5$8 million related to unregulated power delivery construction and maintenance contracts, partially offset by a decrease of $9 million in schedulednon-outage generation outagemaintenance costs $3 million in vegetation management expenses,primarily associated with coal generation and $2 million in certain employee compensation expenses previously deferred in 2019.the timing of maintenance activities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Depreciation and Amortization
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(2) (4.2) $(7) (7.4)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(14)(4.0)
In the secondfirst quarter 2020,2021, depreciation and amortization was $46$338 million compared to $48$352 million for the corresponding period in 2019. For year-to-date 2020,2020. The decrease primarily reflects decreased amortization of regulatory assets related to CCR AROs of $22 million under the terms of the 2019 ARP, partially offset by a $10 million increase in depreciation associated with additional plant in service. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and amortizationNote 2 to the financial statements under "Georgia Power – Rate Plans – 2019 ARP" in Item 8 of the Form 10-K for additional information regarding recovery of costs associated with CCR AROs.
Estimated Loss on Plant Vogtle Units 3 and 4
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$48N/M
N/M - Not meaningful
In the first quarter 2021, an estimated probable loss of $48 million was $88recorded to reflect Georgia Power's revised total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
Other Income (Expense), Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2038.5
In the first quarter 2021, other income (expense), net was $72 million compared to $95$52 million for the corresponding period in 2019. These decreases2020. The increase was primarily due to an increase of $12 million in non-service cost-related retirement benefits income and an increase of $7 million in AFUDC equity associated with the construction of Plant Vogtle Units 3 and 4. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits and Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Mississippi Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1340.6
In the first quarter 2021, net income was $45 million compared to $32 million for the corresponding period in 2020. The increase was primarily due to an increase in base revenues primarily due to colder weather in the first quarter 2021 compared to the corresponding period in 2020, partially offset by decreased customer usage as a result of the COVID-19 pandemic, and a decrease in operations and maintenance expenses, partially offset by an increase in depreciation and amortization.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Retail Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$52.5
In the first quarter 2021, retail revenues were related$204 million compared to $199 million for the corresponding period in 2020.
Details of the changes in retail revenues were as follows:
 First Quarter 2021
 (in millions)(% change)
Retail – prior year$199 
Estimated change resulting from –
Rates and pricing(7)(3.5)%
Sales decline(5)(2.5)
Weather8 4.0 
Fuel and other cost recovery9 4.5 
Retail – current year$204 2.5 %
Revenues associated with changes in rates and pricing decreased in the first quarter 2021 when compared to the corresponding period in 2020 primarily due to decreases in amortizationbase rates that became effective in April 2020 in accordance with the Mississippi Power Rate Case Settlement Agreement. See Note 2 to the financial statements under "Mississippi Power – 2019 Base Rate Case" in Item 8 of $8 million and $14 millionthe Form 10-K for additional information.
Revenues attributable to changes in sales decreased in the secondfirst quarter 2021 when compared to the corresponding period in 2020 primarily due to continued impacts of the COVID-19 pandemic. Weather-adjusted residential KWH sales decreased 0.7% in the first quarter 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales decreased 4.3% in the first quarter 2021 primarily due to lower customer usage resulting from changes in consumer and year-to-datebusiness behavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 10.7% in the first quarter 2021 as a result of disruptions in supply chain and business operations driven by the COVID-19 pandemic and non-pandemic related customer outages.
Fuel and other cost recovery revenues increased in the first quarter 2021 when compared to the corresponding period in 2020 respectively, primarily as a result of higher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the ECO Plan regulatory assets being fully amortizedfuel portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory. Electric rates include provisions to adjust billings for fluctuations in 2019,fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of purchased power costs, and do not affect net income.
Wholesale Revenues – Non-Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1223.5
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See Note 2 to the financial statements under "Mississippi Power" in Item 8 of the Form 10-K for additional information.
In the first quarter 2021, wholesale revenues from sales to non-affiliates were $63 million compared to $51 million for the corresponding period in 2020. The increase was primarily due to increases in revenue from MRA customers as a result of colder weather and higher fuel costs in the first quarter 2021 compared to the corresponding period in 2020, partially offset by amortizationdecreased customer usage as a result of the COVID-19 pandemic.
Wholesale Revenues – Affiliates
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1257.1
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a regulatory assetsignificant impact on earnings since this energy is generally sold at marginal cost.
In the first quarter 2021, wholesale revenues from sales to affiliates were $33 million compared to $21 million for the corresponding period in 2020. The increase was primarily associated with an ARO. These decreasesincrease in the average cost of fuel.
Fuel and Purchased Power Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
Fuel$22 27.8
Purchased power— —
Total fuel and purchased power expenses$22 
In the first quarter 2021, total fuel and purchased power expenses were $106 million compared to $84 million for the corresponding period in 2020. The increase was primarily due to a higher average cost of fuel and an increase associated with the volume of KWHs generated.
Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.
Details of Mississippi Power's generation and purchased power were as follows:
First Quarter 2021
First
Quarter
2020
Total generation (in millions of KWHs)
4,3244,167
Total purchased power (in millions of KWHs)
121188
Sources of generation (percent) –
Coal93
Gas9197
Cost of fuel, generated (in cents per net KWH) –
Coal3.174.30
Gas2.411.95
Average cost of fuel, generated (in cents per net KWH)
2.492.02
Average cost of purchased power (in cents per net KWH)
4.082.64
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Fuel
In the first quarter 2021, fuel expense was $101 million compared to $79 million for the corresponding period in 2020. The increase was due to a 225.3% increase in the volume of KWHs generated by coal and a 23.6% increase in the average cost of natural gas per KWH generated, partially offset by increasesa 26.3% decrease in depreciationthe average cost of coal per KWH generated and a 3.4% decrease in the volume of KWHs generated by natural gas.
Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(8)(10.5)
In the first quarter 2021, other operations and maintenance expenses were $68 million compared to $76 million for the corresponding period in 2020. The decrease was primarily due to decreases of $6 million related to planned generation outage costs and $7$4 million associated with the Kemper County energy facility primarily related to an increase in salvage proceeds and a decrease in ongoing period costs.
Depreciation and Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$511.9
In the secondfirst quarter 2021, depreciation and year-to-date 2020, respectively,amortization was $47 million compared to $42 million for the corresponding period in 2020. The increase was primarily due to a $3 million increase in depreciation related to additional plant in service and an increase in depreciation rates in accordance with the Mississippi Power Rate Case Settlement Agreement and a $2 million increase due to amortization of a regulatory asset associated with an ARO in accordance with the Mississippi Power Rate Case Settlement Agreement. See Note (B) to the Condensed Financial Statements under "Mississippi Power – 2019 Base Rate Case" herein and Note 2 to the financial statements under "Mississippi Power – Environmental Compliance Overview Plan"2019 Base Rate Case" in Item 8 of the Form 10-K for additional information.
Income Taxes
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(3) (60.0) $(4) (33.3)
In the second quarter 2020, income taxes were $2 million compared to $5 million for the corresponding period in 2019. For year-to-date 2020, income taxes were $8 million compared to $12 million for the corresponding period in 2019. These decreases were primarily due to a decrease of $3 million in both the second quarter and year-to-date 2020 associated with the flowback of excess deferred income taxes as a result of the Mississippi Power Rate Case Settlement Agreement. See Note (G) to the Condensed Financial Statements herein for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Southern Power
Net Income Attributable to Southern Power
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(111) (63.8) $(92) (40.0)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2229.3
Net income attributable to Southern Power forin the secondfirst quarter 20202021 was $63$97 million compared to $174$75 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to the gain on the sale of Plant Nacogdoches in the second quarter 2019 of $88a $16 million after tax. In addition, the decrease wastax benefit due to reduced net income related to the dispositions of Plant Nacogdocheschanges in 2019 and Plant Mankato in the first quarter 2020. The decrease also reflects net gains in the second quarter 2019 totaling $22 millionstate apportionment methodology resulting from the Roserock solar facility litigation settlement and sales of wind equipment.
Net income attributable to Southern Power for year-to-date 2020 was $138 million compared to $230 million for the corresponding period in 2019. The decrease was primarily due to the gain on the sale of Plant Nacogdoches in the second quarter 2019 of $88 million after tax partially offsetlegislation enacted by the gain on saleState of Plant MankatoAlabama in the first quarter 2020 of $23 million after tax. In addition, the decrease was due to reduced net income related to the dispositions of Plant Nacogdoches and Plant Mankato. The decrease also reflects net gains in the second quarter 2019 totaling $22 million from the Roserock solar facility litigation settlement and sales of wind equipment.February 2021.
See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K for additional information.
Operating Revenues
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(71) (13.9) $(139) (14.6)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$6517.3
Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities, and a biomass generating facility (through the second quarter 2019 sale of Plant Nacogdoches), and PPA energy revenues from Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Natural Gas and Biomass Capacity and Energy Revenue
Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.
Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.
Solar and Wind Energy Revenue
Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

the grid. As a result, Southern Power's ability to recover fixed and variable operations and maintenance expenses is dependent upon the level of energy generated from these facilities, which can be impacted by weather conditions, equipment performance, transmission constraints, and other factors.
See FUTURE EARNINGS POTENTIAL – "Southern"Southern Power's Power Sales Agreements" hereinAgreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.
Operating Revenues Details
Details of Southern Power's operating revenues were as follows:
Second Quarter 2020 Second Quarter 2019 Year-to-Date 2020 Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
PPA capacity revenues$92
 $125
 $181
 $252
PPA capacity revenues$96 $90 
PPA energy revenues270
 291
 475
 518
PPA energy revenues245 205 
Total PPA revenues362
 416
 656
 770
Total PPA revenues341 295 
Non-PPA revenues73
 91
 151
 177
Non-PPA revenues95 77 
Other revenues4
 3
 7
 6
Other revenues4 3 
Total operating revenues$439
 $510
 $814
 $953
Total operating revenues$440 $375 
In the secondfirst quarter 2020,2021, total operating revenues were $439$440 million, reflecting a $71$65 million, or 14%17%, decreaseincrease from the corresponding period in 2019.2020. The decreaseincrease in operating revenues was primarily due to the following:
•PPA capacity revenues decreased $33increased $6 million, or 26%7%, primarily due to decreasesnew natural gas PPAs and increased capacity on existing contracts, partially offset by the disposition of $22 million related to the dispositions of Plant Nacogdoches in the second quarter 2019 and Plant Mankato in the first quarter 2020 and $10 million from the contractual expiration of an affiliatea natural gas PPA.PPA in November 2020.
•PPA energy revenues decreased $21increased $40 million, or 7%20%, primarily due to a $46$35 million decreaseincrease in sales from natural gas facilities resulting from a $25$42 million increase in the price of fuel and purchased power, partially offset by a $7 million decrease in the volume of KWHs sold due to reduced demand and a $21sold. In addition, the increase reflects $6 million decrease in the average cost of fuel and purchased power. This decrease was partially offset by a $13 million increase in sales primarily driven by the volume of KWHs generated by solar and wind facilities and a $12 million increase in sales from a fuel cell project acquirednew wind facilities placed in late 2019.service subsequent to the first quarter 2020.
•Non-PPA revenues decreasedincreased $18 million, or 20%23%, due to a $40$38 million decreaseincrease in the market price of energy, partially offset by a $23$20 million increasedecrease in the volume of KWHs sold through short-term sales.
For year-to-date 2020, total operating revenues were $814 million, reflecting a $139 million, or 15%, decrease from the corresponding period in 2019. The decrease in operating revenues was primarily due to the following:
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PPA capacity revenues decreased $71 million, or 28%, primarily due to decreases of $45 million related to the dispositions of Plant Nacogdoches in the second quarter 2019 and Plant Mankato in the first quarter 2020 and $24 million from the contractual expiration of an affiliate natural gas PPA.
PPA energy revenues decreased $43 million, or 8%, due to an $86 million decrease in sales from natural gas facilities resulting from a $49 million decrease in the price of fuel and purchased power and a $37 million decrease in the volume of KWHs sold due to reduced demand. This decrease was partially offset by increases of $23 million in sales primarily driven by the volume of KWHs generated by solar and wind facilities and $20 million in sales from a fuel cell project acquired in late 2019.
Non-PPA revenues decreased $26 million, or 15%, due to a $74 million decrease in the market price of energy, partially offset by a $48 million increase in the volume of KWHs sold through short-term sales.
    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses
Details of Southern Power's generation and purchased power were as follows:
Second Quarter 2020Second Quarter 2019 Year-to-Date 2020Year-to-Date 2019 First Quarter 2021First
Quarter
2020
(in billions of KWHs)(in billions of KWHs)
Generation11.311.7 22.021.9Generation9.410.7
Purchased power0.91.0 1.51.8Purchased power0.60.7
Total generation and purchased power12.212.7 23.523.7Total generation and purchased power1011.4
 
Total generation and purchased power, excluding solar, wind, and tolling agreements7.47.1 14.513.7Total generation and purchased power, excluding solar, wind, and tolling agreements6.17.2
Southern Power's PPAs for natural gas generation generally provide that the purchasers are responsible for either procuring the fuel (tolling agreements) or reimbursing Southern Power for substantially all of the cost of fuel relating to the energy delivered under such PPAs. Consequently, changes in such fuel costs are generally accompanied by a corresponding change in related fuel revenues and do not have a significant impact on net income. Southern Power is responsible for the cost of fuel for generating units that are not covered under PPAs. Power from these generating units is sold into the wholesale market or into the Southern Company power pool for capacity owned directly by Southern Power.
Purchased power expenses will vary depending on demand, availability, and the cost of generating resources throughout the Southern Company system and other contract resources. Load requirements are submitted to the Southern Company power pool on an hourly basis and are fulfilled with the lowest cost alternative, whether that is generation owned by Southern Power, an affiliate company, or external parties. Such purchased power costs are generally recovered through PPA revenues.
Details of Southern Power's fuel and purchased power expenses were as follows:
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019 First Quarter 2021 vs. First Quarter 2020
(change in millions) (% change) (change in millions) (% change) (change in millions)(% change)
Fuel$(37) (26.6) $(75) (26.4)Fuel$34 31.8
Purchased power(14) (43.8) (23) (41.8)Purchased power6 42.9
Total fuel and purchased power expenses$(51) $(98) Total fuel and purchased power expenses$40 
In the secondfirst quarter 2020,2021, total fuel and purchased power expenses decreased $51increased $40 million, or 30%33%, compared to the corresponding period in 2019.2020. Fuel expense decreased $37increased $34 million due to a $46$50 million decreaseincrease in the average cost of fuel per KWH generated, partially offset by a $9$16 million increasedecrease associated with the volume of KWHs generated. Purchased power expense decreased $14increased $6 million due to a $9an $8 million decreaseincrease associated with the average cost of purchased power, andpartially offset by a $5$2 million decrease associated with the volume of KWHs purchased.
For year-to-date 2020, total fuel
Other Operations and purchased powerMaintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2227.8
In the first quarter 2021, other operations and maintenance expenses decreased $98were $101 million or 29%, compared to $79 million for the corresponding period in 2019. Fuel expense decreased $75 million2020. The increase was primarily due to a $98 million decrease in the average cost of fuel per KWH generated, partially offset by a $23an $8 million increase in scheduled outage and maintenance expenses, $6 million in expenses related to the allocation of uncollected settlements by the Energy Reliability Council of Texas market as a result of Winter Storm Uri, and $2 million in expenses associated with new wind facilities placed in service subsequent to the volume of KWHs generated. Purchased power expense decreased $23 million due to a $16 million decrease associated with the average cost of purchased power and a $7 million decrease associated with the volume of KWHs purchased.first quarter 2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

(Gain) Loss on Dispositions, Net
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$——
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$23 N/M $(16) N/M
N/M - Not meaningful
In the secondfirst quarter 2021, gains on dispositions totaled $39 million primarily from contributions of wind turbine equipment to various equity method investments. A $39 million gain was also recorded in the first quarter 2020 loss on dispositions, net was immaterial compared to a gain on dispositions, net of $23 million for the corresponding period in 2019. For year-to-date 2020, gain on dispositions, net was $39 million compared to $23 million for the corresponding period in 2019. The changes were duerelated to the sale of Plant Mankato in the first quarter 2020, which resulted in a $39 million gain,Mankato. See Notes (E) and the sale of Plant Nacogdoches in the second quarter 2019, which resulted in a $23 million gain. See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K under "Southern Power – Sales of Natural Gas and Biomass Plants" for additional information.
Other Income (Expense), Net
Taxes (Benefit)
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(39) (97.5) $(37) (90.2)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(17)(242.9)
In the secondfirst quarter 2020, other2021, income (expense), nettax benefit was $1$10 million compared to $40income tax expense of $7 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net2020. The change was $4 million compared to $41 million for the corresponding period in 2019. The decreases were primarily due to a $36 million gain arisingchanges in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in February 2021, as well as the tax impact from the Roserock solar facility litigation settlementsale of Plant Mankato in the second quarter 2019.January 2020. See Note 3(G) to the Condensed Financial Statements herein, MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters – Alabama State Tax Reform Legislation" in Item 7 of the Form 10-K, and Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
Income Taxes (Benefit)
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$57 111.8 $73 121.7
In the second quarter 2020, income tax expense was $6 million compared to a $51 million benefit for the corresponding period in 2019. For year-to-date 2020, income tax expense was $13 million compared to a $60 million benefit for the corresponding period in 2019. The changes were primarily due to a $75 million income tax benefit in 2019 resulting from ITCs recognized upon the sale of Plant Nacogdoches, partially offset by a decrease in income tax expense as a result of lower pre-tax earnings. See Notes (G) and (K) to the Condensed Financial Statements herein for additional information.
Net Income (Loss) Attributable to Noncontrolling Interests
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(24) N/M $(26) N/M
In the second quarter 2020, net income attributable to noncontrolling interests was $5 million compared to $29 million for the corresponding period in 2019. For year-to-date 2020, net loss attributable to noncontrolling interests was $26 million compared to an immaterial amount for the corresponding period in 2019. The changes were primarily due to an allocation of approximately $26 million of income to the noncontrolling interest partner related to the Roserock solar facility litigation settlement in the second quarter 2019. See Note 3 to the financial statements in Item 8 of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Southern Company Gas
Operating Metrics
Southern Company Gas continues to focus on several operating metrics, including Heating Degree Days, customer count, and volumes of natural gas sold.
Southern Company Gas measures weather and the effect on its business using Heating Degree Days. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit its exposure to weather changes within typical ranges in each of its utility's respective service territory, including Nicor Gas following the approval of a revenue decoupling mechanism for residential customers in its base rate case that concluded in 2019.territory. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather.
The number of customers served by gas distribution operations and gas marketing services can be impacted by natural gas prices, economic conditions, and competition from alternative fuels. Gas distribution operations and gas marketing services' customers are primarily located in Georgia Illinois, and Ohio.Illinois.
Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services illustrate the effects of weather and customer demand for natural gas. Wholesale gas services' physical sales volumes represent the daily average natural gas volumes sold to its customers.
Seasonality of Results
During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. Occasionally in the summer, wholesale gas services' operating revenues are impacted due to peak usage by power generators in response to summer energy demands. Southern Company Gas' base operating expenses, excluding cost of natural gas, bad debt expense, and certain incentive compensation costs, are incurred relatively evenly throughout the year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Seasonality also affects the comparison of certain balance sheet items across quarters, including receivables, unbilled revenues, natural gas for sale, and notes payable. However, these items are comparable when reviewing Southern Company Gas' annual results. Thus, Southern Company Gas' operating results for the interim periods presented are not necessarily indicative of annual results and can vary significantly from quarter to quarter.
Net Income
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(35) (33.0) $(30) (8.0)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$12344.7
In the secondfirst quarter 2020,2021, net income was $71$398 million compared to $106$275 million for the corresponding period in 2019. This decrease2020. The increase was primarily due to a $46$103 million decreaseincrease at wholesale gas services primarily due to reduced natural gas price volatility compared to the prior yearhigher commercial activities as a result of Winter Storm Uri and a $7 million gain from the sale of Triton in 2019, partially offset by a $16$19 million increase at gas distribution operations primarily due to base rate increases for Nicor Gas and Atlanta Gas Light and continued investment in infrastructure replacement programs, partially offset by reduced flowback of excess deferred income taxes at Atlanta Gas Light in 2020.
For year-to-date 2020, net income was $346 million compared to $376 million for the corresponding period in 2019. This decrease in net income was primarily due to a $70 million decrease at wholesale gas services primarily due to reduced natural gas price volatility compared to the prior year and a $7 million gain from the sale of Triton in 2019, partially offset by a $47 million increase at gas distribution operations primarily due to base rate increases for Nicor Gas and Atlanta Gas Light and continued investment in infrastructure replacement programs, partially offset by reduced flowback of excess deferred income taxes at Atlanta Gas Light in 2020.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

replacement. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
Natural Gas Revenues, including Alternative Revenue Programs
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(53) (7.7) $(278) (12.9)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$44535.6
In the secondfirst quarter 2020,2021, natural gas revenues, including alternative revenue programs, were $636 million compared to $689 million for the corresponding period in 2019. For year-to-date 2020, natural gas revenues, including alternative revenue programs, were $1.9$1.7 billion compared to $2.2$1.2 billion for the corresponding period in 2019.2020.
Details of the changes in natural gas revenues, including alternative revenue programs, were as follows:
Second Quarter 2020 Year-to-Date 2020First Quarter 2021
(in millions) (% change) (in millions) (% change)(in millions)(% change)
Natural gas revenues – prior year$689



