0000092122so:OtherNaturalGasMember2020-01-012020-09-300000092122us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FixedIncomeFundsMemberso:SouthernCompanyGasMember2021-03-31
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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 September 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, Georgia 30308
(404) 506-5000
1-3164Alabama Power Company63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35203
(205) 257-1000
1-6468Georgia Power Company58-0257110
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308
(404) 506-6526
001-11229Mississippi Power Company64-0205820
(A Mississippi Corporation)
2992 West Beach Boulevard
Gulfport, Mississippi 39501
(228) 864-1211
001-37803Southern Power Company58-2598670
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta, Georgia 30308
(404) 506-5000
1-14174Southern Company Gas58-2210952
(A Georgia Corporation)
Ten Peachtree Place, N.E.
Atlanta, Georgia 30309
(404) 584-4000

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Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of Each ClassTrading
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 FilerAccelerated
Filer		Non-accelerated FilerSmaller
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 September 30, 2020March 31, 2021
The Southern CompanyPar Value $5 Per Share1,056,241,9931,058,630,385 
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
Item 1.
10
Item 2.
10485
Item 3.
181132
Item 4.
181132
PART II—OTHER INFORMATION
Item 1.
182133
Item 1A.
182133
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.
183133
186136
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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 AcquisitionAlabama Power's August 31, 2020 acquisition of the Central Alabama Generation Station, 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
FASBFinancial 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
FitchFitch Ratings, Inc.
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DEFINITIONS
(continued)
TermMeaning
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
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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
IRPIntegrated resource plan
ITAACInspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC
ITCInvestment tax credit
JEAJacksonville Electric Authority
Jefferson IslandJefferson 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
KWHKilowatt-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
Mississippi 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
Part A CCR RuleHolistic Approach to Closure Part A final rule published by the EPA on August 28, 2020
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
PowerSecurePowerSecure, Inc., a wholly-owned subsidiary of Southern Company
PowerSouthPowerSouth 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
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DEFINITIONS
(continued)
TermMeaning
PowerSecurePowerSecure, Inc., a wholly-owned subsidiary of Southern Company
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
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
SEGCOSouthern 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
TritonTriton 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
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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
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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
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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, 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,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" herein;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(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,scale) and includingPlant 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, 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, 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.
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PART I
Item 1. Financial Statements (Unaudited).
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Retail electric revenuesRetail electric revenues$4,243 $4,512 $10,503 $11,136 Retail electric revenues$3,342 $3,078 
Wholesale electric revenuesWholesale electric revenues584 625 1,473 1,667 Wholesale electric revenues545 418 
Other electric revenuesOther electric revenues164 163 484 492 Other electric revenues170 151 
Natural gas revenues (includes alternative revenue programs of
$(1), $0, $6, and $0, respectively)
477 498 2,362 2,661 
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 revenuesOther revenues152 197 436 549 Other revenues159 122 
Total operating revenuesTotal operating revenues5,620 5,995 15,258 16,505 Total operating revenues5,910 5,018 
Operating Expenses:Operating Expenses:Operating Expenses:
FuelFuel933 1,072 2,190 2,836 Fuel848 636 
Purchased powerPurchased power230 254 611 625 Purchased power207 181 
Cost of natural gasCost of natural gas71 79 654 956 Cost of natural gas583 439 
Cost of other salesCost of other sales72 114 201 316 Cost of other sales82 55 
Other operations and maintenanceOther operations and maintenance1,286 1,296 3,785 3,898 Other operations and maintenance1,372 1,296 
Depreciation and amortizationDepreciation and amortization889 760 2,619 2,267 Depreciation and amortization871 857 
Taxes other than income taxesTaxes other than income taxes304 303 932 931 Taxes other than income taxes345 330 
Estimated loss on Plant Vogtle Units 3 and 4Estimated loss on Plant Vogtle Units 3 and 40 0 149 0 Estimated loss on Plant Vogtle Units 3 and 448 0 
Impairment charges0 110 0 142 
(Gain) loss on dispositions, net(Gain) loss on dispositions, net0 (6)(39)(2,512)(Gain) loss on dispositions, net(44)(39)
Total operating expensesTotal operating expenses3,785 3,982 11,102 9,459 Total operating expenses4,312 3,755 
Operating IncomeOperating Income1,835 2,013 4,156 7,046 Operating Income1,598 1,263 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Allowance for equity funds used during constructionAllowance for equity funds used during construction38 33 106 96 Allowance for equity funds used during construction46 34 
Earnings from equity method investmentsEarnings from equity method investments33 39 105 120 Earnings from equity method investments45 42 
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(443)(434)(1,343)(1,294)Interest expense, net of amounts capitalized(450)(456)
Impairment of leveraged lease0 0 (154)0 
Other income (expense), netOther income (expense), net113 61 319 239 Other income (expense), net58 103 
Total other income and (expense)Total other income and (expense)(259)(301)(967)(839)Total other income and (expense)(301)(277)
Earnings Before Income TaxesEarnings Before Income Taxes1,576 1,712 3,189 6,207 Earnings Before Income Taxes1,297 986 
Income taxesIncome taxes293 367 443 1,872 Income taxes190 145 
Consolidated Net IncomeConsolidated Net Income1,283 1,345 2,746 4,335 Consolidated Net Income1,107 841 
Dividends on preferred stock of subsidiariesDividends on preferred stock of subsidiaries4 4 11 11 Dividends on preferred stock of subsidiaries4 4 
Net income attributable to noncontrolling interests28 25 3 26 
Net loss attributable to noncontrolling interestsNet loss attributable to noncontrolling interests(32)(31)
Consolidated Net Income Attributable to
Southern Company		Consolidated Net Income Attributable to
Southern Company		$1,251 $1,316 $2,732 $4,298 Consolidated Net Income Attributable to
Southern Company		$1,135 $868 
Common Stock Data:Common Stock Data:Common Stock Data:
Earnings per share -Earnings per share -Earnings per share -
BasicBasic$1.18 $1.26 $2.58 $4.12 Basic$1.07 $0.82 
DilutedDiluted$1.18 $1.25 $2.57 $4.09 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)Average number of shares of common stock outstanding (in millions)
BasicBasic1,058 1,048 1,058 1,043 Basic1,060 1,057 
DilutedDiluted1,064 1,057 1,064 1,051 Diluted1,066 1,067 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Consolidated Net IncomeConsolidated Net Income$1,283 $1,345 $2,746 $4,335 Consolidated Net Income$1,107 $841 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Qualifying hedges:Qualifying hedges:Qualifying hedges:
Changes in fair value, net of tax of
$17, $(33), $(9), and $(54), respectively
49 (92)(26)(152)
Reclassification adjustment for amounts included in net income,
net of tax of $(11), $17, $(1), and $25, respectively
(32)50 (3)74 
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:Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,
net of tax of $1, $0, $3, and $0, respectively
3 1 6 2 
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)Total other comprehensive income (loss)20 (41)(23)(76)Total other comprehensive income (loss)28 (47)
Comprehensive IncomeComprehensive Income1,303 1,304 2,723 4,259 Comprehensive Income1,135 794 
Dividends on preferred stock of subsidiariesDividends on preferred stock of subsidiaries4 4 11 11 Dividends on preferred stock of subsidiaries4 4 
Comprehensive income attributable to noncontrolling interests28 25 3 26 
Comprehensive loss attributable to noncontrolling interestsComprehensive loss attributable to noncontrolling interests(32)(31)
Consolidated Comprehensive Income Attributable to
Southern Company		Consolidated Comprehensive Income Attributable to
Southern Company		$1,271 $1,275 $2,709 $4,222 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 Nine Months Ended September 30, For the Three Months Ended March 31,
20202019 20212020
(in millions) (in millions)
Operating Activities:Operating Activities:Operating Activities:
Consolidated net incomeConsolidated net income$2,746 $4,335 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 —Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization, totalDepreciation and amortization, total2,903 2,514 Depreciation and amortization, total964 949 
Deferred income taxesDeferred income taxes(196)253 Deferred income taxes140 (58)
Utilization of federal investment tax credits319 722 
Allowance for equity funds used during constructionAllowance for equity funds used during construction(106)(96)Allowance for equity funds used during construction(46)(34)
Pension, postretirement, and other employee benefitsPension, postretirement, and other employee benefits(190)(114)Pension, postretirement, and other employee benefits(78)(67)
Settlement of asset retirement obligationsSettlement of asset retirement obligations(315)(225)Settlement of asset retirement obligations(109)(86)
Stock based compensation expenseStock based compensation expense99 87 Stock based compensation expense83 72 
Estimated loss on Plant Vogtle Units 3 and 4Estimated loss on Plant Vogtle Units 3 and 4149 0 Estimated loss on Plant Vogtle Units 3 and 448 0 
Storm damage reserve accruals171 34 
Impairment charges154 142 
Storm damage accrualsStorm damage accruals54 56 
(Gain) loss on dispositions, net(Gain) loss on dispositions, net(36)(2,517)(Gain) loss on dispositions, net(41)(38)
Natural gas cost under recovery – long-termNatural gas cost under recovery – long-term(185)0 
Other, netOther, net93 (20)Other, net114 55 
Changes in certain current assets and liabilities —Changes in certain current assets and liabilities —Changes in certain current assets and liabilities —
-Receivables-Receivables125 588 -Receivables308 317 
-Prepayments-Prepayments(39)61 -Prepayments(98)(110)
-Materials and supplies(141)(31)
-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-Other current assets(80)(31)-Other current assets63 (67)
-Accounts payable-Accounts payable(428)(1,155)-Accounts payable(216)(504)
-Accrued taxes-Accrued taxes289 679 -Accrued taxes(212)(102)
-Accrued compensation-Accrued compensation(183)(191)-Accrued compensation(417)(473)
-Retail fuel cost over recovery158 31 
-Accrued interest-Accrued interest(90)(60)
-Customer refunds-Customer refunds(226)(30)-Customer refunds0 (103)
-Other current liabilities-Other current liabilities(46)(155)-Other current liabilities(116)60 
Net cash provided from operating activitiesNet cash provided from operating activities5,220 4,881 Net cash provided from operating activities1,242 894 
Investing Activities:Investing Activities:Investing Activities:
Business acquisitions, net of cash acquiredBusiness acquisitions, net of cash acquired(345)0 
Property additionsProperty additions(5,365)(5,417)Property additions(1,678)(1,560)
Nuclear decommissioning trust fund purchasesNuclear decommissioning trust fund purchases(714)(683)Nuclear decommissioning trust fund purchases(550)(254)
Nuclear decommissioning trust fund salesNuclear decommissioning trust fund sales708 678 Nuclear decommissioning trust fund sales546 249 
Proceeds from dispositions and asset sales987 5,036 
Proceeds from dispositionsProceeds from dispositions20 982 
Cost of removal, net of salvageCost of removal, net of salvage(233)(290)Cost of removal, net of salvage(85)(69)
Change in construction payables, netChange in construction payables, net(40)(132)Change in construction payables, net(116)(141)
Investment in unconsolidated subsidiaries(79)(141)
Payments pursuant to LTSAsPayments pursuant to LTSAs(139)(139)Payments pursuant to LTSAs(60)(26)
Other investing activitiesOther investing activities(17)15 Other investing activities25 (70)
Net cash used for investing activitiesNet cash used for investing activities(4,892)(1,073)Net cash used for investing activities(2,243)(889)
Financing Activities:Financing Activities:Financing Activities:
Decrease in notes payable, net(1,534)(773)
Increase (decrease) in notes payable, netIncrease (decrease) in notes payable, net182 (685)
Proceeds —Proceeds —Proceeds —
Long-term debtLong-term debt7,543 4,737 Long-term debt2,150 2,653 
Common stockCommon stock63 623 Common stock14 52 
Short-term borrowingsShort-term borrowings615 250 Short-term borrowings325 565 
Redemptions and repurchases —Redemptions and repurchases —Redemptions and repurchases —
Long-term debtLong-term debt(2,472)(3,216)Long-term debt(384)(1,481)
Short-term borrowingsShort-term borrowings(840)(1,850)Short-term borrowings(25)(100)
Capital contributions from noncontrolling interestsCapital contributions from noncontrolling interests313 16 
Distributions to noncontrolling interestsDistributions to noncontrolling interests(164)(125)Distributions to noncontrolling interests(46)(48)
Capital contributions from noncontrolling interests173 11 
Purchase of membership interests from noncontrolling interests(60)0 
Payment of common stock dividendsPayment of common stock dividends(2,008)(1,919)Payment of common stock dividends(678)(655)
Other financing activitiesOther financing activities(239)(130)Other financing activities(117)(132)
Net cash provided from (used for) financing activities1,077 (2,392)
Net cash provided from financing activitiesNet cash provided from financing activities1,734 185 
Net Change in Cash, Cash Equivalents, and Restricted CashNet Change in Cash, Cash Equivalents, and Restricted Cash1,405 1,416 Net Change in Cash, Cash Equivalents, and Restricted Cash733 190 
Cash, Cash Equivalents, and Restricted Cash at Beginning of PeriodCash, 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 PeriodCash, Cash Equivalents, and Restricted Cash at End of Period$3,383 $2,935 Cash, Cash Equivalents, and Restricted Cash at End of Period$1,801 $2,168 
Supplemental Cash Flow Information:Supplemental Cash Flow Information:Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $61 and $55 capitalized for 2020 and 2019, respectively)$1,346 $1,318 
Cash paid (received) during the period for —Cash paid (received) during the period for —
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, netIncome taxes, net66 265 Income taxes, net(51)(16)
Noncash transactions —Noncash transactions —Noncash transactions —
Accrued property additions at end of periodAccrued property additions at end of period917 953 Accrued property additions at end of period872 733 
Right-of-use assets obtained under operating leases158 76 
Right-of-use assets obtained under finance leases8 31 
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)
 
AssetsAssetsAt September 30, 2020At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Assets:Current Assets:Current Assets:
Cash and cash equivalentsCash and cash equivalents$3,379 $1,975 Cash and cash equivalents$1,770 $1,065 
Receivables —Receivables —Receivables —
Customer accounts receivable1,778 1,614 
Energy marketing receivables328 428 
Customer accountsCustomer accounts1,716 1,753 
Energy marketingEnergy marketing412 516 
Unbilled revenuesUnbilled revenues503 599 Unbilled revenues544 672 
Other accounts and notes receivable506 817 
Other accounts and notesOther accounts and notes478 512 
Accumulated provision for uncollectible accountsAccumulated provision for uncollectible accounts(99)(49)Accumulated provision for uncollectible accounts(124)(118)
Materials and suppliesMaterials and supplies1,522 1,388 Materials and supplies1,504 1,478 
Fossil fuel for generationFossil fuel for generation506 521 Fossil fuel for generation494 550 
Natural gas for saleNatural gas for sale448 479 Natural gas for sale197 460 
Prepaid expensesPrepaid expenses299 314 Prepaid expenses657 276 
Assets from risk management activities, net of collateralAssets from risk management activities, net of collateral135 183 Assets from risk management activities, net of collateral100 147 
Regulatory assets – asset retirement obligationsRegulatory assets – asset retirement obligations246 287 Regulatory assets – asset retirement obligations214 214 
Natural gas cost under recoveryNatural gas cost under recovery487 0 
Other regulatory assetsOther regulatory assets813 885 Other regulatory assets788 810 
Assets held for sale0 188 
Other current assetsOther current assets210 188 Other current assets232 282 
Total current assetsTotal current assets10,574 9,817 Total current assets9,469 8,617 
Property, Plant, and Equipment:Property, Plant, and Equipment:Property, Plant, and Equipment:
In serviceIn service108,831 105,114 In service111,579 110,516 
Less: Accumulated depreciationLess: Accumulated depreciation32,099 30,765 Less: Accumulated depreciation32,887 32,397 
Plant in service, net of depreciationPlant in service, net of depreciation76,732 74,349 Plant in service, net of depreciation78,692 78,119 
Nuclear fuel, at amortized costNuclear fuel, at amortized cost804 851 Nuclear fuel, at amortized cost820 818 
Construction work in progressConstruction work in progress8,861 7,880 Construction work in progress9,525 8,697 
Total property, plant, and equipmentTotal property, plant, and equipment86,397 83,080 Total property, plant, and equipment89,037 87,634 
Other Property and Investments:Other Property and Investments:Other Property and Investments:
GoodwillGoodwill5,280 5,280 Goodwill5,280 5,280 
Nuclear decommissioning trusts, at fair valueNuclear decommissioning trusts, at fair value2,346 2,303 
Equity investments in unconsolidated subsidiariesEquity investments in unconsolidated subsidiaries1,358 1,303 Equity investments in unconsolidated subsidiaries1,368 1,362 
Other intangible assets, net of amortization of $316 and $280
at September 30, 2020 and December 31, 2019, respectively
499 536 
Nuclear decommissioning trusts, at fair value2,109 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 leasesLeveraged leases653 788 Leveraged leases562 556 
Miscellaneous property and investmentsMiscellaneous property and investments403 391 Miscellaneous property and investments463 398 
Total other property and investmentsTotal other property and investments10,302 10,334 Total other property and investments10,496 10,386 
Deferred Charges and Other Assets:Deferred Charges and Other Assets:Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortizationOperating lease right-of-use assets, net of amortization1,791 1,800 Operating lease right-of-use assets, net of amortization1,821 1,802 
Deferred charges related to income taxesDeferred charges related to income taxes799 798 Deferred charges related to income taxes803 796 
Unamortized loss on reacquired debtUnamortized loss on reacquired debt285 300 Unamortized loss on reacquired debt274 280 
Regulatory assets – asset retirement obligations, deferredRegulatory assets – asset retirement obligations, deferred4,984 4,094 Regulatory assets – asset retirement obligations, deferred4,966 4,934 
Other regulatory assets, deferredOther regulatory assets, deferred6,502 6,805 Other regulatory assets, deferred7,263 7,198 
Assets held for sale, deferred0 601 
Other deferred charges and assetsOther deferred charges and assets1,524 1,071 Other deferred charges and assets1,264 1,288 
Total deferred charges and other assetsTotal deferred charges and other assets15,885 15,469 Total deferred charges and other assets16,391 16,298 
Total AssetsTotal Assets$123,158 $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' EquityLiabilities and Stockholders' EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholders' EquityAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$4,378 $2,989 Securities due within one year$3,535 $3,507 
Notes payableNotes payable171 2,055 Notes payable1,092 609 
Energy marketing trade payablesEnergy marketing trade payables361 442 Energy marketing trade payables475 494 
Accounts payableAccounts payable1,924 2,115 Accounts payable2,058 2,312 
Customer depositsCustomer deposits496 496 Customer deposits470 487 
Accrued taxes —Accrued taxes —Accrued taxes —
Accrued income taxesAccrued income taxes75 0 Accrued income taxes71 130 
Other accrued taxesOther accrued taxes742 659 Other accrued taxes412 699 
Accrued interestAccrued interest421 474 Accrued interest423 513 
Accrued compensationAccrued compensation843 992 Accrued compensation584 1,025 
Asset retirement obligationsAsset retirement obligations640 504 Asset retirement obligations642 585 
Other regulatory liabilities616 756 
Liabilities held for sale0 5 
Operating lease obligationsOperating lease obligations235 229 Operating lease obligations244 241 
Other regulatory liabilitiesOther regulatory liabilities462 509 
Other current liabilitiesOther current liabilities848 830 Other current liabilities1,118 968 
Total current liabilitiesTotal current liabilities11,750 12,546 Total current liabilities11,586 12,079 
Long-term DebtLong-term Debt45,581 41,798 Long-term Debt46,727 45,073 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes8,342 7,888 Accumulated deferred income taxes8,839 8,175 
Deferred credits related to income taxesDeferred credits related to income taxes5,763 6,078 Deferred credits related to income taxes5,676 5,767 
Accumulated deferred ITCsAccumulated deferred ITCs2,251 2,291 Accumulated deferred ITCs2,214 2,235 
Employee benefit obligationsEmployee benefit obligations1,753 1,814 Employee benefit obligations2,091 2,213 
Operating lease obligations, deferredOperating lease obligations, deferred1,570 1,615 Operating lease obligations, deferred1,652 1,611 
Asset retirement obligations, deferredAsset retirement obligations, deferred10,020 9,282 Asset retirement obligations, deferred10,043 10,099 
Accrued environmental remediationAccrued environmental remediation220 234 Accrued environmental remediation208 216 
Other cost of removal obligationsOther cost of removal obligations2,231 2,239 Other cost of removal obligations2,215 2,211 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred315 256 Other regulatory liabilities, deferred226 251 
Other deferred credits and liabilitiesOther deferred credits and liabilities571 609 Other deferred credits and liabilities557 480 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities33,036 32,306 Total deferred credits and other liabilities33,721 33,258 
Total LiabilitiesTotal Liabilities90,367 86,650 Total Liabilities92,034 90,410 
Redeemable Preferred Stock of SubsidiariesRedeemable Preferred Stock of Subsidiaries291 291 Redeemable Preferred Stock of Subsidiaries291 291 
Total Stockholders' Equity (See accompanying statements)
Total Stockholders' Equity (See accompanying statements)
32,500 31,759 
Total Stockholders' Equity (See accompanying statements)
33,068 32,234 
Total Liabilities and Stockholders' EquityTotal Liabilities and Stockholders' Equity$123,158 $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' EquitySouthern Company Common Stockholders' Equity
Number of
Common Shares		Common StockAccumulated
Other
Comprehensive Income
(Loss)		 Number of
Common Shares		Common StockAccumulated
Other
Comprehensive Income
(Loss)
IssuedTreasuryPar ValuePaid-In CapitalTreasuryRetained EarningsNoncontrolling InterestsTotal IssuedTreasuryPar ValuePaid-In CapitalTreasuryRetained EarningsAccumulated
Other
Comprehensive Income
(Loss)		Noncontrolling InterestsTotal
(in millions) (in millions)
Balance at December 31, 20181,035 (1)$5,164 $11,094 $(38)$8,706 $(203)$4,316 $29,039 
Balance at December 31, 2019Balance at December 31, 20191,054 (1)$5,257 $11,734 $(42)$10,877 $(321)$4,254 $31,759 
Consolidated net income (loss)Consolidated net income (loss)— — — — — 2,084 — (29)2,055 Consolidated net income (loss)— — — — — 868 — (31)837 
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)Other comprehensive income (loss)— — — — — — (35)— (35)Other comprehensive income (loss)— — — — — — (47)— (47)
Stock issuedStock issued5 — 25 203 — — — — 228 Stock issued3 — 9 43 — — — — 52 
Stock-based compensationStock-based compensation— — — 11 — — — — 11 Stock-based compensation— — — 5 — — — — 5 
Cash dividends of $0.62 per shareCash dividends of $0.62 per share— — — — — (646)— — (646)Cash dividends of $0.62 per share— — — — — (655)— — (655)
Contributions from noncontrolling interests— — — — — — — 2 2 
Capital contributions from
noncontrolling interests		Capital contributions from
noncontrolling interests		— — — — — — — 16 16 
Distributions to noncontrolling interestsDistributions to noncontrolling interests— — — — — — — (47)(47)Distributions to noncontrolling interests— — — — — — — (48)(48)
OtherOther— — — 5 (1)— — (1)3 Other— — — — (2)(2)1 — (3)
Balance at June 30, 20191,046 (1)5,217 11,540 (41)10,420 (238)4,233 31,131 
Consolidated net income— — — — — 1,316 — 25 1,341 
Other comprehensive income (loss)— — — — — — (41)— (41)
Issuance of equity units— — — (198)— — — — (198)
Stock issued4 — 17 154 — — — — 171 
Stock-based compensation— — — 12 — — — — 12 
Cash dividends of $0.62 per share— — — — — (649)— — (649)
Contributions from noncontrolling interests— — — — — — — 63 63 
Distributions to noncontrolling interests— — — — — — — (43)(43)
Balance at March 31, 2020Balance at March 31, 20201,057 (1)$5,266 $11,782 $(44)$11,088 $(367)$4,191 $31,916 
Other— — — 4 0 — — 0 4 
Balance at September 30, 20191,050 (1)$5,234 $11,512 $(41)$11,087 $(279)$4,278 $31,791 
16
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 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 
Balance at December 31, 2020Balance at December 31, 20201,058 (1)$5,268 $11,834 $(46)$11,311 $(395)$4,262 $32,234 
Consolidated net income (loss)Consolidated net income (loss)— — — — — 868 — (31)837 Consolidated net income (loss)— — — — — 1,135 — (32)1,103 
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 incomeOther comprehensive income— — — — — — 4 — 4 Other comprehensive income— — — — — — 28 — 28 
Stock issuedStock issued— — — 7 — — — — 7 Stock issued2 — 5 9 — — — — 14 
Stock-based compensationStock-based compensation— — — 11 — — — — 11 Stock-based compensation— — — 9 — — — — 9 
Cash dividends of $0.64 per shareCash dividends of $0.64 per share— — — — — (677)— — (677)Cash dividends of $0.64 per share— — — — — (678)— — (678)
Contributions from noncontrolling interests— — — — — — — 165 165 
Capital contributions from
noncontrolling interests		Capital contributions from
noncontrolling interests		— — — — — — — 403 403 
Distributions to noncontrolling interestsDistributions to noncontrolling interests— — — — — — — (70)(70)Distributions to noncontrolling interests— — — — — — — (46)(46)
OtherOther— — — (13)— 1 — — (12)Other— — — 2 — — — (1)1 
Balance at June 30, 20201,057 (1)5,266 11,787 (44)11,024 (363)4,291 31,961 
Consolidated net income— — — — — 1,251 — 28 1,279 
Other comprehensive income— — — — — — 20 — 20 
Stock issued— — 1 3 — — — — 4 
Stock-based compensation— — — 15 — — — — 15 
Cash dividends of $0.64 per share— — — — — (676)— — (676)
Contributions from noncontrolling interests— — — — — — — 2 2 
Distributions to noncontrolling interests— — — — — — — (51)(51)
Purchase of membership interests
from noncontrolling interests		— — — 5 — — — (60)(55)
Balance at March 31, 2021Balance at March 31, 20211,060 (1)$5,273 $11,854 $(46)$11,768 $(367)$4,586 $33,068 
Other— 0 0 0 0 1 (1)1 1 
Balance at September 30, 20201,057 (1)$5,267 $11,810 $(44)$11,600 $(344)$4,211 $32,500 
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

1716
    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30,For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Retail revenuesRetail revenues$1,575 $1,694 $4,003 $4,286 Retail revenues$1,352 $1,205 
Wholesale revenues, non-affiliatesWholesale revenues, non-affiliates73 71 184 194 Wholesale revenues, non-affiliates92 56 
Wholesale revenues, affiliatesWholesale revenues, affiliates11 2 36 66 Wholesale revenues, affiliates32 19 
Other revenuesOther revenues70 74 222 216 Other revenues83 71 
Total operating revenuesTotal operating revenues1,729 1,841 4,445 4,762 Total operating revenues1,559 1,351 
Operating Expenses:Operating Expenses:Operating Expenses:
FuelFuel306 310 721 864 Fuel291 215 
Purchased power, non-affiliatesPurchased power, non-affiliates64 77 153 160 Purchased power, non-affiliates50 40 
Purchased power, affiliatesPurchased power, affiliates44 73 93 164 Purchased power, affiliates30 18 
Other operations and maintenanceOther operations and maintenance387 409 1,078 1,221 Other operations and maintenance361 350 
Depreciation and amortizationDepreciation and amortization205 195 606 593 Depreciation and amortization211 200 
Taxes other than income taxesTaxes other than income taxes103 101 311 301 Taxes other than income taxes103 106 
Total operating expensesTotal operating expenses1,109 1,165 2,962 3,303 Total operating expenses1,046 929 
Operating IncomeOperating Income620 676 1,483 1,459 Operating Income513 422 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Allowance for equity funds used during constructionAllowance for equity funds used during construction12 13 34 41 Allowance for equity funds used during construction12 10 
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(84)(83)(255)(248)Interest expense, net of amounts capitalized(84)(88)
Other income (expense), netOther income (expense), net30 11 78 36 Other income (expense), net32 24 
Total other income and (expense)Total other income and (expense)(42)(59)(143)(171)Total other income and (expense)(40)(54)
Earnings Before Income TaxesEarnings Before Income Taxes578 617 1,340 1,288 Earnings Before Income Taxes473 368 
Income taxesIncome taxes130 144 307 295 Income taxes110 84 
Net IncomeNet Income448 473 1,033 993 Net Income363 284 
Dividends on Preferred StockDividends on Preferred Stock4 4 11 11 Dividends on Preferred Stock4 4 
Net Income After Dividends on Preferred StockNet Income After Dividends on Preferred Stock$444 $469 $1,022 $982 Net Income After Dividends on Preferred Stock$359 $280 


CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30,For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Net IncomeNet Income$448 $473 $1,033 $993 Net Income$363 $284 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Qualifying hedges:Qualifying hedges:Qualifying hedges:
Reclassification adjustment for amounts included in net income,
net of tax of $0, $0, $1, and $1, respectively
1 1 3 3 
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)Total other comprehensive income (loss)1 1 3 3 Total other comprehensive income (loss)1 1 
Comprehensive IncomeComprehensive Income$449 $474 $1,036 $996 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 ContentsIndex to Financial Statements
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Activities:
Net income$363 $284 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total248 241 
Deferred income taxes33 10 
Pension, postretirement, and other employee benefits(29)(25)
Settlement of asset retirement obligations(49)(46)
Other, net(15)10 
Changes in certain current assets and liabilities —
-Receivables40 93 
-Fossil fuel stock38 (15)
-Prepayments(73)(80)
-Materials and supplies(4)(22)
-Other current assets(11)(14)
-Accounts payable(299)(305)
-Accrued taxes104 100 
-Accrued compensation(105)(111)
-Retail fuel cost over recovery(18)47 
-Other current liabilities(9)(12)
Net cash provided from operating activities214 155 
Investing Activities:
Property additions(466)(340)
Nuclear decommissioning trust fund purchases(310)(81)
Nuclear decommissioning trust fund sales310 81 
Cost of removal, net of salvage(23)(15)
Change in construction payables32 (65)
Other investing activities(9)(4)
Net cash used for investing activities(466)(424)
Financing Activities:
Redemptions — Pollution control revenue bonds0 (87)
Capital contributions from parent company600 610 
Payment of common stock dividends(246)(239)
Other financing activities(13)(11)
Net cash provided from financing activities341 273 
Net Change in Cash, Cash Equivalents, and Restricted Cash89 4 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period530 894 
Cash, Cash Equivalents, and Restricted Cash at End of Period$619 $898 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $3 capitalized for both 2021 and 2020)$93 $92 
Noncash transactions —
Accrued property additions at end of period198 135 
Right-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 STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Nine Months Ended September 30,
 20202019
 (in millions)
Operating Activities:
Net income$1,033 $993 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total731 756 
Deferred income taxes71 148 
Allowance for equity funds used during construction(34)(41)
Pension, postretirement, and other employee benefits(71)(30)
Settlement of asset retirement obligations(157)(76)
Other, net69 18 
Changes in certain current assets and liabilities —
-Receivables(130)(115)
-Prepayments(32)(30)
-Materials and supplies(55)11 
-Other current assets(32)(30)
-Accounts payable(248)(267)
-Accrued taxes142 149 
-Accrued compensation(55)(55)
-Retail fuel cost over recovery74 21 
-Customer refunds(64)(28)
-Other current liabilities(13)47 
Net cash provided from operating activities1,229 1,471 
Investing Activities:
Property additions(1,460)(1,239)
Nuclear decommissioning trust fund purchases(213)(201)
Nuclear decommissioning trust fund sales213 201 
Cost of removal, net of salvage(68)(79)
Change in construction payables(46)(99)
Other investing activities(17)(22)
Net cash used for investing activities(1,591)(1,439)
Financing Activities:
Proceeds —
Senior notes600 600 
Capital contributions from parent company649 1,252 
Pollution control revenue bonds87 0 
Redemptions —
Pollution control revenue bonds(87)0 
Senior notes0 (200)
Payment of common stock dividends(718)(633)
Other financing activities(26)(27)
Net cash provided from financing activities505 992 
Net Change in Cash, Cash Equivalents, and Restricted Cash143 1,024 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period894 313 
Cash, Cash Equivalents, and Restricted Cash at End of Period$1,037 $1,337 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $11 and $15 capitalized for 2020 and 2019, respectively)$249 $246 
Income taxes, net203 89 
Noncash transactions —
Accrued property additions at end of period154 173 
Right-of-use assets obtained under operating leases63 7 
Right-of-use assets obtained under finance leases2 1 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
19
Table of ContentsIndex to Financial Statements
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
AssetsAssetsAt September 30, 2020At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
(in millions)(in millions)
Current Assets:Current Assets:Current Assets:
Cash and cash equivalentsCash and cash equivalents$1,037 $894 Cash and cash equivalents$619 $530 
Receivables —Receivables —Receivables —
Customer accounts receivable499 425 
Customer accountsCustomer accounts394 429 
Unbilled revenuesUnbilled revenues138 134 Unbilled revenues124 152 
AffiliatedAffiliated37 37 Affiliated35 31 
Other accounts and notes receivable84 72 
Other accounts and notesOther accounts and notes71 66 
Accumulated provision for uncollectible accountsAccumulated provision for uncollectible accounts(32)(22)Accumulated provision for uncollectible accounts(33)(43)
Fossil fuel stockFossil fuel stock208 212 Fossil fuel stock197 235 
Materials and suppliesMaterials and supplies562 512 Materials and supplies550 546 
Prepaid expensesPrepaid expenses71 50 Prepaid expenses114 42 
Other regulatory assetsOther regulatory assets207 242 Other regulatory assets224 226 
Other current assetsOther current assets42 30 Other current assets43 33 
Total current assetsTotal current assets2,853 2,586 Total current assets2,338 2,247 
Property, Plant, and Equipment:Property, Plant, and Equipment:Property, Plant, and Equipment:
In serviceIn service31,355 30,023 In service32,015 31,816 
Less: Accumulated provision for depreciationLess: Accumulated provision for depreciation9,920 9,540 Less: Accumulated provision for depreciation10,123 10,009 
Plant in service, net of depreciationPlant in service, net of depreciation21,435 20,483 Plant in service, net of depreciation21,892 21,807 
Nuclear fuel, at amortized costNuclear fuel, at amortized cost257 296 Nuclear fuel, at amortized cost268 270 
Construction work in progressConstruction work in progress926 890 Construction work in progress1,052 866 
Total property, plant, and equipmentTotal property, plant, and equipment22,618 21,669 Total property, plant, and equipment23,212 22,943 
Other Property and Investments: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 subsidiariesEquity investments in unconsolidated subsidiaries63 66 Equity investments in unconsolidated subsidiaries63 63 
Nuclear decommissioning trusts, at fair value1,039 1,023 
Miscellaneous property and investmentsMiscellaneous property and investments130 128 Miscellaneous property and investments128 131 
Total other property and investmentsTotal other property and investments1,232 1,217 Total other property and investments1,389 1,351 
Deferred Charges and Other Assets:Deferred Charges and Other Assets:Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortizationOperating lease right-of-use assets, net of amortization162 132 Operating lease right-of-use assets, net of amortization140 151 
Deferred charges related to income taxesDeferred charges related to income taxes242 244 Deferred charges related to income taxes237 235 
Deferred under recovered regulatory clause revenues62 40 
Regulatory assets – asset retirement obligationsRegulatory assets – asset retirement obligations1,475 1,019 Regulatory assets – asset retirement obligations1,446 1,441 
Other regulatory assets, deferredOther regulatory assets, deferred1,923 1,976 Other regulatory assets, deferred2,161 2,162 
Other deferred charges and assetsOther deferred charges and assets402 269 Other deferred charges and assets282 273 
Total deferred charges and other assetsTotal deferred charges and other assets4,266 3,680 Total deferred charges and other assets4,266 4,262 
Total AssetsTotal Assets$30,969 $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.

2019
    Table of Contents                                Index to Financial Statements
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's EquityLiabilities and Stockholder's EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$496 $251 Securities due within one year$815 $311 
Accounts payable —Accounts payable —Accounts payable —
AffiliatedAffiliated272 316 Affiliated220 316 
OtherOther353 514 Other392 545 
Customer depositsCustomer deposits104 100 Customer deposits105 104 
Accrued taxesAccrued taxes210 78 Accrued taxes257 152 
Accrued interestAccrued interest83 92 Accrued interest75 90 
Accrued compensationAccrued compensation172 216 Accrued compensation113 212 
Asset retirement obligationsAsset retirement obligations251 195 Asset retirement obligations275 254 
Other regulatory liabilitiesOther regulatory liabilities144 193 Other regulatory liabilities98 108 
Other current liabilitiesOther current liabilities116 105 Other current liabilities108 107 
Total current liabilitiesTotal current liabilities2,201 2,060 Total current liabilities2,458 2,199 
Long-term DebtLong-term Debt8,622 8,270 Long-term Debt8,055 8,558 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes3,372 3,260 Accumulated deferred income taxes3,318 3,273 
Deferred credits related to income taxesDeferred credits related to income taxes1,917 1,960 Deferred credits related to income taxes2,006 2,016 
Accumulated deferred ITCsAccumulated deferred ITCs96 100 Accumulated deferred ITCs92 94 
Employee benefit obligationsEmployee benefit obligations191 206 Employee benefit obligations187 214 
Operating lease obligationsOperating lease obligations121 107 Operating lease obligations112 119 
Asset retirement obligations, deferredAsset retirement obligations, deferred3,707 3,345 Asset retirement obligations, deferred3,688 3,720 
Other cost of removal obligationsOther cost of removal obligations360 412 Other cost of removal obligations320 335 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred137 146 Other regulatory liabilities, deferred98 124 
Other deferred credits and liabilitiesOther deferred credits and liabilities39 40 Other deferred credits and liabilities54 50 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities9,940 9,576 Total deferred credits and other liabilities9,875 9,945 
Total LiabilitiesTotal Liabilities20,763 19,906 Total Liabilities20,388 20,702 
Redeemable Preferred StockRedeemable Preferred Stock291 291 Redeemable Preferred Stock291 291 
Common Stockholder's Equity (See accompanying statements)
Common Stockholder's Equity (See accompanying statements)
9,915 8,955 
Common Stockholder's Equity (See accompanying statements)
10,526 9,810 
Total Liabilities and Stockholder's EquityTotal Liabilities and Stockholder's Equity$30,969 $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.
