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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, 20212022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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| Commission File Number | | Registrant, State of Incorporation, Address and Telephone Number | | I.R.S. Employer Identification No. | |
| | | | | | | | | | | | | | | | | | | | |
| 1-3526 | | The Southern Company | | 58-0690070 | |
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta, Georgia 30308
(404) 506-5000
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| 1-3164 | | Alabama Power Company | | 63-0004250 | |
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35203
(205) 257-1000
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| 1-6468 | | Georgia Power Company | | 58-0257110 | |
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308
(404) 506-6526
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| 001-11229 | | Mississippi Power Company | | 64-0205820 | |
(A Mississippi Corporation)
2992 West Beach Boulevard
Gulfport, Mississippi 39501
(228) 864-1211
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| 001-37803 | | Southern Power Company | | 58-2598670 | |
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta, Georgia 30308
(404) 506-5000
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| 1-14174 | | Southern Company Gas | | 58-2210952 | |
(A Georgia Corporation)
Ten Peachtree Place, N.E.
Atlanta, Georgia 30309
(404) 584-4000
Securities registered pursuant to Section 12(b) of the Act:
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Registrant | Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
The Southern Company | Common Stock, par value $5 per share | SO | New York Stock Exchange |
(NYSE) |
The Southern Company | Series 2016A 5.25% Junior Subordinated Notes due 2076 | SOJB | NYSE |
The Southern Company | Series 2017B 5.25% Junior Subordinated Notes due 2077 | SOJC | NYSE |
The Southern Company | 2019 Series A Corporate Units | SOLN | NYSE |
The Southern Company | Series 2020A 4.95% Junior Subordinated Notes due 2080 | SOJD | NYSE |
The Southern Company | Series 2020C 4.20% Junior Subordinated Notes due 2060 | SOJE | NYSE |
The Southern Company | Series 2021B 1.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2081 | SO 81 | NYSE |
Alabama Power Company | 5.00% Series Class A Preferred Stock | ALP PR Q | NYSE |
Georgia Power Company | Series 2017A 5.00% Junior Subordinated Notes due 2077 | GPJA | NYSE |
Southern Power Company | Series 2016A 1.000% Senior Notes due 2022 | SO/22B | NYSE |
Southern Power Company | Series 2016B 1.850% Senior Notes due 2026 | SO/26A | NYSE |
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.
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Registrant | Large Accelerated Filer | Accelerated Filer | Non-accelerated Filer | Smaller Reporting Company | Emerging Growth Company |
The Southern Company | X | | | | |
Alabama Power Company | | | X | | |
Georgia Power Company | | | X | | |
Mississippi Power Company | | | X | | |
Southern Power Company | | | X | | |
Southern Company Gas | | | X | | |
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.)
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Registrant | Description of Common Stock | Shares Outstanding at September 30, 20212022 |
The Southern Company | Par Value $5 Per Share | 1,059,803,9311,088,672,828 | |
Alabama Power Company | Par Value $40 Per Share | 30,537,500 | |
Georgia Power Company | Without Par Value | 9,261,500 | |
Mississippi Power Company | Without Par Value | 1,121,000 | |
Southern Power Company | Par Value $0.01 Per Share | 1,000 | |
Southern Company Gas | Par Value $0.01 Per Share | 100 | |
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.
TABLE OF CONTENTS
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| PART I—FINANCIAL INFORMATION | |
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Item 1. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
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| PART II—OTHER INFORMATION | |
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Item 1. | | |
Item 1A. | | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | Inapplicable |
Item 3. | Defaults Upon Senior Securities | Inapplicable |
Item 4. | Mine Safety Disclosures | Inapplicable |
Item 5. | Other Information | Inapplicable |
Item 6. | | |
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Term | Meaning |
2019 ARP | Alternate Rate Plan approved by the Georgia PSC in 2019 for Georgia Power for the years 2020 through 2022 |
AFUDC | Allowance for funds used during construction |
Alabama Power | Alabama Power Company |
Amended and Restated Loan Guarantee Agreement | Loan 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 |
ARO | Asset retirement obligation |
Atlanta Gas Light | Atlanta Gas Light Company, a wholly-owned subsidiary of Southern Company Gas |
Atlantic Coast Pipeline | Atlantic 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 |
Bechtel | Bechtel Power Corporation, the primary contractor for the remaining construction activities for Plant Vogtle Units 3 and 4 |
Bechtel Agreement | The 2017 construction completion agreement between the Vogtle Owners and Bechtel |
CCR | Coal combustion residuals |
CCR Rule | Disposal of Coal Combustion Residuals from Electric Utilities final rule published by the EPA in 2015 |
Chattanooga Gas | Chattanooga Gas Company, a wholly-owned subsidiary of Southern Company Gas |
Clean Air Act | Clean Air Act Amendments of 1990 |
COD | Commercial operation date |
Contractor Settlement Agreement | The 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-19 | The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020 |
CWIP | Construction work in progress |
Dalton | City 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 Pipeline | A pipeline facility in Georgia in which Southern Company Gas has a 50% undivided ownership interest |
DOE | U.S. Department of Energy |
ECCR | Georgia Power's Environmental Compliance Cost Recovery tariff |
ECO Plan | Mississippi Power's environmental compliance overview plan |
ELG Rules | The EPA's steam electric effluent limitations guidelines (ELG) rule (finalized in 2015) and the ELG reconsideration rule (finalized in October 2020) |
Eligible Project Costs | Certain 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 |
EPA | U.S. Environmental Protection Agency |
EPC Contractor | Westinghouse and its affiliate, WECTEC Global Project Services Inc.; the former engineering, procurement, and construction contractor for Plant Vogtle Units 3 and 4 |
FERC | Federal Energy Regulatory Commission |
FFB | Federal Financing Bank |
FFB Credit Facilities | Note purchase agreements among the DOE, Georgia Power, and the FFB and related promissory notes which provide for two multi-advance term loan facilities |
Fitch | Fitch Ratings, Inc. |
Form 10-K | Annual 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, 2020,2021, as applicable |
GAAP | U.S. generally accepted accounting principles |
Georgia Power | Georgia Power Company |
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Term | Meaning |
GRAM | Atlanta Gas Light's Georgia Rate Adjustment Mechanism |
Guarantee Settlement Agreement | The June 9, 2017 settlement agreement between the Vogtle Owners and Toshiba related to certain payment obligations of the EPC Contractor guaranteed by Toshiba |
Gulf Power | Gulf 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 |
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Term | Meaning |
Heating Degree Days | A measure of weather, calculated when the average daily temperatures are less than 65 degrees Fahrenheit |
Heating Season | The period from November through March when Southern Company Gas' natural gas usage and operating revenues are generally higher |
HLBV | Hypothetical liquidation at book value |
IGCC | Integrated coal gasification combined cycle, the technology originally approved for Mississippi Power's Kemper County energy facility |
IIC | Intercompany Interchange Contract |
IRP | Integrated resource plan |
ITAAC | Inspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC |
ITC | Investment tax credit |
JEA | Jacksonville Electric Authority |
Jefferson Island | Jefferson 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 |
KWH | Kilowatt-hour |
LIBOR | London Interbank Offered Rate |
LIFO | Last-in, first-out |
LOCOM | Lower of weighted average cost or current market price |
LTSA | Long-term service agreement |
Marketers | Marketers selling retail natural gas in Georgia and certificated by the Georgia PSC |
MEAG Power | Municipal Electric Authority of Georgia |
Mississippi Power | Mississippi Power Company |
Mississippi Power Rate Case Settlement Agreement | Settlement 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 |
mmBtu | Million British thermal units |
Moody's | Moody's Investors Service, Inc. |
MRA | Municipal and Rural Associations |
MW | Megawatt |
natural gas distribution utilities | Southern Company Gas' natural gas distribution utilities (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas) |
NCCR | Georgia Power's Nuclear Construction Cost Recovery tariff |
NDR | Alabama Power's Natural Disaster Reserve |
Nicor Gas | Northern Illinois Gas Company, a wholly-owned subsidiary of Southern Company Gas |
N/M | Not meaningful |
NRC | U.S. Nuclear Regulatory Commission |
NYMEX | New York Mercantile Exchange, Inc. |
OCI | Other comprehensive income |
OPC | Oglethorpe Power Corporation (an electric membership corporation) |
PennEast Pipeline | PennEast Pipeline Company, LLC, a joint venture in which Southern Company Gas has a 20% ownership interest |
PEP | Mississippi Power's Performance Evaluation Plan |
Pivotal LNG | Pivotal LNG, Inc., through March 24, 2020, a wholly-owned subsidiary of Southern Company Gas |
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Term | Meaning |
PowerSecure | PowerSecure, Inc., a wholly-owned subsidiary of Southern Company |
PowerSouth | PowerSouth Energy Cooperative |
PPA | Power 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 |
PSC | Public Service Commission |
PTC | Production tax credit |
Rate CNP | Alabama Power's Rate Certificated New Plant, consisting of Rate CNP New Plant, Rate CNP Compliance, and Rate CNP PPA |
Rate ECR | Alabama Power's Rate Energy Cost Recovery |
Rate NDR | Alabama Power's Rate Natural Disaster Reserve |
Rate RSE | Alabama Power's Rate Stabilization and Equalization |
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Term | Meaning |
Registrants | Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power Company, and Southern Company Gas |
ROE | Return on equity |
S&P | S&P Global Ratings, a division of S&P Global Inc. |
SAVE | Steps to Advance Virginia's Energy, an infrastructure replacement program at Virginia Natural Gas |
SCS | Southern Company Services, Inc., the Southern Company system service company and a wholly-owned subsidiary of Southern Company |
SEC | U.S. Securities and Exchange Commission |
SEGCO | Southern Electric Generating Company, 50% owned by each of Alabama Power and Georgia Power |
Sequent | Sequent Energy Management, L.P. and Sequent Energy Canada Corp., wholly-owned subsidiaries of Southern Company Gas through June 30, 2021 |
SNG | Southern Natural Gas Company, L.L.C., a pipeline system in which Southern Company Gas has a 50% ownership interest |
SOFR | Secured Overnight Financing Rate |
Southern Company | The Southern Company |
Southern Company Gas | Southern Company Gas and its subsidiaries |
Southern Company Gas Capital | Southern Company Gas Capital Corporation, a 100%-owned subsidiary of Southern Company Gas |
Southern Company power pool | The 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 system | Southern Company, the traditional electric operating companies, Southern Power, Southern Company Gas, SEGCO, Southern Nuclear, SCS, Southern Communications Services, Inc., PowerSecure, and other subsidiaries |
Southern Holdings | Southern Company Holdings, Inc., a wholly-owned subsidiary of Southern Company |
Southern Nuclear | Southern Nuclear Operating Company, Inc., a wholly-owned subsidiary of Southern Company |
Southern Power | Southern Power Company and its subsidiaries |
SouthStar | SouthStar Energy Services, LLC (a Marketer), a wholly-owned subsidiary of Southern Company Gas |
SP Solar | SP Solar Holdings I, LP, a limited partnership indirectly owning substantially all of Southern Power's solar and battery energy storage facilities, in which Southern Power has a 67% ownership interest |
SP Wind | SP 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 Registrants | Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas |
Tax Reform | The impact of the Tax Cuts and Jobs Act, which became effective on January 1, 2018 |
Toshiba | Toshiba Corporation, the parent company of Westinghouse |
traditional electric operating companies | Alabama Power, Georgia Power, and Mississippi Power |
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Term | Meaning |
VCM | Vogtle Construction Monitoring |
VIE | Variable interest entity |
Virginia Commission | Virginia State Corporation Commission |
Virginia Natural Gas | Virginia Natural Gas, Inc., a wholly-owned subsidiary of Southern Company Gas |
Vogtle 3 and 4 Agreement | Agreement 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 |
Vogtle Owners | Georgia Power, Oglethorpe Power Corporation,OPC, MEAG Power, and Dalton |
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Term | Meaning |
Vogtle Services Agreement | The 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 |
WACOG | Weighted average cost of gas |
Westinghouse | Westinghouse Electric Company LLC |
Williams Field Services Group | Williams Field Services Group, LLC |
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 continued COVID-19 pandemic, regulated rates, the strategic goals for the business, customer and sales growth, economic conditions, cost recovery and other rate actions, projected equity ratios, current and proposed environmental regulations and related compliance plans and estimated expenditures, pending or potential litigation matters, access to sources of capital, financing activities, completion dates and costs of construction projects, matters related to the abandonment of the Kemper IGCC, completion of announced 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" 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;facility and Plant Vogtle Units 3 and 4;
•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;fuels and commodities;
•the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities;
•transmission constraints;
•effects of inflation;
•the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects, including Plant Vogtle Units 3 and 4 (which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale) and Plant Barry Unit 8, due to current andand/or 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 or any remediation related thereto; design and other licensing-based compliance matters, including, for nuclear units,Plant Vogtle Unit 4, inspections and the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related investigations, reviews, and approvals by the NRC necessary to support NRC authorization to load fuel; challenges with start-up activities, including major equipment failure, or system integration; and/or operational performance; and challenges related to the COVID-19 pandemic;
•the ability to overcome or mitigate the current challenges at Plant Vogtle Units 3 and 4, as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" in Item 1 herein, that could further impact the cost and schedule for the project;
•legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4 and Plant Barry Unit 8, 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 construction;
•the ability of certain other Vogtle Owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases;increases, including the purported exercises by OPC and Dalton of their tender options and related litigation;
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, including the pace and extent of development of low- to no-carbon energy and battery energy storage 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 traditional electric utilities' generating,operating companies' and SEGCO's generation, transmission, and distribution facilities, Southern Power's generation 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'sthe traditional electric utilitiesoperating companies 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, wars, 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.
PART I
Item 1. Financial Statements (Unaudited).
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Retail electric revenues | Retail electric revenues | $ | 4,551 | | | $ | 4,243 | | | $ | 11,492 | | | $ | 10,503 | | Retail electric revenues | $ | 5,961 | | | $ | 4,551 | | | $ | 14,363 | | | $ | 11,492 | |
Wholesale electric revenues | Wholesale electric revenues | 731 | | | 584 | | | 1,822 | | | 1,473 | | Wholesale electric revenues | 1,197 | | | 731 | | | 2,798 | | | 1,822 | |
Other electric revenues | Other electric revenues | 179 | | | 164 | | | 525 | | | 484 | | Other electric revenues | 185 | | | 179 | | | 554 | | | 525 | |
Natural gas revenues (includes alternative revenue programs of $(1), $(1), $3, and $6, respectively) | 623 | | | 477 | | | 2,994 | | | 2,362 | | |
Natural gas revenues (includes alternative revenue programs of $(1), $(1), $—, and $3, respectively) | | Natural gas revenues (includes alternative revenue programs of $(1), $(1), $—, and $3, respectively) | 857 | | | 623 | | | 3,998 | | | 2,994 | |
Other revenues | Other revenues | 154 | | | 152 | | | 513 | | | 436 | | Other revenues | 178 | | | 154 | | | 519 | | | 513 | |
Total operating revenues | Total operating revenues | 6,238 | | | 5,620 | | | 17,346 | | | 15,258 | | Total operating revenues | 8,378 | | | 6,238 | | | 22,232 | | | 17,346 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Fuel | Fuel | 1,234 | | | 933 | | | 2,930 | | | 2,190 | | Fuel | 2,423 | | | 1,234 | | | 5,249 | | | 2,930 | |
Purchased power | Purchased power | 288 | | | 230 | | | 712 | | | 611 | | Purchased power | 645 | | | 288 | | | 1,285 | | | 712 | |
Cost of natural gas | Cost of natural gas | 129 | | | 71 | | | 943 | | | 654 | | Cost of natural gas | 294 | | | 129 | | | 1,840 | | | 943 | |
Cost of other sales | Cost of other sales | 71 | | | 72 | | | 255 | | | 201 | | Cost of other sales | 92 | | | 71 | | | 275 | | | 255 | |
Other operations and maintenance | Other operations and maintenance | 1,446 | | | 1,286 | | | 4,257 | | | 3,785 | | Other operations and maintenance | 1,547 | | | 1,446 | | | 4,621 | | | 4,257 | |
Depreciation and amortization | Depreciation and amortization | 896 | | | 889 | | | 2,658 | | | 2,619 | | Depreciation and amortization | 922 | | | 896 | | | 2,728 | | | 2,658 | |
Taxes other than income taxes | Taxes other than income taxes | 312 | | | 304 | | | 969 | | | 932 | | Taxes other than income taxes | 352 | | | 312 | | | 1,073 | | | 969 | |
Estimated loss on Plant Vogtle Units 3 and 4 | Estimated loss on Plant Vogtle Units 3 and 4 | 264 | | | — | | | 772 | | | 149 | | Estimated loss on Plant Vogtle Units 3 and 4 | (70) | | | 264 | | | (18) | | | 772 | |
| (Gain) loss on dispositions, net | (125) | | | — | | | (179) | | | (39) | | |
Gain on dispositions, net | | Gain on dispositions, net | (20) | | | (125) | | | (53) | | | (179) | |
Total operating expenses | Total operating expenses | 4,515 | | | 3,785 | | | 13,317 | | | 11,102 | | Total operating expenses | 6,185 | | | 4,515 | | | 17,000 | | | 13,317 | |
Operating Income | Operating Income | 1,723 | | | 1,835 | | | 4,029 | | | 4,156 | | Operating Income | 2,193 | | | 1,723 | | | 5,232 | | | 4,029 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | 49 | | | 38 | | | 140 | | | 106 | | Allowance for equity funds used during construction | 59 | | | 49 | | | 163 | | | 140 | |
Earnings from equity method investments | Earnings from equity method investments | 30 | | | 33 | | | 35 | | | 105 | | Earnings from equity method investments | 28 | | | 30 | | | 109 | | | 35 | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (451) | | | (443) | | | (1,352) | | | (1,343) | | Interest expense, net of amounts capitalized | (511) | | | (451) | | | (1,461) | | | (1,352) | |
Impairment of leveraged leases | — | | | — | | | (7) | | | (154) | | |
| Other income (expense), net | Other income (expense), net | 131 | | | 113 | | | 297 | | | 319 | | Other income (expense), net | 132 | | | 131 | | | 414 | | | 290 | |
Total other income and (expense) | Total other income and (expense) | (241) | | | (259) | | | (887) | | | (967) | | Total other income and (expense) | (292) | | | (241) | | | (775) | | | (887) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 1,482 | | | 1,576 | | | 3,142 | | | 3,189 | | Earnings Before Income Taxes | 1,901 | | | 1,482 | | | 4,457 | | | 3,142 | |
Income taxes | Income taxes | 372 | | | 293 | | | 550 | | | 443 | | Income taxes | 414 | | | 372 | | | 891 | | | 550 | |
Consolidated Net Income | Consolidated Net Income | 1,110 | | | 1,283 | | | 2,592 | | | 2,746 | | Consolidated Net Income | 1,487 | | | 1,110 | | | 3,566 | | | 2,592 | |
| Dividends on preferred stock of subsidiaries | Dividends on preferred stock of subsidiaries | 4 | | | 4 | | | 11 | | | 11 | | Dividends on preferred stock of subsidiaries | 3 | | | 4 | | | 10 | | | 11 | |
Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 5 | | | 28 | | | (27) | | | 3 | | Net income (loss) attributable to noncontrolling interests | 12 | | | 5 | | | (55) | | | (27) | |
Consolidated Net Income Attributable to Southern Company | Consolidated Net Income Attributable to Southern Company | $ | 1,101 | | | $ | 1,251 | | | $ | 2,608 | | | $ | 2,732 | | Consolidated Net Income Attributable to Southern Company | $ | 1,472 | | | $ | 1,101 | | | $ | 3,611 | | | $ | 2,608 | |
Common Stock Data: | Common Stock Data: | | | | | | | | Common Stock Data: | | | | | | | |
Earnings per share - | Earnings per share - | | Earnings per share - | |
Basic | Basic | $ | 1.04 | | | $ | 1.18 | | | $ | 2.46 | | | $ | 2.58 | | Basic | $ | 1.36 | | | $ | 1.04 | | | $ | 3.38 | | | $ | 2.46 | |
Diluted | Diluted | $ | 1.03 | | | $ | 1.18 | | | $ | 2.44 | | | $ | 2.57 | | Diluted | $ | 1.35 | | | $ | 1.03 | | | $ | 3.36 | | | $ | 2.44 | |
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) | |
Basic | Basic | 1,061 | | | 1,058 | | | 1,060 | | | 1,058 | | Basic | 1,082 | | | 1,061 | | | 1,070 | | | 1,060 | |
Diluted | Diluted | 1,068 | | | 1,064 | | | 1,067 | | | 1,064 | | Diluted | 1,088 | | | 1,068 | | | 1,076 | | | 1,067 | |
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Consolidated Net Income | Consolidated Net Income | $ | 1,110 | | | $ | 1,283 | | | $ | 2,592 | | | $ | 2,746 | | Consolidated Net Income | $ | 1,487 | | | $ | 1,110 | | | $ | 3,566 | | | $ | 2,592 | |
Other comprehensive income (loss): | | |
Other comprehensive income: | | Other comprehensive income: | |
Qualifying hedges: | Qualifying hedges: | | Qualifying hedges: | |
Changes in fair value, net of tax of $1, $17, $(4), and $(9), respectively | 1 | | | 49 | | | (15) | | | (26) | | |
Reclassification adjustment for amounts included in net income, net of tax of $10, $(11), $27, and $(1), respectively | 31 | | | (32) | | | 81 | | | (3) | | |
Changes in fair value, net of tax of $2, $1, $(5), and $(4), respectively | | Changes in fair value, net of tax of $2, $1, $(5), and $(4), respectively | — | | | 1 | | | (27) | | | (15) | |
Reclassification adjustment for amounts included in net income, net of tax of $8, $10, $32, and $27, respectively | | Reclassification adjustment for amounts included in net income, net of tax of $8, $10, $32, and $27, respectively | 26 | | | 31 | | | 100 | | | 81 | |
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, $1, $4, and $3, respectively | 4 | | | 3 | | | 10 | | | 6 | | |
Total other comprehensive income (loss) | 36 | | | 20 | | | 76 | | | (23) | | |
Reclassification adjustment for amounts included in net income, net of tax of $1, $1, $3, and $4, respectively | | Reclassification adjustment for amounts included in net income, net of tax of $1, $1, $3, and $4, respectively | 2 | | | 4 | | | 8 | | | 10 | |
Total other comprehensive income | | Total other comprehensive income | 28 | | | 36 | | | 81 | | | 76 | |
Comprehensive Income | Comprehensive Income | 1,146 | | | 1,303 | | | 2,668 | | | 2,723 | | Comprehensive Income | 1,515 | | | 1,146 | | | 3,647 | | | 2,668 | |
| Dividends on preferred stock of subsidiaries | Dividends on preferred stock of subsidiaries | 4 | | | 4 | | | 11 | | | 11 | | Dividends on preferred stock of subsidiaries | 3 | | | 4 | | | 10 | | | 11 | |
Comprehensive income (loss) attributable to noncontrolling interests | Comprehensive income (loss) attributable to noncontrolling interests | 5 | | | 28 | | | (27) | | | 3 | | Comprehensive income (loss) attributable to noncontrolling interests | 12 | | | 5 | | | (55) | | | (27) | |
Consolidated Comprehensive Income Attributable to Southern Company | Consolidated Comprehensive Income Attributable to Southern Company | $ | 1,137 | | | $ | 1,271 | | | $ | 2,684 | | | $ | 2,709 | | Consolidated Comprehensive Income Attributable to Southern Company | $ | 1,500 | | | $ | 1,137 | | | $ | 3,692 | | | $ | 2,684 | |
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Consolidated net income | Consolidated net income | $ | 2,592 | | | $ | 2,746 | | Consolidated net income | $ | 3,566 | | | $ | 2,592 | |
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, total | Depreciation and amortization, total | 2,944 | | | 2,903 | | Depreciation and amortization, total | 3,084 | | | 2,944 | |
Deferred income taxes | Deferred income taxes | 89 | | | (196) | | Deferred income taxes | 608 | | | 89 | |
Utilization of federal investment tax credits | Utilization of federal investment tax credits | 256 | | | 319 | | Utilization of federal investment tax credits | 266 | | | 256 | |
| Allowance for equity funds used during construction | | Allowance for equity funds used during construction | (163) | | | (140) | |
Mark-to-market adjustments | | Mark-to-market adjustments | (33) | | | 147 | |
Pension, postretirement, and other employee benefits | Pension, postretirement, and other employee benefits | (218) | | | (190) | | Pension, postretirement, and other employee benefits | (322) | | | (218) | |
Settlement of asset retirement obligations | Settlement of asset retirement obligations | (341) | | | (315) | | Settlement of asset retirement obligations | (314) | | | (341) | |
Stock based compensation expense | Stock based compensation expense | 134 | | | 99 | | Stock based compensation expense | 116 | | | 134 | |
| Estimated loss on Plant Vogtle Units 3 and 4 | Estimated loss on Plant Vogtle Units 3 and 4 | 772 | | | 149 | | Estimated loss on Plant Vogtle Units 3 and 4 | (18) | | | 772 | |
| Storm damage accruals | Storm damage accruals | 166 | | | 171 | | Storm damage accruals | 160 | | | 166 | |
Impairment charges | 91 | | | 154 | | |
(Gain) loss on dispositions, net | (171) | | | (36) | | |
| Gain on dispositions, net | | Gain on dispositions, net | (41) | | | (171) | |
Natural gas cost under recovery – long-term | | Natural gas cost under recovery – long-term | 207 | | | (79) | |
Retail fuel cost under recovery – long-term | Retail fuel cost under recovery – long-term | (209) | | | — | | Retail fuel cost under recovery – long-term | (1,701) | | | (209) | |
Other, net | Other, net | (7) | | | (14) | | Other, net | (45) | | | 156 | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | 2 | | | 125 | | -Receivables | (327) | | | 2 | |
| -Materials and supplies | -Materials and supplies | (91) | | | (141) | | -Materials and supplies | (138) | | | (91) | |
| -Natural gas for sale, net of temporary LIFO liquidation | | -Natural gas for sale, net of temporary LIFO liquidation | (136) | | | 20 | |
-Natural gas cost under recovery | -Natural gas cost under recovery | (432) | | | — | | -Natural gas cost under recovery | (124) | | | (432) | |
-Other current assets | -Other current assets | (160) | | | (119) | | -Other current assets | (343) | | | (180) | |
-Accounts payable | -Accounts payable | (45) | | | (428) | | -Accounts payable | 805 | | | (45) | |
-Accrued taxes | -Accrued taxes | 288 | | | 289 | | -Accrued taxes | 167 | | | 288 | |
-Accrued compensation | -Accrued compensation | (93) | | | (183) | | -Accrued compensation | (123) | | | (93) | |
-Accrued interest | -Accrued interest | (110) | | | (52) | | -Accrued interest | (101) | | | (110) | |
-Retail fuel cost over recovery | -Retail fuel cost over recovery | (150) | | | 158 | | -Retail fuel cost over recovery | (1) | | | (150) | |
| -Customer refunds | (58) | | | (226) | | |
| -Other current liabilities | -Other current liabilities | (168) | | | 7 | | -Other current liabilities | (32) | | | (226) | |
Net cash provided from operating activities | Net cash provided from operating activities | 5,081 | | | 5,220 | | Net cash provided from operating activities | 5,017 | | | 5,081 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Business acquisitions, net of cash acquired | Business acquisitions, net of cash acquired | (345) | | | (81) | | Business acquisitions, net of cash acquired | — | | | (345) | |
| Property additions | Property additions | (5,222) | | | (5,365) | | Property additions | (5,502) | | | (5,222) | |
| Nuclear decommissioning trust fund purchases | Nuclear decommissioning trust fund purchases | (1,301) | | | (714) | | Nuclear decommissioning trust fund purchases | (858) | | | (1,301) | |
Nuclear decommissioning trust fund sales | Nuclear decommissioning trust fund sales | 1,297 | | | 708 | | Nuclear decommissioning trust fund sales | 854 | | | 1,297 | |
Proceeds from dispositions | Proceeds from dispositions | 160 | | | 987 | | Proceeds from dispositions | 120 | | | 160 | |
Cost of removal, net of salvage | Cost of removal, net of salvage | (282) | | | (233) | | Cost of removal, net of salvage | (518) | | | (282) | |
| Payments pursuant to LTSAs | Payments pursuant to LTSAs | (145) | | | (139) | | Payments pursuant to LTSAs | (121) | | | (145) | |
Other investing activities | Other investing activities | (12) | | | (55) | | Other investing activities | 73 | | | (12) | |
Net cash used for investing activities | Net cash used for investing activities | (5,850) | | | (4,892) | | Net cash used for investing activities | (5,952) | | | (5,850) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
Decrease in notes payable, net | Decrease in notes payable, net | (203) | | | (1,534) | | Decrease in notes payable, net | (349) | | | (203) | |
Proceeds — | Proceeds — | | Proceeds — | |
Long-term debt | Long-term debt | 6,793 | | | 7,543 | | Long-term debt | 3,800 | | | 6,793 | |
| Short-term borrowings | | Short-term borrowings | 1,200 | | | 325 | |
Common stock | Common stock | 62 | | | 63 | | Common stock | 1,803 | | | 62 | |
| Short-term borrowings | 325 | | | 615 | | |
Redemptions and repurchases — | Redemptions and repurchases — | | Redemptions and repurchases — | |
Long-term debt | Long-term debt | (3,060) | | | (2,472) | | Long-term debt | (1,932) | | | (3,060) | |
| Short-term borrowings | Short-term borrowings | (25) | | | (840) | | Short-term borrowings | (900) | | | (25) | |
Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | 415 | | | 173 | | Capital contributions from noncontrolling interests | 73 | | | 415 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | (204) | | | (164) | | Distributions to noncontrolling interests | (175) | | | (204) | |
| Payment of common stock dividends | Payment of common stock dividends | (2,077) | | | (2,008) | | Payment of common stock dividends | (2,166) | | | (2,077) | |
| Other financing activities | Other financing activities | (224) | | | (299) | | Other financing activities | (235) | | | (224) | |
Net cash provided from financing activities | Net cash provided from financing activities | 1,802 | | | 1,077 | | Net cash provided from financing activities | 1,119 | | | 1,802 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 1,033 | | | 1,405 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | 184 | | | 1,033 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 1,068 | | | 1,978 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 1,829 | | | 1,068 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 2,101 | | | $ | 3,383 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 2,013 | | | $ | 2,101 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid during the period for — | Cash paid during the period for — | | Cash paid during the period for — | |
Interest (net of $68 and $61 capitalized for 2021 and 2020, respectively) | $ | 1,417 | | | $ | 1,346 | | |
Interest (net of $74 and $68 capitalized for 2022 and 2021, respectively) | | Interest (net of $74 and $68 capitalized for 2022 and 2021, respectively) | $ | 1,425 | | | $ | 1,417 | |
Income taxes, net | Income taxes, net | 92 | | | 66 | | Income taxes, net | 160 | | | 92 | |
Noncash transactions — | Noncash transactions — | | Noncash transactions — | |
Accrued property additions at end of period | Accrued property additions at end of period | 915 | | | 917 | | Accrued property additions at end of period | 872 | | | 915 | |
Contributions from noncontrolling interests | Contributions from noncontrolling interests | 89 | | | 9 | | Contributions from noncontrolling interests | — | | | 89 | |
Contributions of wind turbine equipment | Contributions of wind turbine equipment | 82 | | | 17 | | Contributions of wind turbine equipment | — | | | 82 | |
Right-of-use assets obtained under leases | Right-of-use assets obtained under leases | 92 | | | 166 | | Right-of-use assets obtained under leases | 141 | | | 92 | |
Reassessment of right-of-use assets under operating leases | | Reassessment of right-of-use assets under operating leases | 40 | | | — | |
|
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 2,078 | | | $ | 1,065 | | Cash and cash equivalents | | $ | 2,009 | | | $ | 1,798 | |
| Receivables — | Receivables — | | Receivables — | |
Customer accounts | Customer accounts | | 1,831 | | | 1,753 | | Customer accounts | | 2,223 | | | 1,806 | |
Energy marketing | | — | | | 516 | | |
| Unbilled revenues | Unbilled revenues | | 535 | | | 672 | | Unbilled revenues | | 593 | | | 711 | |
| Other accounts and notes | Other accounts and notes | | 611 | | | 512 | | Other accounts and notes | | 533 | | | 523 | |
Accumulated provision for uncollectible accounts | Accumulated provision for uncollectible accounts | | (72) | | | (118) | | Accumulated provision for uncollectible accounts | | (80) | | | (78) | |
Materials and supplies | Materials and supplies | | 1,504 | | | 1,478 | | Materials and supplies | | 1,657 | | | 1,543 | |
Fossil fuel for generation | Fossil fuel for generation | | 386 | | | 550 | | Fossil fuel for generation | | 526 | | | 450 | |
Natural gas for sale | Natural gas for sale | | 368 | | | 460 | | Natural gas for sale | | 498 | | | 362 | |
| Prepaid expenses | Prepaid expenses | | 329 | | | 276 | | Prepaid expenses | | 373 | | | 330 | |
| Assets from risk management activities, net of collateral | Assets from risk management activities, net of collateral | | 365 | | | 147 | | Assets from risk management activities, net of collateral | | 289 | | | 151 | |
Regulatory assets – asset retirement obligations | Regulatory assets – asset retirement obligations | | 233 | | | 214 | | Regulatory assets – asset retirement obligations | | 284 | | | 219 | |
Natural gas cost under recovery | Natural gas cost under recovery | | 432 | | | — | | Natural gas cost under recovery | | 390 | | | 266 | |
| Other regulatory assets | Other regulatory assets | | 792 | | | 810 | | Other regulatory assets | | 746 | | | 653 | |
Other current assets | Other current assets | | 282 | | | 282 | | Other current assets | | 322 | | | 231 | |
Total current assets | Total current assets | | 9,674 | | | 8,617 | | Total current assets | | 10,363 | | | 8,965 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 114,166 | | | 110,516 | | In service | | 116,236 | | | 115,592 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | | 33,723 | | | 32,397 | | Less: Accumulated depreciation | | 34,922 | | | 34,079 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 80,443 | | | 78,119 | | Plant in service, net of depreciation | | 81,314 | | | 81,513 | |
| Other utility plant, net | | Other utility plant, net | | 602 | | | — | |
Nuclear fuel, at amortized cost | Nuclear fuel, at amortized cost | | 805 | | | 818 | | Nuclear fuel, at amortized cost | | 840 | | | 824 | |
Construction work in progress | Construction work in progress | | 9,611 | | | 8,697 | | Construction work in progress | | 10,773 | | | 8,771 | |
Total property, plant, and equipment | Total property, plant, and equipment | | 90,859 | | | 87,634 | | Total property, plant, and equipment | | 93,529 | | | 91,108 | |
Other Property and Investments: | Other Property and Investments: | | | | | Other Property and Investments: | | | | |
Goodwill | Goodwill | | 5,280 | | | 5,280 | | Goodwill | | 5,280 | | | 5,280 | |
Nuclear decommissioning trusts, at fair value | Nuclear decommissioning trusts, at fair value | | 2,446 | | | 2,303 | | Nuclear decommissioning trusts, at fair value | | 2,031 | | | 2,542 | |
Equity investments in unconsolidated subsidiaries | Equity investments in unconsolidated subsidiaries | | 1,278 | | | 1,362 | | Equity investments in unconsolidated subsidiaries | | 1,292 | | | 1,282 | |
Other intangible assets, net of amortization of $296 and $328, respectively | | 455 | | | 487 | | |
Leveraged leases | | 575 | | | 556 | | |
Other intangible assets, net of amortization of $331 and $307, respectively | | Other intangible assets, net of amortization of $331 and $307, respectively | | 415 | | | 445 | |
| Miscellaneous property and investments | Miscellaneous property and investments | | 586 | | | 398 | | Miscellaneous property and investments | | 590 | | | 653 | |
Total other property and investments | Total other property and investments | | 10,620 | | | 10,386 | | Total other property and investments | | 9,608 | | | 10,202 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | | | Deferred Charges and Other Assets: | | | | |
Operating lease right-of-use assets, net of amortization | Operating lease right-of-use assets, net of amortization | | 1,724 | | | 1,802 | | Operating lease right-of-use assets, net of amortization | | 1,560 | | | 1,701 | |
Deferred charges related to income taxes | Deferred charges related to income taxes | | 815 | | | 796 | | Deferred charges related to income taxes | | 854 | | | 824 | |
| Prepaid pension costs | | Prepaid pension costs | | 2,019 | | | 1,657 | |
| Unamortized loss on reacquired debt | Unamortized loss on reacquired debt | | 263 | | | 280 | | Unamortized loss on reacquired debt | | 243 | | | 258 | |
Deferred under recovered fuel clause revenues | | Deferred under recovered fuel clause revenues | | 1,697 | | | 410 | |
Regulatory assets – asset retirement obligations, deferred | Regulatory assets – asset retirement obligations, deferred | | 5,418 | | | 4,934 | | Regulatory assets – asset retirement obligations, deferred | | 6,519 | | | 5,466 | |
Other regulatory assets, deferred | Other regulatory assets, deferred | | 6,902 | | | 7,198 | | Other regulatory assets, deferred | | 6,121 | | | 5,577 | |
| Other deferred charges and assets | Other deferred charges and assets | | 1,586 | | | 1,288 | | Other deferred charges and assets | | 1,492 | | | 1,366 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 16,708 | | | 16,298 | | Total deferred charges and other assets | | 20,505 | | | 17,259 | |
Total Assets | Total Assets | | $ | 127,861 | | | $ | 122,935 | | Total Assets | | $ | 134,005 | | | $ | 127,534 | |
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholders' Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 3,286 | | | $ | 3,507 | | Securities due within one year | | $ | 3,241 | | | $ | 2,157 | |
| Notes payable | Notes payable | | 707 | | | 609 | | Notes payable | | 1,398 | | | 1,440 | |
Energy marketing trade payables | | — | | | 494 | | |
| Accounts payable | Accounts payable | | 2,229 | | | 2,312 | | Accounts payable | | 3,079 | | | 2,169 | |
Customer deposits | Customer deposits | | 493 | | | 487 | | Customer deposits | | 516 | | | 479 | |
Accrued taxes — | Accrued taxes — | | Accrued taxes — | |
Accrued income taxes | Accrued income taxes | | 149 | | | 130 | | Accrued income taxes | | 129 | | | 50 | |
| Other accrued taxes | Other accrued taxes | | 797 | | | 699 | | Other accrued taxes | | 882 | | | 641 | |
Accrued interest | Accrued interest | | 404 | | | 513 | | Accrued interest | | 431 | | | 533 | |
| Accrued compensation | Accrued compensation | | 908 | | | 1,025 | | Accrued compensation | | 961 | | | 1,070 | |
Asset retirement obligations | Asset retirement obligations | | 690 | | | 585 | | Asset retirement obligations | | 689 | | | 697 | |
| Operating lease obligations | Operating lease obligations | | 246 | | | 241 | | Operating lease obligations | | 191 | | | 250 | |
Other regulatory liabilities | Other regulatory liabilities | | 555 | | | 509 | | Other regulatory liabilities | | 440 | | | 563 | |
Other current liabilities | Other current liabilities | | 795 | | | 968 | | Other current liabilities | | 844 | | | 872 | |
Total current liabilities | Total current liabilities | | 11,259 | | | 12,079 | | Total current liabilities | | 12,801 | | | 10,921 | |
Long-term Debt | Long-term Debt | | 48,843 | | | 45,073 | | Long-term Debt | | 50,427 | | | 50,120 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 8,916 | | | 8,175 | | Accumulated deferred income taxes | | 9,916 | | | 8,862 | |
Deferred credits related to income taxes | Deferred credits related to income taxes | | 5,485 | | | 5,767 | | Deferred credits related to income taxes | | 5,271 | | | 5,401 | |
Accumulated deferred ITCs | Accumulated deferred ITCs | | 2,230 | | | 2,235 | | Accumulated deferred ITCs | | 2,154 | | | 2,216 | |
Employee benefit obligations | Employee benefit obligations | | 1,849 | | | 2,213 | | Employee benefit obligations | | 1,466 | | | 1,550 | |
Operating lease obligations, deferred | Operating lease obligations, deferred | | 1,495 | | | 1,611 | | Operating lease obligations, deferred | | 1,393 | | | 1,503 | |
Asset retirement obligations, deferred | Asset retirement obligations, deferred | | 10,919 | | | 10,099 | | Asset retirement obligations, deferred | | 11,007 | | | 10,990 | |
| Accrued environmental remediation | | 203 | | | 216 | | |
| Other cost of removal obligations | Other cost of removal obligations | | 2,164 | | | 2,211 | | Other cost of removal obligations | | 1,950 | | | 2,103 | |
Other regulatory liabilities, deferred | Other regulatory liabilities, deferred | | 351 | | | 251 | | Other regulatory liabilities, deferred | | 536 | | | 485 | |
| Other deferred credits and liabilities | Other deferred credits and liabilities | | 637 | | | 480 | | Other deferred credits and liabilities | | 1,366 | | | 816 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 34,249 | | | 33,258 | | Total deferred credits and other liabilities | | 35,059 | | | 33,926 | |
Total Liabilities | Total Liabilities | | 94,351 | | | 90,410 | | Total Liabilities | | 98,287 | | | 94,967 | |
Redeemable Preferred Stock of Subsidiaries | Redeemable Preferred Stock of Subsidiaries | | 291 | | | 291 | | Redeemable Preferred Stock of Subsidiaries | | 242 | | | 291 | |
| Total Stockholders' Equity (See accompanying statements) | Total Stockholders' Equity (See accompanying statements) | | 33,219 | | | 32,234 | | Total Stockholders' Equity (See accompanying statements) | | 35,476 | | | 32,276 | |
Total Liabilities and Stockholders' Equity | Total Liabilities and Stockholders' Equity | | $ | 127,861 | | | $ | 122,935 | | Total Liabilities and Stockholders' Equity | | $ | 134,005 | | | $ | 127,534 | |
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.
SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
| | | Southern Company Common Stockholders' Equity | | | | Southern Company Common Stockholders' Equity | | |
| | Number of Common Shares | | Common Stock | | Accumulated Other Comprehensive Income (Loss) | | | | Number of Common Shares | | Common Stock | | Accumulated Other Comprehensive Income (Loss) | | |
| | Issued | | Treasury | | Par Value | | Paid-In Capital | | Treasury | | Retained Earnings | | Noncontrolling Interests | | Total | | Issued | | Treasury | | Par Value | | Paid-In Capital | | Treasury | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | | Total |
| | (in millions) | | (in millions) |
Balance at December 31, 2019 | 1,054 | | | (1) | | | $ | 5,257 | | | $ | 11,734 | | | $ | (42) | | | $ | 10,877 | | | $ | (321) | | | | $ | 4,254 | | | $ | 31,759 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | 1,058 | | | (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 issued | 3 | | | — | | | 9 | | | 43�� | | | — | | | — | | | — | | | | — | | | 52 | | |
Stock-based compensation | — | | | — | | | — | | | 5 | | | — | | | — | | | — | | | | — | | | 5 | | |
| Cash dividends of $0.62 per share | — | | | — | | | — | | | — | | | — | | | (655) | | | — | | | | — | | | (655) | | |
| Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 16 | | | 16 | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (48) | | | (48) | | |
| Other | — | | | — | | | — | | | — | | | (2) | | | (2) | | | 1 | | | | — | | | (3) | | |
Balance at March 31, 2020 | 1,057 | | | (1) | | | 5,266 | | | 11,782 | | | (44) | | | 11,088 | | | (367) | | | | 4,191 | | | 31,916 | | |
Consolidated net income | — | | | — | | | — | | | — | | | — | | | 612 | | | — | | | | 5 | | | 617 | | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 4 | | | | — | | | 4 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 28 | | | | — | | | 28 | |
Stock issued | Stock issued | — | | | — | | | — | | | 7 | | | — | | | — | | | — | | | | — | | | 7 | | Stock issued | 2 | | | — | | | 5 | | | 9 | | | — | | | — | | | — | | | | — | | | 14 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | 11 | | | — | | | — | | | — | | | | — | | | 11 | | Stock-based compensation | — | | | — | | | — | | | 9 | | | — | | | — | | | — | | | | — | | | 9 | |
| Cash dividends of $0.64 per share | Cash dividends of $0.64 per share | — | | | — | | | — | | | — | | | — | | | (677) | | | — | | | | — | | | (677) | | Cash dividends of $0.64 per share | — | | | — | | | — | | | — | | | — | | | (678) | | | — | | | | — | | | (678) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 165 | | | 165 | | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 403 | | | 403 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (70) | | | (70) | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (46) | | | (46) | |
| Other | | Other | — | | | — | | | — | | | 2 | | | — | | | — | | | — | | | | (1) | | | 1 | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 1,060 | | | (1) | | | 5,273 | | | 11,854 | | | (46) | | | 11,768 | | | (367) | | | | 4,586 | | | 33,068 | |
Consolidated net income | | Consolidated net income | — | | | — | | | — | | | — | | | — | | | 372 | | | — | | | | — | | | 372 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 12 | | | | — | | | 12 | |
Stock issued | | Stock issued | — | | | — | | | 1 | | | 9 | | | — | | | — | | | — | | | | — | | | 10 | |
Stock-based compensation | | Stock-based compensation | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | | — | | | 22 | |
| Cash dividends of $0.66 per share | | Cash dividends of $0.66 per share | — | | | — | | | — | | | — | | | — | | | (699) | | | — | | | | — | | | (699) | |
| Capital contributions from noncontrolling interests | | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 29 | | | 29 | |
Distributions to noncontrolling interests | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (68) | | | (68) | |
| | Other | Other | — | | | — | | | — | | | (13) | | | — | | | 1 | | | — | | | | — | | | (12) | | Other | — | | | — | | | — | | | 1 | | | (2) | | | 1 | | | — | | | | — | | | — | |
Balance at June 30, 2020 | 1,057 | | | (1) | | | 5,266 | | | 11,787 | | | (44) | | | 11,024 | | | (363) | | | | 4,291 | | | 31,961 | | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 1,060 | | | (1) | | | 5,274 | | | 11,886 | | | (48) | | | 11,442 | | | (355) | | | | 4,547 | | | 32,746 | |
Consolidated net income | Consolidated net income | — | | | — | | | — | | | — | | | — | | | 1,251 | | | — | | | | 28 | | | 1,279 | | Consolidated net income | — | | | — | | | — | | | — | | | — | | | 1,101 | | | — | | | | 5 | | | 1,106 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 20 | | | | — | | | 20 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 36 | | | | — | | | 36 | |
| Stock issued | Stock issued | — | | | — | | | 1 | | | 3 | | | — | | | — | | | — | | | | — | | | 4 | | Stock issued | 1 | | | — | | | 4 | | | 34 | | | — | | | — | | | — | | | | — | | | 38 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | 15 | | | — | | | — | | | — | | | | — | | | 15 | | Stock-based compensation | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | | — | | | 22 | |
| Cash dividends of $0.64 per share | — | | | — | | | — | | | — | | | — | | | (676) | | | — | | | | — | | | (676) | | |
Cash dividends of $0.66 per share | | Cash dividends of $0.66 per share | — | | | — | | | — | | | — | | | — | | | (700) | | | — | | | | — | | | (700) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 2 | | | 2 | | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 72 | | | 72 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (51) | | | (51) | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (94) | | | (94) | |
Purchase of membership interests from noncontrolling interests | — | | | — | | | — | | | 5 | | | — | | | — | | | — | | | | (60) | | | (55) | | |
| | Other | Other | — | | | — | | | — | | | — | | | — | | | 1 | | | (1) | | | | 1 | | | 1 | | Other | — | | | — | | | — | | | (10) | | | 2 | | | 1 | | | — | | | | — | | | (7) | |
Balance at September 30, 2020 | 1,057 | | | (1) | | | $ | 5,267 | | | $ | 11,810 | | | $ | (44) | | | $ | 11,600 | | | $ | (344) | | | | $ | 4,211 | | | $ | 32,500 | | |
Balance at September 30, 2021 | | Balance at September 30, 2021 | 1,061 | | | (1) | | | $ | 5,278 | | | $ | 11,932 | | | $ | (46) | | | $ | 11,844 | | | $ | (319) | | | | $ | 4,530 | | | $ | 33,219 | |
|
SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
| | | Southern Company Common Stockholders' Equity | | | | Southern Company Common Stockholders' Equity | | |
| | Number of Common Shares | | Common Stock | | Accumulated Other Comprehensive Income (Loss) | | | | Number of Common Shares | | Common Stock | | Accumulated Other Comprehensive Income (Loss) | | |
| | Issued | | Treasury | | Par Value | | Paid-In Capital | | Treasury | | Retained Earnings | | Noncontrolling Interests | | Total | | Issued | | Treasury | | Par Value | | Paid-In Capital | | Treasury | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | | Total |
| | (in millions) | | (in millions) |
Balance at December 31, 2020 | 1,058 | | | (1) | | | $ | 5,268 | | | $ | 11,834 | | | $ | (46) | | | $ | 11,311 | | | $ | (395) | | | | $ | 4,262 | | | $ | 32,234 | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | 1,061 | | | (1) | | | $ | 5,279 | | | $ | 11,950 | | | $ | (47) | | | $ | 10,929 | | | $ | (237) | | | | $ | 4,402 | | | $ | 32,276 | |
Consolidated net income (loss) | Consolidated net income (loss) | — | | | — | | | — | | | — | | | — | | | 1,135 | | | — | | | | (32) | | | 1,103 | | Consolidated net income (loss) | — | | | — | | | — | | | — | | | — | | | 1,032 | | | — | | | | (45) | | | 987 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 28 | | | | — | | | 28 | | |
Stock issued | 2 | | | — | | | 5 | | | 9 | | | — | | | — | | | — | | | | — | | | 14 | | |
Stock-based compensation | — | | | — | | | — | | | 9 | | | — | | | — | | | — | | | | — | | | 9 | | |
| Cash dividends of $0.64 per share | — | | | — | | | — | | | — | | | — | | | (678) | | | — | | | | — | | | (678) | | |
| Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 403 | | | 403 | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (46) | | | (46) | | |
| Other | — | | | — | | | — | | | 2 | | | — | | | — | | | — | | | | (1) | | | 1 | | |
Balance at March 31, 2021 | 1,060 | | | (1) | | | 5,273 | | | 11,854 | | | (46) | | | 11,768 | | | (367) | | | | 4,586 | | | 33,068 | | |
Consolidated net income | — | | | — | | | — | | | — | | | — | | | 372 | | | — | | | | — | | | 372 | | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 12 | | | | — | | | 12 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 42 | | | | — | | | 42 | |
Stock issued | Stock issued | — | | | — | | | 1 | | | 9 | | | — | | | — | | | — | | | | — | | | 10 | | Stock issued | 3 | | | — | | | 7 | | | 31 | | | — | | | — | | | — | | | | — | | | 38 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | | — | | | 22 | | Stock-based compensation | — | | | — | | | — | | | 6 | | | — | | | — | | | — | | | | — | | | 6 | |
| Cash dividends of $0.66 per share | Cash dividends of $0.66 per share | — | | | — | | | — | | | — | | | — | | | (699) | | | — | | | | — | | | (699) | | Cash dividends of $0.66 per share | — | | | — | | | — | | | — | | | — | | | (702) | | | — | | | | — | | | (702) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 29 | | | 29 | | Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 73 | | | 73 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (68) | | | (68) | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (98) | | | (98) | |
| Other | | Other | — | | | — | | | — | | | 7 | | | (2) | | | 2 | | | — | | | | — | | | 7 | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | 1,064 | | | (1) | | | 5,286 | | | 11,994 | | | (49) | | | 11,261 | | | (195) | | | | 4,332 | | | 32,629 | |
Consolidated net income (loss) | | Consolidated net income (loss) | — | | | — | | | — | | | — | | | — | | | 1,107 | | | — | | | | (22) | | | 1,085 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 11 | | | | — | | | 11 | |
Stock issued | | Stock issued | — | | | — | | | 2 | | | 21 | | | — | | | — | | | — | | | | — | | | 23 | |
Stock-based compensation | | Stock-based compensation | — | | | — | | | — | | | 14 | | | — | | | — | | | — | | | | — | | | 14 | |
| Cash dividends of $0.68 per share | | Cash dividends of $0.68 per share | — | | | — | | | — | | | — | | | — | | | (723) | | | — | | | | — | | | (723) | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (28) | | | (28) | |
| | Other | Other | — | | | — | | | — | | | 1 | | | (2) | | | 1 | | | — | | | | — | | | — | | Other | — | | | — | | | — | | | 4 | | | (2) | | | — | | | — | | | | — | | | 2 | |
Balance at June 30, 2021 | 1,060 | | | (1) | | | 5,274 | | | 11,886 | | | (48) | | | 11,442 | | | (355) | | | | 4,547 | | | 32,746 | | |
Balance at June 30, 2022 | | Balance at June 30, 2022 | 1,064 | | | (1) | | | 5,288 | | | 12,033 | | | (51) | | | 11,645 | | | (184) | | | | 4,282 | | | 33,013 | |
Consolidated net income | Consolidated net income | — | | | — | | | — | | | — | | | — | | | 1,101 | | | — | | | | 5 | | | 1,106 | | Consolidated net income | — | | | — | | | — | | | — | | | — | | | 1,472 | | | — | | | | 12 | | | 1,484 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 36 | | | | — | | | 36 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 28 | | | | — | | | 28 | |
| Stock issued | Stock issued | 1 | | | — | | | 4 | | | 34 | | | — | | | — | | | — | | | | — | | | 38 | | Stock issued | 26 | | | — | | | 129 | | | 1,613 | | | — | | | — | | | — | | | | — | | | 1,742 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | | — | | | 22 | | Stock-based compensation | — | | | — | | | — | | | 15 | | | — | | | — | | | — | | | | — | | | 15 | |
| Cash dividends of $0.66 per share | — | | | — | | | — | | | — | | | — | | | (700) | | | — | | | | — | | | (700) | | |
Cash dividends of $0.68 per share | | Cash dividends of $0.68 per share | — | | | — | | | — | | | — | | | — | | | (741) | | | — | | | | — | | | (741) | |
| Capital contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 72 | | | 72 | | |
| Distributions to noncontrolling interests | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (94) | | | (94) | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (57) | | | (57) | |
| Other | Other | — | | | — | | | — | | | (10) | | | 2 | | | 1 | | | — | | | | — | | | (7) | | Other | — | | | — | | | — | | | (4) | | | (1) | | | (2) | | | (1) | | | | — | | | (8) | |
Balance at September 30, 2021 | 1,061 | | | (1) | | | $ | 5,278 | | | $ | 11,932 | | | $ | (46) | | | $ | 11,844 | | | $ | (319) | | | | $ | 4,530 | | | $ | 33,219 | | |
Balance at September 30, 2022 | | Balance at September 30, 2022 | 1,090 | | | (1) | | | $ | 5,417 | | | $ | 13,657 | | | $ | (52) | | | $ | 12,374 | | | $ | (157) | | | | $ | 4,237 | | | $ | 35,476 | |
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated 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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Retail revenues | Retail revenues | $ | 1,651 | | | $ | 1,575 | | | $ | 4,357 | | | $ | 4,003 | | Retail revenues | $ | 2,008 | | | $ | 1,651 | | | $ | 5,015 | | | $ | 4,357 | |
Wholesale revenues, non-affiliates | Wholesale revenues, non-affiliates | 107 | | | 73 | | | 285 | | | 184 | | Wholesale revenues, non-affiliates | 250 | | | 107 | | | 522 | | | 285 | |
Wholesale revenues, affiliates | Wholesale revenues, affiliates | 53 | | | 11 | | | 109 | | | 36 | | Wholesale revenues, affiliates | 70 | | | 53 | | | 170 | | | 109 | |
Other revenues | Other revenues | 93 | | | 70 | | | 268 | | | 222 | | Other revenues | 116 | | | 93 | | | 316 | | | 268 | |
Total operating revenues | Total operating revenues | 1,904 | | | 1,729 | | | 5,019 | | | 4,445 | | Total operating revenues | 2,444 | | | 1,904 | | | 6,023 | | | 5,019 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Fuel | Fuel | 373 | | | 306 | | | 927 | | | 721 | | Fuel | 666 | | | 373 | | | 1,399 | | | 927 | |
Purchased power, non-affiliates | Purchased power, non-affiliates | 76 | | | 64 | | | 173 | | | 153 | | Purchased power, non-affiliates | 185 | | | 76 | | | 347 | | | 173 | |
Purchased power, affiliates | Purchased power, affiliates | 45 | | | 44 | | | 114 | | | 93 | | Purchased power, affiliates | 113 | | | 45 | | | 260 | | | 114 | |
Other operations and maintenance | Other operations and maintenance | 401 | | | 387 | | | 1,175 | | | 1,078 | | Other operations and maintenance | 418 | | | 401 | | | 1,270 | | | 1,175 | |
Depreciation and amortization | Depreciation and amortization | 214 | | | 205 | | | 640 | | | 606 | | Depreciation and amortization | 220 | | | 214 | | | 652 | | | 640 | |
Taxes other than income taxes | Taxes other than income taxes | 99 | | | 103 | | | 303 | | | 311 | | Taxes other than income taxes | 106 | | | 99 | | | 309 | | | 303 | |
Total operating expenses | Total operating expenses | 1,208 | | | 1,109 | | | 3,332 | | | 2,962 | | Total operating expenses | 1,708 | | | 1,208 | | | 4,237 | | | 3,332 | |
Operating Income | Operating Income | 696 | | | 620 | | | 1,687 | | | 1,483 | | Operating Income | 736 | | | 696 | | | 1,786 | | | 1,687 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | 14 | | | 12 | | | 38 | | | 34 | | Allowance for equity funds used during construction | 18 | | | 14 | | | 51 | | | 38 | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (84) | | | (84) | | | (252) | | | (255) | | Interest expense, net of amounts capitalized | (98) | | | (84) | | | (278) | | | (252) | |
Other income (expense), net | Other income (expense), net | 29 | | | 30 | | | 93 | | | 78 | | Other income (expense), net | 38 | | | 29 | | | 101 | | | 93 | |
Total other income and (expense) | Total other income and (expense) | (41) | | | (42) | | | (121) | | | (143) | | Total other income and (expense) | (42) | | | (41) | | | (126) | | | (121) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 655 | | | 578 | | | 1,566 | | | 1,340 | | Earnings Before Income Taxes | 694 | | | 655 | | | 1,660 | | | 1,566 | |
Income taxes | Income taxes | 152 | | | 130 | | | 366 | | | 307 | | Income taxes | 166 | | | 152 | | | 394 | | | 366 | |
Net Income | Net Income | 503 | | | 448 | | | 1,200 | | | 1,033 | | Net Income | 528 | | | 503 | | | 1,266 | | | 1,200 | |
Dividends on Preferred Stock | Dividends on Preferred Stock | 4 | | | 4 | | | 11 | | | 11 | | Dividends on Preferred Stock | 3 | | | 4 | | | 10 | | | 11 | |
Net Income After Dividends on Preferred Stock | Net Income After Dividends on Preferred Stock | $ | 499 | | | $ | 444 | | | $ | 1,189 | | | $ | 1,022 | | Net Income After Dividends on Preferred Stock | $ | 525 | | | $ | 499 | | | $ | 1,256 | | | $ | 1,189 | |
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Net Income | Net Income | $ | 503 | | | $ | 448 | | | $ | 1,200 | | | $ | 1,033 | | Net Income | $ | 528 | | | $ | 503 | | | $ | 1,266 | | | $ | 1,200 | |
Other comprehensive income (loss): | | |
Other comprehensive income: | | Other comprehensive income: | |
Qualifying hedges: | Qualifying hedges: | | Qualifying hedges: | |
Changes in fair value, net of tax of $1, $—, $1, and $—, respectively | 4 | | | — | | | 3 | | | — | | |
Changes in fair value, net of tax of $—, $1, $—, and $1, respectively | | Changes in fair value, net of tax of $—, $1, $—, and $1, respectively | 1 | | | 4 | | | (1) | | | 3 | |
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $1, respectively | Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $1, respectively | 1 | | | 1 | | | 3 | | | 3 | | Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $1, respectively | 1 | | | 1 | | | 3 | | | 3 | |
Total other comprehensive income (loss) | 5 | | | 1 | | | 6 | | | 3 | | |
Total other comprehensive income | | Total other comprehensive income | 2 | | | 5 | | | 2 | | | 6 | |
Comprehensive Income | Comprehensive Income | $ | 508 | | | $ | 449 | | | $ | 1,206 | | | $ | 1,036 | | Comprehensive Income | $ | 530 | | | $ | 508 | | | $ | 1,268 | | | $ | 1,206 | |
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Net income | Net income | $ | 1,200 | | | $ | 1,033 | | Net income | $ | 1,266 | | | $ | 1,200 | |
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, total | Depreciation and amortization, total | 748 | | | 731 | | Depreciation and amortization, total | 817 | | | 748 | |
Deferred income taxes | Deferred income taxes | 104 | | | 71 | | Deferred income taxes | 210 | | | 104 | |
| Pension, postretirement, and other employee benefits | Pension, postretirement, and other employee benefits | (74) | | | (71) | | Pension, postretirement, and other employee benefits | (85) | | | (74) | |
Settlement of asset retirement obligations | Settlement of asset retirement obligations | (152) | | | (157) | | Settlement of asset retirement obligations | (139) | | | (152) | |
| Retail fuel cost under recovery – long-term | | Retail fuel cost under recovery – long-term | (413) | | | — | |
| Other, net | Other, net | (51) | | | 33 | | Other, net | (98) | | | (51) | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | (128) | | | (130) | | -Receivables | (296) | | | (128) | |
-Fossil fuel stock | -Fossil fuel stock | 91 | | | 4 | | -Fossil fuel stock | (40) | | | 91 | |
-Prepayments | -Prepayments | (24) | | | (32) | | -Prepayments | (34) | | | (24) | |
-Materials and supplies | (13) | | | (55) | | |
| -Retail fuel cost under recovery | -Retail fuel cost under recovery | (79) | | | — | | -Retail fuel cost under recovery | (93) | | | (79) | |
-Other current assets | -Other current assets | (19) | | | (35) | | -Other current assets | (41) | | | (32) | |
-Accounts payable | -Accounts payable | (230) | | | (248) | | -Accounts payable | (22) | | | (230) | |
-Accrued taxes | -Accrued taxes | 178 | | | 142 | | -Accrued taxes | 110 | | | 178 | |
-Accrued compensation | (37) | | | (55) | | |
-Retail fuel cost over recovery | (18) | | | 74 | | |
| | -Other current liabilities | -Other current liabilities | (77) | | | (76) | | -Other current liabilities | (70) | | | (132) | |
Net cash provided from operating activities | Net cash provided from operating activities | 1,419 | | | 1,229 | | Net cash provided from operating activities | 1,072 | | | 1,419 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Property additions | Property additions | (1,235) | | | (1,460) | | Property additions | (1,483) | | | (1,235) | |
Nuclear decommissioning trust fund purchases | Nuclear decommissioning trust fund purchases | (536) | | | (213) | | Nuclear decommissioning trust fund purchases | (273) | | | (536) | |
Nuclear decommissioning trust fund sales | Nuclear decommissioning trust fund sales | 536 | | | 213 | | Nuclear decommissioning trust fund sales | 273 | | | 536 | |
Cost of removal, net of salvage | Cost of removal, net of salvage | (93) | | | (68) | | Cost of removal, net of salvage | (163) | | | (93) | |
Change in construction payables | 12 | | | (46) | | |
| Other investing activities | Other investing activities | (19) | | | (17) | | Other investing activities | 5 | | | (7) | |
Net cash used for investing activities | Net cash used for investing activities | (1,335) | | | (1,591) | | Net cash used for investing activities | (1,641) | | | (1,335) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
| Proceeds — | | |
Senior notes | 600 | | | 600 | | |
| Pollution control revenue bonds | — | | | 87 | | |
Proceeds — Senior notes | | Proceeds — Senior notes | 1,700 | | | 600 | |
| | Redemptions — | Redemptions — | | Redemptions — | |
| Senior notes | Senior notes | (200) | | | — | | Senior notes | (550) | | | (200) | |
Pollution control revenue bonds | — | | | (87) | | |
| Other long-term debt | Other long-term debt | (206) | | | — | | Other long-term debt | — | | | (206) | |
| Capital contributions from parent company | Capital contributions from parent company | 630 | | | 649 | | Capital contributions from parent company | 660 | | | 630 | |
Payment of common stock dividends | Payment of common stock dividends | (738) | | | (718) | | Payment of common stock dividends | (762) | | | (738) | |
Other financing activities | Other financing activities | (30) | | | (26) | | Other financing activities | (81) | | | (30) | |
Net cash provided from financing activities | Net cash provided from financing activities | 56 | | | 505 | | Net cash provided from financing activities | 967 | | | 56 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 140 | | | 143 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | 398 | | | 140 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 530 | | | 894 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 1,060 | | | 530 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 670 | | | $ | 1,037 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 1,458 | | | $ | 670 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid during the period for — | Cash paid during the period for — | | Cash paid during the period for — | |
Interest (net of $11 capitalized for both 2021 and 2020) | $ | 246 | | | $ | 249 | | |
Interest (net of $14 and $11 capitalized for 2022 and 2021, respectively) | | Interest (net of $14 and $11 capitalized for 2022 and 2021, respectively) | $ | 278 | | | $ | 246 | |
Income taxes, net | Income taxes, net | 183 | | | 203 | | Income taxes, net | 178 | | | 183 | |
Noncash transactions — | Noncash transactions — | | Noncash transactions — | |
Accrued property additions at end of period | Accrued property additions at end of period | 178 | | | 154 | | Accrued property additions at end of period | 186 | | | 178 | |
Right-of-use assets obtained under leases | Right-of-use assets obtained under leases | 2 | | | 65 | | Right-of-use assets obtained under leases | 9 | | | 2 | |
|
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 670 | | | $ | 530 | | Cash and cash equivalents | | $ | 1,458 | | | $ | 1,060 | |
Receivables — | Receivables — | | Receivables — | |
Customer accounts | Customer accounts | | 497 | | | 429 | | Customer accounts | | 573 | | | 410 | |
Unbilled revenues | Unbilled revenues | | 151 | | | 152 | | Unbilled revenues | | 146 | | | 138 | |
| Affiliated | Affiliated | | 53 | | | 31 | | Affiliated | | 84 | | | 37 | |
Other accounts and notes | Other accounts and notes | | 101 | | | 66 | | Other accounts and notes | | 131 | | | 55 | |
Accumulated provision for uncollectible accounts | Accumulated provision for uncollectible accounts | | (18) | | | (43) | | Accumulated provision for uncollectible accounts | | (13) | | | (14) | |
Fossil fuel stock | Fossil fuel stock | | 144 | | | 235 | | Fossil fuel stock | | 199 | | | 159 | |
Materials and supplies | Materials and supplies | | 556 | | | 546 | | Materials and supplies | | 568 | | | 548 | |
| Prepaid expenses | Prepaid expenses | | 65 | | | 42 | | Prepaid expenses | | 67 | | | 41 | |
Other regulatory assets | Other regulatory assets | | 289 | | | 226 | | Other regulatory assets | | 298 | | | 208 | |
Other current assets | Other current assets | | 107 | | | 33 | | Other current assets | | 129 | | | 67 | |
Total current assets | Total current assets | | 2,615 | | | 2,247 | | Total current assets | | 3,640 | | | 2,709 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 32,787 | | | 31,816 | | In service | | 33,042 | | | 33,135 | |
Less: Accumulated provision for depreciation | Less: Accumulated provision for depreciation | | 10,298 | | | 10,009 | | Less: Accumulated provision for depreciation | | 10,393 | | | 10,313 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 22,489 | | | 21,807 | | Plant in service, net of depreciation | | 22,649 | | | 22,822 | |
| Other utility plant, net | | Other utility plant, net | | 602 | | | — | |
Nuclear fuel, at amortized cost | Nuclear fuel, at amortized cost | | 241 | | | 270 | | Nuclear fuel, at amortized cost | | 242 | | | 247 | |
Construction work in progress | Construction work in progress | | 1,129 | | | 866 | | Construction work in progress | | 1,524 | | | 1,147 | |
Total property, plant, and equipment | Total property, plant, and equipment | | 23,859 | | | 22,943 | | Total property, plant, and equipment | | 25,017 | | | 24,216 | |
Other Property and Investments: | Other Property and Investments: | | | | | Other Property and Investments: | | | | |
Nuclear decommissioning trusts, at fair value | Nuclear decommissioning trusts, at fair value | | 1,259 | | | 1,157 | | Nuclear decommissioning trusts, at fair value | | 1,067 | | | 1,325 | |
Equity investments in unconsolidated subsidiaries | Equity investments in unconsolidated subsidiaries | | 57 | | | 63 | | Equity investments in unconsolidated subsidiaries | | 58 | | | 57 | |
Miscellaneous property and investments | Miscellaneous property and investments | | 129 | | | 131 | | Miscellaneous property and investments | | 128 | | | 126 | |
Total other property and investments | Total other property and investments | | 1,445 | | | 1,351 | | Total other property and investments | | 1,253 | | | 1,508 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | | | Deferred Charges and Other Assets: | | | | |
Operating lease right-of-use assets, net of amortization | Operating lease right-of-use assets, net of amortization | | 119 | | | 151 | | Operating lease right-of-use assets, net of amortization | | 70 | | | 108 | |
Deferred charges related to income taxes | Deferred charges related to income taxes | | 238 | | | 235 | | Deferred charges related to income taxes | | 248 | | | 240 | |
| Prepaid pension and other postretirement benefit costs | | Prepaid pension and other postretirement benefit costs | | 605 | | | 513 | |
| Regulatory assets – asset retirement obligations | Regulatory assets – asset retirement obligations | | 1,580 | | | 1,441 | | Regulatory assets – asset retirement obligations | | 1,952 | | | 1,547 | |
Other regulatory assets, deferred | Other regulatory assets, deferred | | 2,100 | | | 2,162 | | Other regulatory assets, deferred | | 2,048 | | | 1,807 | |
Other deferred charges and assets | Other deferred charges and assets | | 348 | | | 273 | | Other deferred charges and assets | | 413 | | | 334 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 4,385 | | | 4,262 | | Total deferred charges and other assets | | 5,336 | | | 4,549 | |
Total Assets | Total Assets | | $ | 32,304 | | | $ | 30,803 | | Total Assets | | $ | 35,246 | | | $ | 32,982 | |
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholder's Equity | Liabilities and Stockholder's Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholder's Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 616 | | | $ | 311 | | Securities due within one year | | $ | 202 | | | $ | 751 | |
| Accounts payable — | Accounts payable — | | Accounts payable — | |
Affiliated | Affiliated | | 299 | | | 316 | | Affiliated | | 401 | | | 309 | |
Other | Other | | 370 | | | 545 | | Other | | 376 | | | 459 | |
Customer deposits | Customer deposits | | 106 | | | 104 | | Customer deposits | | 106 | | | 106 | |
| Accrued taxes | Accrued taxes | | 331 | | | 152 | | Accrued taxes | | 209 | | | 98 | |
Accrued interest | Accrued interest | | 79 | | | 90 | | Accrued interest | | 86 | | | 100 | |
| Accrued compensation | Accrued compensation | | 191 | | | 212 | | Accrued compensation | | 200 | | | 219 | |
| Asset retirement obligations | Asset retirement obligations | | 308 | | | 254 | | Asset retirement obligations | | 327 | | | 320 | |
Other regulatory liabilities | Other regulatory liabilities | | 72 | | | 108 | | Other regulatory liabilities | | 89 | | | 215 | |
Other current liabilities | Other current liabilities | | 122 | | | 107 | | Other current liabilities | | 97 | | | 125 | |
Total current liabilities | Total current liabilities | | 2,494 | | | 2,199 | | Total current liabilities | | 2,093 | | | 2,702 | |
Long-term Debt | Long-term Debt | | 8,443 | | | 8,558 | | Long-term Debt | | 10,628 | | | 8,936 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 3,425 | | | 3,273 | | Accumulated deferred income taxes | | 3,829 | | | 3,573 | |
Deferred credits related to income taxes | Deferred credits related to income taxes | | 1,973 | | | 2,016 | | Deferred credits related to income taxes | | 1,930 | | | 1,968 | |
Accumulated deferred ITCs | Accumulated deferred ITCs | | 89 | | | 94 | | Accumulated deferred ITCs | | 82 | | | 88 | |
Employee benefit obligations | Employee benefit obligations | | 136 | | | 214 | | Employee benefit obligations | | 171 | | | 171 | |
Operating lease obligations | Operating lease obligations | | 69 | | | 119 | | Operating lease obligations | | 65 | | | 66 | |
Asset retirement obligations, deferred | Asset retirement obligations, deferred | | 4,015 | | | 3,720 | | Asset retirement obligations, deferred | | 3,987 | | | 4,014 | |
Other cost of removal obligations | Other cost of removal obligations | | 261 | | | 335 | | Other cost of removal obligations | | 57 | | | 192 | |
Other regulatory liabilities, deferred | Other regulatory liabilities, deferred | | 139 | | | 124 | | Other regulatory liabilities, deferred | | 226 | | | 210 | |
| Other deferred credits and liabilities | Other deferred credits and liabilities | | 66 | | | 50 | | Other deferred credits and liabilities | | 62 | | | 58 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 10,173 | | | 9,945 | | Total deferred credits and other liabilities | | 10,409 | | | 10,340 | |
Total Liabilities | Total Liabilities | | 21,110 | | | 20,702 | | Total Liabilities | | 23,130 | | | 21,978 | |
Redeemable Preferred Stock | Redeemable Preferred Stock | | 291 | | | 291 | | Redeemable Preferred Stock | | 242 | | | 291 | |
| Common Stockholder's Equity (See accompanying statements) | Common Stockholder's Equity (See accompanying statements) | | 10,903 | | | 9,810 | | Common Stockholder's Equity (See accompanying statements) | | 11,874 | | | 10,713 | |
Total Liabilities and Stockholder's Equity | Total Liabilities and Stockholder's Equity | | $ | 32,304 | | | $ | 30,803 | | Total Liabilities and Stockholder's Equity | | $ | 35,246 | | | $ | 32,982 | |
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
| | | Number of Common Shares Issued | | Common Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Number of Common Shares Issued | | Common Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| (in millions) | |
Balance at December 31, 2019 | 31 | | | $ | 1,222 | | | $ | 4,755 | | | $ | 3,001 | | | $ | (23) | | | $ | 8,955 | | |
Net income after dividends on preferred stock | — | | | — | | | — | | | 280 | | | — | | | 280 | | |
| Capital contributions from parent company | — | | | — | | | 612 | | | — | | | — | | | 612 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | |
Cash dividends on common stock | — | | | — | | | — | | | (239) | | | — | | | (239) | | |
| Balance at March 31, 2020 | 31 | | | 1,222 | | | 5,367 | | | 3,042 | | | (22) | | | 9,609 | | |
Net income after dividends on preferred stock | — | | | — | | | — | | | 298 | | | — | | | 298 | | |
| Capital contributions from parent company | — | | | — | | | 1 | | | — | | | — | | | 1 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | |
Cash dividends on common stock | — | | | — | | | — | | | (239) | | | — | | | (239) | | |
| Balance at June 30, 2020 | 31 | | | 1,222 | | | 5,368 | | | 3,101 | | | (21) | | | 9,670 | | |
Net income after dividends on preferred stock | — | | | — | | | — | | | 444 | | | — | | | 444 | | |
| Capital contributions from parent company | — | | | — | | | 40 | | | — | | | — | | | 40 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | |
Cash dividends on common stock | — | | | — | | | — | | | (240) | | | — | | | (240) | | |
| Balance at September 30, 2020 | 31 | | | $ | 1,222 | | | $ | 5,408 | | | $ | 3,305 | | | $ | (20) | | | $ | 9,915 | | |
| | | (in millions) |
Balance at December 31, 2020 | Balance at December 31, 2020 | 31 | | | $ | 1,222 | | | $ | 5,413 | | | $ | 3,194 | | | $ | (19) | | | $ | 9,810 | | Balance at December 31, 2020 | 31 | | | $ | 1,222 | | | $ | 5,413 | | | $ | 3,194 | | | $ | (19) | | | $ | 9,810 | |
Net income after dividends on preferred stock | Net income after dividends on preferred stock | — | | | — | | | — | | | 359 | | | — | | | 359 | | Net income after dividends on preferred stock | — | | | — | | | — | | | 359 | | | — | | | 359 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 602 | | | — | | | — | | | 602 | | Capital contributions from parent company | — | | | — | | | 602 | | | — | | | — | | | 602 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | |
| Balance at March 31, 2021 | Balance at March 31, 2021 | 31 | | | 1,222 | | | 6,015 | | | 3,307 | | | (18) | | | 10,526 | | Balance at March 31, 2021 | 31 | | | 1,222 | | | 6,015 | | | 3,307 | | | (18) | | | 10,526 | |
Net income after dividends on preferred stock | Net income after dividends on preferred stock | — | | | — | | | — | | | 331 | | | — | | | 331 | | Net income after dividends on preferred stock | — | | | — | | | — | | | 331 | | | — | | | 331 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 26 | | | — | | | — | | | 26 | | Capital contributions from parent company | — | | | — | | | 26 | | | — | | | — | | | 26 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | |
Other | Other | — | | | — | | | — | | | (1) | | | — | | | (1) | | Other | — | | | — | | | — | | | (1) | | | — | | | (1) | |
Balance at June 30, 2021 | Balance at June 30, 2021 | 31 | | | 1,222 | | | 6,041 | | | 3,391 | | | (17) | | | 10,637 | | Balance at June 30, 2021 | 31 | | | 1,222 | | | 6,041 | | | 3,391 | | | (17) | | | 10,637 | |
Net income after dividends on preferred stock | Net income after dividends on preferred stock | — | | | — | | | — | | | 499 | | | — | | | 499 | | Net income after dividends on preferred stock | — | | | — | | | — | | | 499 | | | — | | | 499 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 9 | | | — | | | — | | | 9 | | Capital contributions from parent company | — | | | — | | | 9 | | | — | | | — | | | 9 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 5 | | | 5 | | Other comprehensive income | — | | | — | | | — | | | — | | | 5 | | | 5 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | | Cash dividends on common stock | — | | | — | | | — | | | (246) | | | — | | | (246) | |
Other | Other | — | | | — | | | — | | | — | | | (1) | | | (1) | | Other | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Balance at September 30, 2021 | Balance at September 30, 2021 | 31 | | | $ | 1,222 | | | $ | 6,050 | | | $ | 3,644 | | | $ | (13) | | | $ | 10,903 | | Balance at September 30, 2021 | 31 | | | $ | 1,222 | | | $ | 6,050 | | | $ | 3,644 | | | $ | (13) | | | $ | 10,903 | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 31 | | | $ | 1,222 | | | $ | 6,056 | | | $ | 3,448 | | | $ | (13) | | | $ | 10,713 | |
Net income after dividends on preferred stock | | Net income after dividends on preferred stock | — | | | — | | | — | | | 347 | | | — | | | 347 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 626 | | | — | | | — | | | 626 | |
| Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (254) | | | — | | | (254) | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | 31 | | | 1,222 | | | 6,682 | | | 3,541 | | | (13) | | | 11,432 | |
Net income after dividends on preferred stock | | Net income after dividends on preferred stock | — | | | — | | | — | | | 383 | | | — | | | 383 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 32 | | | — | | | — | | | 32 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (254) | | | — | | | (254) | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 31 | | | 1,222 | | | 6,714 | | | 3,670 | | | (12) | | | 11,594 | |
Net income after dividends on preferred stock | | Net income after dividends on preferred stock | — | | | — | | | — | | | 525 | | | — | | | 525 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 7 | | | — | | | — | | | 7 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (254) | | | — | | | (254) | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | 31 | | | $ | 1,222 | | | $ | 6,721 | | | $ | 3,941 | | | $ | (10) | | | $ | 11,874 | |
The accompanying notes as they relate to Alabama Power are an integral part of these condensed 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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Retail revenues | Retail revenues | $ | 2,652 | | | $ | 2,435 | | | $ | 6,465 | | | $ | 5,870 | | Retail revenues | $ | 3,703 | | | $ | 2,652 | | | $ | 8,629 | | | $ | 6,465 | |
Wholesale revenues | Wholesale revenues | 63 | | | 34 | | | 143 | | | 85 | | Wholesale revenues | 56 | | | 63 | | | 186 | | | 143 | |
| Other revenues | Other revenues | 141 | | | 148 | | | 442 | | | 416 | | Other revenues | 130 | | | 141 | | | 403 | | | 442 | |
Total operating revenues | Total operating revenues | 2,856 | | | 2,617 | | | 7,050 | | | 6,371 | | Total operating revenues | 3,889 | | | 2,856 | | | 9,218 | | | 7,050 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Fuel | Fuel | 432 | | | 368 | | | 1,088 | | | 826 | | Fuel | 841 | | | 432 | | | 1,887 | | | 1,088 | |
Purchased power, non-affiliates | Purchased power, non-affiliates | 173 | | | 146 | | | 461 | | | 409 | | Purchased power, non-affiliates | 304 | | | 173 | | | 700 | | | 461 | |
Purchased power, affiliates | Purchased power, affiliates | 288 | | | 142 | | | 573 | | | 393 | | Purchased power, affiliates | 571 | | | 288 | | | 1,100 | | | 573 | |
Other operations and maintenance | Other operations and maintenance | 544 | | | 483 | | | 1,558 | | | 1,411 | | Other operations and maintenance | 595 | | | 544 | | | 1,686 | | | 1,558 | |
Depreciation and amortization | Depreciation and amortization | 345 | | | 358 | | | 1,025 | | | 1,064 | | Depreciation and amortization | 359 | | | 345 | | | 1,066 | | | 1,025 | |
Taxes other than income taxes | Taxes other than income taxes | 130 | | | 123 | | | 365 | | | 344 | | Taxes other than income taxes | 155 | | | 130 | | | 420 | | | 365 | |
Estimated loss on Plant Vogtle Units 3 and 4 | Estimated loss on Plant Vogtle Units 3 and 4 | 264 | | | — | | | 772 | | | 149 | | Estimated loss on Plant Vogtle Units 3 and 4 | (70) | | | 264 | | | (18) | | | 772 | |
Total operating expenses | Total operating expenses | 2,176 | | | 1,620 | | | 5,842 | | | 4,596 | | Total operating expenses | 2,755 | | | 2,176 | | | 6,841 | | | 5,842 | |
Operating Income | Operating Income | 680 | | | 997 | | | 1,208 | | | 1,775 | | Operating Income | 1,134 | | | 680 | | | 2,377 | | | 1,208 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | 33 | | | 22 | | | 94 | | | 63 | | Allowance for equity funds used during construction | 37 | | | 33 | | | 102 | | | 94 | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (106) | | | (106) | | | (315) | | | (322) | | Interest expense, net of amounts capitalized | (123) | | | (106) | | | (347) | | | (315) | |
Other income (expense), net | Other income (expense), net | 42 | | | 32 | | | 124 | | | 93 | | Other income (expense), net | 36 | | | 42 | | | 140 | | | 124 | |
Total other income and (expense) | Total other income and (expense) | (31) | | | (52) | | | (97) | | | (166) | | Total other income and (expense) | (50) | | | (31) | | | (105) | | | (97) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 649 | | | 945 | | | 1,111 | | | 1,609 | | Earnings Before Income Taxes | 1,084 | | | 649 | | | 2,272 | | | 1,111 | |
Income taxes | Income taxes | 113 | | | 172 | | | 81 | | | 198 | | Income taxes | 226 | | | 113 | | | 421 | | | 81 | |
Net Income | Net Income | $ | 536 | | | $ | 773 | | | $ | 1,030 | | | $ | 1,411 | | Net Income | $ | 858 | | | $ | 536 | | | $ | 1,851 | | | $ | 1,030 | |
|
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) | | (in millions) |
Net Income | $ | 536 | | | $ | 773 | | | $ | 1,030 | | | $ | 1,411 | |
Other comprehensive income (loss): | | | | | | | |
Qualifying hedges: | | | | | | | |
Changes in fair value, net of tax of $—, $—, $—, and $(1), respectively | — | | | — | | | — | | | (2) | |
Reclassification adjustment for amounts included in net income, net of tax of $1, $—, $2, and $2, respectively | 2 | | | 2 | | | 5 | | | 4 | |
Total other comprehensive income (loss) | 2 | | | 2 | | | 5 | | | 2 | |
Comprehensive Income | $ | 538 | | | $ | 775 | | | $ | 1,035 | | | $ | 1,413 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) | | (in millions) |
Net Income | $ | 858 | | | $ | 536 | | | $ | 1,851 | | | $ | 1,030 | |
Other comprehensive income: | | | | | | | |
Qualifying hedges: | | | | | | | |
Changes in fair value, net of tax of $—, $—, $8, and $—, respectively | — | | | — | | | 23 | | | — | |
Reclassification adjustment for amounts included in net income, net of tax of $—, $1, $1, and $2, respectively | 1 | | | 2 | | | 4 | | | 5 | |
Total other comprehensive income | 1 | | | 2 | | | 27 | | | 5 | |
Comprehensive Income | $ | 859 | | | $ | 538 | | | $ | 1,878 | | | $ | 1,035 | |
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Net income | Net income | $ | 1,030 | | | $ | 1,411 | | Net income | $ | 1,851 | | | $ | 1,030 | |
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, total | Depreciation and amortization, total | 1,164 | | | 1,206 | | Depreciation and amortization, total | 1,211 | | | 1,164 | |
Deferred income taxes | Deferred income taxes | (299) | | | (167) | | Deferred income taxes | 266 | | | (299) | |
Utilization of federal investment tax credits | | Utilization of federal investment tax credits | 49 | | | 19 | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | (94) | | | (63) | | Allowance for equity funds used during construction | (102) | | | (94) | |
| Pension, postretirement, and other employee benefits | Pension, postretirement, and other employee benefits | (112) | | | (98) | | Pension, postretirement, and other employee benefits | (178) | | | (112) | |
| Settlement of asset retirement obligations | Settlement of asset retirement obligations | (154) | | | (130) | | Settlement of asset retirement obligations | (149) | | | (154) | |
Storm damage accruals | Storm damage accruals | 160 | | | 160 | | Storm damage accruals | 160 | | | 160 | |
Retail fuel cost under recovery – long-term | Retail fuel cost under recovery – long-term | (203) | | | — | | Retail fuel cost under recovery – long-term | (1,287) | | | (203) | |
| Estimated loss on Plant Vogtle Units 3 and 4 | Estimated loss on Plant Vogtle Units 3 and 4 | 772 | | | 149 | | Estimated loss on Plant Vogtle Units 3 and 4 | (18) | | | 772 | |
Other, net | Other, net | 88 | | | 11 | | Other, net | (71) | | | 70 | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | (85) | | | (168) | | -Receivables | (321) | | | (85) | |
-Fossil fuel stock | -Fossil fuel stock | 77 | | | 4 | | -Fossil fuel stock | (23) | | | 77 | |
| -Materials and supplies | -Materials and supplies | (60) | | | (74) | | -Materials and supplies | (67) | | | (60) | |
| -Contract assets | | -Contract assets | (51) | | | (32) | |
-Other current assets | -Other current assets | (51) | | | (69) | | -Other current assets | (72) | | | (20) | |
-Accounts payable | -Accounts payable | 164 | | | 25 | | -Accounts payable | 211 | | | 164 | |
-Accrued taxes | -Accrued taxes | 154 | | | 44 | | -Accrued taxes | 151 | | | 154 | |
| -Retail fuel cost over recovery | -Retail fuel cost over recovery | (113) | | | 84 | | -Retail fuel cost over recovery | — | | | (113) | |
-Customer refunds | (5) | | | (162) | | |
| -Other current liabilities | -Other current liabilities | (83) | | | (38) | | -Other current liabilities | (78) | | | (88) | |
Net cash provided from operating activities | Net cash provided from operating activities | 2,350 | | | 2,125 | | Net cash provided from operating activities | 1,482 | | | 2,350 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Property additions | Property additions | (2,411) | | | (2,519) | | Property additions | (2,658) | | | (2,411) | |
Nuclear decommissioning trust fund purchases | Nuclear decommissioning trust fund purchases | (766) | | | (500) | | Nuclear decommissioning trust fund purchases | (585) | | | (766) | |
Nuclear decommissioning trust fund sales | Nuclear decommissioning trust fund sales | 761 | | | 495 | | Nuclear decommissioning trust fund sales | 581 | | | 761 | |
Cost of removal, net of salvage | Cost of removal, net of salvage | (99) | | | (93) | | Cost of removal, net of salvage | (250) | | | (99) | |
Change in construction payables, net of joint owner portion | Change in construction payables, net of joint owner portion | (68) | | | (14) | | Change in construction payables, net of joint owner portion | 148 | | | (68) | |
Payments pursuant to LTSAs | (38) | | | (44) | | |
| Contributions in aid of construction | Contributions in aid of construction | 71 | | | 18 | | Contributions in aid of construction | 102 | | | 71 | |
Proceeds from dispositions | Proceeds from dispositions | 4 | | | 143 | | Proceeds from dispositions | 56 | | | 4 | |
| Other investing activities | Other investing activities | (26) | | | (12) | | Other investing activities | (47) | | | (64) | |
Net cash used for investing activities | Net cash used for investing activities | (2,572) | | | (2,526) | | Net cash used for investing activities | (2,653) | | | (2,572) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
Decrease in notes payable, net | (60) | | | (115) | | |
Increase (decrease) in notes payable, net | | Increase (decrease) in notes payable, net | 415 | | | (60) | |
Proceeds — | Proceeds — | | Proceeds — | |
Senior notes | Senior notes | 750 | | | 1,500 | | Senior notes | 1,500 | | | 750 | |
Pollution control revenue bonds | Pollution control revenue bonds | 122 | | | 53 | | Pollution control revenue bonds | — | | | 122 | |
FFB loan | FFB loan | 371 | | | 519 | | FFB loan | — | | | 371 | |
Short-term borrowings | Short-term borrowings | — | | | 250 | | Short-term borrowings | 650 | | | — | |
| Redemptions and repurchases — | Redemptions and repurchases — | | Redemptions and repurchases — | |
| Senior notes | Senior notes | (325) | | | (950) | | Senior notes | (400) | | | (325) | |
Pollution control revenue bonds | Pollution control revenue bonds | (69) | | | (148) | | Pollution control revenue bonds | (53) | | | (69) | |
FFB loan | | FFB loan | (66) | | | (75) | |
Short-term borrowings | Short-term borrowings | — | | | (375) | | Short-term borrowings | (250) | | | — | |
FFB loan | (75) | | | (55) | | |
| Other long-term debt | | Other long-term debt | (125) | | | — | |
| Capital contributions from parent company | Capital contributions from parent company | 1,054 | | | 1,379 | | Capital contributions from parent company | 813 | | | 1,054 | |
Payment of common stock dividends | Payment of common stock dividends | (1,237) | | | (1,156) | | Payment of common stock dividends | (1,268) | | | (1,237) | |
| Other financing activities | Other financing activities | (26) | | | (35) | | Other financing activities | (45) | | | (26) | |
Net cash provided from financing activities | Net cash provided from financing activities | 505 | | | 867 | | Net cash provided from financing activities | 1,171 | | | 505 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 283 | | | 466 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | — | | | 283 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 9 | | | 52 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 33 | | | 9 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 292 | | | $ | 518 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 33 | | | $ | 292 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid during the period for — | Cash paid during the period for — | | Cash paid during the period for — | |
Interest (net of $47 and $34 capitalized for 2021 and 2020, respectively) | $ | 325 | | | $ | 316 | | |
Interest (net of $52 and $47 capitalized for 2022 and 2021, respectively) | | Interest (net of $52 and $47 capitalized for 2022 and 2021, respectively) | $ | 332 | | | $ | 325 | |
Income taxes, net | Income taxes, net | 237 | | | 311 | | Income taxes, net | 151 | | | 237 | |
Noncash transactions — | Noncash transactions — | | Noncash transactions — | |
Accrued property additions at end of period | Accrued property additions at end of period | 477 | | | 523 | | Accrued property additions at end of period | 609 | | | 477 | |
Right-of-use assets obtained under operating leases | Right-of-use assets obtained under operating leases | (3) | | | 30 | | Right-of-use assets obtained under operating leases | 7 | | | (3) | |
| Right-of-use assets obtained under finance leases | | Right-of-use assets obtained under finance leases | 112 | | | — | |
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 292 | | | $ | 9 | | Cash and cash equivalents | | $ | 33 | | | $ | 33 | |
| Receivables — | Receivables — | | Receivables — | |
Customer accounts | | 689 | | | 621 | | |
Customer accounts, net | | Customer accounts, net | | 866 | | | 547 | |
Unbilled revenues | Unbilled revenues | | 258 | | | 233 | | Unbilled revenues | | 267 | | | 231 | |
| Joint owner accounts | Joint owner accounts | | 106 | | | 123 | | Joint owner accounts | | 64 | | | 116 | |
| Affiliated | Affiliated | | 41 | | | 21 | | Affiliated | | 66 | | | 25 | |
Other accounts and notes | Other accounts and notes | | 46 | | | 67 | | Other accounts and notes | | 30 | | | 44 | |
Accumulated provision for uncollectible accounts | | (2) | | | (26) | | |
| Fossil fuel stock | Fossil fuel stock | | 201 | | | 278 | | Fossil fuel stock | | 272 | | | 248 | |
Materials and supplies | Materials and supplies | | 647 | | | 592 | | Materials and supplies | | 713 | | | 670 | |
| Regulatory assets – storm damage | | 102 | | | 213 | | |
| Regulatory assets – asset retirement obligations | Regulatory assets – asset retirement obligations | | 191 | | | 166 | | Regulatory assets – asset retirement obligations | | 244 | | | 178 | |
Assets from risk management activities | | Assets from risk management activities | | 88 | | | 48 | |
Other regulatory assets | Other regulatory assets | | 243 | | | 248 | | Other regulatory assets | | 299 | | | 289 | |
Other current assets | Other current assets | | 255 | | | 143 | | Other current assets | | 212 | | | 130 | |
Total current assets | Total current assets | | 3,069 | | | 2,688 | | Total current assets | | 3,154 | | | 2,559 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 40,831 | | | 39,682 | | In service | | 41,159 | | | 41,332 | |
Less: Accumulated provision for depreciation | Less: Accumulated provision for depreciation | | 12,743 | | | 12,251 | | Less: Accumulated provision for depreciation | | 12,942 | | | 12,854 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 28,088 | | | 27,431 | | Plant in service, net of depreciation | | 28,217 | | | 28,478 | |
| Nuclear fuel, at amortized cost | Nuclear fuel, at amortized cost | | 564 | | | 548 | | Nuclear fuel, at amortized cost | | 598 | | | 577 | |
Construction work in progress | Construction work in progress | | 7,337 | | | 6,857 | | Construction work in progress | | 8,053 | | | 6,688 | |
Total property, plant, and equipment | Total property, plant, and equipment | | 35,989 | | | 34,836 | | Total property, plant, and equipment | | 36,868 | | | 35,743 | |
Other Property and Investments: | Other Property and Investments: | | | | | Other Property and Investments: | | | | |
Nuclear decommissioning trusts, at fair value | Nuclear decommissioning trusts, at fair value | | 1,187 | | | 1,145 | | Nuclear decommissioning trusts, at fair value | | 964 | | | 1,217 | |
Equity investments in unconsolidated subsidiaries | Equity investments in unconsolidated subsidiaries | | 50 | | | 51 | | Equity investments in unconsolidated subsidiaries | | 51 | | | 50 | |
Miscellaneous property and investments | Miscellaneous property and investments | | 66 | | | 63 | | Miscellaneous property and investments | | 87 | | | 69 | |
Total other property and investments | Total other property and investments | | 1,303 | | | 1,259 | | Total other property and investments | | 1,102 | | | 1,336 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | | | Deferred Charges and Other Assets: | | | | |
Operating lease right-of-use assets, net of amortization | Operating lease right-of-use assets, net of amortization | | 1,193 | | | 1,308 | | Operating lease right-of-use assets, net of amortization | | 1,034 | | | 1,157 | |
Deferred charges related to income taxes | Deferred charges related to income taxes | | 544 | | | 527 | | Deferred charges related to income taxes | | 573 | | | 550 | |
| Prepaid pension costs | | Prepaid pension costs | | 697 | | | 563 | |
Deferred under recovered fuel clause revenues | | Deferred under recovered fuel clause revenues | | 1,697 | | | 410 | |
Regulatory assets – asset retirement obligations, deferred | Regulatory assets – asset retirement obligations, deferred | | 3,607 | | | 3,291 | | Regulatory assets – asset retirement obligations, deferred | | 4,323 | | | 3,688 | |
Other regulatory assets, deferred | Other regulatory assets, deferred | | 2,515 | | | 2,692 | | Other regulatory assets, deferred | | 2,579 | | | 1,964 | |
Other deferred charges and assets | Other deferred charges and assets | | 712 | | | 479 | | Other deferred charges and assets | | 519 | | | 491 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 8,571 | | | 8,297 | | Total deferred charges and other assets | | 11,422 | | | 8,823 | |
Total Assets | Total Assets | | $ | 48,932 | | | $ | 47,080 | | Total Assets | | $ | 52,546 | | | $ | 48,461 | |
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholder's Equity | Liabilities and Stockholder's Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholder's Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 672 | | | $ | 542 | | Securities due within one year | | $ | 900 | | | $ | 675 | |
Notes payable | Notes payable | | — | | | 60 | | Notes payable | | 814 | | | — | |
Accounts payable — | Accounts payable — | | Accounts payable — | |
Affiliated | Affiliated | | 719 | | | 597 | | Affiliated | | 880 | | | 757 | |
Other | Other | | 761 | | | 753 | | Other | | 1,025 | | | 702 | |
Customer deposits | Customer deposits | | 263 | | | 276 | | Customer deposits | | 254 | | | 259 | |
| Accrued taxes | Accrued taxes | | 457 | | | 407 | | Accrued taxes | | 486 | | | 335 | |
Accrued interest | Accrued interest | | 98 | | | 130 | | Accrued interest | | 127 | | | 136 | |
| Accrued compensation | Accrued compensation | | 207 | | | 233 | | Accrued compensation | | 213 | | | 232 | |
Operating lease obligations | Operating lease obligations | | 153 | | | 151 | | Operating lease obligations | | 148 | | | 156 | |
Asset retirement obligations | Asset retirement obligations | | 333 | | | 287 | | Asset retirement obligations | | 309 | | | 317 | |
| Over recovered fuel clause revenues | | — | | | 113 | | |
| Other regulatory liabilities | Other regulatory liabilities | | 360 | | | 228 | | Other regulatory liabilities | | 197 | | | 280 | |
| Other current liabilities | Other current liabilities | | 198 | | | 254 | | Other current liabilities | | 243 | | | 254 | |
Total current liabilities | Total current liabilities | | 4,221 | | | 4,031 | | Total current liabilities | | 5,596 | | | 4,103 | |
Long-term Debt | Long-term Debt | | 13,064 | | | 12,428 | | Long-term Debt | | 13,831 | | | 13,109 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 3,222 | | | 3,272 | | Accumulated deferred income taxes | | 3,588 | | | 3,019 | |
Deferred credits related to income taxes | Deferred credits related to income taxes | | 2,386 | | | 2,588 | | Deferred credits related to income taxes | | 2,264 | | | 2,321 | |
Accumulated deferred ITCs | Accumulated deferred ITCs | | 321 | | | 273 | | Accumulated deferred ITCs | | 321 | | | 328 | |
Employee benefit obligations | Employee benefit obligations | | 461 | | | 586 | | Employee benefit obligations | | 370 | | | 402 | |
Operating lease obligations, deferred | Operating lease obligations, deferred | | 1,008 | | | 1,156 | | Operating lease obligations, deferred | | 854 | | | 999 | |
Asset retirement obligations, deferred | Asset retirement obligations, deferred | | 6,432 | | | 5,978 | | Asset retirement obligations, deferred | | 6,547 | | | 6,507 | |
| Other deferred credits and liabilities | Other deferred credits and liabilities | | 456 | | | 267 | | Other deferred credits and liabilities | | 518 | | | 439 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 14,286 | | | 14,120 | | Total deferred credits and other liabilities | | 14,462 | | | 14,015 | |
Total Liabilities | Total Liabilities | | 31,571 | | | 30,579 | | Total Liabilities | | 33,889 | | | 31,227 | |
| Common Stockholder's Equity (See accompanying statements) | Common Stockholder's Equity (See accompanying statements) | | 17,361 | | | 16,501 | | Common Stockholder's Equity (See accompanying statements) | | 18,657 | | | 17,234 | |
Total Liabilities and Stockholder's Equity | Total Liabilities and Stockholder's Equity | | $ | 48,932 | | | $ | 47,080 | | Total Liabilities and Stockholder's Equity | | $ | 52,546 | | | $ | 48,461 | |
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
| | | Number of Common Shares Issued | | Common Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | | Number of Common Shares Issued | | Common Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| (in millions) | |
Balance at December 31, 2019 | 9 | | | $ | 398 | | | $ | 10,962 | | | $ | 3,756 | | | $ | (51) | | | $ | 15,065 | | |
Net income | — | | | — | | | — | | | 331 | | | — | | | 331 | | |
| Capital contributions from parent company | — | | | — | | | 502 | | | — | | | — | | | 502 | | |
Other comprehensive income (loss) | — | | | — | | | — | | | — | | | (1) | | | (1) | | |
Cash dividends on common stock | — | | | — | | | — | | | (385) | | | — | | | (385) | | |
| Balance at March 31, 2020 | 9 | | | 398 | | | 11,464 | | | 3,702 | | | (52) | | | 15,512 | | |
Net income | — | | | — | | | — | | | 308 | | | — | | | 308 | | |
| Capital contributions from parent company | — | | | — | | | 1 | | | — | | | — | | | 1 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | | |
Cash dividends on common stock | — | | | — | | | — | | | (386) | | | — | | | (386) | | |
| Balance at June 30, 2020 | 9 | | | 398 | | | 11,465 | | | 3,624 | | | (50) | | | 15,437 | | |
Net income | — | | | — | | | — | | | 773 | | | — | | | 773 | | |
| Capital contributions from parent company | — | | | — | | | 880 | | | — | | | — | | | 880 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | | |
Cash dividends on common stock | — | | | — | | | — | | | (386) | | | — | | | (386) | | |
| Balance at September 30, 2020 | 9 | | | $ | 398 | | | $ | 12,345 | | | $ | 4,011 | | | $ | (48) | | | $ | 16,706 | | |
| | | (in millions) |
Balance at December 31, 2020 | Balance at December 31, 2020 | 9 | | | $ | 398 | | | $ | 12,361 | | | $ | 3,789 | | | $ | (47) | | | $ | 16,501 | | Balance at December 31, 2020 | 9 | | | $ | 398 | | | $ | 12,361 | | | $ | 3,789 | | | $ | (47) | | | $ | 16,501 | |
Net income | Net income | — | | | — | | | — | | | 351 | | | — | | | 351 | | Net income | — | | | — | | | — | | | 351 | | | — | | | 351 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 332 | | | — | | | — | | | 332 | | Capital contributions from parent company | — | | | — | | | 332 | | | — | | | — | | | 332 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | | Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (412) | | | — | | | (412) | | Cash dividends on common stock | — | | | — | | | — | | | (412) | | | — | | | (412) | |
| Balance at March 31, 2021 | Balance at March 31, 2021 | 9 | | | 398 | | | 12,693 | | | 3,728 | | | (45) | | | 16,774 | | Balance at March 31, 2021 | 9 | | | 398 | | | 12,693 | | | 3,728 | | | (45) | | | 16,774 | |
Net income | Net income | — | | | — | | | — | | | 143 | | | — | | | 143 | | Net income | — | | | — | | | — | | | 143 | | | — | | | 143 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 40 | | | — | | | — | | | 40 | | Capital contributions from parent company | — | | | — | | | 40 | | | — | | | — | | | 40 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (412) | | | — | | | (412) | | Cash dividends on common stock | — | | | — | | | — | | | (412) | | | — | | | (412) | |
| Balance at June 30, 2021 | Balance at June 30, 2021 | 9 | | | 398 | | | 12,733 | | | 3,459 | | | (44) | | | 16,546 | | Balance at June 30, 2021 | 9 | | | 398 | | | 12,733 | | | 3,459 | | | (44) | | | 16,546 | |
Net income | Net income | — | | | — | | | — | | | 536 | | | — | | | 536 | | Net income | — | | | — | | | — | | | 536 | | | — | | | 536 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 690 | | | — | | | — | | | 690 | | Capital contributions from parent company | — | | | — | | | 690 | | | — | | | — | | | 690 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | | Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (413) | | | — | | | (413) | | Cash dividends on common stock | — | | | — | | | — | | | (413) | | | — | | | (413) | |
| Balance at September 30, 2021 | Balance at September 30, 2021 | 9 | | | $ | 398 | | | $ | 13,423 | | | $ | 3,582 | | | $ | (42) | | | $ | 17,361 | | Balance at September 30, 2021 | 9 | | | $ | 398 | | | $ | 13,423 | | | $ | 3,582 | | | $ | (42) | | | $ | 17,361 | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 9 | | | $ | 398 | | | $ | 14,153 | | | $ | 2,724 | | | $ | (41) | | | $ | 17,234 | |
Net income | | Net income | — | | | — | | | — | | | 385 | | | — | | | 385 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 443 | | | — | | | — | | | 443 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | 10 | | | 10 | |
Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (423) | | | — | | | (423) | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | 9 | | | 398 | | | 14,596 | | | 2,686 | | | (31) | | | 17,649 | |
Net income | | Net income | — | | | — | | | — | | | 608 | | | — | | | 608 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 46 | | | — | | | — | | | 46 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | 16 | | | 16 | |
Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (422) | | | — | | | (422) | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 9 | | | 398 | | | 14,642 | | | 2,872 | | | (15) | | | 17,897 | |
Net income | | Net income | — | | | — | | | — | | | 858 | | | — | | | 858 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 324 | | | — | | | — | | | 324 | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (423) | | | — | | | (423) | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | 9 | | | $ | 398 | | | $ | 14,966 | | | $ | 3,307 | | | $ | (14) | | | $ | 18,657 | |
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.