$2,163



Natural gas revenues – prior year$1,249 
Estimated change resulting from –       Estimated change resulting from –
Infrastructure replacement programs and base rate changes43

6.2 %
119

5.5 %Infrastructure replacement programs and base rate changes38 3.0 %
Gas costs and other cost recovery(38)
(5.5)
(287)
(13.3)Gas costs and other cost recovery152 12.2 
Weather3

0.4

(8)
(0.4)
Wholesale gas services(67)
(9.7)
(102)
(4.7)Wholesale gas services247 19.8 
Other6

0.9

—

—
Other8 0.6 
Natural gas revenues – current year$636
 (7.7)% $1,885
 (12.9)%Natural gas revenues – current year$1,694 35.6 %
Revenues from infrastructure replacement programs and base rate changes increased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 20192020 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investments recovered throughinvestment in infrastructure replacement programs.replacement. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.
Revenues associated with gas costs and other cost recovery decreasedincreased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 20192020 primarily due to lower naturalhigher volumes sold and higher gas prices and decreased volumes of natural gas sold. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations.recovery. See "Cost"Cost of Natural Gas"Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.
Revenues from wholesale gas services decreasedincreased in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 2019 primarily2020 due to decreasedhigher commercial activityactivities as a result of warmer weather and a decrease inWinter Storm Uri, partially offset by derivative gains.losses. See "Segment"Segment Information – Wholesale Gas Services"Services" herein for additional information. Also see Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding the sale of Sequent, which is expected to be completed during the third quarter 2021.
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AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas' natural gas distribution utilities have various regulatory mechanisms that limit their exposure to weather changes. Southern Company Gas hedged the majority of itsalso uses hedges for any remaining exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services. During Heating Season, natural gas usage and operating revenues are generally higher. Weatherservices; therefore, weather typically does not have a significant net income impact other than during the Heating Season.impact. The following table presents Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.
First Quarter2021 vs. normal2021 vs. 2020
Normal(*)
20212020colder (warmer)colder (warmer)
(in thousands)
Illinois3,024 2,947 2,759 (2.5)%6.8 %
Georgia1,326 1,254 1,091 (5.4)%14.9 %
(*)Table of ContentsNormal represents the 10-year average from January 1, 2011 through March 31, 2020 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

 Second Quarter 2020
vs.
normal		2020
vs.
2019		 Year-to-Date 2020 vs. normal
2020
vs.
2019
 
Normal(a)
20202019 coldercolder 
Normal(a)
20202019  (warmer)(warmer)
 (in thousands)    (in thousands)   
Illinois(b)
631
736
659
 16.6%11.7% 3,684
3,495
3,956
 (5.1)%(11.7)%
Georgia114
188
86
 64.9%118.6% 1,529
1,279
1,298
 (16.4)%(1.5)%
(a)Normal represents the 10-year average from January 1, 2010 through June 30, 2019 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.
(b)Heating Degree Days in Illinois are expected to have a limited financial impact beginning in 2020. In October 2019, Nicor Gas received approval for a volume balancing adjustment, a revenue decoupling mechanism for residential customers that provides a monthly benchmark level of revenue per rate class for recovery.
The following table provides the number of customers served by Southern Company Gas at June 30, 2020March 31, 2021 and 2019:2020:
March 31,
202120202021 vs. 2020
(in thousands, except market share %)(% change)
Gas distribution operations4,335 4,298 0.9 %
Gas marketing services
Energy customers(*)
667 638 4.5 %
Market share of energy customers in Georgia28.9 %28.8 %0.3 %
 June 30,  
 2020 2019 2020 vs. 2019
 (in thousands, except market share %) (% change)
Gas distribution operations4,275
 4,231
 1.0%
Gas marketing services     
Energy customers(*)
671
 622
 7.9%
Market share of energy customers in Georgia29.0% 28.8% 

(*)Gas marketing services' customers are primarily located in Georgia and Illinois. March 31, 2021 also includes approximately 50,000 customers in Ohio contracted through an annual auction process to serve for 12 months beginning April 1, 2020.
(*)Gas marketing services' customers are primarily located in Georgia, Ohio, and Illinois. Also included as of June 30, 2020 were approximately 50,000 customers in Ohio contracted through an annual auction process to serve for 12 months beginning April 1, 2020.
Southern Company Gas anticipates overallcontinued customer growth trends in gas distribution operations to continue as it expects continued low natural gas prices. Southern Company Gas uses a variety of targeted marketing programs to attract new customers and to retain existing customers.
Cost of Natural Gas
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14432.8
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(47) (24.6) $(294) (33.5)
Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations. Cost of natural gas at gas distribution operations represented 86% of total cost of natural gas for both the secondfirst quarter and year-to-date 2020.2021. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS – "Southern Company Gas – Cost of Natural Gas" in Item 7 of the Form 10-K and "Natural"Natural Gas Revenues, including Alternative Revenue Programs"Programs" herein for additional information.
In the secondfirst quarter 2020, cost of natural gas was $144 million compared to $191 million for the corresponding period in 2019. This decrease reflects a 34.9% decrease in natural gas prices in the second quarter 2020 compared to the corresponding period in 2019.
For year-to-date 2020,2021, cost of natural gas was $583 million compared to $877$439 million for the corresponding period in 2019. This decrease2020. The increase reflects a 36.6% decreasehigher volumes sold due to colder weather and higher gas cost recovery in natural gas prices compared to 2019 and decreased volumes primarily as a result of warmer weather for year-to-date 2020the first quarter 2021 compared to the corresponding period in 2019.2020. The increase also reflects a 38% increase in natural gas prices in the first quarter 2021 compared to the corresponding period in 2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

The following table details the volumes of natural gas sold duringduring all periods presented.
Second Quarter2020 vs. 2019 Year-to-Date2020 vs. 2019First Quarter2021 vs. 2020
20202019 2020201920212020
Gas distribution operations (mmBtu in millions)
Gas distribution operations (mmBtu in millions)
   
Gas distribution operations (mmBtu in millions)
Firm100
99
1.0 % 357
396
(9.8)%Firm288 258 11.6 %
Interruptible21
22
(4.5) 45
46
(2.2)Interruptible26 24 8.3 
Total121
121
— % 402
442
(9.0)%Total314 282 11.3 %
Wholesale gas services (mmBtu in millions/day)
Wholesale gas services (mmBtu in millions/day)
   
Wholesale gas services (mmBtu in millions/day)
Daily physical sales6.4
5.7
12.3 % 6.6
6.3
4.8 %Daily physical sales7.1 6.9 2.9 %
Gas marketing services (mmBtu in millions)
Gas marketing services (mmBtu in millions)
 
  
Gas marketing services (mmBtu in millions)
Firm: 

  

Firm:
Georgia4
4
— % 18
19
(5.3)%Georgia19 14 35.7 %
Illinois1
2
(50.0) 6
8
(25.0)Illinois4 5 (20.0)
Other3
2
50.0
 7
10
(30.0)Other6 5 20.0 
Interruptible large commercial and industrial3
3
—
 7
7
—
Interruptible large commercial and industrial4 4 — 
Total11
11
— % 38
44
(13.6)%Total33 28 17.9 %
Other Operations and Maintenance Expenses
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$21 10.6 $46 10.6
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4115.9
In the secondfirst quarter 2020,2021, other operations and maintenance expenses were $220$299 million compared to $199$258 million for the corresponding period in 2019. For year-to-date 2020, other operations2020. The increase was primarily due to higher compensation expense at wholesale gas services.
Depreciation and maintenance expenses were $479Amortization
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$108.3
In the first quarter 2021, depreciation and amortization was $130 million compared to $433$120 million for the corresponding period in 2019. These increases were2020. The increase was primarily due to increases in compensation and benefit expenses and expenses passed through directly to customers primarily related to bad debt and pipeline compliance and maintenance activities. See Note (H) tocontinued infrastructure investments at the Condensed Financial Statements herein for additional information.natural gas distribution utilities.
Taxes Other Than Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$912.5
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$1 2.2 $(10) (7.8)
For year-to-date 2020,In the first quarter 2021, taxes other than income taxes were $118$81 million compared to $128$72 million for the corresponding period in 2019.2020. The decreaseincrease primarily relates to a decreasereflects an increase in revenue tax expenses as a result of lowerhigher natural gas revenues at Nicor Gas. These revenue tax expenses are passed through directly to customers and have no impact on net income.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Other Income (Expense), Net
Earnings from Equity Method Investments
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(72)(800.0)
In the first quarter 2021, other income (expense), net was $63 million of expense compared to $9 million of income for the corresponding period in 2020. The increase in other expense was primarily due to $75 million in charitable contributions in the first quarter 2021.
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$(1) (3.2) $(8) (10.0)
Income Taxes
For year-to-date 2020, earnings from equity method investments
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4253.2
In the first quarter 2021, income taxes were $72$121 million compared to $80$79 million for the corresponding period in 2019.2020. The decrease primarily relates to lower income at SNG, the sale of Atlantic Coast Pipeline in the first quarter 2020, and the sale of Triton in the second quarter 2019. See Note (E) to the Condensed Financial Statements herein for additional information.
Other Income (Expense), Net
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$6 100.0 $11 110.0
In the second quarter 2020, other income (expense), netincrease was $12 million compared to $6 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net was $21 million compared to $10 million for the corresponding period in 2019. These increases were primarily due to increases in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
Second Quarter 2020 vs. Second Quarter 2019 Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions) (% change) (change in millions) (% change)
$10 166.7 $12 14.5
In the second quarter 2020, income taxes were $16 million compared to $6 million for the corresponding period in 2019. For year-to-date 2020, income taxes were $95 million compared to $83 million for the corresponding period in 2019. These increases were primarily due to a decrease in the flowback of excess deferred income taxeshigher pre-tax earnings at Atlanta Gas Light as authorized by the Georgia PSCwholesale gas services and the reversal of a federal income tax valuation allowance in connection with the sale of Triton in 2019, partially offset by lower pre-tax earnings. See Note (G) to the Condensed Financial Statements herein for additional information.gas distribution operations.
Performance and Non-GAAP Measures
Adjusted operating margin is a non-GAAP measure that is calculated as operating revenues less cost of natural gas, cost of other sales, and revenue tax expense. Adjusted operating margin excludes other operations and maintenance expenses, depreciation and amortization, and taxes other than income taxes, which are included in the calculation of operating income as calculated in accordance with GAAP and reflected in the statements of income. The presentation of adjusted operating margin is believed to provide useful information regarding the contribution resulting from base rate changes, infrastructure replacement programs and capital projects, and customer growth at gas distribution operations since the cost of natural gas and revenue tax expense can vary significantly and are generally billed directly to customers. Southern Company Gas further believes that utilizing adjusted operating margin at gas pipeline investments, wholesale gas services, and gas marketing services allows it to focus on a direct measure of performance before overhead costs. The applicable reconciliation of operating income to adjusted operating margin is provided herein.
Adjusted operating margin should not be considered an alternative to, or a more meaningful indicator of, Southern Company Gas' operating performance than operating income as determined in accordance with GAAP. In addition, Southern Company Gas' adjusted operating margin may not be comparable to similarly titled measures of other companies.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Detailed variance explanations of Southern Company Gas' financial performance are provided herein.
Reconciliations of operating income to adjusted operating margin are as follows:
First Quarter 2021First Quarter 2020
(in millions)
Operating Income$601 $360 
Other operating expenses(a)
510 450 
Revenue taxes(b)
(53)(45)
Adjusted Operating Margin$1,058 $765 
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
112
 Second Quarter 2020Second Quarter 2019 Year-to-Date 2020Year-to-Date 2019
 (in millions)
Operating Income$102
$134
 $462
$487
Other operating expenses(a)
390
364
 840
799
Revenue taxes(b)
(22)(22) (67)(76)
Adjusted Operating Margin$470
$476
 $1,235
$1,210
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Segment Information
Adjusted operating margin, operating expenses, and net income for each segment are provided in the table below. See Note (L) to the Condensed Financial Statements under "Southern"Southern Company Gas"Gas" herein for additional information.
 First Quarter 2021First Quarter 2020
 Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
(in millions)(in millions)
Gas distribution operations$644 $357 $183 $595 $340 $164 
Gas pipeline investments8 3 29 8 3 30 
Wholesale gas services297 55 126 50 17 23 
Gas marketing services104 29 56 107 30 57 
All other7 15 4 6 16 1 
Intercompany eliminations(2)(2)— (1)(1)— 
Consolidated$1,058 $457 $398 $765 $405 $275 
(*)Adjusted operating margin and operating expenses are adjusted for Nicor Gas' revenue tax expenses, which are passed through directly to customers.
 Second Quarter 2020 Second Quarter 2019
 
 Adjusted Operating Margin(*)
 
Operating Expenses(*)
 Net Income (Loss) 
Adjusted Operating Margin(*)
 
Operating Expenses(*)
 
Net Income (Loss)(b)
 (in millions) (in millions)
Gas distribution operations$441
 $314
 $74
 $394
 $287
 $58
Gas pipeline investments8
 3
 21
 8
 3
 25
Wholesale gas services(19) 11
 (23) 41
 10
 23
Gas marketing services35
 28
 5
 27
 31
 (3)
All other7
 14
 (6) 7
 12
 3
Intercompany eliminations(2) (2) —
 (1) (1) —
Consolidated$470
 $368
 $71
 $476
 $342
 $106
(*)Adjusted operating margin and operating expenses are adjusted for Nicor Gas' revenue tax expenses, which are passed through directly to customers.
 Year-to-Date 2020 Year-to-Date 2019
 
 Adjusted Operating Margin(*)
 
Operating Expenses(*)
 Net Income (Loss) 
Adjusted Operating Margin(*)
 
Operating Expenses(*)
 Net Income (Loss)
 (in millions) (in millions)
Gas distribution operations$1,036
 $654
 $238
 $918
 $601
 $191
Gas pipeline investments16
 6
 51
 16
 6
 57
Wholesale gas services31
 28
 —
 125
 29
 70
Gas marketing services142
 58
 62
 142
 62
 58
All other13
 30
 (5) 13
 29
 —
Intercompany eliminations(3) (3) —
 (4) (4) —
Consolidated$1,235
 $773
 $346
 $1,210
 $723
 $376
(*)Adjusted operating margin and operating expenses are adjusted for Nicor Gas' revenue tax expenses, which are passed through directly to customers.
Gas Distribution Operations
Gas distribution operations is the largest component of Southern Company Gas' business and is subject to regulation and oversight by regulatory agencies in each of the states it serves. These agencies approve natural gas rates designed to provide Southern Company Gas with the opportunity to generate revenues to recover the cost of natural gas delivered to its customers and its fixed and variable costs, including depreciation, interest expense, operations and maintenance, taxes, and overhead costs, and to earn a reasonable return on its investments.
With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on consumption, the earnings of the natural gas distribution utilities can be affected by customer consumption patterns that are a function of weather conditions, price levels for natural gas, and general economic conditions that may impact customers' ability to pay for natural gas consumed. Southern Company Gas has various regulatory and other mechanisms, such as weather and revenue normalization mechanisms and weather derivative
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

instruments, that limit its exposure to changes in customer consumption, including weather changes within typical ranges in its natural gas distribution utilities' service territories.
In the secondfirst quarter 2020,2021, net income increased $16$19 million, or 27.6%11.6%, compared to the corresponding period in 2019.2020. The $47$49 million increase in adjusted operating margin primarily reflects base rate increases for Nicor Gas and Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investments recovered throughinvestment in infrastructure replacement programs.replacement. The $27$17 million increase in operating expenses includes increased medical and retirement benefit expenses, higher expenses passed through directly to customers, primarily related to bad debt and pipeline compliance and maintenance activities, and higher depreciation primarily due to additional assets placed in service.service and higher compensation expenses. The $6$5 million increase in other incomeinterest expense net of amounts capitalized is primarily due to an increase in non-service cost-related retirement benefits income. Income tax expense increased $11 million primarily dueadditional debt issued to higher pre-tax earnings and a decrease in the flowback of excess deferred income taxes at Atlanta Gas Light as authorized by the Georgia PSC.
For year-to-date 2020, net income increased $47 million or 24.6%, compared to the corresponding period in 2019.finance continued investments. The $118 million increase in adjusted operating margin primarily reflects base rate increases for Nicor Gas and Atlanta Gas Light and continued investments recovered through infrastructure replacement programs, partially offset by warmer weather, net of weather normalization mechanisms. The $53 million increase in operating expenses includes increased medical and retirement benefit expenses, higher expenses passed through directly to customers, primarily related to bad debt and pipeline compliance and maintenance activities, and additional depreciation primarily due to additional assets placed in service. The $12 million increase in other income is primarily due to an increase in non-service cost-related retirement benefits income. The $31$6 million increase in income tax expense is primarily due to higher pre-tax earnings and a decrease in the flowback of excess deferred income taxes at Atlanta Gas Light as authorized by the Georgia PSC.
earnings. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (H) to the Condensed Financial Statements herein for additional information.
Gas Pipeline Investments
Gas pipeline investments consists primarily of joint ventures in natural gas pipeline investments including SNG, PennEast Pipeline, Dalton Pipeline, and Atlantic Coast Pipeline (until its sale on March 24, 2020). See NotesNote (E) and (K) to the Condensed Financial Statements under "Southern Company Gas" herein and Note 715 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
In the second quarter and year-to-date 2020, net income decreased $4 million, or 16.0%, and $6 million, or 10.5%, respectively, compared
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Wholesale Gas Services
Wholesale gas services is involved in asset management and optimization, storage, transportation, producer and peaking services, natural gas supply, natural gas services, and wholesale gas marketing. Southern Company Gas has positioned the business to generate positive economic earnings on an annual basis even under low volatility market conditions that can result from a number of factors. When market price volatility increases, wholesale gas services is well positioned to capture significant value and generate stronger results. Operating expenses primarily reflect employee compensation and benefits.
In the secondfirst quarter 2020,2021, net income decreased $46increased $103 million, or 200.0%447.8%, compared to the corresponding period in 2019. This decrease2020. The increase primarily relates to a $60$247 million decreaseincrease in adjusted operating margin, partially offset by a $15$38 million decreaseincrease in operating expenses primarily related to an increase in variable compensation. The increase was also partially offset by a $75 million increase in other income (expenses) related to higher charitable contributions and a $31 million increase in income tax expense due to lowerhigher pre-tax earnings.
For year-to-date 2020, net income decreased $70 million, or 100.0%, compared to the corresponding period in 2019. This decrease primarily relates to a $94 million decrease in adjusted operating margin and a $1 million decrease in operating expenses, partially offset by a $22 million decrease in income tax expense due to lower pre-tax earnings.
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AND RESULTS OF OPERATIONS (Continued)

Details of the changes in adjusted operating margin are provided in the table below.
Second Quarter 2020Second Quarter 2019 Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
Commercial activity recognized$(33)$(1) $(42)$37
Commercial activity recognized$315 $(20)
Gain (loss) on storage derivatives(5)2
 (11)5
Gain (loss) on storage derivatives(2)(6)
Gain on transportation and forward commodity derivatives19
48
 85
77
Gain (loss) on transportation and forward commodity derivativesGain (loss) on transportation and forward commodity derivatives(15)77 
LOCOM adjustments, net of current period recoveries—
(6) —
(8)LOCOM adjustments, net of current period recoveries(1)(1)
Purchase accounting adjustments to fair value inventory and contracts—
(2) (1)14
Adjusted operating margin$(19)$41
 $31
$125
Adjusted operating margin$297 $50 
Change in Commercial Activity
The commercial activity at wholesale gas services includes recognition of storage and transportation values that were generatedgenerated in prior periods, which reflect the impact of prior period hedge gains and losses as associated physical transactions occur. The decreaseincrease in commercial activity in the secondfirst quarter and year-to-date 20202021 compared to the corresponding periodsperiod in 20192020 was primarily due to warmer-than-normalnatural gas price volatility that was generated by cold weather, conditions.particularly in the Midwest and Texas, resulting in wider transportation spreads.
Change in Storage and Transportation Derivatives
Volatility in the natural gas market arises from a number of factors, such as weather fluctuations or changes in supply or demand for natural gas in different regions of the U.S. The volatility of natural gas commodity prices has a significant impact on Southern Company Gas' customer rates, long-term competitive position against other energy sources, and the ability of wholesale gas services to capture value from locational and seasonal spreads. Forward storage or time spreads applicable to the locations of wholesale gas services' specific storage positions in 20202021 resulted in storage derivative losses. Transportation and forward commodity derivative gainslosses in 2020the first quarter 2021 are primarily thea result of narrowingwidening transportation spreads due to supply constraints and increases in natural gas supply, which impacted forward prices at natural gas receipt and delivery points, primarily in the Northeast and Midwest regions.spreads.
Withdrawal Schedule and Physical Transportation Transactions
The expected natural gas withdrawals from storage and expected offset to prior hedge losses/gains associated with the transportation portfolio of wholesale gas services are presented in the following table, along with the net operating revenues expected at the time of withdrawal from storage and the physical flow of natural gas between contracted transportation receipt and delivery points. Wholesale gas services' expected net operating revenues exclude storage and transportation demand charges, as well as other variable fuel, withdrawal, receipt, and delivery charges, and exclude estimated profit sharing under asset management agreements. Further, the amounts that are realizable in future periods are based on the inventory withdrawal schedule, planned physical flow of natural gas between the transportation receipt and delivery points, and forward natural gas prices at June 30, 2020.March 31, 2021. A portion
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of wholesale gas services' storage inventory and transportation capacity is economically hedged with futures contracts, which results in the realization of substantially fixed net operating revenues.
 Storage withdrawal schedule
Total storage(a)
Expected net operating
gains (losses)(b)
Physical transportation transactions – expected net operating gains (losses)(c)
(in mmBtu in millions)(in millions)(in millions)
202111 $6 $— 
2022 and thereafter6 5 15 
Total at March 31, 202117 $11 $15 
(a)TableAt March 31, 2021, the WACOG of Contentswholesale gas services' expected natural gas withdrawals from storage was $1.85 per mmBtu.
Index(b)Represents expected operating gains from planned storage withdrawals associated with existing inventory positions and could change as wholesale gas services adjusts its daily injection and withdrawal plans in response to Financial Statementschanges in future market conditions and forward NYMEX price fluctuations.