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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)		TotalNumber 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 
Net income after dividends on
preferred stock		— — — 217 — 217 
Capital contributions from parent company— — 1,236 — — 1,236 
Other comprehensive income— — — — 1 1 
Cash dividends on common stock— — — (211)— (211)
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 
Net income after dividends on
preferred stock		— — — 469 — 469 
Return of capital to parent company— — (2)— — (2)
Other comprehensive income— — — — 1 1 
Cash dividends on common stock— — — (211)— (211)
Balance at September 30, 201931 $1,222 $4,765 $3,124 $(25)$9,086 
(in millions)
Balance at December 31, 2019Balance at December 31, 201931 $1,222 $4,755 $3,001 $(23)$8,955 Balance 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 Net income after dividends on
preferred stock		— — — 280 — 280 
Capital contributions from parent companyCapital contributions from parent company— — 612 — — 612 Capital contributions from parent company— — 612 — — 612 
Other comprehensive incomeOther comprehensive income— — — — 1 1 Other comprehensive income— — — — 1 1 
Cash dividends on common stockCash dividends on common stock— — — (239)— (239)Cash dividends on common stock— — — (239)— (239)
Balance at March 31, 2020Balance at March 31, 202031 1,222 5,367 3,042 (22)9,609 Balance at March 31, 202031 $1,222 $5,367 $3,042 $(22)$9,609 
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		Net income after dividends on
preferred stock		— — — 298 — 298 Net income after dividends on
preferred stock		— — — 359 — 359 
Capital contributions from parent companyCapital contributions from parent company— — 1 — — 1 Capital contributions from parent company— — 602 — — 602 
Other comprehensive incomeOther comprehensive income— — — — 1 1 Other comprehensive income— — — — 1 1 
Cash dividends on common stockCash dividends on common stock— — — (239)— (239)Cash dividends on common stock— — — (246)— (246)
Balance at June 30, 202031 1,222 5,368 3,101 (21)9,670 
Net income after dividends on
preferred stock		— — — 444 — 444 
Balance at March 31, 2021Balance at March 31, 202131 $1,222 $6,015 $3,307 $(18)$10,526 
Capital contributions from parent company— — 40 — — 40 
Other comprehensive income— — — — 1 1 
Cash dividends on common stock— — — (240)— (240)
Balance at September 30, 202031 $1,222 $5,408 $3,305 $(20)$9,915 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Retail revenuesRetail revenues$2,435 $2,567 $5,870 $6,181 Retail revenues$1,787 $1,675 
Wholesale revenuesWholesale revenues34 39 85 107 Wholesale revenues43 26 
Other revenuesOther revenues148 149 416 418 Other revenues140 124 
Total operating revenuesTotal operating revenues2,617 2,755 6,371 6,706 Total operating revenues1,970 1,825 
Operating Expenses:Operating Expenses:Operating Expenses:
FuelFuel368 443 826 1,132 Fuel313 231 
Purchased power, non-affiliatesPurchased power, non-affiliates146 151 409 393 Purchased power, non-affiliates144 129 
Purchased power, affiliatesPurchased power, affiliates142 150 393 460 Purchased power, affiliates136 129 
Other operations and maintenanceOther operations and maintenance483 473 1,411 1,385 Other operations and maintenance474 465 
Depreciation and amortizationDepreciation and amortization358 250 1,064 733 Depreciation and amortization338 352 
Taxes other than income taxesTaxes other than income taxes123 127 344 348 Taxes other than income taxes116 113 
Estimated loss on Plant Vogtle Units 3 and 4Estimated loss on Plant Vogtle Units 3 and 40 0 149 0 Estimated loss on Plant Vogtle Units 3 and 448 0 
Total operating expensesTotal operating expenses1,620 1,594 4,596 4,451 Total operating expenses1,569 1,419 
Operating IncomeOperating Income997 1,161 1,775 2,255 Operating Income401 406 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(106)(103)(322)(304)Interest expense, net of amounts capitalized(104)(111)
Other income (expense), netOther income (expense), net54 36 156 113 Other income (expense), net72 52 
Total other income and (expense)Total other income and (expense)(52)(67)(166)(191)Total other income and (expense)(32)(59)
Earnings Before Income TaxesEarnings Before Income Taxes945 1,094 1,609 2,064 Earnings Before Income Taxes369 347 
Income taxesIncome taxes172 255 198 466 Income taxes18 16 
Net IncomeNet Income$773 $839 $1,411 $1,598 Net Income$351 $331 
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Net IncomeNet Income$773 $839 $1,411 $1,598 Net Income$351 $331 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Qualifying hedges:Qualifying hedges:Qualifying hedges:
Changes in fair value, net of tax of
$0, $(12), $(1), and $(21), respectively
0 (35)(2)(62)
Reclassification adjustment for amounts included in net income,
net of tax of $0, $0, $2, and $0, respectively
2 0 4 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)Total other comprehensive income (loss)2 (35)2 (61)Total other comprehensive income (loss)2 (1)
Comprehensive IncomeComprehensive Income$775 $804 $1,413 $1,537 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 ContentsIndex to Financial Statements
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 20212020
 (in millions)
Operating Activities:
Net income$351 $331 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total384 396 
Deferred income taxes(86)(73)
Pension, postretirement, and other employee benefits(43)(40)
Settlement of asset retirement obligations(49)(33)
Storm damage accruals53 53 
Retail fuel cost over recovery – long-term0 90 
Estimated loss on Plant Vogtle Units 3 and 448 0 
Other, net(19)(52)
Changes in certain current assets and liabilities —
-Receivables176 22 
-Fossil fuel stock10 (42)
-Other current assets(7)(15)
-Accounts payable(74)(69)
-Accrued taxes(110)(156)
-Accrued compensation(68)(87)
-Customer refunds0 (107)
-Other current liabilities(77)(5)
Net cash provided from operating activities489 213 
Investing Activities:
Property additions(775)(849)
Nuclear decommissioning trust fund purchases(241)(173)
Nuclear decommissioning trust fund sales236 167 
Cost of removal, net of salvage(40)(34)
Change in construction payables, net of joint owner portion(103)(46)
Proceeds from dispositions1 142 
Other investing activities9 (2)
Net cash used for investing activities(913)(795)
Financing Activities:
Increase in notes payable, net145 11 
Proceeds —
Senior notes750 1,500 
Pollution control revenue bonds0 53 
Short-term borrowings0 200 
Redemptions and repurchases —
Senior notes(325)(950)
Pollution control revenue bonds0 (148)
FFB loan(25)(16)
Capital contributions from parent company330 500 
Payment of common stock dividends(412)(385)
Other financing activities(19)(23)
Net cash provided from financing activities444 742 
Net Change in Cash, Cash Equivalents, and Restricted Cash20 160 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period9 52 
Cash, Cash Equivalents, and Restricted Cash at End of Period$29 $212 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $15 and $11 capitalized for 2021 and 2020, respectively)$128 $122 
Noncash transactions —
Accrued property additions at end of period445 472 
Right-of-use assets obtained under operating leases3 10 
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 STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Nine Months Ended September 30,
 20202019
 (in millions)
Operating Activities:
Net income$1,411 $1,598 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total1,206 887 
Deferred income taxes(167)145 
Allowance for equity funds used during construction(63)(49)
Pension, postretirement, and other employee benefits(98)(85)
Settlement of asset retirement obligations(130)(110)
Storm damage reserve accruals160 22 
Estimated loss on Plant Vogtle Units 3 and 4149 0 
Other, net12 40 
Changes in certain current assets and liabilities —
-Receivables(168)(128)
-Prepaid income taxes0 102 
-Materials and supplies(74)(2)
-Contract assets(34)(33)
-Other current assets(31)(13)
-Accounts payable25 (134)
-Accrued taxes44 138 
-Accrued compensation(36)(12)
-Retail fuel cost over recovery84 0 
-Customer refunds(162)18 
-Other current liabilities(3)(19)
Net cash provided from operating activities2,125 2,365 
Investing Activities:
Property additions(2,519)(2,581)
Nuclear decommissioning trust fund purchases(500)(483)
Nuclear decommissioning trust fund sales495 477 
Cost of removal, net of salvage(93)(136)
Change in construction payables, net of joint owner portion(14)(75)
Payments pursuant to LTSAs(44)(17)
Proceeds from dispositions and asset sales143 9 
Other investing activities6 13 
Net cash used for investing activities(2,526)(2,793)
Financing Activities:
Decrease in notes payable, net(115)(294)
Proceeds —
FFB loan519 835 
Senior notes1,500 750 
Pollution control revenue bonds53 584 
Short-term borrowings250 250 
Capital contributions from parent company1,379 82 
Redemptions and repurchases —
Senior notes(950)0 
Pollution control revenue bonds(148)(223)
Short-term borrowings(375)0 
FFB loan(55)0 
Payment of common stock dividends(1,156)(1,182)
Other financing activities(35)(37)
Net cash provided from financing activities867 765 
Net Change in Cash, Cash Equivalents, and Restricted Cash466 337 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period52 112 
Cash, Cash Equivalents, and Restricted Cash at End of Period$518 $449 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $34 and $25 capitalized for 2020 and 2019, respectively)$316 $296 
Income taxes, net311 45 
Noncash transactions —
Accrued property additions at end of period523 589 
Right-of-use assets obtained under operating leases30 18 
Right-of-use assets obtained under finance leases0 24 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
24
Table of ContentsIndex to Financial Statements
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
AssetsAssetsAt September 30, 2020At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Assets:Current Assets:Current Assets:
Cash and cash equivalentsCash and cash equivalents$518 $52 Cash and cash equivalents$29 $9 
Receivables —Receivables —Receivables —
Customer accounts receivable715 533 
Customer accountsCustomer accounts532 621 
Unbilled revenuesUnbilled revenues237 203 Unbilled revenues196 233 
Joint owner accounts receivable120 136 
Joint owner accountsJoint owner accounts124 123 
AffiliatedAffiliated17 21 Affiliated22 21 
Other accounts and notes receivable39 209 
Other accounts and notesOther accounts and notes35 67 
Accumulated provision for uncollectible accountsAccumulated provision for uncollectible accounts(29)(2)Accumulated provision for uncollectible accounts(26)(26)
Fossil fuel stockFossil fuel stock269 272 Fossil fuel stock268 278 
Materials and suppliesMaterials and supplies572 501 Materials and supplies610 592 
Regulatory assets – storm damage reserves213 213 
Regulatory assets – storm damageRegulatory assets – storm damage213 213 
Regulatory assets – asset retirement obligationsRegulatory assets – asset retirement obligations209 254 Regulatory assets – asset retirement obligations175 166 
Other regulatory assetsOther regulatory assets251 263 Other regulatory assets250 248 
Other current assetsOther current assets162 140 Other current assets114 143 
Total current assetsTotal current assets3,293 2,795 Total current assets2,542 2,688 
Property, Plant, and Equipment:Property, Plant, and Equipment:Property, Plant, and Equipment:
In serviceIn service39,170 38,137 In service39,857 39,682 
Less: Accumulated provision for depreciationLess: Accumulated provision for depreciation12,139 11,753 Less: Accumulated provision for depreciation12,421 12,251 
Plant in service, net of depreciationPlant in service, net of depreciation27,031 26,384 Plant in service, net of depreciation27,436 27,431 
Nuclear fuel, at amortized costNuclear fuel, at amortized cost547 555 Nuclear fuel, at amortized cost553 548 
Construction work in progressConstruction work in progress6,752 5,650 Construction work in progress7,394 6,857 
Total property, plant, and equipmentTotal property, plant, and equipment34,330 32,589 Total property, plant, and equipment35,383 34,836 
Other Property and Investments: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 subsidiariesEquity investments in unconsolidated subsidiaries50 52 Equity investments in unconsolidated subsidiaries51 51 
Nuclear decommissioning trusts, at fair value1,070 1,013 
Miscellaneous property and investmentsMiscellaneous property and investments67 64 Miscellaneous property and investments66 63 
Total other property and investmentsTotal other property and investments1,187 1,129 Total other property and investments1,266 1,259 
Deferred Charges and Other Assets:Deferred Charges and Other Assets:Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortizationOperating lease right-of-use assets, net of amortization1,345 1,428 Operating lease right-of-use assets, net of amortization1,273 1,308 
Deferred charges related to income taxesDeferred charges related to income taxes522 519 Deferred charges related to income taxes532 527 
Regulatory assets – asset retirement obligations, deferredRegulatory assets – asset retirement obligations, deferred3,307 2,865 Regulatory assets – asset retirement obligations, deferred3,310 3,291 
Other regulatory assets, deferredOther regulatory assets, deferred2,521 2,716 Other regulatory assets, deferred2,609 2,692 
Other deferred charges and assetsOther deferred charges and assets541 500 Other deferred charges and assets434 479 
Total deferred charges and other assetsTotal deferred charges and other assets8,236 8,028 Total deferred charges and other assets8,158 8,297 
Total AssetsTotal Assets$47,046 $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.

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GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's EquityLiabilities and Stockholder's EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$531 $1,025 Securities due within one year$87 $542 
Notes payableNotes payable0 365 Notes payable205 60 
Accounts payable —Accounts payable —Accounts payable —
AffiliatedAffiliated561 512 Affiliated472 597 
OtherOther731 711 Other732 753 
Customer depositsCustomer deposits280 283 Customer deposits272 276 
Accrued taxesAccrued taxes415 407 Accrued taxes239 407 
Accrued interestAccrued interest100 118 Accrued interest96 130 
Accrued compensationAccrued compensation198 233 Accrued compensation123 233 
Operating lease obligationsOperating lease obligations151 144 Operating lease obligations151 151 
Asset retirement obligationsAsset retirement obligations351 265 Asset retirement obligations304 287 
Over recovered fuel clause revenuesOver recovered fuel clause revenues84 0 Over recovered fuel clause revenues83 113 
Other regulatory liabilitiesOther regulatory liabilities302 447 Other regulatory liabilities235 228 
Other current liabilitiesOther current liabilities201 187 Other current liabilities242 254 
Total current liabilitiesTotal current liabilities3,905 4,697 Total current liabilities3,241 4,031 
Long-term DebtLong-term Debt12,314 10,791 Long-term Debt13,278 12,428 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes3,296 3,257 Accumulated deferred income taxes3,303 3,272 
Deferred credits related to income taxesDeferred credits related to income taxes2,664 2,862 Deferred credits related to income taxes2,517 2,588 
Accumulated deferred ITCsAccumulated deferred ITCs272 255 Accumulated deferred ITCs271 273 
Employee benefit obligationsEmployee benefit obligations486 540 Employee benefit obligations539 586 
Operating lease obligations, deferredOperating lease obligations, deferred1,163 1,282 Operating lease obligations, deferred1,149 1,156 
Asset retirement obligations, deferredAsset retirement obligations, deferred5,901 5,519 Asset retirement obligations, deferred5,971 5,978 
Other deferred credits and liabilitiesOther deferred credits and liabilities339 273 Other deferred credits and liabilities306 267 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities14,121 13,988 Total deferred credits and other liabilities14,056 14,120 
Total LiabilitiesTotal Liabilities30,340 29,476 Total Liabilities30,575 30,579 
Common Stockholder's Equity (See accompanying statements)
Common Stockholder's Equity (See accompanying statements)
16,706 15,065 
Common Stockholder's Equity (See accompanying statements)
16,774 16,501 
Total Liabilities and Stockholder's EquityTotal Liabilities and Stockholder's Equity$47,046 $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.
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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     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 
Net income— — — 311 — 311 
Capital contributions from parent company— — 29 — — 29 
Other comprehensive income— — — — 1 1 
Cash dividends on common stock— — — (394)— (394)
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)— 0 
Balance at June 30, 20199 398 10,371 3,582 (35)14,316 
Net income— — — 839 — 839 
Capital contributions from parent company— — 38 — — 38 
Other comprehensive income (loss)— — — — (35)(35)
Cash dividends on common stock— — — (394)— (394)
Other— — (1)1 — 0 
Balance at September 30, 20199 $398 $10,408 $4,028 $(70)$14,764 
(in millions)
Balance at December 31, 2019Balance at December 31, 20199 $398 $10,962 $3,756 $(51)$15,065 Balance at December 31, 20199 $398 $10,962 $3,756 $(51)$15,065 
Net incomeNet income— — — 331 — 331 Net income— — — 331 — 331 
Capital contributions from parent companyCapital contributions from parent company— — 502 — — 502 Capital contributions from parent company— — 502 — — 502 
Other comprehensive income (loss)Other comprehensive income (loss)— — — — (1)(1)Other comprehensive income (loss)— — — — (1)(1)
Cash dividends on common stockCash dividends on common stock— — — (385)— (385)Cash dividends on common stock— — — (385)— (385)
Balance at March 31, 2020Balance at March 31, 20209 398 11,464 3,702 (52)15,512 Balance at March 31, 20209 $398 $11,464 $3,702 $(52)$15,512 
Balance at December 31, 2020Balance at December 31, 20209 $398 $12,361 $3,789 $(47)$16,501 
Net incomeNet income— — — 308 — 308 Net income— — — 351 — 351 
Capital contributions from parent companyCapital contributions from parent company— — 1 — — 1 Capital contributions from parent company— — 332 — — 332 
Other comprehensive incomeOther comprehensive income— — — — 2 2 Other comprehensive income— — — — 2 2 
Cash dividends on common stockCash dividends on common stock— — — (386)— (386)Cash dividends on common stock— — — (412)— (412)
Balance at June 30, 20209 398 11,465 3,624 (50)15,437 
Net income— — — 773 — 773 
Balance at March 31, 2021Balance at March 31, 20219 $398 $12,693 $3,728 $(45)$16,774 
Capital contributions from parent company— — 880 — — 880 
Other comprehensive income— — — — 2 2 
Cash dividends on common stock— — — (386)— (386)
Balance at September 30, 20209 $398 $12,345 $4,011 $(48)$16,706 
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

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MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30,For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Retail revenuesRetail revenues$232 $251 $630 $669 Retail revenues$204 $199 
Wholesale revenues, non-affiliatesWholesale revenues, non-affiliates61 64 164 178 Wholesale revenues, non-affiliates63 51 
Wholesale revenues, affiliatesWholesale revenues, affiliates36 51 82 109 Wholesale revenues, affiliates33 21 
Other revenuesOther revenues7 4 19 14 Other revenues7 6 
Total operating revenuesTotal operating revenues336 370 895 970 Total operating revenues307 277 
Operating Expenses:Operating Expenses:Operating Expenses:
FuelFuel103 121 266 319 Fuel101 79 
Purchased powerPurchased power6 6 18 15 Purchased power5 5 
Other operations and maintenanceOther operations and maintenance62 72 202 204 Other operations and maintenance68 76 
Depreciation and amortizationDepreciation and amortization47 48 135 144 Depreciation and amortization47 42 
Taxes other than income taxesTaxes other than income taxes31 30 90 85 Taxes other than income taxes31 29 
Total operating expensesTotal operating expenses249 277 711 767 Total operating expenses252 231 
Operating IncomeOperating Income87 93 184 203 Operating Income55 46 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(14)(17)(45)(52)Interest expense, net of amounts capitalized(14)(16)
Other income (expense), netOther income (expense), net6 4 19 15 Other income (expense), net8 8 
Total other income and (expense)Total other income and (expense)(8)(13)(26)(37)Total other income and (expense)(6)(8)
Earnings Before Income TaxesEarnings Before Income Taxes79 80 158 166 Earnings Before Income Taxes49 38 
Income taxesIncome taxes12 15 20 27 Income taxes4 6 
Net Income$67 $65 $138 $139 
Net Income and Comprehensive IncomeNet Income and Comprehensive Income$45 $32 
27
Table of ContentsIndex to Financial Statements
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOMECASH FLOWS (UNAUDITED)
For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
 (in millions)(in millions)
Net Income$67 $65 $138 $139 
Other comprehensive income (loss):
Qualifying hedges:
Reclassification adjustment for amounts included in net income,
   net of tax of $0, $0, $0, and $0, respectively
0 0 1 1 
Total other comprehensive income (loss)0 0 1 1 
Comprehensive Income$67 $65 $139 $140 
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.
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    Table of Contents                                Index to Financial Statements
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
 20202019
 (in millions)
Operating Activities:
Net income$138 $139 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total142 148 
Deferred income taxes(19)10 
Settlement of asset retirement obligations(16)(28)
Other, net9 8 
Changes in certain current assets and liabilities —
-Receivables(3)(11)
-Other current assets(7)18 
-Accounts payable(54)(26)
-Accrued taxes15 (12)
-Accrued compensation(8)(10)
-Other current liabilities(11)6 
Net cash provided from operating activities186 242 
Investing Activities:
Property additions(174)(134)
Construction payables7 (16)
Payments pursuant to LTSAs(20)(18)
Other investing activities(13)(30)
Net cash used for investing activities(200)(198)
Financing Activities:
Proceeds —
Capital contributions from parent company80 2 
Short-term borrowings40 0 
Pollution control revenue bonds34 43 
Other long-term debt100 0 
Redemptions —
Senior notes(275)0 
Short-term borrowings(40)0 
Pollution control revenue bonds(41)0 
Return of capital to parent company(74)(113)
Payment of common stock dividends(37)0 
Other financing activities(1)(1)
Net cash used for financing activities(214)(69)
Net Change in Cash, Cash Equivalents, and Restricted Cash(228)(25)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period286 293 
Cash, Cash Equivalents, and Restricted Cash at End of Period$58 $268 
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $0 and $(1) capitalized for 2020 and 2019, respectively)$49 $55 
Income taxes, net9 0 
Noncash transactions — Accrued property additions at end of period42 20 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
29
Table of ContentsIndex to Financial Statements
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
AssetsAssetsAt September 30, 2020At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Assets:Current Assets:Current Assets:
Cash and cash equivalentsCash and cash equivalents$58 $286 Cash and cash equivalents$24 $39 
Receivables —Receivables —Receivables —
Customer accounts receivable46 35 
Customer accounts, netCustomer accounts, net50 34 
Unbilled revenuesUnbilled revenues40 39 Unbilled revenues33 38 
AffiliatedAffiliated14 27 Affiliated17 32 
Other accounts and notes receivable34 26 
Other accounts and notesOther accounts and notes29 32 
Fossil fuel stockFossil fuel stock19 26 Fossil fuel stock17 24 
Materials and suppliesMaterials and supplies63 61 Materials and supplies67 65 
Other regulatory assetsOther regulatory assets60 99 Other regulatory assets49 60 
Other current assetsOther current assets19 10 Other current assets20 20 
Total current assetsTotal current assets353 609 Total current assets306 344 
Property, Plant, and Equipment:Property, Plant, and Equipment:Property, Plant, and Equipment:
In serviceIn service4,966 4,857 In service5,037 5,011 
Less: Accumulated provision for depreciationLess: Accumulated provision for depreciation1,553 1,463 Less: Accumulated provision for depreciation1,579 1,545 
Plant in service, net of depreciationPlant in service, net of depreciation3,413 3,394 Plant in service, net of depreciation3,458 3,466 
Construction work in progressConstruction work in progress140 126 Construction work in progress163 146 
Total property, plant, and equipmentTotal property, plant, and equipment3,553 3,520 Total property, plant, and equipment3,621 3,612 
Other Property and InvestmentsOther Property and Investments149 131 Other Property and Investments149 151 
Deferred Charges and Other Assets:Deferred Charges and Other Assets:Deferred Charges and Other Assets:
Deferred charges related to income taxesDeferred charges related to income taxes32 32 Deferred charges related to income taxes32 32 
Regulatory assets – asset retirement obligationsRegulatory assets – asset retirement obligations202 210 Regulatory assets – asset retirement obligations211 201 
Other regulatory assets, deferredOther regulatory assets, deferred357 360 Other regulatory assets, deferred386 388 
Accumulated deferred income taxesAccumulated deferred income taxes130 139 Accumulated deferred income taxes126 129 
Other deferred charges and assetsOther deferred charges and assets72 34 Other deferred charges and assets64 55 
Total deferred charges and other assetsTotal deferred charges and other assets793 775 Total deferred charges and other assets819 805 
Total AssetsTotal Assets$4,848 $5,035 Total Assets$4,895 $4,912 
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's EquityLiabilities and Stockholder's EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$0 $281 Securities due within one year$421 $406 
Notes payableNotes payable54 25 
Accounts payable —Accounts payable —Accounts payable —
AffiliatedAffiliated54 76 Affiliated50 63 
OtherOther50 75 Other84 109 
Accrued taxesAccrued taxes120 105 Accrued taxes39 114 
Accrued interestAccrued interest14 15 Accrued interest14 15 
Accrued compensationAccrued compensation28 35 Accrued compensation18 34 
Asset retirement obligationsAsset retirement obligations23 33 Asset retirement obligations40 27 
Over recovered regulatory clause liabilitiesOver recovered regulatory clause liabilities31 29 Over recovered regulatory clause liabilities26 34 
Other regulatory liabilitiesOther regulatory liabilities56 21 Other regulatory liabilities36 49 
Other current liabilitiesOther current liabilities42 64 Other current liabilities38 40 
Total current liabilitiesTotal current liabilities418 734 Total current liabilities820 916 
Long-term DebtLong-term Debt1,402 1,308 Long-term Debt996 1,013 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes422 424 Accumulated deferred income taxes463 447 
Deferred credits related to income taxesDeferred credits related to income taxes299 352 Deferred credits related to income taxes285 287 
Employee benefit obligationsEmployee benefit obligations95 99 Employee benefit obligations107 113 
Asset retirement obligations, deferredAsset retirement obligations, deferred158 157 Asset retirement obligations, deferred134 150 
Other cost of removal obligationsOther cost of removal obligations195 189 Other cost of removal obligations194 194 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred64 76 Other regulatory liabilities, deferred14 15 
Other deferred credits and liabilitiesOther deferred credits and liabilities35 44 Other deferred credits and liabilities34 35 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities1,268 1,341 Total deferred credits and other liabilities1,231 1,241 
Total LiabilitiesTotal Liabilities3,088 3,383 Total Liabilities3,047 3,170 
Common Stockholder's Equity (See accompanying statements)
Common Stockholder's Equity (See accompanying statements)
1,760 1,652 
Common Stockholder's Equity (See accompanying statements)
1,848 1,742 
Total Liabilities and Stockholder's EquityTotal Liabilities and Stockholder's Equity$4,848 $5,035 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.
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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     Number of
Common
Shares
Issued		Common
Stock		Paid-In
Capital		Retained
Earnings (Accumulated Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Total
(in millions) (in millions)
Balance at December 31, 20181 $38 $4,546 $(2,971)$(4)$1,609 
Balance at December 31, 2019Balance at December 31, 20191 $38 $4,449 $(2,832)$(3)$1,652 
Net incomeNet income— — — 37 — 37 Net income— — — 32 — 32 
Capital contributions from parent companyCapital contributions from parent company— — 76 — — 76 
Return of capital to parent companyReturn of capital to parent company— — (38)— — (38)Return of capital to parent company— — (37)— — (37)
Capital contributions from parent company— — 2 — — 2 
Balance at March 31, 20191 38 4,510 (2,934)(4)1,610 
Net income— — — 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 
Net income— — — 65 — 65 
Return of capital to parent company— — (43)— — (43)
OtherOther— — (1)— — (1)
Balance at March 31, 2020Balance at March 31, 20201 $38 $4,487 $(2,800)$(3)$1,722 
Balance at September 30, 20191 $38 $4,437 $(2,832)$(4)$1,639 
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 
Balance at December 31, 2020Balance at December 31, 20201 $38 $4,460 $(2,754)$(2)$1,742 
Net incomeNet income— — — 67 — 67 Net income— — — 45 — 45 
Capital contributions from parent companyCapital contributions from parent company— — 6 — — 6 Capital contributions from parent company— — 100 — — 100 
Cash dividends on common stockCash dividends on common stock— — — (37)— (37)Cash dividends on common stock— — — (39)— (39)
Balance at September 30, 20201 $38 $4,456 $(2,731)$(3)$1,760 
Balance at March 31, 2021Balance 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.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Wholesale revenues, non-affiliatesWholesale revenues, non-affiliates$418 $455 $1,047 $1,197 Wholesale revenues, non-affiliates$355 $286 
Wholesale revenues, affiliatesWholesale revenues, affiliates101 116 279 320 Wholesale revenues, affiliates81 86 
Other revenuesOther revenues4 3 11 10 Other revenues4 3 
Total operating revenuesTotal operating revenues523 574 1,337 1,527 Total operating revenues440 375 
Operating Expenses:Operating Expenses:Operating Expenses:
FuelFuel137 166 346 449 Fuel141 107 
Purchased powerPurchased power19 26 52 82 Purchased power20 14 
Other operations and maintenanceOther operations and maintenance89 85 245 250 Other operations and maintenance101 79 
Depreciation and amortizationDepreciation and amortization129 120 367 357 Depreciation and amortization119 117 
Taxes other than income taxesTaxes other than income taxes10 10 29 32 Taxes other than income taxes12 9 
(Gain) loss on dispositions, net(Gain) loss on dispositions, net0 0 (39)(23)(Gain) loss on dispositions, net(39)(39)
Total operating expensesTotal operating expenses384 407 1,000 1,147 Total operating expenses354 287 
Operating IncomeOperating Income139 167 337 380 Operating Income86 88 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(36)(43)(114)(127)Interest expense, net of amounts capitalized(38)(39)
Other income (expense), netOther income (expense), net13 6 19 48 Other income (expense), net7 2 
Total other income and (expense)Total other income and (expense)(23)(37)(95)(79)Total other income and (expense)(31)(37)
Earnings Before Income TaxesEarnings Before Income Taxes116 130 242 301 Earnings Before Income Taxes55 51 
Income taxes (benefit)Income taxes (benefit)14 19 27 (41)Income taxes (benefit)(10)7 
Net IncomeNet Income102 111 215 342 Net Income65 44 
Net income attributable to noncontrolling interests28 25 3 26 
Net loss attributable to noncontrolling interestsNet loss attributable to noncontrolling interests(32)(31)
Net Income Attributable to Southern PowerNet Income Attributable to Southern Power$74 $86 $212 $316 Net Income Attributable to Southern Power$97 $75 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Net IncomeNet Income$102 $111 $215 $342 Net Income$65 $44 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Qualifying hedges:Qualifying hedges:Qualifying hedges:
Changes in fair value, net of tax of
$15, $(18), $(2), and $(28), respectively
44 (53)(6)(84)
Reclassification adjustment for amounts included in net income,
net of tax of $(13), $15, $(8), and $21, respectively
(36)45 (24)64 
Changes in fair value, net of tax of $(11) and $(21), respectivelyChanges 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
Reclassification adjustment for amounts included in net income,
net of tax of $15 and $10, respectively
48 28 
Pension and other postretirement benefit plans:Pension and other postretirement benefit plans:Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,
net of tax of $0, $0, $0, and $0, respectively
0 0 2 0 
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)Total other comprehensive income (loss)8 (8)(28)(20)Total other comprehensive income (loss)16 (33)
Comprehensive IncomeComprehensive Income110 103 187 322 Comprehensive Income81 11 
Comprehensive income attributable to noncontrolling interests28 25 3 26 
Comprehensive loss attributable to noncontrolling interestsComprehensive loss attributable to noncontrolling interests(32)(31)
Comprehensive Income Attributable to Southern PowerComprehensive Income Attributable to Southern Power$82 $78 $184 $296 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 ContentsIndex to Financial Statements
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 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 CASH FLOWSBALANCE SHEETS (UNAUDITED)
 
 For the Nine Months Ended September 30,
 20202019
 (in millions)
Operating Activities:
Net income$215 $342 
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total386 377 
Deferred income taxes(59)(122)
Utilization of federal investment tax credits318 705 
Amortization of investment tax credits(44)(136)
(Gain) loss on dispositions, net(39)(24)
Other, net(16)(19)
Changes in certain current assets and liabilities —
-Receivables(28)15 
-Prepaid income taxes74 33 
-Other current assets(17)(3)
-Accounts payable(12)(5)
-Accrued taxes21 66 
-Other current liabilities(25)(8)
Net cash provided from operating activities774 1,221 
Investing Activities:
Business acquisitions, net of cash acquired(81)(50)
Property additions(135)(284)
Proceeds from dispositions and asset sales663 572 
Investment in unconsolidated subsidiaries0 (116)
Payments pursuant to LTSAs(61)(85)
Other investing activities38 (1)
Net cash provided from investing activities424 36 
Financing Activities:
Decrease in notes payable, net(449)0 
Proceeds — Capital contributions from parent company0 59 
Redemptions —
Short-term borrowings(100)(100)
Senior notes(300)0 
Return of capital to parent company0 (755)
Distributions to noncontrolling interests(164)(125)
Capital contributions from noncontrolling interests173 11 
Purchase of membership interests from noncontrolling interests(60)0 
Payment of common stock dividends(151)(154)
Other financing activities(9)(6)
Net cash used for financing activities(1,060)(1,070)
Net Change in Cash, Cash Equivalents, and Restricted Cash138 187 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period279 181 
Cash, Cash Equivalents, and Restricted Cash at End of Period$417 $368 
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $10 and $11 capitalized for 2020 and 2019, respectively)$123 $133 
Income taxes, net(278)(612)
Noncash transactions —
Accrued property additions at end of period44 41 
Right-of-use assets obtained under operating leases30 0 
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 ContentsIndex to Financial Statements
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AssetsAt September 30, 2020At December 31, 2019
 (in millions)
Current Assets:
Cash and cash equivalents$416 $279 
Receivables —
Customer accounts receivable135 107 
Affiliated41 30 
Other37 73 
Materials and supplies204 191 
Prepaid income taxes33 36 
Other current assets37 43 
Total current assets903 759 
Property, Plant, and Equipment:
In service13,600 13,270 
Less: Accumulated provision for depreciation2,776 2,464 
Plant in service, net of depreciation10,824 10,806 
Construction work in progress335 515 
Total property, plant, and equipment11,159 11,321 
Other Property and Investments:
Intangible assets, net of amortization of $84 and $69
   at September 30, 2020 and December 31, 2019, respectively
307 322 
Equity investments in unconsolidated subsidiaries19 28 
Total other property and investments326 350 
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization395 369 
Prepaid LTSAs160 128 
Accumulated deferred income taxes231 551 
Income taxes receivable, non-current13 5 
Assets held for sale0 601 
Other deferred charges and assets237 216 
Total deferred charges and other assets1,036 1,870 
Total Assets$13,424 $14,300 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
35
    Table of Contents                                Index to Financial Statements
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Liabilities and Stockholders' EquityLiabilities and Stockholders' EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholders' EquityAt March 31, 2021At December 31, 2020
(in millions) (in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$525 $824 Securities due within one year$300 $299 
Notes payableNotes payable0 549 Notes payable315 175 
Accounts payable —Accounts payable —Accounts payable —
AffiliatedAffiliated49 56 Affiliated44 65 
OtherOther69 85 Other127 92 
Accrued taxes —Accrued taxes —Accrued taxes —
Accrued income taxesAccrued income taxes9 0 Accrued income taxes10 8 
Other accrued taxesOther accrued taxes31 26 Other accrued taxes15 22 
Accrued interestAccrued interest26 32 Accrued interest35 32 
Other current liabilitiesOther current liabilities104 132 Other current liabilities132 132 
Total current liabilitiesTotal current liabilities813 1,704 Total current liabilities978 825 
Long-term DebtLong-term Debt3,630 3,574 Long-term Debt3,730 3,393 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes117 115 Accumulated deferred income taxes230 123 
Accumulated deferred ITCsAccumulated deferred ITCs1,687 1,731 Accumulated deferred ITCs1,658 1,672 
Operating lease obligationsOperating lease obligations404 376 Operating lease obligations487 426 
Other deferred credits and liabilitiesOther deferred credits and liabilities162 178 Other deferred credits and liabilities168 165 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities2,370 2,400 Total deferred credits and other liabilities2,543 2,386 
Total LiabilitiesTotal Liabilities6,813 7,678 Total Liabilities7,251 6,604 
Total Stockholders' Equity (See accompanying statements)
Total Stockholders' Equity (See accompanying statements)
6,611 6,622 
Total Stockholders' Equity (See accompanying statements)
6,744 6,631 
Total Liabilities and Stockholders' EquityTotal Liabilities and Stockholders' Equity$13,424 $14,300 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 Contents                                Index 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, 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)0 
Balance at June 30, 20191,102 1,479 4 2,585 4,233 6,818 
Net income— 86 — 86 25 111 
Return of capital to parent company(250)— — (250)— (250)
Capital contributions from parent company53 — — 53 — 53 
Other comprehensive income (loss)— — (8)(8)— (8)
Cash dividends on common stock— (51)— (51)— (51)
Capital contributions from
noncontrolling interests		— — — — 63 63 
Distributions to noncontrolling interests— — — — (43)(43)
Balance at September 30, 2019$905 $1,514 $(4)$2,415 $4,278 $6,693 
37
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, 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)0 0 (2)0 (2)
Balance at June 30, 2020907 1,523 (62)2,368 4,291 6,659 
Net income— 74 — 74 28 102 
Return of capital to parent company(4)— — (4)— (4)
Other comprehensive income— — 8 8 — 8 
Cash dividends on common stock— (51)— (51)— (51)
Capital contributions from
noncontrolling interests		— — — — 2 2 
Distributions to noncontrolling interests— — — — (51)(51)
Purchase of membership interests
from noncontrolling interests		5 — — 5 (60)(55)
Other0 0 — 0 1 1 
Balance at September 30, 2020$908 $1,546 $(54)$2,400 $4,211 $6,611 
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
38
Table of ContentsIndex to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended September 30,For the Nine Months Ended September 30, For the Three Months Ended March 31,
2020201920202019 20212020
(in millions)(in millions) (in millions)
Operating Revenues:Operating Revenues:Operating Revenues:
Natural gas revenues (includes revenue taxes of
$10, $10, $79, and $88, respectively)
$478 $498 $2,356 $2,661 
Natural gas revenues (includes revenue taxes of $54 and $47, respectively)Natural gas revenues (includes revenue taxes of $54 and $47, respectively)$1,692 $1,240 
Alternative revenue programsAlternative revenue programs(1)0 6 0 Alternative revenue programs2 9 
Total operating revenuesTotal operating revenues477 498 2,362 2,661 Total operating revenues1,694 1,249 
Operating Expenses:Operating Expenses:Operating Expenses:
Cost of natural gasCost of natural gas71 79 654 956 Cost of natural gas583 439 
Other operations and maintenanceOther operations and maintenance217 208 696 642 Other operations and maintenance299 258 
Depreciation and amortizationDepreciation and amortization125 121 368 359 Depreciation and amortization130 120 
Taxes other than income taxesTaxes other than income taxes35 33 154 161 Taxes other than income taxes81 72 
Impairment charges0 92 0 92 
Total operating expensesTotal operating expenses448 533 1,872 2,210 Total operating expenses1,093 889 
Operating Income (Loss)29 (35)490 451 
Operating IncomeOperating Income601 360 
Other Income and (Expense):Other Income and (Expense):Other Income and (Expense):
Earnings from equity method investmentsEarnings from equity method investments33 35 106 115 Earnings from equity method investments41 43 
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(57)(56)(171)(174)Interest expense, net of amounts capitalized(60)(58)
Other income (expense), netOther income (expense), net12 5 33 16 Other income (expense), net(63)9 
Total other income and (expense)Total other income and (expense)(12)(16)(32)(43)Total other income and (expense)(82)(6)
Earnings (Loss) Before Income Taxes17 (51)458 408 
Income taxes (benefit)3 (22)98 61 
Net Income (Loss)$14 $(29)$360 $347 
Earnings Before Income TaxesEarnings Before Income Taxes519 354 
Income taxesIncome taxes121 79 
Net IncomeNet Income$398 $275 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
 (in millions)(in millions)
Net Income (Loss)$14 $(29)$360 $347 
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of
   $1, $(3), $(6), and $(4), respectively
4 (3)(17)(6)
Reclassification adjustment for amounts included in net income,
   net of tax of $0, $0, $2, and $0, respectively
1 0 7 0 
Pension and other postretirement benefit plans:
Reclassification adjustment for amounts included in net income,
   net of tax of $0, $0, $1, and $(1), respectively
0 0 0 (1)
Total other comprehensive income (loss)5 (3)(10)(7)
Comprehensive Income$19 $(32)$350 $340 
 For the Three Months Ended March 31,
 20212020
 (in millions)
Net Income$398 $275 
Other comprehensive income (loss):
Qualifying hedges:
Changes 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
3 5 
Total other comprehensive income (loss)4 (15)
Comprehensive Income$402 $260 
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
3937
    Table of Contents                                Index to Financial Statements
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, For the Three Months Ended March 31,
20202019 20212020
(in millions) (in millions)
Operating Activities:Operating Activities:Operating Activities:
Net incomeNet income$360 $347 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 —Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, totalDepreciation and amortization, total368 359 Depreciation and amortization, total130 120 
Deferred income taxesDeferred income taxes(1)96 Deferred income taxes160 22 
Mark-to-market adjustmentsMark-to-market adjustments104 44 Mark-to-market adjustments64 13 
Impairment charges0 92 
Natural gas cost under recovery – long-termNatural gas cost under recovery – long-term(185)0 
Other, netOther, net(20)(58)Other, net5 (19)
Changes in certain current assets and liabilities —Changes in certain current assets and liabilities —Changes in certain current assets and liabilities —
-Receivables-Receivables403 832 -Receivables74 112 
-Natural gas for sale26 49 
-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-Other current assets(45)45 -Other current assets(34)33 
-Accounts payable-Accounts payable(75)(607)-Accounts payable(7)(185)
-Accrued taxes-Accrued taxes7 (68)-Accrued taxes10 27 
-Accrued compensation-Accrued compensation(17)(34)-Accrued compensation0 (42)
-Other current liabilities-Other current liabilities12 (48)-Other current liabilities(34)41 
Net cash provided from operating activitiesNet cash provided from operating activities1,122 1,049 Net cash provided from operating activities550 643 
Investing Activities:Investing Activities:Investing Activities:
Property additionsProperty additions(1,045)(1,008)Property additions(251)(261)
Cost of removal, net of salvageCost of removal, net of salvage(60)(59)Cost of removal, net of salvage(16)(15)
Change in construction payables, netChange in construction payables, net25 57 Change in construction payables, net(47)(18)
Investment in unconsolidated subsidiariesInvestment in unconsolidated subsidiaries(79)(25)Investment in unconsolidated subsidiaries(1)(77)
Proceeds from dispositions and asset sales178 32 
Proceeds from dispositionsProceeds from dispositions0 178 
Other investing activitiesOther investing activities8 14 Other investing activities7 0 
Net cash used for investing activitiesNet cash used for investing activities(973)(989)Net cash used for investing activities(308)(193)
Financing Activities:Financing Activities:Financing Activities:
Decrease in notes payable, netDecrease in notes payable, net(500)(383)Decrease in notes payable, net(127)(39)
Proceeds —
First mortgage bonds150 200 
Capital contributions from parent company215 820 
Senior notes500 0 
Redemptions —
First mortgage bonds0 (50)
Senior notes0 (300)
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 dividendsPayment of common stock dividends(399)(353)Payment of common stock dividends(132)(133)
Other financing activitiesOther financing activities(3)(2)Other financing activities0 (13)
Net cash used for financing activities(37)(68)
Net cash provided from (used for) financing activitiesNet cash provided from (used for) financing activities50 (185)
Net Change in Cash, Cash Equivalents, and Restricted CashNet Change in Cash, Cash Equivalents, and Restricted Cash112 (8)Net Change in Cash, Cash Equivalents, and Restricted Cash292 265 
Cash, Cash Equivalents, and Restricted Cash at Beginning of PeriodCash, 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 PeriodCash, Cash Equivalents, and Restricted Cash at End of Period$161 $62 Cash, Cash Equivalents, and Restricted Cash at End of Period$311 $314 
Supplemental Cash Flow Information:Supplemental Cash Flow Information:Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $5 capitalized for both 2020 and 2019)$162 $180 
Cash paid (received) during the period for —Cash paid (received) during the period for —
Interest (net of $2 capitalized for both 2021 and 2020)Interest (net of $2 capitalized for both 2021 and 2020)$52 $49 
Income taxes, netIncome taxes, net45 48 Income taxes, net(1)(12)
Noncash transactions — Accrued property additions at end of periodNoncash transactions — Accrued property additions at end of period146 154 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.