MISSISSIPPI 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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Retail revenues | Retail revenues | $ | 248 | | | $ | 232 | | | $ | 670 | | | $ | 630 | | Retail revenues | $ | 250 | | | $ | 248 | | | $ | 718 | | | $ | 670 | |
Wholesale revenues, non-affiliates | Wholesale revenues, non-affiliates | 60 | | | 61 | | | 178 | | | 164 | | Wholesale revenues, non-affiliates | 60 | | | 60 | | | 191 | | | 178 | |
Wholesale revenues, affiliates | Wholesale revenues, affiliates | 62 | | | 36 | | | 120 | | | 82 | | Wholesale revenues, affiliates | 187 | | | 62 | | | 336 | | | 120 | |
Other revenues | Other revenues | 8 | | | 7 | | | 20 | | | 19 | | Other revenues | 13 | | | 8 | | | 34 | | | 20 | |
Total operating revenues | Total operating revenues | 378 | | | 336 | | | 988 | | | 895 | | Total operating revenues | 510 | | | 378 | | | 1,279 | | | 988 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Fuel | 139 | | | 103 | | | 330 | | | 266 | | |
Purchased power | 6 | | | 6 | | | 21 | | | 18 | | |
Fuel and purchased power | | Fuel and purchased power | 262 | | | 145 | | | 601 | | | 351 | |
| | Other operations and maintenance | Other operations and maintenance | 85 | | | 62 | | | 230 | | | 202 | | Other operations and maintenance | 86 | | | 85 | | | 252 | | | 230 | |
Depreciation and amortization | Depreciation and amortization | 46 | | | 47 | | | 138 | | | 135 | | Depreciation and amortization | 45 | | | 46 | | | 135 | | | 138 | |
Taxes other than income taxes | Taxes other than income taxes | 33 | | | 31 | | | 96 | | | 90 | | Taxes other than income taxes | 32 | | | 33 | | | 93 | | | 96 | |
| Total operating expenses | Total operating expenses | 309 | | | 249 | | | 815 | | | 711 | | Total operating expenses | 425 | | | 309 | | | 1,081 | | | 815 | |
Operating Income | Operating Income | 69 | | | 87 | | | 173 | | | 184 | | Operating Income | 85 | | | 69 | | | 198 | | | 173 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
| Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (16) | | | (14) | | | (45) | | | (45) | | Interest expense, net of amounts capitalized | (15) | | | (16) | | | (42) | | | (45) | |
Other income (expense), net | Other income (expense), net | 7 | | | 6 | | | 27 | | | 19 | | Other income (expense), net | 9 | | | 7 | | | 32 | | | 27 | |
Total other income and (expense) | Total other income and (expense) | (9) | | | (8) | | | (18) | | | (26) | | Total other income and (expense) | (6) | | | (9) | | | (10) | | | (18) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 60 | | | 79 | | | 155 | | | 158 | | Earnings Before Income Taxes | 79 | | | 60 | | | 188 | | | 155 | |
Income taxes | Income taxes | 10 | | | 12 | | | 22 | | | 20 | | Income taxes | 17 | | | 10 | | | 38 | | | 22 | |
Net Income | Net Income | $ | 50 | | | $ | 67 | | | $ | 133 | | | $ | 138 | | Net Income | $ | 62 | | | $ | 50 | | | $ | 150 | | | $ | 133 | |
|
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Net Income | Net Income | $ | 50 | | | $ | 67 | | | $ | 133 | | | $ | 138 | | Net Income | $ | 62 | | | $ | 50 | | | $ | 150 | | | $ | 133 | |
Other comprehensive income (loss): | | |
Other comprehensive income: | | Other comprehensive income: | |
Qualifying hedges: | Qualifying hedges: | | Qualifying hedges: | |
| Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $—, respectively | Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $—, respectively | — | | | — | | | 1 | | | 1 | | Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $—, respectively | — | | | — | | | — | | | 1 | |
Total other comprehensive income (loss) | — | | | — | | | 1 | | | 1 | | |
Total other comprehensive income | | Total other comprehensive income | — | | | — | | | — | | | 1 | |
Comprehensive Income | Comprehensive Income | $ | 50 | | | $ | 67 | | | $ | 134 | | | $ | 139 | | Comprehensive Income | $ | 62 | | | $ | 50 | | | $ | 150 | | | $ | 134 | |
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Net income | Net income | $ | 133 | | | $ | 138 | | Net income | $ | 150 | | | $ | 133 | |
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, total | Depreciation and amortization, total | 161 | | | 142 | | Depreciation and amortization, total | 164 | | | 161 | |
| Settlement of asset retirement obligations | Settlement of asset retirement obligations | (18) | | | (16) | | Settlement of asset retirement obligations | (15) | | | (18) | |
| Other, net | Other, net | (20) | | | (11) | | Other, net | 20 | | | (20) | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | (19) | | | (3) | | -Receivables | (58) | | | (19) | |
| | -Other current assets | -Other current assets | (9) | | | (7) | | -Other current assets | (17) | | | (9) | |
-Accounts payable | -Accounts payable | (12) | | | (54) | | -Accounts payable | 41 | | | (12) | |
-Accrued taxes | -Accrued taxes | (20) | | | 15 | | -Accrued taxes | (3) | | | (20) | |
| -Retail fuel cost over recovery | -Retail fuel cost over recovery | (19) | | | — | | -Retail fuel cost over recovery | — | | | (19) | |
| -Other current liabilities | -Other current liabilities | (18) | | | (18) | | -Other current liabilities | (3) | | | (18) | |
Net cash provided from operating activities | Net cash provided from operating activities | 159 | | | 186 | | Net cash provided from operating activities | 279 | | | 159 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Property additions | Property additions | (135) | | | (174) | | Property additions | (165) | | | (135) | |
Construction payables | Construction payables | (11) | | | 7 | | Construction payables | (9) | | | (11) | |
| Payments pursuant to LTSAs | Payments pursuant to LTSAs | (21) | | | (20) | | Payments pursuant to LTSAs | (23) | | | (21) | |
Other investing activities | Other investing activities | (15) | | | (13) | | Other investing activities | (22) | | | (15) | |
Net cash used for investing activities | Net cash used for investing activities | (182) | | | (200) | | Net cash used for investing activities | (219) | | | (182) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
Decrease in notes payable, net | Decrease in notes payable, net | (25) | | | — | | Decrease in notes payable, net | — | | | (25) | |
Proceeds — | | |
Senior notes | 525 | | | — | | |
Short-term borrowings | — | | | 40 | | |
Pollution control revenue bonds | — | | | 34 | | |
| Proceeds — Senior notes | | Proceeds — Senior notes | — | | | 525 | |
| Other long-term debt | — | | | 100 | | |
| Redemptions — | Redemptions — | | Redemptions — | |
Senior notes | — | | | (275) | | |
Short-term borrowings | — | | | (40) | | |
Pollution control revenue bonds | — | | | (41) | | |
| Other revenue bonds | Other revenue bonds | (270) | | | — | | Other revenue bonds | — | | | (270) | |
Other long-term debt | Other long-term debt | (75) | | | — | | Other long-term debt | — | | | (75) | |
| Capital contributions from parent company | Capital contributions from parent company | 103 | | | 80 | | Capital contributions from parent company | 55 | | | 103 | |
Return of capital to parent company | — | | | (74) | | |
| Payment of common stock dividends | Payment of common stock dividends | (118) | | | (37) | | Payment of common stock dividends | (128) | | | (118) | |
Other financing activities | Other financing activities | (10) | | | (1) | | Other financing activities | 1 | | | (10) | |
Net cash provided from (used for) financing activities | Net cash provided from (used for) financing activities | 130 | | | (214) | | Net cash provided from (used for) financing activities | (72) | | | 130 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 107 | | | (228) | | Net Change in Cash, Cash Equivalents, and Restricted Cash | (12) | | | 107 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 39 | | | 286 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 61 | | | 39 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 146 | | | $ | 58 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 49 | | | $ | 146 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid during the period for — | Cash paid during the period for — | | Cash paid during the period for — | |
Interest | Interest | $ | 53 | | | $ | 49 | | Interest | $ | 49 | | | $ | 53 | |
Income taxes, net | Income taxes, net | 11 | | | 9 | | Income taxes, net | 18 | | | 11 | |
| Noncash transactions — Accrued property additions at end of period | Noncash transactions — Accrued property additions at end of period | 23 | | | 42 | | Noncash transactions — Accrued property additions at end of period | 16 | | | 23 | |
|
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 146 | | | $ | 39 | | Cash and cash equivalents | | $ | 49 | | | $ | 61 | |
Receivables — | Receivables — | | Receivables — | |
Customer accounts, net | Customer accounts, net | | 46 | | | 34 | | Customer accounts, net | | 71 | | | 37 | |
Unbilled revenues | Unbilled revenues | | 39 | | | 38 | | Unbilled revenues | | 43 | | | 34 | |
| Affiliated | Affiliated | | 45 | | | 32 | | Affiliated | | 39 | | | 29 | |
Other accounts and notes | Other accounts and notes | | 27 | | | 32 | | Other accounts and notes | | 34 | | | 28 | |
| Fossil fuel stock | Fossil fuel stock | | 27 | | | 24 | | Fossil fuel stock | | 37 | | | 28 | |
Materials and supplies | Materials and supplies | | 71 | | | 65 | | Materials and supplies | | 80 | | | 70 | |
Assets from risk management activities, net of collateral | | 66 | | | 1 | | |
Assets from risk management activities | | Assets from risk management activities | | 69 | | | 28 | |
Other regulatory assets | Other regulatory assets | | 54 | | | 60 | | Other regulatory assets | | 60 | | | 54 | |
| Other current assets | Other current assets | | 11 | | | 19 | | Other current assets | | 16 | | | 13 | |
Total current assets | Total current assets | | 532 | | | 344 | | Total current assets | | 498 | | | 382 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 5,078 | | | 5,011 | | In service | | 5,209 | | | 5,106 | |
Less: Accumulated provision for depreciation | Less: Accumulated provision for depreciation | | 1,568 | | | 1,545 | | Less: Accumulated provision for depreciation | | 1,669 | | | 1,591 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 3,510 | | | 3,466 | | Plant in service, net of depreciation | | 3,540 | | | 3,515 | |
| Construction work in progress | Construction work in progress | | 117 | | | 146 | | Construction work in progress | | 168 | | | 127 | |
Total property, plant, and equipment | Total property, plant, and equipment | | 3,627 | | | 3,612 | | Total property, plant, and equipment | | 3,708 | | | 3,642 | |
Other Property and Investments | Other Property and Investments | | 180 | | | 151 | | Other Property and Investments | | 171 | | | 179 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | | | Deferred Charges and Other Assets: | | | | |
| Deferred charges related to income taxes | Deferred charges related to income taxes | | 31 | | | 32 | | Deferred charges related to income taxes | | 30 | | | 31 | |
Prepaid pension costs | | Prepaid pension costs | | 97 | | | 79 | |
Regulatory assets – asset retirement obligations | Regulatory assets – asset retirement obligations | | 231 | | | 201 | | Regulatory assets – asset retirement obligations | | 238 | | | 232 | |
Other regulatory assets, deferred | Other regulatory assets, deferred | | 371 | | | 388 | | Other regulatory assets, deferred | | 271 | | | 317 | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 119 | | | 129 | | Accumulated deferred income taxes | | 108 | | | 118 | |
| Other deferred charges and assets | Other deferred charges and assets | | 100 | | | 55 | | Other deferred charges and assets | | 130 | | | 100 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 852 | | | 805 | | Total deferred charges and other assets | | 874 | | | 877 | |
Total Assets | Total Assets | | $ | 5,191 | | | $ | 4,912 | | Total Assets | | $ | 5,251 | | | $ | 5,080 | |
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholder's Equity | Liabilities and Stockholder's Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholder's Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 76 | | | $ | 406 | | Securities due within one year | | $ | 1 | | | $ | 1 | |
| Notes payable | | — | | | 25 | | |
| | Accounts payable — | Accounts payable — | | Accounts payable — | |
Affiliated | Affiliated | | 88 | | | 63 | | Affiliated | | 96 | | | 81 | |
Other | Other | | 61 | | | 109 | | Other | | 68 | | | 47 | |
| Accrued taxes | Accrued taxes | | 94 | | | 114 | | Accrued taxes | | 116 | | | 120 | |
| Accrued interest | | 7 | | | 15 | | |
| Accrued compensation | Accrued compensation | | 31 | | | 34 | | Accrued compensation | | 33 | | | 36 | |
| Asset retirement obligations | Asset retirement obligations | | 19 | | | 27 | | Asset retirement obligations | | 20 | | | 30 | |
Over recovered regulatory clause liabilities | | 7 | | | 34 | | |
| Other regulatory liabilities | Other regulatory liabilities | | 104 | | | 49 | | Other regulatory liabilities | | 102 | | | 59 | |
| Other current liabilities | Other current liabilities | | 50 | | | 40 | | Other current liabilities | | 80 | | | 65 | |
Total current liabilities | Total current liabilities | | 537 | | | 916 | | Total current liabilities | | 516 | | | 439 | |
| Long-term Debt | Long-term Debt | | 1,509 | | | 1,013 | | Long-term Debt | | 1,509 | | | 1,510 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 464 | | | 447 | | Accumulated deferred income taxes | | 465 | | | 464 | |
Deferred credits related to income taxes | Deferred credits related to income taxes | | 276 | | | 287 | | Deferred credits related to income taxes | | 258 | | | 269 | |
| Employee benefit obligations | Employee benefit obligations | | 94 | | | 113 | | Employee benefit obligations | | 86 | | | 88 | |
| Asset retirement obligations, deferred | Asset retirement obligations, deferred | | 175 | | | 150 | | Asset retirement obligations, deferred | | 162 | | | 160 | |
| Other cost of removal obligations | Other cost of removal obligations | | 194 | | | 194 | | Other cost of removal obligations | | 197 | | | 195 | |
Other regulatory liabilities, deferred | Other regulatory liabilities, deferred | | 48 | | | 15 | | Other regulatory liabilities, deferred | | 87 | | | 64 | |
Other deferred credits and liabilities | Other deferred credits and liabilities | | 31 | | | 35 | | Other deferred credits and liabilities | | 25 | | | 24 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 1,282 | | | 1,241 | | Total deferred credits and other liabilities | | 1,280 | | | 1,264 | |
Total Liabilities | Total Liabilities | | 3,328 | | | 3,170 | | Total Liabilities | | 3,305 | | | 3,213 | |
| Common Stockholder's Equity (See accompanying statements) | Common Stockholder's Equity (See accompanying statements) | | 1,863 | | | 1,742 | | Common Stockholder's Equity (See accompanying statements) | | 1,946 | | | 1,867 | |
Total Liabilities and Stockholder's Equity | Total Liabilities and Stockholder's Equity | | $ | 5,191 | | | $ | 4,912 | | Total Liabilities and Stockholder's Equity | | $ | 5,251 | | | $ | 5,080 | |
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
| | | Number of Common Shares Issued | | Common Stock | | Paid-In Capital | | Retained Earnings (Accumulated Deficit) | | 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) | |
Balance at December 31, 2019 | 1 | | | $ | 38 | | | $ | 4,449 | | | $ | (2,832) | | | $ | (3) | | | $ | 1,652 | | |
Net income | — | | | — | | | — | | | 32 | | | — | | | 32 | | |
| Capital contributions from parent company | — | | | — | | | 76 | | | — | | | — | | | 76 | | |
Return of capital to parent company | — | | | — | | | (37) | | | — | | | — | | | (37) | | |
| Other | — | | | — | | | (1) | | | — | | | — | | | (1) | | |
Balance at March 31, 2020 | 1 | | | 38 | | | 4,487 | | | (2,800) | | | (3) | | | 1,722 | | |
Net income | — | | | — | | | — | | | 39 | | | — | | | 39 | | |
| Return of capital to parent company | — | | | — | | | (37) | | | — | | | — | | | (37) | | |
| Balance at June 30, 2020 | 1 | | | 38 | | | 4,450 | | | (2,761) | | | (3) | | | 1,724 | | |
Net income | — | | | — | | | — | | | 67 | | | — | | | 67 | | |
| Capital contributions from parent company | — | | | — | | | 6 | | | — | | | — | | | 6 | | |
| Cash dividends on common stock | — | | | — | | | — | | | (37) | | | — | | | (37) | | |
| Balance at September 30, 2020 | 1 | | | $ | 38 | | | $ | 4,456 | | | $ | (2,731) | | | $ | (3) | | | $ | 1,760 | | |
| | | (in millions) |
Balance at December 31, 2020 | Balance at December 31, 2020 | 1 | | | $ | 38 | | | $ | 4,460 | | | $ | (2,754) | | | $ | (2) | | | $ | 1,742 | | Balance at December 31, 2020 | 1 | | | $ | 38 | | | $ | 4,460 | | | $ | (2,754) | | | $ | (2) | | | $ | 1,742 | |
Net income | Net income | — | | | — | | | — | | | 45 | | | — | | | 45 | | Net income | — | | | — | | | — | | | 45 | | | — | | | 45 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 100 | | | — | | | — | | | 100 | |
| Capital contributions from parent company | — | | | — | | | 100 | | | — | | | — | | | 100 | | |
| Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | |
| Balance at March 31, 2021 | Balance at March 31, 2021 | 1 | | | 38 | | | 4,560 | | | (2,748) | | | (2) | | | 1,848 | | Balance at March 31, 2021 | 1 | | | 38 | | | 4,560 | | | (2,748) | | | (2) | | | 1,848 | |
Net income | Net income | — | | | — | | | — | | | 38 | | | — | | | 38 | | Net income | — | | | — | | | — | | | 38 | | | — | | | 38 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 2 | | | — | | | — | | | 2 | | Capital contributions from parent company | — | | | — | | | 2 | | | — | | | — | | | 2 | |
| Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | |
Other | Other | — | | | — | | | — | | | (1) | | | 1 | | | — | | Other | — | | | — | | | — | | | (1) | | | 1 | | | — | |
Balance at June 30, 2021 | Balance at June 30, 2021 | 1 | | | 38 | | | 4,562 | | | (2,750) | | | (1) | | | 1,849 | | Balance at June 30, 2021 | 1 | | | 38 | | | 4,562 | | | (2,750) | | | (1) | | | 1,849 | |
Net income | Net income | — | | | — | | | — | | | 50 | | | — | | | 50 | | Net income | — | | | — | | | — | | | 50 | | | — | | | 50 | |
| Capital contributions from parent company | Capital contributions from parent company | — | | | — | | | 3 | | | — | | | — | | | 3 | | Capital contributions from parent company | — | | | — | | | 3 | | | — | | | — | | | 3 | |
| Cash dividends on common stock | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | | Cash dividends on common stock | — | | | — | | | — | | | (39) | | | — | | | (39) | |
| Balance at September 30, 2021 | Balance at September 30, 2021 | 1 | | | $ | 38 | | | $ | 4,565 | | | $ | (2,739) | | | $ | (1) | | | $ | 1,863 | | Balance at September 30, 2021 | 1 | | | $ | 38 | | | $ | 4,565 | | | $ | (2,739) | | | $ | (1) | | | $ | 1,863 | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 1 | | | $ | 38 | | | $ | 4,582 | | | $ | (2,753) | | | $ | — | | | $ | 1,867 | |
Net income | | Net income | — | | | — | | | — | | | 42 | | | — | | | 42 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 51 | | | — | | | — | | | 51 | |
| Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (43) | | | — | | | (43) | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | 1 | | | 38 | | | 4,633 | | | (2,754) | | | — | | | 1,917 | |
Net income | | Net income | — | | | — | | | — | | | 45 | | | — | | | 45 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (42) | | | — | | | (42) | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 1 | | | 38 | | | 4,634 | | | (2,751) | | | — | | | 1,921 | |
Net income | | Net income | — | | | — | | | — | | | 62 | | | — | | | 62 | |
| Capital contributions from parent company | | Capital contributions from parent company | — | | | — | | | 5 | | | — | | | — | | | 5 | |
| Cash dividends on common stock | | Cash dividends on common stock | — | | | — | | | — | | | (42) | | | — | | | (42) | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | 1 | | | $ | 38 | | | $ | 4,639 | | | $ | (2,731) | | | $ | — | | | $ | 1,946 | |
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Wholesale revenues, non-affiliates | Wholesale revenues, non-affiliates | $ | 503 | | | $ | 418 | | | $ | 1,231 | | | $ | 1,047 | | Wholesale revenues, non-affiliates | $ | 835 | | | $ | 503 | | | $ | 1,918 | | | $ | 1,231 | |
Wholesale revenues, affiliates | Wholesale revenues, affiliates | 167 | | | 101 | | | 361 | | | 279 | | Wholesale revenues, affiliates | 336 | | | 167 | | | 673 | | | 361 | |
Other revenues | Other revenues | 9 | | | 4 | | | 18 | | | 11 | | Other revenues | 9 | | | 9 | | | 27 | | | 18 | |
Total operating revenues | Total operating revenues | 679 | | | 523 | | | 1,610 | | | 1,337 | | Total operating revenues | 1,180 | | | 679 | | | 2,618 | | | 1,610 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Fuel | Fuel | 259 | | | 137 | | | 540 | | | 346 | | Fuel | 605 | | | 259 | | | 1,274 | | | 540 | |
Purchased power | Purchased power | 41 | | | 19 | | | 86 | | | 52 | | Purchased power | 144 | | | 41 | | | 233 | | | 86 | |
| Other operations and maintenance | Other operations and maintenance | 94 | | | 89 | | | 308 | | | 245 | | Other operations and maintenance | 113 | | | 94 | | | 331 | | | 308 | |
Depreciation and amortization | Depreciation and amortization | 132 | | | 129 | | | 383 | | | 367 | | Depreciation and amortization | 133 | | | 132 | | | 384 | | | 383 | |
Taxes other than income taxes | Taxes other than income taxes | 12 | | | 10 | | | 35 | | | 29 | | Taxes other than income taxes | 13 | | | 12 | | | 38 | | | 35 | |
| Loss on sales-type lease | 15 | | | — | | | 15 | | | — | | |
(Gain) loss on dispositions, net | — | | | — | | | (39) | | | (39) | | |
Loss on sales-type leases | | Loss on sales-type leases | — | | | 15 | | | 1 | | | 15 | |
Gain on dispositions, net | | Gain on dispositions, net | — | | | — | | | (2) | | | (39) | |
Total operating expenses | Total operating expenses | 553 | | | 384 | | | 1,328 | | | 1,000 | | Total operating expenses | 1,008 | | | 553 | | | 2,259 | | | 1,328 | |
Operating Income | Operating Income | 126 | | | 139 | | | 282 | | | 337 | | Operating Income | 172 | | | 126 | | | 359 | | | 282 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (36) | | | (36) | | | (111) | | | (114) | | Interest expense, net of amounts capitalized | (32) | | | (36) | | | (105) | | | (111) | |
Other income (expense), net | Other income (expense), net | 2 | | | 13 | | | 10 | | | 19 | | Other income (expense), net | 3 | | | 2 | | | 5 | | | 10 | |
Total other income and (expense) | Total other income and (expense) | (34) | | | (23) | | | (101) | | | (95) | | Total other income and (expense) | (29) | | | (34) | | | (100) | | | (101) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 92 | | | 116 | | | 181 | | | 242 | | Earnings Before Income Taxes | 143 | | | 92 | | | 259 | | | 181 | |
Income taxes (benefit) | Income taxes (benefit) | 9 | | | 14 | | | (3) | | | 27 | | Income taxes (benefit) | 36 | | | 9 | | | 49 | | | (3) | |
Net Income | Net Income | 83 | | | 102 | | | 184 | | | 215 | | Net Income | 107 | | | 83 | | | 210 | | | 184 | |
Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 5 | | | 28 | | | (27) | | | 3 | | Net income (loss) attributable to noncontrolling interests | 12 | | | 5 | | | (55) | | | (27) | |
Net Income Attributable to Southern Power | Net Income Attributable to Southern Power | $ | 78 | | | $ | 74 | | | $ | 211 | | | $ | 212 | | Net Income Attributable to Southern Power | $ | 95 | | | $ | 78 | | | $ | 265 | | | $ | 211 | |
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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Net Income | Net Income | $ | 83 | | | $ | 102 | | | $ | 184 | | | $ | 215 | | Net Income | $ | 107 | | | $ | 83 | | | $ | 210 | | | $ | 184 | |
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 $(7), $15, $(16), and $(2), respectively | (21) | | | 44 | | | (48) | | | (6) | | |
Reclassification adjustment for amounts included in net income, net of tax of $9, $(13), $22, and $(8), respectively | 27 | | | (36) | | | 66 | | | (24) | | |
Changes in fair value, net of tax of $(11), $(7), $(35), and $(16), respectively | | Changes in fair value, net of tax of $(11), $(7), $(35), and $(16), respectively | (35) | | | (21) | | | (106) | | | (48) | |
Reclassification adjustment for amounts included in net income, net of tax of $9, $9, $35, and $22, respectively | | Reclassification adjustment for amounts included in net income, net of tax of $9, $9, $35, and $22, respectively | 28 | | | 27 | | | 106 | | | 66 | |
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, and $—, respectively | 1 | | | — | | | 2 | | | 2 | | |
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $1, respectively | | Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $1, respectively | — | | | 1 | | | 1 | | | 2 | |
Total other comprehensive income (loss) | Total other comprehensive income (loss) | 7 | | | 8 | | | 20 | | | (28) | | Total other comprehensive income (loss) | (7) | | | 7 | | | 1 | | | 20 | |
Comprehensive Income | Comprehensive Income | 90 | | | 110 | | | 204 | | | 187 | | Comprehensive Income | 100 | | | 90 | | | 211 | | | 204 | |
Comprehensive income (loss) attributable to noncontrolling interests | Comprehensive income (loss) attributable to noncontrolling interests | 5 | | | 28 | | | (27) | | | 3 | | Comprehensive income (loss) attributable to noncontrolling interests | 12 | | | 5 | | | (55) | | | (27) | |
Comprehensive Income Attributable to Southern Power | Comprehensive Income Attributable to Southern Power | $ | 85 | | | $ | 82 | | | $ | 231 | | | $ | 184 | | Comprehensive Income Attributable to Southern Power | $ | 88 | | | $ | 85 | | | $ | 266 | | | $ | 231 | |
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Net income | Net income | $ | 184 | | | $ | 215 | | Net income | $ | 210 | | | $ | 184 | |
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, total | Depreciation and amortization, total | 402 | | | 386 | | Depreciation and amortization, total | 404 | | | 402 | |
Deferred income taxes | Deferred income taxes | (16) | | | (59) | | Deferred income taxes | 21 | | | (16) | |
Utilization of federal investment tax credits | Utilization of federal investment tax credits | 237 | | | 318 | | Utilization of federal investment tax credits | 218 | | | 237 | |
Amortization of investment tax credits | Amortization of investment tax credits | (44) | | | (44) | | Amortization of investment tax credits | (44) | | | (44) | |
| (Gain) loss on dispositions, net | (39) | | | (39) | | |
Gain on dispositions, net | | Gain on dispositions, net | (2) | | | (39) | |
Other, net | Other, net | 14 | | | (16) | | Other, net | 1 | | | 14 | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | (117) | | | (28) | | -Receivables | (124) | | | (117) | |
| -Prepaid income taxes | -Prepaid income taxes | 63 | | | 74 | | -Prepaid income taxes | 22 | | | 63 | |
-Other current assets | -Other current assets | (5) | | | (17) | | -Other current assets | (15) | | | (5) | |
-Accounts payable | -Accounts payable | 55 | | | (12) | | -Accounts payable | 95 | | | 55 | |
-Accrued taxes | -Accrued taxes | 15 | | | 21 | | -Accrued taxes | 55 | | | 15 | |
| -Other current liabilities | -Other current liabilities | 1 | | | (25) | | -Other current liabilities | (14) | | | 1 | |
Net cash provided from operating activities | Net cash provided from operating activities | 750 | | | 774 | | Net cash provided from operating activities | 827 | | | 750 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Business acquisitions, net of cash acquired | Business acquisitions, net of cash acquired | (345) | | | (81) | | Business acquisitions, net of cash acquired | — | | | (345) | |
Property additions | Property additions | (355) | | | (135) | | Property additions | (64) | | | (355) | |
Proceeds from dispositions | Proceeds from dispositions | 22 | | | 663 | | Proceeds from dispositions | 48 | | | 22 | |
| Change in construction payables | Change in construction payables | (22) | | | (12) | | Change in construction payables | (60) | | | (22) | |
| Payments pursuant to LTSAs | Payments pursuant to LTSAs | (61) | | | (61) | | Payments pursuant to LTSAs | (52) | | | (61) | |
| Other investing activities | Other investing activities | 8 | | | 50 | | Other investing activities | — | | | 8 | |
Net cash provided from (used for) investing activities | (753) | | | 424 | | |
Net cash used for investing activities | | Net cash used for investing activities | (128) | | | (753) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
Decrease in notes payable, net | Decrease in notes payable, net | (148) | | | (449) | | Decrease in notes payable, net | (5) | | | (148) | |
| Proceeds — Senior notes | Proceeds — Senior notes | 400 | | | — | | Proceeds — Senior notes | — | | | 400 | |
| Redemptions — | | |
Short-term borrowings | — | | | (100) | | |
Senior notes | — | | | (300) | | |
| | Redemptions — Senior notes | | Redemptions — Senior notes | (677) | | | — | |
| Capital contributions from parent company | | Capital contributions from parent company | 330 | | | 4 | |
Return of capital to parent company | Return of capital to parent company | (271) | | | — | | Return of capital to parent company | — | | | (271) | |
Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | 415 | | | 173 | | Capital contributions from noncontrolling interests | 73 | | | 415 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | (204) | | | (164) | | Distributions to noncontrolling interests | (175) | | | (204) | |
Purchase of membership interests from noncontrolling interests | — | | | (60) | | |
| Payment of common stock dividends | Payment of common stock dividends | (153) | | | (151) | | Payment of common stock dividends | (148) | | | (153) | |
Other financing activities | Other financing activities | (6) | | | (9) | | Other financing activities | (1) | | | (10) | |
Net cash provided from (used for) financing activities | Net cash provided from (used for) financing activities | 33 | | | (1,060) | | Net cash provided from (used for) financing activities | (603) | | | 33 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 30 | | | 138 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | 96 | | | 30 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 183 | | | 279 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 135 | | | 183 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 213 | | | $ | 417 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 231 | | | $ | 213 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid (received) during the period for — | Cash paid (received) during the period for — | | Cash paid (received) during the period for — | |
Interest (net of $5 and $10 capitalized for 2021 and 2020, respectively) | $ | 118 | | | $ | 123 | | |
Interest (net of $— and $5 capitalized for 2022 and 2021, respectively) | | Interest (net of $— and $5 capitalized for 2022 and 2021, respectively) | $ | 120 | | | $ | 118 | |
Income taxes, net | Income taxes, net | (235) | | | (278) | | Income taxes, net | (202) | | | (235) | |
Noncash transactions — | Noncash transactions — | | Noncash transactions — | |
Contributions from noncontrolling interests | Contributions from noncontrolling interests | 89 | | | 9 | | Contributions from noncontrolling interests | — | | | 89 | |
Contributions of wind turbine equipment | Contributions of wind turbine equipment | 82 | | | 17 | | Contributions of wind turbine equipment | — | | | 82 | |
Accrued property additions at end of period | Accrued property additions at end of period | 53 | | | 44 | | Accrued property additions at end of period | 30 | | | 53 | |
Right-of-use assets obtained under operating leases | Right-of-use assets obtained under operating leases | 66 | | | 30 | | Right-of-use assets obtained under operating leases | — | | | 66 | |
Reassessment of right-of-use assets under operating leases | | Reassessment of right-of-use assets under operating leases | 40 | | | — | |
|
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 192 | | | $ | 182 | | Cash and cash equivalents | | $ | 229 | | | $ | 107 | |
Receivables — | Receivables — | | Receivables — | |
Customer accounts, net | Customer accounts, net | | 178 | | | 125 | | Customer accounts, net | | 232 | | | 139 | |
Affiliated | Affiliated | | 68 | | | 37 | | Affiliated | | 95 | | | 51 | |
Other | Other | | 53 | | | 27 | | Other | | 24 | | | 29 | |
| Materials and supplies | Materials and supplies | | 103 | | | 157 | | Materials and supplies | | 112 | | | 106 | |
| Prepaid income taxes | Prepaid income taxes | | 15 | | | 11 | | Prepaid income taxes | | 5 | | | 27 | |
| Other current assets | Other current assets | | 56 | | | 36 | | Other current assets | | 51 | | | 46 | |
Total current assets | Total current assets | | 665 | | | 575 | | Total current assets | | 748 | | | 505 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 14,399 | | | 13,904 | | In service | | 14,641 | | | 14,585 | |
Less: Accumulated provision for depreciation | Less: Accumulated provision for depreciation | | 3,122 | | | 2,842 | | Less: Accumulated provision for depreciation | | 3,589 | | | 3,241 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 11,277 | | | 11,062 | | Plant in service, net of depreciation | | 11,052 | | | 11,344 | |
Construction work in progress | Construction work in progress | | 274 | | | 127 | | Construction work in progress | | 48 | | | 45 | |
| Total property, plant, and equipment | Total property, plant, and equipment | | 11,551 | | | 11,189 | | Total property, plant, and equipment | | 11,100 | | | 11,389 | |
Other Property and Investments: | Other Property and Investments: | | | | | Other Property and Investments: | | | | |
| Intangible assets, net of amortization of $104 and $89, respectively | | 288 | | | 302 | | |
Intangible assets, net of amortization of $124 and $109, respectively | | Intangible assets, net of amortization of $124 and $109, respectively | | 268 | | | 282 | |
Equity investments in unconsolidated subsidiaries | Equity investments in unconsolidated subsidiaries | | 83 | | | 19 | | Equity investments in unconsolidated subsidiaries | | 49 | | | 86 | |
Net investment in sales-type lease | | 91 | | | — | | |
Net investment in sales-type leases | | Net investment in sales-type leases | | 155 | | | 161 | |
Total other property and investments | Total other property and investments | | 462 | | | 321 | | Total other property and investments | | 472 | | | 529 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | Deferred Charges and Other Assets: | | |
Operating lease right-of-use assets, net of amortization | Operating lease right-of-use assets, net of amortization | | 475 | | | 415 | | Operating lease right-of-use assets, net of amortization | | 491 | | | 479 | |
Prepaid LTSAs | Prepaid LTSAs | | 191 | | | 155 | | Prepaid LTSAs | | 210 | | | 210 | |
Accumulated deferred income taxes | | — | | | 262 | | |
Income taxes receivable, non-current | | 33 | | | 25 | | |
| | Other deferred charges and assets | Other deferred charges and assets | | 234 | | | 293 | | Other deferred charges and assets | | 262 | | | 278 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 933 | | | 1,150 | | Total deferred charges and other assets | | 963 | | | 967 | |
Total Assets | Total Assets | | $ | 13,611 | | | $ | 13,235 | | Total Assets | | $ | 13,283 | | | $ | 13,390 | |
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholders' Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 994 | | | $ | 299 | | Securities due within one year | | $ | 290 | | | $ | 679 | |
Notes payable | Notes payable | | 27 | | | 175 | | Notes payable | | 208 | | | 211 | |
Accounts payable — | Accounts payable — | | Accounts payable — | |
Affiliated | Affiliated | | 110 | | | 65 | | Affiliated | | 179 | | | 92 | |
Other | Other | | 91 | | | 92 | | Other | | 70 | | | 85 | |
Accrued taxes — | | |
Accrued income taxes | | 8 | | | 8 | | |
Other accrued taxes | | 27 | | | 22 | | |
| Accrued taxes | | Accrued taxes | | 208 | | | 14 | |
| Accrued interest | Accrued interest | | 26 | | | 32 | | Accrued interest | | 22 | | | 32 | |
| Other current liabilities | Other current liabilities | | 125 | | | 132 | | Other current liabilities | | 96 | | | 140 | |
Total current liabilities | Total current liabilities | | 1,408 | | | 825 | | Total current liabilities | | 1,073 | | | 1,253 | |
Long-term Debt | Long-term Debt | | 3,021 | | | 3,393 | | Long-term Debt | | 2,642 | | | 3,009 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 156 | | | 123 | | Accumulated deferred income taxes | | 315 | | | 215 | |
Accumulated deferred ITCs | Accumulated deferred ITCs | | 1,629 | | | 1,672 | | Accumulated deferred ITCs | | 1,571 | | | 1,614 | |
| Operating lease obligations | Operating lease obligations | | 489 | | | 426 | | Operating lease obligations | | 515 | | | 497 | |
Other deferred credits and liabilities | Other deferred credits and liabilities | | 201 | | | 165 | | Other deferred credits and liabilities | | 287 | | | 204 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 2,475 | | | 2,386 | | Total deferred credits and other liabilities | | 2,688 | | | 2,530 | |
Total Liabilities | Total Liabilities | | 6,904 | | | 6,604 | | Total Liabilities | | 6,403 | | | 6,792 | |
| Total Stockholders' Equity (See accompanying statements) | Total Stockholders' Equity (See accompanying statements) | | 6,707 | | | 6,631 | | Total Stockholders' Equity (See accompanying statements) | | 6,880 | | | 6,598 | |
Total Liabilities and Stockholders' Equity | Total Liabilities and Stockholders' Equity | | $ | 13,611 | | | $ | 13,235 | | Total Liabilities and Stockholders' Equity | | $ | 13,283 | | | $ | 13,390 | |
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
| | | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Common Stockholders' Equity | | Noncontrolling Interests | | Total | | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Common Stockholders' Equity | | Noncontrolling Interests | | Total |
| | | (in millions) | | | (in millions) |
Balance at December 31, 2019 | | $ | 909 | | | $ | 1,485 | | | $ | (26) | | | $ | 2,368 | | | $ | 4,254 | | | $ | 6,622 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | | $ | 914 | | | $ | 1,522 | | | $ | (67) | | | $ | 2,369 | | | $ | 4,262 | | | $ | 6,631 | |
Net income (loss) | Net income (loss) | | — | | | 75 | | | — | | | 75 | | | (31) | | | 44 | | Net income (loss) | | — | | | 97 | | | — | | | 97 | | | (32) | | | 65 | |
Return of capital to parent company | | Return of capital to parent company | | (271) | | | — | | | — | | | (271) | | | — | | | (271) | |
| Other comprehensive income (loss) | | — | | | — | | | (33) | | | (33) | | | — | | | (33) | | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | 16 | | | 16 | | | — | | | 16 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (50) | | | — | | | (50) | | | — | | | (50) | | Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 16 | | | 16 | | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 403 | | | 403 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (48) | | | (48) | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (46) | | | (46) | |
| Balance at March 31, 2020 | | 909 | | | 1,510 | | | (59) | | | 2,360 | | | 4,191 | | | 6,551 | | |
Other | | Other | | (2) | | | 1 | | | (1) | | | (2) | | | (1) | | | (3) | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | | 641 | | | 1,569 | | | (52) | | | 2,158 | | | 4,586 | | | 6,744 | |
Net income | Net income | | — | | | 63 | | | — | | | 63 | | | 5 | | | 68 | | Net income | | — | | | 36 | | | — | | | 36 | | | — | | | 36 | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | | — | | | — | | | (3) | | | (3) | | | — | | | (3) | | Other comprehensive income (loss) | | — | | | — | | | (3) | | | (3) | | | — | | | (3) | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (50) | | | — | | | (50) | | | — | | | (50) | | Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 165 | | | 165 | | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 29 | | | 29 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (70) | | | (70) | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (68) | | | (68) | |
| Other | Other | | (2) | | | — | | | — | | | (2) | | | — | | | (2) | | Other | | 2 | | | — | | | 1 | | | 3 | | | — | | | 3 | |
Balance at June 30, 2020 | | 907 | | | 1,523 | | | (62) | | | 2,368 | | | 4,291 | | | 6,659 | | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | | 643 | | | 1,554 | | | (54) | | | 2,143 | | | 4,547 | | | 6,690 | |
Net income | Net income | | — | | | 74 | | | — | | | 74 | | | 28 | | | 102 | | Net income | | — | | | 78 | | | — | | | 78 | | | 5 | | | 83 | |
Return of capital to parent company | | (4) | | | — | | | — | | | (4) | | | — | | | (4) | | |
| | Other comprehensive income | Other comprehensive income | | — | | | — | | | 8 | | | 8 | | | — | | | 8 | | Other comprehensive income | | — | | | — | | | 7 | | | 7 | | | — | | | 7 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | | Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 2 | | | 2 | | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 73 | | | 73 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (51) | | | (51) | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (95) | | | (95) | |
Purchase of membership interests from noncontrolling interests | | 5 | | | — | | | — | | | 5 | | | (60) | | | (55) | | |
| Other | | — | | | — | | | — | | | — | | | 1 | | | 1 | | |
Balance at September 30, 2020 | | $ | 908 | | | $ | 1,546 | | | $ | (54) | | | $ | 2,400 | | | $ | 4,211 | | | $ | 6,611 | | |
| Balance at September 30, 2021 | | Balance at September 30, 2021 | | $ | 643 | | | $ | 1,581 | | | $ | (47) | | | $ | 2,177 | | | $ | 4,530 | | | $ | 6,707 | |
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
| | | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Common Stockholders' Equity | | Noncontrolling Interests | | Total | | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Common Stockholders' Equity | | Noncontrolling Interests | | Total |
| | | (in millions) | | | (in millions) |
Balance at December 31, 2020 | | $ | 914 | | | $ | 1,522 | | | $ | (67) | | | $ | 2,369 | | | $ | 4,262 | | | $ | 6,631 | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | | $ | 638 | | | $ | 1,585 | | | $ | (27) | | | $ | 2,196 | | | $ | 4,402 | | | $ | 6,598 | |
Net income (loss) | Net income (loss) | | — | | | 97 | | | — | | | 97 | | | (32) | | | 65 | | Net income (loss) | | — | | | 72 | | | — | | | 72 | | | (45) | | | 27 | |
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 | | |
Net income | | — | | | 36 | | | — | | | 36 | | | — | | | 36 | | |
| Other comprehensive income (loss) | | — | | | — | | | (3) | | | (3) | | | — | | | (3) | | |
Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | | |
| Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 29 | | | 29 | | |
Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (68) | | | (68) | | |
| Other | | 2 | | | — | | | 1 | | | 3 | | | — | | | 3 | | |
Balance at June 30, 2021 | | 643 | | | 1,554 | | | (54) | | | 2,143 | | | 4,547 | | | 6,690 | | |
Net income | | — | | | 78 | | | — | | | 78 | | | 5 | | | 83 | | |
| Other comprehensive income | Other comprehensive income | | — | | | — | | | 7 | | | 7 | | | — | | | 7 | | Other comprehensive income | | — | | | — | | | 5 | | | 5 | | | — | | | 5 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (51) | | | — | | | (51) | | | — | | | (51) | | Cash dividends on common stock | | — | | | (49) | | | — | | | (49) | | | — | | | (49) | |
| Capital contributions from noncontrolling interests | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 73 | | | 73 | | Capital contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | 73 | | | 73 | |
Distributions to noncontrolling interests | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (95) | | | (95) | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (98) | | | (98) | |
| Balance at September 30, 2021 | | $ | 643 | | | $ | 1,581 | | | $ | (47) | | | $ | 2,177 | | | $ | 4,530 | | | $ | 6,707 | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | | 638 | | | 1,608 | | | (22) | | | 2,224 | | | 4,332 | | | 6,556 | |
Net income (loss) | | Net income (loss) | | — | | | 98 | | | — | | | 98 | | | (22) | | | 76 | |
| Capital contributions from parent company | | Capital contributions from parent company | | 322 | | | — | | | — | | | 322 | | | — | | | 322 | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | 3 | | | 3 | | | — | | | 3 | |
Cash dividends on common stock | | Cash dividends on common stock | | — | | | (50) | | | — | | | (50) | | | — | | | (50) | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (28) | | | (28) | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | | 960 | | | 1,656 | | | (19) | | | 2,597 | | | 4,282 | | | 6,879 | |
Net income | | Net income | | — | | | 95 | | | — | | | 95 | | | 12 | | | 107 | |
| Capital contributions from parent company | | Capital contributions from parent company | | 9 | | | — | | | — | | | 9 | | | — | | | 9 | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | | — | | | — | | | (7) | | | (7) | | | — | | | (7) | |
Cash dividends on common stock | | Cash dividends on common stock | | — | | | (49) | | | — | | | (49) | | | — | | | (49) | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | (57) | | | (57) | |
| Other | | Other | | — | | | (1) | | | (1) | | | (2) | | | — | | | (2) | |
Balance at September 30, 2022 | | Balance at September 30, 2022 | | $ | 969 | | | $ | 1,701 | | | $ | (27) | | | $ | 2,643 | | | $ | 4,237 | | | $ | 6,880 | |
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated 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 September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Operating Revenues: | Operating Revenues: | | Operating Revenues: | |
Natural gas revenues (includes revenue taxes of $12, $10, $89, and $79, respectively) | $ | 624 | | | $ | 478 | | | $ | 2,991 | | | $ | 2,356 | | |
Natural gas revenues (includes revenue taxes of $15, $12, $118, and $89, respectively) | | Natural gas revenues (includes revenue taxes of $15, $12, $118, and $89, respectively) | $ | 858 | | | $ | 624 | | | $ | 3,998 | | | $ | 2,991 | |
Alternative revenue programs | Alternative revenue programs | (1) | | | (1) | | | 3 | | | 6 | | Alternative revenue programs | (1) | | | (1) | | | — | | | 3 | |
| Total operating revenues | Total operating revenues | 623 | | | 477 | | | 2,994 | | | 2,362 | | Total operating revenues | 857 | | | 623 | | | 3,998 | | | 2,994 | |
Operating Expenses: | Operating Expenses: | | | | | | | | Operating Expenses: | | | | | | | |
Cost of natural gas | Cost of natural gas | 129 | | | 71 | | | 943 | | | 654 | | Cost of natural gas | 294 | | | 129 | | | 1,840 | | | 943 | |
| Other operations and maintenance | Other operations and maintenance | 238 | | | 217 | | | 776 | | | 694 | | Other operations and maintenance | 252 | | | 238 | | | 829 | | | 776 | |
Depreciation and amortization | Depreciation and amortization | 133 | | | 125 | | | 396 | | | 368 | | Depreciation and amortization | 140 | | | 133 | | | 414 | | | 396 | |
Taxes other than income taxes | Taxes other than income taxes | 36 | | | 35 | | | 166 | | | 154 | | Taxes other than income taxes | 45 | | | 36 | | | 208 | | | 166 | |
| (Gain) loss on dispositions, net
| (121) | | | — | | | (127) | | | 2 | | |
Gain on dispositions, net
| | Gain on dispositions, net
| — | | | (121) | | | (5) | | | (127) | |
| Total operating expenses | Total operating expenses | 415 | | | 448 | | | 2,154 | | | 1,872 | | Total operating expenses | 731 | | | 415 | | | 3,286 | | | 2,154 | |
Operating Income | Operating Income | 208 | | | 29 | | | 840 | | | 490 | | Operating Income | 126 | | | 208 | | | 712 | | | 840 | |
Other Income and (Expense): | Other Income and (Expense): | | Other Income and (Expense): | |
Earnings from equity method investments | Earnings from equity method investments | 25 | | | 33 | | | 14 | | | 106 | | Earnings from equity method investments | 34 | | | 25 | | | 105 | | | 14 | |
Interest expense, net of amounts capitalized | Interest expense, net of amounts capitalized | (57) | | | (57) | | | (175) | | | (171) | | Interest expense, net of amounts capitalized | (65) | | | (57) | | | (187) | | | (175) | |
Other income (expense), net | Other income (expense), net | 13 | | | 12 | | | (66) | | | 33 | | Other income (expense), net | 15 | | | 13 | | | 47 | | | (66) | |
Total other income and (expense) | Total other income and (expense) | (19) | | | (12) | | | (227) | | | (32) | | Total other income and (expense) | (16) | | | (19) | | | (35) | | | (227) | |
Earnings Before Income Taxes | Earnings Before Income Taxes | 189 | | | 17 | | | 613 | | | 458 | | Earnings Before Income Taxes | 110 | | | 189 | | | 677 | | | 613 | |
Income taxes | Income taxes | 133 | | | 3 | | | 224 | | | 98 | | Income taxes | 27 | | | 133 | | | 161 | | | 224 | |
Net Income | Net Income | $ | 56 | | | $ | 14 | | | $ | 389 | | | $ | 360 | | Net Income | $ | 83 | | | $ | 56 | | | $ | 516 | | | $ | 389 | |
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) | | (in millions) |
Net Income | $ | 56 | | | $ | 14 | | | $ | 389 | | | $ | 360 | |
Other comprehensive income (loss): | | | | | | | |
Qualifying hedges: | | | | | | | |
Changes in fair value, net of tax of $8, $1, $11, and $(6), respectively | 23 | | | 4 | | | 32 | | | (17) | |
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $2, respectively | (2) | | | 1 | | | 1 | | | 7 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income (loss) | 21 | | | 5 | | | 33 | | | (10) | |
Comprehensive Income | $ | 77 | | | $ | 19 | | | $ | 422 | | | $ | 350 | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) | | (in millions) |
Net Income | $ | 83 | | | $ | 56 | | | $ | 516 | | | $ | 389 | |
Other comprehensive income: | | | | | | | |
Qualifying hedges: | | | | | | | |
Changes in fair value, net of tax of $8, $8, $16, and $11, respectively | 19 | | | 23 | | | 39 | | | 32 | |
Reclassification adjustment for amounts included in net income, net of tax of $(2), $—, $(7), and $1, respectively | (5) | | | (2) | | | (17) | | | 1 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income | 14 | | | 21 | | | 22 | | | 33 | |
Comprehensive Income | $ | 97 | | | $ | 77 | | | $ | 538 | | | $ | 422 | |
| | | | | | | |
| | | | | | | |
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (in millions) | | (in millions) |
Operating Activities: | Operating Activities: | | Operating Activities: | |
Net income | Net income | $ | 389 | | | $ | 360 | | Net income | $ | 516 | | | $ | 389 | |
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, total | Depreciation and amortization, total | 396 | | | 368 | | Depreciation and amortization, total | 414 | | | 396 | |
Deferred income taxes | Deferred income taxes | 289 | | | (1) | | Deferred income taxes | 109 | | | 289 | |
| Mark-to-market adjustments | Mark-to-market adjustments | 147 | | | 104 | | Mark-to-market adjustments | (34) | | | 147 | |
Impairment of PennEast Pipeline investment | Impairment of PennEast Pipeline investment | 84 | | | — | | Impairment of PennEast Pipeline investment | — | | | 84 | |
(Gain) loss on dispositions, net | (127) | | | 2 | | |
Gain on dispositions, net | | Gain on dispositions, net | (5) | | | (127) | |
Natural gas cost under recovery – long-term | Natural gas cost under recovery – long-term | (79) | | | — | | Natural gas cost under recovery – long-term | 207 | | | (79) | |
Other, net | Other, net | 32 | | | (21) | | Other, net | 27 | | | 32 | |
Changes in certain current assets and liabilities — | Changes in certain current assets and liabilities — | | Changes in certain current assets and liabilities — | |
-Receivables | -Receivables | 311 | | | 403 | | -Receivables | 301 | | | 311 | |
| -Natural gas for sale, net of temporary LIFO liquidation | | -Natural gas for sale, net of temporary LIFO liquidation | (136) | | | 20 | |
-Prepaid income taxes | -Prepaid income taxes | (148) | | | (19) | | -Prepaid income taxes | (77) | | | (148) | |
-Natural gas cost under recovery | -Natural gas cost under recovery | (432) | | | — | | -Natural gas cost under recovery | (124) | | | (432) | |
-Other current assets | -Other current assets | (78) | | | (1) | | -Other current assets | 7 | | | (98) | |
-Accounts payable | -Accounts payable | 30 | | | (75) | | -Accounts payable | 342 | | | 30 | |
| -Other current liabilities | -Other current liabilities | (57) | | | 2 | | -Other current liabilities | (15) | | | (57) | |
Net cash provided from operating activities | Net cash provided from operating activities | 757 | | | 1,122 | | Net cash provided from operating activities | 1,532 | | | 757 | |
Investing Activities: | Investing Activities: | | | | Investing Activities: | | | |
Property additions | Property additions | (1,045) | | | (1,045) | | Property additions | (1,063) | | | (1,045) | |
Cost of removal, net of salvage | Cost of removal, net of salvage | (74) | | | (60) | | Cost of removal, net of salvage | (84) | | | (74) | |
Change in construction payables, net | | Change in construction payables, net | (103) | | | 4 | |
| Investment in unconsolidated subsidiaries | (3) | | | (79) | | |
| Proceeds from dispositions | Proceeds from dispositions | 126 | | | 178 | | Proceeds from dispositions | — | | | 126 | |
Other investing activities | Other investing activities | 30 | | | 33 | | Other investing activities | 11 | | | 23 | |
Net cash used for investing activities | Net cash used for investing activities | (966) | | | (973) | | Net cash used for investing activities | (1,239) | | | (966) | |
Financing Activities: | Financing Activities: | | | | Financing Activities: | | | |
Increase (decrease) in notes payable, net | Increase (decrease) in notes payable, net | 38 | | | (500) | | Increase (decrease) in notes payable, net | (749) | | | 38 | |
Proceeds — | Proceeds — | | Proceeds — | |
Short-term borrowings | Short-term borrowings | 300 | | | — | | Short-term borrowings | 50 | | | 300 | |
First mortgage bonds | First mortgage bonds | 100 | | | 150 | | First mortgage bonds | 100 | | | 100 | |
Senior notes | Senior notes | 450 | | | 500 | | Senior notes | 500 | | | 450 | |
Redemptions — | Redemptions — | | Redemptions — | |
| Short-term borrowings | | Short-term borrowings | (150) | | | — | |
Senior notes | Senior notes | (300) | | | — | | Senior notes | — | | | (300) | |
| Medium-term notes | Medium-term notes | (30) | | | — | | Medium-term notes | (46) | | | (30) | |
Capital contributions from parent company | Capital contributions from parent company | 63 | | | 215 | | Capital contributions from parent company | 357 | | | 63 | |
Payment of common stock dividends | Payment of common stock dividends | (397) | | | (399) | | Payment of common stock dividends | (389) | | | (397) | |
Other financing activities | Other financing activities | (2) | | | (3) | | Other financing activities | 14 | | | (2) | |
Net cash provided from (used for) financing activities | Net cash provided from (used for) financing activities | 222 | | | (37) | | Net cash provided from (used for) financing activities | (313) | | | 222 | |
Net Change in Cash, Cash Equivalents, and Restricted Cash | Net Change in Cash, Cash Equivalents, and Restricted Cash | 13 | | | 112 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | (20) | | | 13 | |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 19 | | | 49 | | Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 48 | | | 19 | |
Cash, Cash Equivalents, and Restricted Cash at End of Period | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 32 | | | $ | 161 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 28 | | | $ | 32 | |
Supplemental Cash Flow Information: | Supplemental Cash Flow Information: | | | | Supplemental Cash Flow Information: | | | |
Cash paid during the period for — | Cash paid during the period for — | | Cash paid during the period for — | |
Interest (net of $6 and $5 capitalized for 2021 and 2020, respectively) | $ | 173 | | | $ | 162 | | |
Interest (net of $7 and $6 capitalized for 2022 and 2021, respectively) | | Interest (net of $7 and $6 capitalized for 2022 and 2021, respectively) | $ | 186 | | | $ | 173 | |
Income taxes, net | Income taxes, net | 85 | | | 45 | | Income taxes, net | 193 | | | 85 | |
Noncash transactions — Accrued property additions at end of period | Noncash transactions — Accrued property additions at end of period | 146 | | | 146 | | Noncash transactions — Accrued property additions at end of period | 10 | | | 146 | |
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Assets | Assets | | At September 30, 2021 | | At December 31, 2020 | Assets | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Assets: | Current Assets: | | | | | Current Assets: | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 29 | | | $ | 17 | | Cash and cash equivalents | | $ | 26 | | | $ | 45 | |
Receivables — | Receivables — | | | | | Receivables — | | | | |
Energy marketing | | — | | | 516 | | |
| Customer accounts | Customer accounts | | 249 | | | 353 | | Customer accounts | | 296 | | | 462 | |
Unbilled revenues | Unbilled revenues | | 70 | | | 219 | | Unbilled revenues | | 122 | | | 278 | |
| Affiliated | | 1 | | | 4 | | |
| Other accounts and notes | Other accounts and notes | | 39 | | | 51 | | Other accounts and notes | | 58 | | | 49 | |
Accumulated provision for uncollectible accounts | Accumulated provision for uncollectible accounts | | (37) | | | (40) | | Accumulated provision for uncollectible accounts | | (41) | | | (39) | |
| Natural gas for sale | Natural gas for sale | | 368 | | | 460 | | Natural gas for sale | | 498 | | | 362 | |
| Prepaid expenses | Prepaid expenses | | 181 | | | 48 | | Prepaid expenses | | 192 | | | 114 | |
Assets from risk management activities, net of collateral | | 75 | | | 118 | | |
| Natural gas cost under recovery | Natural gas cost under recovery | | 432 | | | — | | Natural gas cost under recovery | | 390 | | | 266 | |
| Other regulatory assets | Other regulatory assets | | 137 | | | 102 | | Other regulatory assets | | 121 | | | 136 | |
Other current assets | Other current assets | | 44 | | | 38 | | Other current assets | | 118 | | | 82 | |
Total current assets | Total current assets | | 1,588 | | | 1,886 | | Total current assets | | 1,780 | | | 1,755 | |
Property, Plant, and Equipment: | Property, Plant, and Equipment: | | | | | Property, Plant, and Equipment: | | | | |
In service | In service | | 18,527 | | | 17,611 | | In service | | 19,656 | | | 18,880 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | | 5,004 | | | 4,821 | | Less: Accumulated depreciation | | 5,270 | | | 5,067 | |
Plant in service, net of depreciation | Plant in service, net of depreciation | | 13,523 | | | 12,790 | | Plant in service, net of depreciation | | 14,386 | | | 13,813 | |
Construction work in progress | Construction work in progress | | 691 | | | 648 | | Construction work in progress | | 871 | | | 684 | |
Total property, plant, and equipment | Total property, plant, and equipment | | 14,214 | | | 13,438 | | Total property, plant, and equipment | | 15,257 | | | 14,497 | |
Other Property and Investments: | Other Property and Investments: | | | | | Other Property and Investments: | | | | |
Goodwill | Goodwill | | 5,015 | | | 5,015 | | Goodwill | | 5,015 | | | 5,015 | |
Equity investments in unconsolidated subsidiaries | Equity investments in unconsolidated subsidiaries | | 1,174 | | | 1,290 | | Equity investments in unconsolidated subsidiaries | | 1,125 | | | 1,173 | |
Other intangible assets, net of amortization of $142 and $195, respectively | | 40 | | | 51 | | |
Other intangible assets, net of amortization of $154 and $145, respectively | | Other intangible assets, net of amortization of $154 and $145, respectively | | 28 | | | 37 | |
Miscellaneous property and investments | Miscellaneous property and investments | | 20 | | | 19 | | Miscellaneous property and investments | | 27 | | | 19 | |
Total other property and investments | Total other property and investments | | 6,249 | | | 6,375 | | Total other property and investments | | 6,195 | | | 6,244 | |
Deferred Charges and Other Assets: | Deferred Charges and Other Assets: | | | | | Deferred Charges and Other Assets: | | | | |
Operating lease right-of-use assets, net of amortization | Operating lease right-of-use assets, net of amortization | | 72 | | | 81 | | Operating lease right-of-use assets, net of amortization | | 61 | | | 70 | |
Prepaid pension costs | | Prepaid pension costs | | 200 | | | 175 | |
| Other regulatory assets, deferred | Other regulatory assets, deferred | | 634 | | | 615 | | Other regulatory assets, deferred | | 468 | | | 689 | |
| Other deferred charges and assets | Other deferred charges and assets | | 201 | | | 235 | | Other deferred charges and assets | | 136 | | | 130 | |
Total deferred charges and other assets | Total deferred charges and other assets | | 907 | | | 931 | | Total deferred charges and other assets | | 865 | | | 1,064 | |
Total Assets | Total Assets | | $ | 22,958 | | | $ | 22,630 | | Total Assets | | $ | 24,097 | | | $ | 23,560 | |
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| Liabilities and Stockholder's Equity | Liabilities and Stockholder's Equity | | At September 30, 2021 | | At December 31, 2020 | Liabilities and Stockholder's Equity | | At September 30, 2022 | | At December 31, 2021 |
| | | (in millions) | | | (in millions) |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Securities due within one year | Securities due within one year | | $ | 47 | | | $ | 333 | | Securities due within one year | | $ | — | | | $ | 47 | |
Notes payable | Notes payable | | 662 | | | 324 | | Notes payable | | 360 | | | 1,209 | |
Energy marketing trade payables | | — | | | 494 | | |
| Accounts payable — | Accounts payable — | | Accounts payable — | |
Affiliated | Affiliated | | 42 | | | 56 | | Affiliated | | 64 | | | 58 | |
Other | Other | | 399 | | | 373 | | Other | | 592 | | | 361 | |
Customer deposits | Customer deposits | | 106 | | | 90 | | Customer deposits | | 137 | | | 95 | |
| Accrued taxes | Accrued taxes | | 79 | | | 83 | | Accrued taxes | | 71 | | | 124 | |
Accrued interest | Accrued interest | | 68 | | | 58 | | Accrued interest | | 67 | | | 59 | |
| Accrued compensation | Accrued compensation | | 87 | | | 106 | | Accrued compensation | | 92 | | | 110 | |
| Temporary LIFO liquidation | | 18 | | | — | | |
| | Other regulatory liabilities | Other regulatory liabilities | | 18 | | | 122 | | Other regulatory liabilities | | 15 | | | 8 | |
Other current liabilities | Other current liabilities | | 154 | | | 150 | | Other current liabilities | | 168 | | | 155 | |
Total current liabilities | Total current liabilities | | 1,680 | | | 2,189 | | Total current liabilities | | 1,566 | | | 2,226 | |
Long-term Debt | Long-term Debt | | 6,766 | | | 6,293 | | Long-term Debt | | 7,361 | | | 6,855 | |
Deferred Credits and Other Liabilities: | Deferred Credits and Other Liabilities: | | | | | Deferred Credits and Other Liabilities: | | | | |
Accumulated deferred income taxes | Accumulated deferred income taxes | | 1,571 | | | 1,265 | | Accumulated deferred income taxes | | 1,662 | | | 1,555 | |
Deferred credits related to income taxes | Deferred credits related to income taxes | | 822 | | | 847 | | Deferred credits related to income taxes | | 793 | | | 816 | |
| Employee benefit obligations | Employee benefit obligations | | 260 | | | 283 | | Employee benefit obligations | | 158 | | | 176 | |
| Operating lease obligations | Operating lease obligations | | 60 | | | 67 | | Operating lease obligations | | 53 | | | 59 | |
Other cost of removal obligations | Other cost of removal obligations | | 1,675 | | | 1,649 | | Other cost of removal obligations | | 1,696 | | | 1,683 | |
Accrued environmental remediation | Accrued environmental remediation | | 203 | | | 216 | | Accrued environmental remediation | | 217 | | | 197 | |
| Other deferred credits and liabilities | Other deferred credits and liabilities | | 45 | | | 54 | | Other deferred credits and liabilities | | 153 | | | 77 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | | 4,636 | | | 4,381 | | Total deferred credits and other liabilities | | 4,732 | | | 4,563 | |
Total Liabilities | Total Liabilities | | 13,082 | | | 12,863 | | Total Liabilities | | 13,659 | | | 13,644 | |
| Common Stockholder's Equity (See accompanying statements) | Common Stockholder's Equity (See accompanying statements) | | 9,876 | | | 9,767 | | Common Stockholder's Equity (See accompanying statements) | | 10,438 | | | 9,916 | |
Total Liabilities and Stockholder's Equity | Total Liabilities and Stockholder's Equity | | $ | 22,958 | | | $ | 22,630 | | Total Liabilities and Stockholder's Equity | | $ | 24,097 | | | $ | 23,560 | |
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
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, 2019 | | $ | 9,697 | | | $ | (198) | | | $ | 7 | | | $ | 9,506 | | |
Net income | | — | | | 275 | | | — | | | 275 | | |
| Return of capital to parent company | | (2) | | | — | | | — | | | (2) | | |
| Other comprehensive income (loss) | | — | | | — | | | (15) | | | (15) | | |
Cash dividends on common stock | | — | | | (133) | | | — | | | (133) | | |
| Balance at March 31, 2020 | | 9,695 | | | (56) | | | (8) | | | 9,631 | | |
Net income | | — | | | 71 | | | — | | | 71 | | |
| Capital contributions from parent company | | 200 | | | — | | | — | | | 200 | | |
| Cash dividends on common stock | | — | | | (133) | | | — | | | (133) | | |
| Balance at June 30, 2020 | | 9,895 | | | (118) | | | (8) | | | 9,769 | | |
Net income | | — | | | 14 | | | — | | | 14 | | |
| Capital contributions from parent company | | 30 | | | — | | | — | | | 30 | | |
Other comprehensive income | | — | | | — | | | 5 | | | 5 | | |
Cash dividends on common stock | | — | | | (133) | | | — | | | (133) | | |
| Balance at September 30, 2020 | | $ | 9,925 | | | $ | (237) | | | $ | (3) | | | $ | 9,685 | | |
| | | | | | (in millions) |
Balance at December 31, 2020 | Balance at December 31, 2020 | | $ | 9,930 | | | $ | (141) | | | $ | (22) | | | $ | 9,767 | | Balance at December 31, 2020 | | $ | 9,930 | | | $ | (141) | | | $ | (22) | | | $ | 9,767 | |
Net income | Net income | | — | | | 398 | | | — | | | 398 | | Net income | | — | | | 398 | | | — | | | 398 | |
| Capital contributions from parent company | Capital contributions from parent company | | 57 | | | — | | | — | | | 57 | | Capital contributions from parent company | | 57 | | | — | | | — | | | 57 | |
Other comprehensive income | Other comprehensive income | | — | | | — | | | 4 | | | 4 | | Other comprehensive income | | — | | | — | | | 4 | | | 4 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (132) | | | — | | | (132) | | Cash dividends on common stock | | — | | | (132) | | | — | | | (132) | |
| Balance at March 31, 2021 | Balance at March 31, 2021 | | 9,987 | | | 125 | | | (18) | | | 10,094 | | Balance at March 31, 2021 | | 9,987 | | | 125 | | | (18) | | | 10,094 | |
Net loss | Net loss | | — | | | (65) | | | — | | | (65) | | Net loss | | — | | | (65) | | | — | | | (65) | |
| Capital contributions from parent company | Capital contributions from parent company | | 25 | | | — | | | — | | | 25 | | Capital contributions from parent company | | 25 | | | — | | | — | | | 25 | |
Other comprehensive income | Other comprehensive income | | — | | | — | | | 8 | | | 8 | | Other comprehensive income | | — | | | — | | | 8 | | | 8 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (133) | | | — | | | (133) | | Cash dividends on common stock | | — | | | (133) | | | — | | | (133) | |
| Balance at June 30, 2021 | Balance at June 30, 2021 | | 10,012 | | | (73) | | | (10) | | | 9,929 | | Balance at June 30, 2021 | | 10,012 | | | (73) | | | (10) | | | 9,929 | |
Net income | Net income | | — | | | 56 | | | — | | | 56 | | Net income | | — | | | 56 | | | — | | | 56 | |
| | Capital contributions from parent company | Capital contributions from parent company | | 2 | | | — | | | — | | | 2 | | Capital contributions from parent company | | 2 | | | — | | | — | | | 2 | |
Other comprehensive income | Other comprehensive income | | — | | | — | | | 21 | | | 21 | | Other comprehensive income | | — | | | — | | | 21 | | | 21 | |
Cash dividends on common stock | Cash dividends on common stock | | — | | | (132) | | | — | | | (132) | | Cash dividends on common stock | | — | | | (132) | | | — | | | (132) | |
| Balance at September 30, 2021 | Balance at September 30, 2021 | | $ | 10,014 | | | $ | (149) | | | $ | 11 | | | $ | 9,876 | | Balance at September 30, 2021 | | $ | 10,014 | | | $ | (149) | | | $ | 11 | | | $ | 9,876 | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | | $ | 10,024 | | | $ | (132) | | | $ | 24 | | | $ | 9,916 | |
Net income | | Net income | | — | | | 319 | | | — | | | 319 | |
| Capital contributions from parent company | | Capital contributions from parent company | | 50 | | | — | | | — | | | 50 | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | 20 | | | 20 | |
Cash dividends on common stock | | Cash dividends on common stock | | — | | | (130) | | | — | | | (130) | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | | 10,074 | | | 57 | | | 44 | | | 10,175 | |
Net income | | Net income | | — | | | 115 | | | — | | | 115 | |
| Capital contributions from parent company | | Capital contributions from parent company | | 312 | | | — | | | — | | | 312 | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | | — | | | — | | | (12) | | | (12) | |
Cash dividends on common stock | | Cash dividends on common stock | | — | | | (130) | | | — | | | (130) | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | | 10,386 | | | 42 | | | 32 | | | 10,460 | |
Net income | | Net income | | — | | | 83 | | | — | | | 83 | |
| Capital contributions from parent company | | Capital contributions from parent company | | 11 | | | — | | | — | | | 11 | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | 14 | | | 14 | |
Cash dividends on common stock | | Cash dividends on common stock | | — | | | (130) | | | — | | | (130) | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | | $ | 10,397 | | | $ | (5) | | | $ | 46 | | | $ | 10,438 | |
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
MISSISSIPPI POWER COMPANY
SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
(UNAUDITED)
INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS
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.