(c)Represents the expected net gains during the periods in which the derivatives will be settled and the physical transportation transactions will occur that offset the derivative gains and losses previously recognized.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

 Storage withdrawal schedule  
 
Total storage(a)
 
Expected net operating gains(b)
 
Physical transportation transactions – expected net operating losses(c)
 (in mmBtu in millions) (in millions) (in millions)
202015
 $6
 $(12)
2021 and thereafter33
 34
 (73)
Total at June 30, 202048
 $40
 $(85)
(a)At June 30, 2020, the WACOG of wholesale gas services' expected natural gas withdrawals from storage was $1.68 per mmBtu.
(b)Represents expected operating gains from planned storage withdrawals associated with existing inventory positions and could change as wholesale gas services adjusts its daily injection and withdrawal plans in response to changes in future market conditions and forward NYMEX price fluctuations.
(c)Represents the transportation derivative gains and (losses) that will be settled during the period and the physical transportation transactions that offset the derivative gains and losses previously recognized.
The unrealized storage and transportation derivative gains do not change the underlying economic value of wholesale gas services' storage and transportation positions and will be reversed when the related transactions occur and are recognized. For more information on wholesale gas services' energy marketing and risk management activities, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" in Item 7 of the Form 10-K.
Gas Marketing Services
Gas marketing services provides energy-related products and services to natural gas markets and participants in customer choice programs that were approved in various states to increase competition. These programs allow customers to choose their natural gas supplier while the local distribution utility continues to provide distribution and transportation services. Gas marketing services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.
In the second quarter 2020, net income increased $8 million compared to the corresponding period in 2019. This increase primarily relates to an $8 million increase in adjusted operating margin, which primarily reflects recovery of prior period hedge losses, and a $3 million decrease in operating expenses, partially offset by a $3 million increase in income tax expense.
For year-to-date 2020, net income increased $4 million compared to the corresponding period in 2019. This increase primarily relates to a $4 million decrease in operating expenses.
All Other
All other includes natural gas storage businesses, including Jefferson Island through its sale on December 1, 2020, fuels operations through the sale of Southern Company Gas' interest in Pivotal LNG on March 24, 2020, the investment in Triton through its sale on May 29, 2019, AGL Services Company, and Southern Company Gas Capital, as well as various corporate operating expenses that are not allocated to the reportable segments and interest income (expense) associated with affiliate financing arrangements. See Note (K)15 to the Condensed Financial Statementsfinancial statements under "Southern Company Gas" hereinin Item 8 of the Form 10-K for additional information on the sale of its interest in Pivotal LNG.
In the second quarter 2020, net income decreased $9 million compared to the corresponding period in 2019. This decrease primarily reflects a $2 million increase in operating expensesLNG and a $12 million increase in income taxes, partially offset by a $7 million increase in other income (expenses). The increase in other income (expenses) was primarily due to a pre-tax loss on the sale of Triton in 2019. The increase in income taxes reflects the reversal of a federal income tax valuation allowance in connection with the sale of Triton in 2019.
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For year-to-date 2020, net income decreased $5 million compared to the corresponding period in 2019. This decrease includes a $2 million increase in interest expense, net of amounts capitalized, and a $6 million increase in income taxes related to the reversal of a federal income tax valuation allowance in connection with the sale of Triton in 2019, partially offset by a $4 million increase in other income (expenses) primarily due to a pre-tax loss on the sale of Triton in 2019.Jefferson Island.
Segment Reconciliations
Reconciliations of operating income to adjusted operating margin for the secondfirst quarter 2021 and year-to-date 2020 and 2019 are reflected in the following tables. See Note (L) to the Condensed Financial Statements herein for additional information.
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Second Quarter 2020

Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated

(in millions)
Operating Income (Loss)$127
$5
$(30)$7
$(7)$—
$102
Other operating expenses(a)
336
3
11
28
14
(2)390
Revenue tax expense(b)
(22)—
—
—
—
—
(22)
Adjusted Operating Margin$441
$8
$(19)$35
$7
$(2)$470
 Second Quarter 2019
 Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
 (in millions)
Operating Income (Loss)$107
$5
$31
$(4)$(5)$—
$134
Other operating expenses(a)
309
3
10
31
12
(1)364
Revenue tax expense(b)
(22)—
—
—
—
—
(22)
Adjusted Operating Margin$394
$8
$41
$27
$7
$(1)$476
 Year-to-Date 2020
 Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
 (in millions)
Operating Income (Loss)$382
$10
$3
$84
$(17)$—
$462
Other operating expenses(a)
721
6
28
58
30
(3)840
Revenue tax expense(b)
(67)—
—
—
—
—
(67)
Adjusted Operating Margin$1,036
$16
$31
$142
$13
$(3)$1,235
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First Quarter 2021
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)
Operating Income (Loss)$287 $5 $242 $75 $(8)$— $601 
Other operating expenses(a)
410 3 55 29 15 (2)510 
Revenue tax expense(b)
(53)— — — — — (53)
Adjusted Operating Margin$644 $8 $297 $104 $7 $(2)$1,058 
First Quarter 2020
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)
Operating Income (Loss)$255 $5 $33 $77 $(10)$— $360 
Other operating expenses(a)
385 3 17 30 16 (1)450 
Revenue tax expense(b)
(45)— — — — — (45)
Adjusted Operating Margin$595 $8 $50 $107 $6 $(1)$765 
 Year-to-Date 2019
 Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
 (in millions)
Operating Income (Loss)$317
$10
$96
$80
$(16)$—
$487
Other operating expenses(a)
677
6
29
62
29
(4)799
Revenue tax expense(b)
(76)—
—
—
—
—
(76)
Adjusted Operating Margin$918
$16
$125
$142
$13
$(4)$1,210
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
FUTURE EARNINGS POTENTIAL
Each Registrant's results of operations are not necessarily indicative of its future earnings potential. Recent disposition activities described under "Acquisitions and Dispositions" herein, in Note (K) to the Condensed Financial Statements herein, and in Note 15 to the financial statements in Item 8 of the Form 10-K will impact future earnings for the applicable Registrants. The level of the Registrants' future earnings depends on numerous factors that affect the opportunities, challenges, and risks of the Registrants' primary businesses of selling electricity and/or distributing natural gas, as described further herein.
For the traditional electric operating companies, these factors include the ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs during a time of increasing costs, continued customer growth, and the trend of reduced electricity usage per customer, especially in residential and commercial markets. Other major factors includeFor Georgia Power, completing construction of Plant Vogtle Units 3 and 4 and related cost recovery proceedings for Georgia Power and the ability to prevail against legal challenges associated with the Kemper County energy facility for Mississippi Power.is another major factor.
Earnings in the electricity business will also depend upon maintaining and growing sales, considering, among other things, the adoption and/or penetration rates of increasingly energy-efficient technologies and increasing volumes of electronic commerce transactions, which could contribute to a net reduction in customer usage.
Global and U.S. economic conditions have been significantly affected by a series of demand and supply shocks that have caused a global and national economic recession.recession in 2020. Most prominently, the COVID-19 pandemic has negatively impacted global supply chains and globalbusiness operations as suppliers continue to experience difficulties keeping up with strong demand for factory goods, which is being driven by low business inventories. The combination of rising inoculation rates in the U.S. population and services and public policy responses of social distancing and closing non-essential businesses have further restrictedthe recent federal COVID-19 relief package is expected to help boost economic activity.recovery in 2021. The drivers, speed, and depth of thisthe 2020 economic contraction arewere unprecedented and have reduced energy demand across the Southern Company system's service territory, primarily in the commercial and industrial classes. The negative impacts, which started in late-March 2020, of the COVID-19 pandemic and related recession on the Southern Company system's retail electric sales began to improve in the middle of May 2020; however, retail electric sales throughrevenues in the end of the secondfirst quarter 20202021 continued to be approximately 3% to 4% lower than levels projected prior tonegatively impacted by the COVID-19 pandemic. Recovery is expected to continue forinto the remaindersecond half of 2020 and into 2021, but responses to the COVID-19 pandemic by both customers and governmentgovernments could significantly affect the pace of recovery. The ultimate extent of the negative impact on revenues depends on the depth and duration of the economic contraction in
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the Southern Company system's service territory and cannot be determined at this time. See RESULTS OF OPERATIONS herein for information on COVID-19-related impacts on energy demand in the Southern Company system's service territory during the first six months of 2020.
Alabama Power continues to temporarily suspend disconnections for non-payment by customers and waive late fees as a result of the COVID-19 pandemic. In addition, the traditional electric operating companies have established installment payment plans to allow customers to repay past due accounts over a period of time. See "Regulatory Matters" herein for additional information on the status of disconnections and the deferral of costs resulting from
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the COVID-19 pandemic at Georgia Power, Mississippi Power, and the natural gas distribution utilities. The ultimate outcome of these matters cannot be determined at this time.quarter 2021.
The level of future earnings for Southern Power's competitive wholesale electric business depends on numerous factors including Southern Power's ability to execute its growth strategy through the development or acquisition of renewable facilities and other energy projects while containing costs, as well as regulatory matters, creditworthiness of customers, total electric generating capacity available in Southern Power's market areas, and Southern Power's ability to successfully remarket capacity as current contracts expire. In addition, renewable portfolio standards, availability of tax credits, transmission constraints, cost of generation from units within the Southern Company power pool, and operational limitations could influence Southern Power's future earnings.
The level of future earnings for Southern Company Gas' primary business of distributing natural gas and its complementary businesses in the gas pipeline investments, wholesale gas services, and gas marketing services sectors depends on numerous factors. These factors include the natural gas distribution utilities' ability to maintain constructive regulatory environments that allow for the timely recovery of prudently-incurred costs, the completion and subsequent operation of ongoing infrastructure and other construction projects, creditworthiness of customers, and Southern Company Gas' ability to optimize its transportation and storage positions and to re-contract storage rates at favorable prices. The volatility of natural gas prices has an impact on Southern Company Gas' customer rates, its long-term competitive position against other energy sources, and the ability of Southern Company Gas' gas marketing services and wholesale gas services businesses to capture value from locational and seasonal spreads. Additionally, changes in commodity prices subject a portion of Southern Company Gas' operations to earnings variability. Over the longer term, volatility is expected to be low to moderate and locational and/or transportation spreads are expected to decrease as new pipelines are built to reduce the existing supply constraints in the shale areas of the Northeast U.S. To the extent these pipelines are further delayed or not built, volatility could increase. See "Construction Programs"Note 3 to the financial statements in Item 8 of the Form 10-K and Note (C) to the Condensed Financial Statements herein under "Other Matters – Southern Company Gas" for additional information on permitting challenges experienced by the PennEast Pipeline. Additional economic factors may contribute to this environment, including a significant drop in oil and natural gas prices, which could lead to consolidation of natural gas producers or reduced levels of natural gas production. In addition, if the COVID-19 pandemic results in a continued economic downturnuncertainty for a sustained period, demand for natural gas may decrease, resulting in further downward pressure on natural gas prices and lower volatility in the natural gas markets on a longer-term basis.
Earnings for both the electricity and natural gas businesses are subject to a variety of other factors. These factors include weather, competition, developing new and maintaining existing energy contracts and associated load requirements with wholesale customers, energy conservation practiced by customers, the use of alternative energy sources by customers, government incentives to reduce overall energy usage, the prices of electricity and natural gas, and the price elasticity of demand. Demand for electricity and natural gas in the Registrants' service territories is primarily driven by the pace of economic growth or decline that may be affected by changes in regional and global economic conditions, which may impact future earnings.
As part of its ongoing effort to adapt to changing market conditions, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, partnerships, and acquisitions involving other utility or non-utility businesses or properties, disposition of certain assets or businesses, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, Southern Power and Southern Company Gas regularly consider and evaluate joint development arrangements as well as acquisitions and dispositions of businesses and assets as part of their business strategies. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.
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For additional information relating to these issues, see RISK FACTORS in Item 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7 of the Form 10-K and RISK FACTORS in Item 1A herein.10-K.
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Acquisitions and Dispositions
See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.
Alabama Power
On April 22, 2020 and June 9, 2020, the FERC and the Alabama PSC, respectively, approved the Autauga Combined Cycle Acquisition, which is expected to close by September 1, 2020. See "Regulatory Matters – Alabama Power" herein for additional information. The ultimate outcome of this matter cannot be determined at this time.
Southern Power
On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments. The sale resulted in a gain of approximately $39 million ($23 million after tax). Pre-tax income for Plant Mankato was immaterial for the six months ended June 30, 2020 and the three and six months ended June 30, 2019.
In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, which is expected to occur in late 2020 or early 2021. The facility's output is contracted under two long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.
On May 1, 2020, Southern Power purchased a controlling interest in the 56-MW Beech Ridge II wind facility located in Greenbrier County, West Virginia from Invenergy Renewables LLC. The facility's output is contracted under a 12-year PPA. See Note (K) to the Condensed Financial Statements herein for additional information.
Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 to development and construction projects. During the six months ended June 30, 2020, certain wind turbine equipment was sold, resulting in an immaterial gain.
Southern Company Gas
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline to Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceeds of $178 million, including working capital adjustments. The preliminary loss associated with the transactions was immaterial. Southern Company Gas may also receive two future payments of $5 million each, contingent upon certain milestones related to Pivotal LNG being met by Dominion Modular LNG Holdings, Inc. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
Environmental Matters
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 and Note 3 to the financial statements under "Environmental Remediation" in Item 8 of the Form 10-K, as well as Note (C) to the Condensed Financial Statements under "Environmental Remediation""Environmental Remediation" herein, for additional information.
Environmental Laws and Regulations
Coal Combustion ResidualsWater Quality
In June 2020, Alabama Power recorded an increaseis assessing the viability of complying with the EPA's steam electric effluent limitations guidelines (ELG) rule (finalized in 2015) and the ELG reconsideration rule (finalized in October 2020) (ELG rules) for certain of its coal units (totaling approximately $462 million to its AROs related2,000 MWs) due to the CCR Ruletiming and anticipated cost to comply with the ELG rules. The results of the assessment could accelerate a determination to discontinue or modify operation of the units. Alabama Power will review all of the facts and circumstances and evaluate all alternatives prior to reaching a final determination. The units under evaluation have net book values totaling approximately $2.3 billion at March 31, 2021. Additionally, net capitalized asset retirement costs associated with these facilities totaled approximately $900 million at March 31, 2021. Alabama Power is authorized to establish a regulatory asset to record the unrecovered investment costs, including the plant asset balance and the related state rule primarily due to management's completion of a feasibility study and the related cost estimates during the second quarter 2020 for one of its ash ponds. Alabama Power's increase also reflects costs
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associated with the addition of a water treatment systemsite removal and closure, associated with future unit retirements caused by environmental regulations. The regulatory asset would be amortized and recovered over an affected unit's remaining useful life, as established prior to the design of another ash pond. The additional estimated costs to close these ash ponds under the planned closure-in-place methodology primarily relate to inputs from contractor bids, design revisions, and changes in the expected volume of ash handling.
The traditional electric operating companies expect to continue updating their cost estimates and ARO liabilities periodically as additional information related to ash pond closure methodologies, schedules, and/or costs becomes available. Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costsdecision regarding early retirement, through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted.Rate CNP Compliance. See Note (B)2 to the Condensed Financial Statementsfinancial statements under "Georgia"Alabama Power – Integrated Resource PlanRate CNP Compliance" and " herein– Environmental Accounting Order" in Item 8 of the Form 10-K for additional information. The ultimate outcome of these mattersthis matter cannot be determined at this time. See Note 6 to the financial statements in Item 8 of the Form 10-K and Note (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for additional information.
Regulatory Matters
See OVERVIEW – "Recent Developments" and Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.
Alabama Power
Alabama Power's revenues from regulated retail operations are collected through various rate mechanisms subjecta discussion of regulatory matters related to the oversight of the Alabama PSC. Alabama Power, currently recovers its costs from the regulated retail business primarily through Rate RSE, Rate CNP, Rate ECR, and Rate NDR. In addition, the Alabama PSC issues accounting orders to address current events impacting Alabama Power.
Petition for Certificate of Convenience and Necessity
On June 9, 2020, the Alabama PSC approved in part Alabama Power's petition for a CCN which authorizes Alabama Power to (i) construct an approximately 720-MW combined cycle facility at Alabama Power's Plant Barry (Plant Barry Unit 8), which is expected to be placed in service by the end of 2023, (ii) complete the Autauga Combined Cycle Acquisition, which was approved by the FERC on April 22, 2020 and is expected to close by September 1, 2020, (iii) purchase approximately 240 MWs of combined cycle generation under a long-term PPA expected to begin later in 2020 and (iv) pursue up to approximately 200 MWs of certain demand-side management and distributed energy resource programs.
The Alabama PSC authorized the recovery of actual costs for the construction of Plant Barry Unit 8 up to 5% above the estimated in-service cost of $652 million. In so doing, it recognized the potential for developments that could cause the project costs to exceed the capped amount, in which case Alabama Power would provide documentation to the Alabama PSC to explain and justify potential recovery of the additional costs.
The Alabama PSC further directed that the proposed solar generation of approximately 400 MWs, coupled with battery energy storage systems (solar/battery systems), be evaluated under an existing Renewable Generation Certificate issued by the Alabama PSC in September 2015.
Alabama Power expects to recover all approved costs associated with the CCN through existing rate mechanisms as outlined in Note 2 to the financial statements in Item 8 of the Form 10-K. The Alabama PSC's approval in part of the CCN will be followed by a written order which is subject to any rehearing request or judicial appeal filed within 30 days of the date of such order.
The ultimate outcome of these matters cannot be determined at this time.
Georgia Power,
Georgia Power's revenues from regulated retail operations are collected through various rate mechanisms subject to the oversight of the Georgia PSC. Georgia Power currently recovers its costs from the regulated retail business through an alternate rate plan, which includes traditional base tariffs, Demand-Side Management tariffs, the
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Environmental Compliance Cost Recovery tariff, and Municipal Franchise Fee tariffs. In addition, financing costs on certified construction costs of Plant Vogtle Units 3 and 4 are being collected through the NCCR tariff and fuel costs are collected through a separate fuel cost recovery tariff.
Deferral of Incremental COVID-19 Costs
On April 7, 2020 and June 2, 2020, in response to the COVID-19 pandemic, the Georgia PSC approved orders directing Georgia Power to continue its previous, voluntary suspension of customer disconnections through July 14, 2020 and to defer the resulting incremental bad debt as a regulatory asset. On June 16, 2020 and July 7, 2020, the Georgia PSC approved orders establishing a methodology for identifying incremental bad debt and allowing the deferral of other incremental costs associated with the COVID-19 pandemic. The period over which such costs will be recovered is expected to be determined in Georgia Power's next base rate case. At June 30, 2020, the incremental costs deferred totaled approximately $34 million. The ultimate outcome of this matter cannot be determined at this time.
Integrated Resource Plan
On March 5, 2020, the Sierra Club filed a petition for judicial review in the Superior Court of Fulton County to appeal the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. Georgia Power intervened in the appeal on June 22, 2020. The ultimate outcome of this matter cannot be determined at this time.
Fuel Cost Recovery
On May 28, 2020, the Georgia PSC approved a stipulation agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors to lower total fuel billings by approximately $740 million over a two-year period effective June 1, 2020. In addition, Georgia Power will further lower fuel billings by approximately $44 million under an interim fuel rider effective June 1, 2020 through September 30, 2020. Georgia Power continues to be allowed to adjust its fuel cost recovery rates under an interim fuel rider prior to its next fuel case if the under or over recovered fuel balance exceeds $200 million. Georgia Power is scheduled to file its next fuel case no later than February 28, 2023.
Mississippi Power
Mississippi Power's rates and charges for service to retail customers are subject to the regulatory oversight of the Mississippi PSC. Mississippi Power's rates are a combination of base rates and several separate cost recovery clauses for specific categories of costs. These separate cost recovery clauses address such items as fuel and purchased power, ad valorem taxes, property damage, and the costs of compliance with environmental laws and regulations. Costs not addressed through one of the specific cost recovery clauses are expected to be recovered through Mississippi Power's base rates.
2019 Base Rate Case
On March 17, 2020, the Mississippi PSC approved the Mississippi Power Rate Case Settlement Agreement between Mississippi Power, and the Mississippi Public Utilities Staff related to Mississippi Power's base rate case filed in November 2019.
Under the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%, effective for the first billing cycle of April 2020, based on a test year period of January 1, 2020 through December 31, 2020, a 53% average equity ratio, an allowed maximum actual equity ratio of 55% by the end of 2020, and a 7.57% return on investment.
Additionally, the approved Mississippi Power Rate Case Settlement Agreement: (i) established common amortization periods of four years for regulatory assets and three years for regulatory liabilities included in the approved revenue requirement, including those related to unprotected deferred income taxes; (ii) established new depreciation rates reflecting an annual increase in depreciation of approximately $10 million; and (iii) excluded
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certain compensation costs totaling approximately $3.9 million. It also eliminated separate rates for costs associated with Plant Ratcliffe and energy efficiency initiatives and includes such costs in the PEP, ECO Plan, and ad valorem tax adjustment factor, as applicable. In accordance with the previous order of the Mississippi PSC suspending the operation of PEP and the ECO Plan for 2018 through 2020, Mississippi Power plans to resume PEP proceedings and ECO Plan filings for 2021.
Performance Evaluation Plan
On July 24, 2020, the Mississippi PSC approved Mississippi Power's July 14, 2020 filing of its PEP compliance rate clause reflecting revisions agreed to in the Mississippi Power Rate Case Settlement Agreement. These revisions include, among other things, changing the filing date for the annual PEP rate filing from November of the immediately preceding year to March of the current year, utilizing a historic test year adjusted for "known and measurable" changes, using discounted cash flow and regression formulas to determine base return on equity, and moving all embedded ad valorem property taxes currently collected in PEP to the ad valorem tax adjustment clause.
Deferral of Incremental COVID-19 Costs
On April 14, 2020 and May 12, 2020, in order to mitigate the economic impact of the COVID-19 pandemic on customers, the Mississippi PSC approved orders directing Mississippi Power to continue its previous, voluntary suspension of customer disconnections through May 25, 2020 and to defer as a regulatory asset all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system during the COVID-19 pandemic. The period over which such costs will be recovered is expected to be determined in a future PEP filing. At June 30, 2020, the incremental costs deferred totaled approximately $2 million. The ultimate outcome of this matter cannot be determined at this time.
Municipal and Rural Associations Tariff
On June 25, 2020, the FERC accepted Mississippi Power's April 27, 2020 request for an increase in wholesale base revenues under the MRA tariff as agreed upon in a settlement agreement reached with its wholesale customers. The MRA settlement agreement resulted in a $2 million annual increase in base rates effective June 1, 2020.
Southern Company Gas, including items that could impact the applicable registrants' future earnings, cash flows, and/or financial condition.
The natural gas distribution utilities are subject to regulation and oversight by their respective state regulatory agencies for the rates charged to their customers and other matters. With the exception of Atlanta Gas Light, which does not sell natural gas to end-use customers, the natural gas distribution utilities are authorized by the relevant regulatory agencies in the states in which they serve to use natural gas cost recovery mechanisms that adjust rates to reflect changes in the wholesale cost of natural gas and ensure recovery of all costs prudently incurred in purchasing natural gas for customers. Natural gas cost recovery revenues are adjusted for differences in actual recoverable natural gas costs and amounts billed in current regulated rates. Changes in the billing factor will not have a significant effect on revenues or net income, but will affect cash flows. In addition to natural gas cost recovery mechanisms, there are other cost recovery mechanisms, such as regulatory riders, which vary by utility but allow recovery of certain costs, such as those related to infrastructure replacement programs, as well as environmental remediation, energy efficiency plans, and bad debt.
The natural gas distribution utilities have various regulatory mechanisms to recover bad debt expense, which will mitigate potential increases in bad debt expense as a result of the COVID-19 pandemic. Nicor Gas fully recovers its bad debt expenses, both the gas and non-gas portions, through its purchased gas adjustment mechanism and separate bad debt rider. Virginia Natural Gas and Chattanooga Gas recover the gas portion of bad debt expense through their purchased gas adjustment mechanisms and the non-gas portion of bad debt expense through their base rates in accordance with established benchmarks. Atlanta Gas Light does not have material bad debt expense because its receivables are from Marketers, rather than end-use customers. Its tariff allows it to obtain credit security support from the Marketers in an amount equal to at least two times their estimated highest bill.
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Rate Proceedings
On June 1, 2020, Virginia Natural Gas filed a general rate case with the Virginia Commission seeking an increase in rates of$49.6 million primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month test year beginning November 1, 2020, a ROE of 10.35%, and an equity ratio of 54%. Rate adjustments are expected to be effective November 1, 2020, subject to refund. The Virginia Commission is expected to rule on the requested increase in the second quarter 2021.
On July 1, 2020, Atlanta Gas Light filed its 2020 GRAM filing with the Georgia PSC. The filing requests an annual base rate increase of $37.6 million based on the projected 12-month period beginning January 1, 2021, which does not exceed the 5% limitation established by the Georgia PSC in its December 2019 approval of Atlanta Gas Light's general base rate case. Resolution of the 2020 GRAM filing is expected by December 31, 2020, with rates effective January 1, 2021.
The ultimate outcome of these matters cannot be determined at this time.
Deferral of Incremental COVID-19 Costs
Atlanta Gas Light
On April 30, 2020, in response to the COVID-19 pandemic, the Georgia PSC approved orders directing Atlanta Gas Light to continue its previous, voluntary suspension of customer disconnections. On June 22, 2020, the Georgia PSC ordered Atlanta Gas Light to resume customer disconnections beginning July 1, 2020, with exceptions for customers still covered by a shelter-in-place order. The orders provide the Marketers, including SouthStar, with a mechanism to receive credits from Atlanta Gas Light for the base rates it charged to the Marketers of non-paying customers during the suspension. Atlanta Gas Light expects to recover these credits through the annual revenue true-up process within its 2021 GRAM filing, which would impact rates effective January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
Nicor Gas
On March 18, 2020, the Illinois Commission issued an order directing utilities to cease disconnections for non-payment and to suspend the imposition of late payment fees or penalties until the Governor of Illinois announces the end of the COVID-19 state of emergency. In response to this order, on March 27, 2020, Nicor Gas and other utilities in Illinois filed their plans seeking cost recovery and more flexible credit and collection plans.
On June 18, 2020, the Illinois Commission approved a stipulation pursuant to which the utilities will provide more flexible credit and collection procedures to assist customers with financial hardship and which authorizes a special purpose rider for recovery of the following COVID-19 pandemic-related impacts: incremental costs directly associated with the COVID-19 pandemic, net of the offset for COVID-19 pandemic-related credits received, foregone late fees, foregone reconnection charges, and the costs associated with a bill payment assistance program. The special purpose rider is proposed to be effective on October 1, 2020 and continue over a 24-month period. At June 30, 2020, Nicor Gas' related regulatory asset was $12 million. The ultimate outcome of this matter cannot be determined at this time.
Virginia Natural Gas
In response to the COVID-19 pandemic, the Virginia Commission issued orders requiring Virginia Natural Gas to suspend disconnections beginning on March 16, 2020 and also to suspend late payment and reconnection fees beginning on April 9, 2020, both of which continue in effect through August 31, 2020. On April 29, 2020, the Virginia Commission authorized Virginia Natural Gas to defer the following COVID-19 pandemic-related costs as a regulatory asset: incremental uncollectible expense incurred, suspended late fees, suspended reconnection charges, carrying costs, and other incremental prudently incurred costs associated with the COVID-19 pandemic. Specific recovery of the amounts deferred in a regulatory asset will be addressed in a future rate proceeding. At June 30,
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2020, Virginia Natural Gas' related regulatory asset was $1 million. The ultimate outcome of this matter cannot be determined at this time.
Construction Programs
Overview
The Subsidiary Registrants are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. The Southern Company system intends to continue its strategy of developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations.
For the traditional electric operating companies, major generation construction projects are subject to state PSC approval in order to be included in retail rates. The largest construction project currently underway in the Southern Company system is Plant Vogtle Units 3 and 4. See "Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction"Construction" herein for additional information. Also see Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Alabama Power" for information regarding Alabama Power's construction of Plant Barry Unit 8.
While Southern Power generally constructs and acquires generation assets covered by long-term PPAs, any uncontracted capacity could negatively affect future earnings. See "Southern Power" herein, "Acquisitions and Dispositions – Southern Power" herein,Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein as well as Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K, for additional information about costs relating to Southern Power's acquisitions that involve construction of renewable energy facilities.
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Southern Company Gas is engaged in various infrastructure improvement programs designed to update or expand the natural gas distribution systems of the natural gas distribution utilities to improve reliability and meet operational flexibility and growth. The natural gas distribution utilities recover their investment and a return associated with these infrastructure programs through their regulated rates. See Notes 2 and 3 to the financial statements in Item 8 of the Form 10-K and Notes (B) and (C) to the Condensed Financial Statements herein under "Southern Company Gas" hereinand "Other Matters – Southern Company Gas – PennEast Pipeline Project," respectively, for additional information regarding infrastructure improvement programs at the natural gas distribution utilities and the PennEast Pipelineon Southern Company Gas' construction project.program.
See FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations""Cash Requirements" herein for additional information regarding the Registrants' capital requirements for their construction programs.
Nuclear Construction
See Note 2 to the financial statements under "Georgia Power – Nuclear Construction" in Item 8 of the Form 10-K for additional information regarding Georgia Power's construction of Plant Vogtle Units 3 and 4, the joint ownership agreements and related funding agreement, VCM reports, and the NCCR tariff.
In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4, in which Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the two AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement. In March 2017, the EPC Contractor filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.
In connection with the EPC Contractor's bankruptcy filing, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into several transitional arrangements to allow construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Vogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are complete and electricity is generated and
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sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.
In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement, a cost reimbursable plus fee arrangement, whereby Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, which is subject to adjustment based on Bechtel's performance against cost and schedule targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay amounts related to work performed prior to the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.
See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, mandatory prepayment events, and conditions to borrowing.
Cost and Schedule
Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4 by the expected in-service dates of November 2021 and November 2022, respectively, is as follows:
 (in billions)
Base project capital cost forecast(a)(b)
$8.4
Construction contingency estimate0.1
Total project capital cost forecast(a)(b)
8.5
Net investment as of June 30, 2020(b)
(6.6)
Remaining estimate to complete(a)
$1.9
(a)Excludes financing costs expected to be capitalized through AFUDC of approximately $260 million, of which $52 million had been accrued through June 30, 2020.
(b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.
Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.0 billion, of which $2.4 billion had been incurred through June 30, 2020.
As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers, and workforce statistics.
During the second quarter 2020, approximately $194 million of construction contingency was assigned to the base capital cost forecast for cost risks including, among other things, construction productivity, including the April 2020 reduction in workforce designed to mitigate impacts of the COVID-19 pandemic described below, field support, subcontracts, engineering resources, and procurement. The second quarter 2020 assignment of contingency exceeded the remaining balance of the $366 million construction contingency originally established in the second quarter 2018 by approximately $34 million. Through June 30, 2020, assignments of contingency for cost risks also have included, among other factors, construction productivity; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement. As a result of these factors, Southern Nuclear recommended establishing additional construction contingency, of which Georgia Power's share is approximately $115 million, for further potential risks including, among other factors, construction productivity and expected impacts of the COVID-19
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pandemic; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement.
After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded a total pre-tax charge to income of $149 million ($111 million after tax) for the increase in the total project capital cost forecast as of June 30, 2020. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.
In April 2019, Southern Nuclear established aggressive target values for monthly construction production and system turnover activities as part of a strategy to maintain and, where possible, build margin to the regulatory-approved in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. Through early 2020, the project faced challenges with the April 2019 aggressive strategy targets including, but not limited to, electrical and pipefitting labor productivity and work package closure rates, which resulted in a backlog of activities and completion percentages below the April 2019 aggressive strategy targets.
In February 2020, Southern Nuclear updated its cost and schedule forecast, which, at that time, did not change the total project capital cost forecast and confirmed the expected in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. This update included initiatives to improve productivity while refining and extending system turnover plans and certain near-term milestone dates. Other milestone dates did not change. Achievement of the February 2020 aggressive site work plan relied on meeting increased monthly production and activity target values during 2020.
In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures.
In April 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4, which totaled approximately 20% of the then-existing site workforce. This reduction in workforce was a mitigation action intended to address the impact of the COVID-19 pandemic on the Plant Vogtle Units 3 and 4 workforce and construction site, including challenges with labor productivity that were exacerbated by the impact of the COVID-19 pandemic. The April 2020 workforce reduction was intended to provide operational efficiencies by increasing productivity of the remaining workforce and reducing workforce fatigue and absenteeism. Further, it was also intended to allow for increased social distancing by the workforce and facilitate compliance with the recommendations from the Centers for Disease Control and Prevention. The April 2020 workforce reduction did reduce absenteeism, providing an improvement in operational efficiency and allowing for increased social distancing. From the initial peak in April 2020, the number of active cases at the site declined significantly during May and early June, but began increasing again in mid-June and continues to impact productivity levels and pace of activity completion. As a result of these factors, overall production improvements have not been achieved at the levels anticipated, contributing to the allocation of, and increase in, construction contingency described above. Through mid-July 2020, Unit 3 mechanical, electrical, and subcontract activities continued to build a backlog to Southern Nuclear's February 2020 aggressive site work plan.
To address these issues, in July 2020, Southern Nuclear updated its aggressive site work plan for both Unit 3 and Unit 4. To meet the targets in the July 2020 aggressive site work plan, absenteeism rates must continue to normalize and overall construction productivity and production levels, including subcontractors, must significantly improve and be sustained above pre-pandemic levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, must be added and maintained. While Southern Nuclear's July 2020 aggressive site work plan extended milestone dates from the February 2020 aggressive site work plan, Georgia Power still expects to achieve the regulatory-approved in-service dates of November 2021 and November 2022 for Plant Vogtle Units 3
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and 4, respectively. Southern Nuclear and Georgia Power continue to believe that pursuit of an aggressive site work plan is an appropriate strategy to achieve completion of the units by their regulatory-approved in-service dates.
As construction, including subcontract work, continues and testing and system turnover activities increase, challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularly in the installation of electrical, mechanical, and instrumentation and controls commodities, ability to attract and retain craft labor, and/or related cost escalation; procurement, fabrication, delivery, assembly, installation, system turnover, and the initial testing and start-up, including any required engineering changes or any remediation related thereto, of plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale), any of which may require additional labor and/or materials; or other issues could arise and change the projected schedule and estimated cost.
In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $70 million and $115 million, which is included in the total project capital cost forecast and assumes (i) absenteeism rates continue to normalize and (ii) the intended productivity efficiencies and production targets assumed in Southern Nuclear's July 2020 aggressive site work plan are realized in the coming months. However, the ultimate impact of the COVID-19 pandemic on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.
There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, may arise, which may result in additional license amendments or require other resolution. As part of the aggressive site work plan, in January 2020, Southern Nuclear notified the NRC of its intent to load fuel in 2020. On May 11, 2020, the Blue Ridge Environmental Defense League filed a petition with the NRC that challenges a license amendment request. On June 15, 2020, the NRC issued an appealable order rejecting Nuclear Watch South's April 20, 2020 petition requesting a hearing and challenging the closure of certain ITAAC. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.
The ultimate outcome of these matters cannot be determined at this time. However, any extension of the regulatory-approved project schedule is currently estimated to result in additional base capital costs of approximately $50 million per month, based on Georgia Power's ownership interests, and AFUDC of approximately $10 million per month. While Georgia Power is not precluded from seeking recovery of any future capital cost forecast increase, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.
Joint Owner Contracts
In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle
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Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.
As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.
Amendments to the Vogtle Joint Ownership Agreements
In connection with the vote to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).
As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests. If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.
In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more over the most recently approved schedule.
The ultimate outcome of these matters cannot be determined at this time.
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Regulatory Matters
In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At June 30, 2020, Georgia Power had recovered approximately $2.4 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In December 2019, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $62 million annually, effective January 1, 2020.
Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.
In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the amounts paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that prudence decisions on cost recovery will be made at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 ARP) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that upon Unit 3 reaching commercial operation, retail base rates would be adjusted to include carrying costs on those capital costs deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $75 million in 2019 and are estimated to have negative earnings impacts of approximately $145 million, $255 million, and $200 million in 2020, 2021, and 2022, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.
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In February 2018, Georgia Interfaith Power & Light, Inc. (GIPL) and Partnership for Southern Equity, Inc. (PSE) filed a petition appealing the Georgia PSC's January 11, 2018 order with the Fulton County Superior Court. In March 2018, Georgia Watch filed a similar appeal to the Fulton County Superior Court for judicial review of the Georgia PSC's decision and denial of Georgia Watch's motion for reconsideration. In December 2018, the Fulton County Superior Court granted Georgia Power's motion to dismiss the two appeals. In January 2019, GIPL, PSE, and Georgia Watch filed an appeal of this decision with the Georgia Court of Appeals. In October 2019, the Georgia Court of Appeals issued an opinion affirming the Fulton County Superior Court's ruling that the Georgia PSC's January 11, 2018 order was not a final, appealable decision. In addition, the Georgia Court of Appeals remanded the case to the Fulton County Superior Court to clarify its ruling as to whether the petitioners showed that review of the Georgia PSC's final order would not provide them an adequate remedy. On April 21, 2020, the Fulton County Superior Court granted Georgia Power's motion to dismiss the two appeals. The petitioners filed a notice of appeal of the dismissal on May 20, 2020. Georgia Power believes the petitions have no merit; however, an adverse outcome in the litigation combined with subsequent adverse action by the Georgia PSC could have a material impact on Southern Company's and Georgia Power's results of operations, financial condition, and liquidity.
The Georgia PSC has approved 21 VCM reports covering the periods through June 30, 2019, including total construction capital costs incurred through that date of $6.7 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). On August 18, 2020, the Georgia PSC is scheduled to vote on Georgia Power's twenty-second VCM report, which requested approval of $674 million of construction capital costs incurred from July 1, 2019 through December 31, 2019.
Georgia Power expects to file its twenty-third VCM report with the Georgia PSC by August 31, 2020, which will reflect the revised capital cost forecast discussed above and request approval of $701 million of construction capital costs incurred from January 1, 2020 through June 30, 2020.
See RISK FACTORS in Item 1A herein and in the Form 10-K for a discussion of certain risks associated with the licensing, construction, and operation of nuclear generating units, including potential impacts that could result from a major incident at a nuclear facility anywhere in the world.
The ultimate outcome of these matters cannot be determined at this time.
Southern Power
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Construction Programs – Southern Power" in Item 7 of the Form 10-K and FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" herein for additional information.
During the six months ended June 30, 2020, Southern Power completed construction of and placed in service the Reading wind facility, continued construction of the Skookumchuck wind facility, and commenced construction of the Garland and Tranquillity battery energy storage facilities. Total aggregate construction costs, excluding acquisition costs, are expected to be between $475 million and $545 million for the facilities under construction. At June 30, 2020, total costs of construction incurred for these projects were $232 million and are included in CWIP. The ultimate outcome of these matters cannot be determined at this time.
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Project FacilityResource
Approximate Nameplate Capacity (MW)
Location
Actual/Expected
COD
PPA CounterpartiesPPA Contract Period
Projects Completed During the Six Months Ended June 30, 2020
Reading(a)
Wind200Osage and Lyon Counties, KSMay 2020Royal Caribbean Cruises LTD12 years
Projects Under Construction as of June 30, 2020
Skookumchuck(b)
Wind136Lewis and Thurston Counties, WAFourth quarter 2020Puget Sound Energy20 years
Garland Solar Storage(c)
Battery energy storage system88Kern County, CASecond quarter 2021Southern California Edison20 years
Tranquillity Solar Storage(c)
Battery energy storage system72Fresno County, CASecond quarter 2021Southern California Edison20 years
(a)In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. At the time the facility was placed in service, Southern Power recorded an operating lease right-of-use asset and an operating lease liability, each in the amount of $24 million. In June 2020, Southern Power completed a tax equity transaction whereby it received $156 million and now owns 100% of the Class B membership interests.
(b)In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. Southern Power expects to complete a tax equity transaction upon commercial operation and retain the Class B membership interests. Shortly after commercial operation, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. The ultimate outcome of these matters cannot be determined at this time.
(c)Prior to commercial operation, Southern Power may enter into one or more partnerships, in which case it would ultimately own less than 100% of the Class B membership interests, but would retain ownership of the controlling interest. The PPAs for these facilities are pending approval from the California Public Utilities Commission. The ultimate outcome of these matters cannot be determined at this time.
Southern Company Gas
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Construction Programs – Southern Company Gas" in Item 7 of the Form 10-K for additional information.
Infrastructure Replacement Programs and Capital Projects
In addition to capital expenditures recovered through base rates by each of the natural gas distribution utilities, Nicor Gas and Virginia Natural Gas have separate rate riders that provide timely recovery of capital expenditures for specific infrastructure replacement programs. Infrastructure expenditures incurred under these programs in the first six months of 2020 were as follows:
UtilityProgramYear-to-Date 2020
  (in millions)
Nicor GasInvesting in Illinois$158
Virginia Natural GasSteps to Advance Virginia's Energy (SAVE)25
Total $183
In December 2019, Virginia Natural Gas filed an application with the Virginia Commission for a 24.1-mile header improvement project to improve resiliency and increase the supply of natural gas delivered to energy suppliers, including Virginia Natural Gas. On June 26, 2020, the Virginia Commission issued an order requiring Virginia Natural Gas to submit additional information by December 31, 2020 related to the financing plans of the project's primary customer before ruling on the December 2019 application. The ultimate outcome of this matter cannot be determined at this time.
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See Note 2 to the financial statements under "Southern Company Gas – Infrastructure Replacement Programs and Capital Projects" in Item 8 of the Form 10-K for additional information.
Pipeline Construction Projects
On March 24, 2020, Southern Company Gas completed the sale of its interest in Atlantic Coast Pipeline. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
On February 20, 2020, the FERC approved a two-year extension for PennEast Pipeline to complete the project by January 19, 2022.
In September 2019, an appellate court ruled that the PennEast Pipeline does not have federal eminent domain authority over lands in which a state has property rights interests. On June 29, 2020, the U.S. Supreme Court requested the U.S. Solicitor General to provide an opinion on PennEast Pipeline's petition for a writ of certiorari seeking its review of the appellate court's decision.
Expected project costs related to the PennEast Pipeline for Southern Company Gas total approximately $300 million, excluding financing costs. The ultimate outcome of the PennEast Pipeline construction project cannot be determined at this time; however, any work delays, whether caused by judicial or regulatory action, abnormal weather, or other conditions, may result in additional cost or schedule modifications or, ultimately, in project cancellation, any of which could result in impairment of Southern Company Gas' investment and could have a significant impact on Southern Company's financial statements and a material impact on Southern Company Gas' financial statements.
See Notes 3 and 7 to the financial statements in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information.
Southern Power's Power Sales Agreements
See BUSINESS – "The Southern Company System – Southern Power" in Item 1 of the Form 10-K and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs. Generally, under the solar and wind generation PPAs, the purchasing party retains the right to keep or resell the renewable energy credits.
During the first quarter 2020, Southern Power received $15 million from Pacific Gas & Electric Company (PG&E) in accordance with a November 2019 bankruptcy court order granting payment of certain transmission interconnections. PG&E emerged from bankruptcy on July 1, 2020 and Southern Power's PPAs and transmission interconnection agreements continue in effect unchanged.
Tax Matters
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information.
On March 18, 2020 and March 27, 2020, respectively, the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act were signed into law. Both acts include provisions intended to provide stability and support for individuals and businesses in response to the COVID-19 pandemic. Southern Company continues to evaluate these provisions, including those related to payroll tax deferrals and employee retention credits; however, they are not expected to have a material impact on the Registrants' financial statements.
On March 20, 2020 and April 9, 2020, the Treasury Department and the Internal Revenue Service issued Notices 2020-18 and 2020-23, respectively, providing relief to taxpayers by postponing to July 15, 2020 a variety of tax form filings and payment obligations that were due before July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment were also suspended until July 16, 2020. These provisions had a modest
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positive impact on the Registrants' liquidity. However, Southern Power's expected utilization of tax credits in the first half of 2020 was delayed until July 15, 2020.
General Litigation and Other Matters
The Registrants are involved in various other matters being litigated and/or regulatory and regulatoryother matters that could affect future earnings.earnings, cash flows, and/or financial condition. The ultimate outcome of such pending or potential litigation or regulatory matters against each Registrant and any subsidiaries or regulatory and other matters cannot be determined at this time; however, for current proceedings and/or matters not specifically reported herein or in Notes (B) and (C) to the Condensed Financial Statements herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings and/or matters would have a material effect on such Registrant's financial statements. See Notes (B) and (C) to the Condensed Financial Statements for a discussion of various other contingencies, including matters being litigated, regulatory matters, and other matters being litigated which may affect future earnings potential.
The Registrants believe the pending legal challenges discussed below have no merit; however, the ultimate outcome of these matters cannot be determined at this time.
Southern Company
In January 2017, a securities class action complaint was filed in the U.S. District Court for the Northern District of Georgia by Monroe County Employees' Retirement System on behalf of all persons who purchased shares of Southern Company's common stock between April 25, 2012 and October 29, 2013. The complaint names as defendants Southern Company, certain of its current and former officers, and certain former Mississippi Power officers and alleges that the defendants made materially false and misleading statements regarding the Kemper County energy facility in violation of certain provisions under the Securities Exchange Act of 1934, as amended. The complaint seeks, among other things, compensatory damages and litigation costs and attorneys' fees. In 2017, the plaintiffs filed an amended complaint that provided additional detail about their claims, increased the purported class period by one day, and added certain other former Mississippi Power officers as defendants. Also in 2017, the defendants filed a motion to dismiss the plaintiffs' amended complaint with prejudice, to which the plaintiffs filed an opposition. In 2018, the court issued an order dismissing certain claims against certain officers of Southern Company and Mississippi Power and dismissing the allegations related to a number of the statements that plaintiffs challenged as being false or misleading. In 2018, the court denied the defendants' motion for reconsideration and also denied a motion to certify the issue for interlocutory appeal. In the third quarter 2019, the court certified the plaintiffs' proposed class and the defendants filed a petition for interlocutory appeal of the class certification order with the U.S. Court of Appeals for the Eleventh Circuit. In December 2019, the U.S. District Court for the Northern District of Georgia entered an order staying all deadlines in the case pending mediation. The stay automatically expired on March 31, 2020; however, in light of the COVID-19 pandemic, the U.S. District Court for the Northern District of Georgia vacated all existing discovery deadlines until June 15, 2020. On June 30, 2020, the court entered a revised scheduling order, which resumed discovery and set out remaining case deadlines.
In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. In 2017, these two shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of Georgia. The complaints allege that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints allege that the defendants were unjustly enriched and caused the waste of corporate assets and also allege that the individual defendants violated their fiduciary duties. Each plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. Each plaintiff also seeks certain changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action.
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In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint alleges that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleges that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. The plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and disgorgement of profits and, on its behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiff also seeks certain unspecified changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.
GeorgiaAlabama Power
In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state law claims. This case has been ruled upon and appealed numerous times over the last several years. In one recent appeal, the Georgia Supreme Court remanded the case and noted that the trial court could refer the matter to the Georgia PSC to interpret its tariffs. Following a motion by Georgia Power, in February 2019, the Superior Court of Fulton County ordered the parties to submit petitions to the Georgia PSC for a declaratory ruling and also conditionally certified the proposed class. In March 2019, Georgia Power and the plaintiffs filed petitions with the Georgia PSC seeking confirmation of the proper application of the municipal franchise fee schedule pursuant to the Georgia PSC's orders. Also in March 2019, Georgia Power appealed the class certification decision to the Georgia Court of Appeals. In October 2019, the Georgia PSC issued an order that found Georgia Power has appropriately implemented the municipal franchise fee schedule. On March 11, 2020, the Georgia Court10, 2021, Alabama Power executed a coordinated planning and operations agreement with PowerSouth, with a minimum term of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification.10 years. The Court of Appeals remanded the caseagreement, which includes combined operations (including joint commitment and dispatch), is expected to the Superior Court of Fulton Countycreate energy cost savings and enhanced system reliability for further proceedings. The amount ofboth parties. Projected revenues are expected to offset any possible losses cannot be calculated at this time because, among other factors, it is unknown whether a class will be certified, the ultimate composition of any class, and whether any losses would be subject to recovery from any municipalities.
On July 29, 2020, a group of individual plaintiffs filed a complaint in the Superior Court of Fulton County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater, surface water, and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages, a medical monitoring fund, and injunctive relief.
Mississippi Power
In May 2018, Southern Company and Mississippi Power received a notice of dispute and arbitration demand filedincreased administrative costs incurred by Martin Product Sales, LLC (Martin) based on two agreements, both related to Kemper IGCC byproducts for which Mississippi Power provided termination notices in 2017. Martin alleges breach of contract, breach of good faith and fair dealing, fraud and misrepresentation, and civil conspiracy and makes a claim for damages in the amount of approximately $143 million, as well as additional unspecified damages, attorney's fees, costs, and interest. A portion of the claim for damages was on behalf of Martin Transport, Inc. (Martin Transport), an affiliate of Martin. In May 2019, the arbitration panel denied Mississippi Power's and Southern Company's motions to dismiss. In September 2019, Martin Transport filed a separate complaint against Mississippi Power in the Circuit Court of Kemper County, Mississippi alleging claims of fraud, negligent misrepresentation, promissory estoppel, and equitable estoppel, each arising out of the same alleged facts and circumstances that underlie Martin's arbitration demand. Martin Transport seeks compensatory damages of $5 million and punitive damages of $50 million. In November 2019, Martin Transport's claim was combined with the Martin arbitration case and the
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separate court case was dismissed. In December 2019, Southern Company and Mississippi Power each filed motions for summary judgment on all claims. On February 17, 2020, the arbitration panel granted Southern Company's motion and dismissed Southern Company from the arbitration. On March 12, 2020, the arbitration panel denied Mississippi Power's motions for summary judgment. An adverse outcome in this proceeding could have aAlabama Power; therefore, no material impact on Southern Company's and Mississippi Power's financial statements.
In November 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippito net income is expected. Alabama Power and the three then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. In response to Mississippi Power and the Mississippi PSC each filing a motion to dismiss, the plaintiffs filed an amended complaint in March 2019. The amended complaint included four additional plaintiffs and additional claims for gross negligence, reckless conduct, and intentional wrongdoing. Mississippi Power and the Mississippi PSC have each filed a motion to dismiss the amended complaint. On March 27, 2020, the Mississippi PSC's motion to dismiss was granted. Also on March 27, 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants based on a dormant commerce clause theory under the U.S. Constitution. On April 9, 2020 and April 10, 2020, Mississippi Power and the Mississippi PSC, respectively, filed responses opposing the motion for leave to file a second amended complaint. On May 26, 2020, Mississippi Power's motion to dismiss the first amended complaint filed in 2019 was granted. On July 6, 2020, the plaintiffs filed a motion for revision of the court's decision. The plaintiffs' motion for leave to file a second amended complaint also remains pending before the court. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
Other Matters
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Other Matters" in Item 7 of the Form 10-K for additional information.
Southern Company
See Notes 1 and 3 under "Leveraged Leases" and "Other Matters – Southern Company," respectively, in Item 8 of the Form 10-K for discussion of challenges associated with a leveraged lease agreement with a subsidiary of Southern Holdings. While all required lease payments through June 30, 2020 have been paid in full, the operational and remarketing risks and the resulting cash liquidity challenges persist and significant concerns continue regarding the lessee's ability to make the remaining required semi-annual lease payments to the Southern Holdings subsidiary through the term of the lease.
In its annual impairment analysis of the expected residual value of the generation assets and the overall collectability of the related lease receivable, Southern Company uses multiple scenarios of long-term market energy prices to estimate the cash flows expected to be received from remarketing the generation assets following the expiration of the existing PPA in 2032 and the residual value of the generation assets at the end of the lease in 2047. Southern Company received the latest annual forecasts of natural gas prices during the second quarter 2020 and considered the significant decline in forecasted prices to be an indicator of potential impairment that required an interim impairment assessment. Accordingly, consistent with prior years, Southern Company evaluated the
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recoverability of the lease receivable and the expected residual value of the generation assets under various natural gas price scenarios. Based on the current forecasts of energy prices in the years following the expiration of the existing PPA, Southern Company concluded that it is no longer probable that any of the associated rental payments will be received, because it is no longer probable the generation assets will be successfully remarketed and continue to operate after that date. During the second quarter 2020, Southern Company revised the estimated cash flows to be received under the leveraged lease to reflect this conclusion, which resulted in a full impairment of the lease investment and a pre-tax charge to earnings of $154 million ($74 million after tax).
If any future lease payment due prior to the expiration of the associated PPA is not paid in full, the Southern Holdings subsidiary may be unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. Failure to make the required payment to the debtholders could represent an event of default that would give the debtholdershas the right to foreclose on, and take ownershipparticipate in a portion of PowerSouth's future incremental load growth. Implementation of the generation assets, in effect terminating the lease. As the full amountagreement is subject to certain regulatory approvals, including approvals of the lease investment has been charged against earnings as of June 30, 2020, termination would not be expected to result in additional charges. Southern Company will continue to monitorRural Utilities Service, the operational performance ofSERC Reliability Corporation, and the underlying assets and evaluate the ability of the lessee to continue to make the required lease payments and meet its obligations associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.
Mississippi Power
Kemper County Energy Facility
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
As the mining permit holder, Liberty Fuels Company, LLC has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities related to the lignite mine and equipment and mineral reserves located around the Kemper County energy facility site. As a result of the abandonment of the Kemper IGCC, final mine reclamation began in 2018FERC, and is expected to be substantially completed in 2020, with monitoring expected to continue through 2027. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Dismantlement of the abandoned gasifier-related assets and site restoration activities are expected to be completed in 2025. The additional pre-tax period costs associated with dismantlement and site restoration activities, including related costs for compliance and safety, ARO accretion, and property taxes, are estimated to total $5 million for the remainder of 2020, $16 million in 2021, and $11 million to $13 million annually in 2022 through 2025. In addition, closure costs for the mine and gasifier-related assets, currently estimated at up to $6 million pre-tax (excluding dismantlement costs, net of salvage), may be incurred during the remainder of 2020.
In December 2019, Mississippi Power transferred ownership of the CO2 pipeline to an unrelated gas pipeline company, with no resulting impact on income. In conjunction with the transfer of the CO2 pipeline, the parties agreed to enter into a 15-year firm transportation agreement, which is expected to be signed by the end of 2020, providing for the conversion by the pipeline company of the CO2 pipeline to a natural gas pipeline to be used for the delivery of natural gas to Plant Ratcliffe. The agreement will be treated as a finance lease for accounting purposes upon commencement.
In 2018, Mississippi Power filed with the DOE its request for property closeout certification under the contract related to the $387 million of grants received for the Kemper County energy facility. Mississippi Power expects to close out the DOE contract in 2020. In connection with the DOE closeout discussions, in April 2019, the Civil Division of the Department of Justice informed Southern Company and Mississippi Power of an investigation related to the Kemper County energy facility. The ultimate outcome of this matter cannot be determined at this time; however, it could have a material impact on Southern Company's and Mississippi Power's financial statements.
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Plant Daniel
In conjunction with Southern Company's sale of Gulf Power, Mississippi Power and Gulf Power agreed to seek a restructuring of their 50% undivided ownership interests in Plant Daniel such that each of them would, after the restructuring, own 100% of a generating unit. On April 24, 2020, Mississippi Power and Gulf Power amended the terms of the agreement to extend the deadline from May 1, 2020 to August 1, 2020 for Mississippi Power to notify Gulf Power of which generating unit it has selected for 100% ownership. Mississippi Power and Gulf Power are continuing negotiations on a mutually acceptable revised operating agreement for Plant Daniel and, as a result, the parties have agreed not to select a specific unit on August 1, 2020. The impacts of operating the units on an individual basis continue to be evaluated by Mississippi Power and any transfer of ownership would be subject to approval by the FERC and the Mississippi PSC.March 2022. The ultimate outcome of this matter cannot be determined at this time.
ACCOUNTING POLICIES
See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES in Item 7 of the Form 10-K for a complete discussion of the Registrants' critical accounting policies and estimates, as well as recently issued accounting standards.
Application of Critical Accounting Policies and Estimates
The Registrants prepare their financial statements in accordance with GAAP. Significant accounting policies are described in the notes to the financial statements in Item 8 of the Form 10-K. In the application of these policies, certain estimates are made that may have a material impact on the Registrants' results of operations and related disclosures. Different assumptions and measurements could produce estimates that are significantly different from those recorded in the financial statements. See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates" in Item 7 of the Form 10-K for a complete discussion of the Registrants' critical accounting policies and estimates.
Estimated Cost, Schedule, and Rate Recovery for the Construction of Plant Vogtle Units 3 and 4
(Southern Company and Georgia Power)
InFollowing milestone extensions in January 2021, Southern Nuclear has been performing additional construction remediation work, primarily related to electrical commodity installations, necessary to ensure quality and design standards are met as system turnovers are completed to support hot functional testing and fuel load for Unit 3. Hot functional testing commenced in late April 2021 and the secondsite work plan currently targets fuel load for Unit 3 in the third quarter 2018,2021 and an in-service date of December 2021. As the site work plan includes minimal margin to these
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milestone dates, any delay could result in an in-service date in the first quarter 2022 for Unit 3. Achievement of the extended milestone dates established in January 2021 for Unit 4, which are expected to support a regulatory-approved in-service date of November 2022, primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, being added and maintained.
Considering the factors above, during the first quarter 2021, approximately $84 million of the construction contingency established in the fourth quarter 2020 was assigned to the base capital cost forecast for costs primarily associated with the schedule extension for Unit 3 to December 2021, construction productivity, support resources, and construction remediation work. Georgia Power increased its total capital cost forecast as of March 31, 2021 by adding $48 million to the remaining construction contingency. Georgia Power's revised its base capital cost forecast and contingency to complete construction and start-up of Plant Vogtle Units 3 and 4 to $8.0is $8.62 billion and $0.4$0.14 billion, respectively, for a total project capital cost forecast of $8.4$8.76 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). Through the second quarter 2020, assignment of construction contingency to the base capital cost forecast exceeded the amount originally established in the second quarter 2018 by approximately $34 million. As a result, Southern Nuclear recommended establishing additional construction contingency, of which Georgia Power's share is $115 million.
After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in these future regulatory proceedings, Georgia Power recorded a total pre-tax charge to income of $1.1 billion ($0.8 billion after tax) in the second quarter 2018 and a total pre-tax charge to income of $149$48 million ($11136 million after tax) for the increase in the second quarter 2020.
In July 2020, Southern Nuclear updated its aggressive site work plan for both Unit 3total project capital cost forecast as of March 31, 2021. As and Unit 4. To meet the targets in the July 2020 aggressive site work plan, absenteeism rates must continue to normalize and overall construction productivity and production levels, including subcontractors, must significantly improve and be sustained above pre-pandemic levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, must be added and maintained. While Southern Nuclear's July 2020 aggressive site work plan extended milestone dates from the February 2020 aggressive site work plan,when these amounts are spent, Georgia Power still expectsmay request the Georgia PSC to achieve the regulatory-approved in-service dates of November 2021 and November 2022evaluate those expenditures for Plant Vogtle Units 3 and 4, respectively. The continuing effects of the COVID-19 pandemic and other factors could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4.rate recovery.
The ultimate impact of these matters on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time. See Note (B) to the Condensed Financial Statements under ""Georgia Power – Nuclear Construction"Construction" herein for additional information.
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AND RESULTS OF OPERATIONS (Continued)