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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
AssetsAssetsAt September 30, 2020At December 31, 2019AssetsAt March 31, 2021At December 31, 2020
(in millions)(in millions)
Current Assets:Current Assets:  Current Assets:  
Cash and cash equivalentsCash and cash equivalents$157 $46 Cash and cash equivalents$309 $17 
Receivables —Receivables —  Receivables —  
Energy marketing receivables328 428 
Customer accounts receivable214 323 
Energy marketingEnergy marketing412 516 
Customer accountsCustomer accounts452 353 
Unbilled revenuesUnbilled revenues60 183 Unbilled revenues161 219 
AffiliatedAffiliated3 5 Affiliated2 4 
Other accounts and notes receivable42 114 
Other accounts and notesOther accounts and notes43 51 
Accumulated provision for uncollectible accountsAccumulated provision for uncollectible accounts(34)(18)Accumulated provision for uncollectible accounts(51)(40)
Natural gas for saleNatural gas for sale448 479 Natural gas for sale197 460 
Prepaid expensesPrepaid expenses92 65 Prepaid expenses97 48 
Assets from risk management activities, net of collateralAssets from risk management activities, net of collateral75 177 Assets from risk management activities, net of collateral68 118 
Natural gas cost under recoveryNatural gas cost under recovery487 0 
Other regulatory assetsOther regulatory assets110 92 Other regulatory assets84 102 
Assets held for sale0 171 
Other current assetsOther current assets43 41 Other current assets39 38 
Total current assetsTotal current assets1,538 2,106 Total current assets2,300 1,886 
Property, Plant, and Equipment:Property, Plant, and Equipment:  Property, Plant, and Equipment:  
In serviceIn service17,202 16,344 In service17,866 17,611 
Less: Accumulated depreciationLess: Accumulated depreciation4,761 4,650 Less: Accumulated depreciation4,893 4,821 
Plant in service, net of depreciationPlant in service, net of depreciation12,441 11,694 Plant in service, net of depreciation12,973 12,790 
Construction work in progressConstruction work in progress655 613 Construction work in progress636 648 
Total property, plant, and equipmentTotal property, plant, and equipment13,096 12,307 Total property, plant, and equipment13,609 13,438 
Other Property and Investments:Other Property and Investments:Other Property and Investments:
GoodwillGoodwill5,015 5,015 Goodwill5,015 5,015 
Equity investments in unconsolidated subsidiariesEquity investments in unconsolidated subsidiaries1,301 1,251 Equity investments in unconsolidated subsidiaries1,290 1,290 
Other intangible assets, net of amortization of $191 and $176
at September 30, 2020 and December 31, 2019, respectively
55 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 investmentsMiscellaneous property and investments20 20 Miscellaneous property and investments20 19 
Total other property and investmentsTotal other property and investments6,391 6,356 Total other property and investments6,372 6,375 
Deferred Charges and Other Assets:Deferred Charges and Other Assets:Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortizationOperating lease right-of-use assets, net of amortization85 93 Operating lease right-of-use assets, net of amortization80 81 
Other regulatory assets, deferredOther regulatory assets, deferred580 618 Other regulatory assets, deferred786 615 
Other deferred charges and assetsOther deferred charges and assets242 207 Other deferred charges and assets230 235 
Total deferred charges and other assetsTotal deferred charges and other assets907 918 Total deferred charges and other assets1,096 931 
Total AssetsTotal Assets$21,932 $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.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Liabilities and Stockholder's EquityLiabilities and Stockholder's EquityAt September 30, 2020At December 31, 2019Liabilities and Stockholder's EquityAt March 31, 2021At December 31, 2020
(in millions)(in millions)
Current Liabilities:Current Liabilities:Current Liabilities:
Securities due within one yearSecurities due within one year$334 $0 Securities due within one year$302 $333 
Notes payableNotes payable150 650 Notes payable497 324 
Energy marketing trade payablesEnergy marketing trade payables361 442 Energy marketing trade payables475 494 
Accounts payable —Accounts payable —Accounts payable —
AffiliatedAffiliated46 41 Affiliated49 56 
OtherOther341 315 Other346 373 
Customer depositsCustomer deposits94 96 Customer deposits76 90 
Accrued taxesAccrued taxes78 71 Accrued taxes94 83 
Accrued interestAccrued interest66 52 Accrued interest68 58 
Accrued compensationAccrued compensation83 100 Accrued compensation107 106 
Liabilities from risk management activities, net of collateral31 21 
Other regulatory liabilitiesOther regulatory liabilities112 94 Other regulatory liabilities92 122 
Temporary LIFO liquidationTemporary LIFO liquidation194 0 
Other current liabilitiesOther current liabilities128 128 Other current liabilities166 150 
Total current liabilitiesTotal current liabilities1,824 2,010 Total current liabilities2,466 2,189 
Long-term DebtLong-term Debt6,127 5,845 Long-term Debt6,286 6,293 
Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:Deferred Credits and Other Liabilities:
Accumulated deferred income taxesAccumulated deferred income taxes1,213 1,219 Accumulated deferred income taxes1,427 1,265 
Deferred credits related to income taxesDeferred credits related to income taxes854 874 Deferred credits related to income taxes839 847 
Employee benefit obligationsEmployee benefit obligations247 265 Employee benefit obligations273 283 
Operating lease obligationsOperating lease obligations70 78 Operating lease obligations65 67 
Other cost of removal obligationsOther cost of removal obligations1,642 1,606 Other cost of removal obligations1,668 1,649 
Accrued environmental remediationAccrued environmental remediation220 233 Accrued environmental remediation208 216 
Other deferred credits and liabilitiesOther deferred credits and liabilities50 51 Other deferred credits and liabilities51 54 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities4,296 4,326 Total deferred credits and other liabilities4,531 4,381 
Total LiabilitiesTotal Liabilities12,247 12,181 Total Liabilities13,283 12,863 
Common Stockholder's Equity (See accompanying statements)
Common Stockholder's Equity (See accompanying statements)
9,685 9,506 
Common Stockholder's Equity (See accompanying statements)
10,094 9,767 
Total Liabilities and Stockholder's EquityTotal Liabilities and Stockholder's Equity$21,932 $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.


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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     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 
Net income—��270 — 270 
Capital contributions from parent company17 — — 17 
Other comprehensive income (loss)— — (1)(1)
Cash dividends on common stock— (118)— (118)
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, 20198,908 (171)22 8,759 
Net loss— (29)— (29)
Capital contributions from parent company784 — — 784 
Other comprehensive income (loss)— — (3)(3)
Cash dividends on common stock— (118)— (118)
Balance at September 30, 2019$9,692 $(318)$19 $9,393 
(in millions)
Balance at December 31, 2019Balance at December 31, 2019$9,697 $(198)$7 $9,506 Balance at December 31, 2019$9,697 $(198)$7 $9,506 
Net incomeNet income— 275 — 275 Net income— 275 — 275 
Return of capital to parent companyReturn of capital to parent company(2)— — (2)Return of capital to parent company(2)— — (2)
Other comprehensive income (loss)Other comprehensive income (loss)— — (15)(15)Other comprehensive income (loss)— — (15)(15)
Cash dividends on common stockCash dividends on common stock— (133)— (133)Cash dividends on common stock— (133)— (133)
Balance at March 31, 2020Balance at March 31, 20209,695 (56)(8)9,631 Balance at March 31, 2020$9,695 $(56)$(8)$9,631 
Balance at December 31, 2020Balance at December 31, 2020$9,930 $(141)$(22)$9,767 
Net incomeNet income— 71 — 71 Net income— 398 — 398 
Capital contributions from parent company200 — — 200 
Cash dividends on common stock— (133)— (133)
Balance at June 30, 20209,895 (118)(8)9,769 
Net income— 14 — 14 
Capital contributions from parent companyCapital contributions from parent company30 — — 30 Capital contributions from parent company57 — — 57 
Other comprehensive incomeOther comprehensive income— — 5 5 Other comprehensive income— — 4 4 
Cash dividends on common stockCash dividends on common stock— (133)— (133)Cash dividends on common stock— (132)— (132)
Balance at September 30, 2020$9,925 $(237)$(3)$9,685 
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.

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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
4946
C
5954
D
6557
E
7260
F
7462
G
7563
H
7664
I
8166
J
8671
K
9780
L
9982



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

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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 September 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 September 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 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, 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.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Other intangible assets were as follows:
At September 30, 2020At December 31, 2019At March 31, 2021At December 31, 2020
Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net		Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net		Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net		Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net
(in millions)(in millions)(in millions)(in millions)
Southern CompanySouthern CompanySouthern Company
Other intangible assets subject to amortization:Other intangible assets subject to amortization:Other intangible assets subject to amortization:
Customer relationshipsCustomer relationships$212 $(130)$82 $212 $(116)$96 Customer relationships$212 $(139)$73 $212 $(135)$77 
Trade namesTrade names64 (30)34 64 (25)39 Trade names64 (33)31 64 (31)33 
Storage and transportation contractsStorage and transportation contracts64 (64)0 64 (62)2 Storage and transportation contracts64 (64)0 64 (64)0 
PPA fair value adjustmentsPPA fair value adjustments390 (84)306 390 (69)321 PPA fair value adjustments390 (94)296 390 (89)301 
OtherOther10 (8)2 11 (8)3 Other11 (9)2 10 (9)1 
Total other intangible assets subject to amortizationTotal other intangible assets subject to amortization$740 $(316)$424 $741 $(280)$461 Total other intangible assets subject to amortization$741 $(339)$402 $740 $(328)$412 
Other intangible assets not subject to amortization:Other intangible assets not subject to amortization:Other intangible assets not subject to amortization:
Federal Communications Commission licensesFederal Communications Commission licenses75 — 75 75 — 75 Federal Communications Commission licenses75 — 75 75 — 75 
Total other intangible assetsTotal other intangible assets$815 $(316)$499 $816 $(280)$536 Total other intangible assets$816 $(339)$477 $815 $(328)$487 
Southern PowerSouthern PowerSouthern Power
Other intangible assets subject to amortization:Other intangible assets subject to amortization:Other intangible assets subject to amortization:
PPA fair value adjustmentsPPA fair value adjustments$390 $(84)$306 $390 $(69)$321 PPA fair value adjustments$390 $(94)$296 $390 $(89)$301 
Southern Company GasSouthern Company GasSouthern Company Gas
Other intangible assets subject to amortization:Other intangible assets subject to amortization:Other intangible assets subject to amortization:
Gas marketing servicesGas marketing servicesGas marketing services
Customer relationshipsCustomer relationships$156 $(115)$41 $156 $(104)$52 Customer relationships$156 $(122)$34 $156 $(119)$37 
Trade namesTrade names26 (12)14 26 (10)16 Trade names26 (13)13 26 (12)14 
Wholesale gas servicesWholesale gas servicesWholesale gas services
Storage and transportation contractsStorage and transportation contracts64 (64)0 64 (62)2 Storage and transportation contracts64 (64)0 64 (64)0 
Total other intangible assets subject to amortizationTotal other intangible assets subject to amortization$246 $(191)$55 $246 $(176)$70 Total other intangible assets subject to amortization$246 $(199)$47 $246 $(195)$51 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Amortization associated with other intangible assets was as follows:
Three Months EndedNine Months Ended
September 30, 2020
(in millions)
Southern Company(a)
$12 $37 
Southern Power(b)
$5 $15 
Southern Company Gas
Gas marketing services$4 $13 
Wholesale gas services(b)
1 2 
Southern Company Gas total$5 $15 
Three Months Ended
March 31, 2021
(in millions)
Southern Company(a)
$11 
Southern Power(b)
5 
Southern Company Gas(c)
4 
(a)Includes $6$5 million and $17 million for the three and nine months ended September 30, 2020, respectively, 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 September 30, 2020March 31, 2021 and/or December 31, 2019:2020:
Southern
Company		Southern PowerSouthern
Company Gas		Southern
Company		Southern PowerSouthern
Company Gas
At September
30, 2020		At December 31, 2019At September 30, 2020At September
30, 2020		At December 31, 2019March 31, 2021December 31, 2020March 31, 2021March 31, 2021December 31, 2020
(in millions)(in millions)(in millions)(in millions)(in millions)(in millions)
Cash and cash equivalentsCash and cash equivalents$3,379 $1,975 $416 $157 $46 Cash and cash equivalents$1,770 $1,065 $314 $309 $17 
Restricted cash(a):
Restricted cash(a):
Restricted cash(a):
Other accounts and notes receivable0 3 0 0 3 
Other current assetsOther current assets4 0 0 4 0 Other current assets2 2 0 2 2 
Other deferred charges and assetsOther deferred charges and assets1 0 1 0 0 Other deferred charges and assets29 0 29 0 0 
Total cash, cash equivalents, and restricted cashTotal cash, cash equivalents, and restricted cash$3,383 (b)$1,978 $417 $161 $49 Total cash, cash equivalents, and restricted cash$1,801 $1,068 (b)$343 $311 $19 
(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.
(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. 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 the three and nine months ended September 30, 2020 or the three months ended September 30, 2019 and recorded an adjustment of $10
47
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
million for the nine months ended September 30, 2019.either period presented. Nicor Gas' inventory decrement at September 30, 2020March 31, 2021 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, Alabama Power, and Georgia Power during the first nine months of 2020 are shown in the following table. There were no material changes in AROs for the other Registrants during the first nine months of 2020.
Southern CompanyAlabama PowerGeorgia Power
(in millions)
Balance at December 31, 2019$9,786 $3,540 $5,784 
Liabilities incurred15 0 10 
Liabilities settled(315)(157)(130)
Accretion308 113 177 
Cash flow revisions866 462 411 
Balance at September 30, 2020$10,660 $3,958 $6,252 
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.
During the third quarter 2020, Georgia Power completed an assessment of its plans to close the ash ponds at all of its generating plants in compliance with the CCR Rule and the related state rule. The related cost estimates were further refined, including updates to long-term post-closure care requirements, market pricing, and timing of future cash outlays. As a result, in September 2020, Georgia Power recorded an increase of approximately $411 million to its AROs related to the CCR Rule and the related state rule.
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, and the changes could be material. 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) and Note 2 to the financial statements in Item 8 of the Form 10-K 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 nine months ended September 30, 2020 and is expected to result in an immaterial decrease in annual depreciation for 2020.
4845
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(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.
The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at September 30, 2020March 31, 2021 and December 31, 20192020 were as follows:
Regulatory ClauseRegulatory ClauseBalance Sheet Line ItemSeptember 30,
2020		December 31, 2019Regulatory ClauseBalance Sheet Line ItemMarch 31,
2021		December 31, 2020
(in millions)(in millions)
Alabama PowerAlabama PowerAlabama Power
Rate CNP ComplianceRate CNP ComplianceOther regulatory liabilities, current$12 $55 Rate CNP ComplianceOther regulatory liabilities, current$33 $28 
Other regulatory liabilities, deferred38 7 
Rate CNP PPARate CNP PPADeferred under recovered regulatory clause revenues62 40 Rate CNP PPAOther regulatory assets, deferred58 58 
Retail Energy Cost RecoveryRetail Energy Cost RecoveryOther regulatory liabilities, current107 32 Retail Energy Cost RecoveryOther regulatory liabilities, current0 18 
Other regulatory liabilities, deferred16 17 
Other regulatory assets, deferred15 0 
Natural Disaster ReserveNatural Disaster ReserveOther regulatory liabilities, current7 37 Natural Disaster ReserveOther regulatory liabilities, deferred52 77 
Other regulatory liabilities, deferred51 113 
Georgia PowerGeorgia PowerGeorgia Power
Fuel Cost RecoveryFuel Cost RecoveryOver recovered fuel clause revenues$84 $0 Fuel Cost RecoveryOver recovered fuel clause revenues$83 $113 
Other deferred credits and liabilities67 73 
Mississippi PowerMississippi PowerMississippi Power
Fuel Cost RecoveryFuel Cost RecoveryOver recovered regulatory clause liabilities$23 $23 Fuel Cost RecoveryOver recovered regulatory clause liabilities$18 $24 
Ad Valorem TaxAd Valorem TaxOther regulatory assets11 47 Ad Valorem TaxOther regulatory assets, current12 11 
Other regulatory assets, deferred36 0 Other regulatory assets, deferred45 41 
Property Damage ReserveProperty Damage ReserveOther regulatory liabilities, deferred48 54 Property Damage ReserveOther regulatory liabilities, deferred0 4 
Other regulatory assets, deferred1 0 
Southern Company GasSouthern Company GasSouthern Company Gas
Natural Gas Cost RecoveryOther regulatory liabilities$84 $74 
Natural Gas Cost Recovery(*)
Natural Gas Cost Recovery(*)
Other regulatory liabilities$12 $88 
Natural gas cost under recovery487 0 
Other regulatory assets, deferred185 0 
(*)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 August 14, 2020,Energy Alabama, Gasp, Inc., and the Sierra Club filed requests for reconsideration and rehearing with the Alabama PSC issued its order regarding Alabama Power's petition for athe certificate of convenience and necessity (CCN), issued to Alabama Power in August 2020, which authorized, 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 occurred on August 31, 2020, (iii) purchase approximately 240 MWs of combined cycle generation under a long-term PPA, which began on September 1, 2020, and (iv) pursue up to approximately 200 MWs of cost-effective 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 issued an order denying the requests. On January 7, 2021, Energy Alabama and Gasp, Inc. filed judicial appeals regarding both the Alabama PSC's August 2020 CCN order and the December 2020 order denying reconsideration and rehearing. On February 23, 2021, Alabama Power filed a motion to explainintervene in the appeal and, justify potential recoveryon 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 jointly 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 costs.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 Georgia PSC further directedin 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 6 to the financial statements in Item 8 of the Form 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 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 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 proposed solar generationVogtle 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 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 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 400 MWs, coupled$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 total 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 battery energy storageCOVID-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 adding $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 the 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 the 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, (solar/battery 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 evaluated under an existing Renewable Generationdelays in the project schedule that could result in increased costs.
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Certificate (RGC) issued by the Alabama PSC in September 2015. The contracts proposed in the CCN petition expired on July 31, 2020. Any future requests for solar/battery systems will be evaluated under the RGC process.
Energy Alabama, Gasp, Inc., and the Sierra Club filed petitions for reconsideration and rehearing with the Alabama PSC. Alabama PSC action on these petitions is expected by November 10, 2020. Upon issuance of a written order reflecting such action, affected parties would have 30 days to pursue an appeal through the State of Alabama court system.
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 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.
Rate ECRJoint Owner Contracts
OnIn 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 7, 2020,2018, the Alabama PSC issuedVogtle 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 order authorizing Alabama Power to reduce its over-collected fuel balance by $100 million and return that amount to customersincrease in the formtotal project capital cost forecast and Georgia Power's decision not to seek rate recovery of bill creditsthe 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 billing monthother Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of October 2020. Any portionPTCs 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 $100 million undistributed followingMEAG Term Sheet. In February 2019, Georgia Power, the bill credit process will remain inother Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Rate ECR regulatory liability forVogtle Joint Ownership Agreements to implement the benefit of customers.
Rate NDR
In the third quarter 2020, Alabama Power recorded $44 million against the NDR for damages incurred to its transmission and distribution facilities from Hurricane Sally. The NDR balance available for storm damages was $51 million as of September 30, 2020. If the balance falls below $50 million, a reserve establishment charge would be activated (and the ongoing reserve maintenance charge concurrently suspended) until the reserve balance reaches $75 million.
Georgia Power
Rate Plans
2019 ARP
In accordance with the termsprovisions of the 2019 ARP, on October 1, 2020, Georgia Power filed the following tariff adjustments to become effective January 1, 2021 pending approval by the Georgia PSC:Vogtle Owner Term Sheet (Global Amendments).
•increase traditional base tariffs by approximately $120 million;
•increase the Environmental Compliance Cost Recovery tariff by approximately $2 million;
•decrease Demand-Side Management tariffs by approximately $15 million; and
•increase Municipal Franchise Fee tariffs by approximately $4 million.
The ultimate outcome of this matter cannot be determined at this time.
2013 ARP
In 2019, Georgia Power's retail ROE exceeded 12.00% and, under the modified sharing mechanismAs previously disclosed, pursuant to the 2019 ARP,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 reduced regulatory assets by approximately $60will be responsible for 55.7% of actual qualifying construction costs between $800 million and accrued refunds$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 retail customers44.3% of approximately $60 million. On September 1, 2020, the Georgia PSC authorizedsuch 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 issue customers bill credits prior to final reviewGeorgia 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 2019 Annual Surveillance Report byother Vogtle Owners will have a one-time option at the staff oftime the Georgia PSC. Georgia Power issued the bill credits in October 2020.
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 theproject budget forecast is
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deferralso 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 incrementalevents: (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 associated withrelating to the COVID-19 pandemic. The period over which such costsconstruction of Plant Vogtle Units 3 and 4 will not be recovered isin 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 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 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 determinedrecovered 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 nextrequest 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 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 $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate case. At Septemberbase 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 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 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 $38 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 ResourcePerformance Evaluation Plan
On March 5, 2020,15, 2021, Mississippi Power submitted its annual retail PEP filing for 2021 to the Sierra Club filedMississippi PSC, which requested a petition for judicial review1.8%, or approximately $16 million, annual increase in revenues, primarily due to increased investment and amortization and lower sales. In accordance with the Superior CourtPEP rate schedule, the rate increase became effective with the first billing cycle of Fulton CountyApril 2021, subject 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.refund. 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 further lowered 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 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 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 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.
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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 September 30, 2020(b)
(6.9)
Remaining estimate to complete(a)
$1.6
(a)    Excludes financing costs expected to be capitalized through AFUDC of approximately $240 million, of which $71 million had been accrued through September 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 $2.5 billion had been incurred through September 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 related test results, and workforce statistics.
As of June 30, 2020, assignments of contingency exceeded the remaining balance of the $366 million construction contingency originally established in the second quarter 2018 by approximately $34 million. This contingency was used to address cost risks related to construction productivity, including the April 2020 reduction in workforce designed to mitigate impacts of the COVID-19 pandemic described below; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement, among other factors. As a result of these factors, Georgia Power established $115 million of additional construction contingency as of June 30, 2020 for further potential risks including, among other factors, construction productivity and expected impacts of the COVID-19 pandemic; additional 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.
During the third quarter 2020, approximately $5 million of the construction contingency established in the second quarter 2020 was assigned to the base capital cost forecast for cost risks primarily associated with construction productivity and field support.
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
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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 from mid-June through July, and continued to impact productivity levels and pace of activity completion. As a result of these factors, overall production improvements were not achieved at the levels anticipated, contributing to the June 30, 2020 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. Through October 2020, the project has faced challenges in meeting the July 2020 aggressive site work plan targets including, but not limited to, overall construction and subcontractor labor productivity, which has resulted in a backlog of activities and completion percentages below the July 2020 aggressive site work plan targets. In addition, while the number of active COVID-19 cases at the site has declined since July 2020, the COVID-19 pandemic continues to impact productivity and the pace of activity completion. After considering these factors, Southern Nuclear has further extended milestone dates from the July 2020 aggressive site work plan. Achievement of these extended milestone dates depends on absenteeism rates continuing to normalize and overall construction productivity and production levels, including subcontractors, significantly improving and being sustained above pre-pandemic levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, need to be added and maintained. 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. 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.
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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 June 15, 2020, the NRC rejected Nuclear Watch South's April 20, 2020 petition requesting a hearing and challenging the closure of certain ITAAC. On August 10, 2020, the Atomic Safety and Licensing Board rejected the Blue Ridge Environmental Defense League's (BREDL) May 11, 2020 petition challenging a license amendment request. The staff of the NRC has issued the requested amendment to the combined construction and operating license for Plant Vogtle Unit 3. BREDL appealed the Atomic Safety and Licensing Board decision to the NRC. 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 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.
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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.
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 September 30, 2020, Georgia Power had recovered approximately $2.5 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected
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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. On October 1, 2020, Georgia Power filed a request to decrease the NCCR tariff by $142 million annually, effective January 1, 2021, pending Georgia PSC approval.
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.
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, 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
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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, which was withdrawn on August 20, 2020. This matter is now concluded.
The Georgia PSC has approved 22 VCM reports covering the periods through December 31, 2019, including total construction capital costs incurred through that date of $7.4 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). Georgia Power filed its twenty-third VCM report with the Georgia PSC on August 31, 2020, which reflects the capital cost forecast discussed above and requests approval of $701 million of construction capital costs incurred from January 1, 2020 through June 30, 2020.
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.
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 26, 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 September 30, 2020, the incremental costs deferred totaled approximately $2 million.refund. The ultimate outcome of this matter cannot be determined at this time.
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Municipal and Rural Associations Tariff
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 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 GeorgiaMississippi PSC. The filing requests an annual base rate increaseincludes 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 $37.6 million based on the projected 12-month period beginning JanuaryMississippi Power's 50% undivided ownership interest in Plant Daniel Units 1 2021, which does not exceed the 5% limitation establishedand 2 (502 MWs) by the Georgia PSC in its December 2019 approvalend of Atlanta Gas Light's general base rate case. Resolution2027. The Plant Greene County unit retirements require the completion by Alabama Power of the 2020 GRAM filing is expectedtransmission and system reliability improvements, as well as agreement 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 future GRAM filings, which would impact rates starting on January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
Nicor Gas
On March 18, 2020, in response to the COVID-19 pandemic, 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. In response to this order, on March 27, 2020, Nicor Gas and other utilities in Illinois filed their plans seeking cost recovery and providing 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. Nicor Gas resumed late payment fees on July 27, 2020 and, on October 1, 2020, began recovery of the COVID-19 pandemic-related impacts through the special purpose rider, which will continue over a 24-month period. In response to an Illinois Commission request, Nicor Gas will continue to voluntarily suspend residential customer disconnections for non-payment through March 31, 2021. At September 30, 2020, Nicor Gas' related regulatory asset was $13 million.Alabama Power.
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Virginia Natural Gas
In responseThe remaining net book value of Plant Daniel Units 1 and 2 was approximately $531 million at March 31, 2021. Mississippi Power expects to reclassify the COVID-19 pandemic, the Virginia Commission issued orders requiring Virginia Natural Gasnet book value remaining at retirement 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 expired on October 5, 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 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 Greene County units are expected to be fully depreciated upon retirement.
The 2021 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 be addressed in a future rate proceeding. At September 30, 2020, Virginia Natural Gas' related regulatory asset was $1 million. conclude on August 13, 2021.
The ultimate outcome of this matter cannot be determined at this time.
Ad 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
In December 2019, 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 April 28, 2021, Atlanta Gas Light filed an applicationits first Integrated Capacity and Delivery Plan (i-CDP) with the Virginia CommissionGeorgia PSC, which includes a series of ongoing and proposed pipeline safety, reliability, and growth programs for a 24.1-mile header improvement projectthe next 10 years (2022 through 2031), as well as the required capital investments and related costs to improve resiliency and increaseimplement the supply of natural gas deliveredprograms. The i-CDP reflects capital investments totaling approximately $0.5 billion 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$0.6 billion annually.
Recovery of the project's primary customer before ruling onrelated revenue requirements will be included in either subsequent annual GRAM filings or the December 2019 application.new System Reinforcement Rider for authorized large pressure improvement and system reliability projects. The i-CDP is subject to a five-month review period, which may be extended. The ultimate outcome of this matter cannot be determined at this time.
Virginia Natural Gas
On April 6, 2021, the Virginia State Corporation Commission approved a motion filed by Virginia Natural Gas to withdraw the application for its 9.5-mile interconnect project due to a change in the capacity needs of one of the project's customers. No further action is necessary and this matter 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 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
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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. On August 15, 2020, the parties reached a settlement. On September 8, 2020, the plaintiffs filed a stipulation of settlement and motion for preliminary approval to resolve the case on a class-wide basis, which the court granted on October 1, 2020. The settlement amount will be paid entirely through existing insurance policies and is not expected to have a material impact on Southern Company's financial statements.
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. On September 25, 2020, the plaintiffs filed a status report noting the settlement of the securities class action and informing the court that the parties have scheduled mediation of this case later in the fourth quarter 2020.
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. On
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 30, 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 havehad 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
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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 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 on all claims 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. During the third quarter 2020, the plaintiffs reduced their claim for damages to approximately $76 million. On October 12, 2020, the arbitration panel issued a unanimous award in favor of Mississippi Power on all claims. This matter is now concluded.
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
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motion for leave to file a second amended complaint. On May 26, 2020, the court granted Mississippi Power's motion to dismiss the first amended complaint filed in 2019. OnIn 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. On July 28, 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which includesincluded the same federal claims as the proposed second amended complaint, as 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 motions and entered final judgment in favor of Mississippi Power. On January 22, 2021, the 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.
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 $16 million and $15 million at both September 30, 2020March 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 $252$240 million and $269$245 million as of September 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.
Nuclear Fuel Disposal Costs
On August 13, 2020, Alabama Power and Georgia Power filed amended complaints in each of the lawsuits against the U.S. government in the Court of Federal Claims for the costs of continuing to store spent nuclear fuel at Plants Farley, Hatch, and Vogtle Units 1 and 2. The amended complaints add damages from January 1, 2018 to December 31, 2019 to the claim period. Damages will continue to accumulate until the issue is resolved, the U.S. government disposes of Alabama Power's and Georgia Power's spent nuclear fuel pursuant to its contractual obligations, or alternative storage is otherwise provided. No amounts have been recognized in the financial statements as of September 30, 2020 for any potential recoveries from the pending lawsuits. The final outcome of these matters cannot be determined at this time. However, Alabama Power and Georgia Power expect to credit any recoveries for
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the benefit of customers in accordance with direction from their respective PSC; therefore, no material impact on Southern Company's, Alabama Power's, or Georgia Power's net income is expected.
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 September 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 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 remaining amount of the lease investment was charged against earnings in the second quarter 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.
For year-to-date 2020, Mississippi Power recorded pre-tax (and after-tax) charges to income totaling $2 million primarily associated with abandonment and related closure costs and ongoing period costs, net of salvage proceeds,
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for the mine and gasifier-related assets at the Kemper County energy facility. 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, net of salvage, are estimated to total $3 million for the remainder of 2020 and $10 million to $15 million annually for 2021 through 2025.
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 is expected to be treated as a finance lease for accounting purposes upon commencement.