| | | | | |
Registrant | Applicable Notes |
Southern Company | A, B, C, D, E, F, G, H, I, J, K, L |
Alabama Power | A, B, C, D, F, G, H, I, J, K |
Georgia Power | A, B, C, D, F, G, H, I, J |
Mississippi Power | A, B, C, D, F, G, H, I, J |
Southern Power | A, C, D, E, F, G, H, I, J, K |
Southern Company Gas | A, B, C, D, E, F, G, H, I, J, K, L |
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 at December 31, 20202021 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, 20212022 and 2020.2021. 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, 20212022 and December 31, 20202021 was as follows:
| | | | | | |
| Goodwill | |
| (in millions) |
Southern Company | $ | 5,280 | | |
Southern Company Gas: | | |
Gas distribution operations | $ | 4,034 | | |
Gas marketing services | 981 | | |
Southern Company Gas total | $ | 5,015 | | |
Goodwill is not amortized, but is subject to an annual impairment test induring the fourth quarter of theeach year, and on an interim basis as events and changes in circumstances occur.or more frequently if impairment indicators arise.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Other intangible assets were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2021 | | At December 31, 2020 |
| Gross Carrying Amount | Accumulated Amortization | Other Intangible Assets, Net | | Gross Carrying Amount | Accumulated Amortization | Other Intangible Assets, Net |
| (in millions) | | (in millions) |
Southern Company | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
Customer relationships | $ | 212 | | $ | (148) | | $ | 64 | | | $ | 212 | | $ | (135) | | $ | 77 | |
Trade names | 64 | | (36) | | 28 | | | 64 | | (31) | | 33 | |
Storage and transportation contracts(*) | — | | — | | — | | | 64 | | (64) | | — | |
PPA fair value adjustments | 390 | | (104) | | 286 | | | 390 | | (89) | | 301 | |
Other | 10 | | (8) | | 2 | | | 10 | | (9) | | 1 | |
Total other intangible assets subject to amortization | $ | 676 | | $ | (296) | | $ | 380 | | | $ | 740 | | $ | (328) | | $ | 412 | |
Other intangible assets not subject to amortization: | | | | | | | |
Federal Communications Commission licenses | 75 | | — | | 75 | | | 75 | | — | | 75 | |
Total other intangible assets | $ | 751 | | $ | (296) | | $ | 455 | | | $ | 815 | | $ | (328) | | $ | 487 | |
| | | | | | | |
Southern Power | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
PPA fair value adjustments | $ | 390 | | $ | (104) | | $ | 286 | | | $ | 390 | | $ | (89) | | $ | 301 | |
| | | | | | | |
Southern Company Gas | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
Gas marketing services | | | | | | | |
Customer relationships | $ | 156 | | $ | (128) | | $ | 28 | | | $ | 156 | | $ | (119) | | $ | 37 | |
Trade names | 26 | | (14) | | 12 | | | 26 | | (12) | | 14 | |
Wholesale gas services | | | | | | | |
Storage and transportation contracts(*) | — | | — | | — | | | 64 | | (64) | | — | |
Total other intangible assets subject to amortization | $ | 182 | | $ | (142) | | $ | 40 | | | $ | 246 | | $ | (195) | | $ | 51 | |
(*)See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent. | | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2022 | | At December 31, 2021 |
| Gross Carrying Amount | Accumulated Amortization | Other Intangible Assets, Net | | Gross Carrying Amount | Accumulated Amortization | Other Intangible Assets, Net |
| (in millions) | | (in millions) |
Southern Company | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
Customer relationships | $ | 212 | $ | (159) | $ | 53 | | $ | 212 | | $ | (150) | | $ | 62 | |
Trade names | 64 | (44) | 20 | | 64 | | (38) | | 26 | |
PPA fair value adjustments | 390 | (124) | 266 | | 390 | | (109) | | 281 | |
Other | 5 | (4) | 1 | | 11 | | (10) | | 1 | |
Total other intangible assets subject to amortization | $ | 671 | | $ | (331) | | $ | 340 | | | $ | 677 | | $ | (307) | | $ | 370 | |
Other intangible assets not subject to amortization: | | | | | | | |
Federal Communications Commission licenses | 75 | | — | | 75 | | | 75 | | — | | 75 | |
Total other intangible assets | $ | 746 | | $ | (331) | | $ | 415 | | | $ | 752 | | $ | (307) | | $ | 445 | |
| | | | | | | |
Southern Power | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
PPA fair value adjustments | $ | 390 | | $ | (124) | | $ | 266 | | | $ | 390 | | $ | (109) | | $ | 281 | |
| | | | | | | |
Southern Company Gas | | | | | | | |
Other intangible assets subject to amortization: | | | | | | | |
Gas marketing services | | | | | | | |
Customer relationships | $ | 156 | | $ | (137) | | $ | 19 | | | $ | 156 | | $ | (130) | | $ | 26 | |
Trade names | 26 | | (17) | | 9 | | | 26 | | (15) | | 11 | |
Total other intangible assets subject to amortization | $ | 182 | | $ | (154) | | $ | 28 | | | $ | 182 | | $ | (145) | | $ | 37 | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Amortization associated with other intangible assets was as follows:
| | | Three Months Ended | Nine Months Ended | | Three Months Ended | Nine Months Ended |
| | September 30, 2021 | | September 30, 2022 |
| | (in millions) | | (in millions) |
Southern Company(a) | Southern Company(a) | $ | 11 | | $ | 33 | | Southern Company(a) | $ | 11 | | $ | 30 | |
Southern Power(b) | Southern Power(b) | 5 | | 15 | | Southern Power(b) | 5 | | 15 | |
Southern Company Gas(c) | Southern Company Gas(c) | 4 | | 11 | | Southern Company Gas(c) | 4 | | 9 | |
(a)Includes $5 million and $15 million for the three and nine months ended September 30, 2021,2022, respectively, recorded as a reduction to operating revenues.
(b)Recorded as a reduction to operating revenues.
(c)Relates to gas marketing services.
Cash, Cash Equivalents, and 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 amount shown in the condensed statements of cash flows for the applicable Registrants:
| | | Southern Company | | Southern Power | | Southern Company Gas | | Southern Company | Southern Power | | Southern Company Gas |
| | September 30, 2021 | | December 31, 2020 | | September 30, 2021 | | September 30, 2021 | December 31, 2020 | | September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | | September 30, 2022 | December 31, 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Cash and cash equivalents | Cash and cash equivalents | $ | 2,078 | | | $ | 1,065 | | | $ | 192 | | | $ | 29 | | $ | 17 | | Cash and cash equivalents | $ | 2,009 | | $ | 1,798 | | $ | 229 | | $ | 107 | | | $ | 26 | | $ | 45 | |
| Restricted cash(a): | Restricted cash(a): | | Restricted cash(a): | | | |
Other current assets | Other current assets | 3 | | | 2 | | | — | | | 3 | | 2 | | Other current assets | 2 | | 2 | | — | | — | | | 2 | | 2 | |
Other deferred charges and assets | Other deferred charges and assets | 21 | | | — | | | 21 | | | — | | — | | Other deferred charges and assets | 3 | | 29 | | 3 | | 29 | | | — | | — | |
Total cash, cash equivalents, and restricted cash(b) | Total cash, cash equivalents, and restricted cash(b) | $ | 2,101 | | | $ | 1,068 | | | $ | 213 | | | $ | 32 | | $ | 19 | | Total cash, cash equivalents, and restricted cash(b) | $ | 2,013 | | $ | 1,829 | | $ | 231 | | $ | 135 | | | $ | 28 | | $ | 48 | |
(a)For Southern Power, reflects $3 million and $10 million at September 30, 2022 and December 31, 2021, respectively, held to fund estimated construction completion costs at the Deuel Harvest wind facility and $19 million at December 31, 2021 related to tax equity contributions restricted until the Garland battery energy storage facility achieved final contracted capacity. 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 may not add due to rounding.
Natural Gas for Sale
With the exception of Nicor Gas, Southern Company Gas records 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 anyeither period presented. Nicor Gas'Gas had no inventory decrement at September 30, 2021 is expected to be restored prior to year end.2022.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Asset Retirement ObligationsDepreciation and Amortization
See Note 65 to the financial statements under "Depreciation and Amortization" in Item 8 of the Form 10-K for additional information.
Details of changes in AROs for Southern Company,Alabama Power
On September 23, 2022, the FERC authorized Alabama Power Georgiato use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Southern Power
Effective January 1, 2022, Southern Power revised the depreciable lives of its wind generating facilities from up to 30 years to up to 35 years. This revision resulted in an immaterial decrease in depreciation for the three and Mississippi Power during the first nine months of 2021 are shown in the following table. There were no material changes in AROs for the other Registrants during the first nine months of 2021.ended September 30, 2022.
| | | | | | | | | | | | | | |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power |
| (in millions) |
Balance at December 31, 2020 | $ | 10,684 | | $ | 3,974 | | $ | 6,265 | | $ | 176 | |
Liabilities incurred | 17 | | — | | 3 | | — | |
Liabilities settled | (341) | | (152) | | (154) | | (18) | |
Accretion | 304 | | 116 | | 176 | | 6 | |
Cash flow revisions | 945 | | 385 | | 475 | | 30 | |
Balance at September 30, 2021 | $ | 11,609 | | $ | 4,323 | | $ | 6,765 | | $ | 194 | |
In August 2021, Alabama Power recorded an increase of approximately $385 million to its AROs related to the CCR Rule and the related state rule based on updated estimates for post-closure costs at its ash ponds and inflation rates.
In September 2021, Georgia Power recorded an increase of approximately $435 million to its AROs related to the CCR Rule and the related state rule based on updated estimates for inflation rates and the timing of closure activities.
In September 2021, Mississippi Power recorded an increase of approximately $30 million to its AROs related to the CCR Rule based on updated estimates for the timing of closure activities, post-closure costs at one of its ash ponds, and inflation rates.
The traditional electric operating companies have periodically updated, and expect to continue periodically updating, their related cost estimates and ARO liabilities for each CCR unit as additional information related to these assumptions becomes available. Some of these updates have been, and future updates may 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) under "Georgia Power – Rate Plan" for additional information.The ultimate outcome of these matters cannot be determined at this time.
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, 20212022 and December 31, 20202021 were as follows:
| Regulatory Clause | Regulatory Clause | Balance Sheet Line Item | September 30, 2021 | December 31, 2020 | Regulatory Clause | Balance Sheet Line Item | September 30, 2022 | December 31, 2021 |
| | (in millions) | | (in millions) |
Alabama Power | Alabama Power | | Alabama Power | |
| Rate CNP Compliance | Rate CNP Compliance | Other regulatory liabilities, current | $ | — | | $ | 28 | | Rate CNP Compliance | Other regulatory liabilities, deferred | $ | 4 | | $ | — | |
| | Other regulatory liabilities, deferred | 24 | | — | | | Other regulatory assets, deferred | — | | 16 | |
| Rate CNP PPA | Rate CNP PPA | Other regulatory assets, deferred | 88 | | 58 | | Rate CNP PPA | Other regulatory assets, deferred | 125 | | 84 | |
Retail Energy Cost Recovery | Other regulatory liabilities, current | — | | 18 | | |
| Retail Energy Cost Recovery(*) | | Retail Energy Cost Recovery(*) | Other regulatory assets, current | 93 | | — | |
| | | Other regulatory assets, deferred | 413 | | 126 | |
| | Other regulatory assets, current | 79 | | — | | |
| | Other regulatory assets, deferred | 6 | | — | | |
Georgia Power | | Georgia Power | |
| Natural Disaster Reserve | Other regulatory liabilities, deferred | 36 | | 77 | | |
Georgia Power | | |
Fuel Cost Recovery | Fuel Cost Recovery | Over recovered fuel clause revenues | $ | — | | $ | 113 | | Fuel Cost Recovery | Deferred under recovered fuel clause revenues | $ | 1,697 | | $ | 410 | |
| | Other deferred charges and assets | 203 | | — | | |
Mississippi Power | | Mississippi Power | |
| Mississippi Power | | |
Fuel Cost Recovery | Fuel Cost Recovery | Over recovered regulatory clause liabilities | $ | 5 | | $ | 24 | | Fuel Cost Recovery | Other customer accounts receivable | $ | 13 | | $ | 4 | |
Ad Valorem Tax | Ad Valorem Tax | Other regulatory assets, current | 12 | | 11 | | Ad Valorem Tax | Other regulatory assets, current | 12 | | 12 | |
| | Other regulatory assets, deferred | 39 | | 41 | | | Other regulatory assets, deferred | 22 | | 37 | |
Property Damage Reserve | Other regulatory liabilities, deferred | — | | 4 | | |
| | | Other regulatory assets, deferred | 16 | | — | | |
Southern Company Gas | Southern Company Gas | | Southern Company Gas | |
Natural Gas Cost Recovery(*) | Other regulatory liabilities | $ | — | | $ | 88 | | |
| Natural Gas Cost Recovery | | Natural Gas Cost Recovery | Natural gas cost under recovery | $ | 390 | | $ | 266 | |
| | Natural gas cost under recovery | 432 | | — | | | Other regulatory assets, deferred | — | | 207 | |
| | Other regulatory assets, deferred | 79 | | — | | |
(*)The significant change during the nine months ended September 30, 2021 was primarily driven byIn accordance with an increase in the cost of gas purchased in February 2021 resulting from Winter Storm Uri.
Alabama Power
Certificate of Convenience and Necessity
Energy Alabama, Gasp, Inc., and the Sierra Club filed requests for reconsideration and rehearing with the Alabama PSC regarding the certificate of convenience and necessity (CCN)order issued toon February 1, 2022, Alabama Power in August 2020, which authorized, among other things,applied $126 million of its 2021 Rate RSE refund to reduce the construction of Plant Barry Unit 8 and the acquisition of the Central Alabama Generating Station. In December 2020, the Alabama PSC issued an order denying the requests. On January 7, 2021, Energy Alabama and Gasp, Inc. filed a judicial appeal regarding both the Alabama PSC's August 2020 CCN order and the December 2020 order denying reconsideration and rehearing. On March 9, 2021, the Circuit Court of Montgomery County, Alabama granted a motion by Alabama Power to intervene in the appeal. On August 27, 2021, the court affirmed both the August 2020 and December 2020 Alabama PSC orders. On October 7, 2021, Energy Alabama and Gasp, Inc. filed an unopposed motion for voluntary dismissal of their direct appeal previouslyRate ECR under recovered balance.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
filedAlabama Power
Certificates of Convenience and Necessity
On July 12, 2022, the Alabama PSC approved a certificate of convenience and necessity (CCN) authorizing Alabama Power to complete the acquisition of the Calhoun Generating Station, which was approved by the FERC on January 7, 2021. This matter is now concluded. AtMarch 25, 2022. The transaction closed on September 30, 2021, expenditures2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of $34 million, or 0.6%, effective with the billing month of November 2022. Alabama Power expects to recover all approved costs associated with the constructionacquisition through existing rate mechanisms as outlined in Note 2 to the financial statements in Item 8 of the Form 10-K. See Note (K) under "Alabama Power" for additional information.
With the completion of the Calhoun Generating Station acquisition, Alabama Power expects to retire Plant Barry Unit 8 included in CWIP totaled approximately $222 million.
Plant Greene County
5 as early as 2023. In September 2022, Alabama Power jointly ownsreclassified approximately $600 million for Plant Greene County with an affiliate, Mississippi Power.Barry Unit 5 from plant in service, net of depreciation to other utility plant, net and will continue to depreciate the asset according to the original depreciation rates. At retirement, Alabama Power will reclassify the remaining net investment costs of the unit to a regulatory asset to be recovered over the unit's remaining useful life, as established prior to the decision to retire, through Rate CNP Compliance. See Note 52 to the financial statements under "Joint Ownership Agreements""Alabama Power – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information.
OnIn its 2020 order authorizing the CCN for Alabama Power's construction of Plant Barry Unit 8, the Alabama PSC authorized recovery of estimated actual in-service costs of $652 million. At September 9, 2021,30, 2022, project expenditures associated with Plant Barry Unit 8 included in CWIP totaled approximately $484 million and the Mississippi PSC issued an order confirming the conclusion of its review of Mississippi Power's 2021 IRP with no deficiencies identified. Mississippi Power's 2021 IRP includes a scheduleunit is expected to retire Mississippi Power's 40% ownership interestbe placed in Plant Greene County Units 1 and 2service in December 2025 and 2026, respectively, consistent with each unit's remaining useful life. 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 the transmission and system reliability improvements. Currently, Alabama Power plans to retire Plant Greene County Units 1 and 2 at the dates indicated.November 2023. The ultimate outcome of this matter cannot be determined at this time.
Rate ECR
On July 12, 2022, the Alabama PSC approved an adjustment to Rate ECR from 1.960 cents per KWH to 2.557 cents per KWH, or approximately $310 million annually, effective with August 2022 billings. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery. The rate will adjust to 5.910 cents per KWH in January 2025 absent a further order from the Alabama PSC.
Rate NDR
Based on an order fromOn July 12, 2022, the Alabama PSC whenapproved modifications to Rate NDR, which include an adjustment to the charges to establish and maintain the reserve and an adjustment to the recovery period for any existing deferred storm-related operations and maintenance costs and future reserve deficits from 24 months to 48 months. As modified, the maximum total Rate NDR charge to recover a deficit is limited to $5.00 per month per non-residential customer account and $2.50 per month per residential customer account.
Beginning with August 2022 billings, the reserve establishment charge was suspended and the reserve maintenance charge was activated as a result of the NDR balance exceeding $75 million. Alabama Power'sPower expects to collect $6 million in the second half of 2022 and approximately $12 million annually beginning in 2023 under Rate NDR unless the NDR balance falls below $50 million, a reserve establishment charge will be activated and the ongoing reserve maintenance charge will be concurrently suspended until the NDR balance reaches $75 million. At September 30, 2021,2022, Alabama Power's NDR balance was $36$103 million. Effective with October 2021 billings,Alabama Power continues to have the authority to accrue additional amounts to the NDR as circumstances warrant.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Reliability Reserve Accounting Order
On July 12, 2022, the Alabama PSC approved an accounting order authorizing Alabama Power to create a reliability reserve maintenance charge component ofseparate from the NDR and transition the previous Rate NDR was suspended andauthority related to reliability expenditures to the reserve establishment charge was activated.reliability reserve. Alabama Power expectsmay make accruals to collect approximately $4 million in the fourth quarter 2021 and $16 million annually under Rate NDR untilreliability reserve if the NDR balance is restored to $75exceeds $35 million.
Calhoun Generating Station AcquisitionRenewable Generation Certificate
On September 23, 2021,Through the issuance of a Renewable Generation Certificate (RGC), Alabama Power entered into an agreement to acquire all of the equity interests in Calhoun Power Company, LLC, which owns and operates a 743-MW winter peak, simple-cycle, combustion turbine generation facility in Calhoun County, Alabama (Calhoun Generating Station). The total purchase price associated with the acquisition is approximately $180 million, subject to working capital adjustments. The completion of the acquisition is subject to the satisfaction and waiver of certain conditions, including, among other customary conditions, approvalauthorized by the Alabama PSC and the FERC, as well as the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Alabama Power expects to complete the transaction by September 30, 2022.
On October 28, 2021, Alabama Power filed a petition for a CCN with the Alabama PSC to procure additional generatingup to 500 MWs of renewable capacity throughand energy by September 16, 2027 and to market the acquisitionrelated energy and environmental attributes to customers and other third parties. In April 2022, one of the Calhoun Generating Station.
Upon certification,existing solar projects which was expected to be served through a PPA commencing in first quarter 2024 was terminated, resulting in the restoration of 80 MWs of capacity under the RGC. On October 4, 2022, the Alabama PSC approved two new solar PPAs totaling 160 MWs. Alabama Power expects to recover costs associated withhas procured solar capacity totaling approximately 330 MWs under the Calhoun Generating Station through its existing rate structure, primarily Rate CNP New Plant, Rate CNP Compliance, Rate ECR, and Rate RSE.
RGC. The ultimate outcome of this matter cannot be determined at this time.
Georgia Power
Rate PlanPlans
Effective2022 Base Rate Case
On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2021, 2023, January 1, 2024, and January 1, 2025, respectively. These increases are based on a proposed retail ROE of 11.00% using the currently approved equity ratio of 56% and reflect levelized revenue requirements during the three-year period, with the exception of incremental compliance costs related to CCR AROs, Demand-Side Management (DSM) programs, and related adjustments to the Municipal Franchise Fee tariff.
Georgia Power reducedhas requested recovery of the proposed increases through its amortization of costs associated with CCR AROs by approximately $90 millionexisting base rate tariffs as approvedfollows:
| | | | | | | | | | | | | | | | | |
Tariff | 2023 | | 2024 | | 2025 |
| (in millions) |
Traditional base | $ | 762 | | | $ | — | | | $ | — | |
ECCR | | | | | |
Traditional | 5 | | | — | | | — | |
CCR ARO(a) | 64 | | | 78 | | | 47 | |
DSM(a) | 37 | | | 27 | | | (2) | |
Municipal Franchise Fee | 21 | | | 2 | | | 1 | |
Total(b) | $ | 889 | | | $ | 107 | | | $ | 45 | |
(a)As determined by the Georgia PSC in conjunction with Georgia Power'sthrough annual compliance filings.
In February 2020,(b)Totals may not add due to rounding.
Georgia Power's filing primarily reflects requests to (i) recover the Georgia PSC denied a motion for reconsideration filed by the Sierra Club regarding the Georgia PSC's decisioncosts of recent and future capital investments in the 2019 ARP allowingelectric grid including the transmission and distribution systems and the continuation of its grid investment plan, all designed to support customer long-term reliability and resiliency needs, (ii) recover the cost of coal-fired generation units proposed for retirement, or made unavailable, as requested in the 2022 IRP, as Georgia Power to recover compliance costs for CCR AROs, and, in December 2020,continues the Superior Court of Fulton County affirmed the decisiontransition of the Georgia PSC. On October 25,generation fleet to more economical and cleaner resources, (iii) make the necessary investments and recover costs to comply with federal and state environmental regulations, including costs
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
associated with the CCR AROs related to ash pond and landfill closures and post-closure care, and (iv) reduce operating costs despite significant inflationary pressures. In addition, the filing includes the following provisions:
•Continuation of an allowed retail ROE range of 9.50% to 12.00%.
•Continuation of the process whereby 80% of any earnings above the top of the allowed ROE range are shared with Georgia Power's customers and the remaining 20% are retained by Georgia Power.
•Continuation of the option to file an Interim Cost Recovery tariff in the event earnings are projected to fall below the bottom of the allowed ROE range during the three-year term of the plan.
Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time.
2019 ARP
In 2020, the Georgia PSC denied a motion for reconsideration filed by Sierra Club regarding the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. The Superior Court of Fulton County subsequently affirmed the Georgia PSC's decision and, in October 2021, the Georgia Court of Appeals affirmed the Superior Court of Fulton County's order. In December 2020 order. On November 3, 2021, the Sierra Club filed a motionpetition for reconsideration withwrit of certiorari to the Georgia Supreme Court, of Appeals. The ultimate outcome of thiswhich was denied on July 14, 2022. This matter cannot be determined at this time.
In accordance with the terms of the 2019 ARP, on October 1, 2021, Georgia Power filed the following tariff adjustments to become effective January 1, 2022 pending approval by the Georgia PSC:
•increase traditional base tariffs by approximately $192 million;
•decrease the ECCR tariff by approximately $12 million;
•decrease Demand-Side Management tariffs by approximately $25 million; and
•increase Municipal Franchise Fee tariffs by approximately $2 million.
The ultimate outcome of this matter cannot be determined at this time.
is now concluded. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information regarding Georgia Power's AROs.
Plant Vogtle Unit 3 and Common Facilities Rate ProceedingIntegrated Resource Plans
On June 15, 2021, Georgia Power filed an application withIn response to supply chain challenges in the solar industry, the Georgia PSC approved Georgia Power's request to adjust retail base rates to include the portionamend 970 MWs of costs related to its investment in Plant Vogtle Unit 3 and the common facilities shared between Plant Vogtle Units 3 and 4 (Common Facilities) previously deemed prudentutility-scale solar PPAs that were authorized by the Georgia PSC ($2.38 billion), as well asin Georgia Power's 2019 IRP. The amendments extended the related costs of operation. required commercial operation dates for the PPAs from 2023 to 2024.
On November 2, 2021,July 21, 2022, the Georgia PSC voted to approve Georgia Power's applicationapproved the 2022 IRP, as filed, with the following modifications pursuant tomodified by a stipulated agreement betweenamong Georgia Power, and the staff of the Georgia PSC. Georgia Power will include in rate base $2.1 billion of the $2.38 billion previously deemed prudentPSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved the following requests:
•Decertification and will recover the related depreciation expense through retail base rates. Financing costsretirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and reclassification to regulatory asset accounts of the remaining portionnet book values and any remaining unusable materials and supplies inventories upon retirement. The regulatory asset accounts for the remaining net book values of the totalunits ($299 million and $277 million for Unit 1 and Unit 2, respectively, at September 30, 2022) are being amortized at a rate equal to the unit depreciation rates authorized in the 2019 ARP through December 31, 2022. In the Georgia Power 2022 Base Rate Case, Georgia Power requested recovery of the remaining regulatory asset balances for the net book values of the units through 2030 and requested that the timing of recovery of the regulatory asset account for the unusable materials and supplies inventories be determined in a future base rate case.
•Decertification and retirement of Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028 and the Common Facilities construction costs will continuereclassification to be recovered through the NCCR tariff or deferred. Georgia Power will defer as a regulatory asset accounts of the remaining depreciation expensenet book value (approximately $38$608 million annually) until Unit 4 costs are placed in retail base rates. In addition, the stipulated agreement clarified that following the prudency review, the remaining amount to be placed in retail base rates will be net of the proceeds from the Guarantee Settlement Agreement and will not be used to offset imprudent costs, if any.
The related increase in annual retail base rates of approximately $302 million also includes recovery of all projected operations and maintenance expenses for Unit 3 and the Common Facilities and other related costs of operation, partially offset by the related production tax credits, and will become effective the month after Unit 3 is placed in service. This increase will be partially offset by a decrease in the NCCR tariff of approximately $78 million expected to be effective January 1, 2022.
See "Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.
Deferral of Incremental COVID-19 Costs
Since June 2021, Georgia Power has continued a review of bad debt amounts deferred under the Georgia PSC-approved methodology, including consideration of actual amounts repaid by customers from arrears and installment plans after the disconnection moratorium period ended in July 2020. As a result, Georgia Power has reduced the balance of deferred incremental costs by a total of approximately $23 million throughat September 30, 2021. At September 30, 2021, the incremental costs deferred totaled approximately $20 million, including approximately $1 million2022) and any remaining unusable materials and supplies inventory to regulatory asset accounts upon retirement. The timing of incremental bad debt costs and $19 million of other incremental costs. The period over whichrecovery for these costs will be recoveredregulatory assets is expected to be determined in Georgia Power's nexta future base rate case. The ultimate outcome
•Decertification and retirement of this matter cannotPlant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.
•Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills. Recovery of the related costs is expected to be determined at this time.
Fuel Cost Recovery
in future base rate cases. The Georgia Power has established fuel cost recovery rates approved byPSC's approval included a change in the Georgia PSC. On October 12, 2021, Georgia Power filed a notification and plan with the Georgia PSC to implement an interim fuel rider and increasemethod of closure for one ash
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
fuel rates by 15% effective January 1, 2022, which is expected to increase annual billings by approximately $252 million. The Georgia PSC has 30 days from the filing to approve the plan; however, if the Georgia PSC elects to take no action, the new rates become effective as requested.pond. Georgia Power is currently scheduledevaluating the related impact on its cost estimates and AROs; however, it is not expected to file its next fuel casebe material.
•Installation of environmental controls at Plants Bowen and Scherer for compliance with rules related to effluent limitations guidelines.
•Initiation of a license renewal application with the NRC for Plant Hatch.
•Investments related to the continued hydro operations of Plants Sinclair and Burton.
•Provisional authorization for development of a 265-MW battery energy storage facility with expected commercial operation in 2026.
•Issuance of requests for proposals (RFP) for 2,300 MWs of renewable resources, an additional 500 MWs of energy storage, and up to 140 MWs of biomass generation.
•Related transmission projects necessary to support the generation facilities plan.
•Certification of six PPAs (including five affiliate PPAs with Southern Power that are subject to approval by February 28, 2023. the FERC) with capacities of 1,567 MWs beginning in 2024, 380 MWs beginning in 2025, and 228 MWs beginning in 2028, procured through RFPs authorized in the 2019 IRP. See Note (F) under "Georgia Power Lease Modification" for additional information.
The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP and rejected Georgia Power's request to certify approximately 88 MWs of wholesale capacity to be placed in retail rate base between January 1, 2024 and January 1, 2025. Georgia Power may offer such capacity in the wholesale market or to the retail jurisdiction in a future regulatory proceeding.
On August 26, 2022, Restore Chattooga Gorge Coalition (RCG) filed a petition in the Superior Court of Fulton County, Georgia against Georgia Power and the Georgia PSC. The petition challenges Georgia Power's plan to expend $115 million to modernize Plant Tugalo, as approved in the 2019 IRP, and seeks judicial review of the Georgia PSC's order in the 2022 IRP proceeding with respect to the denial of RCG's challenge to the modernization plan.
The ultimate outcome of this matterthese matters cannot be determined at this time.
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 2two 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, wherebyunder which 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
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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, and mandatory prepayment events, and conditions to borrowing.events.
Cost and Schedule
Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4, including contingency, through September 2022the end of the first quarter 2023 and Junethe fourth quarter 2023, respectively, is as follows:
| | | | | |
| (in millions) |
Base project capital cost forecast(a)(b) | $ | 9,34210,334 | |
Construction contingency estimate | 13749 | |
| |
Total project capital cost forecast(a)(b) | 9,47910,383 | |
Net investment at September 30, 20212022(b) | (8,159)(9,280) | |
Remaining estimate to complete | $ | 1,3201,103 | |
(a)Includes approximately $570$590 million of costs that are not shared with the other Vogtle Owners.Owners and approximately $353 million of incremental costs under the cost-sharing and tender provisions of the joint ownership agreements described below. Excludes financing costs expected to be capitalized through AFUDC of approximately $318$385 million, of which $169$275 million had been accrued through September 30, 2021.2022.
(b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.2$3.4 billion, of which $2.8$3.1 billion had been incurred through September 30, 2021.2022.
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. Southern Nuclear'sactivities, which are reflected in the site work plans continue to reflect this approach in support of safely completing Units 3 and 4, while achieving the required construction quality.plans.
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 tested positive for COVID-19, showed symptoms consistent with COVID-19, were being tested for COVID-19, or were in close contact with such persons; requiring self-quarantine; and adopting additional precautionary measures. Since March 2020, the number of active COVID-19 cases at the site has fluctuated consistent with the surrounding area and impacted productivity levels and pace of activity completion. Through June 2021,completion, with the site experienced an overall declineexperiencing peaks in the number of active cases since the peak in January 2021. During the third quarter 2021, the site experienced a similar peak in August 2021; however, the number of active cases since this peak has declined. The lower productivity levels2021, and slower pace of activity completion experienced since March 2020 contributed to a backlog to the aggressive site work plan established at the beginning of 2020.January 2022. 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,As of September 30, 2022, Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is estimated to be between $160 million and $200 million and is included in the total project continued to face challenges including, but not limited to, higher than expected absenteeism; overallcapital cost forecast. The continuing effects of the COVID-19 pandemic could further disrupt or delay construction and subcontractor labor productivity; system turnovertesting activities at Plant Vogtle Units 3 and testing activities; and electrical equipment and commodity installation. As a result of these factors, in January 2021,4.
On July 29, 2022, Southern Nuclear further extended certain milestone dates, includingannounced that all Unit 3 ITAACs had been submitted to the start of hot functionalNRC. On August 3, 2022, the NRC published its 103(g) finding that the acceptance criteria in the combined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and allows start-up testing and fuelto begin. 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 necessary to ensure quality and design standards are met as system turnovers are completed to support hot functional testing, which was completed on October 17, 2022, and the unit is projected to be placed in July 2021, and fuel loadservice by the end of the first quarter 2023. Unit 4 is projected to be placed in service by the end of the fourth quarter 2023.
During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for Unit 3. As a result of challenges including, but not limited to,costs primarily associated with construction productivity, construction remediation work, the pace of system turnovers, spent fuel pool repairs, and the timeframe and duration for hot functional and other testing, at the end of the second quarter 2021, Southern Nuclear further extended certain milestone dates, including the fuel load for Unit 3, from those established in January 2021. Through the third quarter 2021, the project continued to face challenges including, but not limited to, construction productivity, construction remediation work, and the pace of system turnovers. As a result of these continued challenges, at the end of the third quarter 2021, Southern Nuclear further extended certain milestone dates, including fuel load for Unit 3, from those established at the end of the second quarter 2021. The site work plan currently targets fuel load for Unit 3 in the first quarter 2022 and an in-service date of May 2022 and primarily depends on significant improvements in overall construction productivity and production levels, the volume of construction remediation work, the pace of system and area turnovers, and the progression of startup and other testing. As the site work plan includes minimal margin to these milestone dates, an in-service date in the third quarter 2022 for Unit 3 is projected, although any further delays could result in a later in-service date.
As the result of productivity challenges, at the end of the second quarter 2021, Southern Nuclear also further extended milestone dates for Unit 4 from those established in January 2021. These productivity challenges continued into the third quarter 2021 and someadditional craft and support resources, were diverted temporarily to support construction efforts on Unit 3. As a result of these factors, at the end of the third quarter 2021, Southern Nuclear further extended the milestone datesand procurement for Unit 4 from those established at the end of the second quarter 2021. The site work plan targets an in-service date of March 2023 for Unit 4Units 3 and primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electricians and pipefitters, being added and maintained. As the site work plan includes minimal margin4. Georgia Power also increased its total
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project capital cost forecast by adding $36 million and $32 million to the milestone dates, an in-service datereplenish construction contingency in the second quarter 2023 for Unit 4 is projected, although any further delays could result in a later in-service date.
As of March 31, 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,2022 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. As of June 30, 2021, all of the remaining construction contingency previously established and an additional $341 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction remediation work for Unit 3, and construction productivity and support resources for Units 3 and 4. Georgia Power also increased its total capital cost forecast as of June 30, 2021 by adding $119 million to replenish construction contingency. As a result of the factors discussed above, during the third quarter 2021, all of the remaining construction contingency previously established in the second quarter 2021 and an additional $127 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction productivity and support resources for Units 3 and 4, and construction remediation work for Unit 3. Georgia Power also increased its total capital cost forecast as of September 30, 2021 by adding $137 million to replenish construction contingency.2022, respectively.
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 pre-tax charges to income in the first quarter 2021, the second quarter 2021,2022 and the third quarter 20212022 of $48$36 million ($3627 million after tax), $460 and $32 million ($343 million after tax), and $264 million ($19724 million after tax), respectively, for the increases in the total project capital cost forecast. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described below.
In addition,The projected schedule for Unit 3 primarily depends on the continuing effectspace of system and area transitions to operations, including the COVID-19 pandemic could further disruptcompletion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or delayother operational failures. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. As Unit 4 progresses through construction and continues to transition into testing, activities at Plant Vogtle Units 3ongoing and 4. Georgia Power's proportionate sharepotential future challenges include the pace and quality of electrical, mechanical, and instrumentation and controls commodities installation; availability of craft and supervisory resources, including the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimatedtemporary diversion of such resources to be between $160 million and $200 million and is included insupport Unit 3; the total project capital cost forecast.
As construction, including subcontractpace of work continues and testingpackage closures and system turnover activities increase, ongoingturnovers; and the timeframe and duration of hot functional and other testing. Ongoing or future challenges withfor both units also include 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,productivity; ability to attract and retain craft labor,labor; and/or related cost escalation; procurement, fabrication, delivery, assembly, installation, system turnover,escalation. New challenges also may arise, particularly as Units 3 and the4 move into initial testing and start-up, including anywhich may result in required engineering changes or any remediation related thereto, ofto 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), including the spent fuel pools, any of which. These challenges may require additional laborresult in further schedule delays and/or materials; or other issues could continue or arise and change the projected schedule and estimated cost.cost increases.
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 ensure 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. In June 2021,On March 25, 2022, the NRC begancompleted a follow-up inspection related to the November 2021 final significance report on its special inspection to review the root cause of this additional construction remediation work identified in 2021 and theSouthern Nuclear's corresponding corrective action plans. On August 26,The NRC closed the two white findings identified in November 2021 the NRC issued an inspection report with initial findings. Southern Nuclear had already identified and self-reported many of the issues in this report to the NRC and implemented corrective-action plans to resolve these issues. Southern Nuclear respondedreturned Vogtle Unit 3 to the NRC's initial findings on October 5, 2021 and expects a final report frombaseline inspection program.
With the NRC by November 24, 2021. Findings resulting from this or other inspections could require additional remediation
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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 denied the Blue Ridge Environmental Defense League's (BREDL) December 2020 motion to reopen proceedings on BREDL's petition challenging a requested license amendment, which has been issued by the NRC staff.
The site work plan currently targets fuel load forNRC's 103(g) finding, Unit 3 inis now under the first quarter 2022.NRC's operating reactor oversight process and must meet applicable technical and operational requirements contained within Unit 3's operating license. 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 have arisen orfor Unit 4, may arise, which may result in additional license amendmentsamendment requests or require other resolution. If any license amendment requests or other licensing-based compliance issues, including inspections and ITAACs for Unit 4, 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 in-service date beyond the thirdfirst quarter 20222023 for Unit 3 or the secondfourth quarter 2023 for Unit 4, including the current level of cost sharing described below, is currently estimated to result in additional base capital costs for Georgia Power of approximately $25up to $15 million per month for Unit 3 and approximately $15$35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. While Georgia Power is not precluded from seeking retail recovery of any future capital cost forecast increase other than the amounts related to the cost-sharing
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and tender provisions of the joint ownership agreements described below, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.