Recently Issued Accounting Standards
On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) providing temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR, which is currently expected to occur on December 31, 2021. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The new guidance provides the following optional expedients: (i) simplifies accounting analyses under current GAAP for contract modifications; (ii) simplifies the assessment of hedge effectiveness and allows hedging relationships affected by reference rate reform to continue; and (iii) allows a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform. An entity may elect to apply the amendments prospectively from March 12, 2020 through December 31, 2022 by accounting topic.
The Registrants currently reference LIBOR for certain debt and hedging arrangements. Contract language has been, or is expected to be, incorporated into each of these agreements to address the transition to an alternative rate for agreements that will be in place at the transition date. While existing effective hedging relationships are expected to continue, the Registrants are continuing to evaluate the provisions of ASU 2020–04 and the impacts of transitioning to an alternative rate. The ultimate outcome of the transition cannot be determined at this time, but is not expected to have a material impact on the Registrants' financial statements. See FINANCIAL CONDITION AND LIQUIDITY – "Financing Activities" herein and Note (J) to the Condensed Financial Statements under "Interest Rate Derivatives" herein for additional information.
FINANCIAL CONDITION AND LIQUIDITY
Overview
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Overview" in Item 7 of the Form 10-K for additional information. The financial condition of each Registrant remained stable at June 30, 2020. The Registrants have maintained adequate access to capital throughout 2020, including during periods of volatility in the financial markets. This volatility began to constrain access across the Southern Company system to commercial paper during certain periods. As a precautionary measure, in the first quarter 2020, Southern Company, Georgia Power, Mississippi Power, and Southern Company Gas increased their outstanding short-term debt while also increasing cash and cash equivalents by taking actions such as entering into new bank term loans, entering into and funding new committed and uncommitted credit facilities, funding existing uncommitted credit facilities, and issuing commercial paper with longer-date maturities when available. No material changes occurred in the terms of the applicable Registrants' bank credit arrangements or their interest expense on short-term debt as a result of these actions.
The Registrants have experienced no material counterparty credit losses as a result of the volatility in the financial markets.March 31, 2021. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. The impact on future financing costs as a resultSee "Cash Requirements," "Sources of continued financial market volatility cannot be determined at this time. See "Capital, Requirements and Contractual Obligations," "Sources of Capital," and "Financing Activities" herein and Note (K) to the Condensed Financial Statements herein for additional information.
At the end of the secondfirst quarter 2020,2021, the market price of Southern Company's common stock was $51.85$62.16 per share (based on the closing price as reported on the NYSE) and the book value was $26.20$26.90 per share, representing a market-to-book ratio of 198%231%, compared to $63.70, $26.11,$61.43, $26.48, and 244%232%, respectively, at the end of 2019.2020. Southern Company's common stock dividend for the secondfirst quarter 20202021 was $0.64 per share compared to $0.62 per share in the secondfirst quarter 2019.2020.
Cash Requirements
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" in Item 7 of the Form 10-K for a description of the Registrants' significant cash requirements.
The Registrants' significant cash requirements include estimated capital expenditures associated with their construction programs. The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected
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environmental compliance program; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. The continued COVID-19 pandemic could also impair the ability to develop, construct, and operate facilities, as discussed further in Item 1A of the Form 10-K. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for additional information regarding Southern Power's plant acquisitions and construction projects.
The construction program of Georgia Power includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale and which may be subject to additional revised cost estimates during construction. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Nuclear Construction" for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.
Long-term debt maturities and the interest payable on long-term debt each represent a significant cash requirement for the Registrants. See "Financing Activities" herein for information on changes in the Registrants' long-term debt balances since December 31, 2020.
Sources of Capital
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances in the capital markets. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. Southern Company does not expect to issue any equity in the capital markets through 2025. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on stock purchase contracts associated with Southern Company's equity units.
The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. In addition, Georgia Power plans to utilize borrowings from the FFB (as discussed further in Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K) and Southern Power plans to utilize tax equity partnership contributions (as discussed further herein).
The amount, type, and timing of any financings in 2021, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein for additional information.
Southern Power utilizes tax equity partnerships as one of its financing sources, where the tax partner takes significantly all of the federal tax benefits. These tax equity partnerships are consolidated in Southern Power's financial statements and are accounted for using HLBV methodology to allocate partnership gains and losses. In
March 2021, Southern Power obtained tax equity funding for the Deuel Harvest wind facility and received proceeds of $220 million. In addition, during the first three months of 2021, Southern Power received tax equity funding totaling $17 million from existing partnerships. See Note 1 to the financial statements under "General" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
By regulation, Nicor Gas is restricted, to the extent of its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At March 31, 2021, the amount of subsidiary retained earnings restricted to dividend totaled $1.1 billion. This restriction did not impact Southern
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Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.
Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at March 31, 2021 for the applicable Registrants:
At March 31, 2021Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern Company Gas
(in millions)
Current liabilities in excess of current assets$2,117 $120 $699 $514 $166 
The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.
Bank Credit Arrangements
At March 31, 2021, the Registrants' unused committed credit arrangements with banks were as follows:
At March 31, 2021Southern
Company
parent		Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCOSouthern
Company
(in millions)
Unused committed credit$1,999 $1,328 $1,728 $250 $568 $1,745 $30 $7,648 
(a)At March 31, 2021, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $13 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(b)Includes $1.045 billion and $700 million at Southern Company Gas Capital and Nicor Gas, respectively.
Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at March 31, 2021 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $34 million at Mississippi Power). In addition, at March 31, 2021, Georgia Power and Mississippi Power had approximately $174 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.
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Short-term Borrowings
The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short-term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:
 