On September 3, 2020, Mississippi Power and Southern Company executed an agreement with the DOE completing Mississippi Power's request for property closeout certification under the contract related to the DOE grants received for the Kemper County energy facility, which enables Mississippi Power to proceed with full dismantlement of the abandoned gasifier-related assets and site restoration activities. The execution of the agreement had no material impact on Mississippi Power's financial statements. 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 $387 million of DOE grants received. 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 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. The parties agreed not to select a specific unit by August 1, 2020 and are continuing negotiations on a mutually acceptable revised operating agreement. 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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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.
(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" herein and Note (J) for additional information on revenue accounted for under lease and derivative accounting guidance, respectively.
The following table disaggregates revenue from contracts with customers for the three months ended March 31, 2021 and 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 
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The following table disaggregates revenue from contracts with customers for the three and nine months ended September 30, 2020 and 2019:
Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended September 30, 2020
Operating revenues
Retail electric revenues
Residential$2,019 $752 $1,183 $84 $0 $0 
Commercial1,354 447 833 74 0 0 
Industrial783 358 352 73 0 0 
Other22 5 15 2 0 0 
Total retail electric revenues4,178 1,562 2,383 233 0 0 
Natural gas distribution revenues
Residential170 0 0 0 0 170 
Commercial41 0 0 0 0 41 
Transportation224 0 0 0 0 224 
Industrial4 0 0 0 0 4 
Other35 0 0 0 0 35 
Total natural gas distribution revenues474 0 0 0 0 474 
Wholesale electric revenues
PPA energy revenues214 40 13 2 165 0 
PPA capacity revenues136 26 15 1 95 0 
Non-PPA revenues59 10 3 93 68 0 
Total wholesale electric revenues409 76 31 96 328 0 
Other natural gas revenues
Wholesale gas services431 0 0 0 0 431 
Gas marketing services38 0 0 0 0 38 
Other natural gas revenues7 0 0 0 0 7 
Total natural gas revenues476 0 0 0 0 476 
Other revenues218 33 115 6 4 0 
Total revenue from contracts with customers5,755 1,671 2,529 335 332 950 
Other revenue sources(a)
968 58 88 1 191 630 
Other adjustments(b)
(1,103)0 0 0 0 (1,103)
Total operating revenues$5,620 $1,729 $2,617 $336 $523 $477 
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Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Nine Months Ended September 30, 2020
Operating revenues
Retail electric revenues
Residential$4,802 $1,839 $2,760 $203 $0 $0 
Commercial3,589 1,152 2,242 195 0 0 
Industrial2,081 956 907 218 0 0 
Other68 16 46 6 0 0 
Total retail electric revenues10,540 3,963 5,955 622 0 0 
Natural gas distribution revenues
Residential906 0 0 0 0 906 
Commercial229 0 0 0 0 229 
Transportation723 0 0 0 0 723 
Industrial21 0 0 0 0 21 
Other179 0 0 0 0 179 
Total natural gas distribution revenues2,058 0 0 0 0 2,058 
Wholesale electric revenues
PPA energy revenues550 94 38 7 425 0 
PPA capacity revenues339 78 30 3 231 0 
Non-PPA revenues159 33 7 235 184 0 
Total wholesale electric revenues1,048 205 75 245 840 0 
Other natural gas revenues
Wholesale gas services1,168 0 0 0 0 1,168 
Gas marketing services258 0 0 0 0 258 
Other natural gas revenues22 0 0 0 0 22 
Total natural gas revenues1,448 0 0 0 0 1,448 
Other revenues677 117 329 19 11 0 
Total revenue from contracts with customers15,771 4,285 6,359 886 851 3,506 
Other revenue sources(a)
2,604 160 12 9 486 1,973 
Other adjustments(b)
(3,117)0 0 0 0 (3,117)
Total operating revenues$15,258 $4,445 $6,371 $895 $1,337 $2,362 
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Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Three Months Ended September 30, 2019
Operating revenues
Retail electric revenues
Residential$2,119 $820 $1,211 $88 $0 $0 
Commercial1,563 512 965 86 0 0 
Industrial953 421 450 82 0 0 
Other26 7 16 3 0 0 
Total retail electric revenues4,661 1,760 2,642 259 0 0 
Natural gas distribution revenues
Residential162 0 0 0 0 162 
Commercial42 0 0 0 0 42 
Transportation204 0 0 0 0 204 
Industrial3 0 0 0 0 3 
Other30 0 0 0 0 30 
Total natural gas distribution revenues441 0 0 0 0 441 
Wholesale electric revenues
PPA energy revenues245 43 19 2 188 0 
PPA capacity revenues134 25 13 1 100 0 
Non-PPA revenues62 2 3 111 81 0 
Total wholesale electric revenues441 70 35 114 369 0 
Other natural gas revenues
Wholesale gas services425 0 0 0 0 425 
Gas marketing services37 0 0 0 0 37 
Other natural gas revenues10 0 0 0 0 10 
Total natural gas revenues472 0 0 0 0 472 
Other revenues267 36 113 4 3 0 
Total revenue from contracts with customers6,282 1,866 2,790 377 372 913 
Other revenue sources(a)
855 (25)(35)(7)202 727 
Other adjustments(b)
(1,142)0 0 0 0 (1,142)
Total operating revenues$5,995 $1,841 $2,755 $370 $574 $498 
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(UNAUDITED)
Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company GasSouthern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)(in millions)
Nine Months Ended September 30, 2019
Three Months Ended March 31, 2020Three Months Ended March 31, 2020
Operating revenuesOperating revenuesOperating revenues
Retail electric revenuesRetail electric revenuesRetail electric revenues
ResidentialResidential$4,939 $1,971 $2,751 $217 $0 $0 Residential$1,370 $553 $760 $57 $0 $0 
CommercialCommercial3,951 1,301 2,427 223 0 0 Commercial1,146 364 720 62 0 0 
IndustrialIndustrial2,428 1,128 1,074 226 0 0 Industrial680 321 281 78 0 0 
OtherOther69 20 41 8 0 0 Other23 5 16 2 0 0 
Total retail electric revenuesTotal retail electric revenues11,387 4,420 6,293 674 — 0 Total retail electric revenues3,219 1,243 1,777 199 0 0 
Natural gas distribution revenuesNatural gas distribution revenuesNatural gas distribution revenues
ResidentialResidential992 0 0 0 0 992 Residential496 0 0 0 0 496 
CommercialCommercial277 0 0 0 0 277 Commercial130 0 0 0 0 130 
TransportationTransportation673 0 0 0 0 673 Transportation264 0 0 0 0 264 
IndustrialIndustrial25 0 0 0 0 25 Industrial12 0 0 0 0 12 
OtherOther191 0 0 0 0 191 Other97 0 0 0 0 97 
Total natural gas distribution revenuesTotal natural gas distribution revenues2,158 0 0 0 0 2,158 Total natural gas distribution revenues999 0 0 0 0 999 
Wholesale electric revenuesWholesale electric revenuesWholesale electric revenues
PPA energy revenuesPPA energy revenues648 110 47 8 508 0 PPA energy revenues159 27 9 2 125 0 
PPA capacity revenuesPPA capacity revenues350 77 41 2 272 0 PPA capacity revenues105 27 12 1 66 0 
Non-PPA revenuesNon-PPA revenues174 65 5 275 190 0 Non-PPA revenues51 19 2 69 58 0 
Total wholesale electric revenuesTotal wholesale electric revenues1,172 252 93 285 970 0 Total wholesale electric revenues315 73 23 72 249 0 
Other natural gas revenuesOther natural gas revenuesOther natural gas revenues
Wholesale gas servicesWholesale gas services1,590 0 0 0 0 1,590 Wholesale gas services396 0 0 0 0 396 
Gas marketing servicesGas marketing services313 0 0 0 0 313 Gas marketing services163 0 0 0 0 163 
Other natural gas revenuesOther natural gas revenues32 0 0 0 0 32 Other natural gas revenues7 0 0 0 0 7 
Total natural gas revenuesTotal natural gas revenues1,935 0 0 0 0 1,935 Total natural gas revenues566 0 0 0 0 566 
Other revenuesOther revenues763 119 298 14 10 0 Other revenues192 37 95 5 3 0 
Total revenue from contracts with customersTotal revenue from contracts with customers17,415 4,791 6,684 973 980 4,093 Total revenue from contracts with customers5,291 1,353 1,895 276 252 1,565 
Other revenue sources(a)
Other revenue sources(a)
3,266 (29)22 (3)547 2,744 
Other revenue sources(a)
868 (2)(70)1 123 825 
Other adjustments(b)
Other adjustments(b)
(4,176)0 0 0 0 (4,176)
Other adjustments(b)
(1,141)0 0 0 0 (1,141)
Total operating revenuesTotal operating revenues$16,505 $4,762 $6,706 $970 $1,527 $2,661 Total operating revenues$5,018 $1,351 $1,825 $277 $375 $1,249 
(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 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.
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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 September 30, 2020March 31, 2021 and December 31, 2019:2020:
Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Accounts Receivables
As of September 30, 2020$2,344 $686 $901 $93 $100 $385 
As of December 31, 20192,413 586 688 79 97 749 
Contract Assets
As of September 30, 2020$159 $5 $103 $0 $0 $0 
As of December 31, 2019117 0 69 0 0 0 
Contract Liabilities
As of September 30, 2020$56 $1 $24 $0 $3 $1 
As of December 31, 201952 10 13 0 1 1 
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 
As of September 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, and unregulated service agreements, where payment is contingent on project completion.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 $47$55 million and $40$81 million of contract assets and $22$34 million and $28$27 million of contract liabilities at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, for outstanding performance obligations.
Revenues recognized by Southern Company in the three and nine months ended September 30, 2020,March 31, 2021, which were included in contract liabilities at December 31, 2019,2020, were $8 million and $29 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 September 30, 2020March 31, 2021 are expected to be recognized as follows:
2020
(remaining)		20212022202320242025 and
Thereafter		2021 (remaining)2022202320242025Thereafter
(in millions)(in millions)
Southern CompanySouthern Company$170 $487 $362 $339 $319 $3,062 Southern Company$485 $408 $340 $327 $307 $2,666 
Alabama PowerAlabama Power7 33 31 24 7 5 Alabama Power24 31 24 7 5 0 
Georgia PowerGeorgia Power20 71 43 35 24 62 Georgia Power57 51 36 24 21 41 
Southern PowerSouthern Power60 290 292 282 290 3,013 Southern Power213 287 280 296 280 2,644 
Revenue expected to be recognized for performance obligations remaining at March 31, 2021 was immaterial for Mississippi Power and Southern Company Gas.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Revenue expected to be recognized for performance obligations remaining at September 30, 2020 was immaterial for Mississippi Power.
Lease Income
Lease income for the three and nine months ended September 30,March 31, 2021 and 2020 and 2019 is as follows:
Southern
Company		Alabama PowerGeorgia PowerMississippi
Power		Southern PowerSouthern Company GasSouthern
Company		Alabama PowerGeorgia PowerMississippi
Power		Southern PowerSouthern Company Gas
(in millions) (in millions)
For the Three Months Ended September 30, 2020
For the Three Months Ended March 31, 2021For the Three Months Ended March 31, 2021
Lease income - interest income on sales-type leasesLease income - interest income on sales-type leases$3 $0 $0 $3 $0 $0 Lease income - interest income on sales-type leases$3 $0 $0 $3 $0 $0 
Lease income - operating leasesLease income - operating leases50 11 14 0 21 9 Lease income - operating leases55 21 10 0 21 9 
Variable lease incomeVariable lease income145 0 0 0 153 0 Variable lease income84 0 0 0 90 0 
Total lease incomeTotal lease income$198 $11 $14 $3 $174 $9 Total lease income$142 $21 $10 $3 $111 $9 
For the Nine Months Ended September 30, 2020
For the Three Months Ended March 31, 2020For the Three Months Ended March 31, 2020
Lease income - interest income on sales-type leasesLease income - interest income on sales-type leases$8 $0 $0 $8 $0 $0 Lease income - interest income on sales-type leases$3 $0 $0 $3 $0 $0 
Lease income - operating leasesLease income - operating leases148 24 44 1 66 26 Lease income - operating leases51 6 16 0 24 9 
Variable lease incomeVariable lease income345 0 0 0 368 0 Variable lease income74 0 0 0 80 0 
Total lease incomeTotal lease income$501 $24 $44 $9 $434 $26 Total lease income$128 $6 $16 $3 $104 $9 
For the Three Months Ended September 30, 2019
Lease income - interest income on sales-type leases$2 $0 $0 $2 $0 $0 
Lease income - operating leases64 5 18 0 31 9 
Variable lease income141 0 0 0 151 0 
Total lease income$207 $5 $18 $2 $182 $9 
For the Nine Months Ended September 30, 2019
Lease income - interest income on sales-type leases$7 $0 $0 $7 $0 $0 
Lease income - operating leases216 19 57 0 111 26 
Variable lease income324 0 0 0 349 0 
Total lease income$547 $19 $57 $7 $460 $26 
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.
As part of the Autauga Combined Cycle Acquisition, Lease income for Alabama Power assumed an existing power sales agreement under which the full output of the generating facility remains committed to another third party for its remaining term of approximately three years. These revenues are included above as lease income from operating leases. See Note (B) and Note 15 to the financial statements in Item 8 of the Form 10-K under "Alabama Power" for additional information.
Lease Receivables
MississippiSouthern Power completed construction of additional leased assets under an existing sales-type lease during the third quarter 2020. Upon completion of construction, the book value of $25 million was transferred from CWIP to lease receivables, of which $22 million and $3 million is included in other property and investments and other accounts and notes receivable, respectively, at September 30, 2020. The transfer represents a non-cash investing transaction for purposes of the statements of cash flows.wholesale revenues.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(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.
SP Solar and SP Wind
At September 30, 2020March 31, 2021 and December 31, 2019,2020, SP Solar had total assets of $6.3$6.1 billion, and $6.4 billion, respectively, and total liabilities of $382 million. Noncontrolling$377 million and $387 million, respectively, and noncontrolling interests totaledof $1.1 billion at both September 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 September 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 $129$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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(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 September 30, 2020March 31, 2021 and December 31, 2019,2020, the other VIEs had total assets of $1.9 billion and $1.1 billion, respectively, total liabilities of $109$260 million and $104$110 million, respectively, and noncontrolling interests of $471$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 September 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.
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(UNAUDITED)
Southern Company Gas
Equity Method Investments
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.
The carrying amounts of Southern Company Gas' equity method investments as of September 30, 2020March 31, 2021 and December 31, 20192020 and related income from those investments for the three and nine months ended September 30,March 31, 2021 and 2020 and 2019 were as follows:
Investment BalanceInvestment BalanceSeptember 30, 2020
December 31, 2019(a)
Investment BalanceMarch 31, 2021December 31, 2020
(in millions)(in millions)
SNG(b)
SNG(b)
$1,180 $1,137 
SNG(b)
$1,164 $1,167 
PennEast Pipeline(c)
89 82 
PennEast Pipeline(*)
PennEast Pipeline(*)
93 91 
OtherOther32 32 Other33 32 
TotalTotal$1,301 $1,251 Total$1,290 $1,290 
(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.information.
Earnings from Equity Method InvestmentsEarnings from Equity Method InvestmentsThree Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019Earnings from Equity Method InvestmentsThree Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
(in millions)(in millions)
SNGSNG$30 $30 $95 $104 SNG$38 $37 
Atlantic Coast Pipeline(a)(b)
0 3 3 9 
PennEast Pipeline(a)
PennEast Pipeline(a)
2 2 5 5 
PennEast Pipeline(a)
2 2 
Other(b)Other(b)1 0 3 (3)Other(b)1 4 
TotalTotal$33 $35 $106 $115 Total$41 $43 
(a)AmountsEarnings primarily result from AFUDC equity recorded by the project entity.
(b)On March 24, 2020, Southern Company Gas completed the sale of its interestinterests in 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.
SNG
Selected financial information of SNG for the three and nine months ended September 30, 2020 and 2019 is as follows:
Income Statement InformationThree Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
(in millions)
Revenues$150 $152 $457 $473 
Operating income85 82 262 274 
Net income59 60 189 208 
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(UNAUDITED)
(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.
At September 30, 2020,March 31, 2021, committed credit arrangements with banks were as follows:
ExpiresExpires
CompanyCompany2021202220232024TotalUnusedDue within One YearCompany2021202220232024TotalUnusedDue within One Year
(in millions)(in millions)
Southern Company parentSouthern Company parent$0 $0 $0 $2,000 $2,000 $1,999 $0 Southern Company parent$0 $0 $0 $2,000 $2,000 $1,999 $0 
Alabama PowerAlabama Power3 525 0 800 1,328 1,328 3 Alabama Power3 525 0 800 1,328 1,328 3 
Georgia PowerGeorgia Power0 0 0 1,750 1,750 1,728 0 Georgia Power0 0 0 1,750 1,750 1,728 0 
Mississippi PowerMississippi Power0 150 125 0 275 250 0 Mississippi Power0 150 125 0 275 250 0 
Southern Power(a)
Southern Power(a)
0 0 0 600 600 591 0 
Southern Power(a)
0 0 0 600 600 568 0 
Southern Company Gas(b)
Southern Company Gas(b)
0 0 0 1,750 1,750 1,745 0 
Southern Company Gas(b)
0 0 0 1,750 1,750 1,745 0 
SEGCOSEGCO30 0 0 0 30 30 30 SEGCO30 0 0 0 30 30 30 
Southern CompanySouthern Company$33 $675 $125 $6,900 $7,733 $7,671 $33 Southern Company$33 $675 $125 $6,900 $7,733 $7,648 $33 
(a)Does not include Southern Power Company's $120$75 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2021 and 2023, respectively, of which $23$12 million and $40$1 million, respectively, was unused at September 30, 2020.March 31, 2021. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.25$1.05 billion of this arrangement. Southern Company Gas' committed credit arrangement also includes $500$700 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 $125 million revolving credit facility that matures in March 2023.
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 September 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 September 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 September 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 the equity units issued in August 2019. Earnings per share dilution resulting from stock-based 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 September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
(in millions) (in millions)
As reported sharesAs reported shares1,058 1,048 1,058 1,043 As reported shares1,060 1,057 
Effect of stock-based compensationEffect of stock-based compensation6 9 6 8 Effect of stock-based compensation6 7 
Effect of equity unitsEffect of equity units0 3 
Diluted sharesDiluted shares1,064 1,057 1,064 1,051 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 nine months ended September 30,March 31, 2021 and 2020. There were 0 such amounts for the three and nine months ended September 30, 2019.
An immaterial number of shares related to the equity units issued in August 2019 was included in the calculation of diluted earnings per share for the nine months ended September 30, 2020. There were no such amounts for all other periods presented.
(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
Southern Company had federal ITC and PTC carryforwards (primarily related to Southern Power) totaling $1.5 billion as of September 30, 2020 compared to $1.8 billion as of December 31, 2019.
The federal ITC and PTC carryforwards begin expiring in 2034 and 2032, respectively, but are expected to be fully utilized by 2024. 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.
Details of significant changes in the effective tax rate for the applicable Registrants are provided herein.
Mississippi Power
Mississippi Power's effective tax rate was 8.4% for the three months ended March 31, 2021 compared to 16.2% for the corresponding period in 2020. The effective tax rate decrease was primarily due to an increase in the flowback of excess deferred income taxes beginning in April 2020 as authorized in 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 the Form 10-K for additional information.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Company'sPower
Southern Power's effective tax benefit rate was (17.3)% for the three months ended March 31, 2021 compared to an effective tax rate was 13.9% for the nine months ended September 30, 2020 compared to 30.2%of 13.5% for the corresponding period in 2019.2020. 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 Gulf PowerPlant Mankato in 2019, as well as an increase in the flowback of excess deferred income taxes in 2020 primarily at Georgia Power.January 2020. 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 12.3% for the nine months ended September 30, 2020 compared to 22.6% 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 in 2020 as authorized in the 2019 ARP, as well as the second quarter 2020 charge to 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 12.7% for the nine months ended September 30, 2020 compared to 16.3% 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 in 2020 as authorized in the Mississippi Power Rate Case Settlement Agreement. See Note (B) under "Mississippi Power – 2019 Base Rate Case" for additional information.
Southern Power
Southern Power's effective tax rate was 11.3% for the nine months ended September 30, 2020 compared to a benefit rate of (13.6)% 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 21.4% for the nine months ended September 30, 2020 compared to 15.0% 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.
(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
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 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 nine months ended September 30,March 31, 2021 and 2020 and 2019 are presented in the following tables.
Three Months Ended September 30, 2020Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
Three Months Ended
March 31, 2021		Three Months Ended
March 31, 2021		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
(in millions) (in millions)
Pension PlansPension PlansPension Plans
Service costService cost$94 $23 $24 $3 $2 $8 Service cost$109 $26 $28 $4 $2 $9 
Interest costInterest cost108 25 33 5 1 8 Interest cost87 20 26 4 1 6 
Expected return on plan assetsExpected return on plan assets(274)(66)(87)(13)(4)(20)Expected return on plan assets(298)(72)(94)(14)(3)(21)
Amortization:Amortization:Amortization:
Prior service costsPrior service costs0 1 0 0 0 (1)Prior service costs0 0 0 0 0 (1)
Regulatory assetRegulatory asset0 0 0 0 0 4 Regulatory asset0 0 0 0 0 4 
Net (gain)/lossNet (gain)/loss67 17 22 4 1 2 Net (gain)/loss78 21 25 4 1 3 
Net periodic pension cost (income)Net periodic pension cost (income)$(5)$0 $(8)$(1)$0 $1 Net periodic pension cost (income)$(24)$(5)$(15)$(2)$1 $0 
Postretirement BenefitsPostretirement BenefitsPostretirement Benefits
Service costService cost$6 $1 $2 $(1)$1 $0 Service cost$6 $1 $2 $0 $0 $0 
Interest costInterest cost13 4 5 1 0 2 Interest cost8 2 3 0 0 1 
Expected return on plan assetsExpected return on plan assets(18)(7)(7)0 0 (2)Expected return on plan assets(19)(7)(7)0 0 (2)
Amortization:Amortization:Amortization:
Prior service costs0 0 (1)0 0 0 
Regulatory assetRegulatory asset0 0 0 0 0 2 Regulatory asset0 0 0 0 0 2 
Net (gain)/lossNet (gain)/loss1 0 1 0 0 (1)Net (gain)/loss1 0 1 0 0 (1)
Net periodic postretirement benefit cost$2 $(2)$0 $0 $1 $1 
Net periodic postretirement benefit cost (income)Net periodic postretirement benefit cost (income)$(4)$(4)$(1)$0 $0 $0 
7764
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Nine Months Ended September 30, 2020Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
Three Months Ended
March 31, 2020		Three Months Ended
March 31, 2020		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
(in millions) (in millions)
Pension PlansPension PlansPension Plans
Service costService cost$282 $67 $72 $11 $6 $24 Service cost$94 $22 $24 $4 $2 $8 
Interest costInterest cost324 75 100 15 4 23 Interest cost108 25 33 5 1 8 
Expected return on plan assetsExpected return on plan assets(824)(198)(261)(38)(10)(59)Expected return on plan assets(275)(66)(87)(13)(3)(19)
Amortization:Amortization:Amortization:
Prior service costsPrior service costs1 1 1 0 0 (2)Prior service costs1 0 0 0 0 (1)
Regulatory assetRegulatory asset0 0 0 0 0 12 Regulatory asset0 0 0 0 0 4 
Net (gain)/lossNet (gain)/loss201 53 65 10 2 7 Net (gain)/loss67 18 22 3 1 2 
Net periodic pension cost (income)Net periodic pension cost (income)$(16)$(2)$(23)$(2)$2 $5 Net periodic pension cost (income)$(5)$(1)$(8)$(1)$1 $2 
Postretirement BenefitsPostretirement BenefitsPostretirement Benefits
Service costService cost$17 $4 $5 $0 $1 $1 Service cost$5 $2 $1 $0 $0 $0 
Interest costInterest cost40 10 15 2 0 5 Interest cost13 3 5 0 0 2 
Expected return on plan assetsExpected return on plan assets(54)(21)(20)(1)0 (5)Expected return on plan assets(18)(7)(7)0 0 (2)
Amortization:Amortization:Amortization:
Prior service costs(1)0 (1)0 0 0 
Regulatory assetRegulatory asset0 0 0 0 0 5 Regulatory asset0 0 0 0 0 2 
Net (gain)/lossNet (gain)/loss2 0 2 0 0 (2)Net (gain)/loss1 0 1 0 0 (1)
Net periodic postretirement benefit cost$4 $(7)$1 $1 $1 $4 
Net periodic postretirement benefit cost (income)Net periodic postretirement benefit cost (income)$1 $(2)$0 $0 $0 $1 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Three Months Ended September 30, 2019Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
 (in millions)
Pension Plans
Service cost$73 $17 $19 $3 $2 $7 
Interest cost123 28 38 6 1 9 
Expected return on plan assets(222)(51)(73)(10)(2)(15)
Amortization:
Prior service costs1 0 0 0 0 (1)
Regulatory asset0 0 0 0 0 3 
Net (gain)/loss30 9 11 1 0 1 
Net periodic pension cost (income)$5 $3 $(5)$0 $1 $4 
Postretirement Benefits
Service cost$5 $1 $2 $1 $0 $0 
Interest cost18 4 6 0 0 2 
Expected return on plan assets(16)(6)(7)0 0 (1)
Amortization:
Prior service costs0 1 0 0 0 0 
Regulatory asset0 0 0 0 0 1 
Net (gain)/loss(1)0 1 0 0 0 
Net periodic postretirement benefit cost$6 $0 $2 $1 $0 $2 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Nine Months Ended September 30, 2019Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern PowerSouthern Company Gas
 (in millions)
Pension Plans
Service cost$219 $51 $56 $9 $5 $19 
Interest cost369 85 116 17 4 27 
Expected return on plan assets(664)(154)(219)(30)(7)(45)
Amortization:
Prior service costs2 1 1 0 0 (2)
Regulatory asset0 0 0 0 0 10 
Net (gain)/loss90 27 33 4 0 2 
Net periodic pension cost (income)$16 $10 $(13)$0 $2 $11 
Postretirement Benefits
Service cost$14 $3 $4 $1 $0 $1 
Interest cost52 12 19 2 0 7 
Expected return on plan assets(49)(19)(19)(1)0 (4)
Amortization:
Prior service costs2 3 0 0 0 0 
Regulatory asset0 0 0 0 0 4 
Net (gain)/loss(2)0 1 0 0 (2)
Net periodic postretirement benefit cost$17 $(1)$5 $2 $0 $6 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(I) FAIR VALUE MEASUREMENTS
As of September 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:Fair Value Measurements Using:
As of September 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
As of March 31, 2021: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)(in millions)
Southern CompanySouthern CompanySouthern Company
Assets:Assets:Assets:
Energy-related derivatives(a)
Energy-related derivatives(a)
$488 $218 $117 $— $823 
Energy-related derivatives(a)
$372 $179 $34 $— $585 
Interest rate derivativesInterest rate derivatives0 20 0 — 20 Interest rate derivatives0 10 0 — 10 
Foreign currency derivativesForeign currency derivatives0 29 0 — 29 Foreign currency derivatives0 41 0 — 41 
Investments in trusts:(b)(c)
Investments in trusts:(b)(c)
Investments in trusts:(b)(c)
Domestic equityDomestic equity754 137 0 — 891 Domestic equity782 214 0 — 996 
Foreign equityForeign equity71 220 0 — 291 Foreign equity145 197 0 — 342 
U.S. Treasury and government agency securitiesU.S. Treasury and government agency securities0 268 0 — 268 U.S. Treasury and government agency securities0 325 0 — 325 
Municipal bondsMunicipal bonds0 99 0 — 99 Municipal bonds0 45 0 — 45 
Pooled funds – fixed incomePooled funds – fixed income0 17 0 — 17 Pooled funds – fixed income0 18 0 — 18 
Corporate bondsCorporate bonds15 376 0 — 391 Corporate bonds5 436 0 — 441 
Mortgage and asset backed securitiesMortgage and asset backed securities0 79 0 — 79 Mortgage and asset backed securities0 81 0 — 81 
Private equityPrivate equity0 0 0 68 68 Private equity0 0 0 83 83 
Cash and cash equivalents1 0 0 — 1 
OtherOther25 6 0 — 31 Other50 7 0 — 57 
Cash equivalentsCash equivalents2,750 11 0 — 2,761 Cash equivalents1,121 11 0 — 1,132 
Other investmentsOther investments9 19 0 — 28 Other investments9 33 0 — 42 
TotalTotal$4,113 $1,499 $117 $68 $5,797 Total$2,484 $1,597 $34 $83 $4,198 
Liabilities:Liabilities:Liabilities:
Energy-related derivatives(a)
Energy-related derivatives(a)
$521 $155 $75 $— $751 
Energy-related derivatives(a)
$359 $158 $6 $— $523 
Foreign currency derivativesForeign currency derivatives0 23 0 — 23 Foreign currency derivatives0 23 0 — 23 
Contingent considerationContingent consideration0 0 19 — 19 Contingent consideration0 0 16 — 16 
TotalTotal$521 $178 $94 $— $793 Total$359 $181 $22 $— $562 
8166
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Fair Value Measurements Using:Fair Value Measurements Using:
As of September 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
As of March 31, 2021: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)(in millions)
Alabama PowerAlabama PowerAlabama Power
Assets:Assets:Assets:
Energy-related derivativesEnergy-related derivatives$0 $23 $0 $— $23 Energy-related derivatives$0 $12 $0 $— $12 
Nuclear decommissioning trusts:(b)
Nuclear decommissioning trusts:(b)
Nuclear decommissioning trusts:(b)
Domestic equityDomestic equity477 128 0 — 605 Domestic equity448 205 0 — 653 
Foreign equityForeign equity71 64 0 — 135 Foreign equity145 15 0 — 160 
U.S. Treasury and government agency securitiesU.S. Treasury and government agency securities0 21 0 — 21 U.S. Treasury and government agency securities0 20 0 — 20 
Municipal bondsMunicipal bonds0 1 0 — 1 Municipal bonds0 1 0 — 1 
Corporate bondsCorporate bonds15 159 0 — 174 Corporate bonds5 235 0 — 240 
Mortgage and asset backed securitiesMortgage and asset backed securities0 27 0 — 27 Mortgage and asset backed securities0 26 0 — 26 
Private equityPrivate equity0 0 0 68 68 Private equity0 0 0 83 83 
OtherOther6 0 0 — 6 Other27 0 0 — 27 
Cash equivalentsCash equivalents825 11 0 — 836 Cash equivalents401 11 0 — 412 
Other investmentsOther investments0 19 0 — 19 Other investments0 33 0 — 33 
TotalTotal$1,394 $453 $0 $68 $1,915 Total$1,026 $558 $0 $83 $1,667 
Liabilities:Liabilities:Liabilities:
Energy-related derivativesEnergy-related derivatives$0 $6 $0 $— $6 Energy-related derivatives$0 $4 $0 $— $4 
Georgia PowerGeorgia PowerGeorgia Power
Assets:Assets:Assets:
Energy-related derivativesEnergy-related derivatives$0 $31 $0 $— $31 Energy-related derivatives$0 $17 $0 $— $17 
Nuclear decommissioning trusts:(b)(c)
Nuclear decommissioning trusts:(b)(c)
Nuclear decommissioning trusts:(b)(c)
Domestic equityDomestic equity277 1 0 — 278 Domestic equity334 1 0 — 335 
Foreign equityForeign equity0 153 0 — 153 Foreign equity0 179 0 — 179 
U.S. Treasury and government agency securitiesU.S. Treasury and government agency securities0 247 0 — 247 U.S. Treasury and government agency securities0 305 0 — 305 
Municipal bondsMunicipal bonds0 98 0 — 98 Municipal bonds0 44 0 — 44 
Corporate bondsCorporate bonds0 217 0 — 217 Corporate bonds0 201 0 — 201 
Mortgage and asset backed securitiesMortgage and asset backed securities0 52 0 — 52 Mortgage and asset backed securities0 55 0 — 55 
OtherOther19 6 0 — 25 Other23 7 0 — 30 
Cash equivalents485 0 0 — 485 
TotalTotal$781 $805 $0 $— $1,586 Total$357 $809 $0 $— $1,166 
Liabilities:Liabilities:Liabilities:
Energy-related derivativesEnergy-related derivatives$0 $9 $0 $— $9 Energy-related derivatives$0 $8 $0 $— $8 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Fair Value Measurements Using:Fair Value Measurements Using:
As of September 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
As of March 31, 2021: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)(in millions)
Mississippi PowerMississippi PowerMississippi Power
Assets:Assets:Assets:
Energy-related derivativesEnergy-related derivatives$0 $18 $0 $— $18 Energy-related derivatives$0 $11 $0 $— $11 
Cash equivalents36 0 0 — 36 
Total$36 $18 $0 $— $54 
Liabilities:Liabilities:Liabilities:
Energy-related derivativesEnergy-related derivatives$0 $7 $0 $— $7 Energy-related derivatives$0 $6 $0 $— $6 
Southern PowerSouthern PowerSouthern Power
Assets:Assets:Assets:
Energy-related derivativesEnergy-related derivatives$0 $5 $0 $— $5 Energy-related derivatives$0 $1 $0 $— $1 
Foreign currency derivativesForeign currency derivatives0 29 0 — 29 Foreign currency derivatives0 41 0 — 41 
Cash equivalentsCash equivalents149 0 0 — 149 Cash equivalents115 0 0 — 115 
TotalTotal$149 $34 $0 $— $183 Total$115 $42 $0 $— $157 
Liabilities:Liabilities:Liabilities:
Energy-related derivativesEnergy-related derivatives$0 $1 $0 $— $1 Energy-related derivatives$0 $1 $0 $— $1 
Foreign currency derivativesForeign currency derivatives0 23 0 — 23 Foreign currency derivatives0 23 0 — 23 
Contingent considerationContingent consideration0 0 19 — 19 Contingent consideration0 0 16 — 16 
TotalTotal$0 $24 $19 $— $43 Total$0 $24 $16 $— $40 
Southern Company GasSouthern Company GasSouthern Company Gas
Assets:Assets:Assets:
Energy-related derivatives(a)
Energy-related derivatives(a)
$488 $141 $117 $— $746 
Energy-related derivatives(a)
$372 $138 $34 $— $544 
Non-qualified deferred compensation trusts:Non-qualified deferred compensation trusts:Non-qualified deferred compensation trusts:
Domestic equityDomestic equity0 8 0 — 8 Domestic equity0 8 0 — 8 
Foreign equityForeign equity0 3 0 — 3 Foreign equity0 3 0 — 3 
Pooled funds – fixed incomePooled funds – fixed income0 17 0 — 17 Pooled funds – fixed income0 18 0 — 18 
Cash equivalents1 0 0 — 1 
Cash equivalents and restricted cashCash equivalents and restricted cash113 0 0 — 113 Cash equivalents and restricted cash284 0 0 — 284 
TotalTotal$602 $169 $117 $— $888 Total$656 $167 $34 $— $857 
Liabilities:Liabilities:Liabilities:
Energy-related derivatives(a)
Energy-related derivatives(a)
$521 $132 $75 $— $728 
Energy-related derivatives(a)
$359 $139 $6 $— $504 
(a)Energy-related derivatives excludeExcludes cash collateral of $70$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 September 30, 2020,March 31, 2021, approximately $25$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.
8368
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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 nine months ended September 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)Fair value increases (decreases)Three Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019Fair value increases (decreases)Three Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
(in millions)(in millions)
Southern CompanySouthern Company$108 $27 $85 $255 Southern Company$39 $(247)
Alabama PowerAlabama Power66 15 24 140 Alabama Power41 (167)
Georgia PowerGeorgia Power42 12 61 115 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
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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 September 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 $68$83 million and unfunded commitments related to the private equity investments totaled $67$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 September 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(*)
Southern
Company		Alabama PowerGeorgia PowerMississippi PowerSouthern Power
Southern Company Gas(*)
(in millions)(in millions)
Long-term debt, including securities due within one year:Long-term debt, including securities due within one year:Long-term debt, including securities due within one year:
Carrying amountCarrying amount$49,743 $9,113 $12,700 $1,402 $4,155 $6,461 Carrying amount$50,035 $8,866 $13,220 $1,398 $4,030 $6,588 
Fair valueFair value56,739 10,741 15,052 1,562 4,535 7,640 Fair value54,113 9,821 14,291 1,507 4,347 7,264 
(*)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.bonds, the latest being through 2043.
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 September 30, 2020,March 31, 2021, the fair value of Southern Company Gas' Level 3 physical natural gas forward contracts was $42$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 September 30, 2020Nine Months Ended September 30, 2020
(in millions)
Beginning balance$80 $14 
Transfers to Level 30 70 
Transfers from Level 3(2)(5)
Instruments realized or otherwise settled during period(9)(16)
Changes in fair value(27)(21)
Ending balance$42 $42 
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.
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(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
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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 $(1.11)$(0.07) to $0.24 $0.30 per mmBtu). Forward price increases (decreases) as of September 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.
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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 fuelan approved cost recovery clauses.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 September 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		Net
Purchased
mmBtu		Longest
Hedge
Date		Longest
Non-Hedge
Date
(in millions)(in millions)
Southern Company(*)
Southern Company(*)
87720242031
Southern Company(*)
90720302031
Alabama PowerAlabama Power782024—Alabama Power732024—
Georgia PowerGeorgia Power1312023—Georgia Power1252024—
Mississippi PowerMississippi Power862024—Mississippi Power852024—
Southern PowerSouthern Power1420222021Southern Power920302021
Southern Company Gas(*)
Southern Company Gas(*)
56820232031
Southern Company Gas(*)
61520232031
(*)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 4.64.4 billion mmBtu and short natural gas positions of 4.13.8 billion mmBtu as of September 30, 2020,March 31, 2021, which is also included in Southern Company's total volume.