Joint Owner Contracts
In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.
As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.
Amendments to the Vogtle Joint Ownership Agreements
In connection with a September 2018 vote by the voteVogtle Owners 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).
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As previously disclosed, pursuantPursuant 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. IfThe Global Amendments provide that 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 cost 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.
For purposes of the foregoing provisions, qualifying construction costs will not include costs (i) resulting from force majeure events, including epidemics and quarantines, governmental actions or inactions (or significant delays associated with issuance of such actions) that affect the licensing, completion, start-up, operations, or financing of Plant Vogtle Units 3 and 4, administrative proceedings or litigation regarding ITAAC or other regulatory challenges to commencement of operation of Plant Vogtle Units 3 and 4, and changes in laws or regulations governing Plant Vogtle Units 3 and 4, (ii) legal fees and legal expenses incurred due to litigation with contractors or subcontractors
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that are not subsidiaries or affiliates of Southern Company, and (iii) additional costs caused by requests from the Vogtle Owners other than Georgia Power, except for the exercise of a right to vote granted under the Vogtle Joint Ownership Agreements, that increase costs by $100,000 or more.
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 (Project 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 overfrom the most recently approved schedule.seventeenth VCM report estimated in-service dates of November 2021 and November 2022 for Units 3 and 4, respectively. The schedule extension announced in February 2022 triggered the requirement for a vote to continue construction. Effective February 25, 2022, all of the Vogtle Owners had voted to continue construction.
Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments or the extent to which COVID-19-related costs impact the calculation.those provisions. Based on the definition in the Global Amendments, Georgia Power believes the starting dollar amount is $18.38 billion and doesthe current project capital cost forecast exceeds the cost-sharing provision threshold, but not believe estimated project costs have reached a level where cost-sharing would be triggered. However, the tender provision threshold. The other Vogtle Owners have assertednotified Georgia Power that they believe the current capital cost increases through September 30, 2021expenditures have reachedalready exceeded the cost-sharing thresholds and could be sufficient to triggerthe current project capital cost forecast triggers the tender provisions under the Global Amendments, which could require Georgia Power to record additional pre-tax charges to income of up to approximately $350 million. OnAmendments. In October 29, 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which will provide additional timethe other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options.
On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. The lawsuits also assert other claims, including breach of contract allegations, and seek, among other remedies, damages and injunctive relief requiring Georgia Power to track and allocate construction costs consistent with MEAG Power's and OPC's interpretations of the Global Amendments. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve these matters.their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. In addition, MEAG Power agreed to vote to continue construction upon occurrence of a Project Adverse Event unless the commercial operation date of either of Plant Vogtle Unit 3 or Unit 4 is not projected to occur by December 31, 2025. On October 4, 2022, MEAG Power and Georgia Power filed a
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notice of settlement and voluntary dismissal of their pending litigation, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint.
Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast and will not be recovered from retail customers. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, described above. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.
Georgia Power's ownership interest in Plant Vogtle Units 3 and 4 continues to be 45.7%; however, it could increase if OPC or Dalton effectively exercises the option to tender a portion of their ownership interest to Georgia Power and require Georgia Power to pay 100% of the remaining share of the costs necessary to complete Plant Vogtle Units 3 and 4. Georgia Power's incremental ownership interest would be calculated and conveyed to Georgia Power after Plant Vogtle Units 3 and 4 are placed in service.
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, 2021,2022, Georgia Power had recovered approximately $2.7$2.8 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 willis not recordrecording AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently
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$7.3 $7.3 billion) and not requested for rate recovery. On October 1,In November 2021, the Georgia Power filed aPSC approved Georgia Power's request to decrease the NCCR tariff by $78 million annually, effective January 1, 2022, pending approval by the Georgia PSC.2022.
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 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
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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 a prudence proceeding on cost recovery will occur following Unit 4 fuel load, 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 effective the first month after Unit 3 reaches 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.Agreement (see Note 2 to the financial statements under "Georgia Power – Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" in Item 8 of the Form 10-K for additional information). 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$270 million in 20202021 and are estimated to have negative earnings impacts of approximately $270 million, $260$300 million and $135$250 million in 2021, 2022 and 2023, 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 24 VCM reports covering periods through December 31, 2020, including total construction capital costs incurred through December 31, 2020 of $7.3 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). In the August 24, 2021 order approving the twenty-fourth VCM report, the Georgia PSC also approved a stipulation addressing the following matters: (i) beginning with its twenty-fifth VCM report, Georgia Power will continue to report to the Georgia PSC all costs incurred during the period for review and will request for approval costs up to the $7.3 billion determined to be reasonable in the Georgia PSC's seventeenth VCM order and (ii) Georgia Power will not seek rate recovery of the $0.7 billion increase to the base capital cost forecast included in the nineteenth VCM report and charged to income by Georgia Power in the second quarter 2018. In addition, the stipulation
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confirms Georgia Power may request verification and approval of costs above $7.3 billion for inclusion in rate base at a later time, but no earlier than the prudence review contemplated by the seventeenth VCM order described previously. Georgia Power filed its twenty-fifth VCM report with the
The Georgia PSC on August 31, 2021, which reflects the revised capital cost forecast as ofhas approved 25 VCM reports covering periods through June 30, 20212021. These reports reflect total construction capital costs incurred of $9.2$7.9 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). See "Plant Vogtle Unit 3, of which the Georgia PSC has verified and Common Facilities Rate Proceeding" herein for informationapproved $7.3 billion as described above. The Georgia PSC also has reviewed the twenty-sixth VCM report, which reflects $584 million of additional construction capital costs incurred through December 31, 2021. Georgia Power filed its twenty-seventh VCM report with the Georgia PSC on Georgia Power's request to adjust retail base rates to include a portionAugust 31, 2022, which reflects the revised capital cost forecast as of June 30, 2022 of $10.5 billion and $522 million of construction capital costs related to its investment in Plant Vogtle Unit 3 and Common Facilities.incurred from January 1, 2022 through June 30, 2022.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
Performance Evaluation Plan
On June 8, 2021,7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2021,2022, resulting in an annual increase in revenues of approximately $16$18 million, or 1.8%1.9%, which became effective with the first billing cycle of April 2021 in accordance with the PEP rate schedule.
Integrated Resource Plan
In December 2020, the Mississippi 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 September 9, 2021, the Mississippi PSC issued an order confirming the conclusion of its review of Mississippi Power's 2021 IRP with no deficiencies identified. The 2021 IRP 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 Plant Greene County unit retirements require the completion by Alabama Power of transmission and system reliability improvements, as well as agreement by Alabama Power.
The remaining net book value of Plant Daniel Units 1 and 2 was approximately $520 million at September 30, 2021 and Mississippi Power is continuing to depreciate these units using the current approved rates through the end of 2027. Mississippi Power expects to reclassify the net book value remaining at retirement, which is expected to total approximately $390 million, to a regulatory asset to be amortized over a period to be determined by the Mississippi PSC in future proceedings, consistent with the December 2020 order. The Plant Watson and Greene County units are expected to be fully depreciated upon retirement. The ultimate outcome of these matters cannot be determined at this time.
Environmental Compliance Overview Plan
On June 8, 2021, the Mississippi PSC approved Mississippi Power's ECO Plan filing for 2021, resulting in an annual decrease in revenues of approximately $9 million, primarily due to a changeincreases in the amortization periods of certain regulatory assetsrate base, operations and liabilities. The rate decrease became effective with the first billing cycle of July 2021.
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.maintenance expenses, and depreciation and amortization. The rate increase became effective with the first billing cycle of May 2021.April 2022 in accordance with the PEP rate schedule.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
System Restoration RiderAd Valorem Tax Adjustment
On October 14, 2021,June 7, 2022, the Mississippi PSC issued an accounting order giving Mississippi Power the authority to reclassify the retail costs associated with Hurricanes Zeta and Ida to a regulatory asset to be recovered through PEP over a period to be determined inapproved Mississippi Power's annual ad valorem tax adjustment filing for 2022, PEP proceeding. At September 30, 2021, these costs totaled approximately $49 million.
On October 25, 2021, Mississippi Power made its annual System Restoration Rider filing with the Mississippi PSC, which requestedresulting in an annual increase in retail revenues of approximately $9$5 million, primarily for an increase in the property damage reserve accrual. The requested increase is expected to become effective with the first billing cycle following approval byof July 2022.
Municipal and Rural Associations Tariff
On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi PSC. The filing excludes recoveryPower and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the costs associatedMRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand. Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA.
On July 15, 2022, Mississippi Power filed a request with Hurricanes Zetathe FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and Ida.
requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with the FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of these mattersthis matter cannot be determineddetermined at this time.
Southern Company Gas
Infrastructure Replacement Programs and Capital Projects
Capital expenditures incurred under specific infrastructure replacement programs and capital projects during the first nine months of 20212022 were as follows:
| | | | | | | | |
Utility | Program | Nine Months Ended September 30, 20212022 |
| | (in millions) |
Nicor Gas | Investing in Illinois | $ | 307311 | |
Virginia Natural Gas | Steps to Advance Virginia's EnergySAVE | 3652 | |
Atlanta Gas Light | System Reinforcement Rider | 51 | |
Chattanooga Gas | Pipeline Replacement Program | 2 | |
Total | | $ | 343416 | |
Rate Proceedings
Atlanta Gas Light
On April 28, 2021,July 1, 2022, Atlanta Gas Light filed its first Integrated Capacity and Delivery Plan (i-CDP)annual GRAM update with the Georgia PSC, which includes a seriesPSC. The filing requests an annual base rate increase of ongoing and proposed pipeline safety, reliability, and growth programs for the next 10 years (2022 through 2031), as well as the required capital investments and related costs to implement the programs. The i-CDP reflects capital investments totaling approximately $0.5 billion to $0.6 billion annually.
Recovery of the related revenue requirements will be included in either subsequent annual GRAM filings or the new System Reinforcement Rider for authorized large pressure improvement and system reliability projects. On October 14, 2021, Atlanta Gas Light and the staff of the Georgia PSC filed a joint stipulation agreement, under which, for the years 2022 through 2024, Atlanta Gas Light would incrementally reduce its combined GRAM and System Reinforcement Rider request by 10% through Atlanta Gas Light's GRAM mechanism, or $5$53 million for 2022 based on the initial July 21, 2021projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing. The stipulation agreement also would provide for $1.7 billion of total capital investment forfiling is expected by December 28, 2022, with the years 2022 through 2024. The Georgia PSC is scheduled to vote on this matter later in November 2021.new rates effective January 1, 2023. The ultimate outcome of this matter cannot be determined at this time. See "Rate Proceedings – Atlanta Gas Light" herein for additional information.
Virginia Natural Gas
On April 6, 2021,August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission approvedseeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a motion filed byprojected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Natural GasCommission is expected to withdrawrule on the application for its 9.5-mile interconnect project due to a changerequested increase in the capacity needsthird quarter 2023. The ultimate outcome of one of the project's customers. No further action is necessary and this matter is now concluded.cannot be determined at this time.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Rate Proceedings
Virginia Natural Gas
On September 14, 2021, the Virginia Commission approved a stipulation agreement related to Virginia Natural Gas' June 2020 general rate case filing, which allows for a $43 million increase in annual base rate revenues, including $14 million related to the recovery of investments under the SAVE program, based on a ROE of 9.5% and an equity ratio of 51.9%. Interim rate adjustments became effective as of November 1, 2020, subject to refund, based on Virginia Natural Gas' original request for an increase of approximately $50 million. Refunds to customers related to the difference between the approved rates and the interim rates will be completed during the fourth quarter 2021.
Atlanta Gas Light
On July 21, 2021, Atlanta Gas Light filed its annual GRAM filing with the Georgia PSC. The filing requested an annual base rate increase of $49 million based on the projected 12-month period beginning January 1, 2022. Later in November 2021, Atlanta Gas Light expects to file an amended GRAM filing in accordance with the reduction agreed to in the October 14, 2021 joint stipulation agreement, as discussed previously under "Infrastructure Replacement Programs and Capital Projects – Atlanta Gas Light" herein. Resolution of the GRAM filing is expected by December 31, 2021, with the new rates to become effective January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
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 resumed normal disconnections in June 2021.
Virginia Natural Gas
On June 30, 2021, the declared state of emergency in Virginia expired, ending the suspension of disconnections related to non-payment. Virginia Natural Gas began certain disconnections in July 2021 and late payment fees resumed in October 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 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 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 namesnamed as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. In 2017, these 2two shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Georgia. The complaints allegealleged that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints allegealleged that the defendants were unjustly enriched and caused the waste of corporate assets and also allegealleged that the individual defendants violated their fiduciary duties.
In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that namesnamed as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint allegesalleged 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 allegesalleged 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. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.
The plaintiffs in each of these cases seeksought 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 seeksought certain changes to Southern Company's corporate governance and internal processes. In 2018,On January 21, 2022, the plaintiffs in the federal court in each caseaction filed a motion for preliminary approval of settlement, together with an executed stipulation of settlement, which applied to both actions. On June 9, 2022, the U.S. District Court for the Northern District of Georgia granted final approval of the settlement and, on June 16, 2022, the Superior Court of Gwinnett County, Georgia entered an order staying each lawsuit until 30 days afterawarding attorneys' fees and expenses related to the Martin J. Kobuck lawsuit. The settlement consisted of an aggregate payment by Southern Company's insurers of approximately $4.5 million for attorneys' fees and expenses, as well as adoption of various corporate governance reforms by Southern Company. These matters are now concluded.
Alabama Power
On September 26, 2022, Mobile Baykeeper, through its counsel Southern Environmental Law Center, filed a citizen suit in the U.S. District Court for the Southern District of Alabama alleging that Alabama Power's plan to close the Plant Barry ash pond utilizing a closure-in-place methodology violates the Resource Conservation and Recovery Act (RCRA) and regulations governing CCR. Among other relief requested, Mobile Baykeeper seeks a declaratory judgment that the RCRA and regulations governing CCR are being violated, preliminary and injunctive relief to
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
prevent implementation of Alabama Power's closure plan and the development of a securities class action filedclosure plan that satisfies regulations governing CCR requirements. See Note 6 to the financial statements in January 2017 against Southern Company, certain of its current and former officers, and certain former Mississippi Power officers. In September 2020, the plaintiffs in each case filed a status report noting the settlementItem 8 of the securities class action and informing the courtForm 10-K for a discussion of Alabama Power's ARO liabilities related to facilities that the parties had scheduled mediation, which occurred in November 2020. In September 2021, the parties executed a term sheet memorializing a settlement-in-principle of both pending derivative lawsuits. The parties are negotiating a global stipulation of settlement that will apply to both lawsuits and will be subject to approval by the federal court. If approved,CCR Rule and the termsrelated state rule. The ultimate outcome of the settlement-in-principle are not expected to have a material impact on Southern Company's financial statements.this matter cannot be determined at this time.
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. In March 2020, the Georgia Court of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification and remanded the case to the Superior Court of Fulton County for further proceedings. In September 2020, the plaintiffs and Georgia Power each filed motions for summary judgment and the plaintiffs renewed their motion for class certification. On March 16, 2021, the Superior Court of Fulton County granted class certification and Georgia Power's motion for summary judgment. On March 22, 2021,judgment and the plaintiffs filed a notice of appeal, and, onappeal. In April 2, 2021, Georgia Power filed a notice of cross appeal on the issue of class certification. In December 2021, the Georgia Court of Appeals affirmed the Superior Court's ruling that granted summary judgment to Georgia Power and dismissed Georgia Power's cross appeal on the issue of class certification as moot. Also in December 2021, the plaintiffs filed a petition for writ of certiorari to the Georgia Supreme Court. The amount of any possible losses cannot be estimated at this time because, among other factors, it is unknown whether any losses would be subject to recovery from any municipalities.
In July 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
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
damages including punitive damages, a medical monitoring fund, and injunctive relief. In September 2020, Georgia Power has filed a motionmultiple motions to dismiss. Ondismiss the complaint. In October 8, 2021, 3three additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages. In November 2021, Georgia Power filed a notice to remove the three cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. On February 7, 2022, four additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power seeking damages for alleged personal injuries or property damage. On March 9, 2022, Georgia Power filed a notice to remove the four cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. The amount of any possible losses from these matters cannot be estimated at this time.
Mississippi Power
In 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and the 3three then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi.Mississippi, which was amended in March 2019 to include four additional plaintiffs. 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.improper and make claims for gross negligence, reckless conduct, and intentional wrongdoing. 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 each filed a motion to dismissdistrict court dismissed the amended complaint, which occurred in May 2020 and March 2020, respectively. Alsocomplaint; however, in March 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. In July 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which included the same federal claims as the proposed second amended complaint, as well as several
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 district court denied each of the plaintiffs' pending motions and entered final judgment in favor of Mississippi Power. OnIn January 22, 2021, the district court denied further motions by the plaintiffs to vacate the judgment and to file a revised second amended complaint. OnIn February 19, 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. On March 21, 2022, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the dismissal of the claims against the Mississippi PSC defendants but reversing the dismissal of the claims against Mississippi Power. On May 31, 2022, the U.S. Court of Appeals for the Fifth Circuit denied a petition by Mississippi Power for a rehearing en banc and remanded the case to the U.S. District Court for the Southern District of Mississippi for further proceedings. On June 17, 2022, Mississippi Power filed with the trial court a motion to dismiss the complaint. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.
See Note 3 to the financial statements under "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 remediation 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 $19$16 million and $15$17 million at September 30, 20212022 and December 31, 2020,2021, 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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Company Gas' environmental remediation liability was $255$270 million and $245$249 million at September 30, 20212022 and December 31, 2020,2021, respectively, based on the estimated cost of environmental investigation and remediation associated with known former manufactured gas plant operating sites.
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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Other Matters
Mississippi Power
In conjunction with Southern Company's 2019 sale of Gulf Power, NextEra Energy, Inc. held back $75 million of the purchase price pending Mississippi Power and Gulf Power negotiating a mutually acceptable revised operating agreement for Plant Daniel. On July 12, 2022, the co-owners executed a revised operating agreement and Southern Company Gas
PennEast Pipeline Projectsubsequently received the remaining $75 million of the purchase price. The revised operating agreement contains dispatch procedures for the two jointly-owned coal units at Plant Daniel such that Mississippi Power will designate one of the two units as primary and the other as secondary in lieu of each company separately owning 100% of a single generating unit. Mississippi Power has the option to purchase its co-owner's ownership interest for $1 on January 15, 2024, provided that Mississippi Power exercises the option no later than 120 days prior to that date. The revised operating agreement is not expected to have a material impact on Mississippi Power's financial statements. 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.
On June 29, 2021,August 31, 2022, the U.S. Supreme Court ruled in favorMississippi Department of PennEast Pipeline regardingRevenue (Mississippi DOR) completed an audit of sales and use taxes paid by Mississippi Power from 2016 to 2019 and entered a final assessment, indicating a total amount due of $28 million, including associated penalties and interest. Mississippi Power does not agree with the audit findings and expects to exercise its federal eminent domain authority over lands in which a state has property rights interests.
Southern Company Gas tests its equity method investmentsto an administrative appeal with the Mississippi DOR by October 30, 2022. Excluding amounts associated with the gasifier and other abandoned Kemper IGCC assets, Mississippi Power's sales and use taxes are generally authorized for impairment whenever events or changes in circumstances indicate thatrate recovery; however, the investment may be impaired. Following the U.S. Supreme Court ruling, during the second quarter 2021, Southern Company Gas management reassessed the project construction timing, including the anticipated timing for receipt of the FERC certificate and all remaining state and local permits for both Phase 1 (the construction of 68 miles of pipe entirely within Pennsylvania) and Phase 2 (the construction of the remaining 50 miles in Pennsylvania and New Jersey), as well as potential challenges thereto, and performed an impairment analysis. Theultimate outcome of the analysis resulted in a pre-tax impairment chargethis matter cannot be determined at this time.
On September 27, 2021, PennEast Pipeline announced that further development of the project is no longer supported, and, as a result, all further development of the project has ceased. During the third quarter 2021, Southern Company Gas recorded a pre-tax charge of $2 million ($2 million after tax) related to its share of the project level impairment, as well as $7 million of additional tax expense, resulting in total pre-tax charges of $84 million ($67 million after tax) during 2021 related to the project.
See Note (E) under "Southern Company Gas" for additional information.NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
SNG(UNAUDITED)
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. Southern Company Gas previously committed to fund up to $150 million as a contingent capital contribution if SNG was unable to refinance or otherwise satisfy $300 million of debt maturing in June 2021. On April 29, 2021, SNG successfully refinanced the debt obligation. See Note (E) under "Southern Company Gas" for additional information.
(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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The following table disaggregates revenue from contracts with customers for the three and nine months ended September 30, 20212022 and 2020:2021:
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2021 | | |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | |
Operating revenues | Operating revenues | | Operating revenues | |
Retail electric revenues | Retail electric revenues | | Retail electric revenues | |
Residential | Residential | $ | 1,974 | | $ | 750 | | $ | 1,138 | | $ | 86 | | $ | — | | $ | — | | Residential | $ | 2,104 | | $ | 799 | | $ | 1,212 | | $ | 93 | | $ | — | | $ | — | |
Commercial | Commercial | 1,432 | | 471 | | 882 | | 79 | | — | | — | | Commercial | 1,637 | | 499 | | 1,051 | | 87 | | — | | — | |
Industrial | Industrial | 902 | | 394 | | 428 | | 80 | | — | | — | | Industrial | 1,183 | | 452 | | 642 | | 89 | | — | | — | |
Other | Other | 24 | | 4 | | 18 | | 2 | | — | | — | | Other | 27 | | 3 | | 22 | | 2 | | — | | — | |
Total retail electric revenues | Total retail electric revenues | 4,332 | | 1,619 | | 2,466 | | 247 | | — | | — | | Total retail electric revenues | 4,951 | | 1,753 | | 2,927 | | 271 | | — | | — | |
Natural gas distribution revenues | Natural gas distribution revenues | | Natural gas distribution revenues | |
Residential | Residential | 218 | | — | | — | | — | | — | | 218 | | Residential | 331 | | — | | — | | — | | — | | 331 | |
Commercial | Commercial | 55 | | — | | — | | — | | — | | 55 | | Commercial | 93 | | — | | — | | — | | — | | 93 | |
Transportation | Transportation | 239 | | — | | — | | — | | — | | 239 | | Transportation | 259 | | — | | — | | — | | — | | 259 | |
Industrial | Industrial | 6 | | — | | — | | — | | — | | 6 | | Industrial | 12 | | — | | — | | — | | — | | 12 | |
Other | Other | 31 | | — | | — | | — | | — | | 31 | | Other | 49 | | — | | — | | — | | — | | 49 | |
Total natural gas distribution revenues | Total natural gas distribution revenues | 549 | | — | | — | | — | | — | | 549 | | Total natural gas distribution revenues | 744 | | — | | — | | — | | — | | 744 | |
Wholesale electric revenues | Wholesale electric revenues | | Wholesale electric revenues | |
PPA energy revenues | PPA energy revenues | 359 | | 61 | | 41 | | 2 | | 261 | | — | | PPA energy revenues | 812 | | 187 | | 40 | | 4 | | 591 | | — | |
PPA capacity revenues | PPA capacity revenues | 125 | | 14 | | 14 | | 1 | | 97 | | — | | PPA capacity revenues | 175 | | 56 | | 12 | | 1 | | 107 | | — | |
Non-PPA revenues | Non-PPA revenues | 63 | | 54 | | 3 | | 120 | | 134 | | — | | Non-PPA revenues | 58 | | 67 | | 4 | | 242 | | 303 | | — | |
Total wholesale electric revenues | Total wholesale electric revenues | 547 | | 129 | | 58 | | 123 | | 492 | | — | | Total wholesale electric revenues | 1,045 | | 310 | | 56 | | 247 | | 1,001 | | — | |
Other natural gas revenues | Other natural gas revenues | | Other natural gas revenues | |
| Gas marketing services | Gas marketing services | 45 | | — | | — | | — | | — | | 45 | | Gas marketing services | 84 | | — | | — | | — | | — | | 84 | |
Other natural gas revenues | Other natural gas revenues | 11 | | — | | — | | — | | — | | 11 | | Other natural gas revenues | 15 | | — | | — | | — | | — | | 15 | |
Total natural gas revenues | Total natural gas revenues | 56 | | — | | — | | — | | — | | 56 | | Total natural gas revenues | 99 | | — | | — | | — | | — | | 99 | |
Other revenues | Other revenues | 248 | | 53 | | 112 | | 8 | | 9 | | — | | Other revenues | 277 | | 65 | | 110 | | 13 | | 9 | | — | |
Total revenue from contracts with customers | Total revenue from contracts with customers | 5,732 | | 1,801 | | 2,636 | | 378 | | 501 | | 605 | | Total revenue from contracts with customers | 7,116 | | 2,128 | | 3,093 | | 531 | | 1,010 | | 843 | |
Other revenue sources(a) | Other revenue sources(a) | 506 | | 103 | | 220 | | — | | 178 | | 18 | | Other revenue sources(a) | 1,262 | | 316 | | 796 | | (21) | | 170 | | 14 | |
| Total operating revenues | Total operating revenues | $ | 6,238 | | $ | 1,904 | | $ | 2,856 | | $ | 378 | | $ | 679 | | $ | 623 | | Total operating revenues | $ | 8,378 | | $ | 2,444 | | $ | 3,889 | | $ | 510 | | $ | 1,180 | | $ | 857 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| | (in millions) | | (in millions) |
Nine Months Ended September 30, 2021 | | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | |
Operating revenues | Operating revenues | | Operating revenues | |
Retail electric revenues | Retail electric revenues | | Retail electric revenues | |
Residential | Residential | $ | 4,910 | | $ | 1,931 | | $ | 2,765 | | $ | 214 | | $ | — | | $ | — | | Residential | $ | 5,282 | | $ | 2,049 | | $ | 2,995 | | $ | 238 | | $ | — | | $ | — | |
Commercial | Commercial | 3,727 | | 1,229 | | 2,293 | | 205 | | — | | — | | Commercial | 4,202 | | 1,285 | | 2,688 | | 229 | | — | | — | |
Industrial | Industrial | 2,299 | | 1,048 | | 1,034 | | 217 | | — | | — | | Industrial | 2,914 | | 1,143 | | 1,529 | | 242 | | — | | — | |
Other | Other | 70 | | 13 | | 51 | | 6 | | — | | — | | Other | 79 | | 10 | | 62 | | 7 | | — | | — | |
Total retail electric revenues | Total retail electric revenues | 11,006 | | 4,221 | | 6,143 | | 642 | | — | | — | | Total retail electric revenues | 12,477 | | 4,487 | | 7,274 | | 716 | | — | | — | |
Natural gas distribution revenues | Natural gas distribution revenues | | Natural gas distribution revenues | |
Residential | Residential | 1,143 | | — | | — | | — | | — | | 1,143 | | Residential | 1,821 | | — | | — | | — | | — | | 1,821 | |
Commercial | Commercial | 298 | | — | | — | | — | | — | | 298 | | Commercial | 493 | | — | | — | | — | | — | | 493 | |
Transportation | Transportation | 775 | | — | | — | | — | | — | | 775 | | Transportation | 872 | | — | | — | | — | | — | | 872 | |
Industrial | Industrial | 29 | | — | | — | | — | | — | | 29 | | Industrial | 60 | | — | | — | | — | | — | | 60 | |
Other | Other | 187 | | — | | — | | — | | — | | 187 | | Other | 244 | | — | | — | | — | | — | | 244 | |
Total natural gas distribution revenues | Total natural gas distribution revenues | 2,432 | | — | | — | | — | | — | | 2,432 | | Total natural gas distribution revenues | 3,490 | | — | | — | | — | | — | | 3,490 | |
Wholesale electric revenues | Wholesale electric revenues | | Wholesale electric revenues | |
PPA energy revenues | PPA energy revenues | 782 | | 143 | | 71 | | 9 | | 575 | | — | | PPA energy revenues | 1,739 | | 354 | | 112 | | 11 | | 1,285 | | — | |
PPA capacity revenues | PPA capacity revenues | 375 | | 86 | | 41 | | 4 | | 247 | | — | | PPA capacity revenues | 443 | | 135 | | 35 | | 4 | | 273 | | — | |
Non-PPA revenues | Non-PPA revenues | 181 | | 108 | | 14 | | 283 | | 273 | | — | | Non-PPA revenues | 182 | | 166 | | 19 | | 511 | | 572 | | — | |
Total wholesale electric revenues | Total wholesale electric revenues | 1,338 | | 337 | | 126 | | 296 | | 1,095 | | — | | Total wholesale electric revenues | 2,364 | | 655 | | 166 | | 526 | | 2,130 | | — | |
Other natural gas revenues | Other natural gas revenues | | Other natural gas revenues | |
| Wholesale gas services | 2,168 | | — | | — | | — | | — | | 2,168 | | |
| Gas marketing services | Gas marketing services | 303 | | — | | — | | — | | — | | 303 | | Gas marketing services | 417 | | — | | — | | — | | — | | 417 | |
Other natural gas revenues | Other natural gas revenues | 27 | | — | | — | | — | | — | | 27 | | Other natural gas revenues | 41 | | — | | — | | — | | — | | 41 | |
Total natural gas revenues | Total natural gas revenues | 2,498 | | — | | — | | — | | — | | 2,498 | | Total natural gas revenues | 458 | | — | | — | | — | | — | | 458 | |
Other revenues | Other revenues | 792 | | 150 | | 362 | | 22 | | 18 | | — | | Other revenues | 810 | | 173 | | 327 | | 34 | | 27 | | — | |
Total revenue from contracts with customers | Total revenue from contracts with customers | 18,066 | | 4,708 | | 6,631 | | 960 | | 1,113 | | 4,930 | | Total revenue from contracts with customers | 19,599 | | 5,315 | | 7,767 | | 1,276 | | 2,157 | | 3,948 | |
Other revenue sources(a) | Other revenue sources(a) | 2,979 | | 311 | | 419 | | 28 | | 497 | | 1,763 | | Other revenue sources(a) | 2,633 | | 708 | | 1,451 | | 3 | | 461 | | 50 | |
Other adjustments(b) | (3,699) | | — | | — | | — | | — | | (3,699) | | |
| Total operating revenues | Total operating revenues | $ | 17,346 | | $ | 5,019 | | $ | 7,050 | | $ | 988 | | $ | 1,610 | | $ | 2,994 | | Total operating revenues | $ | 22,232 | | $ | 6,023 | | $ | 9,218 | | $ | 1,279 | | $ | 2,618 | | $ | 3,998 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2020 | | |
Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | | Operating revenues | |
Retail electric revenues | Retail electric revenues | | Retail electric revenues | |
Residential | Residential | $ | 2,019 | | $ | 752 | | $ | 1,183 | | $ | 84 | | $ | — | | $ | — | | Residential | $ | 1,974 | | $ | 750 | | $ | 1,138 | | $ | 86 | | $ | — | | $ | — | |
Commercial | Commercial | 1,354 | | 447 | | 833 | | 74 | | — | | — | | Commercial | 1,432 | | 471 | | 882 | | 79 | | — | | — | |
Industrial | Industrial | 783 | | 358 | | 352 | | 73 | | — | | — | | Industrial | 902 | | 394 | | 428 | | 80 | | — | | — | |
Other | Other | 22 | | 5 | | 15 | | 2 | | — | | — | | Other | 24 | | 4 | | 18 | | 2 | | — | | — | |
Total retail electric revenues | Total retail electric revenues | 4,178 | | 1,562 | | 2,383 | | 233 | | — | | — | | Total retail electric revenues | 4,332 | | 1,619 | | 2,466 | | 247 | | — | | — | |
Natural gas distribution revenues | Natural gas distribution revenues | | Natural gas distribution revenues | |
Residential | Residential | 170 | | — | | — | | — | | — | | 170 | | Residential | 218 | | — | | — | | — | | — | | 218 | |
Commercial | Commercial | 41 | | — | | — | | — | | — | | 41 | | Commercial | 55 | | — | | — | | — | | — | | 55 | |
Transportation | Transportation | 224 | | — | | — | | — | | — | | 224 | | Transportation | 239 | | — | | — | | — | | — | | 239 | |
Industrial | Industrial | 4 | | — | | — | | — | | — | | 4 | | Industrial | 6 | | — | | — | | — | | — | | 6 | |
Other | Other | 35 | | — | | — | | — | | — | | 35 | | Other | 31 | | — | | — | | — | | — | | 31 | |
Total natural gas distribution revenues | Total natural gas distribution revenues | 474 | | — | | — | | — | | — | | 474 | | Total natural gas distribution revenues | 549 | | — | | — | | — | | — | | 549 | |
Wholesale electric revenues | Wholesale electric revenues | | Wholesale electric revenues | |
PPA energy revenues | PPA energy revenues | 214 | | 40 | | 13 | | 2 | | 165 | | — | | PPA energy revenues | 359 | | 61 | | 41 | | 2 | | 261 | | — | |
PPA capacity revenues | PPA capacity revenues | 136 | | 26 | | 15 | | 1 | | 95 | | — | | PPA capacity revenues | 125 | | 14 | | 14 | | 1 | | 97 | | — | |
Non-PPA revenues | Non-PPA revenues | 59 | | 10 | | 3 | | 93 | | 68 | | — | | Non-PPA revenues | 63 | | 54 | | 3 | | 120 | | 134 | | — | |
Total wholesale electric revenues | Total wholesale electric revenues | 409 | | 76 | | 31 | | 96 | | 328 | | — | | Total wholesale electric revenues | 547 | | 129 | | 58 | | 123 | | 492 | | — | |
Other natural gas revenues | Other natural gas revenues | | Other natural gas revenues | |
| Wholesale gas services | 431 | | — | | — | | — | | — | | 431 | | |
| Gas marketing services | Gas marketing services | 38 | | — | | — | | — | | — | | 38 | | Gas marketing services | 45 | | — | | — | | — | | — | | 45 | |
Other natural gas revenues | Other natural gas revenues | 7 | | — | | — | | — | | — | | 7 | | Other natural gas revenues | 11 | | — | | — | | — | | — | | 11 | |
Total natural gas revenues | Total natural gas revenues | 476 | | — | | — | | — | | — | | 476 | | Total natural gas revenues | 56 | | — | | — | | — | | — | | 56 | |
Other revenues | Other revenues | 218 | | 33 | | 115 | | 6 | | 4 | | — | | Other revenues | 248 | | 53 | | 112 | | 8 | | 9 | | — | |
Total revenue from contracts with customers | Total revenue from contracts with customers | 5,755 | | 1,671 | | 2,529 | | 335 | | 332 | | 950 | | Total revenue from contracts with customers | 5,732 | | 1,801 | | 2,636 | | 378 | | 501 | | 605 | |
Other revenue sources(a) | Other revenue sources(a) | 968 | | 58 | | 88 | | 1 | | 191 | | 630 | | Other revenue sources(a) | 506 | | 103 | | 220 | | — | | 178 | | 18 | |
Other adjustments(b) | (1,103) | | — | | — | | — | | — | | (1,103) | | |
| Total operating revenues | Total operating revenues | $ | 5,620 | | $ | 1,729 | | $ | 2,617 | | $ | 336 | | $ | 523 | | $ | 477 | | Total operating revenues | $ | 6,238 | | $ | 1,904 | | $ | 2,856 | | $ | 378 | | $ | 679 | | $ | 623 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| | (in millions) | | (in millions) |
Nine Months Ended September 30, 2020 | | |
Nine Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | | Operating revenues | |
Retail electric revenues | Retail electric revenues | | Retail electric revenues | |
Residential | Residential | $ | 4,802 | | $ | 1,839 | | $ | 2,760 | | $ | 203 | | $ | — | | $ | — | | Residential | $ | 4,910 | | $ | 1,931 | | $ | 2,765 | | $ | 214 | | $ | — | | $ | — | |
Commercial | Commercial | 3,589 | | 1,152 | | 2,242 | | 195 | | — | | — | | Commercial | 3,727 | | 1,229 | | 2,293 | | 205 | | — | | — | |
Industrial | Industrial | 2,081 | | 956 | | 907 | | 218 | | — | | — | | Industrial | 2,299 | | 1,048 | | 1,034 | | 217 | | — | | — | |
Other | Other | 68 | | 16 | | 46 | | 6 | | — | | — | | Other | 70 | | 13 | | 51 | | 6 | | — | | — | |
Total retail electric revenues | Total retail electric revenues | 10,540 | | 3,963 | | 5,955 | | 622 | | — | | — | | Total retail electric revenues | 11,006 | | 4,221 | | 6,143 | | 642 | | — | | — | |
Natural gas distribution revenues | Natural gas distribution revenues | | Natural gas distribution revenues | |
Residential | Residential | 906 | | — | | — | | — | | — | | 906 | | Residential | 1,143 | | — | | — | | — | | — | | 1,143 | |
Commercial | Commercial | 229 | | — | | — | | — | | — | | 229 | | Commercial | 298 | | — | | — | | — | | — | | 298 | |
Transportation | Transportation | 723 | | — | | — | | — | | — | | 723 | | Transportation | 775 | | — | | — | | — | | — | | 775 | |
Industrial | Industrial | 21 | | — | | — | | — | | — | | 21 | | Industrial | 29 | | — | | — | | — | | — | | 29 | |
Other | Other | 179 | | — | | — | | — | | — | | 179 | | Other | 187 | | — | | — | | — | | — | | 187 | |
Total natural gas distribution revenues | Total natural gas distribution revenues | 2,058 | | — | | — | | — | | — | | 2,058 | | Total natural gas distribution revenues | 2,432 | | — | | — | | — | | — | | 2,432 | |
Wholesale electric revenues | Wholesale electric revenues | | Wholesale electric revenues | |
PPA energy revenues | PPA energy revenues | 550 | | 94 | | 38 | | 7 | | 425 | | — | | PPA energy revenues | 782 | | 143 | | 71 | | 9 | | 575 | | — | |
PPA capacity revenues | PPA capacity revenues | 339 | | 78 | | 30 | | 3 | | 231 | | — | | PPA capacity revenues | 375 | | 86 | | 41 | | 4 | | 247 | | — | |
Non-PPA revenues | Non-PPA revenues | 159 | | 33 | | 7 | | 235 | | 184 | | — | | Non-PPA revenues | 181 | | 108 | | 14 | | 283 | | 273 | | — | |
Total wholesale electric revenues | Total wholesale electric revenues | 1,048 | | 205 | | 75 | | 245 | | 840 | | — | | Total wholesale electric revenues | 1,338 | | 337 | | 126 | | 296 | | 1,095 | | — | |
Other natural gas revenues | Other natural gas revenues | | Other natural gas revenues | |
| Wholesale gas services | Wholesale gas services | 1,168 | | — | | — | | — | | — | | 1,168 | | Wholesale gas services | 2,168 | | — | | — | | — | | — | | 2,168 | |
Gas marketing services | Gas marketing services | 258 | | — | | — | | — | | — | | 258 | | Gas marketing services | 303 | | — | | — | | — | | — | | 303 | |
Other natural gas revenues | Other natural gas revenues | 22 | | — | | — | | — | | — | | 22 | | Other natural gas revenues | 27 | | — | | — | | — | | — | | 27 | |
Total natural gas revenues | Total natural gas revenues | 1,448 | | — | | — | | — | | — | | 1,448 | | Total natural gas revenues | 2,498 | | — | | — | | — | | — | | 2,498 | |
Other revenues | Other revenues | 677 | | 117 | | 329 | | 19 | | 11 | | — | | Other revenues | 792 | | 150 | | 362 | | 22 | | 18 | | — | |
Total revenue from contracts with customers | Total revenue from contracts with customers | 15,771 | | 4,285 | | 6,359 | | 886 | | 851 | | 3,506 | | Total revenue from contracts with customers | 18,066 | | 4,708 | | 6,631 | | 960 | | 1,113 | | 4,930 | |
Other revenue sources(a) | Other revenue sources(a) | 2,604 | | 160 | | 12 | | 9 | | 486 | | 1,973 | | Other revenue sources(a) | 2,979 | | 311 | | 419 | | 28 | | 497 | | 1,763 | |
Other adjustments(b) | Other adjustments(b) | (3,117) | | — | | — | | — | | — | | (3,117) | | Other adjustments(b) | (3,699) | | — | | — | | — | | — | | (3,699) | |
Total operating revenues | Total operating revenues | $ | 15,258 | | $ | 4,445 | | $ | 6,371 | | $ | 895 | | $ | 1,337 | | $ | 2,362 | | Total operating revenues | $ | 17,346 | | $ | 5,019 | | $ | 7,050 | | $ | 988 | | $ | 1,610 | | $ | 2,994 | |
(a)Other revenue sources relate to revenues from customers accounted for as derivatives and leases, alternative revenue programs at Southern Company Gas, and cost recovery mechanisms and revenues that meet other scope exceptions for revenues from contracts with customers at the traditional electric operating companies.
(b)Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Notes (K)Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (L) under "Southern Company Gas" for information on the sale of Sequent and components of wholesale gas services' operating revenues, respectively.
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, 20212022 and December 31, 2020:2021:
| | | | | | | | | | | | | | | | | | | | |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| (in millions) |
Accounts Receivable | | | | | | |
At September 30, 2021 | $ | 2,343 | | $ | 712 | | $ | 904 | | $ | 90 | | $ | 170 | | $ | 329 | |
At December 31, 2020 | 2,614 | | 632 | | 806 | | 77 | | 112 | | 788 | |
Contract Assets | | | | | | |
At September 30, 2021 | $ | 165 | | $ | 5 | | $ | 103 | | $ | — | | $ | 1 | | $ | — | |
At December 31, 2020 | 158 | | 2 | | 71 | | — | | — | | — | |
Contract Liabilities | | | | | | |
At September 30, 2021 | $ | 65 | | $ | 6 | | $ | 39 | | $ | 1 | | $ | 2 | | $ | — | |
At December 31, 2020 | 61 | | 6 | | 27 | | 1 | | 1 | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| (in millions) |
Accounts Receivable | | | | | | |
At September 30, 2022 | $ | 2,760 | | $ | 800 | | $ | 1,035 | | $ | 98 | | $ | 264 | | $ | 433 | |
At December 31, 2021 | 2,504 | | 589 | | 736 | | 73 | | 149 | | 753 | |
Contract Assets | | | | | | |
At September 30, 2022 | $ | 178 | | $ | 5 | | $ | 114 | | $ | — | | $ | — | | $ | — | |
At December 31, 2021 | 117 | | 2 | | 63 | | — | | 1 | | — | |
Contract Liabilities | | | | | | |
At September 30, 2022 | $ | 56 | | $ | 5 | | $ | 6 | | $ | 7 | | $ | 2 | | $ | — | |
At December 31, 2021 | 57 | | 4 | | 14 | | — | | 1 | | — | |
At September 30, 20212022 and December 31, 2020,2021, Georgia Power had contract assets primarily related to fixed retail customer fixed 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. Contract liabilities for Georgia Power relate to cash collections recognized in advance of revenue for unregulated service agreements. Southern Company's unregulated distributed generation business had $55$59 million and $81$50 million of contract assets and $19$37 million and $27$39 million of contract liabilities at September 30, 20212022 and December 31, 2020,2021, respectively, for outstanding performance obligations.
Revenues recognized by Southern Company in the three and nine months ended September 30, 2021,2022, which were included in contract liabilities at December 31, 2020,2021, were $5$13 million and $25$32 million, respectively, for Southern Company and immaterial for allthe other Registrants.
Remaining Performance Obligations
The traditional electric operating companies and Southern PowerSubsidiary Registrants 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 wherebyFor the traditional electric operating companies and Southern Power, providethese contracts primarily relate to PPAs whereby electricity and generation capacity are provided 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. For Southern Company Gas, these contracts involve energy infrastructure enhancement and upgrade projects for certain governmental customers. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenues from contracts with customers related to these performance obligations remaining at September 30, 20212022 are expected to be recognized as follows:
| | | 2021 (remaining) | 2022 | 2023 | 2024 | 2025 | Thereafter | | 2022 (remaining) | 2023 | 2024 | 2025 | 2026 | Thereafter |
| | (in millions) | | (in millions) |
Southern Company | Southern Company | $ | 156 | | $ | 543 | | $ | 347 | | $ | 327 | | $ | 307 | | $ | 2,667 | | Southern Company | $ | 243 | | $ | 619 | | $ | 434 | | $ | 322 | | $ | 307 | | $ | 2,340 | |
Alabama Power | Alabama Power | 13 | | 32 | | 24 | | 7 | | 5 | | — | | Alabama Power | 8 | | 24 | | 7 | | 5 | | — | | — | |
Georgia Power | Georgia Power | 22 | | 64 | | 43 | | 23 | | 21 | | 41 | | Georgia Power | 20 | | 70 | | 34 | | 22 | | 11 | | 21 | |
| Southern Power | Southern Power | 70 | | 323 | | 281 | | 297 | | 281 | | 2,644 | | Southern Power | 80 | | 341 | | 344 | | 294 | | 299 | | 2,334 | |
Southern Company Gas | | Southern Company Gas | 12 | | 29 | | 29 | | — | | — | | — | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Revenue expected to be recognized for performance obligations remaining at September 30, 20212022 was immaterial for Mississippi Power.
Lease Income
Lease income for the three and nine months ended September 30, 20212022 and 20202021 is as follows:
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| | | (in millions) |
For the Three Months Ended September 30, 2022 | | For the Three Months Ended September 30, 2022 |
Lease income - interest income on sales-type leases | | Lease income - interest income on sales-type leases | $ | 7 | | $ | — | | $ | — | | $ | 4 | | $ | 3 | | $ | — | |
Lease income - operating leases | | Lease income - operating leases | 50 | | 19 | | 8 | | 1 | | 21 | | 9 | |
Variable lease income | | Variable lease income | 139 | | — | | — | | — | | 145 | | — | |
Total lease income | | Total lease income | $ | 196 | | $ | 19 | | $ | 8 | | $ | 5 | | $ | 169 | | $ | 9 | |
| For the Nine Months Ended September 30, 2022 | | For the Nine Months Ended September 30, 2022 |
Lease income - interest income on sales-type leases | | Lease income - interest income on sales-type leases | $ | 19 | | $ | — | | $ | — | | $ | 11 | | $ | 8 | | $ | — | |
Lease income - operating leases | | Lease income - operating leases | 149 | | 58 | | 24 | | 1 | | 64 | | 27 | |
Variable lease income | | Variable lease income | 355 | | 1 | | — | | — | | 372 | | — | |
Total lease income | | Total lease income | $ | 523 | | $ | 59 | | $ | 24 | | $ | 12 | | $ | 444 | | $ | 27 | |
| | (in millions) | |
For the Three Months Ended September 30, 2021 | For the Three Months Ended September 30, 2021 | For the Three Months Ended September 30, 2021 |
Lease income - interest income on sales-type leases | Lease income - interest income on sales-type leases | $ | 4 | | $ | — | | $ | — | | $ | 4 | | $ | — | | $ | — | | Lease income - interest income on sales-type leases | $ | 4 | | $ | — | | $ | — | | $ | 4 | | $ | — | | $ | — | |
Lease income - operating leases | Lease income - operating leases | 56 | | 21 | | 11 | | — | | 21 | | 9 | | Lease income - operating leases | 56 | | 21 | | 11 | | — | | 21 | | 9 | |
Variable lease income | Variable lease income | 143 | | — | | — | | — | | 151 | | — | | Variable lease income | 143 | | — | | — | | — | | 151 | | — | |
Total lease income | Total lease income | $ | 203 | | $ | 21 | | $ | 11 | | $ | 4 | | $ | 172 | | $ | 9 | | Total lease income | $ | 203 | | $ | 21 | | $ | 11 | | $ | 4 | | $ | 172 | | $ | 9 | |
| For the Nine Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 |
Lease income - interest income on sales-type leases | Lease income - interest income on sales-type leases | $ | 11 | | $ | — | | $ | — | | $ | 10 | | $ | — | | $ | — | | Lease income - interest income on sales-type leases | $ | 11 | | $ | — | | $ | — | | $ | 10 | | $ | — | | $ | — | |
Lease income - operating leases | Lease income - operating leases | 168 | | 62 | | 31 | | 1 | | 64 | | 26 | | Lease income - operating leases | 168 | | 62 | | 31 | | 1 | | 64 | | 26 | |
Variable lease income | Variable lease income | 355 | | — | | — | | — | | 379 | | — | | Variable lease income | 355 | | — | | — | | — | | 379 | | — | |
Total lease income | Total lease income | $ | 534 | | $ | 62 | | $ | 31 | | $ | 11 | | $ | 443 | | $ | 26 | | Total lease income | $ | 534 | | $ | 62 | | $ | 31 | | $ | 11 | | $ | 443 | | $ | 26 | |
| For the Three Months Ended September 30, 2020 | |
Lease income - interest income on sales-type leases | $ | 3 | | $ | — | | $ | — | | $ | 3 | | $ | — | | $ | — | | |
Lease income - operating leases | 50 | | 11 | | 14 | | — | | 21 | | 9 | | |
Variable lease income | 145 | | — | | — | | — | | 153 | | — | | |
Total lease income | $ | 198 | | $ | 11 | | $ | 14 | | $ | 3 | | $ | 174 | | $ | 9 | | |
| For the Nine Months Ended September 30, 2020 | |
Lease income - interest income on sales-type leases | $ | 8 | | $ | — | | $ | — | | $ | 8 | | $ | — | | $ | — | | |
Lease income - operating leases | 148 | | 24 | | 44 | | 1 | | 66 | | 26 | | |
Variable lease income | 345 | | — | | — | | — | | 368 | | — | | |
Total lease income | $ | 501 | | $ | 24 | | $ | 44 | | $ | 9 | | $ | 434 | | $ | 26 | | |
Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income for Alabama Power and Southern Power is included in wholesale revenues.
Lease Receivables
Mississippi Power
Mississippi Power completed construction of additional leased assets under an existing sales-type lease during the second quarter 2021. Upon completion of construction, the book value was transferred from CWIP to lease receivables. At September 30, 2021, the lease receivable related to the additional leased assets totaled $39 million and is primarily included in other property and investments. The transfer represents a noncash investing transaction for purposes of the statements of cash flows.
Southern Power
During the third quarter 2021, Southern Power completed construction of a portion of the Garland battery energy storage facility assets and recorded a $15 million loss upon commencement of the related PPA, which Southern
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Power accounts for as a sales-type lease. The lease has an initial term of 20 years. Upon commencement of the lease, the $113 million book value of the assets was derecognized from CWIP and a lease receivable was recorded. At September 30, 2021, the current portion of the lease receivable of $8 million is included in other current assets and the long-term portion of $91 million is included in net investment in sales-type lease on the balance sheet. The transfer represented a noncash investing transaction for purposes of the statement of cash flows. The undiscounted cash flows expected to be received by Southern Power for assets under the lease are as follows:
| | | | | | |
| | At September 30, 2021 |
| | (in millions) |
2021 (remaining) | | $ | 2 | |
2022 | | 8 | |
2023 | | 8 | |
2024 | | 8 | |
2025 | | 8 | |
2026 | | 8 | |
Thereafter | | 115 | |
Total undiscounted cash flows | | $ | 157 | |
Net investment in sales-type lease(*) | | 99 | |
Difference between undiscounted cash flows and discounted cash flows | | $ | 58 | |
(*)Included in other current assets and other property and investments on the balance sheet.
See Note (K) under "Southern Power" for additional information on the Garland battery energy storage facility.
(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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
SP Solar and SP Wind
At September 30, 20212022 and December 31, 2020,2021, SP Solar had total assets of $6.2$6.0 billion and $6.1 billion, respectively, total liabilities of $364 million and $387 million, respectively,$0.4 billion, and noncontrolling interests of $1.1 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, 20212022 and December 31, 2020,2021, SP Wind had total assets of $2.3 billion, and $2.4 billion, respectively, total liabilities of $157$191 million and $138$130 million, respectively, and noncontrolling interests of $42$40 million and $43$41 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 3three financial investors in accordance with the limited liability agreement.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.
Other Variable Interest Entities
Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax-equitytax 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, 20212022 and December 31, 2020,2021, the other VIEs had total assets of $1.9 billion, and $1.1 billion, respectively, total liabilities of $263 million$0.2 billion and $110 million,$0.3 billion, respectively, and noncontrolling interests of $902 million$0.8 billion and $454 million,$0.9 billion, 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, 20212022 and December 31, 2020,2021, Southern Power had equity method investments in wind and battery energy storage projects totaling $83$49 million and $19$86 million, respectively. Earnings (loss) from these investments were immaterial for all periods presented.
Southern Company Gas
Equity Method Investments
The carrying amounts of Southern Company Gas' equity method investments at September 30, 2021 and December 31, 2020 and related earnings (loss) from those investments for During the three and nine months ended September 30, 20212022, Southern Power sold equity method investments in wind projects and 2020received proceeds totaling $38 million. The gains associated with the sales were as follows:
| | | | | | | | |
Investment Balance | September 30, 2021 | December 31, 2020 |
| (in millions) |
SNG | $ | 1,130 | | $ | 1,167 | |
PennEast Pipeline(*) | 11 | | 91 | |
Other | 33 | | 32 | |
Total | $ | 1,174 | | $ | 1,290 | |
(*)Investment balance at September 30, 2021 reflects pre-tax impairment charges totaling $84 million recorded during 2021. See Note (C) under "Other Matters – Southern Company Gas" for additional information, including the September 2021 cancellation of the project.immaterial.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Earnings (Loss) from Equity Method Investments | 2021 | 2020 | | 2021 | 2020 |
| (in millions) |
SNG | $ | 27 | | $ | 30 | | | $ | 93 | | $ | 95 | |
PennEast Pipeline(a)(b) | (2) | | 2 | | | (81) | | 5 | |
Other(a)(c) | — | | 1 | | | 2 | | 6 | |
Total | $ | 25 | | $ | 33 | | | $ | 14 | | $ | 106 | |
Southern Company Gas(a)Earnings primarily resultEquity Method Investments
The carrying amounts of Southern Company Gas' equity method investments at September 30, 2022 and December 31, 2021 and related earnings (loss) from AFUDC equity recorded by the project entity.