Short-term Debt at
March 31, 2021
Short-term Debt During the Period(*)
 Amount
Outstanding		Weighted
Average
Interest
Rate		Average
Amount
Outstanding		Weighted
Average
Interest
Rate		Maximum
Amount
Outstanding
 (in millions)(in millions)(in millions)
Southern Company$1,092 0.3 %$998 0.2 %$1,520 
Alabama Power— — 46 0.1 200 
Georgia Power205 0.2 51 0.2 230 
Mississippi Power54 0.2 20 0.2 64 
Southern Power315 0.2 147 0.2 520 
Southern Company Gas:
Southern Company Gas Capital$— — %$221 0.2 %$345 
Nicor Gas497 0.5 120 0.3 520 
Southern Company Gas Total$497 0.5 %$341 0.3 %
(*)Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2021.
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 are presented in the following table:
Net cash provided from
(used for):
Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern PowerSouthern Company GasNet cash provided from
(used for):		Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern PowerSouthern Company Gas
(in millions)(in millions)
Six Months Ended June 30, 2020 
Three Months Ended March 31, 2021Three Months Ended March 31, 2021
Operating activities$2,847
$674
$1,124
$71
$195
$1,046
Operating activities$1,242 $214 $489 $(38)$187 $550 
Investing activities(2,655)(783)(1,659)(145)490
(570)Investing activities(2,243)(466)(913)(67)(504)(308)
Financing activities(285)116
869
(178)(808)(401)Financing activities1,734 341 444 90 478 50 
 
Six Months Ended June 30, 2019 
Three Months Ended March 31, 2020Three Months Ended March 31, 2020
Operating activities$2,513
695
$1,112
$60
$719
$931
Operating activities$894 $155 $213 $(17)$83 $643 
Investing activities1,002
(1,002)(1,834)(128)254
(586)Investing activities(889)(424)(795)(71)600 (193)
Financing activities(3,648)617
620
(26)(784)(355)Financing activities185 273 742 (98)(632)(185)
Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.
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Southern Company
Net cash provided from operating activities increased $0.3 billion for the sixthree months ended June 30, 2020March 31, 2021 as compared to the corresponding period in 20192020 primarily due to the timing of vendor payments and income tax payments, as well as increased fuel cost recovery, partially offset by the timing of receivable collections and customer bill credits issued in February 2020 at Georgia Power associated with Tax Reform, partially offset by Alabama Power and Georgia Power. See FUTURE EARNINGS POTENTIAL – "Tax Matters" herein and Note 2 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K for additional information.recovered natural gas costs at Southern Company Gas resulting from Winter Storm Uri.
The net cash used for investing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to the Subsidiary Registrants' construction programs, partially offset by proceeds from the sale transactions described in Note (K) to the Condensed Financial Statements herein.programs.
The net cash used forprovided from financing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to common stock dividend payments and net repaymentsissuances of long-term debt, short-term bank debtloans, and commercial paper, partially offset by net issuances of long-term debt.common stock dividend payments.
Alabama Power
Net cash provided from operating activities decreased $21increased $59 million for the sixthree months ended June 30, 2020March 31, 2021 as compared to the corresponding period in 20192020 primarily due to an increase in retail revenues associated with an increase in Rate RSE customer refunds,effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020, as well as the timing of fossil fuel stock and materials and supplies purchases, partially offset by lower fuel cost recovery and the timing of income tax payments. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K and FUTURE EARNINGS POTENTIAL – "Tax Matters" herein for additional information.receivable collections.
The net cash used for investing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to gross property additions.
The net cash provided from financing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to a capital contributionscontribution from Southern Company, partially offset by common stock dividend payments.
Georgia Power
Net cash provided from operating activities increased $276 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of customer receivable collections, as well as customer bill credits issued in February 2020 associated with Tax Reform.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions, including a total of approximately $350 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of senior notes, capital contributions from Southern Company, and an increase in notes payable, partially offset by common stock dividend payments.
Mississippi Power
Net cash used for operating activities increased $21 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of ad valorem tax payments.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to capital contributions from Southern Company and an increase in commercial paper borrowings, partially offset by common stock dividend payments.
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GeorgiaSouthern Power
Net cash provided from operating activities increased $12$104 million for the sixthree months ended June 30, 2020March 31, 2021 as compared to the corresponding period in 20192020 primarily due to the timing of income tax payments and increased fuel cost recovery, partially offset by customer bill credits issued in 2020 associated with Tax Reform and 2018 earnings in excess of the allowed retail ROE range. See FUTURE EARNINGS POTENTIAL – "Tax Matters" herein and Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.
The net cash used for investing activities for the six months ended June 30, 2020 was primarily due to gross property additions, including approximately $690 million related to the construction of Plant Vogtle Units 3PPA counterparties and 4. See FUTURE EARNINGS POTENTIAL – "Construction Programs – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.
The net cash provided from financing activities for the six months ended June 30, 2020 was primarily due to issuances of senior notes, borrowings from the FFB for construction of Plant Vogtle Units 3 and 4, capital contributions from Southern Company, and short-term borrowings, partially offset by the redemption and maturity of senior notes and common stock dividend payments.
Mississippi Power
Net cash provided from operating activities increased $11 million for the six months ended June 30, 2020 as compared to the corresponding period in 2019 primarily due to the timing of income tax payments.receipts from affiliated companies.
The net cash used for investing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to gross property additions.
The net cash used for financing activities for the six months ended June 30, 2020 was primarily due to the redemption of senior notes and a return of capital to Southern Company, partially offset by debt issuances and capital contributions from Southern Company.
Southern Power
Net cash provided from operating activities decreased $524 million for the six months ended June 30, 2020 as compared to the corresponding period in 2019 primarily due to the delay in utilization of tax credits in the first half of 2020 compared to the utilization of $427 million in income tax credits in the first half of 2019. See FUTURE EARNINGS POTENTIAL – "Tax Matters" herein for additional information.
The net cash provided from investing activities for the six months ended June 30, 2020 was primarily due to proceeds from the disposition of Plant Mankato, partially offset by the acquisition of the Beech Ridge IIDeuel Harvest wind facility and ongoing construction activities. See Note (K) to the Condensed Financial StatementStatements under "Southern Power" herein for additional information.
The net cash used forprovided from financing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to net repayments of short-term bank debt and commercial paper, the repaymentissuance of senior notes, at maturity, distributionsnet capital contributions from noncontrolling interests, and an increase in commercial paper borrowings, partially offset by a return of capital to non-controlling interests,Southern Company and common stock dividend payments, partially offset by contributions from non-controlling interests.payments.
Southern Company Gas
Net cash provided from operating activities increased $115decreased $93 million for the sixthree months ended June 30, 2020March 31, 2021 as compared to the corresponding period in 20192020 primarily due to natural gas cost under recovery, reflecting an increase in the timingcost of vendor paymentsgas purchased during Winter Storm Uri, and income tax payments, partially offset by the timing of customer receivable collections, partially offset by temporary LIFO liquidation, and an increase in the usetiming of stored natural gas at lower prices.vendor payments.
The net cash used for investing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to utility capital expendituresconstruction of transportation and distribution assets recovered through base rates and infrastructure investmentsinvestment recovered through replacement programs at gas distribution operations and capital contributed to equity method investments, partially offset by proceeds from the sale of interests inoperations.
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AND RESULTS OF OPERATIONS (Continued)

Pivotal LNG and Atlantic Coast Pipeline. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
The net cash used forprovided from financing activities for the sixthree months ended June 30, 2020March 31, 2021 was primarily duerelated to net repayments the issuance of short-term borrowings debt and capital contributions from Southern Company, partially offset by common stock dividend payments partially offset by capital contributions from Southern Company.and repayments of commercial paper borrowings.
Significant Balance Sheet Changes
Southern Company
Significant balance sheet changes for the six months ended June 30, 2020 included:
an increaseSources of $1.9 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;
an increase of $1.9 billion in long-term debt (including amounts due within one year) related to new issuances;
a decrease of $0.9 billion in notes payable related to net repayments of short-term bank debt and commercial paper;
a decrease of $0.8 billion in assets held for sale related to the completion of Southern Power's sale of Plant Mankato and Southern Company Gas' sale of its interests in Pivotal LNG and Atlantic Coast Pipeline;
increases of $0.5 billion in both AROs and regulatory assets associated with AROs primarily related to cost estimate updates at Alabama Power for certain of its ash pond facilities; and
an increase of $0.4 billion in accumulated deferred income taxes related to the expected utilization of tax credits in 2020.
See FUTURE EARNINGS POTENTIAL – "Tax Matters" herein, "Financing Activities" herein, and Notes (A) and (K) to the Condensed Financial Statements herein for additional information.
Alabama Power
Significant balance sheet changes for the six months ended June 30, 2020 included:
an increase of $715 million in common stockholder's equity primarily due to capital contributions from Southern Company;
increases of $436 million and $472 million in AROs and regulatory assets associated with AROs, respectively, primarily related to cost estimate updates for certain ash pond facilities; and
an increase of $408 million in total property, plant, and equipment primarily related to the construction of distribution and transmission facilities and the installation of equipment to comply with environmental standards.
See Note (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for additional information.
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Georgia Power
Significant balance sheet changes for the six months ended June 30, 2020 included:
an increase of $1.3 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, partially offset by a $149 million decrease due to a charge related to the construction of Plant Vogtle Units 3 and 4;
an increase of $1.1 billion in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notes and borrowings from the FFB for construction of Plant Vogtle Units 3 and 4; and
an increase of $0.4 billion in common stockholder's equity primarily due to capital contributions from Southern Company.
See "Financing Activities – Georgia Power" herein and Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
Mississippi Power
Significant balance sheet changes for the six months ended June 30, 2020 included:
a decrease of $252 million in cash and cash equivalents and a decrease of $185 million in long-term debt (including amounts due within one year) primarily related to the repayment of senior notes at maturity;
an increase of $72 million in common stockholder's equity primarily due to a capital contribution from Southern Company;
a decrease of $42 million in deferred credits related to income taxes due to reclassifying certain amounts to other regulatory liabilities, current for the expected flowback of excess deferred income taxes; and
an increase of $38 million in total property, plant, and equipment primarily related to the installation of equipment to comply with environmental standards and the construction of transmission and distribution facilities.
See "Financing Activities – Mississippi Power" herein for additional information.
Southern Power
Significant balance sheet changes for the six months ended June 30, 2020 included:
a decrease of $618 million in assets held for sale (of which $17 million related to current assets) due to completion of the sale of Plant Mankato;
a decrease of $457 million in notes payable due to net repayments of short-term bank debt and commercial paper;
an increase of $366 million in prepaid income taxes and a decrease of $395 million in accumulated deferred income tax assets primarily related to the expected utilization of tax credits in 2020;
an increase of $364 million in property, plant, and equipment in service and a decrease of $201 million in construction work in progress primarily due to wind facilities being acquired or placed in service; and
a decrease of $299 million in securities due within one year primarily related to the maturity of senior notes.
See FUTURE EARNINGS POTENTIAL – "Tax Matters" herein, "Financing Activities – Southern Power" herein, and Note (K) to the Condensed Financial Statements herein for additional information.
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Southern Company Gas
Significant balance sheet changes for the six months ended June 30, 2020 included:
an increase of $477 million in total property, plant, and equipment primarily due to utility capital expenditures and infrastructure investments recovered through replacement programs;
a decrease of $321 million in notes payable due to net repayments of short-term borrowings;
an increase of $263 million in common stockholder's equity primarily from net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
a decrease of $197 million in natural gas for sale due to the use of stored natural gas;
a decrease of $171 million in assets held for sale due to the completed sale of interests in Pivotal LNG and Atlantic Coast Pipeline;
decreases of $155 million and $158 million in energy marketing receivables and payables, respectively, due to lower natural gas prices and volumes of natural gas sold; and
a decrease of $126 million in unbilled revenues due to seasonality.
See "Financing Activities – Southern Company Gas" herein and Note (K) to the Condensed Financial Statements herein for additional information.
Capital Requirements and Contractual Obligations
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements" and "Contractual Obligations"Sources of Capital" in Item 7 of the Form 10-K for a descriptionadditional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances in the capital markets. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. Southern Company does not expect to issue any equity in the capital markets through 2025. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on stock purchase contracts associated with Southern Company's equity units.
The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. In addition, Georgia Power plans to utilize borrowings from the FFB (as discussed further in Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K) and Southern Power plans to utilize tax equity partnership contributions (as discussed further herein).
The amount, type, and timing of any financings in 2021, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and contractual obligations. The following table provideswill depend upon prevailing market conditions, regulatory approvals (for certain of the applicable Registrants' maturities of long-term debt through June 30, 2021:
At June 30, 2020:Southern CompanyAlabama PowerGeorgia
Power		Southern PowerSouthern Company Gas
 (in millions)
Securities due within one year$1,596
$496
$536
$525
$31
Subsidiary Registrants), and other factors. See "Sources of Capital""Cash Requirements" and "Financing Activities""Financing Activities" herein for additional information.
The construction programsSouthern Power utilizes tax equity partnerships as one of its financing sources, where the tax partner takes significantly all of the federal tax benefits. These tax equity partnerships are subjectconsolidated in Southern Power's financial statements and are accounted for using HLBV methodology to periodic reviewallocate partnership gains and revision,losses. In
March 2021, Southern Power obtained tax equity funding for the Deuel Harvest wind facility and actual construction costs may vary from these estimates becausereceived proceeds of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. The continued COVID-19 pandemic could also impair the ability to develop, construct, and operate facilities, as discussed further in Item 1A herein.$220 million. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Additionally,during the first three months of 2021, Southern Power's planned expenditures for plant acquisitions may vary due to market opportunities and Southern Power's ability to execute its growth strategy.Power received tax equity funding totaling $17 million from existing partnerships. See Note 151 to the financial statements under "Southern Power""General" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power""Southern Power" herein for additional information regarding Southern Power's plant acquisitions and construction projects.information.
The construction programBy regulation, Nicor Gas is restricted, to the extent of Georgia Power also includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operationits retained earnings balance, in the global nuclear industry at this scaleamount it can dividend or loan to affiliates and which may be subjectis not permitted to additional revised cost estimates during construction. See Note 2make money pool loans to affiliates. At March 31, 2021, the financial statements under "Georgia Power – Nuclear Construction" in Item 8amount of the Form 10-K, Note (B)subsidiary retained earnings restricted to thedividend totaled $1.1 billion. This restriction did not impact Southern
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.
Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at March 31, 2021 for the applicable Registrants:
At March 31, 2021Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern Company Gas
(in millions)
Current liabilities in excess of current assets$2,117 $120 $699 $514 $166 
The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.
Bank Credit Arrangements
At March 31, 2021, the Registrants' unused committed credit arrangements with banks were as follows:
At March 31, 2021Southern
Company
parent		Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCOSouthern
Company
(in millions)
Unused committed credit$1,999 $1,328 $1,728 $250 $568 $1,745 $30 $7,648 
Condensed Financial Statements under "(a)GeorgiaAt March 31, 2021, Southern Power – Nuclear Construction" herein, and Item 1A herein also had two continuing letters of credit facilities for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.standby letters of credit, of which $13 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
As a result(b)Includes $1.045 billion and $700 million at Southern Company Gas Capital and Nicor Gas, respectively.
Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
A portion of the second quarter 2020 increase in Alabama Power's AROs discussed under FUTURE EARNINGS POTENTIAL – "Environmental Matters" herein, Alabama Power's costs through 2024 associatedunused credit with closure and monitoringbanks is allocated to provide liquidity support to the revenue bonds of ash ponds and landfills in accordance with the CCR Ruletraditional electric operating companies and the related state rulecommercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at March 31, 2021 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $34 million at Mississippi Power). In addition, at March 31, 2021, Georgia Power and Mississippi Power had approximately $174 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are currently estimatedrequired to be approximately $263 million for 2020, $247 million for 2021, $301 million for 2022, $330 million for 2023, and $326 million for 2024. These costs are reflected in Alabama Power's ARO liabilities and are based on closure-in-place for all of its ash ponds. These anticipated costs are likelyremarketed within the next 12 months.
See Note 8 to change, and could change materially, as assumptions and details pertaining to closure are refined and compliance activities continue. See FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations – Coal Combustion Residuals"the financial statements in Item 8 of the Form 10-K and Note (A)(F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Short-term Borrowings
The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short-term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:
 