At September 30, 2020, the net volume of Southern Power's energy-related derivative contracts for power to be sold was 1 million MWHs, all of which expire in 2021.
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 1239 million mmBtu for Southern Company, which includes 310 million mmBtu for Alabama Power, 412 million mmBtu for Georgia Power, 15 million mmBtu for Mississippi Power, and 412 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 September 30, 2021March 31, 2022 are immaterial for all Registrants.
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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
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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 September 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 September 30, 2020Notional
Amount		Interest
Rate
Received		Weighted
Average
Interest
Rate Paid		Hedge
Maturity
Date		Fair Value Gain (Loss) at March 31, 2021
��(in millions) (in millions)
(in millions) (in millions)
Cash Flow Hedges of Existing DebtCash Flow Hedges of Existing DebtCash Flow Hedges of Existing Debt
Mississippi PowerMississippi Power$60 1-month LIBOR0.58%December 2021$0 Mississippi Power$60 1-month LIBOR0.58%December 2021$0 
Fair Value Hedges of Existing DebtFair Value Hedges of Existing DebtFair Value Hedges of Existing Debt
Southern Company parentSouthern Company parent1,500 2.35%1-month LIBOR + 0.87%July 202120 Southern Company parent1,500 2.35%1-month LIBOR + 0.87%July 202110 
Southern CompanySouthern Company$1,560 $20 Southern Company$1,560 $10 
For cash flow hedge interest rate derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending September 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.
At September 30, 2020,March 31, 2021, the following foreign currency derivatives were outstanding:
Pay NotionalPay RateReceive NotionalReceive RateHedge
Maturity Date		Fair Value Gain (Loss) at September 30, 2020Pay NotionalPay RateReceive NotionalReceive RateHedge
Maturity Date		Fair Value Gain (Loss) at March 31, 2021
(in millions)(in millions) (in millions)(in millions)(in millions) (in millions)
Cash Flow Hedges of Existing DebtCash Flow Hedges of Existing DebtCash Flow Hedges of Existing Debt
Southern PowerSouthern Power$677 2.95%€600 1.00%June 2022$11 Southern Power$677 2.95%€600 1.00%June 2022$9 
Southern PowerSouthern Power564 3.78%500 1.85%June 2026(5)Southern Power564 3.78%500 1.85%June 20269 
TotalTotal$1,241 €1,100 $6 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 March 31, 2022 are $2 million.
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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 September 30, 2021 are $(14) million.
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.
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 
89
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(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 
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(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.
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(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 September 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$52 $13 $3 $70 
Other deferred charges and assets/Other deferred credits and liabilities30 15 6 44 
Total derivatives designated as hedging instruments for regulatory purposes$82 $28 $9 $114 
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities$8 $3 $1 $6 
Other deferred charges and assets/Other deferred credits and liabilities2 0 0 0 
Interest rate derivatives:
Other current assets/Other current liabilities19 0 2 23 
Other deferred charges and assets/Other deferred credits and liabilities0 0 0 1 
Foreign currency derivatives:
Other current assets/Other current liabilities0 23 0 24 
Other deferred charges and assets/Other deferred credits and liabilities29 0 16 0 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$58 $26 $19 $54 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities$392 $428 $461 $358 
Other deferred charges and assets/Other deferred credits and liabilities338 291 207 225 
Total derivatives not designated as hedging instruments$730 $719 $668 $583 
Gross amounts recognized$870 $773 $696 $751 
Gross amounts offset(a)
(636)(706)(463)(562)
Net amounts recognized in the Balance Sheets(b)
$234 $67 $233 $189 
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(UNAUDITED)
As of September 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$14 $2 $2 $14 
Other deferred charges and assets/Other deferred credits and liabilities9 4 2 10 
Total derivatives designated as hedging instruments for regulatory purposes$23 $6 $4 $24 
Gross amounts recognized$23 $6 $4 $24 
Gross amounts offset(5)(5)(2)(2)
Net amounts recognized in the Balance Sheets$18 $1 $2 $22 
Georgia Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities$18 $3 $1 $32 
Other deferred charges and assets/Other deferred credits and liabilities13 6 3 21 
Total derivatives designated as hedging instruments for regulatory purposes$31 $9 $4 $53 
Derivatives designated as hedging instruments in cash flow and fair value hedges
Interest rate derivatives:
Other current assets/Other current liabilities$0 $0 $0 $17 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$0 $0 $0 $17 
Gross amounts recognized$31 $9 $4 $70 
Gross amounts offset(9)(9)(3)(3)
Net amounts recognized in the Balance Sheets$22 $0 $1 $67 
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(UNAUDITED)
As of September 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$10 $2 $0 $15 
Other deferred charges and assets/Other deferred credits and liabilities8 5 1 12 
Total derivatives designated as hedging instruments for regulatory purposes$18 $7 $1 $27 
Gross amounts recognized$18 $7 $1 $27 
Gross amounts offset(7)(7)(1)(1)
Net amounts recognized in the Balance Sheets$11 $0 $0 $26 
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities$4 $1 $1 $2 
Other deferred charges and assets/Other deferred credits and liabilities1 0 0 0 
Foreign currency derivatives:
Other current assets/Other current liabilities0 23 0 24 
Other deferred charges and assets/Other deferred credits and liabilities29 0 16 0 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$34 $24 $17 $26 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities$0 $0 $2 $1 
Total derivatives not designated as hedging instruments$0 $0 $2 $1 
Gross amounts recognized$34 $24 $19 $27 
Gross amounts offset(1)(1)0 0 
Net amounts recognized in the Balance Sheets$33 $23 $19 $27 
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(UNAUDITED)
As of September 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$10 $6 $0 $9 
Other deferred charges and assets/Other deferred credits and liabilities0 0 0 1 
Total derivatives designated as hedging instruments for regulatory purposes$10 $6 $0 $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$4 $2 $0 $4 
Other deferred charges and assets/Other deferred credits and liabilities1 0 0 0 
Interest rate derivatives:
Assets from risk management activities/Liabilities from risk management activities-current0 0 2 0 
Total derivatives designated as hedging instruments in cash flow and fair value hedges$5 $2 $2 $4 
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current$392 $428 $459 $357 
Other deferred charges and assets/Other deferred credits and liabilities338 291 207 225 
Total derivatives not designated as hedging instruments$730 $719 $666 $582 
Gross amounts of recognized$745 $727 $668 $596 
Gross amounts offset(a)
(614)(684)(456)(555)
Net amounts recognized in the Balance Sheets(b)
$131 $43 $212 $41 
(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $70 million and $99 million as of September 30, 2020 and December 31, 2019, respectively.
(b)Net amounts of derivative instruments outstanding exclude premium and intrinsic value associated with weather derivatives of $3 million and $4 million as of September 30, 2020 and December 31, 2019, respectively.
The traditional electric operating companies had noimmaterial energy-related derivatives not designated as hedging instruments at September 30, 2020March 31, 2021 and immaterial amountsno such instruments at December 31, 2019.
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(UNAUDITED)
2020.
At September 30, 2020March 31, 2021 and December 31, 2019,2020, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:
Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance SheetRegulatory Hedge Unrealized Gain (Loss) Recognized in the Balance SheetRegulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet
Location		Derivative Category and Balance Sheet
Location		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern Company GasDerivative Category and Balance Sheet
Location		Southern
Company		Alabama
Power		Georgia
Power		Mississippi
Power		Southern Company Gas
(in millions) (in millions)
At September 30, 2020:
At March 31, 2021:At March 31, 2021:
Energy-related derivatives:Energy-related derivatives:Energy-related derivatives:
Other regulatory assets, current$(5)$0 $0 $0 $(5)
Other regulatory assets, deferredOther regulatory assets, deferred$(2)$0 $(1)$(1)$0 
Other regulatory liabilities, currentOther regulatory liabilities, current41 12 15 8 6 Other regulatory liabilities, current24 7 9 5 3 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred15 5 7 3 0 Other regulatory liabilities, deferred3 1 1 1 0 
Total energy-related derivative gains (losses)Total energy-related derivative gains (losses)$51 $17 $22 $11 $1 Total energy-related derivative gains (losses)$25 $8 $9 $5 $3 
At December 31, 2019:
At December 31, 2020:At December 31, 2020:
Energy-related derivatives:Energy-related derivatives:Energy-related derivatives:
Other regulatory assets, current$(63)$(14)$(31)$(15)$(3)
Other regulatory assets, deferredOther regulatory assets, deferred(37)(8)(18)(11)0 Other regulatory assets, deferred$(2)$0 $(1)$(1)$0 
Other regulatory liabilities, currentOther regulatory liabilities, current6 2 0 0 4 Other regulatory liabilities, current12 5 2 1 4 
Other regulatory liabilities, deferredOther regulatory liabilities, deferred2 1 1 0 0 
Total energy-related derivative gains (losses)Total energy-related derivative gains (losses)$(94)$(20)$(49)$(26)$1 Total energy-related derivative gains (losses)$12 $6 $2 $0 $4 
For the three and nine months ended September 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 DerivativeGain (Loss) Recognized in OCI on DerivativeFor the Three Months Ended September 30,For the Nine Months Ended September 30,Gain (Loss) Recognized in OCI on DerivativeFor the Three Months Ended March 31,
202020192020201920212020
(in millions)(in millions)
Southern CompanySouthern CompanySouthern Company
Energy-related derivativesEnergy-related derivatives$9 $(5)$2 $(11)Energy-related derivatives$5 $(4)
Interest rate derivativesInterest rate derivatives1 (52)(27)(88)Interest rate derivatives3 (26)
Foreign currency derivativesForeign currency derivatives54 (68)(10)(107)Foreign currency derivatives(47)(83)
TotalTotal$64 $(125)$(35)$(206)Total$(39)$(113)
Georgia Power
Interest rate derivatives$0 $(47)$(3)$(83)
Southern PowerSouthern PowerSouthern Power
Energy-related derivativesEnergy-related derivatives$5 $(3)$2 $(5)Energy-related derivatives$4 $0 
Foreign currency derivativesForeign currency derivatives54 (68)(10)(107)Foreign currency derivatives(47)(83)
TotalTotal$59 $(71)$(8)$(112)Total$(43)$(83)
Southern Company GasSouthern Company GasSouthern Company Gas
Energy-related derivativesEnergy-related derivatives$4 $(2)$0 $(6)Energy-related derivatives$1 $(4)
Interest rate derivativesInterest rate derivatives1 (5)(24)(5)Interest rate derivatives0 (23)
TotalTotal$5 $(7)$(24)$(11)Total$1 $(27)
For the three and nine months ended September 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.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and nine months ended September 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 RelationshipsLocation and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended September 30,For the Nine Months Ended September 30,Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended March 31,
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended March 31,
202020192020201920212020
(in millions)(in millions)
Southern CompanySouthern CompanySouthern Company
Total cost of natural gasTotal cost of natural gas$71 $79 $654 $956 Total cost of natural gas$583 $439 
Gain (loss) on energy-related cash flow hedges(a)
Gain (loss) on energy-related cash flow hedges(a)
0 0 (8)0 
Gain (loss) on energy-related cash flow hedges(a)
(3)(7)
Total depreciation and amortizationTotal depreciation and amortization889 760 2,619 2,267 Total depreciation and amortization871 857 
Gain (loss) on energy-related cash flow hedges(a)
Gain (loss) on energy-related cash flow hedges(a)
(1)(1)(3)(5)
Gain (loss) on energy-related cash flow hedges(a)
3 (1)
Total interest expense, net of amounts capitalizedTotal interest expense, net of amounts capitalized(443)(434)(1,343)(1,294)Total interest expense, net of amounts capitalized(450)(456)
Gain (loss) on interest rate cash flow hedges(a)
Gain (loss) on interest rate cash flow hedges(a)
(6)(5)(19)(14)
Gain (loss) on interest rate cash flow hedges(a)
(7)(6)
Gain (loss) on foreign currency cash flow hedges(a)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)(18)(18)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
Gain (loss) on interest rate fair value hedges(b)
Gain (loss) on interest rate fair value hedges(b)
(3)10 27 43 
Gain (loss) on interest rate fair value hedges(b)
(10)29 
Total other income (expense), netTotal other income (expense), net113 61 319 239 Total other income (expense), net58 103 
Gain (loss) on foreign currency cash flow hedges(a)(c)
Gain (loss) on foreign currency cash flow hedges(a)(c)
56 (54)52 (62)
Gain (loss) on foreign currency cash flow hedges(a)(c)
(60)(31)
Southern PowerSouthern PowerSouthern Power
Total depreciation and amortizationTotal depreciation and amortization$129 $120 $367 $357 Total depreciation and amortization$119 $117 
Gain (loss) on energy-related cash flow hedges(a)
Gain (loss) on energy-related cash flow hedges(a)
(1)(1)(3)(5)
Gain (loss) on energy-related cash flow hedges(a)
3 (1)
Total interest expense, net of amounts capitalizedTotal interest expense, net of amounts capitalized(36)(43)(114)(127)Total interest expense, net of amounts capitalized(38)(39)
Gain (loss) on foreign currency cash flow hedges(a)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)(18)(18)
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
Total other income (expense), netTotal other income (expense), net13 6 19 48 Total other income (expense), net7 2 
Gain (loss) on foreign currency cash flow hedges(a)(c)
Gain (loss) on foreign currency cash flow hedges(a)(c)
56 (54)52 (62)
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.
For the three and nine months ended September 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.
As of September 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 ItemCarrying Amount of the Hedged ItemCumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged ItemsBalance Sheet Location of Hedged ItemsAs of September 30, 2020As of December 31, 2019As of September 30, 2020As of December 31, 2019Balance 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)(in millions)(in millions)
Southern CompanySouthern CompanySouthern Company
Securities due within one yearSecurities due within one year$(1,513)$(599)$(15)$0 Securities due within one year$(1,505)$(1,509)$(5)$(10)
Long-term debt0 (1,494)0 3 
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and nine months ended September 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)Gain (Loss)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
Derivatives in Non-Designated Hedging RelationshipsDerivatives in Non-Designated Hedging RelationshipsStatements of Income Location2020201920202019Derivatives in Non-Designated Hedging RelationshipsStatements of Income Location20212020
(in millions)(in millions)(in millions)
Energy-related derivatives:Energy-related derivatives:
Natural gas revenues(*)
$(30)$(2)$54 $81 Energy-related derivatives:
Natural gas revenues(*)
$(17)$70 
Cost of natural gas5 2 18 5 Cost of natural gas7 7 
Total derivatives in non-designated hedging relationshipsTotal derivatives in non-designated hedging relationships$(25)$0 $72 $86 Total derivatives in non-designated hedging relationships$(10)$77 
(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.
For the three and nine months ended September 30,March 31, 2021 and 2020, and 2019, the pre-tax effects of energy-related 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 September 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 September 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 September 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.
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 September 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 September 30, 2020,March 31, 2021, cash collateral held on deposit in broker margin accounts was $70$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
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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.
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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 September 30, 2020.
Alabama Power
On August 31, 2020, Alabama Power completed the Autauga Combined Cycle Acquisition. The total purchase price was $461 million, of which $452 million was relatedis expected to net assets recorded within property, plant,have, a major effect on operations and equipment on the balance sheet and the remainder primarily related to inventory, current receivables, and accounts payable. Alabama Power assumed an existing power sales agreement under which the full outputfinancial results; therefore, none of the generating facility remains committed to another third partyassets have been classified as discontinued operations for its remaining termany of approximately three years. During the remaining term, the estimated revenues from the power sales agreement are expected to offset the associated costs of operation. See Notes (B) and (D) under "Alabama Power" and "Lease Income," respectively, for additional information.periods presented.
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(UNAUDITED)
Southern Power
Asset AcquisitionsAcquisition
During the ninethree months ended September 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)
LocationSouthern Power
Ownership Percentage		CODPPA Contract Period
Beech Ridge IIDeuel Harvest(*)
WindInvenergy Renewables, LLC56300GreenbrierDeuel County,
West Virginia SD
100% of
Class A
(*)BMay 2020February 202112
25 years
and
15 years
(*)In May 2020,On March 26, 2021, Southern Power purchased 100% of the Class A membership interests and now owns theacquired a controlling interest in the project, withfacility 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 the Class BA member, and Invenergy Renewables, LLC owning theeach own a noncontrolling interest.
In March 2020, Southern Power entered into an agreement
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Table of ContentsIndex 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 the first quarter 2021. The facility's output is contracted under 2 long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Construction Projects
During the ninethree months ended September 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 September 30, 2020,March 31, 2021, total costs of construction incurred for these projects were $244$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 Nine Months Ended September 30, 2020
Reading(a)
Wind200Osage and Lyon Counties, KSMay 202012 years
Projects Under Construction as of September 30, 2020
Skookumchuck(b)
Wind136Lewis and Thurston Counties, WANovember 202020 yearsat March 31, 2021
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 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 JuneDecember 2020, Southern Power completed a tax equity transaction whereby it received $156 millionrestructured its ownership of the project by contributing the Class A membership interests to an existing partnership and now ownsselling 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 the completed tax equity transaction, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. Southern Power would retainwhile retaining the controlling ownership interest in the facility. The ultimate outcome of these matters cannot be determined at this time.
(c)interest. Prior to commercial operation, Southern Power may restructure the project ownership again and enter into one or moreadditional partnerships, in which case it would ultimately own less than 100% of the Class B membership interests, but wouldexpects to retain ownership of the controlling interest. The ultimate outcome of this matter cannot be determined at this time.
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(b)TableIn December 2020, Southern Power purchased 100% of Contentsthe membership interests of the Glass Sands facility.Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 ninethree months ended September 30, 2020, certainMarch 31, 2021, gains on wind turbine equipment was sold, resulting in an immaterial gain.contributed to various equity method investments totaled approximately $37 million.
Sales
Southern Company Gas
Sale of Natural Gas and Biomass PlantsSequent
On January 17, 2020,April 28, 2021, certain affiliates of Southern Power completedCompany Gas entered into an agreement 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 finalplus working capital and certain other adjustments. The sale resulted in anet book value of Sequent at March 31, 2021, excluding working capital, was $46 million; however, any potential gain of approximately $39 million ($23 million after tax). The assets and liabilities of Plant Mankato were classified as held for sale on Southern Company's and Southern Power's balance sheets at December 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 September 30, 2019 and the nine months ended September 30, 2020 and 2019 is presented below:
Three Months Ended
September 30, 2019		Nine Months Ended September 30,
20202019
(in millions)
Southern Power's earnings before income taxes:(*)
Plant Nacogdoches$0 N/A$16 
Plant Mankato$12 $2 $20 
(*)Earnings before income taxes for components reflect the cessation of depreciation and amortizationor loss on the long-lived assets being sold upon classificationsale will be based, in large part, on the fair value of the open derivative positions as heldof the date of closing. See Notes (I) and (J) for sale in November 2018information on fair value and April 2019 for Plant Mankato and Plant Nacogdoches, respectively.
derivatives outstanding at March 31, 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 completedwill continue to guarantee payment performance for Sequent after the saletransaction closes for a period of its intereststime 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 Pivotal LNGthe price of natural gas, market conditions, and Atlantic Coast Pipeline to Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceedsthe number of $178 million, including working capital adjustments. The loss associated withopen contracts will change the transactions was immaterial.amount that Southern Company Gas also expectsis required to receive payments in February 2021 and September 2021guarantee 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.
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(UNAUDITED)
Sale of Pivotal LNG
In connection with its March 2020 sale of Pivotal LNG, Southern Company Gas was entitled to 2 $5 million eachpayments contingent upon Dominion Modular LNG Holdings, Inc. meeting certain milestones related to Pivotal LNG. 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 – 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.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $101 million and $279$81 million for the three and nine months ended September 30, 2020, respectively,March 31, 2021 and $116 million and $320$86 million for the three and nine months ended September 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 the three and nine months ended September 30, 2020March 31, 2021 and $9 million and $13 million for the three and nine months ended September 30, 2019, respectively.2020. Revenues from sales of natural gas from Southern Company Gas to Southern Power were $9 million and $22$12 million for the three and nine months ended September 30, 2020, respectively,March 31, 2021 and $20 million and $53$10 million for the three and nine months ended September 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 nine months ended September 30,March 31, 2021 and 2020 and 2019 was as follows:
Electric UtilitiesElectric Utilities
Traditional
Electric Operating
Companies		Southern
Power		EliminationsTotalSouthern Company GasAll
Other		EliminationsConsolidatedTraditional
Electric Operating
Companies		Southern
Power		EliminationsTotalSouthern Company GasAll
Other		EliminationsConsolidated
(in millions)(in millions)
Three Months Ended September 30, 2020
Operating revenues$4,629 $523 $(103)$5,049 $477 $132 $(38)$5,620 
Segment net income (loss)(a)
1,284 74 0 1,358 14 (122)1 1,251 
Nine Months Ended September 30, 2020
Three Months Ended March 31, 2021Three Months Ended March 31, 2021
Operating revenuesOperating revenues$11,576 $1,337 $(285)$12,628 $2,362 $380 $(112)$15,258 Operating revenues$3,764 $440 $(87)$4,117 $1,694 $134 $(35)$5,910 
Segment net income (loss)(d)(c)
Segment net income (loss)(d)(c)
2,571 212 0 2,783 360 (420)9 2,732 
Segment net income (loss)(d)(c)
756 97 0 853 398 (108)(8)1,135 
At September 30, 2020
At March 31, 2021At March 31, 2021
GoodwillGoodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 Goodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 
Total assetsTotal assets85,218 13,424 (671)97,971 21,932 4,116 (861)123,158 Total assets86,053 13,995 (637)99,411 23,377 3,392 (787)125,393 
Three Months Ended September 30, 2019
Operating revenues$4,908 $574 $(119)$5,363 $498 $146 $(12)$5,995 
Segment net income (loss)(a)(e)(f)
1,373 86 0 1,459 (29)(110)(4)1,316 
Nine Months Ended September 30, 2019
Three Months Ended March 31, 2020Three Months Ended March 31, 2020
Operating revenuesOperating revenues$12,252 $1,527 $(331)$13,448 $2,661 $514 $(118)$16,505 Operating revenues$3,407 $375 $(87)$3,695 $1,249 $114 $(40)$5,018 
Segment net income (loss)(g)(d)
Segment net income (loss)(g)(d)
2,719 316 0 3,035 347 931 (15)4,298 
Segment net income (loss)(g)(d)
642 75 0 717 275 (121)(3)868 
At December 31, 2019
At December 31, 2020At December 31, 2020
GoodwillGoodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 Goodwill$0 $2 $0 $2 $5,015 $263 $0 $5,280 
Total assetsTotal assets81,063 14,300 (713)94,650 21,687 3,511 (1,148)118,700 Total assets85,486 13,235 (680)98,041 22,630 3,168 (904)122,935 
(a)Attributable to Southern Company.
(b)Segment net income (loss) forFor the traditional electric operating companies, includes a $48 million pre-tax charge of $149 million ($11136 million after tax) related toat Georgia Power for estimated loss on Plant Vogtle Units 3 and 4. See Note (B) under "Georgia Power – Nuclear Construction" for additional information.
(c)Segment net income (loss) for the "All Other" columnFor Southern Power, includes agains on wind turbine equipment contributed to various equity method investments totaling approximately $37 million pre-tax impairment charge of $154 million ($7428 million after tax) related to a leveraged lease investment.. See Note (C)Notes (E) and (K) under "Other Matters – Southern Company""Southern Power" for additional information.
(d)Segment net income (loss) forFor Southern Power, includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato. See Note (K) under "Southern Power" for additional information.
(e)Segment net income (loss) for Southern Company Gas includes a pre-tax impairment charge of $92 million ($65 million after tax) related to a natural gas storage facility in Louisiana. See Note 3 to the financial statements under "Other Matters – Southern Company Gas – Natural Gas Storage Facilities" in Item 8 of the Form 10-K for additional information.
(f)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 nine months ended September 30, 2019, as well as impairment charges in contemplation of the sales of two of PowerSecure's business units totaling $18 million and $50 million for the three and nine months ended September 30, 2019, respectively. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company"Power" for additional information.
(g)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. 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 September 30, 2020$4,243 $584 $222 $5,049 
Three Months Ended September 30, 20194,512 625 226 5,363 
Nine Months Ended September 30, 2020$10,503 $1,473 $652 $12,628 
Nine Months Ended September 30, 201911,136 1,667 645 13,448 
 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 September 30, 2020$476 $(51)$39 $13 $477 
Three Months Ended September 30, 2019445 (2)39 16 498 
Nine Months Ended September 30, 2020$2,072 $(19)$272 $37 $2,362 
Nine Months Ended September 30, 20192,169 132 326 34 2,661 
 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.
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(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 Illinois, and OhioIllinois 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 nine months ended September 30,March 31, 2021 and 2020 and 2019 was as follows:
Gas Distribution OperationsGas Pipeline Investments
Wholesale Gas Services(a)
Gas Marketing ServicesTotal
All Other(b)
EliminationsConsolidatedGas Distribution OperationsGas Pipeline Investments
Wholesale Gas Services(*)
Gas Marketing ServicesTotalAll OtherEliminationsConsolidated
(in millions)(in millions)
Three Months Ended September 30, 2020
Three Months Ended March 31, 2021Three Months Ended March 31, 2021
Operating revenuesOperating revenues$479 $8 $(51)$39 $475 $8 $(6)$477 Operating revenues$1,200 $8 $298 $195 $1,701 $7 $(14)$1,694 
Segment net income (loss)Segment net income (loss)46 23 (45)(3)21 (7)0 14 Segment net income (loss)183 29 126 56 394 4 0 398 
Nine Months Ended September 30, 2020
Total assets at
March 31, 2021
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, 2020Three Months Ended March 31, 2020
Operating revenuesOperating revenues$2,086 $24 $(19)$272 $2,363 $24 $(25)$2,362 Operating revenues$1,020 $8 $51 $177 $1,256 $8 $(15)$1,249 
Segment net income (loss)Segment net income (loss)284 74 (45)59 372 (12)0 360 Segment net income (loss)164 30 23 57 274 1 0 275 
Total assets at September 30, 202018,715 1,609 650 1,461 22,435 10,979 (11,482)21,932 
Three Months Ended September 30, 2019
Operating revenues$448 $8 $(2)$39 $493 $10 $(5)$498 
Segment net income (loss)37 6 (9)(4)30 (59)0 (29)
Nine Months Ended September 30, 2019
Operating revenues$2,188 $24 $132 $326 $2,670 $34 $(43)$2,661 
Segment net income (loss)228 63 61 54 406 (59)0 347 
Total assets at December 31, 201918,204 1,678 850 1,496 22,228 10,759 (11,300)21,687 
Total assets at
December 31, 2020
Total assets at
December 31, 2020
19,090 1,597 850 1,503 23,040 11,336 (11,746)22,630 
(a)(*)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 September 30, 2020$1,050 $33 $1,083 $1,134 $(51)
Three Months Ended September 30, 20191,138 72 1,210 1,212 (2)
Nine Months Ended September 30, 2020$3,089 $81 $3,170 $3,189 $(19)
Nine Months Ended September 30, 20194,287 223 4,510 4,378 132 
(b)Segment net income (loss) for the "All Other" column includes a pre-tax impairment charge of $92 million ($65 million after tax) for the three and nine months ended September 30, 2019 related to a natural gas storage facility in Louisiana. See Note 3 to the financial statements under "Other Matters – Southern Company Gas – Natural Gas Storage Facilities" in Item 8 of the Form 10-K for additional information.
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 
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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
10586
Results of Operations
10888
Southern Company
10888
Alabama Power
11694
Georgia Power
12098
Mississippi Power
125102
Southern Power
130105
Southern Company Gas
134108
Future Earnings Potential
145116
Accounting Policies
166119
Financial Condition and Liquidity
167120
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 Georgia Power
Plant Vogtle Units 3 and 4 as discussed further herein. Additional information regardingStatus
Construction 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.
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 its past and potential future impacts on the Registrants is providedUnit 4. In addition, throughout Management's Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A herein.
Alabama Power
On August 14, 2020, the Alabama PSC issued an order granting Alabamaproject continued to face challenges as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein. As a certificateresult of conveniencethese factors, in January 2021, Southern Nuclear further extended certain milestone dates, including the start of hot functional testing and necessity (CCN)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 procure additional capacity,electrical commodity installations, necessary to ensure quality and on August 31, 2020, Alabama Powerdesign 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 Autauga Combined Cycle Acquisition.
On August 7, 2020, the Alabama PSC issued an order authorizing Alabama Power to reduce its over-collectedsite work plan currently targets fuel balance by $100 million and return that amount to customersload for Unit 3 in the formthird quarter 2021 and an in-service date of bill creditsDecember 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 billing monthextended milestone dates established in January 2021 for Unit 4, which are expected to support a regulatory-approved in-service date of October 2020.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,
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Alabama Power" herein for additional information.
Georgia Power
Plant Vogtle Units 3 and 4 Status
In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in whichremediation work. Georgia Power holds a 45.7% ownership interest.
As of June 30, 2020, assignments of contingency to the baseincreased its total capital cost forecast exceededas 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, Georgia Power established $115 million of additional construction contingency as of June 30, 2020 for potential risks including, among other factors, construction productivity and expected impacts of the COVID-19 pandemic; additional 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 from mid-June through July, and continued to impact productivity levels and pace of activity completion. As a result, overall production improvements were not achieved at the levels anticipated, contributing to the June 30, 2020 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. In October 2020, Southern Nuclear further extended milestone dates from the July 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 POTENTIAL – "Construction ProgramsNote (B) to the Condensed Financial Statements under "Georgia Power – Nuclear 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 nine months ended September 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 is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, whichMississippi PSC is expected to occurrule on this request later in the firstsecond 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 September 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.
Southern Company Gas
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline with aggregate proceeds of $178 million, including working capital adjustments. 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%. 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 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas
On 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 entered into an agreement for the sale of Sequent. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
The ultimate outcome of these matters cannot be determined at this time.
RESULTS OF OPERATIONS
Southern Company
Net Income
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(65)(4.9)$(1,566)(36.4)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$26730.8
Consolidated net income attributable to Southern Company was $1.25$1.1 billion ($1.181.07 per share) forin the thirdfirst quarter 20202021 compared to $1.32$0.9 billion ($1.260.82 per share) for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a decreaseincreases in both natural gas revenues and retail electric revenues primarily associated with mildercolder weather in the thirdfirst quarter 20202021 as compared to the corresponding period in 2019 and higher depreciation and amortization expenses,first quarter 2020, partially offset by an impairment charge in 2019 recorded at Southern Company Gas related to ahigher cost of natural gas storage facility and lower income tax expense.
Consolidated net income attributable to Southern Company was $2.7 billion ($2.58 per share) for year-to-date 2020 compared to $4.3 billion ($4.12 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.gas.
Retail Electric Revenues
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(269)(6.0)$(633)(5.7)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2648.6
In the thirdfirst quarter 2020,2021, retail electric revenues were $4.2$3.3 billion compared to $4.5$3.1 billion for the corresponding period in 2019. For year-to-date 2020, retail electric revenues were $10.5 billion compared to $11.1 billion for the corresponding period in 2019.2020.
Details of the changes in retail electric revenues were as follows:
Third Quarter 2020Year-to-Date 2020 First Quarter 2021
(in millions)(% change)(in millions)(% change)(in millions)(% change)
Retail electric – prior yearRetail electric – prior year$4,512 $11,136 Retail electric – prior year$3,078 
Estimated change resulting from –Estimated change resulting from –Estimated change resulting from –
Rates and pricingRates and pricing32 0.7 %299 2.7 %Rates and pricing25 0.8 %
Sales declineSales decline(23)(0.5)(122)(1.1)Sales decline(15)(0.5)
WeatherWeather(141)(3.1)(300)(2.7)Weather89 2.9 
Fuel and other cost recoveryFuel and other cost recovery(137)(3.0)(510)(4.6)Fuel and other cost recovery165 5.4 
Retail electric – current yearRetail electric – current year$4,243 (5.9)%$10,503 (5.7)%Retail electric – current year$3,342 8.6 %
Revenues associated with changes in rates and pricing increased in the thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 20192020 primarily due to an increase in revenue at Georgia Power related to the recovery of environmental compliance costs and the impacts of accruals for customer refunds in 2019 related to Tax Reform,Alabama Power's Rate RSE effective January 1, 2021, partially offset by lower contributions from commercialdecreases in Georgia Power's NCCR tariff effective January 1, 2021 and industrial customers with variable demand-driven pricing. The year-to-date 2020 increase was also due to the rate pricing effects of decreased customer usage at Georgia Power and customer bill credits at Alabama Power in the first quarter 2019 related to Tax Reform.Mississippi Power's base rates effective in April 2020. See Note 2 to the financial statements under "Alabama Power"Power – Rate RSE" and "Georgia Power" in Item 8 of the Form 10-K and Note (B) 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)
"Mississippi Power – 2019 Base Rate 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.
Revenues attributable to changes in sales decreased in the thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely due to work-from-home policies related to2020 primarily driven by continued impacts of the COVID-19 pandemic and reluctance of consumers and businesses to resume pre-pandemic levels of activity.pandemic. Weather-adjusted residential KWH sales increased 3.5% and 3.7%1.1% in the thirdfirst 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 work-from-home policies.growth. Weather-adjusted commercial KWH sales decreased 5.1% and 5.9%3.1% in the thirdfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from changes in consumer and business behavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 7.3% and 7.8%3.0% in the thirdfirst 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 $137 million and $510increased $165 million in the thirdfirst 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(41)(6.6)$(194)(11.6)
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 thirdfirst quarter 2020,2021, wholesale electric revenues were $584$545 million compared to $625$418 million for the corresponding period in 2019. For year-to-date 2020, wholesale electric revenues were $1.5 billion compared to $1.7 billion for the corresponding period in 2019. These decreases reflect decreases2020. The increase reflects an increase of $31 million and $134$102 million in energy revenues for the third quarter and year-to-date 2020, respectively, of which $22 million and $88 million, respectively, isprimarily resulting from Southern Power. The decreases in energy revenues primarily resulted from lowerhigher natural gas prices and a net decrease in the volume of KWHs sold, primarily as a result of milder weather in the Southeast U.S. when compared to the corresponding periodsperiod in 2019.2020. In addition, decreasesan increase in capacity revenues of $10$25 million and $60 million in the third quarter and year-to-date 2020, respectively, werewas primarily due to a power sales agreement at Alabama Power which began in September 2020 and new natural gas PPAs at Southern Power's sale ofPower.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Plant Mankato inOther Electric Revenues
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1912.6
In the first quarter 2020. The year-to-date 2020 capacity revenue decrease was also due to Southern Power's sale of Plant Nacogdoches in the second quarter 2019. 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(21)(4.2)$(299)(11.2)
In the third quarter 2020, natural gas2021, other electric revenues were $477$170 million compared to $498$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 $2.4$1.7 billion compared to $2.7$1.2 billion for the corresponding period in 2019.2020.
Details of the changes in natural gas revenues were as follows:
Third Quarter 2020Year-to-Date 2020First Quarter 2021
(in millions)(% change)(in millions)(% change)(in millions)(% change)
Natural gas revenues – prior yearNatural gas revenues – prior year$498 $2,661 Natural gas revenues – prior year$1,249 
Estimated change resulting from –Estimated change resulting from –Estimated change resulting from –
Infrastructure replacement programs and base rate changesInfrastructure replacement programs and base rate changes34 6.8 %153 5.7 %Infrastructure replacement programs and base rate changes38 3.0 %
Gas costs and other cost recoveryGas costs and other cost recovery(8)(1.6)(298)(11.2)Gas costs and other cost recovery152 12.2 
Weather2 0.4 (6)(0.2)
Wholesale gas servicesWholesale gas services(49)(9.8)(151)(5.6)Wholesale gas services247 19.8 
OtherOther— — 3 0.1 Other8 0.6 
Natural gas revenues – current yearNatural gas revenues – current year$477 (4.2)%$2,362 (11.2)%Natural gas revenues – current year$1,694 35.6 %
Revenues from infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the thirdfirst 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 thirdfirst quarter and year-to-date 2020 compared to the corresponding periods in 2019 primarily due to lower natural gas prices. The year-to-date decrease also reflects lower sales volumes in 20202021 compared to the corresponding period in 20192020 primarily as a result of warmer weather.due to higher volumes sold and higher gas 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 from Southern Company Gas' wholesale gas services business decreasedincreased in the thirdfirst quarter 20202021 compared to the corresponding period in 20192020 due to decreasedhigher commercial activityactivities as a result of milder weather andWinter Storm Uri, partially offset by derivative losses and for year-to-date 2020 comparedlosses. See Note (K) to the corresponding period in 2019 primarily dueCondensed Financial Statements under "Southern Company Gas" herein for information regarding the sale of Sequent, which is expected to decreased commercial activity as a result of warmer weather and a decrease in derivative gains.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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(45)(22.8)$(113)(20.6)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$3730.3
In the thirdfirst quarter 2020,2021, other revenues were $152$159 million compared to $197$122 million for the corresponding period in 2019. For year-to-date 2020, other revenues were $4362020. The increase primarily relates to a $24 million compared to $549 million for the corresponding periodincrease in 2019. These decreases primarily relate to the wind-down of a segment of PowerSecure's distributed infrastructure businessand energy efficiency projects at PowerSecure and an increase of $10 million in the first quarter 2020. Additionally, the year-to-date 2020 decrease reflects the sale of PowerSecure's utility infrastructure services business in July 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.unregulated sales associated with power delivery construction and maintenance contracts at Georgia Power.