(b)Includes pre-tax impairment charges totaling $2 million and $84 millionthose investments for the three and nine months ended September 30, 2022 and 2021 respectively.were as follows:
| | | | | | | | |
Investment Balance | September 30, 2022 | December 31, 2021 |
| (in millions) |
SNG | $ | 1,091 | | $ | 1,129 | |
Other(*) | 34 | | 44 | |
Total | $ | 1,125 | | $ | 1,173 | |
(*)Balance at September 30, 2022 reflects an $11 million distribution received in 2022 from PennEast Pipeline.
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Earnings (Loss) from Equity Method Investments | 2022 | 2021 | | 2022 | 2021 |
| (in millions) |
SNG | $ | 34 | | $ | 27 | | | $ | 104 | | $ | 93 | |
PennEast Pipeline(*) | — | | (2) | | | — | | (81) | |
Other | — | | — | | | 1 | | 2 | |
Total | $ | 34 | | $ | 25 | | | $ | 105 | | $ | 14 | |
(*)Primarily reflects pre-tax impairment charges. See Note (C) under "Other Matters – Southern Company Gas" for additional information, including the September 2021 cancellation of the project.
(c)On March 24, 2020, Southern Company Gas completed the sale of its interests in Atlantic Coast Pipeline and Pivotal LNG. See Note 157 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(F) FINANCING AND LEASES
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, 2021,2022, committed credit arrangements with banks were as follows:
| | | | Expires | | | | | | | Expires | | | | |
Company | Company | | 2022 | 2023 | 2024 | 2026 | | Total | | Unused | | Due within One Year | Company | | 2023 | 2024 | 2025 | 2026 | | Total | | Unused | | Expires within One Year |
| | | (in millions) | | | (in millions) |
Southern Company parent | Southern Company parent | | $ | — | | $ | — | | $ | — | | $ | 2,000 | | | $ | 2,000 | | | $ | 1,999 | | | $ | — | | Southern Company parent | | $ | — | | $ | — | | $ | — | | $ | 2,000 | | | $ | 2,000 | | | $ | 1,998 | | | $ | — | |
Alabama Power | Alabama Power | | — | | — | | 550 | | 700 | | | 1,250 | | | 1,250 | | | — | | Alabama Power | | — | | 550 | | — | | 700 | | | 1,250 | | | 1,250 | | | — | |
Georgia Power | Georgia Power | | — | | — | | — | | 1,750 | | | 1,750 | | | 1,726 | | | — | | Georgia Power | | — | | — | | — | | 1,750 | | | 1,750 | | | 1,726 | | | — | |
Mississippi Power | Mississippi Power | | — | | 125 | | 150 | | — | | | 275 | | | 250 | | | — | | Mississippi Power | | — | | 150 | | 125 | | — | | | 275 | | | 275 | | | — | |
Southern Power(a) | Southern Power(a) | | — | | — | | — | | 600 | | | 600 | | | 568 | | | — | | Southern Power(a) | | — | | — | | — | | 600 | | | 600 | | | 569 | | | — | |
Southern Company Gas(b) | Southern Company Gas(b) | | 250 | | — | | — | | 1,500 | | | 1,750 | | | 1,747 | | | 250 | | Southern Company Gas(b) | | 250 | | — | | — | | 1,500 | | | 1,750 | | | 1,748 | | | 250 | |
SEGCO | SEGCO | | 30 | | — | | — | | — | | | 30 | | | 30 | | | 30 | | SEGCO | | 30 | | — | | — | | — | | | 30 | | | 30 | | | 30 | |
Southern Company | Southern Company | | $ | 280 | | $ | 125 | | $ | 700 | | $ | 6,550 | | | $ | 7,655 | | | $ | 7,570 | | | $ | 280 | | Southern Company | | $ | 280 | | $ | 700 | | $ | 125 | | $ | 6,550 | | | $ | 7,655 | | | $ | 7,596 | | | $ | 280 | |
(a)Does not include Southern Power Company's two $75 million and $60 million continuing letter of credit facilities for standby letters of credit, expiring in 2023 and 2025, respectively, of which $23$11 million and $1$5 million, respectively, was unused at September 30, 2021.2022. 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 $800 million of the credit arrangement expiring in 2026 and all $250 million of the arrangement expiring in 2022.2026. Southern Company Gas' committed credit arrangement expiring in 2026 also includes $700 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to the multi-year credit arrangement expiring in 2026, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted. Nicor Gas is also the borrower of a new $250 million credit arrangement expiring in 2023.
As reflected in the table above, in May 2021, Southern Company, Alabama Power, Georgia Power, and Southern Power each amended and restated certain of its multi-year credit arrangements, which, among other things, extended the maturity dates from 2024 to 2026. Alabama Power also decreased the borrowing capacity under its credit arrangement now maturing in 2026 from $800 million to $700 million. Also in May 2021, Southern Company Gas Capital, along with Nicor Gas, amended and restated their multi-year credit arrangement to extend the maturity date from 2024 to 2026 and decrease the aggregate borrowing capacity from $1.75 billion to $1.5 billion. In addition,
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Company Gas Capital entered into a new $250 million credit arrangement, which is guaranteed by Southern Company Gas, that matures in 2022. In June 2021,March 2022, Mississippi Power amended and restated certain of its multi-year$125 million revolving credit arrangements aggregating $150 million, which, among other things, extended the maturity dates from 2022 to 2024. In August 2021, Alabama Power amended and restated one of its multi-year credit arrangements,arrangement, which among other things, extended the maturity date from 20222023 to 20242025 and increased theallows for borrowing capacity from $525 million to $550 million.based on term SOFR.
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, 2021,2022, 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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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, 20212022 was approximately $1.6$1.4 billion (comprised of approximately $854$789 million at Alabama Power, $672$619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2021,2022, Georgia Power and Mississippi Power had approximately $262$288 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
Equity Units
In May 2022, Southern Company remarketed $862.5 million aggregate principal amount of its Series 2019A Remarketable Junior Subordinated Notes due August 1, 2024 (2019A RSNs) and $862.5 million aggregate principal amount of its Series 2019B Remarketable Junior Subordinated Notes due August 1, 2027 (2019B RSNs), pursuant to the terms of its 2019 Series A Equity Units (Equity Units). In connection with the remarketing, the interest rates on the 2019A RSNs and the 2019B RSNs were reset to 4.475% and 5.113%, respectively, payable on a semi-annual basis, and Southern Company ceased to have the ability to redeem these securities prior to maturity or to defer interest payments. Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. At September 30, 2022 and December 31, 2021, the 2019A RSNs and the 2019B RSNs are included in long-term debt on Southern Company's consolidated balance sheets.
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 issuedEquity Units until they were settled in 2019.August 2022. Earnings per share dilution resulting from stock-based compensation plans and the equity unitsEquity 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 and "Equity Units" herein for information on the equity unitsEquity Units 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, | Nine Months Ended September 30, | | Three Months Ended September 30, | Nine Months Ended September 30, |
| | 2021 | 2020 | 2021 | 2020 | | 2022 | 2021 | 2022 | 2021 |
| | (in millions) | | (in millions) |
As reported shares | As reported shares | 1,061 | | 1,058 | | 1,060 | | 1,058 | | As reported shares | 1,082 | | 1,061 | | 1,070 | | 1,060 | |
Effect of stock-based compensation | Effect of stock-based compensation | 7 | | 6 | | 7 | | 6 | | Effect of stock-based compensation | 6 | | 7 | | 6 | | 7 | |
| Diluted shares | Diluted shares | 1,068 | | 1,064 | | 1,067 | | 1,064 | | Diluted shares | 1,088 | | 1,068 | | 1,076 | | 1,067 | |
For all periods presented, an immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive.
An immaterial number
Southern Company Leveraged Lease
See Note 9 to the financial statements in Item 8 of sharesthe Form 10-K for information on a leveraged lease agreement related to energy generation. On June 30, 2022, the equity units issued in 2019 was included inSouthern Holdings subsidiary operating the calculations of diluted earnings per sharegenerating plant for the nine months ended Septemberlessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2020. There were no such amounts for all other periods presented.2023. The parties to the lease agreement are currently negotiating a potential restructuring, which could result in rescission of the termination notice. The ultimate outcome of this matter cannot be determined at this time but is not expected to have a material impact on Southern Company's financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Georgia Power Lease Modification
See Note 9 to the financial statements in Item 8 of the Form 10-K for information on Georgia Power's leases. In July 2022, Georgia Power recognized a lease modification related to an existing non-affiliate PPA which converted from an operating lease to a finance lease upon its approval in the 2022 IRP. As a result, Georgia Power removed from its balance sheet operating lease right-of-use assets, net of amortization of $17 million and lease obligations of $18 million maturing through 2024 and recorded finance lease right-of-use assets of $112 million and lease obligations of $113 million maturing through 2039.
(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 $1.2$1.0 billion at September 30, 20212022 compared to $1.4$1.2 billion at December 31, 2020.2021.
The federal ITCPTC and PTCITC carryforwards begin expiring in 2036 and 2032, respectively, but are expected to be fully utilized by 2024.2025. The utilization of each 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, an increase in Georgia Power's ownership interest percentage in Plant Vogtle Units 3 and 4, changes in taxable income 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.
Valuation Allowances
Details of significant changes in valuation allowances for the applicable Registrants are provided below:
| | | | | | | | |
| Southern Company | Georgia Power |
| (in millions) |
Federal | $ | 20 | | $ | — | |
State (net of federal benefit) | 92 | | 28 | |
Balance at December 31, 2020 | $ | 112 | | $ | 28 | |
| | |
Federal | $ | 20 | | $ | — | |
State (net of federal benefit) | 122 | | 58 | |
Balance at September 30, 2021 | $ | 142 | | $ | 58 | |
The increase in valuation allowances, net of federal benefit, for Southern Company and Georgia Power during 2021 was primarily due to Georgia Power's projected inability to utilize certain state tax credit carryforwards.
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.
Southern Company
Southern Company's effective tax rate was 17.5%20.0% for the nine months ended September 30, 20212022 compared to 13.9%17.5% for the corresponding period in 2020.2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to changesa prior year state tax credit carryforward at Georgia Power in state apportionment rates2022, partially offset by additional tax expense in 2021 as a result of the sale of Sequent, an increase inSequent. See Note 15 to the valuation allowance on certain state tax credit carryforwards, and the tax impact of the second quarter 2020 charge to earnings associated with a leveraged lease investment. See "Valuation Allowances" herein, Note (K)financial statements under "Southern Company Gas," and Note 3 to the financial statementsGas" in Item 8 of the Form 10-K under "Other Matters – Southern Company" for additional information.
Georgia Power
Georgia Power's effective tax rate was 18.5% for the nine months ended September 30, 2022 compared to 7.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to a prior year state tax credit carryforward in 2022.
Mississippi Power
Mississippi Power's effective tax rate was 20.1% for the nine months ended September 30, 2022 compared to 14.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to a decrease in the flowback of excess deferred income taxes in 2022.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
GeorgiaSouthern Power
GeorgiaSouthern Power's effective tax rate was 7.3%18.8% for the nine months ended September 30, 20212022 compared to 12.3%a tax benefit rate of (1.6)% for the corresponding period in 2020.2021. The effective tax rate decreaseincrease was primarily due to higher charges topre-tax earnings in 2021 associated with the construction of Plant Vogtle Units 32022 and 4, partially offset by an increase in the valuation allowance on certain state tax credit carryforwards. See "Valuation Allowances" herein and Note (B) under "Georgia Power – Nuclear Construction" for additional information.
Southern Power
Southern Power's effective tax benefit rate was (1.6)% for the nine months ended September 30, 2021 compared to an effective tax rate of 11.3% for the corresponding period in 2020. The effective tax rate decrease was primarily due to changesa change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in Februarythe first quarter 2021, as well as the tax impact from the sale of Plant Mankatopartially offset by higher wind PTCs in January 2020. See Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K for additional information.2022.
Southern Company Gas
Southern Company Gas' effective tax rate was 36.6%23.7% for the nine months ended September 30, 20212022 compared to 21.4%36.6% for the corresponding period in 2020.2021. The effective tax rate increasedecrease was primarily relateddue to changesadditional tax expense in state apportionment rates2021 as a result of the sale of Sequent. See Note (K)15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
Unrecognized Tax Benefits
Southern Company's and Southern Company Gas' unrecognized tax positions balances at September 30, 2022 were $79 million and $32 million, respectively, compared to $47 million for Southern Company at December 31, 2021. The increases from prior periods are related to the amendment of certain 2018 state tax filing positions related to Southern Company Gas dispositions. If accepted by the states, these positions would decrease Southern Company's and Southern Company Gas' annual effective tax rates. The ultimate outcome of these unrecognized tax benefits is dependent on acceptance by each state and is not expected to be resolved in the next 12 months.
(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). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2021.2022. 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.
During 2022, the qualified pension plan achieved the predetermined funding threshold whereby the asset allocation was adjusted to invest a larger portion of the portfolio in fixed rate debt securities.
See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.
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, 20212022 and 20202021 are presented in the following tables.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Southern Company | | Alabama Power | | Georgia Power | | Mississippi Power | | Southern Power | | Southern Company Gas | | Southern Company | | Alabama Power | | Georgia Power | | Mississippi Power | | Southern Power | | Southern Company Gas |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2021 | | |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | |
Pension Plans | Pension Plans | | Pension Plans | |
Service cost | Service cost | $ | 109 | | | $ | 26 | | | $ | 28 | | | $ | 4 | | | $ | 2 | | | $ | 10 | | Service cost | $ | 103 | | | $ | 25 | | | $ | 26 | | | $ | 5 | | | $ | 2 | | | $ | 9 | |
Interest cost | Interest cost | 87 | | | 20 | | | 26 | | | 4 | | | 2 | | | 6 | | Interest cost | 102 | | | 24 | | | 31 | | | 5 | | | 2 | | | 7 | |
Expected return on plan assets | Expected return on plan assets | (298) | | | (72) | | | (94) | | | (14) | | | (4) | | | (21) | | Expected return on plan assets | (316) | | | (77) | | | (99) | | | (15) | | | (4) | | | (22) | |
Amortization: | Amortization: | | Amortization: | |
Prior service costs | Prior service costs | — | | | — | | | — | | | — | | | — | | | (1) | | Prior service costs | — | | | — | | | — | | | — | | | — | | | (1) | |
Regulatory asset | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 3 | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 3 | |
Net (gain)/loss | 78 | | | 21 | | | 25 | | | 4 | | | 1 | | | 3 | | |
Net periodic pension cost (income) | $ | (24) | | | $ | (5) | | | $ | (15) | | | $ | (2) | | | $ | 1 | | | $ | — | | |
| Postretirement Benefits | | |
Service cost | $ | 6 | | | $ | 2 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | — | | |
Interest cost | 9 | | | 2 | | | 3 | | | — | | | — | | | 1 | | |
Expected return on plan assets | (19) | | | (8) | | | (7) | | | (1) | | | — | | | (2) | | |
Amortization: | | |
| Regulatory asset | — | | | — | | | — | | | — | | | — | | | 2 | | |
Net (gain)/loss | 1 | | | — | | | 1 | | | — | | | — | | | (1) | | |
Net periodic postretirement benefit cost (income) | $ | (3) | | | $ | (4) | | | $ | (1) | | | $ | — | | | $ | 1 | | | $ | — | | |
| Nine Months Ended September 30, 2021 | | |
Pension Plans | |
Service cost | $ | 326 | | | $ | 77 | | | $ | 84 | | | $ | 13 | | | $ | 7 | | | $ | 28 | | |
Interest cost | 260 | | | 61 | | | 78 | | | 12 | | | 4 | | | 18 | | |
Expected return on plan assets | (893) | | | (215) | | | (282) | | | (41) | | | (11) | | | (64) | | |
Amortization: | | |
Prior service costs | — | | | — | | | 1 | | | — | | | — | | | (2) | | |
Regulatory asset | — | | | — | | | — | | | — | | | — | | | 11 | | |
Net (gain)/loss | 235 | | | 62 | | | 75 | | | 11 | | | 3 | | | 9 | | |
Net loss | | Net loss | 60 | | | 16 | | | 18 | | | 2 | | | 1 | | | 2 | |
Net periodic pension cost (income) | Net periodic pension cost (income) | $ | (72) | | | $ | (15) | | | $ | (44) | | | $ | (5) | | | $ | 3 | | | $ | — | | Net periodic pension cost (income) | $ | (51) | | | $ | (12) | | | $ | (24) | | | $ | (3) | | | $ | 1 | | | $ | (2) | |
| Postretirement Benefits | Postretirement Benefits | Postretirement Benefits | |
Service cost | Service cost | $ | 18 | | | $ | 5 | | | $ | 5 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | Service cost | $ | 6 | | | $ | 2 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | — | |
Interest cost | Interest cost | 26 | | | 6 | | | 9 | | | 1 | | | — | | | 3 | | Interest cost | 10 | | | 3 | | | 4 | | | — | | | — | | | 1 | |
Expected return on plan assets | Expected return on plan assets | (57) | | | (22) | | | (20) | | | (2) | | | — | | | (6) | | Expected return on plan assets | (20) | | | (9) | | | (8) | | | — | | | — | | | (2) | |
Amortization: | Amortization: | | Amortization: | |
Prior service costs | Prior service costs | (1) | | | — | | | — | | | — | | | — | | | — | | Prior service costs | (1) | | | — | | | — | | | — | | | — | | | — | |
Regulatory asset | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 5 | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 2 | |
Net (gain)/loss | Net (gain)/loss | 3 | | | — | | | 2 | | | — | | | — | | | (2) | | Net (gain)/loss | 1 | | | — | | | — | | | — | | | — | | | (1) | |
Net periodic postretirement benefit cost (income) | Net periodic postretirement benefit cost (income) | $ | (11) | | | $ | (11) | | | $ | (4) | | | $ | — | | | $ | 1 | | | $ | 1 | | Net periodic postretirement benefit cost (income) | $ | (4) | | | $ | (4) | | | $ | (2) | | | $ | 1 | | | $ | 1 | | | $ | — | |
| Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | |
Pension Plans | | Pension Plans |
Service cost | | Service cost | $ | 309 | | | $ | 74 | | | $ | 78 | | | $ | 13 | | | $ | 7 | | | $ | 26 | |
Interest cost | | Interest cost | 306 | | | 72 | | | 92 | | | 14 | | | 5 | | | 21 | |
Expected return on plan assets | | Expected return on plan assets | (949) | | | (229) | | | (298) | | | (44) | | | (12) | | | (68) | |
Amortization: | | Amortization: | |
Prior service costs | | Prior service costs | — | | | — | | | 1 | | | — | | | — | | | (2) | |
Regulatory asset | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 11 | |
Net loss | | Net loss | 180 | | | 47 | | | 55 | | | 9 | | | 2 | | | 5 | |
Net periodic pension cost (income) | | Net periodic pension cost (income) | $ | (154) | | | $ | (36) | | | $ | (72) | | | $ | (8) | | | $ | 2 | | | $ | (7) | |
| Postretirement Benefits | | Postretirement Benefits |
Service cost | | Service cost | $ | 17 | | | $ | 5 | | | $ | 5 | | | $ | 1 | | | $ | 1 | | | $ | 1 | |
Interest cost | | Interest cost | 31 | | | 8 | | | 11 | | | 1 | | | — | | | 4 | |
Expected return on plan assets | | Expected return on plan assets | (60) | | | (25) | | | (21) | | | (1) | | | — | | | (6) | |
Amortization: | | Amortization: | |
Prior service costs | | Prior service costs | (1) | | | — | | | — | | | — | | | — | | | — | |
Regulatory asset | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 5 | |
Net (gain)/loss | | Net (gain)/loss | 1 | | | — | | | 1 | | | — | | | — | | | (2) | |
Net periodic postretirement benefit cost (income) | | Net periodic postretirement benefit cost (income) | $ | (12) | | | $ | (12) | | | $ | (4) | | | $ | 1 | | | $ | 1 | | | $ | 2 | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Southern Company | | Alabama Power | | Georgia Power | | Mississippi Power | | Southern Power | | Southern Company Gas | | Southern Company | | Alabama Power | | Georgia Power | | Mississippi Power | | Southern Power | | Southern Company Gas |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2020 | | |
Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | |
Pension Plans | Pension Plans | Pension Plans |
Service cost | Service cost | $ | 94 | | | $ | 23 | | | $ | 24 | | | $ | 3 | | | $ | 2 | | | $ | 8 | | Service cost | $ | 109 | | | $ | 26 | | | $ | 28 | | | $ | 4 | | | $ | 2 | | | $ | 10 | |
Interest cost | Interest cost | 108 | | | 25 | | | 33 | | | 5 | | | 1 | | | 8 | | Interest cost | 87 | | | 20 | | | 26 | | | 4 | | | 2 | | | 6 | |
Expected return on plan assets | Expected return on plan assets | (274) | | | (66) | | | (87) | | | (13) | | | (4) | | | (20) | | Expected return on plan assets | (298) | | | (72) | | | (94) | | | (14) | | | (4) | | | (21) | |
Amortization: | Amortization: | | Amortization: | |
Prior service costs | Prior service costs | — | | | 1 | | | — | | | — | | | — | | | (1) | | Prior service costs | — | | | — | | | — | | | — | | | — | | | (1) | |
Regulatory asset | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 4 | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 3 | |
Net loss | | Net loss | 78 | | | 21 | | | 25 | | | 4 | | | 1 | | | 3 | |
Net periodic pension cost (income) | | Net periodic pension cost (income) | $ | (24) | | | $ | (5) | | | $ | (15) | | | $ | (2) | | | $ | 1 | | | $ | — | |
| Postretirement Benefits | | Postretirement Benefits | |
Service cost | | Service cost | $ | 6 | | | $ | 2 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | — | |
Interest cost | | Interest cost | 9 | | | 2 | | | 3 | | | — | | | — | | | 1 | |
Expected return on plan assets | | Expected return on plan assets | (19) | | | (8) | | | (7) | | | (1) | | | — | | | (2) | |
Amortization: | | Amortization: | |
| Regulatory asset | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 2 | |
Net (gain)/loss | Net (gain)/loss | 67 | | | 17 | | | 22 | | | 4 | | | 1 | | | 2 | | Net (gain)/loss | 1 | | | — | | | 1 | | | — | | | — | | | (1) | |
Net periodic postretirement benefit cost (income) | | Net periodic postretirement benefit cost (income) | $ | (3) | | | $ | (4) | | | $ | (1) | | | $ | — | | | $ | 1 | | | $ | — | |
| Nine Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | |
Pension Plans | | Pension Plans |
Service cost | | Service cost | $ | 326 | | | $ | 77 | | | $ | 84 | | | $ | 13 | | | $ | 7 | | | $ | 28 | |
Interest cost | | Interest cost | 260 | | | 61 | | | 78 | | | 12 | | | 4 | | | 18 | |
Expected return on plan assets | | Expected return on plan assets | (893) | | | (215) | | | (282) | | | (41) | | | (11) | | | (64) | |
Amortization: | | Amortization: | |
Prior service costs | | Prior service costs | — | | | — | | | 1 | | | — | | | — | | | (2) | |
Regulatory asset | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 11 | |
Net loss | | Net loss | 235 | | | 62 | | | 75 | | | 11 | | | 3 | | | 9 | |
Net periodic pension cost (income) | Net periodic pension cost (income) | $ | (5) | | | $ | — | | | $ | (8) | | | $ | (1) | | | $ | — | | | $ | 1 | | Net periodic pension cost (income) | $ | (72) | | | $ | (15) | | | $ | (44) | | | $ | (5) | | | $ | 3 | | | $ | — | |
| Postretirement Benefits | Postretirement Benefits | | Postretirement Benefits |
Service cost | Service cost | $ | 6 | | | $ | 1 | | | $ | 2 | | | $ | (1) | | | $ | 1 | | | $ | — | | Service cost | $ | 18 | | | $ | 5 | | | $ | 5 | | | $ | 1 | | | $ | 1 | | | $ | 1 | |
Interest cost | Interest cost | 13 | | | 4 | | | 5 | | | 1 | | | — | | | 2 | | Interest cost | 26 | | | 6 | | | 9 | | | 1 | | | — | | | 3 | |
Expected return on plan assets | Expected return on plan assets | (18) | | | (7) | | | (7) | | | — | | | — | | | (2) | | Expected return on plan assets | (57) | | | (22) | | | (20) | | | (2) | | | — | | | (6) | |
Amortization: | Amortization: | | Amortization: | |
Prior service costs | Prior service costs | — | | | — | | | (1) | | | — | | | — | | | — | | Prior service costs | (1) | | | — | | | — | | | — | | | — | | | — | |
Regulatory asset | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 2 | | Regulatory asset | — | | | — | | | — | | | — | | | — | | | 5 | |
Net (gain)/loss | Net (gain)/loss | 1 | | | — | | | 1 | | | — | | | — | | | (1) | | Net (gain)/loss | 3 | | | — | | | 2 | | | — | | | — | | | (2) | |
Net periodic postretirement benefit cost (income) | Net periodic postretirement benefit cost (income) | $ | 2 | | | $ | (2) | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 1 | | Net periodic postretirement benefit cost (income) | $ | (11) | | | $ | (11) | | | $ | (4) | | | $ | — | | | $ | 1 | | | $ | 1 | |
| Nine Months Ended September 30, 2020 | | |
Pension Plans | |
Service cost | $ | 282 | | | $ | 67 | | | $ | 72 | | | $ | 11 | | | $ | 6 | | | $ | 24 | | |
Interest cost | 324 | | | 75 | | | 100 | | | 15 | | | 4 | | | 23 | | |
Expected return on plan assets | (824) | | | (198) | | | (261) | | | (38) | | | (10) | | | (59) | | |
Amortization: | | |
Prior service costs | 1 | | | 1 | | | 1 | | | — | | | — | | | (2) | | |
Regulatory asset | — | | | — | | | — | | | — | | | — | | | 12 | | |
Net (gain)/loss | 201 | | | 53 | | | 65 | | | 10 | | | 2 | | | 7 | | |
Net periodic pension cost (income) | $ | (16) | | | $ | (2) | | | $ | (23) | | | $ | (2) | | | $ | 2 | | | $ | 5 | | |
| Postretirement Benefits | |
Service cost | $ | 17 | | | $ | 4 | | | $ | 5 | | | $ | — | | | $ | 1 | | | $ | 1 | | |
Interest cost | 40 | | | 10 | | | 15 | | | 2 | | | — | | | 5 | | |
Expected return on plan assets | (54) | | | (21) | | | (20) | | | (1) | | | — | | | (5) | | |
Amortization: | | |
Prior service costs | (1) | | | — | | | (1) | | | — | | | — | | | — | | |
Regulatory asset | — | | | — | | | — | | | — | | | — | | | 5 | | |
Net (gain)/loss | 2 | | | — | | | 2 | | | — | | | — | | | (2) | | |
Net periodic postretirement benefit cost (income) | $ | 4 | | | $ | (7) | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 4 | | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(I) FAIR VALUE MEASUREMENTS
At September 30, 2021,2022, 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: | |
At September 30, 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 | |
At September 30, 2022 | | At September 30, 2022 | 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 Company | Southern Company | | Southern Company | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives(a) | Energy-related derivatives(a) | $ | 75 | | | $ | 425 | | | $ | — | | | $ | — | | | $ | 500 | | Energy-related derivatives(a) | $ | 49 | | | $ | 454 | | | $ | — | | | $ | — | | | $ | 503 | |
Interest rate derivatives | — | | | 25 | | | — | | | — | | | 25 | | |
Foreign currency derivatives | — | | | 20 | | | — | | | — | | | 20 | | |
| Investments in trusts:(b)(c) | Investments in trusts:(b)(c) | | Investments in trusts:(b)(c) | |
Domestic equity | Domestic equity | 738 | | | 237 | | | — | | | — | | | 975 | | Domestic equity | 610 | | | 161 | | | — | | | — | | | 771 | |
Foreign equity | Foreign equity | 167 | | | 183 | | | — | | | — | | | 350 | | Foreign equity | 111 | | | 129 | | | — | | | — | | | 240 | |
U.S. Treasury and government agency securities | U.S. Treasury and government agency securities | — | | | 352 | | | — | | | — | | | 352 | | U.S. Treasury and government agency securities | — | | | 265 | | | — | | | — | | | 265 | |
Municipal bonds | Municipal bonds | — | | | 48 | | | — | | | — | | | 48 | | Municipal bonds | — | | | 52 | | | — | | | — | | | 52 | |
Pooled funds – fixed income | Pooled funds – fixed income | — | | | 14 | | | — | | | — | | | 14 | | Pooled funds – fixed income | — | | | 7 | | | — | | | — | | | 7 | |
Corporate bonds | Corporate bonds | 2 | | | 472 | | | — | | | — | | | 474 | | Corporate bonds | — | | | 438 | | | — | | | — | | | 438 | |
Mortgage and asset backed securities | Mortgage and asset backed securities | — | | | 92 | | | — | | | — | | | 92 | | Mortgage and asset backed securities | — | | | 87 | | | — | | | — | | | 87 | |
Private equity | Private equity | — | | | — | | | — | | | 123 | | | 123 | | Private equity | — | | | — | | | — | | | 156 | | | 156 | |
Cash and cash equivalents | Cash and cash equivalents | 5 | | | — | | | — | | | — | | | 5 | | Cash and cash equivalents | 4 | | | — | | | — | | | — | | | 4 | |
Other | Other | 29 | | | 13 | | | — | | | — | | | 42 | | Other | 17 | | | 13 | | | — | | | — | | | 30 | |
Cash equivalents | Cash equivalents | 1,498 | | | 9 | | | — | | | — | | | 1,507 | | Cash equivalents | 1,402 | | | 18 | | | — | | | — | | | 1,420 | |
Other investments | Other investments | 9 | | | 26 | | | — | | | — | | | 35 | | Other investments | 9 | | | 26 | | | — | | | — | | | 35 | |
Total | Total | $ | 2,523 | | | $ | 1,916 | | | $ | — | | | $ | 123 | | | $ | 4,562 | | Total | $ | 2,202 | | | $ | 1,650 | | | $ | — | | | $ | 156 | | | $ | 4,008 | |
Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives(a) | Energy-related derivatives(a) | $ | 27 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | 44 | | Energy-related derivatives(a) | $ | 20 | | | $ | 141 | | | $ | — | | | $ | — | | | $ | 161 | |
Interest rate derivatives | Interest rate derivatives | — | | | 16 | | | — | | | — | | | 16 | | Interest rate derivatives | — | | | 311 | | | — | | | — | | | 311 | |
Foreign currency derivatives | Foreign currency derivatives | — | | | 43 | | | — | | | — | | | 43 | | Foreign currency derivatives | — | | | 323 | | | — | | | — | | | 323 | |
Contingent consideration | Contingent consideration | — | | | — | | | 16 | | | — | | | 16 | | Contingent consideration | — | | | — | | | 14 | | | — | | | 14 | |
Other | Other | — | | | 13 | | | — | | | — | | | 13 | | Other | — | | | 13 | | | — | | | — | | | 13 | |
Total | Total | $ | 27 | | | $ | 89 | | | $ | 16 | | | $ | — | | | $ | 132 | | Total | $ | 20 | | | $ | 788 | | | $ | 14 | | | $ | — | | | $ | 822 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Fair Value Measurements Using: | | | Fair Value Measurements Using: | |
At September 30, 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 | |
At September 30, 2022 | | At September 30, 2022 | 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 Power | Alabama Power | | Alabama Power | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 104 | | | $ | — | | | $ | — | | | $ | 104 | | Energy-related derivatives | $ | — | | | $ | 147 | | | $ | — | | | $ | — | | | $ | 147 | |
Interest rate derivatives | — | | | 5 | | | — | | | — | | | 5 | | |
| Nuclear decommissioning trusts:(b) | Nuclear decommissioning trusts:(b) | | Nuclear decommissioning trusts:(b) | |
Domestic equity | Domestic equity | 444 | | | 227 | | | — | | | — | | | 671 | | Domestic equity | 370 | | | 152 | | | — | | | — | | | 522 | |
Foreign equity | Foreign equity | 167 | | | — | | | — | | | — | | | 167 | | Foreign equity | 111 | | | — | | | — | | | — | | | 111 | |
U.S. Treasury and government agency securities | U.S. Treasury and government agency securities | — | | | 22 | | | — | | | — | | | 22 | | U.S. Treasury and government agency securities | — | | | 15 | | | — | | | — | | | 15 | |
Municipal bonds | Municipal bonds | — | | | 1 | | | — | | | — | | | 1 | | Municipal bonds | — | | | 2 | | | — | | | — | | | 2 | |
Corporate bonds | Corporate bonds | 2 | | | 243 | | | — | | | — | | | 245 | | Corporate bonds | — | | | 230 | | | — | | | — | | | 230 | |
Mortgage and asset backed securities | Mortgage and asset backed securities | — | | | 22 | | | — | | | — | | | 22 | | Mortgage and asset backed securities | — | | | 20 | | | — | | | — | | | 20 | |
Private equity | Private equity | — | | | — | | | — | | | 123 | | | 123 | | Private equity | — | | | — | | | — | | | 156 | | | 156 | |
Other | Other | 6 | | | — | | | — | | | — | | | 6 | | Other | 10 | | | — | | | — | | | — | | | 10 | |
Cash equivalents | Cash equivalents | 443 | | | 9 | | | — | | | — | | | 452 | | Cash equivalents | 1,225 | | | 18 | | | — | | | — | | | 1,243 | |
Other investments | Other investments | — | | | 26 | | | — | | | — | | | 26 | | Other investments | — | | | 26 | | | — | | | — | | | 26 | |
Total | Total | $ | 1,062 | | | $ | 659 | | | $ | — | | | $ | 123 | | | $ | 1,844 | | Total | $ | 1,716 | | | $ | 610 | | | $ | — | | | $ | 156 | | | $ | 2,482 | |
Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 4 | | | $ | — | | | $ | — | | | $ | 4 | | Energy-related derivatives | $ | — | | | $ | 35 | | | $ | — | | | $ | — | | | $ | 35 | |
| | Georgia Power | Georgia Power | | Georgia Power | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 166 | | | $ | — | | | $ | — | | | $ | 166 | | Energy-related derivatives | $ | — | | | $ | 145 | | | $ | — | | | $ | — | | | $ | 145 | |
| Nuclear decommissioning trusts:(b)(c) | Nuclear decommissioning trusts:(b)(c) | | Nuclear decommissioning trusts:(b)(c) | |
Domestic equity | Domestic equity | 294 | | | 1 | | | — | | | — | | | 295 | | Domestic equity | 240 | | | 1 | | | — | | | — | | | 241 | |
Foreign equity | Foreign equity | — | | | 180 | | | — | | | — | | | 180 | | Foreign equity | — | | | 128 | | | — | | | — | | | 128 | |
U.S. Treasury and government agency securities | U.S. Treasury and government agency securities | — | | | 330 | | | — | | | — | | | 330 | | U.S. Treasury and government agency securities | — | | | 250 | | | — | | | — | | | 250 | |
Municipal bonds | Municipal bonds | — | | | 47 | | | — | | | — | | | 47 | | Municipal bonds | — | | | 50 | | | — | | | — | | | 50 | |
Corporate bonds | Corporate bonds | — | | | 229 | | | — | | | — | | | 229 | | Corporate bonds | — | | | 208 | | | — | | | — | | | 208 | |
Mortgage and asset backed securities | Mortgage and asset backed securities | — | | | 70 | | | — | | | — | | | 70 | | Mortgage and asset backed securities | — | | | 67 | | | — | | | — | | | 67 | |
Other | Other | 23 | | | 13 | | | — | | | — | | | 36 | | Other | 7 | | | 13 | | | — | | | — | | | 20 | |
Cash equivalents | 240 | | | — | | | — | | | — | | | 240 | | |
| Total | Total | $ | 557 | | | $ | 1,036 | | | $ | — | | | $ | — | | | $ | 1,593 | | Total | $ | 247 | | | $ | 862 | | | $ | — | | | $ | — | | | $ | 1,109 | |
Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 4 | | | $ | — | | | $ | — | | | $ | 4 | | Energy-related derivatives | $ | — | | | $ | 51 | | | $ | — | | | $ | — | | | $ | 51 | |
| |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | Fair Value Measurements Using: | | | Fair Value Measurements Using: | |
At September 30, 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 | |
At September 30, 2022 | | At September 30, 2022 | 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 Power | Mississippi Power | | Mississippi Power | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 105 | | | $ | — | | | $ | — | | | $ | 105 | | Energy-related derivatives | $ | — | | | $ | 133 | | | $ | — | | | $ | — | | | $ | 133 | |
| Cash equivalents | Cash equivalents | 121 | | | — | | | — | | | — | | | 121 | | Cash equivalents | 30 | | | — | | | — | | | — | | | 30 | |
Total | Total | $ | 121 | | | $ | 105 | | | $ | — | | | $ | — | | | $ | 226 | | Total | $ | 30 | | | $ | 133 | | | $ | — | | | $ | — | | | $ | 163 | |
Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 3 | | Energy-related derivatives | $ | — | | | $ | 24 | | | $ | — | | | $ | — | | | $ | 24 | |
| | Southern Power | Southern Power | | Southern Power | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 10 | | Energy-related derivatives | $ | — | | | $ | 7 | | | $ | — | | | $ | — | | | $ | 7 | |
Foreign currency derivatives | — | | | 20 | | | — | | | — | | | 20 | | |
| Total | $ | — | | | $ | 30 | | | $ | — | | | $ | — | | | $ | 30 | | |
| Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives | Energy-related derivatives | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 2 | | Energy-related derivatives | $ | — | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 13 | |
Foreign currency derivatives | Foreign currency derivatives | — | | | 11 | | | — | | | — | | | 11 | | Foreign currency derivatives | — | | | 80 | | | — | | | — | | | 80 | |
Contingent consideration | Contingent consideration | — | | | — | | | 16 | | | — | | | 16 | | Contingent consideration | — | | | — | | | 14 | | | — | | | 14 | |
Other | Other | — | | | 13 | | | — | | | — | | | 13 | | Other | — | | | 13 | | | — | | | — | | | 13 | |
Total | Total | $ | — | | | $ | 26 | | | $ | 16 | | | $ | — | | | $ | 42 | | Total | $ | — | | | $ | 106 | | | $ | 14 | | | $ | — | | | $ | 120 | |
| Southern Company Gas | Southern Company Gas | | Southern Company Gas | |
Assets: | Assets: | | Assets: | |
Energy-related derivatives(a) | Energy-related derivatives(a) | $ | 75 | | | $ | 40 | | | $ | — | | | $ | — | | | $ | 115 | | Energy-related derivatives(a) | $ | 49 | | | $ | 22 | | | $ | — | | | $ | — | | | $ | 71 | |
Interest rate derivatives | — | | | 6 | | | — | | | — | | | 6 | | |
| Non-qualified deferred compensation trusts: | Non-qualified deferred compensation trusts: | | Non-qualified deferred compensation trusts: | |
Domestic equity | Domestic equity | — | | | 9 | | | — | | | — | | | 9 | | Domestic equity | — | | | 8 | | | — | | | — | | | 8 | |
Foreign equity | Foreign equity | — | | | 3 | | | — | | | — | | | 3 | | Foreign equity | — | | | 1 | | | — | | | — | | | 1 | |
Pooled funds – fixed income | Pooled funds – fixed income | — | | | 14 | | | — | | | — | | | 14 | | Pooled funds – fixed income | — | | | 7 | | | — | | | — | | | 7 | |
Cash equivalents | Cash equivalents | 5 | | | — | | | — | | | — | | | 5 | | Cash equivalents | 4 | | | — | | | — | | | — | | | 4 | |
| Total | Total | $ | 80 | | | $ | 72 | | | $ | — | | | $ | — | | | $ | 152 | | Total | $ | 53 | | | $ | 38 | | | $ | — | | | $ | — | | | $ | 91 | |
Liabilities: | Liabilities: | | Liabilities: | |
Energy-related derivatives(a) | Energy-related derivatives(a) | $ | 27 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | 31 | | Energy-related derivatives(a) | $ | 20 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | 37 | |
Interest rate derivatives | Interest rate derivatives | — | | | 4 | | | — | | | — | | | 4 | | Interest rate derivatives | — | | | 87 | | | — | | | — | | | 87 | |
| Total | Total | $ | 27 | | 0 | $ | 8 | | 0 | $ | — | | | $ | — | | 0 | $ | 35 | | Total | $ | 20 | | | $ | 104 | | | $ | — | | | $ | — | | | $ | 124 | |
(a)Excludes cash collateral of $(20)$15 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. At September 30, 2021,2022, approximately $57$46 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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
See Note (K) under "Assets Held for Sale" for information regarding assets recorded at fair value on a nonrecurring basis.
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, 20212022 and 2020.2021. 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, 2021 | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | Fair value increases (decreases) | Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 |
| | (in millions) | | (in millions) |
Southern Company | Southern Company | $ | 9 | | $ | 108 | | $ | 173 | | $ | 85 | | Southern Company | $ | (106) | | $ | 9 | | $ | (486) | | $ | 173 | |
Alabama Power | Alabama Power | 15 | | 66 | | 133 | | 24 | | Alabama Power | (53) | | 15 | | (245) | | 133 | |
Georgia Power | Georgia Power | (6) | | 42 | | 40 | | 61 | | Georgia Power | (53) | | (6) | | (241) | | 40 | |
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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Power has contingent payment obligations related to certain acquisitions whereby it 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 obligations are categorized as Level 3 under Fair Value Measurements as
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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 contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.
Southern Power also has payment obligations through 2040 whereby it must reimburse the transmission owners for interconnection facilities and network upgrades constructed to support connection of a Southern Power generating facility to the transmission system. The obligations are categorized as Level 2 under Fair Value Measurements as the fair value is determined using observable inputs for the contracted amounts and reimbursement period, as well as a discount rate. The fair value of the obligations reflects the net present value of expected payments.
"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.
At September 30, 2021,2022, 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 $123$156 million and unfunded commitments related to the private equity investments totaled $72$84 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.
At September 30, 2021,2022, other financial instruments for which the carrying amount did not equal fair value were as follows:
| | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas(*) | | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas(*) |
| | (in billions) | | (in billions) |
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 amount | Carrying amount | $ | 51.9 | | $ | 9.1 | | $ | 13.6 | | $ | 1.6 | | $ | 4.0 | | $ | 6.8 | | Carrying amount | $ | 53.4 | | $ | 10.8 | | $ | 14.5 | | $ | 1.5 | | $ | 2.9 | | $ | 7.4 | |
Fair value | Fair value | 57.6 | | 10.4 | | 15.2 | | 1.7 | | 4.4 | | 7.8 | | Fair value | 46.4 | | 9.3 | | 12.6 | | 1.2 | | 2.7 | | 6.3 | |
(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.
The 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
Prior to July 1, 2021, Southern Company Gas had Level 3 physical natural gas forward contracts related to Sequent. See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent. 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
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
the unobservable components. The following table provides a reconciliation of Southern Company Gas' Level 3 contracts during the three and nine months ended September 30, 2021.
| | | | | | | | |
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 |
| (in millions) |
Beginning balance | $ | 18 | | $ | 28 | |
| | |
| | |
Instruments realized or otherwise settled during period | — | | (6) | |
Changes in fair value | — | | (4) | |
Sale of Sequent | (18) | | (18) | |
Ending balance | $ | — | | $ | — | |
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 prior to the sale of Sequent.
(J) DERIVATIVES
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company GasThe Registrants 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. ThroughPrior to the sale of Sequent on July 1, 2021, Southern Company Gas' wholesale gas operations used various contracts in its commercial activities that generally met 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. See Note (K)15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information regarding Southern Company Gas'the sale of Sequent.
Energy-Related Derivatives
The traditional electric operating companies, Southern Power, and Southern Company GasSubsidiary Registrants 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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Energy-related derivative contracts are accounted for under one of three methods:
•Regulatory Hedges – Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through an approved cost recovery mechanism.
•Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
•Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.
Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric and natural gas industries. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered.
At September 30, 2021,2022, 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(*) | 336 | | 2030 | | 2024 | Southern Company(*) | 399 | | 2030 | | 2025 |
Alabama Power | Alabama Power | 75 | | 2024 | | — | Alabama Power | 105 | | 2026 | | — |
Georgia Power | Georgia Power | 99 | | 2024 | | — | Georgia Power | 116 | | 2025 | | — |
Mississippi Power | Mississippi Power | 79 | | 2025 | | — | Mississippi Power | 82 | | 2027 | | — |
Southern Power | Southern Power | 6 | | 2030 | | 2022 | Southern Power | 11 | | 2030 | | 2023 |
Southern Company Gas(*) | Southern Company Gas(*) | 77 | | 2024 | | 2024 | Southern Company Gas(*) | 85 | | 2025 | | 2025 |
(*)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 91.495.7 million mmBtu and short natural gas positions of 14.310.6 million mmBtu at September 30, 2021,2022, which is also included in Southern Company's total volume. See Note (K) under "Southern Company Gas" for information regarding Southern Company Gas' sale of Sequent.
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 4115 million mmBtu for Southern Company, which includes 104 million mmBtu for Alabama Power, 135 million mmBtu for Georgia Power, 52 million mmBtu for Mississippi Power, and 134 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, 20222023 are $17 million for Southern Company, $26 million for Southern Company Gas, and immaterial for allthe other Registrants.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Interest Rate Derivatives
Southern Company and certain subsidiaries may enter into interest rate derivatives to hedge exposure to changes in interest rates. Derivatives related to existing variable rate securities or 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 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, 2021,2022, 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, 2021 | | Notional Amount | | Interest Rate Received | Weighted Average Interest Rate Paid | Hedge Maturity Date | | Fair Value Gain (Loss) at September 30, 2022 |
| | (in millions) | | | | (in millions) | | (in millions) | | | | (in millions) |
Cash Flow Hedges of Forecasted Debt | | |
Alabama Power | $ | 150 | | | — | 1.91% | August 2051 | | $ | 5 | | |
| | | Cash Flow Hedges of Existing Debt | | Cash Flow Hedges of Existing Debt | |
Southern Company parent | | Southern Company parent | $ | 175 | | | — | 4.25% | September 2025 | | $ | — | |
Southern Company parent | | Southern Company parent | 175 | | | — | 3.83% | August 2032 | | — | |
Fair Value Hedges of Existing Debt | Fair Value Hedges of Existing Debt | | Fair Value Hedges of Existing Debt | |
Southern Company parent | Southern Company parent | 400 | | | 1.75% | 1-month LIBOR + 0.68% | March 2028 | | (2) | | Southern Company parent | 400 | | | 1.75% | 1-month LIBOR + 0.68% | March 2028 | | (57) | |
Southern Company parent | Southern Company parent | 1,000 | | | 3.70% | 1-month LIBOR + 2.36% | April 2030 | | 3 | | Southern Company parent | 1,000 | | | 3.70% | 1-month LIBOR + 2.36% | April 2030 | | (167) | |
Southern Company Gas | Southern Company Gas | 500 | | | 1.75% | 1-month LIBOR + 0.38% | January 2031 | | 2 | | Southern Company Gas | 500 | | | 1.75% | 1-month LIBOR + 0.38% | January 2031 | | (87) | |
Southern Company | Southern Company | $ | 2,050 | | | $ | 8 | | Southern Company | $ | 2,250 | | | $ | (311) | |
For cash flow hedgehedges of 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, 2022 total $(22)2023 are $(17) million for Southern Company and are immaterial for allthe other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 20512052 for the Southern Company, parent entity, 2051 for Alabama Power, 2044 forand Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
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. 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, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Southern Company has elected to exclude the cross-currency basis spread from the assessment of effectiveness in the fair value hedges of its foreign currency risk and record any difference between the change in the fair value of the excluded components and the amounts recognized in earnings as a component of OCI.
At September 30, 2021,2022, the following foreign currency derivatives were outstanding:
| | | Pay Notional | Pay Rate | Receive Notional | Receive Rate | Hedge Maturity Date | Fair Value Gain (Loss) at September 30, 2021 | | Pay Notional | Pay Rate | Receive Notional | Receive Rate | Hedge Maturity Date | Fair Value Gain (Loss) at September 30, 2022 |
| | (in millions) | | (in millions) | | | (in millions) | | (in millions) | | (in millions) | | | (in millions) |
Cash Flow Hedges of Existing Debt | | Cash Flow Hedges of Existing Debt | |
Southern Power | | Southern Power | $ | 564 | | 3.78% | € | 500 | | 1.85% | June 2026 | $ | (80) | |
| Fair Value Hedges of Existing Debt | Fair Value Hedges of Existing Debt | | Fair Value Hedges of Existing Debt | |
| Southern Company parent | Southern Company parent | $ | 1,476 | | 3.39% | € | 1,250 | | 1.88% | September 2027 | $ | (32) | | Southern Company parent | 1,476 | | 3.39% | 1,250 | | 1.88% | September 2027 | (243) | |
| Cash Flow Hedges of Existing Debt | | |
Southern Power | $ | 677 | | 2.95% | € | 600 | | 1.00% | June 2022 | $ | 9 | | |
Southern Power | 564 | | 3.78% | 500 | | 1.85% | June 2026 | — | | |
Southern Power total | $ | 1,241 | | | € | 1,100 | | | $ | 9 | | |
| Southern Company | Southern Company | $ | 2,717 | | | € | 2,350 | | | $ | (23) | | Southern Company | $ | 2,040 | | | € | 1,750 | | | $ | (323) | |
The estimated pre-tax gain (loss) related to Southern Power'sFor cash flow hedges of foreign currency derivatives, accounted for as cash flow hedgesthe estimated pre-tax losses expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2022 is $(4) million.2023 are $12 million for Southern Power.