Short-term Debt at
March 31, 2021
Short-term Debt During the Period(*)
 Amount
Outstanding		Weighted
Average
Interest
Rate		Average
Amount
Outstanding		Weighted
Average
Interest
Rate		Maximum
Amount
Outstanding
 (in millions)(in millions)(in millions)
Southern Company$1,092 0.3 %$998 0.2 %$1,520 
Alabama Power— — 46 0.1 200 
Georgia Power205 0.2 51 0.2 230 
Mississippi Power54 0.2 20 0.2 64 
Southern Power315 0.2 147 0.2 520 
Southern Company Gas:
Southern Company Gas Capital$— — %$221 0.2 %$345 
Nicor Gas497 0.5 120 0.3 520 
Southern Company Gas Total$497 0.5 %$341 0.3 %
(*)Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2021.
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 are presented in the following table:
Net cash provided from
(used for):		Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended March 31, 2021
Operating activities$1,242 $214 $489 $(38)$187 $550 
Investing activities(2,243)(466)(913)(67)(504)(308)
Financing activities1,734 341 444 90 478 50 
Three Months Ended March 31, 2020
Operating activities$894 $155 $213 $(17)$83 $643 
Investing activities(889)(424)(795)(71)600 (193)
Financing activities185 273 742 (98)(632)(185)
Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company
Net cash provided from operating activities increased $0.3 billion for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of vendor payments and customer bill credits issued in February 2020 at Georgia Power associated with Tax Reform, partially offset by under recovered natural gas costs at Southern Company Gas resulting from Winter Storm Uri.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to the Subsidiary Registrants' construction programs.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of long-term debt, short-term bank loans, and commercial paper, partially offset by common stock dividend payments.
Alabama Power
Net cash provided from operating activities increased $59 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to an increase in retail revenues associated with an increase in Rate RSE effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020, as well as the timing of fossil fuel stock and materials and supplies purchases, partially offset by lower fuel cost recovery and the timing of receivable collections.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to a capital contribution from Southern Company, partially offset by common stock dividend payments.
Georgia Power
Net cash provided from operating activities increased $276 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of customer receivable collections, as well as customer bill credits issued in February 2020 associated with Tax Reform.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions, including a total of approximately $350 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of senior notes, capital contributions from Southern Company, and an increase in notes payable, partially offset by common stock dividend payments.
Mississippi Power
Net cash used for operating activities increased $21 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of ad valorem tax payments.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to capital contributions from Southern Company and an increase in commercial paper borrowings, partially offset by common stock dividend payments.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Power
Net cash provided from operating activities increased $104 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of payments to PPA counterparties and the timing of receipts from affiliated companies.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to the acquisition of the Deuel Harvest wind facility and ongoing construction activities. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to the issuance of senior notes, net capital contributions from noncontrolling interests, and an increase in commercial paper borrowings, partially offset by a return of capital to Southern Company and common stock dividend payments.
Southern Company Gas
Net cash provided from operating activities decreased $93 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to natural gas cost under recovery, reflecting an increase in the cost of gas purchased during Winter Storm Uri, and the timing of customer receivable collections, partially offset by temporary LIFO liquidation, and the timing of vendor payments.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs at gas distribution operations.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to the issuance of short-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments and repayments of commercial paper borrowings.
Sources of Capital
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information. Southern Company intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances in the capital markets. Equity capital can be provided from any combination of Southern Company's stock plans, private placements, or public offerings. Southern Company does not expect to issue any equity in the capital markets through 2024.2025. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on stock purchase contracts associated with Southern Company's equity units.
The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in the past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company. In addition, Georgia Power plans to utilize borrowings from the FFB (as discussed further in Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K) and Southern Power plans to utilize tax equity partnership contributions (as discussed further herein).
The traditional electric operating companies and the natural gas distribution utilities have experienced a reduction in operating cash flows as a result of the temporary suspension of disconnections for non-payment by customers resulting from the COVID-19 pandemic and the related overall economic contraction. The U.S. House of Representatives has passed the Heroes Act, which would prohibit creditors, including utilities, from collecting consumer debts that are or become past-due, imposing late fees, or disconnecting customers for nonpayment. If the Heroes Act becomes law, its restrictions would apply until 120 days after the end of the presidential declared emergency related to the COVID-19 pandemic. While the reduction in operating cash flows is expected to continue while disconnections for non-payment are suspended, the ultimate extent of the negative impact on the Registrants' liquidity depends on the duration of the COVID-19 pandemic and the timing of economic recovery and cannot be determined at this time. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See Note (B) to the Condensed Financial Statements herein for information regarding suspended disconnections for non-payment by the traditional electric operating companies and the natural gas distribution utilities.
The amount, type, and timing of any financings in 2020,2021, as well as in subsequent years, will be contingent on investment opportunities and the Registrants' capital requirements and will depend upon prevailing market conditions, regulatory approvals (for certain of the Subsidiary Registrants), and other factors. See "Capital Requirements"Cash Requirements" and Contractual Obligations""Financing Activities" herein for additional information. Also see "Overview" herein for information on volatility in the financial markets that has occurred at certain periods during 2020 as a result of the COVID-19 pandemic.
Southern Power utilizes tax equity partnerships as one of its financing sources, where the tax partner takes significantly all of the federal tax benefits. These tax equity partnerships are consolidated in Southern Power's financial statements and are accounted for using HLBV methodology to allocate partnership gains and losses. In June 2020,
March 2021, Southern Power obtained tax equity funding for the ReadingDeuel Harvest wind projectfacility and received proceeds of $156$220 million. In addition, during the first sixthree months of 2020,2021, Southern Power received tax equity funding totaling $16
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

$17 million from existing partnerships. See Note 1 to the financial statements under "General" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
By regulation, Nicor Gas is restricted, to the extent of its retained earnings balance, in the amount it can dividend or loan to affiliates and is not permitted to make money pool loans to affiliates. At June 30, 2020,March 31, 2021, the amount of subsidiary retained earnings restricted to dividend totaled $1.1 billion. This restriction did not impact Southern
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AND RESULTS OF OPERATIONS (Continued)
Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" in Item 7 of the Form 10-K for additional information.
TheCertain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at June 30, 2020March 31, 2021 for the applicable Registrants:
At June 30, 2020Southern CompanyGeorgia
Power		Mississippi PowerSouthern Company Gas
At March 31, 2021At March 31, 2021Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern Company Gas
(in millions)(in millions)
Current liabilities in excess of current assets$265
$1,132
$70
$209
Current liabilities in excess of current assets$2,117 $120 $699 $514 $166 
The Registrants believe the need for working capital can be adequately met by utilizing operating cash flows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the Subsidiary Registrants may utilize equity contributions and/or loans from Southern Company.
Bank Credit Arrangements
At June 30, 2020,March 31, 2021, the Registrants' unused committed credit arrangements with banks were as follows:
At March 31, 2021Southern
Company
parent		Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCOSouthern
Company
(in millions)
Unused committed credit$1,999 $1,328 $1,728 $250 $568 $1,745 $30 $7,648 
At June 30, 2020
Southern
Company
parent
Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCO
Southern
Company
 (in millions)
Unused committed credit$1,999
$1,328
$1,733
$250
$590
$1,745
$30
$7,675
(a)At March 31, 2021, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $13 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(a)At June 30, 2020, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $79 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangement or to the letter of credit facilities.
(b)Includes $1.245 billion and $500 million at Southern Company Gas Capital and Nicor Gas, respectively.
(b)Includes $1.045 billion and $700 million at Southern Company Gas Capital and Nicor Gas, respectively.
Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at June 30, 2020March 31, 2021 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $34 million at Mississippi Power). In addition, at June 30, 2020,March 31, 2021, Georgia Power and Mississippi Power had approximately $257$174 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
See Note 8 to the financial statements under "Bank Credit Arrangements" in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank"Bank Credit Arrangements" hereinArrangements" for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Short-term Borrowings
The Registrants, Nicor Gas, and SEGCO make short-term borrowings primarily through commercial paper programs that have the liquidity support of the committed bank credit arrangements described above. Southern Power's subsidiaries are not issuers or obligors under its commercial paper program. Commercial paper and short-term bank term loans are included in notes payable in the balance sheets. Details of the Registrants' short-term borrowings were as follows:
 
Short-term Debt at
March 31, 2021
Short-term Debt During the Period(*)
 Amount
Outstanding		Weighted
Average
Interest
Rate		Average
Amount
Outstanding		Weighted
Average
Interest
Rate		Maximum
Amount
Outstanding
 (in millions)(in millions)(in millions)
Southern Company$1,092 0.3 %$998 0.2 %$1,520 
Alabama Power— — 46 0.1 200 
Georgia Power205 0.2 51 0.2 230 
Mississippi Power54 0.2 20 0.2 64 
Southern Power315 0.2 147 0.2 520 
Southern Company Gas:
Southern Company Gas Capital$— — %$221 0.2 %$345 
Nicor Gas497 0.5 120 0.3 520 
Southern Company Gas Total$497 0.5 %$341 0.3 %
(*)Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2021.
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 are presented in the following table:
Net cash provided from
(used for):		Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended March 31, 2021
Operating activities$1,242 $214 $489 $(38)$187 $550 
Investing activities(2,243)(466)(913)(67)(504)(308)
Financing activities1,734 341 444 90 478 50 
Three Months Ended March 31, 2020
Operating activities$894 $155 $213 $(17)$83 $643 
Investing activities(889)(424)(795)(71)600 (193)
Financing activities185 273 742 (98)(632)(185)
Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.
123
 
Short-term Debt at
June 30, 2020
 
Short-term Debt During the Period(*)
 
Amount
Outstanding
 
Weighted
Average
Interest
Rate
 
Average
Amount
Outstanding
 
Weighted
Average
Interest
Rate
 
Maximum
Amount
Outstanding
 (in millions)   (in millions)   (in millions)
Southern Company$1,185
 1.2% $1,317
 1.6% $1,738
Alabama Power—
 —
 42
 1.3
 105
Georgia Power465
 1.5
 443
 1.6
 478
Mississippi Power4
 0.3
 26
 1.9
 40
Southern Power92
 0.3
 68
 0.5
 252
Southern Company Gas:         
Southern Company Gas Capital$290
 1.1% $332
 1.6% $482
Nicor Gas39
 0.2
 25
 1.4
 104
Southern Company Gas Total$329
 1.0% $357
 1.6%  
(*)Average and maximum amounts are based upon daily balances during the three-month period ended June 30, 2020.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company
Net cash provided from operating activities increased $0.3 billion for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of vendor payments and customer bill credits issued in February 2020 at Georgia Power associated with Tax Reform, partially offset by under recovered natural gas costs at Southern Company Gas resulting from Winter Storm Uri.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to the Subsidiary Registrants' construction programs.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of long-term debt, short-term bank loans, and commercial paper, partially offset by common stock dividend payments.
Alabama Power
Net cash provided from operating activities increased $59 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to an increase in retail revenues associated with an increase in Rate RSE effective in January 2021 and colder weather in Alabama Power's service territory in the first quarter 2021 compared to the corresponding period in 2020, as well as the timing of fossil fuel stock and materials and supplies purchases, partially offset by lower fuel cost recovery and the timing of receivable collections.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to a capital contribution from Southern Company, partially offset by common stock dividend payments.
Georgia Power
Net cash provided from operating activities increased $276 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of customer receivable collections, as well as customer bill credits issued in February 2020 associated with Tax Reform.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions, including a total of approximately $350 million related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of senior notes, capital contributions from Southern Company, and an increase in notes payable, partially offset by common stock dividend payments.
Mississippi Power
Net cash used for operating activities increased $21 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of ad valorem tax payments.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to gross property additions.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to capital contributions from Southern Company and an increase in commercial paper borrowings, partially offset by common stock dividend payments.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Power
Net cash provided from operating activities increased $104 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to the timing of payments to PPA counterparties and the timing of receipts from affiliated companies.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to the acquisition of the Deuel Harvest wind facility and ongoing construction activities. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to the issuance of senior notes, net capital contributions from noncontrolling interests, and an increase in commercial paper borrowings, partially offset by a return of capital to Southern Company and common stock dividend payments.
Southern Company Gas
Net cash provided from operating activities decreased $93 million for the three months ended March 31, 2021 as compared to the corresponding period in 2020 primarily due to natural gas cost under recovery, reflecting an increase in the cost of gas purchased during Winter Storm Uri, and the timing of customer receivable collections, partially offset by temporary LIFO liquidation, and the timing of vendor payments.
The net cash used for investing activities for the three months ended March 31, 2021 was primarily related to construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs at gas distribution operations.
The net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to the issuance of short-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments and repayments of commercial paper borrowings.
Significant Balance Sheet Changes
Southern Company
Significant balance sheet changes for the three months ended March 31, 2021 included:
•an increase of $1.7 billion in long-term debt (including amounts due within one year) related to new issuances;
•an increase of $1.4 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs, as well as Southern Power's acquisition of the Deuel Harvest wind facility;
•an increase of $0.8 billion in total stockholders' equity primarily related to net income, partially offset by common stock dividend payments;
•an increase of $0.7 billion in accumulated deferred income taxes primarily related to the expected utilization of tax credits in 2021;
•an increase of $0.7 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Southern Company" herein;
•an increase of $0.5 billion in natural gas cost under recovery, which was impacted by an increase in Southern Company Gas' cost of gas purchased during Winter Storm Uri; and
•an increase of $0.5 billion in notes payable related to net issuances of short-term bank debt and commercial paper.
See "Financing Activities" herein and Notes (B) and (K) to the Condensed Financial Statements herein for additional information.
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Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Alabama Power
Significant balance sheet changes for the three months ended March 31, 2021 included:
•an increase of $716 million in common stockholder's equity primarily due to capital contributions from Southern Company;
•an increase of $269 million in total property, plant, and equipment primarily related to construction of distribution and transmission facilities and the installation of equipment to comply with environmental standards; and
•a decrease of $153 million in other accounts payable primarily due to the timing of vendor payments.
Georgia Power
Significant balance sheet changes for the three months ended March 31, 2021 included:
•an increase of $547 million in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $291 million for Plant Vogtle Units 3 and 4 (net of a pre-tax charge of $48 million for an estimated probable loss);
•an increase of $395 million in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notes; and
•an increase of $273 million in common stockholder's equity primarily due to capital contributions from Southern Company.
See "Financing Activities – Georgia Power" herein and Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
Mississippi Power
Significant balance sheet changes for the three months ended March 31, 2021 included:
•an increase of $106 million in common stockholder's equity primarily from capital contributions from Southern Company and
•a decrease of $75 million in accrued taxes primarily due to the payment of ad valorem taxes.
Southern Power
Significant balance sheet changes for the three months ended March 31, 2021 included:
•an increase of $409 million in property, plant, and equipment in service primarily due to the acquisition of the Deuel Harvest wind facility;
•an increase of $357 million in prepaid income taxes, a decrease of $262 million in accumulated deferred income tax assets, and a $107 million increase in accumulated deferred income tax liabilities primarily related to the expected utilization of ITCs in 2021; and
•an increase of $337 million in long-term debt primarily related to the issuance of senior notes.
See "Financing Activities – Southern Power" herein and Note (K) to the Condensed Financial Statements herein for additional information.
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Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas
Significant balance sheet changes for the three months ended March 31, 2021 included:
•increases of $487 million in natural gas cost under recovery, $171 million in other regulatory assets, deferred, and $162 million in accumulated deferred income taxes, all primarily related to natural gas cost under recovery, reflecting an increase in the cost of gas purchased during Winter Storm Uri;
•an increase of $327 million in common stockholder's equity primarily related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
•an increase of $292 million in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Southern Company Gas" herein;
•a decrease of $263 million in natural gas for sale due to higher volumes of natural gas sold;
•an increase of $194 million in temporary LIFO liquidation due to higher natural gas prices during Winter Storm Uri;
•an increase of $173 million in notes payable due to issuances of short-term borrowings; and
•an increase of $171 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets recovered through base rates and infrastructure investment recovered through replacement programs.
See "Financing Activities – Southern Company Gas" herein and Note (B) to the Condensed Financial Statements herein for additional information.
Financing Activities
The following table outlines the Registrants' long-term debt financing activities for the first sixthree months of 2020:2021:
Senior Notes
CompanyIssuancesMaturities, Redemptions, and Repurchases
Other Long-Term Debt Redemptions
and Maturities(*)
(in millions)
Southern Company parent$1,000 $— $— 
Georgia Power750 325 26 
Southern Power400 — — 
Southern Company Gas— — 30 
Other— — 3 
Southern Company$2,150 $325 $59 
 Senior Notes Revenue Bonds Other Long-Term Debt
CompanyIssuances Maturities, Redemptions, and Repurchases 
Issuances/
Remarketings
 
Maturities, Redemptions, and
Repurchases
 Issuances 
Redemptions
and Maturities(*)
 (in millions)
Southern Company parent$1,000
 $600
 $—
 $—
 $1,000
 $—
Alabama Power—
 —
 87
 87
 —
 —
Georgia Power1,500
 950
 53
 148
 519
 35
Mississippi Power—
 275
 34
 41
 100
 —
Southern Power—
 300
 —
 —
 —
 —
Other—
 —
 —
 —
 —
 8
Southern Company$2,500
 $2,125
 $174
 $276
 $1,619
 $43
(*)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments for FFB borrowings.
(*)Table of ContentsIncludes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments for FFB borrowings.Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Except as otherwise described herein, the Registrants used the proceeds of debt issuances for their redemptions and maturities shown in the table above, to repay short-term indebtedness, and for general corporate purposes, including working capital. The Subsidiary Registrants also used the proceeds for their construction programs.
In addition to any financings that may be necessary to meet capital requirements and contractual obligations, the Registrants plan to continue, when economically feasible, a program to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.
Southern Company
During the first sixthree months of 2020,2021, Southern Company issued approximately 2.92.2 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $59$14 million.
In January 2020, Southern Company issued $1.0 billion aggregate principal amount of Series 2020A 4.95% Junior Subordinated Notes due January 30, 2080.
In March 2020,2021, Southern Company borrowed $250$25 million pursuant to a short-term uncommitted bank credit arrangement, bearing interest at a rate agreed upon by Southern Company and the bank from time to time and payable on demand, following specified notice by the bank. In April 2020, Southern Companywhich it repaid $50 million of the $250 million borrowed.
Also in March 2020, Southern Company entered into a $75 million short-term floating rate bank loan bearing interest based on one-month LIBOR.2021.
In April 2020, Southern Company issued $1.0 billion aggregate principal amount of Series 2020A 3.70% Senior Notes due April 30, 2030.
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In May 2020, Southern Company redeemed all $600 million aggregate principal amount of its Series 2015A 2.750% Senior Notes due June 15, 2020.
Alabama Power
In March 2020, Alabama Power purchased and held approximately $87 million aggregate principal amount of The Industrial Development Board of the City of Mobile, Alabama Pollution Control Revenue Bonds (Alabama Power Company Plant Barry Project), Series 2007-A, which were remarketed to the public in June 2020.
Georgia Power
In January 2020, Georgia Power issued $700 million aggregate principal amount of Series 2020A 2.10% Senior Notes due July 30, 2023, $500 million aggregate principal amount of Series 2020B 3.70% Senior Notes due January 30, 2050, and an additional $300 million aggregate principal amount of Series 2019B 2.65% Senior Notes due September 15, 2029.
In February 2020, Georgia Power redeemed all $500 million aggregate principal amount of its Series 2017C 2.00% Senior Notes due September 8, 2020.
Also in February 2020, Georgia Power purchased and held approximately $28 million, $49 million, and $18 million aggregate principal amounts of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), Second Series 2006, First Series 2012, and First Series 2013, respectively, which may be remarketed to the public at a later date.
In March 2020, Georgia Power repaid at maturity $450 million aggregate principal amount of its Series 2017A 2.00% Senior Notes.
Also in March 2020, Georgia Power purchased and subsequently remarketed to the public approximately $53 million of pollution control revenue bonds.
Also in March 2020, Georgia Power extended one of its $125 million short-term floating rate bank loans to a long-term term loan, which matures in June 2021, and borrowed $200 million pursuant to a $250 million short-term uncommitted bank credit arrangement, which bears interest at a rate agreed upon by Georgia Power and the bank
    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