Fuel and Purchased Power Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019 First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)(change in millions)(% change) (change in millions)(% change)
FuelFuel$(139)(13.0)$(646)(22.8)Fuel$212 33.3
Purchased powerPurchased power(24)(9.4)(14)(2.2)Purchased power26 14.4
Total fuel and purchased power expensesTotal fuel and purchased power expenses$(163)$(660)Total fuel and purchased power expenses$238 
In the thirdfirst quarter 2020,2021, total fuel and purchased power expenses were $1.2$1.1 billion compared to $1.3$0.8 billion for the corresponding period in 2019.2020. The decreaseincrease was primarily the result of a $120$159 million decrease in the volume of KWHs generated and purchased and a $43 million decrease in the average cost of fuel and purchased power.
For year-to-date 2020, total fuel and purchased power expenses were $2.8 billion compared to $3.5 billion for the corresponding period in 2019. The decrease was primarily the result of a $329 million decreaseincrease in the average cost of fuel and purchased power and a $331$79 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:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019
Total generation (in billions of KWHs)
5054132143
Total purchased power (in billions of KWHs)
561414
Sources of generation (percent) —
Gas52545351
Nuclear16151716
Coal24241723
Hydro2154
Other6686
Cost of fuel, generated (in cents per net KWH)—
Gas1.982.251.942.39
Nuclear0.780.790.780.79
Coal3.012.852.962.93
Average cost of fuel, generated (in cents per net KWH)
2.042.181.912.24
Average cost of purchased power (in cents per net KWH)(*)
4.944.784.534.75
(*)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 thirdfirst quarter 2020,2021, fuel expense was $0.9 billion$848 million compared to $1.1 billion$636 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 10.0% decrease79.2% increase in the volume of KWHs generated by coal, a 12.0%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, andpartially offset by a 6.3%9.1% decrease in the volume of KWHs generated by natural gas partially offset byand a 5.6% increase2.1% decrease in the average cost of coal per KWH generated.
For year-to-date 2020, fuel expense was $2.2 billion compared to $2.8 billion for the corresponding period in 2019. The decrease was primarily due to a 30.3% decrease in the volume of KWHs generated by coal, an 18.8% decrease in the average cost of natural gas per KWH generated, and a 2.8% decrease in the volume of KWHs generated by natural gas, partially offset by a 1.0% increase in the average cost of coal per KWH generated.
Purchased Power
In the thirdfirst quarter 2020,2021, purchased power expense was $230$207 million compared to $254$181 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 15.6% decrease in the volume of KWHs purchased, partially offset by a 3.3%30.8% increase in the average cost per KWH purchased.
For year-to-date 2020, purchased power expense was $611 million compared to $625 million for the corresponding period in 2019. The decrease was primarily due to a 4.6%higher natural gas prices, partially offset by an 8.4% decrease in the averagevolume 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 per KWH purchased.of the Southern Company system's generation, and the availability of the Southern Company system's generation.
Cost of Natural Gas
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(8)(10.1)$(302)(31.6)
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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
the natural gas distribution utilities. Cost of natural gas at the natural gas distribution utilities represented 80% and 86% of total cost of natural gas for the third quarter and year-to-date 2020, respectively.
In the third quarter 2020, cost of natural gas was $71 million compared to $79 million for the corresponding period in 2019. The decrease reflects an 11.3% decrease in natural gas prices in the third quarter 2020 compared to the corresponding period in 2019.
For year-to-date 2020, cost of natural gas was $654 million compared to $956 million for the corresponding period in 2019. The decrease reflects a 29.6% decrease 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 2020 compared to the corresponding period in 2019.
Cost of Other Sales
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(42)(36.8)$(115)(36.4)
In the third quarter 2020, cost of other sales was $72 million compared to $114 million for the corresponding period in 2019. For year-to-date 2020, cost of other sales was $201 million compared to $316 million for the corresponding period in 2019. These decreases primarily relate to the wind-down of a segment of PowerSecure's distributed infrastructure business in the first quarter 2020. Additionally, the year-to-date 2020 decrease reflects the sale of PowerSecure's utility infrastructure services business in July 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.
Other Operations and Maintenance Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(10)(0.8)$(113)(2.9)
In the third quarter 2020, other operations and maintenance expenses were $1.29 billion compared to $1.30 billion for the corresponding period in 2019. The decrease primarily results from decreases of $38 million in transmission and distribution maintenancebenefit expenses, primarily at Alabama Power and Georgia Power, including $9 million of reliability NDR credits at Alabama Power, $23 million in scheduled generation outage and maintenance expenses, and $11 million in compliance and environmental expenses at the traditional electric operating companies, substantially offset by a $46 million increase in storm damage recovery at Georgia Power as authorized in its 2019 ARP and an increase in employee compensation and benefit expenses.
For year-to-date 2020, other operations and maintenance expenses were $3.8 billion compared to $3.9 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. The decrease primarily results from decreases of $128 million in scheduled generation outage and maintenance expenses, $81 million in transmission and distribution expenses at the traditional electric operating companies, including $31 million of reliability NDR credits at Alabama Power, $37 million in compliance and environmental expenses at the traditional electric operating companies, and $21 million primarily related to the sale of PowerSecure's utility infrastructure services business in July 2019 and lighting business in December 2019, partially offset by a $138 million increase in storm damage recovery at Georgia Power as authorized in its 2019 ARPSouthern Company Gas, and a $54$15 million increase in employee compensation and benefit expenses. The decrease was also due to a $32 million increase in nuclear property insurance refunds at Alabama Power and Georgia Power.
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Depreciation and Amortization
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$12917.0$35215.5
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$141.6
In the thirdfirst quarter 2020,2021, depreciation and amortization was $889$871 million compared to $760$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 $2.6 billion compared to $2.3 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 $51$22 million and $152 million forunder the third quarter and year-to-date 2020, respectively, and higher depreciationterms of $44 million and $133 million for the third quarter and year-to-date 2020, respectively, as authorized in Georgia Power's 2019 ARP. Also contributingSee Note (B) to the increases were $45 millionCondensed Financial Statements under "Georgia Power – Rate Plan" herein and $92 million increases in depreciation for the third quarter and year-to-date 2020, respectively, associated with additional plant in service. See 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
First Quarter 2021 vs. First Quarter 2020
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$—N/M$14948N/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 "Nuclear"Georgia Power – Nuclear Construction" herein for additional information.
Impairment Charges
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(110)N/M$(142)N/M
N/M - Not meaningful
In the third quarter 2019, an asset impairment charge of $92 million was recorded at Southern Company Gas related to a natural gas storage facility in Louisiana. In the third quarter and year-to-date 2019, goodwill and asset impairment charges totaling $18 million and $50 million, respectively, were recorded related to the sale of PowerSecure's utility infrastructure services business and in contemplation of the sale of its lighting business. See Notes 3 and 15 to the financial statements under "Other Matters – Southern Company Gas – Natural Gas Storage Facilities" and "Southern Company," respectively, in Item 8 of the Form 10-K for additional information.
(Gain) Loss on Dispositions, Net
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(6)N/M$(2,473)N/M
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$512.8
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Expense, Net of Amounts CapitalizedAllowance for Equity Funds Used During Construction
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$92.1$493.8
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1235.3
In the thirdfirst quarter 2020, interest expense, net of amounts capitalized2021, allowance for equity funds used during construction was $443$46 million compared to $434$34 million for the corresponding period in 2019. For year-to-date 2020, interest expense, net of amounts capitalized2020. The increase was $1.34 billion compared to $1.29 billion for the corresponding period in 2019. These increases were primarily due to an increase in average outstanding long-term borrowings primarily atAFUDC equity associated with the parent company. See FINANCIAL CONDITION AND LIQUIDITY – "Financing Activities" hereinconstruction of Plant Vogtle Units 3 and Note 8 to the financial statements in Item 8 of the Form 10-K for additional information.
Impairment of Leveraged Lease
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$—N/M$154N/M
N/M - Not meaningful
For year-to-date 2020, an impairment charge of $154 million was recorded related to a leveraged lease investment at Southern Holdings.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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$5285.2$8033.5
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(45)(43.7)
In the thirdfirst quarter 2020,2021, other income (expense), net was $113$58 million compared to $61$103 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net2020. The decrease was $319primarily due to $75 million compared to $239in 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 increasesincrease in non-service cost-related retirement benefits income of $30 million and $88 million for the third quarter and year-to-date 2020, respectively, as well as $12 million of additional benefits associated with a litigation settlement at Southern Power in the second quarter 2019. The year-to-date 2020 increase was partially offset by the $36 million gain on the litigation settlement that was recorded 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(74)(20.2)$(1,429)(76.3)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4531.0
In the thirdfirst quarter 2020,2021, income taxes were $293$190 million compared to $367$145 million for the corresponding period in 2019. For year-to-date 2020,2020. 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 taxes were $0.4 billionafter dividends on preferred stock for the first quarter 2021 was $359 million compared to $1.9 billion$280 million for the corresponding period in 2019. These decreases were2020. 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 flowback of excess deferred income taxes in 2020 as authorized in Georgia Power's 2019 ARP and lower pre-tax earnings. The year-to-date 2020 decrease also reflects the tax impacts of the sale of Gulf Power in 2019. See Notes 2, 3, and 15first quarter 2021 compared to the financial statements under "Georgia Power – Rate Plans – Tax Reform Settlement Agreement," "Other Matters – Southern Company Gas – Natural Gas Storage Facilities," and "Southern Company," respectively,corresponding period in Item 8 of the Form 10-K and Notes (B) and (G) to the2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Condensed Financial Statements under "Georgia Power – Nuclear Construction" and "Effective Tax Rate," respectively, herein for additional information.Retail Revenues
Net Income Attributable to Noncontrolling Interests
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$14712.2
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$312.0$(23)(88.5)
For year-to-date 2020, net income attributable to noncontrolling interests was $3 millionIn the first quarter 2021, retail revenues were $1.35 billion compared to $26 million$1.21 billion for the corresponding period in 2019. The change was primarily due to an allocation of approximately $26 million of income to the noncontrolling interest partner related to a litigation settlement at Southern Power in the second quarter 2019. See Note 3 to the financial statements in Item 82020.
Details of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
Alabama Power
Net Income
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(25)(5.3)$404.1
Alabama Power's net income after dividends on preferred stock for the third quarter 2020 was $444 million compared to $469 million for the corresponding period in 2019. This decrease was primarily due to a decreasechanges 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 milder weatherchanges in rates and pricing increased in the thirdfirst quarter 20202021 when compared to the corresponding period in 2019 and lower customer usage, partially offset by a decrease in operations and maintenance expenses and an increase in non-service cost-related retirement benefits income.
Alabama Power's net income after dividends on preferred stock for year-to-date 2020 was $1.02 billion compared to $0.98 billion for the corresponding period in 2019. This increase was primarily due to a decrease in operations and maintenance expenses, anRate RSE increase in retail revenues associated with the impact of customer bill credits issued in 2019 related to Tax Reform, and an increase in non-service cost-related retirement benefits income. These increases to income were partially offset by decreases in retail revenues associated with milder weather in 2020 compared to the corresponding period 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(119)(7.0)$(283)(6.6)
In the third quarter 2020, retail revenues were $1.58 billion compared to $1.69 billion for the corresponding period in 2019. For year-to-date 2020, retail revenues were $4.00 billion compared to $4.29 billion for the corresponding period in 2019.
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Details of the changes in retail revenues were as follows:
 Third Quarter 2020Year-to-Date 2020
(in millions)(% change)(in millions)(% change)
Retail – prior year$1,694 $4,286 
Estimated change resulting from –
Rates and pricing(9)(0.5)%53 1.2 %
Sales decline(9)(0.5)(54)(1.3)
Weather(51)(3.0)(104)(2.4)
Fuel and other cost recovery(50)(3.0)(178)(4.1)
Retail – current year$1,575 (7.0)%$4,003 (6.6)%
Revenues associated with changes in rates and pricing decreased in the third quarter 2020 and increased year-to-date 2020 when compared to the corresponding periods in 2019. The third quarter 2020 decrease was due to a decrease in Rate CNP Compliance-related revenue. The year-to-date 2020 increase was primarily due to customer bill credits issued in the first quarter 2019 related to Tax Reform and an increase in year-to-date 2020 Rate CNP Compliance-related revenue.
Revenues attributable to changes in sales decreased in the thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely due to social distancing and safer-at-home guidelines related to the COVID-19 pandemic and reluctance from consumers and businesses to resume pre-pandemic levels of activity.2020. Weather-adjusted residential KWH sales increased 2.6% and 3.2%were relatively flat in the thirdfirst 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 primarily due to the temporary suspension of customer disconnections for nonpayment and safer-at-home guidelines related to the COVID-19 pandemic.2020. Weather-adjusted commercial KWH sales decreased 4.8% and 6.3%2.1% in the thirdfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from changes in consumer and business behavior in response to the COVID-19 pandemic. Industrial KWH sales decreased 10.7% and 9.4%5.4% in the thirdfirst 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 thirdfirst 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
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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$9N/M$(30)(45.5)
N/M - Not meaningful
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.
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For year-to-date 2020,In the first quarter 2021, wholesale revenues from sales to affiliates were $36$32 million compared to $66$19 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a 28.7% decrease in KWH sales as a result of decreased coal generation largely due to lower natural gas prices and a 22.5% 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
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 $2 million in customer fees.
Fuel and Purchased Power Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)(change in millions)(% change)(change in millions)(% change)
FuelFuel$(4)(1.3)$(143)(16.6)Fuel$76 35.3 
Purchased power – non-affiliatesPurchased power – non-affiliates(13)(16.9)(7)(4.4)Purchased power – non-affiliates10 25.0 
Purchased power – affiliatesPurchased power – affiliates(29)(39.7)(71)(43.3)Purchased power – affiliates12 66.7 
Total fuel and purchased power expensesTotal fuel and purchased power expenses$(46)$(221)Total fuel and purchased power expenses$98 
In the thirdfirst quarter 2020,2021, total fuel and purchased power expenses were $414$371 million compared to $460$273 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a $54$59 million decrease inincrease related to the volume of KWHs generated (excluding hydro) and purchased partially offset by an $8and a $39 million net increase in the average cost of generation and purchased power.
For year-to-date 2020, total fuel and purchased power expenses were $0.97 billion compared to $1.19 billion for the corresponding period in 2019. The decrease was primarily due to a $193 million decrease in the volume of KWHs generated (excluding hydro) and purchased and a $28 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.
Details of Alabama Power's generation and purchased power were as follows:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019
Total generation (in billions of KWHs)
15154143
Total purchased power (in billions of KWHs)
2458
Sources of generation (percent) —
Coal47483845
Nuclear25262825
Gas24242321
Hydro42119
Cost of fuel, generated (in cents per net KWH) —
Coal2.862.672.782.76
Nuclear0.760.750.760.77
Gas1.802.401.962.48
Average cost of fuel, generated (in cents per net KWH)
2.042.101.932.15
Average cost of purchased power (in cents per net KWH)(*)
5.124.354.764.40
(*)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
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Fuel
In the third quarter 2020, fuel expense was $306 million compared to $310 million for the corresponding period in 2019. The decrease was primarily due to a 64.0% increase in the volume of KWHs generated by hydro and a 25.0% decrease in the average cost of natural gas per KWH generated, which excludes fuel associated with tolling agreements, partially offset by an 8.0% increase in the volume of KWHs generated by natural gas and a 7.1% increase in the average cost of coal per KWH generated.
For year-to-date 2020, fuel expense was $721 million compared to $864 million for the corresponding period in 2019. The decrease was primarily due to a 21.0% decrease in the average cost of natural gas per KWH generated, which excludes fuel associated with tolling agreements, an 18.6% decrease in the volume of KWHs generated by coal, and a 15.7% and an 8.5% increase in the volume of KWHs generated by hydro and nuclear, respectively.
Purchased Power – Non-Affiliates
In the third quarter 2020, purchased power expense from non-affiliates was $64 million compared to $77 million for the corresponding period in 2019. This decrease was primarily due to a 29.3% decrease in the amount of energy purchased due to milder weather in the third quarter 2020 as compared to the corresponding period in 2019, partially offset by a 14.1% increase in the average cost of purchased power per KWH as a result of fixed capacity costs for PPAs.
Purchased Power – Affiliates
In the third quarter 2020, purchased power expense from affiliates was $44 million compared to $73 million for the corresponding period in 2019. For year-to-date 2020, purchased power expense from affiliates was $93 million compared to $164 million for the corresponding period in 2019. These decreases were primarily due to reductions of 45.4% and 44.5%, respectively, in the amount of energy purchased due to milder weather during 2020 as compared to 2019.
Energy purchases from affiliates will vary depending on demand 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(22)(5.4)$(143)(11.7)
In the third quarter 2020, other operations and maintenance expenses were $387 million compared to $409 million for the corresponding period in 2019. For year-to-date 2020, other operations and maintenance expenses were $1.08 billion compared to $1.22 billion for the corresponding period in 2019. 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. The decreases primarily result from decreases of $22 million and $100 million in generation expenses associated with scheduled outages and CNP Compliance-related expenses for the third quarter and year-to-date 2020, respectively. Also contributing were decreases of $15 million and $44 million in transmission and distribution maintenance expenses primarily related to reliability NDR credits for the third quarter and year-to-date 2020, respectively. Partially offsetting the third quarter 2020 decrease was a $13 million increase in bad debt expense.
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.
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Other Income (Expense), Net
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$19172.7$42116.7
In the third quarter 2020, other income (expense), net was $30 million compared to $11 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net was $78 million compared to $36 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(14)(9.7)$124.1
In the third quarter 2020, income taxes were $130 million compared to $144 million for the corresponding period in 2019. This decrease was primarily due to lower pre-tax earnings and the finalization of the 2019 tax return.
For year-to-date 2020, income taxes were $307 million compared to $295 million for the corresponding period in 2019. This increase was primarily due to higher pre-tax earnings.
Georgia Power
Net Income
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(66)(7.9)$(187)(11.7)
Georgia Power's net income for the third quarter 2020 was $773 million compared to $839 million for the corresponding period in 2019. For year-to-date 2020, net income was $1.41 billion compared to $1.60 billion for the corresponding period in 2019. These decreases were primarily due to 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. The year-to-date decrease was also due to a $111 million after-tax charge in the second quarter 2020 related to the construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Nuclear Construction" herein for additional information on the construction of Plant Vogtle Units 3 and 4.
Retail Revenues
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(132)(5.1)$(311)(5.0)
In the third quarter 2020, retail revenues were $2.44 billion compared to $2.57 billion for the corresponding period in 2019. For year-to-date 2020, retail revenues were $5.87 billion compared to $6.18 billion for the corresponding period in 2019.
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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 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:
Third Quarter 2020Year-to-Date 2020 First Quarter 2021
(in millions)(% change)(in millions)(% change)(in millions)(% change)
Retail – prior yearRetail – prior year$2,567 $6,181 Retail – prior year$1,675 
Estimated change resulting from –Estimated change resulting from –Estimated change resulting from –
Rates and pricingRates and pricing51 2.0 %260 4.2 %Rates and pricing(18)(1.1)%
Sales declineSales decline(9)(0.4)(56)(0.9)Sales decline(6)(0.4)
WeatherWeather(87)(3.4)(194)(3.1)Weather42 2.5 
Fuel cost recoveryFuel cost recovery(87)(3.4)(321)(5.2)Fuel cost recovery94 5.7 
Retail – current yearRetail – current year$2,435 (5.2)%$5,870 (5.0)%Retail – current year$1,787 6.7 %
Revenues associated with changes in rates and pricing increaseddecreased in the thirdfirst 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 Environmental Compliance Cost Recovery (ECCR)NCCR tariff effective January 1, 2020 as authorized in the 2019 ARP and the impacts of accruals in 2019 for customer refunds related to Tax Reform. The increase for year-to-date 2020 was also due2021. See Note (B) to the rate pricing effects of decreased customer usage in the first and second quarters 2020. Partially offsetting these increases were lower contributions from commercial and industrial customers with variable demand-driven pricing. See Note 2 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 thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely2020 primarily due to work-from-home policies related tocontinued impacts of the COVID-19 pandemic, and reluctance of consumers and businesses to resume pre-pandemic levels of activity.partially offset by customer growth. Weather-adjusted residential KWH sales increased 4.0% and 4.1%2.0% in the thirdfirst 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 work-from-home policies.growth. Weather-adjusted commercial KWH sales decreased 5.2% and 5.6%3.3% in the thirdfirst quarter and year-to-date 2020, respectively,2021 when compared to the corresponding periodsperiod in 20192020 primarily due to lower customer usage resulting from changes in consumer and business behavior in response to the COVID-19 pandemic.pandemic, partially offset by customer growth. Weather-adjusted industrial KWH sales decreased 3.6% and 6.7%increased 1.1% in the thirdfirst 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.pandemic.
Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreasedincreased in the thirdfirst 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 Revenues
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(5)(12.8)$(22)(20.6)
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
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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 costs.cost.
In the thirdfirst quarter 2020,2021, wholesale revenues were $34$43 million compared to $39$26 million for the corresponding period in 2019. For year-to-date 2020, wholesale2020. 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 $85$140 million compared to $107$124 million for the corresponding period in 2019. These decreases were2020. The increase was primarily due to lower market demand largely resulting from the expirationan increase of a non-affiliate PPA$13 million in unregulated sales associated with power delivery construction and lower energy prices.maintenance contracts and outdoor lighting.
Fuel and Purchased Power Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)(change in millions)(% change)(change in millions)(% change)
FuelFuel$(75)(16.9)$(306)(27.0)Fuel$82 35.5 
Purchased power – non-affiliatesPurchased power – non-affiliates(5)(3.3)16 4.1 Purchased power – non-affiliates15 11.6 
Purchased power – affiliatesPurchased power – affiliates(8)(5.3)(67)(14.6)Purchased power – affiliates7 5.4 
Total fuel and purchased power expensesTotal fuel and purchased power expenses$(88)$(357)Total fuel and purchased power expenses$104 
In the thirdfirst quarter 2020,2021, total fuel and purchased power expenses were $656$593 million compared to $744$489 million for the corresponding period in 2019.2020. The decrease was due to decreases of $44 million each related to the average cost of fuel and purchased power and the net volume of KWHs generated and purchased.
For year-to-date 2020, total fuel and purchased power expenses were $1.63 billion compared to $1.99 billion for the corresponding period in 2019. The decreaseincrease was due to a decrease of $239$77 million increase related to the average cost of fuel and purchased power and a $27 million net decrease of $118 millionincrease 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 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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AND RESULTS OF OPERATIONS (Continued)
Details of Georgia Power's generation and purchased power were as follows:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
Total generation (in billions of KWHs)
Total generation (in billions of KWHs)
17194248
Total generation (in billions of KWHs)
1413
Total purchased power (in billions of KWHs)
Total purchased power (in billions of KWHs)
882523
Total purchased power (in billions of KWHs)
79
Sources of generation (percent) —
Sources of generation (percent) —
Sources of generation (percent) —
GasGas48465347Gas4758
NuclearNuclear24222724Nuclear2727
CoalCoal26311526Coal228
Hydro and otherHydro and other2153Hydro and other47
Cost of fuel, generated (in cents per net KWH) —
Cost of fuel, generated (in cents per net KWH) —
Cost of fuel, generated (in cents per net KWH) —
GasGas2.142.332.122.45Gas2.582.12
NuclearNuclear0.810.820.810.81Nuclear0.780.80
CoalCoal3.193.003.313.10Coal2.913.83
Average cost of fuel, generated (in cents per net KWH)
Average cost of fuel, generated (in cents per net KWH)
2.092.201.932.21
Average cost of fuel, generated (in cents per net KWH)
2.151.87
Average cost of purchased power (in cents per net KWH)(*)
Average cost of purchased power (in cents per net KWH)(*)
3.764.203.504.22
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 thirdfirst quarter 2020,2021, fuel expense was $368$313 million compared to $443$231 million for the corresponding period in 2019. For year-to-date 2020, fuel expense2020. The increase was $0.83 billion compared to $1.13 billion for the corresponding period in 2019. The decreases for the third quarter and year-to-date 2020 were primarily due to decreasesan increase of 25.7% and 50.3%, respectively,232.9% in the volume of KWHs generated by coal and decreasesan increase of 8.2% and 13.5%, respectively,21.7% in the average cost of natural gas per KWH generated.
Purchased Power – AffiliatesNon-Affiliates
For year-to-date 2020,In the first quarter 2021, purchased power expense from affiliatesnon-affiliates was $393$144 million compared to $460$129 million forin the corresponding period in 2019.2020. The decreaseincrease was primarily due to a decrease of 24.7%24.1% increase in the average cost per KWH purchased primarily resulting from lower energydue to higher natural gas prices, as well as the expiration of a PPA, partially offset by an increase of 5.8%a 9.8% decrease in the volume of KWHs purchased as Georgia Power units generally dispatched at a higherlower cost than other Southern Company systemavailable market resources.
Energy purchases from affiliatesnon-affiliates will vary depending on demand and the availability andmarket prices of wholesale energy as compared to the cost of generating resources at each companythe Southern Company system's generation, demand for energy within the Southern Company system. These purchases are made in accordance withsystem's electric service territory, and the IIC or other contractual agreements, all as approved byavailability of the FERC.Southern Company system's generation.
Other Operations and Maintenance Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$102.1$261.9
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$91.9
In the thirdfirst quarter 2020,2021, other operations and maintenance expenses were $483$474 million compared to $473$465 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 $46$8 million in storm damage recovery as authorized in the 2019 ARPrelated to unregulated power delivery construction and $7 million in employee benefit expenses,maintenance contracts, partially offset by decreasesa decrease of $24$9 million in distribution- and transmission-related expenses and $11 millionnon-outage generation maintenance costs primarily associated with coal generation and the timing of maintenance activities.
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maintenance. 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 $6 million in expenses from unregulated sales associated with new energy conservation projects.
For year-to-date 2020, other operations and maintenance expenses were $1.41 billion compared to $1.39 billion for the corresponding period in 2019. The increase was primarily due to increases of $138 million in storm damage recovery as authorized in the 2019 ARP and $15 million in employee benefit expenses, partially offset by decreases of $42 million in distribution- and transmission-related expenses, $34 million associated with generation maintenance and scheduled outages, and $13 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, an $11 million increase in nuclear property insurance refunds, and a decrease of $9 million associated with workers compensation and legal expenses.
See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$10843.2$33145.2
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(14)(4.0)
In the thirdfirst quarter 2020,2021, depreciation and amortization was $358$338 million compared to $250$352 million for the corresponding period in 2019. For year-to-date 2020, depreciation and amortization was $1.06 billion compared to $0.73 billion for the corresponding period in 2019. These increases2020. The decrease primarily reflect increasedreflects decreased amortization of regulatory assets related to CCR AROs of $51$22 million and $152 million forunder the third quarter and year-to-date 2020, respectively, and higher depreciationterms of $44 million and $133 million for the third quarter and year-to-date 2020, respectively, as authorized in the 2019 ARP. Also contributing to the increases were $16ARP, partially offset by a $10 million and $52 million increasesincrease in depreciation for the third quarter and year-to-date 2020, respectively, associated with additional plant in service. 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 recovery of costs associated with CCR AROs.
Estimated Loss on Plant Vogtle Units 3 and 4
First Quarter 2021 vs. First Quarter 2020
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$—N/M$14948N/M
N/M - Not meaningful
In the secondfirst quarter 2020,2021, an estimated probable loss of $149$48 million was recorded 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 "Nuclear"Georgia Power – Nuclear Construction" herein for additional information.
Interest Expense,Other Income (Expense), Net of Amounts Capitalized
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$32.9$185.9
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2038.5
For year-to-date 2020, interest expense,In the first quarter 2021, other income (expense), net of amounts capitalized was $322$72 million compared to $304$52 million for the corresponding period in 2019.2020. The increase was primarily due to a $32 million increase in interest expense associated with an increase in average outstanding long-term borrowings, partially offset by a $15of $12 million increase
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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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$1850.0$4338.1
In the third quarter 2020, other income (expense), net was $54 million compared to $36 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net was $156 million compared to $113 million for the corresponding period in 2019. The third quarter and year-to-date 2020 increases were primarily due to increases of $10 million and $32 million, respectively, in non-service cost-related retirement benefits income and increasesan increase of $7 million in AFUDC equity of $5 million and $14 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 "Nuclear"Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Income Taxes
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(83)(32.5)$(268)(57.5)
Mississippi Power
Net Income
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$1340.6
In the thirdfirst quarter 2020,2021, net income taxes were $172was $45 million compared to $255$32 million for the corresponding period in 2019. For year-to-date 2020, income taxes were $198 million compared to $466 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, which includes, for year-to-date 2020, the charge in the second quarter 2020 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$23.1$(1)(0.7)
Mississippi Power's net income for the third quarter 2020 was $67 million compared to $65 million for the corresponding period in 2019.2020. 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 decrease in amortization associated with ECO Plan regulatory assets, a decrease in income taxes associated withresult of the flowback of excess deferred income taxes,COVID-19 pandemic, and a decrease in scheduled generation outage costs,operations and maintenance expenses, partially offset by a decrease in revenues as a result of a base rate reduction that became effective for the first billing cycle of April 2020, as well as a decrease in customer usage due to the COVID-19 pandemic, and an increase in depreciation.
For year-to-date 2020, net income was $138 million compared to $139 million for the corresponding period in 2019. The decrease was primarily due to a decrease in revenues as a result of a base rate reduction that became effective for the first billing cycle of April 2020, as well as a decrease in customer usage due to the COVID-19 pandemic,depreciation and amortization.
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and an increase in depreciation, substantially offset by a decrease in amortization associated with ECO Plan regulatory assets and a decrease in income taxes associated with the flowback of excess deferred income taxes.
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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(19)(7.6)$(39)(5.8)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$52.5
In the thirdfirst quarter 2020,2021, retail revenues were $232$204 million compared to $251$199 million for the corresponding period in 2019. For year-to-date 2020, retail revenues were $630 million compared to $669 million for the corresponding period in 2019.2020.
Details of the changes in retail revenues were as follows:
Third Quarter 2020Year-to-Date 2020 First Quarter 2021
(in millions)(% change)(in millions)(% change) (in millions)(% change)
Retail – prior yearRetail – prior year$251 $669 Retail – prior year$199 
Estimated change resulting from –Estimated change resulting from –Estimated change resulting from –
Rates and pricingRates and pricing(10)(4.0)%(15)(2.2)%Rates and pricing(7)(3.5)%
Sales declineSales decline(5)(2.0)(12)(1.8)Sales decline(5)(2.5)
WeatherWeather(4)(1.6)(2)(0.3)Weather8 4.0 
Fuel and other cost recoveryFuel and other cost recovery— — (10)(1.5)Fuel and other cost recovery9 4.5 
Retail – current yearRetail – current year$232 (7.6)%$630 (5.8)%Retail – current year$204 2.5 %
Revenues associated with changes in rates and pricing decreased in the thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 20192020 primarily due to decreases in base rates that became effective in April 2020 in accordance with the Mississippi Power Rate Case Settlement Agreement. The third quarter 2020 decrease was also dueSee Note 2 to a decrease in revenue associated with a tolling arrangement. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Mississippithe financial statements under "Mississippi Power – 2019 Base Rate Case" hereinin Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales decreased in the thirdfirst quarter and year-to-date 20202021 when compared to the corresponding periodsperiod in 2019 largely2020 primarily due to lower overall customer usage resulting from work-from-home policies related tocontinued impacts of the COVID-19 pandemic and reluctance of consumers and businesses to resume pre-pandemic levels of activity.
pandemic. Weather-adjusted residential KWH sales increased 3.3% and 2.7%decreased 0.7% in the thirdfirst quarter and year-to-date 2020, respectively,2021 primarily due to decreased customer growth and an increase in average customer usage as a result of changes in customer behavior and work-from-home policies in response to the COVID-19 pandemic.usage. Weather-adjusted commercial KWH sales decreased 5.8% and 7.1%4.3% in the thirdfirst quarter and year-to-date 2020, respectively,2021 primarily due to lower customer usage resulting from changes in consumer and business behavior including the temporary closure of casinos, in response to the COVID-19 pandemic. Industrial KWH sales decreased 7.9% and 3.6%10.7% in the thirdfirst quarter and year-to-date 2020, respectively,2021 as a result of disruptions in supply chain and business operations driven by the COVID-19 pandemic and the overall decrease in business activity due to the resulting recession.non-pandemic related customer outages.
Fuel and other cost recovery revenues decreased for year-to-date 2020increased in the first quarter 2021 when compared to the corresponding period in 20192020 primarily as a result of lowerhigher recoverable fuel costs. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel 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 fuel costs,
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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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(3)(4.7)$(14)(7.9)
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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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 – MississippiNote 2 to the financial statements under "Mississippi Power" in Item 78 of the Form 10-K for additional information.
For year-to-date 2020,In the first quarter 2021, wholesale revenues from sales to non-affiliates were $164$63 million compared to $178$51 million for the corresponding period in 2019. This decrease2020. The increase was primarily due to decreasesincreases in revenue from MRA customers as a result of lowercolder weather and higher fuel costs milder weather, andin 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 from fewer opportunity sales.pandemic.
Wholesale Revenues – Affiliates
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(15)(29.4)$(27)(24.8)
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 significant impact on earnings since this energy is generally sold at marginal cost.
In the thirdfirst quarter 2020,2021, wholesale revenues from sales to affiliates were $36$33 million compared to $51$21 million for the corresponding period in 2019. This decrease2020. The increase was primarily due to an $8 million decrease associated with lower KWH sales and a $7 million decrease primarily associated with lower natural gas prices.
For year-to-date 2020, wholesale revenues from sales to affiliates were $82 million compared to $109 million foran increase in the corresponding period in 2019. This decrease was primarily due to a $34 million decrease associated with lower natural gas prices, partially offset by a $7 million increase associated with higher KWH sales due to the dispatchaverage cost of Mississippi Power's lower cost generation resources to serve the Southern Company system's territorial load.
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fuel.
Fuel and Purchased Power Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)(change in millions)(% change)(change in millions)(% change)
FuelFuel$(18)(14.9)$(53)(16.6)Fuel$22 27.8
Purchased powerPurchased power— —3 20.0Purchased power— —
Total fuel and purchased power expensesTotal fuel and purchased power expenses$(18)$(50)Total fuel and purchased power expenses$22 
In the thirdfirst quarter 2020,2021, total fuel and purchased power expenses were $109$106 million compared to $127$84 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to a $9 million decreasehigher average cost of fuel and an increase associated with the volume of KWHs generated and a $9 million decrease primarily related to the lower average cost of natural gas.
For year-to-date 2020, total fuel and purchased power expenses were $284 million compared to $334 million for the corresponding period in 2019. The decrease was primarily due to a $47 million decrease related to the cost of fuel and purchased power primarily due to the lower average cost of natural gas.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:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019
Total generation (in millions of KWHs)
5,0115,55413,66214,125
Total purchased power (in millions of KWHs)
162161558403
Sources of generation (percent) –
Coal11867
Gas89929493
Cost of fuel, generated (in cents per net KWH) –
Coal3.523.883.703.98
Gas1.992.161.942.29
Average cost of fuel, generated (in cents per net KWH)
2.162.302.062.41
Average cost of purchased power (in cents per net KWH)
3.663.963.173.84
Fuel
In the third quarter 2020, fuel expense was $103 million compared to $121 million for the corresponding period in 2019. This decrease was primarily due to a 12.2% decrease in the volume of KWHs generated by natural gas, a 9.3% decrease in the average cost of coal per KWH generated, and a 7.8% decrease in the average cost of natural gas per KWH generated, partially offset by a 24.7% increase in the volume of KWHs generated by coal.
For year-to-date 2020, fuel expense was $266 million compared to $319 million for the corresponding period in 2019. This decrease was due to a 15.1% decrease in the average cost of natural gas per KWH generated, a 10.8% decrease in the volume of KWHs generated by coal, a 6.9% decrease in the average cost of coal per KWH generated, and a 2.0% decrease in the volume of KWHs generated by natural gas.
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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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 a 26.3% decrease in the 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(10)(13.9)$(2)(1.0)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(8)(10.5)
In the thirdfirst quarter 2020,2021, other operations and maintenance expenses were $62$68 million compared to $72$76 million for the corresponding period in 2019.2020. The decrease was primarily due to adecreases of $6 million decreaserelated to planned generation outage costs and $4 million associated with the Kemper IGCCCounty energy facility primarily related to an increase in salvage proceeds and the settlement of litigation and a decrease of $3 million in scheduled generation outageongoing period costs.
For year-to-date 2020, other operations and maintenance expenses were $202 million compared to $204 million for the corresponding period in 2019. The decrease was primarily due to an $8 million decrease associated with the Kemper IGCC primarily related to an increase in salvage proceeds, largely offset by increases of $3 million in certain employee compensation expenses deferred in 2019, $2 million in vegetation management expenses, and $2 million in scheduled generation outage costs.
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K and Note (C) to the Condensed Financial Statements under "Other Matters – Mississippi Power – Kemper County Energy Facility" herein for additional information.
Depreciation and Amortization
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(1)(2.1)$(9)(6.3)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$511.9
In the thirdfirst quarter 2020,2021, depreciation and amortization was $47 million compared to $48$42 million for the corresponding period in 2019. For year-to-date 2020, depreciation and amortization2020. The increase was $135primarily due to a $3 million compared to $144 million for the corresponding period in 2019. These decreases were related to decreases in amortization of $5 million and $17 million in the third quarter and year-to-date 2020, respectively, primarily as a result of the ECO Plan regulatory assets being fully amortized in 2019, partially offset by amortization of a regulatory asset associated with an ARO. These decreases were partially offset by increasesincrease in depreciation of $4 million and $8 million in the third quarter and year-to-date 2020, respectively, primarily 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.