Derivative Financial Statement Presentation and Amounts
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company GasThe Registrants 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 sheetsheets are presented net to the extent that there are netting arrangements or similar agreements with the counterparties.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:
| | | At September 30, 2021 | At December 31, 2020 | | At September 30, 2022 | At December 31, 2021 |
Derivative Category and Balance Sheet Location | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities |
| | (in millions) | | (in millions) |
Southern Company | Southern Company | | Southern Company | |
Derivatives designated as hedging instruments for regulatory purposes | | |
Energy-related derivatives: | | |
Energy-related derivatives designated as hedging instruments for regulatory purposes | | Energy-related derivatives designated as hedging instruments for regulatory purposes | |
| Assets from risk management activities/Other current liabilities | Assets from risk management activities/Other current liabilities | $ | 308 | | $ | 9 | | $ | 24 | | $ | 11 | | Assets from risk management activities/Other current liabilities | $ | 299 | | $ | 70 | | $ | 129 | | $ | 30 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 118 | | 6 | | 18 | | 19 | | Other deferred charges and assets/Other deferred credits and liabilities | 150 | | 59 | | 72 | | 6 | |
| Total derivatives designated as hedging instruments for regulatory purposes | Total derivatives designated as hedging instruments for regulatory purposes | $ | 426 | | $ | 15 | | $ | 42 | | $ | 30 | | Total derivatives designated as hedging instruments for regulatory purposes | 449 | | 129 | | 201 | | 36 | |
Derivatives designated as hedging instruments in cash flow and fair value hedges | Derivatives designated as hedging instruments in cash flow and fair value hedges | | Derivatives designated as hedging instruments in cash flow and fair value hedges | |
Energy-related derivatives: | Energy-related derivatives: | | Energy-related derivatives: | |
Assets from risk management activities/Other current liabilities | Assets from risk management activities/Other current liabilities | $ | 41 | | $ | — | | $ | 3 | | $ | 5 | | Assets from risk management activities/Other current liabilities | 27 | | 13 | | 7 | | 5 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 4 | | — | | — | | — | | Other deferred charges and assets/Other deferred credits and liabilities | 7 | | 1 | | 1 | | — | |
Interest rate derivatives: | Interest rate derivatives: | | Interest rate derivatives: | |
Assets from risk management activities/Other current liabilities | Assets from risk management activities/Other current liabilities | 25 | | — | | 20 | | — | | Assets from risk management activities/Other current liabilities | — | | 44 | | 19 | | — | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | — | | 16 | | — | | — | | Other deferred charges and assets/Other deferred credits and liabilities | — | | 266 | | — | | 29 | |
Foreign currency derivatives: | Foreign currency derivatives: | | Foreign currency derivatives: | |
Assets from risk management activities/Other current liabilities | Assets from risk management activities/Other current liabilities | 9 | | 33 | | — | | 23 | | Assets from risk management activities/Other current liabilities | — | | 37 | | — | | 39 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 11 | | 10 | | 87 | | — | | Other deferred charges and assets/Other deferred credits and liabilities | — | | 285 | | — | | 40 | |
Total derivatives designated as hedging instruments in cash flow and fair value hedges | Total derivatives designated as hedging instruments in cash flow and fair value hedges | $ | 90 | | $ | 59 | | $ | 110 | | $ | 28 | | Total derivatives designated as hedging instruments in cash flow and fair value hedges | 34 | | 646 | | 27 | | 113 | |
Derivatives not designated as hedging instruments | | |
Energy-related derivatives: | | |
Energy-related derivatives not designated as hedging instruments | | Energy-related derivatives not designated as hedging instruments | |
| Assets from risk management activities/Other current liabilities | Assets from risk management activities/Other current liabilities | $ | 29 | | $ | 29 | | $ | 388 | | $ | 331 | | Assets from risk management activities/Other current liabilities | 19 | | 18 | | 9 | | 4 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 1 | | — | | 270 | | 232 | | Other deferred charges and assets/Other deferred credits and liabilities | 2 | | 1 | | 1 | | — | |
| Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | $ | 30 | | $ | 29 | | $ | 658 | | $ | 563 | | Total derivatives not designated as hedging instruments | 21 | | 19 | | 10 | | 4 | |
Gross amounts recognized | Gross amounts recognized | $ | 546 | | $ | 103 | | $ | 810 | | $ | 621 | | Gross amounts recognized | 504 | | 794 | | 238 | | 153 | |
Gross amounts offset(a) | Gross amounts offset(a) | (57) | | (37) | | (529) | | (557) | | Gross amounts offset(a) | (113) | | (128) | | (25) | | (28) | |
Net amounts recognized in the Balance Sheets(b) | Net amounts recognized in the Balance Sheets(b) | $ | 489 | | $ | 66 | | $ | 281 | | $ | 64 | | Net amounts recognized in the Balance Sheets(b) | $ | 391 | | $ | 666 | | $ | 213 | | $ | 125 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | At September 30, 2021 | At December 31, 2020 | | At September 30, 2022 | At December 31, 2021 |
Derivative Category and Balance Sheet Location | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities |
| | (in millions) | | (in millions) |
Alabama Power | Alabama Power | | Alabama Power | |
Derivatives designated as hedging instruments for regulatory purposes | | |
Energy-related derivatives: | | |
Other current assets/Other current liabilities | $ | 67 | | $ | 2 | | $ | 7 | | $ | 2 | | |
Other deferred charges and assets/Other deferred credits and liabilities | 37 | | 2 | | 5 | | 5 | | |
Total derivatives designated as hedging instruments for regulatory purposes | $ | 104 | | $ | 4 | | $ | 12 | | $ | 7 | | |
Derivatives designated as hedging instruments in cash flow and fair value hedges | | |
Interest rate derivatives: | | |
Other current assets/Other current liabilities | $ | 5 | | $ | — | | $ | — | | $ | — | | |
Energy-related derivatives designated as hedging instruments for regulatory purposes | | Energy-related derivatives designated as hedging instruments for regulatory purposes | |
| Gross amounts recognized | $ | 109 | | $ | 4 | | $ | 12 | | $ | 7 | | |
Gross amounts offset | (3) | | (3) | | (7) | | (7) | | |
Net amounts recognized in the Balance Sheets | $ | 106 | | $ | 1 | | $ | 5 | | $ | — | | |
| Georgia Power | | |
Derivatives designated as hedging instruments for regulatory purposes | | |
Energy-related derivatives: | | |
Other current assets/Other current liabilities | Other current assets/Other current liabilities | $ | 124 | | $ | 2 | | $ | 7 | | $ | 5 | | Other current assets/Other current liabilities | $ | 90 | | $ | 12 | | $ | 30 | | $ | 9 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 42 | | 2 | | 8 | | 8 | | Other deferred charges and assets/Other deferred credits and liabilities | 57 | | 23 | | 25 | | 2 | |
Total derivatives designated as hedging instruments for regulatory purposes | Total derivatives designated as hedging instruments for regulatory purposes | $ | 166 | | $ | 4 | | $ | 15 | | $ | 13 | | Total derivatives designated as hedging instruments for regulatory purposes | 147 | | 35 | | 55 | | 11 | |
| Gross amounts recognized | $ | 166 | | $ | 4 | | $ | 15 | | $ | 13 | | |
| Gross amounts offset | Gross amounts offset | (3) | | (3) | | (12) | | (12) | | Gross amounts offset | (31) | | (31) | | (5) | | (5) | |
Net amounts recognized in the Balance Sheets | Net amounts recognized in the Balance Sheets | $ | 163 | | $ | 1 | | $ | 3 | | $ | 1 | | Net amounts recognized in the Balance Sheets | $ | 116 | | $ | 4 | | $ | 50 | | $ | 6 | |
| Mississippi Power | | |
Derivatives designated as hedging instruments for regulatory purposes | | |
Energy-related derivatives: | | |
Other current assets/Other current liabilities | $ | 66 | | $ | 1 | | $ | 4 | | $ | 3 | | |
Georgia Power | | Georgia Power | |
Energy-related derivatives designated as hedging instruments for regulatory purposes | | Energy-related derivatives designated as hedging instruments for regulatory purposes | |
| Assets from risk management activities/Other current liabilities | | Assets from risk management activities/Other current liabilities | $ | 107 | | $ | 28 | | $ | 54 | | $ | 6 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 39 | | 2 | | 5 | | 6 | | Other deferred charges and assets/Other deferred credits and liabilities | 38 | | 23 | | 21 | | 2 | |
Total derivatives designated as hedging instruments for regulatory purposes | Total derivatives designated as hedging instruments for regulatory purposes | $ | 105 | | $ | 3 | | $ | 9 | | $ | 9 | | Total derivatives designated as hedging instruments for regulatory purposes | 145 | | 51 | | 75 | | 8 | |
| Energy-related derivatives not designated as hedging instruments | | Energy-related derivatives not designated as hedging instruments | |
| Other current assets/Other current liabilities | | Other current assets/Other current liabilities | 1 | | — | | — | | — | |
| Gross amounts recognized | Gross amounts recognized | $ | 105 | | $ | 3 | | $ | 9 | | $ | 9 | | Gross amounts recognized | 146 | | 51 | | 75 | | 8 | |
Gross amounts offset | Gross amounts offset | (2) | | (2) | | (7) | | (7) | | Gross amounts offset | (41) | | (41) | | (8) | | (8) | |
Net amounts recognized in the Balance Sheets | Net amounts recognized in the Balance Sheets | $ | 103 | | $ | 1 | | $ | 2 | | $ | 2 | | Net amounts recognized in the Balance Sheets | $ | 105 | | $ | 10 | | $ | 67 | | $ | — | |
| Mississippi Power | | Mississippi Power | |
Energy-related derivatives designated as hedging instruments for regulatory purposes | | Energy-related derivatives designated as hedging instruments for regulatory purposes | |
| Assets from risk management activities/Other current liabilities | | Assets from risk management activities/Other current liabilities | $ | 78 | | $ | 12 | | $ | 30 | | $ | 3 | |
Other deferred charges and assets/Other deferred credits and liabilities | | Other deferred charges and assets/Other deferred credits and liabilities | 55 | | 12 | | 26 | | 2 | |
Total derivatives designated as hedging instruments for regulatory purposes | | Total derivatives designated as hedging instruments for regulatory purposes | 133 | | 24 | | 56 | | 5 | |
| Gross amounts offset | | Gross amounts offset | (20) | | (20) | | (4) | | (4) | |
Net amounts recognized in the Balance Sheets | | Net amounts recognized in the Balance Sheets | $ | 113 | | $ | 4 | | $ | 52 | | $ | 1 | |
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | At September 30, 2021 | At December 31, 2020 | | At September 30, 2022 | At December 31, 2021 |
Derivative Category and Balance Sheet Location | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities | Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities |
| | (in millions) | | (in millions) |
Southern Power | Southern Power | | Southern Power | |
Derivatives designated as hedging instruments in cash flow and fair value hedges | Derivatives designated as hedging instruments in cash flow and fair value hedges | | Derivatives designated as hedging instruments in cash flow and fair value hedges | |
Energy-related derivatives: | Energy-related derivatives: | | Energy-related derivatives: | |
Other current assets/Other current liabilities | Other current assets/Other current liabilities | $ | 8 | | $ | — | | $ | 2 | | $ | 2 | | Other current assets/Other current liabilities | $ | — | | $ | 10 | | $ | 2 | | $ | — | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 1 | | — | | — | | — | | Other deferred charges and assets/Other deferred credits and liabilities | 5 | | 1 | | 1 | | — | |
Foreign currency derivatives: | Foreign currency derivatives: | | Foreign currency derivatives: | |
Other current assets/Other current liabilities | Other current assets/Other current liabilities | 9 | | 11 | | — | | 23 | | Other current assets/Other current liabilities | — | | 12 | | — | | 16 | |
Other deferred charges and assets/Other deferred credits and liabilities | Other deferred charges and assets/Other deferred credits and liabilities | 11 | | — | | 87 | | — | | Other deferred charges and assets/Other deferred credits and liabilities | — | | 68 | | — | | — | |
Total derivatives designated as hedging instruments in cash flow and fair value hedges | Total derivatives designated as hedging instruments in cash flow and fair value hedges | $ | 29 | | $ | 11 | | $ | 89 | | $ | 25 | | Total derivatives designated as hedging instruments in cash flow and fair value hedges | 5 | | 91 | | 3 | | 16 | |
Derivatives not designated as hedging instruments | | |
Energy-related derivatives: | | |
Energy-related derivatives not designated as hedging instruments | | Energy-related derivatives not designated as hedging instruments | |
| Other current assets/Other current liabilities | Other current assets/Other current liabilities | $ | 1 | | $ | 2 | | $ | — | | $ | 1 | | Other current assets/Other current liabilities | 2 | | 2 | | 1 | | — | |
| Total derivatives not designated as hedging instruments | $ | 1 | | $ | 2 | | $ | — | | $ | 1 | | |
| Gross amounts recognized | Gross amounts recognized | $ | 30 | | $ | 13 | | $ | 89 | | $ | 26 | | Gross amounts recognized | 7 | | 93 | | 4 | | 16 | |
Gross amounts offset | Gross amounts offset | (1) | | (1) | | — | | — | | Gross amounts offset | (3) | | (3) | | — | | — | |
Net amounts recognized in the Balance Sheets | Net amounts recognized in the Balance Sheets | $ | 29 | | $ | 12 | | $ | 89 | | $ | 26 | | Net amounts recognized in the Balance Sheets | $ | 4 | | $ | 90 | | $ | 4 | | $ | 16 | |
| Southern Company Gas | | Southern Company Gas | |
Energy-related derivatives designated as hedging instruments for regulatory purposes | | Energy-related derivatives designated as hedging instruments for regulatory purposes | |
| Other current assets/Other current liabilities | | Other current assets/Other current liabilities | $ | 24 | | $ | 17 | | $ | 15 | | $ | 12 | |
| Derivatives designated as hedging instruments in cash flow and fair value hedges | | Derivatives designated as hedging instruments in cash flow and fair value hedges | |
Energy-related derivatives: | | Energy-related derivatives: | |
Other current assets/Other current liabilities | | Other current assets/Other current liabilities | 26 | | 3 | | 5 | | 5 | |
Other deferred charges and assets/Other deferred credits and liabilities | | Other deferred charges and assets/Other deferred credits and liabilities | 3 | | — | | — | | — | |
Interest rate derivatives: | | Interest rate derivatives: | |
Other current assets/Other current liabilities | | Other current assets/Other current liabilities | — | | 13 | | 6 | | — | |
Other deferred charges and assets/Other deferred credits and liabilities | | Other deferred charges and assets/Other deferred credits and liabilities | — | | 74 | | — | | 6 | |
Total derivatives designated as hedging instruments in cash flow and fair value hedges | | Total derivatives designated as hedging instruments in cash flow and fair value hedges | 29 | | 90 | | 11 | | 11 | |
Energy-related derivatives not designated as hedging instruments | | Energy-related derivatives not designated as hedging instruments | |
| Other current assets/Other current liabilities | | Other current assets/Other current liabilities | 16 | | 16 | | 8 | | 4 | |
Other deferred charges and assets/Other deferred credits and liabilities | | Other deferred charges and assets/Other deferred credits and liabilities | 2 | | 1 | | 1 | | — | |
| Total derivatives not designated as hedging instruments | | Total derivatives not designated as hedging instruments | 18 | | 17 | | 9 | | 4 | |
Gross amounts recognized | | Gross amounts recognized | 71 | | 124 | | 35 | | 27 | |
Gross amounts offset(a) | | Gross amounts offset(a) | (18) | | (33) | | (8) | | (11) | |
Net amounts recognized in the Balance Sheets(b) | | Net amounts recognized in the Balance Sheets(b) | $ | 53 | | $ | 91 | | $ | 27 | | $ | 16 | |
(a)Gross amounts offset includes cash collateral held on deposit in broker margin accounts of $15 million and $3 million at September 30, 2022 and December 31, 2021, respectively.
(b)Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for all periods presented.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | | | | | | | | | | | | |
| At September 30, 2021 | At December 31, 2020 |
Derivative Category and Balance Sheet Location | Assets | Liabilities | Assets | Liabilities |
| (in millions) | (in millions) |
Southern Company Gas | | | | |
Derivatives designated as hedging instruments for regulatory purposes | | | | |
Energy-related derivatives: | | | | |
Assets from risk management activities/Other current liabilities | $ | 51 | | $ | 4 | | $ | 6 | | $ | 1 | |
| | | | |
Total derivatives designated as hedging instruments for regulatory purposes | $ | 51 | | $ | 4 | | $ | 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 | $ | 33 | | $ | — | | $ | 1 | | $ | 3 | |
Other deferred charges and assets/Other deferred credits and liabilities | 3 | | — | | — | | — | |
Interest rate derivatives: | | | | |
Assets from risk management activities/Liabilities from risk management activities-current | 6 | | — | | — | | — | |
Other deferred charges and assets/Other deferred credits and liabilities | — | | 4 | | — | | — | |
Total derivatives designated as hedging instruments in cash flow and fair value hedges | $ | 42 | | $ | 4 | | $ | 1 | | $ | 3 | |
Derivatives not designated as hedging instruments | | | | |
Energy-related derivatives: | | | | |
Assets from risk management activities/Other current liabilities | $ | 28 | | $ | 27 | | $ | 388 | | $ | 330 | |
Other deferred charges and assets/Other deferred credits and liabilities | 1 | | — | | 270 | | 232 | |
| | | | |
Total derivatives not designated as hedging instruments | $ | 29 | | $ | 27 | | $ | 658 | | $ | 562 | |
Gross amounts recognized | $ | 122 | | $ | 35 | | $ | 665 | | $ | 566 | |
Gross amounts offset(a) | (48) | | (28) | | (503) | | (531) | |
Net amounts recognized in the Balance Sheets(b) | $ | 74 | | $ | 7 | | $ | 162 | | $ | 35 | |
(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $(20) million and $28 million at September 30, 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.
The traditional electric operating companies had no energy-relatedEnergy-related derivatives not designated as hedging instruments were immaterial for Alabama Power and Mississippi Power at September 30, 2021 or2022. There were no such instruments for the traditional electric operating companies at December 31, 2020.2021.
At September 30, 2022 and December 31, 2021, 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 Sheet |
Derivative Category and Balance Sheet Location | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Company Gas |
| (in millions) |
At September 30, 2022: | | | | | |
Energy-related derivatives: | | | | | |
Other regulatory assets, current | $ | (17) | | $ | (2) | | $ | (8) | | $ | (3) | | $ | (4) | |
Other regulatory assets, deferred | (6) | | (2) | | (3) | | (1) | | — | |
| | | | | |
| | | | | |
Other regulatory liabilities, current | 246 | | 80 | | 87 | | 69 | | 10 | |
Other regulatory liabilities, deferred | 98 | | 36 | | 18 | | 44 | | — | |
Total energy-related derivative gains (losses) | $ | 321 | | $ | 112 | | $ | 94 | | $ | 109 | | $ | 6 | |
| | | | | |
At December 31, 2021: | | | | | |
Energy-related derivatives: | | | | | |
Other regulatory assets, current | $ | (17) | | $ | (6) | | $ | — | | $ | — | | $ | (11) | |
| | | | | |
Other regulatory liabilities, current | 107 | | 28 | | 48 | | 27 | | 4 | |
Other regulatory liabilities, deferred | 65 | | 22 | | 19 | | 24 | | — | |
Total energy-related derivative gains (losses) | $ | 155 | | $ | 44 | | $ | 67 | | $ | 51 | | $ | (7) | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
AtFor the three and nine months ended September 30, 20212022 and December 31, 2020,2021, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instrumentscash flow and deferredfair value hedge accounting on accumulated OCI were as follows:
| | | | | | | | | | | | | | | | | |
Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet |
Derivative Category and Balance Sheet Location | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Company Gas |
| (in millions) |
At September 30, 2021: | | | | | |
Energy-related derivatives: | | | | | |
Other regulatory assets, current | $ | (5) | | $ | (1) | | $ | (1) | | $ | — | | $ | (3) | |
| | | | | |
| | | | | |
| | | | | |
Other regulatory liabilities, current | 297 | | 66 | | 123 | | 66 | | 42 | |
Other regulatory liabilities, deferred | 112 | | 35 | | 40 | | 37 | | — | |
Total energy-related derivative gains (losses) | $ | 404 | | $ | 100 | | $ | 162 | | $ | 103 | | $ | 39 | |
| | | | | |
At December 31, 2020: | | | | | |
Energy-related derivatives: | | | | | |
| | | | | |
Other regulatory assets, deferred | $ | (2) | | $ | — | | $ | (1) | | $ | (1) | | $ | — | |
Other regulatory liabilities, current | 12 | | 5 | | 2 | | 1 | | 4 | |
Other regulatory liabilities, deferred | 2 | | 1 | | 1 | | — | | — | |
Total energy-related derivative gains (losses) | $ | 12 | | $ | 6 | | $ | 2 | | $ | — | | $ | 4 | |
| | | | | | | | | | | | | | |
Gain (Loss) Recognized in OCI on Derivative | For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
2022 | 2021 | 2022 | 2021 |
| (in millions) | (in millions) |
Southern Company | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | 11 | | $ | 38 | | $ | 51 | | $ | 59 | |
Interest rate derivatives | 6 | | 5 | | 36 | | 7 | |
Foreign currency derivatives | (35) | | (36) | | (137) | | (79) | |
Fair value hedges(*): | | | | |
Foreign currency derivatives | 20 | | (4) | | 18 | | (4) | |
Total | $ | 2 | | $ | 3 | | $ | (32) | | $ | (17) | |
| | | | |
| | | | |
Georgia Power | | | | |
| | | | |
Interest rate derivatives | $ | — | | $ | — | | $ | 31 | | $ | — | |
| | | | |
| | | | |
| | | | |
Southern Power | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | (11) | | $ | 8 | | $ | (4) | | $ | 16 | |
| | | | |
Foreign currency derivatives | (35) | | (36) | | (137) | | (79) | |
Total | $ | (46) | | $ | (28) | | $ | (141) | | $ | (63) | |
Southern Company Gas | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | 22 | | $ | 30 | | $ | 55 | | $ | 43 | |
Interest rate derivatives | 5 | | — | | — | | — | |
Total | $ | 27 | | $ | 30 | | $ | 55 | | $ | 43 | |
(*)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in OCI.
For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and nine months ended September 30, 20212022 and 2020, the pre-tax effects of cash flow and fair value hedge accounting on accumulated OCI were as follows:
| | | | | | | | | | | | | | |
Gain (Loss) Recognized in OCI on Derivative | For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
2021 | 2020 | 2021 | 2020 |
| (in millions) | (in millions) |
Southern Company | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | 38 | | $ | 9 | | $ | 59 | | $ | 2 | |
Interest rate derivatives | 5 | | 1 | | 7 | | (27) | |
Foreign currency derivatives | (36) | | 54 | | (79) | | (10) | |
Fair value hedges(*): | | | | |
Foreign currency derivatives | (4) | | — | | (4) | | — | |
Total | $ | 3 | | $ | 64 | | $ | (17) | | $ | (35) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Southern Power | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | 8 | | $ | 5 | | $ | 16 | | $ | 2 | |
| | | | |
Foreign currency derivatives | (36) | | 54 | | (79) | | (10) | |
Total | $ | (28) | | $ | 59 | | $ | (63) | | $ | (8) | |
Southern Company Gas | | | | |
Cash flow hedges: | | | | |
Energy-related derivatives | $ | 30 | | $ | 4 | | $ | 43 | | $ | — | |
Interest rate derivatives | — | | 1 | | — | | (24) | |
Total | $ | 30 | | $ | 5 | | $ | 43 | | $ | (24) | |
(*)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in OCI.
For the three and nine months ended September 30, 2021, and 2020, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
For the three and nine months ended September 30, 2021 and 2020, 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 Relationships | Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships | For 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 Relationships | For 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 Relationships | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 |
| | (in millions) | | (in millions) |
Southern Company | Southern Company | | Southern Company | |
Total cost of natural gas | Total cost of natural gas | $ | 129 | | $ | 71 | | $ | 943 | | $ | 654 | | Total cost of natural gas | $ | 294 | | $ | 129 | | $ | 1,840 | | $ | 943 | |
Gain (loss) on energy-related cash flow hedges(a) | Gain (loss) on energy-related cash flow hedges(a) | 2 | | — | | — | | (8) | | Gain (loss) on energy-related cash flow hedges(a) | 9 | | 2 | | 28 | | — | |
Total depreciation and amortization | Total depreciation and amortization | 896 | | 889 | | 2,658 | | 2,619 | | Total depreciation and amortization | 922 | | 896 | | 2,728 | | 2,658 | |
Gain (loss) on energy-related cash flow hedges(a) | Gain (loss) on energy-related cash flow hedges(a) | 3 | | (1) | | 6 | | (3) | | Gain (loss) on energy-related cash flow hedges(a) | (1) | | 3 | | 5 | | 6 | |
Total interest expense, net of amounts capitalized | Total interest expense, net of amounts capitalized | (451) | | (443) | | (1,352) | | (1,343) | | Total interest expense, net of amounts capitalized | (511) | | (451) | | (1,461) | | (1,352) | |
Gain (loss) on interest rate cash flow hedges(a) | Gain (loss) on interest rate cash flow hedges(a) | (7) | | (6) | | (20) | | (19) | | Gain (loss) on interest rate cash flow hedges(a) | (7) | | (7) | | (19) | | (20) | |
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) | (3) | | (6) | | (16) | | (18) | |
Gain (loss) on interest rate fair value hedges(b) | Gain (loss) on interest rate fair value hedges(b) | (4) | | (3) | | (16) | | 27 | | Gain (loss) on interest rate fair value hedges(b) | (102) | | (4) | | (300) | | (16) | |
Total other income (expense), net | Total other income (expense), net | 131 | | 113 | | 297 | | 319 | | Total other income (expense), net | 132 | | 131 | | 414 | | 290 | |
Gain (loss) on foreign currency cash flow hedges(a)(c) | Gain (loss) on foreign currency cash flow hedges(a)(c) | (34) | | 56 | | (76) | | 52 | | Gain (loss) on foreign currency cash flow hedges(a)(c) | (32) | | (34) | | (129) | | (76) | |
Gain (loss) on foreign currency fair value hedges | Gain (loss) on foreign currency fair value hedges | (32) | | — | | (32) | | — | | Gain (loss) on foreign currency fair value hedges | (59) | | (32) | | (180) | | (32) | |
Amount excluded from effectiveness testing recognized in earnings | Amount excluded from effectiveness testing recognized in earnings | 4 | | — | | 4 | | — | | Amount excluded from effectiveness testing recognized in earnings | (21) | | 4 | | (17) | | 4 | |
| Southern Power | Southern Power | | Southern Power | |
Total depreciation and amortization | Total depreciation and amortization | $ | 132 | | $ | 129 | | $ | 383 | | $ | 367 | | Total depreciation and amortization | $ | 133 | | $ | 132 | | $ | 384 | | $ | 383 | |
Gain (loss) on energy-related cash flow hedges(a) | Gain (loss) on energy-related cash flow hedges(a) | 3 | | (1) | | 6 | | (3) | | Gain (loss) on energy-related cash flow hedges(a) | (1) | | 3 | | 5 | | 6 | |
Total interest expense, net of amounts capitalized | Total interest expense, net of amounts capitalized | (36) | | (36) | | (111) | | (114) | | Total interest expense, net of amounts capitalized | (32) | | (36) | | (105) | | (111) | |
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) | (3) | | (6) | | (16) | | (18) | |
Total other income (expense), net | Total other income (expense), net | 2 | | 13 | | 10 | | 19 | | Total other income (expense), net | 3 | | 2 | | 5 | | 10 | |
Gain (loss) on foreign currency cash flow hedges(a)(c) | Gain (loss) on foreign currency cash flow hedges(a)(c) | (34) | | 56 | | (76) | | 52 | | Gain (loss) on foreign currency cash flow hedges(a)(c) | (32) | | (34) | | (129) | | (76) | |
| Southern Company Gas | | Southern Company Gas | |
Total cost of natural gas | | Total cost of natural gas | $ | 294 | | $ | 129 | | $ | 1,840 | | $ | 943 | |
Gain (loss) on energy-related cash flow hedges(a) | | Gain (loss) on energy-related cash flow hedges(a) | 9 | | 2 | | 28 | | — | |
Total interest expense, net of amounts capitalized | | Total interest expense, net of amounts capitalized | (65) | | (57) | | (187) | | (175) | |
Gain (loss) on interest rate cash flow hedges(a) | | Gain (loss) on interest rate cash flow hedges(a) | (2) | | (1) | | (3) | | (2) | |
Gain (loss) on interest rate fair value hedges(b) | | Gain (loss) on interest rate fair value hedges(b) | (30) | | — | | (87) | | 2 | |
(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, 20212022 and 2020,2021, 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 companiesAlabama Power, Georgia Power, and Southern Company Gas.Mississippi Power.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
At September 30, 20212022 and December 31, 2020,2021, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:
| | | Carrying Amount of the Hedged Item | | Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item | | Carrying Amount of the Hedged Item | | Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item |
Balance Sheet Location of Hedged Items | Balance Sheet Location of Hedged Items | At September 30, 2021 | At December 31, 2020 | | At September 30, 2021 | At December 31, 2020 | Balance Sheet Location of Hedged Items | At September 30, 2022 | At December 31, 2021 | | At September 30, 2022 | At December 31, 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Southern Company | Southern Company | | Southern Company | |
Securities due within one year | $ | — | | $ | (1,509) | | | $ | — | | $ | (10) | | |
| Long-term debt | Long-term debt | (3,320) | | — | | | — | | — | | Long-term debt | $ | (2,788) | | $ | (3,280) | | | $ | 306 | | $ | 9 | |
| Southern Company Gas | Southern Company Gas | | Southern Company Gas | |
| Long-term debt | Long-term debt | $ | (497) | | $ | — | | | $ | (1) | | $ | — | | Long-term debt | $ | (411) | | $ | (493) | | | $ | 86 | | $ | 2 | |
For the three and nine months ended September 30, 20212022 and 2020,2021, 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 September 30, | | Nine Months Ended September 30, |
Derivatives in Non-Designated Hedging Relationships | Derivatives in Non-Designated Hedging Relationships | Statements of Income Location | 2021 | 2020 | | 2021 | 2020 | Derivatives in Non-Designated Hedging Relationships | Statements of Income Location | 2022 | 2021 | | 2022 | 2021 |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
| Energy-related derivatives: | Energy-related derivatives: | Natural gas revenues(*) | $ | (2) | | $ | (30) | | | $ | (122) | | $ | 54 | | Energy-related derivatives: | Natural gas revenues(*) | $ | 3 | | $ | (2) | | | $ | (10) | | $ | (122) | |
| | | Cost of natural gas | (2) | | 20 | | | (7) | | 36 | |
| | Cost of natural gas | 20 | | 5 | | | 36 | | 18 | | |
Total derivatives in non-designated hedging relationships | Total derivatives in non-designated hedging relationships | $ | 18 | | $ | (25) | | | $ | (86) | | $ | 72 | | Total derivatives in non-designated hedging relationships | $ | 1 | | $ | 18 | | | $ | (17) | | $ | (86) | |
| |
(*)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, 20212022 and 2020,2021, the pre-tax effects of energy-related derivatives not designated as hedging instruments were immaterial for allthe other Registrants.
Contingent Features
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company GasThe Registrants 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. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. At September 30, 2021,2022, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements.
At September 30, 2021,For Southern Company and Southern Power, the Registrants had nofair value of interest rate derivative liabilities with contingent features. Atfeatures and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were $156 million and $38 million, respectively at September 30, 2021,2022. For the fair value oftraditional electric operating companies and Southern Power, 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.at September 30, 2022. 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 participatecontinued participating 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.through July 13, 2022.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivatives executed with the same counterparty.
Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions and they may be required to post collateral based on the value of the positions in these accounts and the associated margin requirements. At September 30, 2021,2022, 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, 2021,2022, cash collateral held on deposit in broker margin accounts was $(20)$15 million.
The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk.
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 a physical transaction, Southern Company Gas assigns its 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.
Southern Company Gas utilizes netting agreements whenever possible to mitigate exposure to counterparty credit risk. Netting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty across product lines and against cash collateral, provided the netting and cash collateral agreements include such provisions. While the amounts due from, or owed to, counterparties 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.
Southern CompanyAlabama Power
On October 29, 2021, Southern CompanySeptember 30, 2022, Alabama Power completed its acquisition of the saleCalhoun Generating Station, which was accounted for as an asset acquisition. The total purchase price was $179 million, of which $171 million was related to net assets subject to a leveraged lease to the lessee for $45 million. No gain or loss was recognizedrecorded within property, plant, and equipment on the sale. Duringbalance sheet and the fourth quarter 2021, income tax benefits of approximately $16 million will be recognized as a result of the sale. At September 30, 2021, the leveraged lease investment was classified as held for sale.remainder primarily related to fossil fuel stock and materials and supplies. See Note 3(B) and Note 15 to the financial statements under "Other Matters – Southern Company" in Item 8 of the Form 10-K and "Assets Held for Sale" hereinunder "Alabama Power" for additional information.
Alabama Power
On September 23, 2021, Alabama Power entered into an agreement to acquire all of the equity interests in Calhoun Power Company, LLC, which owns and operates the Calhoun Generating Station. See Note (B) under "Alabama Power – Calhoun Generating Station Acquisition" for additional information.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Power
Asset Acquisition
During the nine months ended September 30, 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 Facility | Resource | Seller | Approximate Nameplate Capacity (MW)
| Location | Southern Power Ownership Percentage | COD | PPA Contract Period |
Deuel Harvest(*)
| Wind | Invenergy Renewables, LLC | 300 | Deuel County, SD | 100% of
Class B
| February 2021 | 25 years
and
15 years
|
(*)On March 26, 2021, Southern Power acquired a controlling interest in the project from Invenergy Renewables LLC and, on March 30, 2021, Southern Power completed a tax equity transaction whereby it sold the Class A membership interests in the project. Southern Power consolidates the project's operating results in its financial statements and the tax equity partner and Invenergy Renewables LLC each own a noncontrolling interest.
Construction Projects
During the nine months ended September 30, 2021,2022, Southern Power completed construction of and placed in service 45the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility and continued constructionfacility.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
Project Facility | Resource | Approximate Nameplate Capacity (MW) | Location | Actual/Expected COD | PPA Contract Period |
Projects Under Construction atCompleted During the Nine Months Ended September 30, 20212022 |
Garland Solar Storage(a) | Battery energy storage system | 88 | Kern County, CA | September 2021 and fourth quarter 2021through February 2022(b)
| 20 years |
Tranquillity Solar Storage(a) | Battery energy storage system | 72 | Fresno County, CA | Fourth quarterNovember 2021 and first quarter 2022 | 20 years |
Glass Sandsthrough March 2022(c)
| Wind | 118 | Murray County, OK | Fourth quarter 2021 | 1220 years |
(a)During the third quarter 2021, Southern Power further restructured its ownership in the Garland and Tranquillity battery energy storage projects and completed tax equity transactions whereby it sold the Class A membership interests in the projects. Southern Power consolidates each project's operating results in its financial statements and the tax equity partner and two other partners each own a noncontrolling interest.
(b)The facility has a total capacity of 88 MWs, of which 4573 MWs were placed in service in September 2021 and 4315 MWs are expected to bewere placed in service later in the fourth quarter 2021.February 2022.
(c)In December 2020, Southern Power purchased 100%The facility has a total capacity of the membership interests72 MWs, of the Glass Sands facility.which 32 MWs were placed in service in 2021 and 40 MWs were placed in service in March 2022.
Development Projects
Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 for development and construction projects. During the nine months ended September 30, 2021, gains on wind turbine equipment contributed to various equity method investments totaled approximately $37 million.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Southern Company Gas
Sale of SequentNatural Gas Storage Facilities
On July 1, 2021,September 7, 2022, certain affiliates of Southern Company Gas affiliatesentered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. Completion of the sales is subject to material closing conditions, including, among others, release of a Southern Company Gas parent guarantee, approval from the California Public Utility Commission without a material burdensome condition, and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The parent guarantee release was executed on October 20, 2022, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter 2022. The sale of the Texas facility is expected to be completed later in the fourth quarter 2022, and the sale of Sequent to Williams Field Services Group for a total cash purchase price of $159 million, including final working capital adjustments. The preliminary pre-tax gain associated with the transaction is approximately $121 million ($93 million after tax). As a result of the sale, changes in state apportionment rates resulted in $85 million of additional tax expense.
Prior to the sale, Southern Company Gas had existing agreements in place in which it guaranteed the payment performance of Sequent. Southern Company Gas will continue to guarantee Sequent's payment performance for a period of time as Williams Field Services Group obtains releases from these obligations. At September 30, 2021, the obligations subject to the payment performance guarantee totaled $36 million. Changes in the price of natural gas, market conditions, and the number of open contracts may change the amount that Southern Company Gas is required to guarantee for Sequent each month. The maximum potential exposure over the period of the payment performance guarantee generally is capped at $1 billion. At closing, Williams Field Services Group issued a payment performance guarantee to Southern Company Gas, equal to the outstanding guarantee obligation throughout this period.
Southern Company Gas' sale of Sequent did not represent a strategic shift in operations that has, orCalifornia facility is expected to have, a major effect on its operations and financial results; therefore, nonebe completed during 2023; however, the ultimate outcome of the assets were classified as discontinued operations for any of the periods presented.these matters cannot be determined at this time.
Sale of Pivotal LNG
InOn May 20, 2022, Southern Company Gas received the final $5 million contingent payment from Dominion Modular LNG Holdings, Inc. in connection with its March 2020 sale of Pivotal LNG, Southern Company Gas was entitled to 2 $5 million payments contingent upon Dominion Modular LNG Holdings, Inc. meeting certain milestones related to Pivotal LNG. Southern Company Gas received the first payment on April 22, 2021 and expects to receive the second payment in February 2022.
Assets Held for Sale
The following table provides the major classes of assets classified as held for sale by Southern Company at September 30, 2021 and December 31, 2020:
| | | | | | | | |
| Southern Company |
| At September 30, | At December 31, |
| 2021 | 2020 |
| (in millions) |
Assets Held for Sale: | | |
Total property, plant, and equipment | $ | 6 | | $ | 8 | |
Leveraged leases | 45 | | 52 | |
Total Assets Held for Sale | $ | 51 | | $ | 60 | |
Southern Company's assets held for sale at September 30, 2021 and December 31, 2020 were recorded at fair value on a nonrecurring basis, based primarily on unobservable inputs (Level 3). See "Southern Company" herein for additional information.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(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 3three 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 (through June 30, 2021), and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' other businesses also included wholesale gas services.
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 $336 million and $673 million for the three and nine months ended September 30, 2022, respectively, and $167 million and $361 million for the three and nine months ended September 30, 2021, respectively, and $101 million and $279 million for the three and nine months ended September 30, 2020, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for all periods presented. Revenues from sales of natural gas from Southern Company Gas (prior to its sale of Sequent) to Southern Power were $18 million for the nine months ended September 30, 2021, which represented sales from Sequent through June 30, 2021, and $9 million and $22 million for the three and nine months ended September 30, 2020, respectively.2021. 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 distributed energy and resilience solutions to electric utilities and theirdeploying microgrids for commercial, industrial, governmental, and utility customers, in the areas of distributed generation, energy storage and renewables, and energy efficiency, as well as investments in telecommunications and, for the three and nine months ended September 30, 2021, leveraged lease projects. All other inter-segment revenues are not material.
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, 20212022 and 20202021 was as follows:
| | | Electric Utilities | | | Electric Utilities | |
| | Traditional Electric Operating Companies | Southern Power | Eliminations | Total | Southern Company Gas | All Other | Eliminations | Consolidated | | Traditional Electric Operating Companies | Southern Power | Eliminations | Total | Southern Company Gas | All Other | Eliminations | Consolidated |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | |
Operating revenues | | Operating revenues | $ | 6,938 | | $ | 1,180 | | $ | (691) | | $ | 7,427 | | $ | 857 | | $ | 135 | | $ | (41) | | $ | 8,378 | |
Segment net income (loss)(c)(b) | | Segment net income (loss)(c)(b) | 1,445 | | 95 | | — | | 1,540 | | 83 | | (152) | | 1 | | 1,472 | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | |
Operating revenues | | Operating revenues | $ | 16,716 | | $ | 2,618 | | $ | (1,391) | | $ | 17,943 | | $ | 3,998 | | $ | 418 | | $ | (127) | | $ | 22,232 | |
Segment net income (loss)(f)(b) | | Segment net income (loss)(f)(b) | 3,256 | | 265 | | — | | 3,521 | | 516 | | (415) | | (11) | | 3,611 | |
At September 30, 2022 | | At September 30, 2022 | |
Goodwill | | Goodwill | $ | — | | $ | 2 | | $ | — | | $ | 2 | | $ | 5,015 | | $ | 263 | | $ | — | | $ | 5,280 | |
Total assets | | Total assets | 95,659 | | 13,283 | | (748) | | 108,194 | | 24,097 | | 2,372 | | (658) | | 134,005 | |
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | $ | 5,018 | | $ | 679 | | $ | (170) | | $ | 5,527 | | $ | 623 | | $ | 124 | | $ | (36) | | $ | 6,238 | | Operating revenues | $ | 5,018 | | $ | 679 | | $ | (170) | | $ | 5,527 | | $ | 623 | | $ | 124 | | $ | (36) | | $ | 6,238 | |
Segment net income (loss)(c)(b) | 1,085 | | 78 | | — | | 1,163 | | 56 | | (121) | | 3 | | 1,101 | | |
Segment net income (loss)(a)(b)(c) | | Segment net income (loss)(a)(b)(c) | 1,085 | | 78 | | — | | 1,163 | | 56 | | (121) | | 3 | | 1,101 | |
Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | $ | 12,813 | | $ | 1,610 | | $ | (372) | | $ | 14,051 | | $ | 2,994 | | $ | 412 | | $ | (111) | | $ | 17,346 | | Operating revenues | $ | 12,813 | | $ | 1,610 | | $ | (372) | | $ | 14,051 | | $ | 2,994 | | $ | 412 | | $ | (111) | | $ | 17,346 | |
Segment net income (loss)(f)(b) | 2,352 | | 211 | | — | | 2,563 | | 389 | | (338) | | (6) | | 2,608 | | |
At September 30, 2021 | | |
Segment net income (loss)(a)(b)(c)(d)(e) | | Segment net income (loss)(a)(b)(c)(d)(e) | 2,352 | | 211 | | — | | 2,563 | | 389 | | (338) | | (6) | | 2,608 | |
At December 31, 2021 | | At December 31, 2021 | |
Goodwill | Goodwill | $ | — | | $ | 2 | | $ | — | | $ | 2 | | $ | 5,015 | | $ | 263 | | $ | — | | $ | 5,280 | | Goodwill | $ | — | | $ | 2 | | $ | — | | $ | 2 | | $ | 5,015 | | $ | 263 | | $ | — | | $ | 5,280 | |
Assets held for sale | 3 | | — | | — | | 3 | | — | | 48 | | — | | 51 | | |
Total assets | Total assets | 89,057 | | 13,611 | | (708) | | 101,960 | | 22,958 | | 3,704 | | (761) | | 127,861 | | Total assets | 89,051 | | 13,390 | | (667) | | 101,774 | | 23,560 | | 2,975 | | (775) | | 127,534 | |
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 | | — | | 1,358 | | 14 | | (122) | | 1 | | 1,251 | | |
Nine Months Ended September 30, 2020 | | |
Operating revenues | $ | 11,576 | | $ | 1,337 | | $ | (285) | | $ | 12,628 | | $ | 2,362 | | $ | 380 | | $ | (112) | | $ | 15,258 | | |
Segment net income (loss)(a)(c)(f)(g) | 2,571 | | 212 | | — | | 2,783 | | 360 | | (420) | | 9 | | 2,732 | | |
At December 31, 2020 | | |
Goodwill | $ | — | | $ | 2 | | $ | — | | $ | 2 | | $ | 5,015 | | $ | 263 | | $ | — | | $ | 5,280 | | |
Assets held for sale | 5 | | — | | — | | 5 | | — | | 55 | | — | | 60 | | |
Total assets | 85,486 | | 13,235 | | (680) | | 98,041 | | 22,630 | | 3,168 | | (904) | | 122,935 | | |
(a)Attributable to Southern Company.
(b)For the traditional electric operating companies, includes pre-tax charges (credits) to income at Georgia Power for the estimated probable loss associated with the construction of Plant Vogtle Units 3 and 4 of $(70) million ($(52) million after tax) and $(18) million ($(13) million after tax) for the three and nine months ended September 30, 2022, respectively, and $264 million ($197 million after tax) and $772 million ($576 million after tax) for the three and nine months ended September 30, 2021, respectively. 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.
(c)For Southern Company Gas, includes a preliminary pre-tax gain of $121 million ($93 million after tax) related to its sale of Sequent, as well as the resulting $85 million of additional tax expense due to changes in state apportionment rates.as a result of the sale. See Note (K)15 to the financial statements under "Southern Company Gas" for additional information.
(c)For the traditional electric operating companies, includes pre-tax charges at Georgia Power for estimated losses associated with the construction of Plant Vogtle Units 3 and 4 of $264 million ($197 million after tax) and $772 million ($576 million after tax) for the three and nine months ended September 30, 2021, respectively, and $149 million ($111 million after tax) for the nine months ended September 30, 2020. 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.
(d)For Southern Power, includes gains on wind turbine equipment contributed to various equity method investments totaling approximately $37 million pre-tax ($28 million after tax). See Notes (E) and (K)Note 15 to the financial statements under "Southern Power"Power – Development Projects" in Item 8 of the Form 10-K for additional information.
(e)For Southern Company Gas, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to its equity method investment in the PennEast Pipeline project. See Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, for additional information.
(f)For the "All Other" column, includes pre-tax impairment charges related to leveraged lease investments of $7 million ($6 million after tax) and $154 million ($74 million after tax) for the nine months ended September 30, 2021 and 2020, respectively. See Note 37 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K under "Other Matters – Southern Company" for additional information.
(g)For Southern Power, includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Power" for additional information.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Products and Services
| | | Electric Utilities' Revenues | | Electric Utilities' Revenues |
| | Retail | Wholesale | Other | Total | | Retail | Wholesale | Other | Total |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | $ | 5,961 | | $ | 1,197 | | $ | 269 | | $ | 7,427 | |
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2021 | $ | 4,551 | | $ | 731 | | $ | 245 | | $ | 5,527 | | Three Months Ended September 30, 2021 | 4,551 | | 731 | | 245 | | 5,527 | |
Three Months Ended September 30, 2020 | 4,243 | | 584 | | 222 | | 5,049 | | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | $ | 14,363 | | $ | 2,798 | | $ | 782 | | $ | 17,943 | |
Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | $ | 11,492 | | $ | 1,822 | | $ | 737 | | $ | 14,051 | | Nine Months Ended September 30, 2021 | 11,492 | | 1,822 | | 737 | | 14,051 | |
Nine Months Ended September 30, 2020 | 10,503 | | 1,473 | | 652 | | 12,628 | | |
| | | Southern Company Gas' Revenues | | Southern Company Gas' Revenues |
| | Gas Distribution Operations | Wholesale Gas Services(*) | Gas Marketing Services | Other | Total | | Gas Distribution Operations | Wholesale Gas Services(*) | Gas Marketing Services | Other | Total |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | $ | 748 | | $ | — | | $ | 85 | | $ | 24 | | $ | 857 | |
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2021 | $ | 553 | | $ | — | | $ | 52 | | $ | 18 | | $ | 623 | | Three Months Ended September 30, 2021 | 553 | | — | | 52 | | 18 | | 623 | |
Three Months Ended September 30, 2020 | 476 | | (51) | | 39 | | 13 | | 477 | | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | $ | 3,513 | | $ | — | | $ | 420 | | $ | 65 | | $ | 3,998 | |
Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | $ | 2,451 | | $ | 188 | | $ | 311 | | $ | 44 | | $ | 2,994 | | Nine Months Ended September 30, 2021 | 2,451 | | 188 | | 311 | | 44 | | 2,994 | |
Nine Months Ended September 30, 2020 | 2,072 | | (19) | | 272 | | 37 | | 2,362 | | |
(*)ThePrior to the sale of Sequent, the revenues for wholesale gas services arewere netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein for additional information. Also seeand Note (K)15 to the financial statements under "Southern Company Gas" regardingin Item 8 of the July 1, 2021 sale of Sequent.Form 10-K for additional information.
Southern Company Gas
Southern Company Gas manages its business through 4three reportable segments – gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' reportable segments also included wholesale gas services. The non-reportable segments are combined and presented as all other. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K under "Southern Company Gas" for additional information on the disposition activities described herein.sale of Sequent.
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 4four 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 project, and a 50% joint ownership interest in the Dalton 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 includedincludes a 5%20% ownership interest in the Atlantic CoastPennEast Pipeline construction project, prior to its sale on March 24, 2020.which was cancelled in September 2021. See Note (C)7 to the financial statements under "Other Matters – Southern"Southern Company Gas" for information regarding the September 2021 cancellationin Item 8 of the PennEast Pipeline project.Form 10-K for additional information.
WholesaleThrough July 1, 2021, wholesale gas services (until the sale of Sequent on July 1, 2021) provided 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 engaged 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 on July 1, 2021.
Gas marketing services provides natural gas marketing to end-use customers primarily in Georgia and Illinois through SouthStar.
The all other column includes segments and subsidiaries that fall below the quantitative threshold for separate disclosure, including storage and 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.See Note (K) under "Southern Company Gas" for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Business segment financial data for the three and nine months ended September 30, 20212022 and 20202021 was as follows:
| | | Gas Distribution Operations | Gas Pipeline Investments | Wholesale Gas Services(a) | Gas Marketing Services | Total | All Other | Eliminations | Consolidated | | Gas Distribution Operations | Gas Pipeline Investments | Wholesale Gas Services(a) | Gas Marketing Services | Total | All Other | Eliminations | Consolidated |
| | (in millions) | | (in millions) |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | |
Operating revenues | | Operating revenues | $ | 751 | | $ | 8 | | $ | — | | $ | 85 | | $ | 844 | | $ | 16 | | $ | (3) | | $ | 857 | |
Segment net income (loss)(c) | | Segment net income (loss)(c) | 59 | | 24 | | — | | (2) | | 81 | | 2 | | — | | 83 | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | |
Operating revenues | | Operating revenues | $ | 3,533 | | $ | 24 | | $ | — | | $ | 420 | | $ | 3,977 | | $ | 43 | | $ | (22) | | $ | 3,998 | |
Segment net income (loss)(d) | | Segment net income (loss)(d) | 365 | | 76 | | — | | 65 | | 506 | | 10 | | — | | 516 | |
Total assets at September 30, 2022 | | Total assets at September 30, 2022 | 21,605 | | 1,425 | | — | | 1,595 | | 24,625 | | 9,100 | | (9,628) | | 24,097 | |
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | $ | 556 | | $ | 8 | | $ | — | | $ | 52 | | $ | 616 | | $ | 11 | | $ | (4) | | $ | 623 | | Operating revenues | $ | 556 | | $ | 8 | | $ | — | | $ | 52 | | $ | 616 | | $ | 11 | | $ | (4) | | $ | 623 | |
Segment net income (loss)(c) | Segment net income (loss)(c) | 45 | | 10 | | 94 | | (2) | | 147 | | (91) | | — | | 56 | | Segment net income (loss)(c) | 45 | | 10 | | 94 | | (2) | | 147 | | (91) | | — | | 56 | |
Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | |
Operating revenues | Operating revenues | $ | 2,466 | | $ | 24 | | $ | 188 | | $ | 311 | | $ | 2,989 | | $ | 29 | | $ | (24) | | $ | 2,994 | | Operating revenues | $ | 2,466 | | $ | 24 | | $ | 188 | | $ | 311 | | $ | 2,989 | | $ | 29 | | $ | (24) | | $ | 2,994 | |
Segment net income (loss)(d) | Segment net income (loss)(d) | 308 | | 3 | | 108 | | 60 | | 479 | | (90) | | — | | 389 | | Segment net income (loss)(d) | 308 | | 3 | | 108 | | 60 | | 479 | | (90) | | — | | 389 | |
Total assets at September 30, 2021 | 20,619 | | 1,478 | | 132 | | 1,534 | | 23,763 | | 11,387 | | (12,192) | | 22,958 | | |
Three Months Ended September 30, 2020 | | |
Operating revenues | $ | 479 | | $ | 8 | | $ | (51) | | $ | 39 | | $ | 475 | | $ | 8 | | $ | (6) | | $ | 477 | | |
Segment net income (loss)(c) | 46 | | 23 | | (45) | | (3) | | 21 | | (7) | | — | | 14 | | |
Nine Months Ended September 30, 2020 | | |
Operating revenues | $ | 2,086 | | $ | 24 | | $ | (19) | | $ | 272 | | $ | 2,363 | | $ | 24 | | $ | (25) | | $ | 2,362 | | |
Segment net income (loss)(d) | 284 | | 74 | | (45) | | 59 | | 372 | | (12) | | — | | 360 | | |
Total assets at December 31, 2020 | 19,090 | | 1,597 | | 850 | | 1,503 | | 23,040 | | 11,336 | | (11,746) | | 22,630 | | |
Total assets at December 31, 2021 | | Total assets at December 31, 2021 | 20,917 | | 1,467 | | 31 | | 1,556 | | 23,971 | | 12,114 | | (12,525) | | 23,560 | |
(a)TheAs a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the three and nine months ended September 30, 2022. Prior to the sale of Sequent, the revenues for wholesale gas services arewere 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 Revenues | Intercompany Revenues | Total Gross Revenues | Less Gross Gas Costs | Operating Revenues |
| (in millions) |
Three Months Ended September 30, 2021 | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
Three Months Ended September 30, 2020 | 1,050 | | 33 | | 1,083 | | 1,134 | | (51) | |
Nine Months Ended September 30, 2021 | $ | 3,881 | | $ | 90 | | $ | 3,971 | | $ | 3,783 | | $ | 188 | |
Nine Months Ended September 30, 2020 | 3,089 | | 81 | | 3,170 | | 3,189 | | (19) | |
| | | | | | | | | | | | | | | | | |
| Third Party Gross Revenues | Intercompany Revenues | Total Gross Revenues | Less Gross Gas Costs | Operating Revenues |
| (in millions) |
| | | | | |
| | | | | |
| | | | | |
Nine Months Ended September 30, 2021 | $ | 3,881 | | $ | 90 | | $ | 3,971 | | $ | 3,783 | | $ | 188 | |
(b)For wholesale gas services, includes a preliminary pre-tax gain of $121 million ($93 million after tax) related to the sale of Sequent. See Note (K)15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
(c)For the "All Other" column, includes $85 million of additional tax expense due to changes in state apportionment rates as a result of the sale of Sequent.sale. See Note (K)15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
(d)For gas pipeline investments, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to the equity method investment in the PennEast Pipeline project. See Notes (C) and (E)Note 7 to the financial statements under "Other Matters – Southern"Southern Company Gas" and "Southern Company Gas," respectively,in Item 8 of the Form 10-K for additional information.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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Combined Management's Discussion and Analysis of Financial Condition and Results of Operations | |
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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.
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, wholesaleand gas services (untilmarketing services. Prior to the sale of Sequent on July 1, 2021), and2021, Southern Company Gas' reportable segments also included wholesale gas marketing services. See Notes (K) andNote (L) to the Condensed Financial Statements herein for additional information on the sale of Sequent and segment reporting, respectively.reporting. For additional information on the Registrants' primary business activities and the sale of Sequent, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.10-K and Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K, respectively.
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
Alabama Power
On September 23, 2021, Alabama Power entered into an agreement to acquire all of the equity interests in Calhoun Power Company, LLC, which owns and operates a 743-MW winter peak, simple-cycle, combustion turbine generation facility in Calhoun County, Alabama (Calhoun Generating Station). The completion of the acquisition is subject to the satisfaction and waiver of certain conditions, including, among other customary conditions, approval byJuly 12, 2022, the Alabama PSC andapproved the FERC. On October 28, 2021, following items:
•Alabama Power filed aPower's petition for a certificate of convenience and necessity with theauthorizing Alabama PSCPower to procure additional generating capacity throughcomplete the acquisition of the Calhoun Generating Station. The ultimate outcometransaction closed on September 30, 2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of this matter cannot be determined at this time. $34 million, or 0.6%, effective with the billing month of November 2022.
•An increase to Rate ECR effective with August 2022 billings, which is expected to result in an increase of approximately $310 million annually. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery.
•Modifications to Rate NDR.
•An accounting order authorizing Alabama Power to create a reliability reserve separate from the NDR and transition the previous Rate NDR authority related to reliability expenditures to the reliability reserve. Alabama Power may make accruals to the reliability reserve if the NDR balance exceeds $35 million.
See Note (B) to the Condensed Financial Statements under "Alabama Power – Calhoun Generating Station Acquisition"Power" herein for additional information.