In February 2021, Southern Company issued $600 million aggregate principal amount of Series 2021A 0.60% Senior Notes due February 26, 2024 and $400 million aggregate principal amount of Series 2021B 1.75% Senior Notes due March 15, 2028.
from time to time and is payable on demand, following specified notice by the bank. In April 2020, Georgia
Alabama Power borrowed the remaining $50 million pursuant to this bank credit arrangement.
In June 2020, GeorgiaMarch 2021, Alabama Power extended the maturity dates from March 2021 to March 2026 on its other $125 million short-term floating ratethree bank term loan which matures in December 2020.
Also in June 2020, Georgia Power made additional borrowings under the FFB Credit Facilities inagreements with an aggregate principal amount of $519$45 million, at anbearing interest ratebased on three-month LIBOR.
Georgia Power
In February 2021, Georgia Power issued $750 million aggregate principal amount of 1.652% throughSeries 2021A 3.25% Senior Notes due March 15, 2051. An amount equal to the finalnet proceeds of the senior notes is being allocated to finance or refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.
In March 2021, Georgia Power redeemed all $325 million aggregate principal amount of its Series 2016B 2.40% Senior Notes due April 1, 2021.
Also in March 2021, Georgia Power extended the maturity date of February 20, 2044. The proceeds were usedits $125 million term loan from June 2021 to reimburse Georgia Power for Eligible Project Costs relating to the construction of Plant Vogtle Units 3 and 4. June 2022.
During the sixthree months ended June 30, 2020,March 31, 2021, Georgia Power made principal amortization payments of $32$25 million under the FFB Credit Facilities. At June 30, 2020,March 31, 2021, the outstanding principal balance under the FFB Credit Facilities was $4.3$4.6 billion. See Note 8 to the financial statements under "Long-Term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for additional information.
MississippiSouthern Power
In January 2021, Southern Power issued $400 million aggregate principal amount of Series 2021A 0.90% Senior Notes due January 15, 2026. An amount equal to the net proceeds of the senior notes is being allocated to finance or refinance, in whole or in part, one or more renewable energy projects.
Southern Company Gas
In February 2020, Mississippi Power2021, Atlanta Gas Light repaid at maturity $30 million aggregate principal amount of 9.1% medium-term notes.
In March 2021, Nicor Gas entered into $60 million and $15 millionthree short-term floating rate bank term loans which mature in December 2021 and January 2022, respectively,an aggregate principal amount of $300 million, each bearing interest based on one-month LIBOR.
In March 2020, Mississippi Power entered into a $125 million revolving credit arrangement that matures in March 2023 and borrowed $40 million (short term) and $25 million (long term) pursuant to the arrangement, each bearing interest based on one-month LIBOR. In May 2020, Mississippi Power repaid the $40 million short-term portion.
In March 2020, Mississippi Power repaid at maturity the remaining $275 million aggregate principal amount of its Series 2018A Floating Rate Senior Notes.
In April 2020, Mississippi Power purchased and held approximately $11 million, $14 million, and $9 million aggregate principal amount of Mississippi Business Finance Corporation Solid Waste Disposal Facilities Revenue Bonds, Series 1995 (Mississippi Power Company Project), Solid Waste Disposal Facilities Revenue Refunding Bonds, Series 1998 (Mississippi Power Company Project), and Revenue Bonds, Series 1999 (Mississippi Power Company Project), respectively, which were remarketed to the public in May 2020.
Also in April 2020, Mississippi Power redeemed approximately $7 million aggregate principal amount of The Industrial Development Board of the City of Eutaw, Alabama Pollution Control Revenue Refunding Bonds, Series 1992 (Mississippi Power Greene County Plant Project) due December 1, 2020.
Southern Power
In February 2020, Southern Power repaid its $100 million short-term floating rate bank loan entered into in December 2019.
In June 2020, Southern Power repaid at maturity $300 million aggregate principal amount of its Series 2015B 2.375% Senior Notes.
Southern Company Gas
In March 2020, Southern Company Gas Capital, as borrower, and Southern Company Gas, as guarantor, entered into a $150 million short-term floating rate bank loan bearing interest based on one-month LIBOR.
Also in March 2020, Southern Company Gas Capital borrowed approximately $95 million pursuant to a short-term uncommitted bank credit arrangement, guaranteed by Southern Company Gas, bearing interest at a rate agreed upon by Southern Company Gas Capital and the bank from time to time and payable on demand, following specified notice by the bank.
Credit Rating Risk
At June 30, 2020,March 31, 2021, the Registrants did not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade.
Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

There are certain contracts that could require collateral, but not accelerated payment, in the event of a credit rating change of certain subsidiariesRegistrants to BBB and/or Baa2 or below. These contracts are primarily for physical electricity and natural gas purchases and sales, fuel purchases, fuel transportation and storage, energy price risk management, transmission, interest rate management, and, for Georgia Power, construction of new generation at Plant Vogtle Units 3 and 4.
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Table of ContentsIndex to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
The maximum potential collateral requirements under these contracts at June 30, 2020March 31, 2021 were as follows:
Credit Ratings
Southern Company(*)
Alabama PowerGeorgia PowerMississippi Power
Southern
Power(*)
Southern Company Gas
(in millions)
At BBB and/or Baa2$38 $1 $— $— $37 $— 
At BBB- and/or Baa3433 2 61 1 371 — 
At BB+ and/or Ba1 or below1,938 366 965 308 1,210 10 
Credit Ratings
Southern Company(*)
Alabama PowerGeorgia PowerMississippi Power
Southern
Power(*)
Southern Company Gas
 (in millions)
At BBB and/or Baa2$36
$1
$—
$—
$35
$—
At BBB- and/or Baa3428
2
61
1
366
—
At BB+ and/or Ba1 or below1,926
319
899
265
1,188
7
(*)Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $105 million of cash collateral posted related to PPA requirements at March 31, 2021.
(*)Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $105 million of cash collateral posted related to PPA requirements at June 30, 2020.
The potential collateral requirement amounts in the previous table for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event thatif either Alabama Power or Georgia Power has a credit rating change to below investment grade. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. Additionally, a credit rating downgrade could impact the ability of the Registrants to access capital markets and would be likely to impact the cost at which they do so.
Market Price Risk
Other than the Southern Company Gas items discussed below, there were no material changes to the Registrants' disclosures about market price risk during the secondfirst quarter 2020.2021. For an in-depth discussion of Southern Company Gas' market price risks, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" in Item 7 of the Form 10-K. Also see "Overview" herein for information on volatility in the financial markets that has occurred at certain periods during 2020 resulting from the COVID-19 pandemic and Notes (I) and (J) to the Condensed Financial Statements herein for information relating to derivative instruments.
Southern Company Gas is exposed to market risks, including commodity price risk, interest rate risk, and weather risk. Due to various cost recovery mechanisms, the natural gas distribution utilities that sell natural gas directly to end-use customers continue to have limited exposure to market volatility of natural gas prices. Certain of the natural gas distribution utilities may manage fuel-hedging programs implemented per the guidelines of their respective state regulatory agencies to hedge the impact of market fluctuations in natural gas prices for customers. In addition, certain of Southern Company Gas' non-regulated operations routinely utilize various types of derivative instruments to economically hedge certain commodity price and weather risks inherent in the natural gas industry. These instruments include a variety of exchange-traded and over-the-counter energy contracts, such as forward contracts, futures contracts, options contracts, and swap agreements. Some of these economic hedge activities may not qualify, or may not be designated, for hedge accounting treatment.
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    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

For the periods presented below, the changes in net fair value of Southern Company Gas' energy-related derivative contracts were as follows:
First Quarter 2021First Quarter 2020
(in millions)
Contracts outstanding at beginning of period, assets (liabilities), net$101 $70 
Contracts realized or otherwise settled(48)(91)
Current period changes(*)
(13)59 
Contracts outstanding at the end of period, assets (liabilities), net$40 $38 
Netting of cash collateral27 128 
Cash collateral and net fair value of contracts outstanding at end of period$67 $166 
 Second Quarter 2020Second Quarter 2019 Year-to-Date 2020Year-to-Date 2019
 (in millions)
Contracts outstanding at beginning of period, assets (liabilities), net$17
$(128) $72
$(167)
Contracts realized or otherwise settled(8)5
 (99)—
Current period changes(*)
17
33
 53
77
Contracts outstanding at the end of period, assets (liabilities), net$26
$(90)
$26
$(90)
Netting of cash collateral114
178
 114
178
Cash collateral and net fair value of contracts outstanding at end of period$140
$88

$140
$88
(*)Current period changes also include the fair value of new contracts entered into during the period, if any.
(*)Current period changes also include the fair value of new contracts entered into during the period, if any.
The maturities of Southern Company Gas' derivative contracts at June 30, 2020March 31, 2021 were as follows:
Fair Value Measurements of Contracts at
March 31, 2021
Total
Fair Value		Maturity
20212022 – 20232024 – 2025
(in millions)
Level 1(a)
$13 $11 $(12)$14 
Level 2(b)
(1)(1)(2)2 
Level 3(c)
28 9 8 11 
Fair value of contracts outstanding at end of period(d)
$40 $19 $(6)$27 
(a)Valued using NYMEX futures prices.
(b)Valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers.
(c)Valued using a combination of observable and unobservable inputs.
(d)Excludes cash collateral of$27 million.
Southern Company Gas Value at Risk (VaR)
VaR is the maximum potential loss in portfolio value over a specified time period that is not expected to be exceeded within a given degree of probability. Southern Company Gas' VaR may not be comparable to that of other companies due to differences in the factors used to calculate VaR. Southern Company Gas' VaR is determined on a 95% confidence interval and a one-day holding period, which means that 95% of the time, the risk of loss in a day from a portfolio of positions is expected to be less than or equal to the amount of VaR calculated. The open exposure of Southern Company Gas is managed in accordance with established policies that limit market risk and require daily reporting of potential financial exposure to senior management. Because Southern Company Gas generally manages physical gas assets and economically protects its positions by hedging in the futures markets, Southern Company Gas' open exposure is generally mitigated. Southern Company Gas employs daily risk testing, using both VaR and stress testing, to evaluate the risk of its positions.
Southern Company Gas actively monitors open commodity positions and the resulting VaR and maintains a relatively small risk exposure as total buy volume is close to sell volume, with minimal open natural gas price risk. Based on a 95% confidence interval and employing a one-day holding period, SouthStar's portfolio of positions for all periods presented was immaterial.
130
   Fair Value Measurements
   June 30, 2020
 Total
Fair Value		 Maturity
  Year 1  Years 2 & 3 Years 4 and thereafter
 (in millions)
Level 1(a)
$(80) $(46) $(41) $7
Level 2(b)
26
 13
 9
 4
Level 3(c)
80
 12
 27
 41
Fair value of contracts outstanding at end of period(d)
$26
 $(21) $(5) $52
(a)Valued using NYMEX futures prices.
(b)Valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers.
(c)Valued using a combination of observable and unobservable inputs.
(d)Excludes cash collateral of $114 million.
    Table of Contents                                Index to Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)

Southern Company Gas' wholesale gas services segment had the following VaRs at March 31:
20212020
(in millions)
Period end(*)
$1.1 $4.2 
Average3.2 2.1 
High(*)
55.3 4.2 
Low0.9 1.3 
(*)The VaR at March 31, 2021 reflects significant natural gas price increases in Sequent's key markets driven by a disruption in natural gas supplies and an increase in usage due to Winter Storm Uri that extended from the Gulf Coast to across the mid-west. VaR returned to typical levels as temperatures and natural gas supplies normalized.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
During the sixthree months ended June 30, 2020,March 31, 2021, there were no material changes to Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, and Southern Power's disclosures about market risk. For additional market risk disclosures relating to Southern Company Gas, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" herein. For an in-depth discussion of each Registrant's market risks, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" in Item 7 of the Form 10-K and Note 1 to the financial statements under "Financial Instruments" and Notes 13 and 14 to the financial statements in Item 8 of the Form 10-K, as well as Notes (I) and (J) to the Condensed Financial Statements herein.
Item 4. Controls and Procedures.
(a)Evaluation of disclosure controls and procedures.
(a)Evaluation of disclosure controls and procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas conducted separate evaluations under the supervision and with the participation of each company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based upon these evaluations, the Chief Executive Officer and the Chief Financial Officer, in each case, concluded that the disclosure controls and procedures are effective.
(b)Changes in internal controls over financial reporting.
(b)    Changes in internal controls over financial reporting.
There have been no changes in Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, or Southern Company Gas' internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the secondfirst quarter 20202021 that have materially affected or are reasonably likely to materially affect Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, or Southern Company Gas' internal control over financial reporting.
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    Table of Contents                                Index to Financial Statements

PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
See the Notes to the Condensed Financial Statements herein for information regarding certain legal and administrative proceedings in which the Registrants are involved. The Registrants' threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.
Item 1A. Risk Factors.
See RISK FACTORS in Item 1A of the Form 10-K for a discussion of the risk factors of the Registrants. Except as described below, thereThere have been no material changes to these risk factors from those previously disclosed in the Form 10-K.
The Registrants are subject to risks related to the COVID-19 pandemic, including, but not limited to, disruption to the construction of Plant Vogtle Units 3 and 4 for Southern Company and Georgia Power.
COVID-19 has been declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the United States. In response, most jurisdictions, including in the United States, have instituted restrictions on travel, public gatherings, and non-essential business operations. While some jurisdictions, including some in the Southern Company system's service territory, have begun to relax these restrictions, many of these restrictions remain and there is no guarantee restrictions will not be reimposed in the future. These restrictions have significantly disrupted economic activity in the service territories of the traditional electric operating companies and the natural gas distribution utilities and caused volatility in capital markets at certain periods during 2020. For example, retail electric revenues attributable to changes in sales decreased 3.0% in the second quarter 2020 as compared to the corresponding period in 2019, as discussed further in RESULTS OF OPERATIONS – "Southern Company – Retail Electric Revenues" in Item 2 herein. In addition, the traditional electric operating companies and the natural gas distribution utilities temporarily suspended disconnections for non-payment by customers and waived late fees for certain periods. The U.S. House of Representatives has passed the Heroes Act, which would prohibit creditors, including utilities, from collecting consumer debts that are or become past-due, imposing late fees, or disconnecting customers for nonpayment. If the Heroes Act becomes law, its restrictions would apply until 120 days after the end of the presidential declared emergency related to the COVID-19 pandemic. The effects of the continued COVID-19 pandemic and related responses could include extended disruptions to supply chains and capital markets, further reduced labor availability and productivity, and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Registrants, including continued reduced demand for energy, particularly from commercial and industrial customers, reduced cash flows and liquidity, impairment of goodwill or long-lived assets, reductions in investments recorded at fair value, and further impairment of the ability of the Registrants to develop, construct, and operate facilities, including electric generation, transmission, and distribution assets, to perform necessary corporate and customer service functions, and to access funds from financial institutions and capital markets. In addition, the COVID-19 pandemic could cause delays or cancellations to regulatory proceedings.
Further, the effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures. In April 2020, Georgia Power announced a reduction in workforce at Plant Vogtle Units 3 and 4, which totaled approximately 20% of the then-existing workforce. This reduction in workforce was a mitigation action intended to address the impact of the COVID-19 pandemic on the Plant Vogtle Units 3 and 4 workforce and construction site, including challenges with labor productivity that were exacerbated by the impact of the COVID-19 pandemic. The April 2020 workforce reduction was intended to provide operational efficiencies by increasing productivity of the remaining workforce and reducing workforce fatigue and absenteeism. Further, it was also intended to allow for increased social distancing by the workforce and facilitate compliance with the recommendations from the Centers for Disease Control and Prevention. The April 2020 workforce reduction did reduce absenteeism, providing an improvement in operational efficiency and allowing for increased social distancing. From the initial peak in April 2020, the number of active



cases at the site declined significantly during May and early June, but began increasing again in mid-June and continues to impact productivity levels and pace of activity completion. As a result of these factors, overall production improvements have not been achieved at the levels anticipated, contributing to the allocation of, and increase in, construction contingency described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $70 million and $115 million, which is included in the total project capital cost forecast and assumes (i) absenteeism rates continue to normalize and (ii) the intended productivity efficiencies and production targets assumed in Southern Nuclear's July 2020 aggressive site work plan are realized in the coming months. However, the ultimate impact of the COVID-19 pandemic on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.
Item 6. Exhibits.
The exhibits below with an asterisk (*) preceding the exhibit number are filed herewith. The remaining exhibits have previously been filed with the SEC and are incorporated herein by reference. The exhibits marked with a pound sign (#) are management contracts or compensatory plans or arrangements.
(4) Instruments Describing Rights of Security Holders, Including Indentures
(3) Articles of Incorporation and By-LawsSouthern Company
Mississippi Power
(a)1
*(d)1-
*(d)(a)2-
Georgia Power
(b)-
Sixty-Third Supplemental Indenture to Senior Note Indenture dated as of February 26, 2021, providing for amendments to the Senior Note Indenture and for the issuance of the Series 2021A 3.25% Senior Notes due March 15, 2051. (Designated in Form 8-K dated February 22, 2021, File No. 1-6468, as Exhibit 4.2)
(10) Material Contracts
Alabama PowerSouthern Company
#*(b)(a)-
Alabama Power
#(b)-Amendment No. 2 to The Southern Company Change in Control Benefits Protection Plan, effective as of February 26, 2021. See Exhibit 10(a) herein.
(24) Power of Attorney and Resolutions
Southern Company
(a)-
Alabama Power
(b)-
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Georgia Power
(c)1-
Mississippi Power
(c)2
(d)-
SouthernMississippi Power
(e)(d)1-
*(e)2-
Power of Attorney of Christopher Cummiskey.
Table of ContentsIndex to Financial Statements

Southern Company GasPower
(f)(e)1-
Southern Company Gas
(f)1-
(f)2-
(31) Section 302 Certifications
Southern Company
*(a)1-
*(a)2-
Alabama Power
*(b)1-
*(b)2-
Georgia Power
*(c)1-
*(c)2-
Mississippi Power
*(d)1-
*(d)2-
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Southern Power
*(e)1-
*(e)2-
Southern Company Gas
*(f)1-
*(f)2-
(32) Section 906 Certifications
Southern Company
*(a)-
Alabama Power
*(b)-
Table of ContentsIndex to Financial Statements

Georgia Power
*(c)-
Mississippi Power
*(d)-
Southern Power
*(e)-
Southern Company Gas
*(f)-
(101) Interactive Data Files
*INS-XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
*SCH-XBRL Taxonomy Extension Schema Document
*CAL-XBRL Taxonomy Calculation Linkbase Document
*DEF-XBRL Definition Linkbase Document
*LAB-XBRL Taxonomy Label Linkbase Document
*PRE-XBRL Taxonomy Presentation Linkbase Document
(104) Cover Page Interactive Data File
*Formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.
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THE SOUTHERN COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
THE SOUTHERN COMPANY
ByTHE SOUTHERN COMPANY
ByThomas A. Fanning
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
ByAndrew W. Evans
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021
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ALABAMA POWER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
ALABAMA POWER COMPANY
ByALABAMA POWER COMPANY
ByMark A. Crosswhite
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
ByPhilip C. Raymond
Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021
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GEORGIA POWER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
GEORGIA POWER COMPANY
ByGEORGIA POWER COMPANY
ByW. Paul Bowers
Chairman President, and Chief Executive Officer
(Principal Executive Officer)
ByDavid P. PorochDaniel S. Tucker
Executive Vice President, Chief Financial Officer, Treasurer, and ComptrollerTreasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021
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MISSISSIPPI POWER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
MISSISSIPPI POWER COMPANY
ByMISSISSIPPI POWER COMPANY
ByAnthony L. Wilson
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
ByMoses H. Feagin
Senior Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021
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SOUTHERN POWER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
SOUTHERN POWER COMPANY
BySOUTHERN POWER COMPANYChristopher Cummiskey
ByChristopher Cummiskey
Chairman and Chief Executive Officer
(Principal Executive Officer)
ByElliott L. Spencer
Senior Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021
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SOUTHERN COMPANY GAS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof included in such company's report.
 
SOUTHERN COMPANY GAS
BySOUTHERN COMPANY GAS
ByKimberly S. Greene
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)
ByDaniel S. TuckerDavid P. Poroch
Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: July 29, 2020April 28, 2021


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