Interest Expense, Net of Amounts Capitalized
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(3)(17.6)$(7)(13.5)
For year-to-date 2020, interest expense, net of amounts capitalized was $45 million compared to $52 million for the corresponding period in 2019. The decrease primarily resulted from a decrease in outstanding long-term borrowings.
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Income Taxes
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(3)(20.0)$(7)(25.9)
For year-to-date 2020, income taxes were $20 million compared to $27 million for the corresponding period in 2019. The decrease was primarily due to a decrease of $9 million 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.
Southern Power
Net Income Attributable to Southern Power
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(12)(14.0)$(104)(32.9)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2229.3
Net income attributable to Southern Power forin the thirdfirst quarter 20202021 was $74$97 million compared to $86$75 million for the corresponding period in 2019.2020. The decreaseincrease was primarily due to reduced net income related to the disposition of Plant Mankato in the first quarter 2020.
Net income attributable to Southern Power for year-to-date 2020 was $212a $16 million compared to $316 million for the corresponding period in 2019. The decrease was primarilytax benefit due to the gain on the sale of Plant Nacogdocheschanges in the second quarter 2019 of $88 million afterstate apportionment methodology resulting from 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 reflects the reduced net income related to these dispositions.
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.February 2021.
Operating Revenues
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(51)(8.9)$(190)(12.4)
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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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.
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AND RESULTS OF OPERATIONS (Continued)
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 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 Power's Power Sales Agreements" hereinin 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:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
PPA capacity revenuesPPA capacity revenues$116 $131 $297 $384 PPA capacity revenues$96 $90 
PPA energy revenuesPPA energy revenues319 339 794 857 PPA energy revenues245 205 
Total PPA revenuesTotal PPA revenues435 470 1,091 1,241 Total PPA revenues341 295 
Non-PPA revenuesNon-PPA revenues84 101 235 276 Non-PPA revenues95 77 
Other revenuesOther revenues4 3 11 10 Other revenues4 3 
Total operating revenuesTotal operating revenues$523 $574 $1,337 $1,527 Total operating revenues$440 $375 
In the thirdfirst quarter 2020,2021, total operating revenues were $523$440 million, reflecting a $51$65 million, or 9%17%, decreaseincrease from the corresponding period in 2019.2020. The decreaseincrease in operating revenues was primarily due to the following:
•PPA capacity revenues decreased $15increased $6 million, or 11%7%, primarily due to new natural gas PPAs and increased capacity on existing contracts, partially offset by the disposition of Plant Mankato in the first quarter 2020 and the contractual expiration of a natural gas PPA in November 2020.
•PPA energy revenues decreased $20increased $40 million, or 6%20%, primarily due to a $29$35 million decreaseincrease in sales from natural gas facilities resulting from a $26$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 $3sold. In addition, the increase reflects $6 million decrease in the average cost of fuel and purchased power. This decrease was partially offset by a $9 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 decreased $17increased $18 million, or 17%23%, due to a $20$38 million decreaseincrease in the market price of energy, partially offset by a $3$20 million increase in the volume of KWHs sold through short-term sales.
For year-to-date 2020, total operating revenues were $1.3 billion, reflecting a $190 million, or 12%, decrease from the corresponding period in 2019. The decrease in operating revenues was primarily due to the following:
•PPA capacity revenues decreased $87 million, or 23%, primarily due to decreases of $60 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 $63 million, or 7%, due to a $115 million decrease in sales from natural gas facilities resulting from a $64 million decrease in the volume of KWHs sold due to decreased demand and a $51 million decrease in the price of fuel and purchased power. This decrease was partially offset by increases of $22 million in sales primarily driven by the volume of KWHs generated by solar and wind facilities and $29 million in sales from a fuel cell project acquired in late 2019.
•Non-PPA revenues decreased $41 million, or 15%, due to a $95 million decrease in the market price of energy, partially offset by a $54 million increase in the volume of KWHs sold through short-term sales.
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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:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019 First Quarter 2021First
Quarter
2020
(in billions of KWHs)(in billions of KWHs)
GenerationGeneration12.313.834.335.7Generation9.410.7
Purchased powerPurchased power0.70.82.32.5Purchased power0.60.7
Total generation and purchased powerTotal generation and purchased power13.014.636.638.2Total generation and purchased power1011.4
Total generation and purchased power, excluding solar, wind, and tolling agreementsTotal generation and purchased power, excluding solar, wind, and tolling agreements7.48.621.922.3Total 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:
Third Quarter 2020 vs. Third Quarter 2019Year-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)
FuelFuel$(29)(17.5)$(103)(22.9)Fuel$34 31.8
Purchased powerPurchased power(7)(26.9)(30)(36.6)Purchased power6 42.9
Total fuel and purchased power expensesTotal fuel and purchased power expenses$(36)$(133)Total fuel and purchased power expenses$40 
In the thirdfirst quarter 2020,2021, total fuel and purchased power expenses decreased $36increased $40 million, or 19%33%, compared to the corresponding period in 2019.2020. Fuel expense decreased $29increased $34 million due to a $26$50 million decrease associated with the volume of KWHs generated and a $3 million decrease in the average cost of fuel per KWH generated. Purchased power expense decreased $7 million due to a $6 million decrease associated with the average cost of purchased power and a $1 million decrease associated with the volume of KWHs purchased.
For year-to-date 2020, total fuel and purchased power expenses decreased $133 million, or 25%, compared to the corresponding period in 2019. Fuel expense decreased $103 million due to a $97 million decreaseincrease in the average cost of fuel per KWH generated, andpartially offset by a $6$16 million decrease associated with the volume of KWHs generated. Purchased power expense decreased $30increased $6 million due to a $22an $8 million decreaseincrease associated with the average cost of purchased power, and an $8partially offset by a $2 million decrease associated with the volume of KWHs purchased.
Other Operations and Maintenance Expenses
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$2227.8
In the first quarter 2021, other operations and maintenance expenses were $101 million compared to $79 million for the corresponding period in 2020. The increase was primarily due to an $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 first quarter 2020.
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AND RESULTS OF OPERATIONS (Continued)
(Gain) Loss on Dispositions, Net
First Quarter 2021 vs. First Quarter 2020
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$—N/M$(16)N/M—
N/M - Not meaningful
For year-to-date 2020, gainIn the first quarter 2021, gains on dispositions net wastotaled $39 million comparedprimarily from contributions of wind turbine equipment to $23various equity method investments. A $39 million for the corresponding period in 2019, reflecting the sale of Plant Mankatogain was also recorded in the first quarter 2020 andrelated to the sale of Plant Nacogdoches in the second quarter 2019.Mankato. See NoteNotes (E) and (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Power – Sales of Natural Gas and Biomass Plants" for additional information.
Interest Expense, Net of Amounts Capitalized
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(7)(16.3)$(13)(10.2)
In the third quarter 2020, interest expense, net of amounts capitalized was $36 million compared to $43 million for the corresponding period in 2019. For year-to-date 2020, interest expense, net of amounts capitalized was $114 million compared to $127 million for the corresponding period in 2019. The decreases were primarily due to lower outstanding debt. See FINANCIAL CONDITION AND LIQUIDITY – "Financing Activities" herein for additional information.
Other Income (Expense), Net
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$7116.7$(29)(60.4)
In the third quarter 2020, other income (expense), net was $13 million compared to $6 million for the corresponding period in 2019. The increase was primarily due to the resolution of certain contingencies in the third quarter 2020 associated with the Roserock solar facility litigation settlement in 2019.
For year-to-date 2020, other income (expense), net was $19 million compared to $48 million for the corresponding period in 2019. The decrease was primarily due to a $36 million gain arising from the Roserock solar facility litigation settlement in the second quarter 2019, partially offset by the resolution of certain related contingencies in the third quarter 2020.
See Note 3 to the financial statements in Item 8 of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
Income Taxes (Benefit)
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(5)(26.3)$68165.9
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(17)(242.9)
For year-to-date 2020,In the first quarter 2021, income tax benefit was $10 million compared to income tax expense was $27of $7 million compared to a $41 million benefit for the corresponding period in 2019.2020. The change was primarily due to a $75 million income tax benefitchanges in 2019state apportionment methodology resulting from ITCs recognized upontax legislation enacted by the State of Alabama in February 2021, as well as the tax impact from the sale of Plant Nacogdoches, partially offset by a decreaseMankato in income tax expense as a result of lower pre-tax earnings.January 2020. See NotesNote (G) and (K) to the Condensed Financial Statements herein, for additional information.
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Net Income Attributable to Noncontrolling Interests
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$3N/M$(23)N/M
For year-to-date 2020, net income attributable to noncontrolling interests was $3 million compared to $26 million for– FUTURE EARNINGS POTENTIAL – "Income Tax Matters – Alabama State Tax Reform Legislation" in Item 7 of the corresponding period in 2019. The change was 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. SeeForm 10-K, and Note 315 to the financial statements under "Southern Power" in Item 8 of the Form 10-K under "General Litigation Matters – Southern Power" for additional information.
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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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 (Loss)
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$43148.3$133.7
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$12344.7
In the thirdfirst quarter 2020,2021, net income was $14$398 million comparedcompared to a $29$275 million net loss for the corresponding period in 2019. This2020. The increase was primarily due to a $65$103 million after-tax impairment charge in 2019 related to a natural gas storage facility in Louisiana, partially offset by a $36 million decreaseincrease at wholesale gas services in 2020
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AND RESULTS OF OPERATIONS (Continued)
higher commercial activities as a result of lower commercial activityWinter Storm Uri and derivative losses. Also contributing to the increase was a $9$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 $360 million compared to $347 million for the corresponding period in 2019. This increase was primarily due to a $65 million after-tax impairment charge in 2019 related to a natural gas storage facility in Louisiana and a $56 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. The increase was partially offset by a $106 million decrease at wholesale gas services in 2020 primarily due to lower commercial activity and lower derivative gains.
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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(21)(4.2)$(299)(11.2)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$44535.6
In the thirdfirst quarter 2020,2021, natural gas revenues, including alternative revenue programs, were $477 million compared to $498 million for the corresponding period in 2019. For year-to-date 2020, natural gas revenues, including alternative revenue programs, were $2.4$1.7 billion compared to $2.7$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:
Third Quarter 2020Year-to-Date 2020First Quarter 2021
(in millions)(% change)(in millions)(% change)(in millions)(% change)
Natural gas revenues – prior yearNatural gas revenues – prior year$498 $2,661 Natural gas revenues – prior year$1,249 
Estimated change resulting from –Estimated change resulting from –Estimated change resulting from –
Infrastructure replacement programs and base rate changesInfrastructure replacement programs and base rate changes34 6.8 %153 5.7 %Infrastructure replacement programs and base rate changes38 3.0 %
Gas costs and other cost recoveryGas costs and other cost recovery(8)(1.6)(298)(11.2)Gas costs and other cost recovery152 12.2 
Weather2 0.4 (6)(0.2)
Wholesale gas servicesWholesale gas services(49)(9.8)(151)(5.6)Wholesale gas services247 19.8 
OtherOther— — 3 0.1 Other8 0.6 
Natural gas revenues – current yearNatural gas revenues – current year$477 (4.2)%$2,362 (11.2)%Natural gas revenues – current year$1,694 35.6 %
Revenues from infrastructure replacement programs and base rate changes increased in the thirdfirst 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 thirdfirst quarter and year-to-date 2020 compared to the corresponding periods in 2019 primarily due to lower natural gas prices. The year-to-date decrease also reflects lower sales volumes in 20202021 compared to the corresponding period in 20192020 primarily as a result of warmer weather. Naturaldue to higher volumes sold and higher 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 of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.
Revenues from wholesale gas services increased in the first quarter 2021 compared to the corresponding period in 2020 due to higher commercial activities as a result of Winter Storm Uri, partially offset by derivative losses. See "Segment Information – Wholesale Gas 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)
Revenues from wholesaleSouthern Company Gas' natural gas services decreased in the third quarter 2020 compareddistribution utilities have various regulatory mechanisms that limit their exposure to the corresponding period in 2019 due to decreased commercial activity as a result of milder weather and derivative losses and for year-to-date 2020 compared to the corresponding period in 2019 primarily due to decreased commercial activity as a result of warmer weather and a decrease in derivative gains. See "Segment Information – Wholesale Gas Services" herein for additional information.
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.
Third Quarter2020
vs.
normal		2020
vs.
2019		Year-to-Date2020
vs.
normal		2020
vs.
2019		First Quarter2021 vs. normal2021 vs. 2020
Normal(*)
20202019colder
Normal(*)
20202019(warmer)
Normal(*)
20212020colder (warmer)
(in thousands)(in thousands)(in thousands)
IllinoisIllinois54 54 2 — %N/M3,773 3,548 3,958 (6.0)%(10.4)%Illinois3,024 2,947 2,759 (2.5)%6.8 %
GeorgiaGeorgia2 15 — N/M— %1,530 1,294 1,298 (15.4)%(0.3)%Georgia1,326 1,254 1,091 (5.4)%14.9 %
(*)Normal represents the 10-year average from January 1, 20102011 through September 30, 2019March 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.
The following table provides the number of customers served by Southern Company Gas at September 30, 2020March 31, 2021 and 2019:2020:
September 30,March 31,
202020192020 vs. 2019202120202021 vs. 2020
(in thousands, except market share %)(% change)(in thousands, except market share %)(% change)
Gas distribution operationsGas distribution operations4,258 4,208 1.2 %Gas distribution operations4,335 4,298 0.9 %
Gas marketing servicesGas marketing servicesGas marketing services
Energy customers(*)
Energy customers(*)
659 611 7.9 %
Energy customers(*)
667 638 4.5 %
Market share of energy customers in GeorgiaMarket share of energy customers in Georgia28.9 %28.5 %1.4 %Market share of energy customers in Georgia28.9 %28.8 %0.3 %
(*)Gas marketing services' customers are primarily located in Georgia Ohio, and Illinois. Also included as of September 30, 2020 wereMarch 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.
Southern Company Gas anticipates continued customer growth as it expects continued low natural gas prices. The number of customers served by Southern Company Gas' natural gas distribution utilities at September 30, 2020 was positively impacted by the suspension of disconnections during the COVID-19 pandemic, which resulted in a higher than historical average year-over-year change. Southern Company Gas uses a variety of targeted marketing programs to attract new customers and to retain existing customers.
Cost of Natural Gas
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(8)(10.1)$(302)(31.6)
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 gas distribution operations. Cost of natural gas at gas distribution operations represented 80% and 86% of total cost
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of natural gas for the thirdfirst quarter and year-to-date 2020, respectively.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 Gas Revenues, including Alternative Revenue Programs" herein for additional information.
In the thirdfirst quarter 2020,2021, cost of natural gas was $71$583 million compared to $79$439 million for the corresponding period in 2019. This decrease2020. The increase reflects an 11.3% decreasehigher 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 thirdfirst quarter 20202021 compared to the corresponding period in 2019.
For year-to-date 2020, cost of natural gas was $654 million compared to $956 million for the corresponding period in 2019. This decrease reflects a 29.6% decrease in natural gas prices compared to 2019 and decreased volumes primarily as a result of warmer weather for year-to-date 2020 compared to the corresponding period in 2019.
The following table details the volumes of natural gas sold during all periods presented.
Third Quarter2020 vs. 2019Year-to-Date2020 vs. 2019
2020201920202019
Gas distribution operations (mmBtu in millions)
Firm68 66 3.0 %425 462 (8.0)%
Interruptible21 22 (4.5)67 68 (1.5)
Total89 88 1.1 %492 530 (7.2)%
Wholesale gas services (mmBtu in millions/day)
Daily physical sales7.1 6.3 12.7 %6.8 6.3 7.9 %
Gas marketing services (mmBtu in millions)
Firm:
Georgia3 3 — %21 22 (4.5)%
Illinois1 1 — 6 8 (25.0)
Ohio and other2 1 100.0 9 11 (18.2)
Interruptible large commercial and industrial3 3 — 10 10 — 
Total9 8 12.5 %46 51 (9.8)%
Other Operations and Maintenance Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$94.3$548.4
In the third quarter 2020, other operations and maintenance expenses were $217 million compared to $208 million for the corresponding period in 2019. For year-to-date 2020, other operations and maintenance expenses were $696 million compared to $642 million for the corresponding period in 2019. These increases were primarily due to increases in compensation and benefit expenses and pipeline repair, compliance, and maintenance activities. The year-to-date 2020 increase also reflects an increase in expenses passed through directly to customers primarily related to bad debt.2020.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
DepreciationThe following table details the volumes of natural gas sold during all periods presented.
First Quarter2021 vs. 2020
20212020
Gas distribution operations (mmBtu in millions)
Firm288 258 11.6 %
Interruptible26 24 8.3 
Total314 282 11.3 %
Wholesale gas services (mmBtu in millions/day)
Daily physical sales7.1 6.9 2.9 %
Gas marketing services (mmBtu in millions)
Firm:
Georgia19 14 35.7 %
Illinois4 5 (20.0)
Other6 5 20.0 
Interruptible large commercial and industrial4 4 — 
Total33 28 17.9 %
Other Operations and AmortizationMaintenance Expenses
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$43.3$92.5
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4115.9
For year-to-date 2020, depreciationIn the first quarter 2021, other operations and amortization was $368maintenance expenses were $299 million compared to $359$258 million for the corresponding period in 2019.2020. The increase was primarily due to higher compensation expense at wholesale gas services.
Depreciation and Amortization
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 $120 million for the corresponding period in 2020. The increase was primarily due to continued infrastructure investments at the natural gas distribution operations.utilities.
Taxes Other Than Income Taxes
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$26.1$(7)(4.3)
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$912.5
For year-to-date 2020,In the first quarter 2021, taxes other than income taxes were $154$81 million compared to $161$72 million for the corresponding period in 2019.2020. The decrease increase 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.
Impairment Charges
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(92)(100.0)$(92)(100.0)
In the third quarter 2019, a $92 million impairment charge was recorded related to a natural gas storage facility in Louisiana. See Note 3 to the financial statements under "Other Matters – Southern Company Gas – Natural Gas Storage Facilities" in Item 8 of the Form 10-K for additional information.
Earnings from Equity Method Investments
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$(2)(5.7)$(9)(7.8)
For year-to-date 2020, earnings from equity method investments were $106 million compared to $115 million for the corresponding period in 2019. The decrease primarily relates to lower earnings at SNG due to lower demand and firm revenues, 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
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$7140.0$17106.3
In the third quarter 2020, other income (expense), net was $12 million compared to $5 million for the corresponding period in 2019. For year-to-date 2020, other income (expense), net was $33 million compared to $16 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.
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AND RESULTS OF OPERATIONS (Continued)
Other Income Taxes (Benefit)(Expense), Net
Third Quarter 2020 vs. Third Quarter 2019Year-to-Date 2020 vs. Year-to-Date 2019
(change in millions)(% change)(change in millions)(% change)
$25113.6$3760.7
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$(72)(800.0)
In the thirdfirst quarter 2020,2021, other income taxes were $3(expense), net was $63 million of expense compared to a $22$9 million benefitof income for the corresponding period in 2019. For year-to-date 2020,2020. The increase in other expense was primarily due to $75 million in charitable contributions in the first quarter 2021.
Income Taxes
First Quarter 2021 vs. First Quarter 2020
(change in millions)(% change)
$4253.2
In the first quarter 2021, income taxes were $98$121 million compared to $61$79 million for the corresponding period in 2019. These increases were2020. The increase was primarily due to a decrease in the flowback of excess deferred income taxes at Atlanta Gas Light as authorized by the Georgia PSC and higher pre-tax earnings. The year-to-date 2020 increase also includes the reversal of a federal income tax valuation allowance in connection with the sale of Triton in 2019. See Note (G) to the Condensed Financial Statements herein for additional information.earnings at wholesale gas services and 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, and impairment charges, 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.
Detailed variance explanations of Southern Company Gas' financial performance are provided herein.
Reconciliations of operating income to adjusted operating margin are as follows:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
Operating IncomeOperating Income$29 $(35)$490 $451 Operating Income$601 $360 
Other operating expenses(a)
Other operating expenses(a)
377 454 1,218 1,254 
Other operating expenses(a)
510 450 
Revenue taxes(b)
Revenue taxes(b)
(10)(9)(77)(85)
Revenue taxes(b)
(53)(45)
Adjusted Operating MarginAdjusted Operating Margin$396 $410 $1,631 $1,620 Adjusted Operating Margin$1,058 $765 
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes, and impairment charges.taxes.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
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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 Company Gas" herein for additional information.
 Third Quarter 2020Third 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$412 $317 $46 $376 $294 $37 
Gas pipeline investments8 3 23 8 3 6 
Wholesale gas services(51)11 (45)(3)11 (9)
Gas marketing services21 27 (3)21 28 (4)
All other8 11 (7)9 110 (59)
Intercompany eliminations(2)(2)— (1)(1)— 
Consolidated$396 $367 $14 $410 $445 $(29)
(*)Adjusted operating margin and operating expenses are adjusted for Nicor Gas' revenue tax expenses, which are passed through directly to customers.
Year-to-Date 2020Year-to-Date 2019 First Quarter 2021First Quarter 2020
 Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
 Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
Adjusted Operating Margin(*)
Operating Expenses(*)
Net Income (Loss)
(in millions)(in millions)(in millions)(in millions)
Gas distribution operationsGas distribution operations$1,448 $971 $284 $1,294 $895 $228 Gas distribution operations$644 $357 $183 $595 $340 $164 
Gas pipeline investmentsGas pipeline investments24 9 74 24 9 63 Gas pipeline investments8 3 29 8 3 30 
Wholesale gas servicesWholesale gas services(20)39 (45)122 40 61 Wholesale gas services297 55 126 50 17 23 
Gas marketing servicesGas marketing services163 85 59 163 90 54 Gas marketing services104 29 56 107 30 57 
All otherAll other21 42 (12)22 140 (59)All other7 15 4 6 16 1 
Intercompany eliminationsIntercompany eliminations(5)(5)— (5)(5)— Intercompany eliminations(2)(2)— (1)(1)— 
ConsolidatedConsolidated$1,631 $1,141 $360 $1,620 $1,169 $347 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.
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 instruments, that limit its exposure to changes in customer consumption, including weather changes within typical ranges in its natural gas distribution utilities' service territories.
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In the thirdfirst quarter 2020,2021, net income increased $9$19 million, or 24.3%11.6%, compared to the corresponding period in 2019.2020. The $36$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 $23$17 million increase in operating expenses includes increases for compensation and benefit expenses and pipeline repair and maintenance activities, as well as higher depreciation primarily due to additional assets placed in service. The $8 million increase in other income is primarily due to an increase in non-service cost-related retirement benefits income. Income tax expense increased $12 million 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.
For year-to-date 2020, net income increased $56 million or 24.6%, compared to the corresponding period in 2019. The $154 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 $76 million increase in operating expenses includes increases for compensation and benefit expenses and pipeline compliance and maintenance activities, as well as bad debt costs passed through directly to customers. The increase also reflects higher depreciation primarily due to additional assets placed in service partially offset by lower revenue tax expense.and higher compensation expenses. The $20$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.additional debt issued to finance continued investments. The $43$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.
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In the third quarter 2020, net income increased $17 million, or 283.3%, comparedTable of ContentsIndex to the corresponding period in 2019. This increase primarily relates to an $18 million decrease in income taxes primarily related to a 2019 increase associated with changes in state apportionment rates.Financial Statements
For year-to-date 2020
, net income increased $11 million, or 17.5%, compared to the corresponding period in 2019. This increase primarily relates to a $5 million decrease in interest expense, net of amounts capitalized and a $21 million decrease in income taxes primarily related to a 2019 increase associated with changes in state apportionment rates in 2019, partially offset by a $15 million decrease in earnings primarily at SNG.
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 thirdfirst quarter 2020,2021, net income decreased $36income increased $103 million, or 400.0%447.8%, compared to the corresponding period in 2019. This decrease2020. The increase primarily relates to a $48$247 million decreaseincrease in adjusted operating margin, partially offset by a $12$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 $106 million, or 173.8%, compared to the corresponding period in 2019. This decrease primarily relates to a $142 million decrease in adjusted operating margin, partially offset by a $34 million decrease in income tax expense due to lower pre-tax earnings.
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AND RESULTS OF OPERATIONS (Continued)
Details of the changes in adjusted operating margin are provided in the table below.
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
Commercial activity recognizedCommercial activity recognized$(23)$2 $(55)$43 Commercial activity recognized$315 $(20)
Gain (loss) on storage derivativesGain (loss) on storage derivatives(21)2 (33)7 Gain (loss) on storage derivatives(2)(6)
Gain (loss) on transportation and forward commodity derivativesGain (loss) on transportation and forward commodity derivatives(7)(4)69 68 Gain (loss) on transportation and forward commodity derivatives(15)77 
LOCOM adjustments, net of current period recoveriesLOCOM adjustments, net of current period recoveries— — — (6)LOCOM adjustments, net of current period recoveries(1)(1)
Purchase accounting adjustments to fair value inventory and contracts— (3)(1)10 
Adjusted operating marginAdjusted operating margin$(51)$(3)$(20)$122 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 thirdfirst 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, conditionsparticularly in the Midwest and tighteningTexas, 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 losses forin the thirdfirst quarter 20202021 are a result of widening transportation spreads. Transportation and forward commodity derivative gains for year-to-date 2020 are primarily the result of narrowing 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.
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 September 30, 2020.March 31, 2021. A portion 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.
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 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)
202010 $10 $(5)
2021 and thereafter46 60 (64)
Total at September 30, 202056 $70 $(69)
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)At September 30, 2020,March 31, 2021, the WACOG of wholesale gas services' expected natural gas withdrawals from storagestorage was $1.72$1.85 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 derivativeexpected net gains and (losses) thatduring the periods in which the derivatives will be settled during the period and the physical transportation transactions will occur 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.
For the third quarter and year-to-date 2020, net loss decreased $1 million, or 25%, and net income increased $5 million, or 9%, respectively, compared to the corresponding periods in 2019. These changes primarily relate to decreases 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 third quarter 2020, net loss decreased $52 million compared to the corresponding period in 2019. This decrease primarily reflects a $99 million decrease in operating expenses primarily related to an impairment charge in 2019 related to a natural gas storage facility in Louisiana, partially offset by a $42 million increase in income taxes associated with changes in state apportionment rates in 2019LNG and the reversal of a related federal income tax valuation allowance in connection with the sale of TritonJefferson Island.
Segment Reconciliations
Reconciliations of operating income to adjusted operating margin for the first quarter 2021 and 2020 are reflected in 2019.
For year-to-date 2020, net loss decreased $47 million comparedthe following tables. See Note (L) to the corresponding period in 2019. This decrease includes a $98 million decrease in operating expenses primarily related to an impairment charge in 2019 related to a natural gas storage facility in Louisiana and a $6 million increase in earnings from equity method investments primarily due to a pre-tax loss on the sale of Triton in 2019, partially offset by a $48 million increase in income taxes associated with changes in state apportionment rates in 2019 and the reversal of a related federal income tax valuation allowance in connection with the sale of Triton in 2019, a $3 million decrease in other income (expenses), and a $5 million increase in interest expense, net of amounts capitalized.Condensed Financial Statements herein for additional information.
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Segment Reconciliations
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 
Reconciliations of operating income to adjusted operating margin for the third quarter 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.
Third Quarter 2020
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)
Operating Income (Loss)$95 $5 $(62)$(6)$(3)$— $29 
Other operating expenses(a)
327 3 11 27 11 (2)377 
Revenue tax expense(b)
(10)— — — — — (10)
Adjusted Operating Margin$412 $8 $(51)$21 $8 $(2)$396 
Third Quarter 2019
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)
Operating Income (Loss)$82 $5 $(14)$(7)$(101)$— $(35)
Other operating expenses(a)
303 3 11 28 110 (1)454 
Revenue tax expense(b)
(9)— — — — — (9)
Adjusted Operating Margin$376 $8 $(3)$21 $9 $(1)$410 
Year-to-Date 2020
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)
Operating Income (Loss)$477 $15 $(59)$78 $(21)$— $490 
Other operating expenses(a)
1,048 9 39 85 42 (5)1,218 
Revenue tax expense(b)
(77)— — — — — (77)
Adjusted Operating Margin$1,448 $24 $(20)$163 $21 $(5)$1,631 
Year-to-Date 2019First Quarter 2020
Gas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidatedGas Distribution OperationsGas Pipeline InvestmentsWholesale Gas ServicesGas Marketing ServicesAll OtherIntercompany EliminationConsolidated
(in millions)(in millions)
Operating Income (Loss)Operating Income (Loss)$399 $15 $82 $73 $(118)$— $451 Operating Income (Loss)$255 $5 $33 $77 $(10)$— $360 
Other operating expenses(a)
Other operating expenses(a)
980 9 40 90 140 (5)1,254 
Other operating expenses(a)
385 3 17 30 16 (1)450 
Revenue tax expense(b)
Revenue tax expense(b)
(85)— — — — — (85)
Revenue tax expense(b)
(45)— — — — — (45)
Adjusted Operating MarginAdjusted Operating Margin$1,294 $24 $122 $163 $22 $(5)$1,620 Adjusted Operating Margin$595 $8 $50 $107 $6 $(1)$765 
(a)Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes, and impairment charges.taxes.
(b)Nicor Gas' revenue tax expenses, which are passed through directly to customers.
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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 revenues have declined slightly comparedin the first quarter 2021 continued to 2019.be negatively 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 governments 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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AND RESULTS OF OPERATIONS (Continued)
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 nine months of 2020.
The traditional electric operating companies have established installment payment plans to allow customers to repay over a period of time past due accounts resulting from the COVID-19 pandemic. See "Regulatory Matters" herein for additional information on the status of disconnections and the deferral of costs resulting from 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,
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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.
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.
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 August 31, 2020, Alabama Power completed the Autauga Combined Cycle Acquisition. See "Regulatory Matters – Alabama Power" herein and Note (K) to the Condensed Financial Statements under "Alabama Power" herein for additional information.
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 all periods presented.
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AND RESULTS OF OPERATIONS (Continued)
In March 2020, Southern Power entered into an agreementFor additional information relating to acquire a controlling membership interestthese issues, see RISK FACTORS in an approximately 300-MW wind facility locatedItem 1A and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operationItem 7 of the facility, which is expected to occur in the first quarter 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 nine months ended September 30, 2020, certain wind turbine equipment was sold, resulting in an immaterial gain.Form 10-K.
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 loss associated with the transactions was immaterial. Southern Company Gas also expects to receive payments in February 2021 and September 2021 of $5 million each contingent upon Dominion Modular LNG Holdings, Inc. meeting certain milestones related to Pivotal LNG. 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" herein, for additional information.
Environmental Laws and Regulations
Water Quality
On October 13, 2020,Alabama Power is assessing the EPA publishedviability of complying with the finalEPA's steam electric effluent limitations guidelines (ELG) rule (finalized in 2015) and the ELG reconsideration rule which extends(finalized in October 2020) (ELG rules) for certain of its coal units (totaling approximately 2,000 MWs) due to the latest applicability datetiming and anticipated cost to comply with the generally applicable limits for both flue gas desulfurization wastewater and bottom ash transport water to December 31, 2025.ELG rules. The rule also provides exemptions for low utilization of electric generating units and permanent cessation of coal combustion. The impactresults 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 rule ondetermination. 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 traditional electric operating companies and SEGCO will depend onunrecovered investment costs, including the incorporation of these new requirements into each generating unit's National Pollutant Discharge Elimination System permitplant asset balance and the costs associated with site 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 decision regarding early retirement, through Rate CNP Compliance. See Note 2 to the financial statements under "Alabama Power – Rate CNP Compliance" and " – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information. The ultimate outcome of any legal challenges andthis matter cannot be determined at this time.
Coal Combustion Residuals
On August 28, 2020, the EPA published the final Part A CCR Rule that requires facilities to cease placement of both CCR and non-CCR waste in unlined surface impoundments as soon as technically feasible, but no later than April 11, 2021. The rule allows extensions beyond April 11, 2021, provided certain conditions are met. Impacts to the Southern Company system are expected to be limited, as the traditional electric operating companies and SEGCO stopped sending coal ash from most of their generating units to unlined ponds in April 2019 and expect to stop sending coal ash from the remaining generating units within the timeframes allowed in the rule.
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 one 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
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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.
During the third quarter 2020, Georgia Power completed an assessment of its plans to close the ash ponds at all of its generating plants in compliance with the CCR Rule and the related state rule. The related cost estimates were further refined, including updates to long-term post-closure care requirements, market pricing, and timing of future cash outlays. As a result, in September 2020, Georgia Power recorded an increase of approximately $411 million to its AROs related to the CCR Rule and the related state rule.
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, and the changes could be material. 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 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 – Integrated Resource Plan" for additional information. The ultimate outcome of these matters 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 August 14, 2020, the Alabama PSC issued its order regarding Alabama Power's petition for a CCN, which authorized 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 occurred on August 31, 2020, (iii) purchase approximately 240 MWs of combined cycle generation under a long-term PPA, which began on September 1, 2020, and (iv) pursue up to approximately 200 MWs of cost-effective 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 (RGC) issued by the Alabama PSC in September 2015. The contracts proposed in the CCN petition expired on July 31, 2020. Any future requests for solar/battery systems will be evaluated under the RGC process.
Energy Alabama, Gasp, Inc., and the Sierra Club filed petitions for reconsideration and rehearing with the Alabama PSC. Alabama PSC action on these petitions is expected by November 10, 2020. Upon issuance of a written order reflecting such action, affected parties would have 30 days to pursue an appeal through the State of Alabama court system.
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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 ultimate outcome of these matters cannot be determined at this time.
Rate ECR
On August 7, 2020, the Alabama PSC issued an order authorizing Alabama Power to reduce its over-collected fuel balance by $100 million and return that amount to customers in the form of bill credits for the billing month of October 2020. Any portion of the $100 million undistributed following the bill credit process will remain in the Rate ECR regulatory liability for the benefit of customers.
Rate NDR
In the third quarter 2020, Alabama Power recorded $44 million against the NDR for damages incurred to its transmission and distribution facilities from Hurricane Sally. The NDR balance available for storm damages was $51 million as of September 30, 2020. If the balance falls below $50 million, a reserve establishment charge would be activated (and the ongoing reserve maintenance charge concurrently suspended) until the reserve balance reaches $75 million.
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 ECCR 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.
Rate Plans
2019 ARP
In accordance with the terms of the 2019 ARP, on October 1, 2020, Georgia Power filed the following tariff adjustments to become effective January 1, 2021 pending approval by the Georgia PSC:
•increase traditional base tariffs by approximately $120 million;
•increase the ECCR tariff by approximately $2 million;
•decrease Demand-Side Management tariffs by approximately $15 million; and
•increase Municipal Franchise Fee tariffs by approximately $4 million.
The ultimate outcome of this matter cannot be determined at this time.
2013 ARP
In 2019, Georgia Power's retail ROE exceeded 12.00% and, under the modified sharing mechanism pursuant to the 2019 ARP, Georgia Power reduced regulatory assets by approximately $60 million and accrued refunds for retail customers of approximately $60 million. On September 1, 2020, the Georgia PSC authorized Georgia Power to issue customers bill credits prior to final review of the 2019 Annual Surveillance Report by the staff of the Georgia PSC. Georgia Power issued the bill credits in October 2020.
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
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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 September 30, 2020, the incremental costs deferred totaled approximately $38 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 further lowered 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 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
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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 26, 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 September 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,
The natural gas distribution utilities are subject to regulation and oversight by their respective state regulatory agencies for including items that could impact 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 applicable registrants' future earnings, cash flows, and/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.
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.
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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 future GRAM filings, which would impact rates starting on January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
Nicor Gas
On March 18, 2020, in response to the COVID-19 pandemic, 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. In response to this order, on March 27, 2020, Nicor Gas and other utilities in Illinois filed their plans seeking cost recovery and providing 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. Nicor Gas resumed late payment fees on July 27, 2020 and, on October 1, 2020, began recovery of the COVID-19 pandemic-related impacts through the special purpose rider, which will continue over a 24-month period. In response to an Illinois Commission request, Nicor Gas will continue to voluntarily suspend residential customer disconnections for non-payment through March 31, 2021. At September 30, 2020, Nicor Gas' related regulatory asset was $13 million.
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 expired on October 5, 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 September 30, 2020, Virginia Natural Gas' related regulatory asset was $1 million. The ultimate outcome of this matter cannot be determined at this time.
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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 "NuclearNote (B) to the Condensed Financial Statements under "Georgia Power – Nuclear 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 herein 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 3General Litigation 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 sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.
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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 September 30, 2020(b)
(6.9)
Remaining estimate to complete(a)
$1.6
(a)    Excludes financing costs expected to be capitalized through AFUDC of approximately $240 million, of which $71 million had been accrued through September 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 $2.5 billion had been incurred through September 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 related test results, and workforce statistics.
As of June 30, 2020, assignments of contingency exceeded the remaining balance of the $366 million construction contingency originally established in the second quarter 2018 by approximately $34 million. This contingency was used to address cost risks related to construction productivity, including the April 2020 reduction in workforce designed to mitigate impacts of the COVID-19 pandemic described below; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement, among other factors. As a result of these factors, Georgia Power established $115 million of additional construction contingency as of June 30, 2020 for further potential risks including, among other factors, construction productivity and expected impacts of the COVID-19 pandemic; additional 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.
During the third quarter 2020, approximately $5 million of the construction contingency established in the second quarter 2020 was assigned to the base capital cost forecast for cost risks primarily associated with construction productivity and field support.
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 from mid-June through July, and continued to impact productivity levels and pace of activity completion. As a result of these factors, overall production improvements were not achieved at the levels anticipated, contributing to the June 30, 2020 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. Through October 2020, the project has faced challenges in meeting the July 2020 aggressive site work plan targets including, but not limited to, overall construction and subcontractor labor productivity, which has resulted in a backlog of activities and completion percentages below the July 2020 aggressive site work plan targets. In addition, while the number of active COVID-19 cases at the site has declined since July 2020, the COVID-19 pandemic continues to impact productivity and the pace of activity completion. After considering these factors, Southern Nuclear has further extended milestone dates from the July 2020 aggressive site work plan. Achievement of these extended milestone dates depends on absenteeism rates continuing to normalize and overall construction productivity and production levels, including subcontractors, significantly improving and being sustained above pre-pandemic levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor,
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need to be added and maintained. 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. 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 June 15, 2020, the NRC rejected Nuclear Watch South's April 20, 2020 petition requesting a hearing and challenging the closure of certain ITAAC. On August 10, 2020, the Atomic Safety and Licensing Board rejected the Blue Ridge Environmental Defense League's (BREDL) May 11, 2020 petition challenging a license amendment request. The staff of the NRC has issued the requested amendment to the combined construction and operating license for Plant Vogtle Unit 3. BREDL appealed the Atomic Safety and Licensing Board decision to the NRC. 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.
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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 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
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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 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 September 30, 2020, Georgia Power had recovered approximately $2.5 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. On October 1, 2020, Georgia Power filed a request to decrease the NCCR tariff by $142 million annually, effective January 1, 2021, pending Georgia PSC approval.
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
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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.
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, which was withdrawn on August 20, 2020. This matter is now concluded.
The Georgia PSC has approved 22 VCM reports covering the periods through December 31, 2019, including total construction capital costs incurred through that date of $7.4 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). Georgia Power filed its twenty-third VCM report with the Georgia PSC on August 31, 2020, which reflects the capital cost forecast discussed above and requests 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 nine months ended September 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 September 30, 2020, total costs of construction incurred for these projects were $244 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)
LocationActual/Expected
COD		PPA CounterpartiesPPA Contract Period
Projects Completed During the Nine Months Ended September 30, 2020
Reading(a)
Wind200Osage and Lyon Counties, KSMay 2020Royal Caribbean Cruises LTD12 years
Projects Under Construction as of September 30, 2020
Skookumchuck(b)
Wind136Lewis and Thurston Counties, WANovember 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 the completed tax equity transaction, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. Southern Power would retain the controlling ownership interest in the facility. 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 ultimate outcome of this matter 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 nine months of 2020 were as follows:
UtilityProgramYear-to-Date 2020
(in millions)
Nicor GasInvesting in Illinois$294 
Virginia Natural GasSteps to Advance Virginia's Energy (SAVE)37 
Total$331 
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 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 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 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
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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.
Alabama Power
On March 10, 2021, Alabama Power executed a coordinated planning and operations agreement with PowerSouth, with a minimum term of 10 years. 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, 2012agreement, which includes combined operations (including joint commitment 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. On August 15, 2020, the parties reached a settlement. On September 8, 2020, the plaintiffs filed a stipulation of settlement and motion for preliminary approval to resolve the case on a class-wide basis, which the court granted on October 1, 2020. The settlement amount will be paid entirely through existing insurance policies anddispatch), is not expected to have acreate energy cost savings and enhanced system reliability for both parties. Projected revenues are expected to offset any increased administrative costs incurred by Alabama Power; therefore, no material impact on Southern Company's financial statements.
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 Mississippito net income is expected. Alabama 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. On September 25, 2020, the plaintiffs filed a status report noting the settlement of the securities class action and informing the court that the parties have scheduled mediation of this case later in the fourth quarter 2020.
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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. On September 30, 2020, the plaintiffs filed a status report noting the settlement of the securities class action and informing the court that the parties have scheduled mediation of this case later in the fourth quarter 2020.
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. On 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 Appeals 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 on all claims and the plaintiffs renewed their motion for class certification. The amount of 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 filed 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,
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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. During the third quarter 2020, the plaintiffs reduced their claim for damages to approximately $76 million. On October 12, 2020, the arbitration panel issued a unanimous award in favor of Mississippi Power on all claims. This matter is now concluded.
In November 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi 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, the court granted Mississippi Power's motion to dismiss the first amended complaint filed in 2019. 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. On July 28, 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which includes the same federal claims as the proposed second amended complaint, as 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. 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 September 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.
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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 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 ownershipparticipate in a portion of PowerSouth's future incremental load growth. Implementation of the generation assets, in effect terminating the lease. As the remaining amountagreement is subject to certain regulatory approvals, including approvals of the lease investment was charged against earnings inRural Utilities Service, the second quarter 2020, termination would not be expected to result in additional charges. Southern Company will continue to monitorSERC Reliability Corporation, and 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 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.
For year-to-date 2020, Mississippi Power recorded pre-tax (and after-tax) charges to income totaling $2 million primarily associated with abandonment and related closure costs and ongoing period costs, net of salvage proceeds, for the mine and gasifier-related assets at the Kemper County energy facility. 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, net of salvage, are estimated to total $3 million for the remainder of 2020 and $10 million to $15 million annually for 2021 through 2025.
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 is expected to be treated as a finance lease for accounting purposes upon commencement.
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On September 3, 2020, Mississippi Power and Southern Company executed an agreement with the DOE completing Mississippi Power's request for property closeout certification under the contract related to the DOE grants received for the Kemper County energy facility, which enables Mississippi Power to proceed with full dismantlement of the abandoned gasifier-related assets and site restoration activities. The execution of the agreement had no material impact on Mississippi Power's financial statements. 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 $387 million of DOE grants received. 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 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. The parties agreed not to select a specific unit by August 1, 2020 and are continuing negotiations on a mutually acceptable revised operating agreement. 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, assignments 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, Georgia Power established $115 million of additional construction contingency as of June 30, 2020.
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. In October 2020, Southern Nuclear further extended milestone dates from the July 2020 aggressive site work plan. Achievement ofwhen these extended milestone dates depends on absenteeism rates continuing to normalize and overall construction productivity and production levels, including subcontractors, significantly improving and being sustained above
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pre-pandemic levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, need to be added and maintained.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 "Nuclear"Georgia Power – Nuclear Construction" herein for additional information.
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 will continue 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 September 30, 2020. The Registrants have maintained adequate access to capital throughout 2020, including through a period of volatility in the short-term financial markets during the first quarter. 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, and funding existing uncommitted credit facilities. During the third quarter 2020, most of these additional borrowings were repaid. 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 result of continued financial market volatility cannot be determined at this time. See "Capital"Cash 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 first quarter 2021, the market price of Southern Company's common stock was $62.16 per share (based on the closing price as reported on the NYSE) and the book value was $26.90 per share, representing a market-to-book ratio of 231%, compared to $61.43, $26.48, and 232%, respectively, at the end of 2020. Southern Company's common stock dividend for the first quarter 2021 was $0.64 per share compared to $0.62 per share in the first quarter 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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Atenvironmental compliance program; changes in legislation; the endcost 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 third quarter 2020, theForm 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 price of Southern Company's common stock was $54.22 per share (based on the closing price as reported on the NYSE)opportunities and the book value was $26.78 per share, representing a market-to-book ratioexecution of 202%, compared to $63.70, $26.11, and 244%, respectively, at the end of 2019. Southern Company's common stock dividend for the third quarter 2020 was $0.64 per share compared to $0.62 per share in the third quarter 2019.
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 are presented in the following table:
Net cash provided from
(used for):		Southern CompanyAlabama PowerGeorgia
Power		Mississippi PowerSouthern PowerSouthern Company Gas
(in millions)
Nine Months Ended September 30, 2020
Operating activities$5,220 $1,229 $2,125 $186 $774 $1,122 
Investing activities(4,892)(1,591)(2,526)(200)424 (973)
Financing activities1,077 505 867 (214)(1,060)(37)
Nine Months Ended September 30, 2019
Operating activities$4,881 $1,471 $2,365 $242 $1,221 $1,049 
Investing activities(1,073)(1,439)(2,793)(198)36 (989)
Financing activities(2,392)992 765 (69)(1,070)(68)
Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.
Southern Company
Net cash provided from operating activities increased $0.3 billion for the nine months ended September 30, 2020 as compared to the corresponding period in 2019 primarily due to the timing of vendor payments as well as lower income tax payments, partially offset by the timing of receivable collections and customer bill credits issued in 2020 by Alabama Power and Georgia Power.its growth strategy. See Note 215 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K for additional information.
The net cash used for investing activities for the nine months ended September 30, 2020 was primarily due to the Subsidiary Registrants' construction programs, partially offset by proceeds from the sale transactions described in Note (K) to the Condensed Financial Statements herein.
The net cash provided from financing activities for the nine months ended September 30, 2020 was primarily due to net issuances of long-term debt, partially offset by common stock dividend payments and net repayments of short-term bank debt and commercial paper.
Alabama Power
Net cash provided from operating activities decreased $242 million for the nine months ended September 30, 2020 as compared to the corresponding period in 2019 primarily due to payments related to ARO settlements, purchases of materials and supplies, and Rate RSE customer refunds. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K and Note (A)(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 "Asset Retirement Obligations""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 net cash used for investing activitiesRegistrants 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 nine months ended September 30, 2020 was primarily due to gross property additions.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 netRegistrants believe the need for working capital can be adequately met by utilizing operating cash provided from financing activities forflows, as well as commercial paper, lines of credit, and short-term bank notes, as market conditions permit. In addition, under certain circumstances, the nine months ended September 30, 2020 was primarily due to capitalSubsidiary 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 a long-term debt issuance, partially offset by common stock dividend payments.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.
Georgia Power
Net cash provided from operating activities decreased $240 million forA portion of the nine months ended September 30, 2020 as comparedunused credit with banks is allocated to provide liquidity support to the corresponding period in 2019 primarily due to higher income tax payments and customer bill credits issued in 2020 associated with Tax Reform and 2018 earnings in excessrevenue bonds of the allowed retail ROE range, partially offset bytraditional electric operating companies and the timingcommercial paper programs of vendor payments. 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 28 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.
The net cash used for investing activities for the nine months ended September 30, 2020 was primarily due
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Table of ContentsIndex to gross property additions, including approximately $1.0 billion related to the construction of Plant Vogtle Units 3 and 4. See FUTURE EARNINGS POTENTIAL – "Construction Programs – Nuclear Construction" herein for additional information on construction of Plant Vogtle Units 3 and 4.Financial Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Short-term Borrowings
The netRegistrants, 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 ninethree months ended September 30,March 31, 2021 and 2020 was primarily due to capital contributionsare 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 Southern Company, net issuances of senior notes, and borrowings from the FFB for construction of Plant Vogtle Units 3 and 4, partially offset by common stock dividend payments and net repayment of short-term borrowings.
Mississippi Power
Net cash provided from operating activities decreased $56 million for the nine months ended September 30, 2020 as compared to the corresponding period in 2019 primarily due to the timing of vendor payments, decreased fuel cost recovery, and higher income tax payments.
The net cash used for investing activities for the nine months ended September 30, 2020 was primarily due to gross property additions.
The net cash used for financing activities forvary from year to year based on capital needs and the nine months ended September 30, 2020 was primarily due to the repayment of senior notes at maturity or redemption of pollution control revenue bonds, and repayment of short-term borrowings, partially offset by debt issuances and capital contributions from Southern Company.
Southern Power
Net cash provided from operating activities decreased $447 million for the nine months ended September 30, 2020 as compared to the corresponding period in 2019 primarily due to a reduction in the utilization of tax credits in 2020.
The net cash provided from investing activities for the nine months ended September 30, 2020 was primarily due to proceeds from the disposition of Plant Mankato, partially offset by the acquisition of the Beech Ridge II wind facility and ongoing construction activities. See Note (K) to the Condensed Financial Statement under "Southern Power" herein for additional information.
The net cash used for financing activities for the nine months ended September 30, 2020 was primarily due to net repayments of short-term bank debt and commercial paper, the repayment of senior notes at maturity, distributions to non-controlling interests, and common stock dividend payments, partially offset by contributions from non-controlling interests.securities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas
Net cash provided from operating activities increased $73 million$0.3 billion for the ninethree months ended September 30, 2020March 31, 2021 as compared to the corresponding period in 20192020 primarily due toto the timing of vendor payments and customer bill credits issued in February 2020 at Georgia Power associated with Tax Reform, partially offset by the timing of customer receivable collections.under recovered natural gas costs at Southern Company Gas resulting from Winter Storm Uri.
The net cash used for investing activities for the ninethree months ended September 30, 2020March 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 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 in Pivotal LNG and Atlantic Coast Pipeline. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.operations.
The net cash used forprovided from financing activities for the ninethree months ended September 30, 2020March 31, 2021 was primarily duerelated to the issuance net repayments of short-term borrowings and common stock dividend payments, partially offset by debt issuances and capital contributions from Southern Company.Company, partially offset by common stock dividend payments and repayments of commercial paper borrowings.
Significant Balance Sheet ChangesSources 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
Significant balance sheet changes for intends to meet its future capital needs through operating cash flows, borrowings from financial institutions, and debt and equity issuances in the nine months ended September 30, 2020 included:
•an increasecapital markets. Equity capital can be provided from any combination of $5.2 billionSouthern Company's stock plans, private placements, or public offerings. Southern Company does not expect to issue any equity in long-term debt (including amounts due within one year) related to new issuances;
•an increase of $3.3 billion in total property, plant, and equipment primarily relatedthe capital markets through 2025. See Note 8 to the Subsidiary Registrants' construction programs;
•a decreasefinancial statements under "Equity Units" in Item 8 of $1.9 billion in notes payable related to net repayments of short-term bank debt and commercial paper;
•an increase of $1.4 billion in cash and cash equivalents primarily related tothe Form 10-K for information on stock purchase contracts associated with Southern Company's redemption of $1.0 billion of junior subordinated notesequity units.
The Subsidiary Registrants plan to obtain the funds to meet their future capital needs from sources similar to those they used in October 2020;
•increases of $0.9 billionthe past, which were primarily from operating cash flows, external securities issuances, borrowings from financial institutions, and $0.8 billion in AROs and regulatory assets associated with AROs, respectively, primarily related to cost estimate updates at Alabama Power andequity contributions from Southern Company. In addition, Georgia Power for ash pond facilities;
•a decrease of $0.8 billionplans to utilize borrowings from the FFB (as discussed further in assets held for sale relatedNote 8 to the completionfinancial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of Southern Power's sale of Plant Mankatothe Form 10-K) and Southern Company Gas' salePower plans to utilize tax equity partnership contributions (as discussed further herein).
The amount, type, and timing of its interestsany financings in Pivotal LNG2021, as well as in subsequent years, will be contingent on investment opportunities and Atlantic Coast Pipeline;the Registrants' capital requirements and
•an increase will depend upon prevailing market conditions, regulatory approvals (for certain of $0.5 billion in accumulated deferred income taxes related to the utilization of tax credits in 2020.
Subsidiary Registrants), and other factors. See "Cash Requirements" and "Financing Activities" herein and Notes (A) and (K) to the Condensed Financial Statements 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
AlabamaMarch 2021, Southern Power
Significant balance sheet changes obtained tax equity funding for the nineDeuel Harvest wind facility and received proceeds of $220 million. In addition, during the first three months ended September 30, 2020 included:
•an increase of $9602021, Southern Power received tax equity funding totaling $17 million in common stockholder's equity primarily due to capital contributions from Southern Company;
•an increase of $949 million in total property, plant, and equipment primarily relatedexisting partnerships. See Note 1 to the Autauga Combined Cycle Acquisition, constructionfinancial statements under "General" in Item 8 of distributionthe Form 10-K and transmission facilities, and the installation of equipment to comply with environmental standards;
•an increase of $597 million in long-term debt (including securities due within one year) primarily due to an increase in outstanding senior notes; and
•increases of $456 million and $418 million in regulatory assets associated with AROs and AROs, respectively, primarily related to cost estimate updates for certain ash pond facilities.
See "Financing Activities – Alabama Power" herein and Notes (A) andNote (K) to the Condensed Financial Statements under "Asset Retirement Obligations" and "Alabama Power," respectively,"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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Georgia PowerCompany 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.
Significant balance sheet changesCertain 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 nine months ended September 30, 2020 included: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)anAt 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 $1.7 billion in total property, plant, and equipment primarily relatedthe unused credit with banks is allocated to provide liquidity support to the constructionrevenue bonds of generation, transmission,the traditional electric operating companies and distribution facilities;
•an increasethe commercial paper programs of $1.6the 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 in common stockholder's equity primarily due to capital contributions from Southern Company;
•an increase(comprised of $1.0 billion in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notesapproximately $854 million at Alabama Power, $550 million at Georgia Power, and borrowings from the FFB for construction of Plant Vogtle Units 3$34 million at Mississippi Power). In addition, at March 31, 2021, Georgia Power and 4; and
•increases of $468Mississippi Power had approximately $174 million and $397$50 million, in AROs and regulatory assets associated with AROs, respectively, primarily dueof fixed rate revenue bonds outstanding that are required to cost estimate updates for ash pond closures.be remarketed within the next 12 months.
See "Financing Activities – Georgia Power" herein and Notes (A) and (B)Note 8 to the Condensed Financial Statements under "Asset Retirement Obligations" and "Georgia Power – Nuclear Construction," respectively, herein for additional information.
Mississippi Power
Significant balance sheet changes for the nine months ended September 30, 2020 included:
•a decrease of $228 millionfinancial statements in cash and cash equivalents and a decrease of $187 million in long-term debt (including amounts due within one year) primarily related to the repayment of senior notes at maturity;
•an increase of $108 million in common stockholder's equity primarily from net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company; and
•a decrease of $53 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.
See "Financing Activities – Mississippi Power" herein for additional information.
Southern Power
Significant balance sheet changes for the nine months ended September 30, 2020 included:
•a decrease of $618 million in assets held for sale (of which $17 million related to current assets) due to completionItem 8 of the sale of Plant Mankato;
•a decrease of $549 million in notes payable due to net repayments of short-term bank debt and commercial paper;
•an increase of $330 million in property, plant, and equipment in service and a decrease of $180 million in construction work in progress primarily due to wind facilities acquired or placed in service;
•a decrease of $320 million in accumulated deferred income tax assets primarily related to the utilization of tax credits in 2020; 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,Form 10-K and Note (K)(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 Gas
Significant balance sheet changesNet cash provided from operating activities increased $0.3 billion for the ninethree months ended September 30,March 31, 2021 as compared to the corresponding period in 2020 included: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.
•an increase of $789 million in total property, plant, and equipmentThe 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 transportationlong-term debt, short-term bank loans, and distribution assets recovered through base rates and infrastructure investments recovered through replacement programs;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 of $616 million in long-term debt (including securities due within one year) dueretail 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 issuancecorresponding period in 2020, as well as the timing of senior notesfossil fuel stock and mortgage bonds;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 decrease of $500 million in notes payable due to net repayments of short-term borrowings;
•an increase of $179 million in common stockholder's equity primarily from net income and capital contributionscontribution from Southern Company, partially offset by dividends paid to Southern Company;common stock dividend payments.
•a decrease of $171
Georgia Power
Net cash provided from operating activities increased $276 million in assets held for sale duethe three months ended March 31, 2021 as compared to the completed sale of interestscorresponding period in Pivotal LNG and Atlantic Coast Pipeline;
•a decrease of $123 million in unbilled revenues due to seasonality;
•an increase of $111 million in cash and cash equivalents2020 primarily from long-term debt issuance proceeds;
•a decrease of $109 million in customer accounts receivable due to the timing of collections;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
•decreases of $100 million and $81 million in energy marketing receivables and payables, respectively, due to lower natural gas prices and volumes of natural gas sold.
4. See "Financing Activities – Southern Company Gas" herein and Note (K)(B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
Capital Requirements and Contractual Obligations
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements" and "Contractual Obligations" in Item 7 of the Form 10-K for a description of the Registrants' capital requirements and contractual obligations. The following table provides the applicable Registrants' maturities and announced redemptions of long-term debt through September 30, 2021:
At September 30, 2020:Southern CompanyAlabama PowerGeorgia
Power		Southern PowerSouthern Company Gas
(in millions)
Securities due within one year$4,378 $496 $531 $525 $334 
See "Sources of Capital" and "Financing Activities" herein for additional information.
In October 2020, Alabama Power's Board of Directors approved updates to its construction program that is currently estimated to total $1.9 billion for 2021, $1.8 billion for 2022, $1.7 billion for 2023, $1.6 billion for 2024, and $1.6 billion for 2025. These amounts include capital expenditures related to Plant Barry Unit 8 and contractual purchase commitments for nuclear fuel and capital expenditures covered under LTSAs. These amounts also include estimated capital expenditures to comply with environmental laws and regulations, but do not include any potential compliance costs associated with pending regulation of CO2 emissions from fossil fuel-fired electric generating units. Estimated capital expenditures to comply with environmental laws and regulations included in these amounts are approximately $83 million for 2021, $98 million for 2022, $86 million for 2023, $99 million for 2024, and $70 million for 2025. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Alabama Power" herein for information on Alabama Power's construction of Plant Barry Unit 8.Vogtle Units 3 and 4.
As a resultThe net cash provided from financing activities for the three months ended March 31, 2021 was primarily related to net issuances of the second quarter 2020senior notes, capital contributions from Southern Company, and an increase in Alabama Power's AROs discussed herein under FUTURE EARNINGS POTENTIAL – "Environmental Matters," Alabama Power's costs through 2025 associated with closure and monitoring of ash ponds and landfills in accordance with the CCR Rule and the related state rule are currently estimated to be approximately $263notes 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 $247 millionprimarily due to the timing of ad valorem tax payments.
The net cash used for investing activities for the three months ended March 31, 2021 $301 millionwas primarily related to gross property additions.
The net cash provided from financing activities for 2022, $330 million for 2023, $326 million for 2024,the three months ended March 31, 2021 was primarily related to capital contributions from Southern Company and $311 million for 2025. These costs are reflectedan increase in Alabama Power'scommercial 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)
ARO liabilitiesSouthern 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 are based on closure-in-placethe timing of receipts from affiliated companies.
The net cash used for all of its ash ponds. These anticipated costs are likelyinvesting activities for the three months ended March 31, 2021 was primarily related 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" in Item 8the acquisition of the Form 10-KDeuel Harvest wind facility and Note (A) to the Condensed Financial Statements herein for additional information.
Theongoing 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.activities. See Note 2 to the financial statements under "Georgia Power – Nuclear Construction" in Item 8 of the Form 10-K, Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein, and Item 1A herein for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.
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 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. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Additionally, Southern Power's planned expenditures for plant acquisitions may vary due to market opportunities and Southern Power's ability to execute its growth strategy. See Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information regardinginformation.
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 Power's plant acquisitionsCompany and construction projects.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. To date, this reduction of operating cash flows has not had a material impact on the liquidity of any of the Registrants, and, during the third quarter 2020, most of the temporary measures in place expired. 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 ultimate extent of the negative impact on the Registrants' liquidity depends on resolution of the Heroes Act and the duration of the COVID-19 pandemic and cannot be determined at this time. See Note (B)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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.
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 ninethree months of 2020,2021, Southern Power received tax equity funding totaling $16$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 September 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. See "Financing Activities" herein for information on financing activities that occurred subsequentThe Registrants generally plan to September 30,
2020.refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at September 30, 2020March 31, 2021 for the applicable Registrants:
At September 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 assetsCurrent liabilities in excess of current assets$1,176 $612 $65 $286 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 September 30, 2020,March 31, 2021, the Registrants' unused committed credit arrangements with banks were as follows:
At September 30, 2020Southern
Company
parent		Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCOSouthern
Company
At March 31, 2021At March 31, 2021Southern
Company
parent		Alabama PowerGeorgia
Power		Mississippi Power
Southern
 Power(a)
Southern Company Gas(b)
SEGCOSouthern
Company
(in millions)(in millions)
Unused committed creditUnused committed credit$1,999 $1,328 $1,728 $250 $591 $1,745 $30 $7,671 Unused committed credit$1,999 $1,328 $1,728 $250 $568 $1,745 $30 $7,648 
(a)At September 30, 2020,March 31, 2021, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $63$13 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangementarrangements or to the letter of credit facilities.
(b)Includes $1.245$1.045 billion and $500$700 million at Southern Company Gas Capital and Nicor Gas, respectively.
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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 September 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 September 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 Credit Arrangements" herein for additional information.
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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
September 30, 2020
Short-term Debt During the Period(*)
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		 Amount
Outstanding		Weighted
Average
Interest
Rate		Average
Amount
Outstanding		Weighted
Average
Interest
Rate		Maximum
Amount
Outstanding
(in millions)(in millions)(in millions) (in millions)(in millions)(in millions)
Southern CompanySouthern Company$171 0.9 %$958 1.2 %$1,272 Southern Company$1,092 0.3 %$998 0.2 %$1,520 
Alabama PowerAlabama Power— — 7 0.2 80 Alabama Power— — 46 0.1 200 
Georgia PowerGeorgia Power— — 347 1.4 465 Georgia Power205 0.2 51 0.2 230 
Mississippi PowerMississippi Power— — 1 0.2 10 Mississippi Power54 0.2 20 0.2 64 
Southern PowerSouthern Power— — 19 0.3 114 Southern Power315 0.2 147 0.2 520 
Southern Company Gas:Southern Company Gas:Southern Company Gas:
Southern Company Gas CapitalSouthern Company Gas Capital$150 1.0 %$273 1.0 %$464 Southern Company Gas Capital$— — %$221 0.2 %$345 
Nicor GasNicor Gas— — 21 0.2 82 Nicor Gas497 0.5 120 0.3 520 
Southern Company Gas TotalSouthern Company Gas Total$150 1.0 %$294 0.9 %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 September 30, 2020.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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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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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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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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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 ninethree months of 2020:2021:
Senior NotesRevenue BondsOther Long-Term DebtSenior Notes
CompanyCompanyIssuancesMaturities, Redemptions, and RepurchasesIssuances/
Remarketings		Maturities, Redemptions, and
Repurchases		Issuances
Redemptions
and Maturities(a)
CompanyIssuancesMaturities, Redemptions, and Repurchases
Other Long-Term Debt Redemptions
and Maturities(*)
(in millions)(in millions)
Southern Company parentSouthern Company parent$1,000 $600 $— $— $3,000 $— Southern Company parent$1,000 $— $— 
Alabama Power600 — 87 87 — — 
Georgia PowerGeorgia Power1,500 950 53 148 519 65 Georgia Power750 325 26 
Mississippi Power— 275 34 41 100 — 
Southern PowerSouthern Power— 300 — — — — Southern Power400 — — 
Southern Company GasSouthern Company Gas500 — — — 150 — Southern Company Gas— — 30 
OtherOther— — — — — 12 Other— — 3 
Elimination(b)
— — — — — (6)
Southern CompanySouthern Company$3,600 $2,125 $174 $276 $3,769 $71 Southern Company$2,150 $325 $59 
(a)(*)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments for FFB borrowings.
(b)Represents reductions in affiliate finance lease obligations at Georgia Power, which are eliminated in Southern Company's consolidated financial statements.
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 ninethree months of 2020,2021, Southern Company issued approximately 3.02.2 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $63$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. In April 2020 and September 2020, Southern Company repaid $50 million and $200 million, respectively, 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, which it repaid in September 2020.
In April 2020, Southern Company issued $1.0 billion aggregate principal amount of Series 2020A 3.70% Senior Notes due April 30, 2030.
In May 2020, Southern Company redeemed all $600 million aggregate principal amount of its Series 2015A 2.750% Senior Notes due June 15, 2020.March 2021.
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AND RESULTS OF OPERATIONS (Continued)
In September 2020,February 2021, Southern Company issued $1.25 billion aggregate principal amount of Series 2020B 4.00% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due January 15, 2051 and $750 million aggregate principal amount of Series 2020C 4.20% Junior Subordinated Notes due October 15, 2060.
Subsequent to September 30, 2020, Southern Company redeemed all of its $1.0 billion aggregate principal amount outstanding of Series 2015A 6.25% Junior Subordinated Notes due October 15, 2075.
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.
In August 2020, Alabama Power issued $600 million aggregate principal amount of Series 2020A 1.45%2021A 0.60% Senior Notes due SeptemberFebruary 26, 2024 and $400 million aggregate principal amount of Series 2021B 1.75% Senior Notes due March 15, 2030.2028.
Subsequent to September 30, 2020,
Alabama Power
In March 2021, Alabama Power repaid atextended the maturity $250dates from March 2021 to March 2026 on its three bank term loan agreements with an aggregate principal amount of $45 million, bearing interest based on three-month LIBOR.
Georgia Power
In February 2021, Georgia Power issued $750 million aggregate principal amount of Series 2021A 3.25% Senior Notes due March 15, 2051. 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 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 2010A 3.375% Senior Notes.
Georgia Power
In January 2020, Georgia Power issued $700 million aggregate principal amount of Series 2020A 2.10%2016B 2.40% 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.April 1, 2021.
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 borrowed $200 million pursuant to a $250 million short-term uncommitted bank credit arrangement, bearing interest at a rate agreed upon by Georgia Power and the bank from time to time. In April 2020, Georgia Power borrowed the remaining $50 million pursuant to this bank credit arrangement. In September 2020, Georgia Power repaid the full $250 million.
Also in March 2020,2021, Georgia Power extended onethe maturity date of its $125 million short-term floating rate bank loans to a long-term term loan which matures infrom June 2021.2021 to June 2022.
In June 2020, Georgia Power extended its other $125 million short-term floating rate bank loan to mature in December 2020. In September 2020, Georgia Power repaid this $125 million bank loan.
Also in June 2020, Georgia Power made additional borrowings under the FFB Credit Facilities in an aggregate principal amount of $519 million at an interest rate of 1.652% through the final maturity date of February 20, 2044. The proceeds were used to reimburse Georgia Power for Eligible Project Costs relating to the construction of Plant Vogtle Units 3 and 4. During the ninethree months ended September 30, 2020,March 31, 2021, Georgia Power made principal amortization payments of $55$25 million under the FFB Credit Facilities. At September 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.
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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. In August 2020, Southern Company Gas Capital repaid the outstanding balance.
In August 2020, Southern Company Gas Capital, as borrower, and Southern Company Gas, as guarantor, issued $500 million aggregate principal amount of Series 2020A 1.75% Senior Notes due January 15, 2031.
Also in August 2020, Nicor Gas issued $150 million aggregate principal amount of first mortgage bonds in a private placement and entered into an agreement to issue an additional $175 million aggregate principal amount of first mortgage bonds in November 2020.
Credit Rating Risk
At September 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.
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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AND RESULTS OF OPERATIONS (Continued)
The maximum potential collateral requirements under these contracts at September 30, 2020March 31, 2021 were as follows:
Credit RatingsCredit Ratings
Southern Company(*)
Alabama PowerGeorgia PowerMississippi Power
Southern
Power(*)
Southern Company GasCredit Ratings
Southern Company(*)
Alabama PowerGeorgia PowerMississippi Power
Southern
Power(*)
Southern Company Gas
(in millions)(in millions)
At BBB and/or Baa2At BBB and/or Baa2$36 $1 $— $— $35 $— At BBB and/or Baa2$38 $1 $— $— $37 $— 
At BBB- and/or Baa3At BBB- and/or Baa3413 2 61 1 351 — At BBB- and/or Baa3433 2 61 1 371 — 
At BB+ and/or Ba1 or belowAt BB+ and/or Ba1 or below1,935 372 956 315 1,195 9 At BB+ and/or Ba1 or below1,938 366 965 308 1,210 10 
(*)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 September 30, 2020.March 31, 2021.
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.
On August 27, 2020, Moody's upgraded Mississippi Power's senior unsecured long-term debt rating to Baa1 from Baa2 and revised its rating outlook to stable from positive.
On September 25, 2020, Fitch upgraded Mississippi Power's senior unsecured long-term debt rating to A- from BBB+ and revised its rating outlook to stable from positive.
Also on September 25, 2020, Fitch revised the ratings outlook of Southern Company and its subsidiaries (excluding Georgia Power and Mississippi Power) to stable from negative.
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 thirdfirst 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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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:
Third Quarter 2020Third Quarter 2019Year-to-Date 2020Year-to-Date 2019First Quarter 2021First Quarter 2020
(in millions)(in millions)
Contracts outstanding at beginning of period, assets (liabilities), netContracts outstanding at beginning of period, assets (liabilities), net$26 $(90)$72 $(167)Contracts outstanding at beginning of period, assets (liabilities), net$101 $70 
Contracts realized or otherwise settledContracts realized or otherwise settled(8)7 (107)7 Contracts realized or otherwise settled(48)(91)
Current period changes(*)
Current period changes(*)
— (13)53 64 
Current period changes(*)
(13)59 
Contracts outstanding at the end of period, assets (liabilities), netContracts outstanding at the end of period, assets (liabilities), net$18 $(96)$18 $(96)Contracts outstanding at the end of period, assets (liabilities), net$40 $38 
Netting of cash collateralNetting of cash collateral70 166 70 166 Netting of cash collateral27 128 
Cash collateral and net fair value of contracts outstanding at end of periodCash collateral and net fair value of contracts outstanding at end of period$88 $70 $88 $70 Cash collateral and net fair value of contracts outstanding at end of period$67 $166 
(*)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 September 30, 2020March 31, 2021 were as follows:
Fair Value MeasurementsFair Value Measurements of Contracts at
September 30, 2020March 31, 2021
Total
Fair Value		MaturityTotal
Fair Value		Maturity
Year 1 Years 2 & 3Years 4 and thereafter20212022 – 20232024 – 2025
(in millions)(in millions)
Level 1(a)
Level 1(a)
$(33)$(14)$(35)$16 
Level 1(a)
$13 $11 $(12)$14 
Level 2(b)
Level 2(b)
9 612
Level 2(b)
(1)(1)(2)2 
Level 3(c)
Level 3(c)
42 — 1131
Level 3(c)
28 9 8 11 
Fair value of contracts outstanding at end of period(d)
Fair value of contracts outstanding at end of period(d)
$18 $(8)$(23)$49 
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 $70 million.$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.
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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 ninethree months ended September 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.
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.
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 thirdfirst 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.
In July 2020, Southern Power implemented new financial accounting and reporting systems. As a result, there were certain changes to processes and procedures, which resulted in changes to Southern Power's 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). These changes include automation of previously manual controls. These changes in internal controls were not made in response to an identified internal control deficiency.
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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 relaxed 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 have declined slightly compared to 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 of 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 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 from mid-June
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through July. While the number of active cases at the site has declined since July 2020, the COVID-19 pandemic continues to impact productivity and the pace of activity completion. These factors contributed to the June 30, 2020 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
Southern Company
(a)1-
NinthTwenty-Second Supplemental Indenture to Junior SubordinatedSenior Note Indenture dated as of September 18, 2020,February 26, 2021, providing for amendments to the Senior Note Indenture and for the issuance of the Series 2020B 4.00% Fixed-to-Fixed Reset Rate Junior Subordinated2021A 0.60% Senior Notes due January 15, 2051. February 26, 2024. ((Designated in Form 8-K dated September 15February 23, 2021, 2020, File No. 1-3526, asExhibit 4.4.4(a)4(a))
(a)2-
TenthTwenty-Third Supplemental Indenture to Junior SubordinatedSenior Note Indenture dated as of September 18, 2020,February 26, 2021, providing for the issuance of the Series 2020C 4.20% Junior Subordinated2021B 1.75% Senior Notes due OctoberMarch 15, 2060.2028. (Designated in Form 8-K dated September 15, 2020,February 23, 2021, File No. 1-3526, as Exhibit 4.4(b))
AlabamaGeorgia Power
(b)-
SixtiethSixty-Third Supplemental Indenture to Senior Note Indenture dated as of August 27, 2020,February 26, 2021, providing for amendments to the Senior Note Indenture and for the issuance of the Series 2020A 1.45%2021A 3.25% Senior Notes due SeptemberMarch 15, 2030.2051. (Designated in Form 8-K dated August 24, 2020,February 22, 2021, File No. 1-3164,1-6468, as Exhibit 4.64.2)
Southern Company Gas(10) Material Contracts
(f)1Southern Company
#*(a)-
(f)2Alabama Power
#(b)-
Amendment No. 2 to The Southern Company Gas' Guarantee related to the Series 2020A 1.750% Senior Notes due January 15, 2031, FormChange in Control Benefits Protection Plan, effective as of Guarantee. (Designated in Form 8-K dated August 17, 2020, File No. 1-14174, asFebruary 26, 2021. See Exhibit 4.310(a) herein.)
(24) Power of Attorney and Resolutions
Southern Company
(a)-
Alabama Power
(b)-
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Georgia Power
(c)1-
(c)2-
Mississippi Power
(d)1-
Southern Power
(e)1-
(e)2-
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-
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*(f)2-
(32) Section 906 Certifications
Southern Company
*(a)-
Alabama Power
*(b)-
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
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: OctoberApril 28, 20202021
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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
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: OctoberApril 28, 20202021
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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
ByW. Paul Bowers
Chairman President, and Chief Executive Officer
(Principal Executive Officer)
ByDavid P. PorochDaniel S. Tucker
Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
By/s/ Melissa K. Caen
(Melissa K. Caen, Attorney-in-fact)
Date: OctoberApril 28, 20202021
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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
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: OctoberApril 28, 20202021
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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
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: OctoberApril 28, 20202021
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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
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: OctoberApril 28, 20202021

191141