On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Alabama Power" herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Georgia Power
Plant Vogtle Units 3 and 4 Construction and Start-Up Status
Construction continues on Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each), in which Georgia Power currently 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, including contingency, through September 2022the end of the first quarter 2023 and Junethe fourth quarter 2023, respectively, is $9.48$10.4 billion.
Georgia Power estimatesOn July 29, 2022, Southern Nuclear announced that all Unit 3 ITAACs had been submitted to the productivity impacts ofNRC. On August 3, 2022, the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embeddedNRC published its 103(g) finding that the acceptance criteria in the site work plancombined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and Unit 4. In addition, throughout 2020, the project continuedallows start-up testing to face challenges as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein. As a result of these factors, in January 2021, Southern Nuclear further extended certain milestone dates, including the start of hot functional testing and fuelbegin. 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 necessary to ensure quality and design standards are met as system turnovers are completed to
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
support hot functional testing, which was completed on October 17, 2022, and the unit is projected to be placed in July 2021, and fuel loadservice by the end of the first quarter 2023. The projected schedule for Unit 3. As a result of challenges including, but not limited to, construction productivity, construction remediation work,3 primarily depends on the pace of system turnovers, spent fuel pool repairs,and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the timeframeprogression of start-up, final component, and duration for hot functional andpre-operational testing, which may be impacted by equipment or other testing, atoperational failures. Unit 4 is projected to be placed in service by the end of the secondfourth quarter 2021, Southern Nuclear further extended certain milestone dates, including the fuel load2023. The projected schedule for Unit 3, from those established in January 2021. Through the third quarter 2021, the project continued to face challenges including, but not limited to, construction productivity, construction remediation work, and the pace of system turnovers. As a result of these continued challenges, at the end of the third quarter 2021, Southern Nuclear further extended certain milestone dates, including fuel load for Unit 3, from those established at the end of the second quarter 2021. The site work plan currently targets fuel load for Unit 3 in the first quarter 2022 and an in-service date of May 2022 and4 primarily depends on significant improvements inUnit 3 progress through start-up and testing; overall construction productivity and production levels the volume of construction remediation work, the pace of systemimproving, particularly in electrical installation, including terminations; and area turnovers, and the progression of startup and other testing. As the site work plan includes minimal margin to these milestone dates, an in-service date in the third quarter 2022 for Unit 3 is projected, although any further delays could result in a later in-service date.
As the result of productivity challenges, at the end of the second quarter 2021, Southern Nuclear also further extended milestone dates for Unit 4 from those established in January 2021. These productivity challenges continued into the third quarter 2021 and some craft and support resources were diverted temporarily to support construction efforts on Unit 3. As a result of these factors, at the end of the third quarter 2021, Southern Nuclear further extended the milestone dates for Unit 4 from those established at the end of the second quarter 2021. The site work plan targets an in-service date of March 2023 for Unit 4 and primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electricians, and pipefitters, being added and maintained. As the site work plan includes minimal margin to the milestone dates, an in-service date in the second quarter 2023 for Unit 4 is projected, although anyAny further delays could result in a later in-service date.dates and cost increases.
AsDuring the first nine months of March 31, 2021, approximately $84 million of the2022, established 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. As of June 30, 2021, all of the remaining construction contingency previously established and an additional $341totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction remediation work for Unit 3, and construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total project capital cost forecast as of June 30, 2021 by adding $119$36 million and $32 million to replenish construction contingency. As a result of the factors discussed above, during the third quarter 2021, all of the remaining construction contingency previously established in the second quarter 20212022 and an additional $127 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction productivity and support resources for Units 3 and 4, and construction remediation work for Unit 3. Georgia Power also increased its total capital cost forecast as of September 30, 2021 by adding $137 million to replenish construction contingency.
third quarter 2022, respectively. 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 pre-tax charges to income in the first quarter 2021, the second quarter 2021,2022 and the third quarter 20212022 of $48$36 million ($3627 million after tax), $460 and $32 million ($343 million after tax), and $264 million ($19724 million after tax), respectively, for the increases in the total project capital cost forecast. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Regulatory Matters" herein.
Georgia Power and the other Vogtle Owners do not agree on the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments (as defined in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein). The other Vogtle Owners have notified Georgia Power that they believe the current capital cost expenditures have already exceeded the cost-sharing thresholds and the current project capital cost forecast triggers the tender provisions under the Global Amendments.
On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. On October 4, 2022, MEAG Power and Georgia Power filed a notice of settlement and voluntary dismissal of the pending litigation described above, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint. Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.
The ultimate impact of the COVID-19 pandemic and other factorsthese matters on the construction schedule and budgetproject capital cost forecast for Plant Vogtle Units 3 and 4 cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information.
2022 Base Rate Case
On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2023, January 1, 2024, and January 1, 2025, respectively. Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plans – 2022 Base Rate Case" herein for additional information.
Integrated Resource Plan
On July 21, 2022, the Georgia PSC approved Georgia Power's triennial IRP (2022 IRP), as modified by a stipulated agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved several requests, including the following:
•Decertification and retirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028, as well as the reclassification to regulatory asset accounts of the remaining net book values of these units and any remaining unusable materials and supplies inventories upon retirement.
•Decertification and retirement of Plant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.
•Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills.
The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP.
See Note (B) to the Condensed Financial Statements under "Georgia Power – Integrated Resource Plans" herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Mississippi Power
On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2022, resulting in an annual increase in revenues of approximately $18 million, or 1.9%. The rate increase became effective with the first billing cycle of April 2022 in accordance with the PEP rate schedule.
On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi Power and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the MRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand.Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA. Mississippi Power expects to remarket this capacity, including the potential development of future arrangements with Cooperative Energy.
On July 15, 2022, Mississippi Power filed a request with the FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. 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 nine months ended September 30, 2022, Southern Power completed construction of and placed in service the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
At September 30, 2022, 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 facilities' net book value (or expected in-service value for facilities under construction) as the investment amount was 95% through 2026 and 92% through 2031, with an average remaining contract duration of approximately 13 years.
Southern Company Gas
On July 1, 2022, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing is expected by December 28, 2022, with the new rates effective January 1, 2023.
On August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission seeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Commission is expected to rule on the requested increase in the third quarter 2023.
On September 7, 2022, certain affiliates of Southern Company Gas entered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. On October 20, 2022, the release of a Southern Company Gas parent guarantee was executed, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Plant Vogtle Unit 3 and Common Facilities Rate Proceeding
On June 15, 2021, Georgia Power filed an application with the Georgia PSC to adjust retail base rates to include a portion of costs related to its investment in Plant Vogtle Unit 3 and the common facilities shared between Plant Vogtle Units 3 and 4 (Common Facilities), as well as the related costs of operation. On November 2, 2021, the Georgia PSC voted to approve Georgia Power's application as filed, with certain modifications pursuant to a stipulated agreement between Georgia Power and the staff of the Georgia PSC. The related increase in annual retail base rates of approximately $302 million includes recovery of all projected operations and maintenance expenses for Unit 3 and the Common Facilities and other related costs of operation, partially offset by the related production tax credits, and will become effective the month after Unit 3 is placed in service. This increase will be partially offset by a decrease in the NCCR tariff of approximately $78 million expected to be effective January 1, 2022. See Note (B) to the Condensed Financial Statements under "Georgia Power – Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" herein for additional information.
Rate Plan
In accordance with the terms of the 2019 ARP, on October 1, 2021, Georgia Power filed tariff adjustments to become effective January 1, 2022 that would result in a net increase in rates of $157 million pending approval by the Georgia PSC. The ultimate outcome of this matter cannot be determined at this time. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein for additional information.
Mississippi Power
During the first half of 2021, the Mississippi PSC approved the following non-fuel rate changes related to Mississippi Power's annual rate filings for 2021:
•an annual increase in revenues related to the ad valorem tax adjustment factor of approximately $28 million, which became effective with the first billing cycle of May 2021,
•an annual increase in revenues related to PEP of approximately $16 million, or 1.8%, which became effective with the first billing cycle of April 2021 in accordance with the PEP rate schedule, and
•an annual decrease in revenues related to the ECO Plan of approximately $9 million, which became effective with the first billing cycle of July 2021.
On September 9, 2021, the Mississippi PSC issued an order confirming the conclusion of its review of Mississippi Power's 2021 IRP with no deficiencies identified. The 2021 IRP 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.
On October 14, 2021, the Mississippi PSC issued an accounting order giving Mississippi Power the authority to reclassify the retail costs associated with Hurricanes Zeta and Ida to a regulatory asset to be recovered through PEP over a period to be determined in Mississippi Power's 2022 PEP proceeding. At September 30, 2021, these costs totaled approximately $49 million.
See Note (B) to the Condensed Financial Statements under "Mississippi Power" herein for additional information.
Southern Power
During the nine months ended September 30, 2021, Southern Power completed construction of and placed in service 45 MWs of the 88-MW Garland battery energy storage facility and continued construction of the 72-MW Tranquillity battery energy storage facility, the 118-MW Glass Sands wind facility, and the remainder of the Garland battery energy storage facility. On March 26, 2021, Southern Power purchased a controlling membership interest in the approximately 300-MW Deuel Harvest wind facility located in Deuel County, South Dakota from Invenergy Renewables, LLC. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
At September 30, 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 93% through 2025 and 91% through 2030, with an average remaining contract duration of approximately 14 years.
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. On October 14, 2021, Atlanta Gas Light and the staff of the Georgia PSC filed a joint stipulation agreement, under which, for the years 2022 through 2024, Atlanta Gas Light would incrementally reduce its combined GRAM and System Reinforcement Rider request by 10% through Atlanta Gas Light's GRAM mechanism, or $5 million for 2022 based on the initial July 21, 2021 GRAM filing, as discussed further below. The stipulation agreement also would provide for $1.7 billion of total capital investment for the years 2022 through 2024. The Georgia PSC is scheduled to vote on this matter later in November 2021. The ultimate outcome of this matter cannot be determined at this time.
On September 14, 2021, the Virginia Commission approved a stipulation agreement related to Virginia Natural Gas' June 2020 general rate case filing, which allows for a $43 million increase in annual base rate revenues, including $14 million related to the recovery of investments under the SAVE program, based on a ROE of 9.5% and an equity ratio of 51.9%. Interim rate adjustments became effective as of November 1, 2020, subject to refund, based on Virginia Natural Gas' original request for an increase of approximately $50 million.
On July 21, 2021, Atlanta Gas Light filed its annual GRAM filing with the Georgia PSC requesting an annual base rate increase of $49 million. Later in November 2021, Atlanta Gas Light expects to file an amended GRAM filing in accordance with the reduction agreed to in the October 14, 2021 joint stipulation agreement, as discussed above. Resolution of the GRAM filing is expected by December 31, 2021, with the new rates to become effective January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.
See Note (B) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
On July 1, 2021, Southern Company Gas affiliates completed the sale of Sequent to Williams Field Services Group for a total cash purchase price of $159 million, including final working capital adjustments. The preliminary pre-tax gain associated with the transaction is approximately $121 million ($93 million after tax). As a result of the sale, changes in state apportionment rates resulted in $85 million of additional tax expense. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
During the second and third quartersThe ultimate outcome of 2021, Southern Company Gas recorded pre-tax impairment charges totaling $84 million ($67 million after tax) related to its equity method investment in the PennEast Pipeline project. On September 27, 2021, PennEast Pipeline announced that further development of the project is no longer supported, and, as a result, all further development of the project has ceased. See Notes (C) and (E) to the Condensed Financial Statements herein under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, for additional information.
these matters cannot be determined at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Southern Company
Net Income
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Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(150) | | (12.0) | | $(124) | | (4.5) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$371 | | 33.7 | | $1,003 | | 38.5 |
Consolidated net income attributable to Southern Company was $1.5 billion ($1.36 per share) in the third quarter 2022 compared to $1.1 billion ($1.04 per share) for the third quarter 2021 compared to $1.3 billion ($1.18 per share) for the corresponding period in 2020. The decrease was primarily due to a $197 million after-tax charge in the third quarter 2021 related to the construction of Plant Vogtle Units 3 and 4 at Georgia Power and higher non-fuel operations and maintenance costs, partially offset by higher retail electric revenues driven by rates and pricing and sales growth.
2021. Consolidated net income attributable to Southern Company was $2.6$3.6 billion ($2.463.38 per share) for year-to-date 20212022 compared to $2.7$2.6 billion ($2.582.46 per share) for the corresponding period in 2020.2021. The decrease wasincreases were primarily due to a $465decreases of $249 million increaseand $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4, at Georgia Powerincreases in retail electric revenues associated with rates and pricing, warmer weather, and sales growth, and increases in natural gas revenues from base rate increases and continued infrastructure replacement, partially offset by higher non-fuel operations and maintenance costs, partially offset by ancosts. The increase for year-to-date 2022 also reflects after-tax charges totaling $67 million in natural gas revenues associated with colder weather in the first quarter 2021 as comparedrelated to the corresponding periodPennEast Pipeline project at Southern Company Gas.
See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in 2020Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and infrastructure replacement programs4 and base rate changes, higher retail electric revenues primarily associated with rates and pricing and sales growth, and higher wholesale electric capacity revenues.Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information on the PennEast Pipeline project.
Retail Electric Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$308 | | 7.3 | | $989 | | 9.4 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1,410 | | 31.0 | | $2,871 | | 25.0 |
In the third quarter 2021,2022, retail electric revenues were $4.6$6.0 billion compared to $4.2$4.6 billion for the corresponding period in 2020.2021. For year-to-date 2021,2022, retail electric revenues were $11.5$14.4 billion compared to $10.5$11.5 billion for the corresponding period in 2020.2021.
Details of the changes in retail electric revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | | Year-To-Date 2021 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail electric – prior year | $ | 4,243 | | | | | $ | 10,503 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 74 | | | 1.8 | % | | 210 | | | 2.0 | % |
Sales growth | 86 | | | 2.0 | | | 158 | | | 1.5 | |
Weather | (95) | | | (2.2) | | | 12 | | | 0.1 | |
Fuel and other cost recovery | 243 | | | 5.7 | | | 609 | | | 5.8 | |
Retail electric – current year | $ | 4,551 | | | 7.3 | % | | $ | 11,492 | | | 9.4 | % |
Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 2020. These increases were primarily due to an increase in Alabama Power's Rate RSE effective January 1, 2021 and increases at Georgia Power resulting from higher contributions by commercial and industrial customers with variable demand-driven pricing and fixed residential customer bill programs, partially offset by a decrease in the NCCR tariff effective January 1, 2021. The increase in the third quarter 2021 was also partially offset by pricing effects associated with decreased residential customer usage at | | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 | | Year-To-Date 2022 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail electric – prior year | $ | 4,551 | | | | | $ | 11,492 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 165 | | | 3.6 | % | | 458 | | | 4.0 | % |
Sales growth | 73 | | | 1.6 | | | 158 | | | 1.4 | |
Weather | 26 | | | 0.6 | | | 188 | | | 1.6 | |
Fuel and other cost recovery | 1,146 | | | 25.2 | | | 2,067 | | | 18.0 | |
Retail electric – current year | $ | 5,961 | | | 31.0 | % | | $ | 14,363 | | | 25.0 | % |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Georgia Power. The increase for year-to-date 2021 also reflects increased ECCR tariff revenues at Georgia PowerRevenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. The increases were primarily due to higher KWH sales.contributions from commercial and industrial customers with variable demand-driven pricing, base tariff increases in accordance with Georgia Power's 2019 ARP, and pricing effects associated with customer usage. See Note 2 to the financial statements under "Alabama"Georgia Power – Rate RSE"Plans" 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 increased in the third quarter and year-to-date 20212022 when compared to the corresponding periods in 2020.2021. Weather-adjusted residential KWH sales increased 0.5% in the third quarter 2021 when compared to the corresponding period in 2020 primarily due to customer growth, largely offset by decreased customer usage primarily due to shelter-in-place orders in effect during 2020. Weather-adjusted residential KWH sales decreased 0.1% for year-to-date 2021 when compared to the corresponding period in 2020 primarily due to decreased customer usage resulting from shelter-in-place orders in effect during 2020, partially offset by customer growth. Weather-adjusted commercial KWH sales increased 4.2%1.3% and 3.3%0.4% in the third quarter and year-to-date 2021,2022, respectively, and industrialweather-adjusted commercial KWH sales increased 4.8%2.0% in both the third quarter and 4.3%year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to customer growth. In addition, commercial customer usage increased in the third quarter and year-to-date 2022 and residential customer usage decreased for year-to-date 2022 when compared to the corresponding periods in 2021 as customers return to pre-pandemic levels of activity outside the home. Industrial KWH sales increased 2.2% and 2.6% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2020,2021 primarily due to increases in the negative impacts ofpipeline and paper sectors, partially offset by a decrease in the COVID-19 pandemic on energy sales in 2020.chemicals sector.
Fuel and other cost recovery revenues increased $243 million$1.1 billion and $609 million$2.1 billion in the third quarter and year-to-date 2021,2022, respectively, compared to the corresponding periods in 20202021 primarily due to higher fuel and purchased power costs.costs and an increase in the volume of KWHs generated. 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, 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. See 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.
Wholesale Electric Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$147 | | 25.2 | | $349 | | 23.7 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$466 | | 63.7 | | $976 | | 53.6 |
In the third quarter 2022, wholesale electric revenues were $1.2 billion compared to $731 million for the corresponding period in 2021. For year-to-date 2022, wholesale electric revenues were $2.8 billion compared to $1.8 billion for the corresponding period in 2021. The increases were primarily due to increases of $437 million and $930 million in the third quarter and year-to-date 2022, respectively, in energy revenues as a result of fuel and purchased power price increases when compared to the corresponding periods in 2021, an increase in the volume of KWHs sold primarily associated with natural gas PPAs at Southern Power, and increased opportunity sales at Alabama Power due to warmer weather.
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 third quarter 2021, wholesale electric revenues were $731 million compared to $584 million for the corresponding period in 2020. For year-to-date 2021, wholesale electric revenues were $1.8 billion compared to $1.5 billion for the corresponding period in 2020. Increases in energy revenues of $132 million and $285 million for the third quarter and year-to-date 2021, respectively, reflect higher natural gas prices when compared to the corresponding periods in 2020. In addition, increases in capacity revenues of $15 million and $64 million for the third quarter and year-to-date 2021, respectively, primarily resulted from a power sales agreement at Alabama Power that began in September 2020 and increased capacity sales under existing contracts at Southern Power.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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.
Other Electric Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$15 | | 9.1 | | $41 | | 8.5 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$6 | | 3.4 | | $29 | | 5.5 |
For year-to-date 2021,In the third quarter 2022, other electric revenues were $525$185 million compared to $484$179 million for the corresponding period in 2020.2021. The increase was primarily due to increases of $25 million in customer fees largely resulting from the COVID-19 pandemic-related temporary suspensions of disconnections and late fees in 2020 for the traditional electric operating companies, $12$14 million in transmission revenues primarily associated with open access transmission tariff sales and $8$7 million relatedin cogeneration steam revenues associated with higher natural gas prices at Alabama Power, partially offset by a $14 million increase in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs at Georgia Power.
For year-to-date 2022, other electric revenues were $554 million compared to $525 million for the corresponding period in 2021. The increase was primarily due to increases of $41 million in transmission revenues primarily associated with open access transmission tariff sales, $15 million in cogeneration steam revenues associated with higher natural gas prices at Alabama Power, and $13 million in outdoor lighting sales at Georgia Power, partially offset by a decrease of $26 million resulting from the termination of a transmission service contract and an increase of $21 million in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, both at Georgia Power.
Natural Gas Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$146 | | 30.6 | | $632 | | 26.8 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$234 | | 37.6 | | $1,004 | | 33.5 |
In the third quarter 2021,2022, natural gas revenues were $623$857 million compared to $477$623 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, natural gas revenues were $3.0$4.0 billion compared to $2.4$3.0 billion for the corresponding period in 2020.2021.
Details of the changes in natural gas revenues were as follows:
| | | Third Quarter 2021 | | Year-To-Date 2021 | | Third Quarter 2022 | | Year-To-Date 2022 |
| | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) |
Natural gas revenues – prior year | Natural gas revenues – prior year | $ | 477 | | | $ | 2,362 | | | Natural gas revenues – prior year | $ | 623 | | | $ | 2,994 | | |
Estimated change resulting from – | Estimated change resulting from – | | Estimated change resulting from – | |
Infrastructure replacement programs and base rate changes | Infrastructure replacement programs and base rate changes | 28 | | | 5.9 | % | | 109 | | | 4.6 | % | Infrastructure replacement programs and base rate changes | 54 | | | 8.7 | % | | 186 | | | 6.2 | % |
Gas costs and other cost recovery | Gas costs and other cost recovery | 54 | | | 11.3 | | | 294 | | | 12.5 | | Gas costs and other cost recovery | 172 | | | 27.6 | | | 955 | | | 31.9 | |
| Gas marketing services | | Gas marketing services | 1 | | | 0.2 | | | 14 | | | 0.5 | |
Wholesale gas services | Wholesale gas services | 51 | | | 10.7 | | | 207 | | | 8.8 | | Wholesale gas services | — | | | — | | | (187) | | | (6.2) | |
Other | Other | 13 | | | 2.7 | | | 22 | | | 0.9 | | Other | 7 | | | 1.1 | | | 36 | | | 1.1 | |
Natural gas revenues – current year | Natural gas revenues – current year | $ | 623 | | | 30.6 | % | | $ | 2,994 | | | 26.8 | % | Natural gas revenues – current year | $ | 857 | | | 37.6 | % | | $ | 3,998 | | | 33.5 | % |
Revenues from infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the third quarter and year-to-date 20212022 compared to the corresponding periods in 20202021 primarily due to rate increases at Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investment in infrastructure 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Revenues associated with gas costs and other cost recovery increased in the third quarter and year-to-date 20212022 compared to the corresponding periods in 20202021 primarily due to higher volumes of natural gas sold and higher natural 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.
ForRevenues from gas marketing services increased for year-to-date 2022 compared to the third quartercorresponding period in 2021 the changedue to higher commodity prices and higher sales to commercial customers.
The changes in year-to-date 2022 revenues related to Southern Company Gas' wholesale gas services waswere due to the sale of Sequent on July 1, 2021. The year-to-date 2021 change reflects higher volumes of natural gas sold and higher commercial activities as a result of Winter Storm Uri, partially offset by derivative losses all prior to the sale of Sequent on July 1, 2021. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$2 | | 1.3 | | $77 | | 17.7 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$24 | | 15.6 | | $6 | | 1.2 |
For year-to-date 2021,In the third quarter 2022, other revenues were $513$178 million compared to $436$154 million for the corresponding period in 2020.2021. The increase was primarily due to a $15 million increase in unregulated sales at the traditional electric operating companies primarily associated with power delivery construction and maintenance projects, energy conservation projects, and lighting. Also contributing to the increase was a $9 million increase primarily related to distributed infrastructure projects at PowerSecure.
For year-to-date 2022, other revenues were $519 million compared to $513 million for the corresponding period in 2021. The increase was primarily due to increases of $42$10 million in unregulated sales of productsassociated with power delivery construction and servicesmaintenance projects at Mississippi Power, $9 million in unregulated energy conservation projects at Georgia Power, $8 million in unregulated lighting sales at Alabama Power, and Georgia Power and $26$5 million primarily related to distributeddistribution infrastructure and energy efficiency projects at PowerSecure.PowerSecure, partially offset by a $28 million decrease associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract at Georgia Power.
Fuel and Purchased Power Expenses
| | | Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 | | Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
| | (change in millions) | | (% change) | | (change in millions) | | (% change) | | (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | Fuel | $ | 301 | | | 32.3 | | $ | 740 | | | 33.8 | Fuel | $ | 1,189 | | | 96.4 | | $ | 2,319 | | | 79.1 |
Purchased power | Purchased power | 58 | | | 25.2 | | 101 | | | 16.5 | Purchased power | 357 | | | 124.0 | | 573 | | | 80.5 |
Total fuel and purchased power expenses | Total fuel and purchased power expenses | $ | 359 | | | $ | 841 | | | Total fuel and purchased power expenses | $ | 1,546 | | | $ | 2,892 | | |
In the third quarter 2021,2022, total fuel and purchased power expenses were $1.5$3.1 billion compared to $1.2$1.5 billion for the corresponding period in 2020.2021. The increase was primarily the result of a $370 million increase in the average cost of fuel and purchased power and an $11 million net decrease in the volume of KWHs generated and purchased.
For year-to-date 2021, total fuel and purchased power expenses were $3.6$1.2 billion compared to $2.8 billion for the corresponding period in 2020. The increase was primarily the result of a $690 million increase in the average cost of fuel and purchased power and a $151$310 million netincrease in the volume of KWHs generated and purchased.
For year-to-date 2022, total fuel and purchased power expenses were $6.5 billion compared to $3.6 billion for the corresponding period in 2021. The increase was primarily the result of a $2.4 billion increase in the average cost of fuel and purchased power and a $523 million increase 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 Note 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.
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 2021 | Third Quarter 2020 | Year-To-Date 2021 | Year-To-Date 2020 | | Third Quarter 2022 | Third Quarter 2021 | Year-To-Date 2022 | Year-To-Date 2021 |
Total generation (in billions of KWHs)(a) | Total generation (in billions of KWHs)(a) | 50 | 50 | 136 | 132 | Total generation (in billions of KWHs)(a) | 50 | 50 | 141 | 136 |
Total purchased power (in billions of KWHs) | Total purchased power (in billions of KWHs) | 5 | 5 | 13 | 14 | Total purchased power (in billions of KWHs) | 9 | 5 | 20 | 13 |
Sources of generation (percent)(a) — | Sources of generation (percent)(a) — | | Sources of generation (percent)(a) — | |
Gas | Gas | 48 | 52 | 47 | 53 | Gas | 54 | 48 | 50 | 47 |
Coal | Coal | 26 | 24 | 24 | 17 | Coal | 21 | 26 | 22 | 24 |
Nuclear | Nuclear | 16 | 16 | 17 | 17 | Nuclear | 16 | 16 | 16 | 17 |
Hydro | Hydro | 3 | 2 | 4 | 5 | Hydro | 2 | 3 | 4 | 4 |
Wind, Solar, and Other | Wind, Solar, and Other | 7 | 6 | 8 | 8 | Wind, Solar, and Other | 7 | 7 | 8 | 8 |
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)— | |
Gas(a) | Gas(a) | 3.38 | 1.98 | 2.87 | 1.94 | Gas(a) | 6.75 | 3.38 | 5.42 | 2.87 |
Coal | Coal | 2.82 | 3.01 | 2.84 | 2.96 | Coal | 4.12 | 2.82 | 3.58 | 2.84 |
Nuclear | Nuclear | 0.78 | 0.78 | 0.76 | 0.78 | Nuclear | 0.71 | 0.78 | 0.72 | 0.76 |
Average cost of fuel, generated (in cents per net KWH)(a) | Average cost of fuel, generated (in cents per net KWH)(a) | 2.75 | 2.04 | 2.45 | 1.91 | Average cost of fuel, generated (in cents per net KWH)(a) | 5.05 | 2.75 | 4.07 | 2.45 |
Average cost of purchased power (in cents per net KWH)(b) | Average cost of purchased power (in cents per net KWH)(b) | 6.45 | 4.94 | 5.77 | 4.53 | Average cost of purchased power (in cents per net KWH)(b) | 8.94 | 6.45 | 7.84 | 5.77 |
(a)Third quarter and year-to-date 2021 excludesExcludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel iswas previously 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.
Fuel
In the third quarter 2021,2022, fuel expense was $1.2$2.4 billion compared to $933 million$1.2 billion for the corresponding period in 2020.2021. The increase was primarily due to a 70.7% increase in the average cost of natural gas per KWH generated and a 9.1% increase in the volume of KWHs generated by coal, partially offset by a 91.2% increase in the volume of KWHs generated by hydro, a 6.3% decrease in the average cost of coal per KWH generated, and a 9.4% decrease in the volume of KWHs generated by natural gas.
For year-to-date 2021, fuel expense was $2.9 billion compared to $2.2 billion for the corresponding period in 2020. The increase was primarily due to a 47.9%99.7% increase in the average cost of natural gas per KWH generated, a 43.7%52.7% decrease in the volume of KWHs generated by hydro, a 46.1% increase in the average cost of coal per KWH generated, and a 13.0% increase in the volume of KWHs generated by natural gas, partially offset by a 19.0% decrease in the volume of KWHs generated by coal.
For year-to-date 2022, fuel expense was $5.2 billion compared to $2.9 billion for the corresponding period in 2021. The increase was primarily due to an 88.9% increase in the average cost of natural gas per KWH generated, a 26.1% increase in the average cost of coal per KWH generated, a 9.6% increase in the volume of KWHs generated by natural gas, and an 11.3%8.7% decrease in the volume of KWHs generated by hydro, partially offset by a 9.1%4.1% decrease in the volume of KWHs generated by natural gas and a 4.1% decrease in the average cost of coal per KWH generated.coal.
Purchased Power
In the third quarter 2021,2022, purchased power expense was $288$645 million compared to $230$288 million for the corresponding period in 2020.2021. The increase was primarily due to a 30.6%38.6% increase in the average cost per KWH purchased primarily due to higher natural gas prices.and coal prices and an 87.2% increase in the volume of KWHs purchased.
For year-to-date 2021,2022, purchased power expense was $712 million$1.3 billion compared to $611$712 million for the corresponding period in 2020.2021. The increase was primarily due to a 27.4%35.9% increase in the average cost per KWH purchased primarily due to higher natural gas and coal prices partially offset byand a 3.8% decrease50.9% increase in the volume of KWHs purchased.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Cost of Natural Gas
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$58 | | 81.7 | | $289 | | 44.2 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$165 | | N/M | | $897 | | 95.1 |
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 78% and 85%87% of the total cost of natural gas forin the third quarter and year-to-date 2021,2022, respectively.
In the third quarter 2021,2022, cost of natural gas was $129$294 million compared to $71$129 million for the corresponding period in 2020.2021. For year-to-date 2022, cost of natural gas was $1.8 billion compared to $943 million for the corresponding period in 2021. The increase reflectsincreases reflect higher gas cost recovery driven byas a 103% increaseresult of increases of 104% and 113% in natural gas prices in the third quarter 2021and year-to-date 2022, respectively, compared to the corresponding periodperiods in 2020.2021.
For year-to-date 2021, cost of natural gas was $943 million compared to $654 million for the corresponding period in 2020. The increase reflects higher volumes sold due to colder weather and higher gas cost recovery for year-to-date 2021 compared to the corresponding period in 2020. The increase also reflects a 69% increase in natural gas prices for year-to-date 2021 compared to the corresponding period in 2020.
Cost of Other Sales
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(1) | | (1.4) | | $54 | | 26.9 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$21 | | 29.6 | | $20 | | 7.8 |
For year-to-date 2021,In the third quarter 2022, cost of other sales was $255$92 million compared to $201$71 million for the corresponding period in 2020.2021. The increase was primarily relatesrelated to distributed infrastructure projects at PowerSecure.
For year-to-date 2022, cost of other sales was $275 million compared to $255 million for the corresponding period in 2021. The increase was primarily due to increases of $24$32 million inrelated to distributed infrastructure projects at PowerSecure, $9 million related to unregulated power delivery construction and maintenance projects at Mississippi Power, and $9 million primarily associated with unregulated merchandising and energy services expenses at Alabama Power, partially offset by a decrease of $32 million associated with unregulated power delivery construction and maintenance projects at Georgia Power and $19 million related to distributed infrastructure and energy efficiency projects at PowerSecure.Power.
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$160 | | 12.4 | | $472 | | 12.5 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$101 | | 7.0 | | $364 | | 8.6 |
In the third quarter 2021,2022, other operations and maintenance expenses were $1.4$1.5 billion compared to $1.3$1.4 billion for the corresponding period in 2020. The increase reflects the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic.2021. The increase was primarily associated withdue to increases of $70$49 million in transmission and distribution expenses including $9 million of reliability NDR credits applied in 2020 at Alabama Power, andprimarily related to line maintenance, $18 million in scheduled generation outagecustomer accounts, customer service, and maintenance expenses. Also contributingsales expenses primarily related to the increase was a $15 million loss on a sales-type lease at Southern Power, which was recorded upon commencement of the Garland battery energy storage facility PPA,bad debt expenses, payment convenience fees, and an increase of $14labor, $12 million in compensation and benefit expenses.expenses, and $10 million in generation expenses primarily related to scheduled outage and maintenance costs.
For year-to-date 2021,2022, other operations and maintenance expenses were $4.3$4.6 billion compared to $3.8$4.3 billion for the corresponding period in 2020. The increase reflects the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic. The increase was primarily associated with increases of $122 million in transmission and distribution expenses, including $312021. Excluding $53 million of reliability NDR credits appliedexpenses related to Sequent in 2020 at Alabama Power,2021, other operations and $115 million in compensation and benefit expenses, primarily associated with incentive compensation at Southern Company Gas prior to the sale of Sequent, as well as increases in pension and medical costs. Also contributing to the increase was a $76 million increase in scheduled generation outage and maintenance expenses, a
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
$19maintenance expenses increased $417 million. The increase was primarily due to increases of $135 million increase in compliancetransmission and environmentaldistribution expenses primarily related to line maintenance, $90 million in generation expenses primarily related to scheduled outage and maintenance costs, $38 million in compensation and benefit expenses, $30 million in expenses at the traditional electric operating companies, an $18Southern Company Gas passed through directly to customers primarily related to bad debt, and $21 million decrease in nuclear property insurance refunds,customer accounts, customer service, and a $15 million loss on a sales-type lease at Southern Power, which was recorded upon commencement of the Garland battery energy storage facility PPA.sales expenses primarily related to bad debt expenses, payment convenience fees, and labor.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | 0.8 | | $39 | | 1.5 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$26 | | 2.9 | | $70 | | 2.6 |
In the third quarter 2021,2022, depreciation and amortization was $896$922 million compared to $889$896 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, depreciation and amortization was $2.7$2.73 billion compared to $2.6$2.66 billion for the corresponding period in 2020.2021. The increases for the third quarter and year-to-date 2021were primarily reflect increases of $34 million and $113 million, respectively, in depreciation associated withdue to additional plant in service, partially offset by decreased amortization of regulatory assets related to CCR AROs of $22 million and $66 million, respectively, underincluding continued infrastructure investments at the terms of Georgia Power's 2019 ARP. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and Note 2 to the financial statements under "Georgia Power – Rate Plans – 2019 ARP" in Item 8 of the Form 10-K for additional information regarding Georgia Power's recovery of costs associated with CCR AROs.natural gas distribution utilities.
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$8 | | 2.6 | | $37 | | 4.0 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$40 | | 12.8 | | $104 | | 10.7 |
For year-to-date 2021,In the third quarter 2022, taxes other than income taxes were $969$352 million compared to $932$312 million for the corresponding period in 2020.2021. For year-to-date 2022, taxes other than income taxes were $1.1 billion compared to $969 million for the corresponding period in 2021. The increases primarily reflect an increase primarily reflects increases of $24 million in property taxes primarily resulting from higher assessed valuesmunicipal franchise fees at Georgia Power and $11 millionan 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
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$264 | | N/M | | $623 | | N/M |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(334) | | N/M | | $(790) | | N/M |
N/M - Not meaningful
In the third quarter 2021, Georgia Power recorded anpre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 oftotaling $(70) million and $264 million. For year-to-datemillion in the third quarter 2022 and 2021, respectively, and 2020, estimated probable losses on Plant Vogtle Units 3$(18) million and 4 of $772 million for year-to-date 2022 and $149 million, respectively, were recorded at Georgia Power. These losses2021, respectively. The charges (credits) reflect revisions to the 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 herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.
Gain on Dispositions, Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(105) | | (84.0) | | $(126) | | (70.4) |
In the third quarter 2022, gain on dispositions, net was $20 million compared to $125 million for the corresponding period in 2021. For year-to-date 2022, gain on dispositions, net was $53 million compared to $179 million for the corresponding period in 2021. The decreases primarily reflect a $121 million gain at Southern Company Gas related to the sale of Sequent in the third quarter 2021, partially offset by a $14 million gain recorded in the third quarter
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
(Gain) Loss on Dispositions, Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$125 | | N/M | | $140 | | N/M |
N/M - Not meaningful
In2022 as a result of the third quarter 2021, gain on dispositions, net was $125 million compared to an immaterial gain forearly termination of the corresponding period in 2020. For year-to-date 2021, gain on dispositions, net was $179 million compared to $39 million for the corresponding period in 2020. The increases primarily reflect a $121 million gain at Southern Company Gastransition services agreement related to the 2019 sale of Sequent in the third quarter 2021.Gulf Power. The year-to-date 2021 increase2022 decrease also reflects a $39 million in gainsgain at Southern Power primarily from contributions of wind turbine equipment to various equity method investments in the first quarter 2021, and $13 million in gains at Alabama Power primarily from property sales, partially offset by a $39$17 million gain from sales of integrated transmission system assets at SouthernGeorgia Power related to the sale of Plant Mankato in the first quarter 2020.
2022. See Note (E) to the Condensed Financial Statements under "Southern Power" herein, Note (K) to the Condensed Financial Statements under "Southern Power" and "Southern Company Gas" herein, and Note 15 to the financial statements under "Southern Power – SalesDevelopment Projects" and "Southern Company Gas – Sale of Natural Gas and Biomass Plants"Sequent" in Item 8 of the Form 10-K for additional information.
Allowance for Equity Funds Used During Construction
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$11 | | 28.9 | | $34 | | 32.1 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$10 | | 20.4 | | $23 | | 16.4 |
In the third quarter 2021,2022, allowance for equity funds used during construction was $49$59 million compared to $38$49 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, allowance for equity funds used during construction was $140$163 million compared to $106$140 million for the corresponding period in 2020.2021. The increases were primarily associated with an increase in capital expenditures related to Plant Barry Unit 8 construction at Alabama Power and transmission and distribution projects related to grid modernization at Georgia Power's construction of Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.Power.
Earnings from Equity Method Investments
| Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 | |
Third Quarter 2022 vs. Third Quarter 2021 | | Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | (change in millions) | | (% change) | | (change in millions) | | (% change) | (change in millions) | | (% change) | | (change in millions) | | (% change) |
$(3)(2) | $(3)(2) | | (9.1) | | $(70) | | (66.7) | $(3)(2) | | (6.7) | | $74 | | N/M |
For year-to-date 2021,2022, earnings from equity method investments were $35$109 million compared to $105$35 million for the corresponding period in 2020.2021. The decreaseincrease was primarily due to pre-tax impairment charges in 2021 totaling $84 million at Southern Company Gas related to the PennEast Pipeline project at Southern Company Gas, partially offset by a $22$16 million increasedecrease at Southern Holdings primarily due to a decrease in investment income at Southern Holdings.income. See Notes (C)Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Other Matters"Southern Company Gas" for additional information.
Interest Expense, Net of Amounts Capitalized
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$60 | | 13.3 | | $109 | | 8.1 |
In the third quarter 2022, interest expense, net of amounts capitalized was $511 million compared to $451 million for the corresponding period in 2021. The increase was primarily due to increases of approximately $28 million due to higher average outstanding borrowings and $28 million due to higher interest rates.
For year-to-date 2022, interest expense, net of amounts capitalized was $1.5 billion compared to $1.4 billion for the corresponding period in 2021. The increase was primarily due to higher average outstanding borrowings.
See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1 | | 0.8 | | $124 | | 42.8 |
For year-to-date 2022, other income (expense), net was $414 million compared to $290 million for the corresponding period in 2021. The increase was primarily due to charitable contributions of $101 million at Southern Company Gas"Gas during the first and second quarters of 2021 and a $44 million 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 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$42 | | 11.3 | | $341 | | 62.0 |
In the third quarter 2022, income taxes were $414 million compared to $372 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $891 million compared to $550 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings, partially offset by $113 million of additional tax expense in 2021 resulting from Southern Company Gas' sale of Sequent in the third quarter 2021. The year-to-date 2022 increase was also due to an adjustment in the second quarter 2022 related to a prior year state tax credit carryforward at Georgia Power. See Note (G) to the Condensed Financial Statements herein for additional information.
Net Income (Loss) Attributable to Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | N/M | | $(28) | | N/M |
Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to Southern Power's tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to Southern Power's equity partners.
For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to Southern Power's tax equity partners, partially offset by loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021 and higher income allocations to Southern Power's equity partners.
See Notes 9 and 15 to the financial statements under "Lessor" and "Southern Company Gas,Power," respectively, in Item 8 of the Form 10-K for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Alabama Power
Net Income
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$26 | | 5.2 | | $67 | | 5.6 |
Alabama Power's net income after dividends on preferred stock in the third quarter 2022 was $525 million compared to $499 million for the corresponding period in 2021. Alabama Power's net income after dividends on preferred stock for year-to-date 2022 was $1.26 billion compared to $1.19 billion for the corresponding period in 2021. These increases were primarily due to an increase in retail revenues associated with warmer weather in Alabama Power's service territory in 2022 compared to the corresponding periods in 2021 and sales growth, partially offset by higher non-fuel operations and maintenance costs.
Retail Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$357 | | 21.6 | | $658 | | 15.1 |
In the third quarter 2022, retail revenues were $2.01 billion compared to $1.65 billion for the corresponding period in 2021. For year-to-date 2022, retail revenues were $5.02 billion compared to $4.36 billion for the corresponding period in 2021.
Details of the changes in retail revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 | | Year-To-Date 2022 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail – prior year | $ | 1,651 | | | | | $ | 4,357 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 3 | | | 0.2 | % | | 7 | | | 0.2 | % |
Sales growth | 20 | | | 1.2 | | | 53 | | | 1.2 | |
Weather | 25 | | | 1.5 | | | 88 | | | 2.0 | |
Fuel and other cost recovery | 309 | | | 18.7 | | | 510 | | | 11.7 | |
Retail – current year | $ | 2,008 | | | 21.6 | % | | $ | 5,015 | | | 15.1 | % |
Revenues attributable to changes in sales increased inthe third quarter and year-to-date 2022 when compared to the corresponding periods in 2021. Weather-adjusted residential KWH sales decreased 0.4% and 0.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales decreased 0.7% in the third quarter 2022 when compared to the corresponding period in 2021 primarily due to decreased customer usage. Weather-adjusted commercial KWH sales were flat for year-to-date 2022 when compared to the corresponding period in 2021. Industrial KWH sales increased 2.9% and 2.3% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to increases in the forest product and pipeline sectors, partially offset by decreases in the chemicals sector.
Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2022 when compared to the corresponding periods in 2021 primarily due to increases in the volume of KWHs generated and the average cost of fuel.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Impairment of Leveraged Leases
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$— | | N/M | | $(147) | | (95.5) |
N/M - Not meaningful
For year-to-date 2020, impairment charges of $154 million were recorded related to leveraged lease investments at Southern Holdings. See Note (K) to the Condensed Financial Statements under "Southern Company" and "Assets Held for Sale" herein and Note 3 to the financial statements under "Other Matters – Southern Company" in Item 8 of the Form 10-K for additional information.
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$18 | | 15.9 | | $(22) | | (6.9) |
In the third quarter 2021, other income (expense), net was $131 million compared to $113 million for the corresponding period in 2020. The increase was primarily due to a $36 million increase in non-service cost-related retirement benefits income, partially offset by a $12 million gain recorded by Southern Power in the third quarter 2020 associated with the Roserock solar facility litigation.
For year-to-date 2021, other income (expense), net was $297 million compared to $319 million for the corresponding period in 2020. The decrease was primarily due to $101 million in charitable contributions at Southern Company Gas in the second quarter 2021, a $14 million decrease in interest income, and a $12 million gain recorded by Southern Power in the third quarter 2020 associated with the Roserock solar facility litigation, largely offset by a $107 million 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 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$79 | | 27.0 | | $107 | | 24.2 |
In the third quarter 2021, income taxes were $372 million compared to $293 million for the corresponding period in 2020. For year-to-date 2021, income taxes were $550 million compared to $443 million for the corresponding period in 2020. The increases were primarily due to $85 million in additional tax expense resulting from changes in state apportionment rates as a result of Southern Company Gas' sale of Sequent in the third quarter 2021 and a $30 million increase in a valuation allowance on certain state tax credit carryforwards at Georgia Power, partially offset by lower pre-tax earnings primarily resulting from higher charges in 2021 compared to the corresponding periods in 2020 associated with the construction of Plant Vogtle Units 3 and 4 at Georgia Power. The increase for year-to-date 2021 also reflects the tax impact of the second quarter 2020 charge to earnings associated with a leveraged lease investment.
See Notes (G) and (K) to the Condensed Financial Statements herein and Note 3 to the financial statements under "Other Matters – Southern Company" in Item 8 of the Form 10-K for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Net Income (Loss) Attributable to Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(23) | | (82.1) | | $(30) | | N/M |
N/M - Not meaningful
Substantially all noncontrolling interests relate to renewable projects at Southern Power. In the third quarter 2021, net income attributable to noncontrolling interests was $5 million compared to $28 million for the corresponding period in 2020. For year-to-date 2021, net loss attributable to noncontrolling interests was $27 million compared to net income of $3 million for the corresponding period in 2020. These changes were primarily due to loss allocations of $13 million related to the commencement of the Garland battery energy storage facility PPA in the third quarter 2021 and lower income allocations to solar equity partners and higher HLBV loss allocations to Southern Power's wind tax equity partners, including new partnerships entered into subsequent to the third quarter 2020, totaling $10 million and $16 million for the third quarter and year-to-date 2021, respectively. See Notes (D) and (K) to the Condensed Financial Statements under "Lease Receivables" and "Southern Power," respectively, herein for additional information.
Alabama Power
Net Income
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$55 | | 12.4 | | $167 | | 16.3 |
Alabama Power's net income after dividends on preferred stock for the third quarter 2021 was $499 million compared to $444 million for the corresponding period in 2020. Alabama Power's net income after dividends on preferred stock for year-to-date 2021 was $1.19 billion compared to $1.02 billion for the corresponding period in 2020. The increases were primarily due to an increase in retail revenues associated with a Rate RSE adjustment effective in January 2021 and higher customer usage. Also contributing to the increases were increased sales of unregulated products and services and additional wholesale capacity revenues related to a power sales agreement that began in September 2020. The third quarter 2021 increase was partially offset by a decrease in revenues associated with milder weather in the third quarter 2021 compared to the corresponding period in 2020. Additionally, the third quarter and year-to-date 2021 increases were partially offset by an increase in operations and maintenance expenses and depreciation.
Retail Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$76 | | 4.8 | | $354 | | 8.8 |
In the third quarter 2021, retail revenues were $1.65 billion compared to $1.58 billion for the corresponding period in 2020. For year-to-date 2021, retail revenues were $4.36 billion compared to $4.00 billion for the corresponding period in 2020.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Details of the changes in retail revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | | Year-To-Date 2021 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail – prior year | $ | 1,575 | | | | | $ | 4,003 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 57 | | | 3.6 | % | | 172 | | | 4.3 | % |
Sales growth | 30 | | | 1.9 | | | 43 | | | 1.1 | |
Weather | (28) | | | (1.8) | | | 14 | | | 0.3 | |
Fuel and other cost recovery | 17 | | | 1.1 | | | 125 | | | 3.1 | |
Retail – current year | $ | 1,651 | | | 4.8 | % | | $ | 4,357 | | | 8.8 | % |
Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 2020 primarily due to a Rate RSE increase effective January 1, 2021. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 2020. Weather-adjusted residential KWH sales decreased 0.1% and 1.3% in the third quarter and year-to-date 2021, respectively, when compared to the corresponding periods in 2020 primarily due to safer-at-home guidelines in effect during 2020. Weather-adjusted commercial KWH sales increased 3.3% and 3.0% in the third quarter and year-to-date 2021, respectively, and industrial KWH sales increased 4.6% and 2.7% in the third quarter and year-to-date 2021, respectively, when compared to the corresponding periods in 2020, primarily due to the negative impacts of the COVID-19 pandemic on energy sales in 2020.
Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 2020 primarily due to increases in generation and the average cost of fuel. Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the NDR. 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
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$34 | | 46.6 | | $101 | | 54.9 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$143 | | N/M | | $237 | | 83.2 |
In the third quarter 2022, wholesale revenues from sales to non-affiliates were $250 million compared to $107 million for the corresponding period in 2021. For year-to-date 2022, wholesale revenues from sales to non-affiliates were $522 million compared to $285 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 75.9% and 41.8%, respectively, in the price of energy due to higher natural gas prices, as well as increases of 32.3% and 29.3%, respectively, in KWH sales as a result of increased opportunity sales due to warmer weather in the third quarter and year-to-date 2022 compared to the corresponding periods in 2021.
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.
In the third quarter 2021, wholesale revenues from sales to non-affiliates were $107 million compared to $73 million for the corresponding period in 2020. For year-to-date 2021, wholesale revenues from sales to non-affiliates were $285 million compared to $184 million for the corresponding period in 2020. The third quarter and year-to-date 2021 increases consisted of increases in capacity revenues of $12 million and $47 million, respectively, primarily related to a power sales agreement that began in September 2020 and increases in energy revenues of $22 million and $54 million, respectively, primarily due to higher natural gas prices.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Wholesale Revenues – Affiliates
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$42 | | 381.8 | | $73 | | 202.8 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$17 | | 32.1 | | $61 | | 56.0 |
In the third quarter 2022, wholesale revenues from sales to affiliates were $70 million compared to $53 million for the corresponding period in 2021. The increase was primarily due to a 142.2% increase in the price of energy due to higher natural gas prices, partially offset by a 45.7% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.
For year-to-date 2022, wholesale revenues from sales to affiliates were $170 million compared to $109 million for the corresponding period in 2021. The increase was primarily due to an 84.7% increase in the price of energy due to higher natural gas prices, partially offset by a 15.3% decrease in KWH sales due to the availability of lower cost Southern Company system resources compared to Alabama Power's generation.
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.
In the third quarter 2021, wholesale revenues from sales to affiliates were $53 million compared to $11 million for the corresponding period in 2020. For year-to-date 2021, wholesale revenues from sales to affiliates were $109 million compared to $36 million for the corresponding period in 2020. The third quarter and year-to-date 2021 increases were primarily due to increases of 186.2% and 85.4%, respectively, in KWH sales due to increased demand for Alabama Power's available lower cost generation compared to the corresponding periods in 2020 and increases of 73.2% and 61.0%, respectively, in the price of energy as a result of higher natural gas prices.
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$23 | | 32.9 | | $46 | | 20.7 |
In the third quarter 2021, other revenues were $93 million compared to $70 million for the corresponding period in 2020. For year-to-date 2021, other revenues were $268 million compared to $222 million for the corresponding period in 2020. The third quarter and year-to-date 2021 increases were primarily due to increases of $10 million and $25 million, respectively, in unregulated sales of products and services, increases of $5 million and $11 million, respectively, in customer fees largely resulting from the COVID-19 pandemic-related temporary suspensions of disconnections and late fees in 2020, and increases of $4 million and $7 million, respectively, in cogeneration steam revenue associated with higher natural gas prices. In addition, the third quarter 2021 increase included a $4 million increase in transmission revenues.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 67 | | | 21.9 | | | $ | 206 | | | 28.6 | |
Purchased power – non-affiliates | 12 | | | 18.8 | | | 20 | | | 13.1 | |
Purchased power – affiliates | 1 | | | 2.3 | | | 21 | | | 22.6 | |
Total fuel and purchased power expenses | $ | 80 | | | | | $ | 247 | | | |
In the third quarter 2021, total fuel and purchased power expenses were $494 million compared to $414 million for the corresponding period in 2020. The increase was primarily due to an $85 million increase in the average cost of fuel and purchased power, partially offset by a $5 million net decrease related to the volume of KWHs generated and purchased.
For year-to-date 2021, total fuel and purchased power expenses were $1.21 billion compared to $0.97 billion for the corresponding period in 2020. The increase was primarily due to a $151 million increase in the average cost of fuel and purchased power and a $96 million net increase related to the volume of KWHs generated and purchased.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$23 | | 24.7 | | $48 | | 17.9 |
In the third quarter 2022, other revenues were $116 million compared to $93 million for the corresponding period in 2021. For year-to-date 2022, other revenues were $316 million compared to $268 million for the corresponding period in 2021. The third quarter and year-to-date 2022 increases were primarily due to increases of $7 million and $15 million, respectively, in cogeneration steam revenue associated with higher natural gas prices, $6 million and $13 million, respectively, in transmission revenues primarily due to open access transmission tariff sales, and $3 million and $8 million, respectively, in unregulated lighting sales. The year-to-date 2022 increase also included a $5 million increase in energy services revenue.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 293 | | | 78.6 | | | $ | 472 | | | 50.9 | |
Purchased power – non-affiliates | 109 | | | 143.4 | | | 174 | | | 100.6 | |
Purchased power – affiliates | 68 | | | 151.1 | | | 146 | | | 128.1 | |
Total fuel and purchased power expenses | $ | 470 | | | | | $ | 792 | | | |
In the third quarter 2022, total fuel and purchased power expenses were $964 million compared to $494 million for the corresponding period in 2021. The increase was primarily due to a $257 million increase in the cost of fuel and purchased power and a $213 million increase related to the volume of KWHs generated and purchased.
For year-to-date 2022, total fuel and purchased power expenses were $2.01 billion compared to $1.21 billion for the corresponding period in 2021. The increase was primarily due to a $518 million increase in the cost of fuel and purchased power and a $274 million increase related to the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings, since 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Details of Alabama Power's generation and purchased power were as follows:
| | | Third Quarter 2021 | | Third Quarter 2020 | | Year-To-Date 2021 | | Year-To-Date 2020 | | Third Quarter 2022 | | Third Quarter 2021 | | Year-To-Date 2022 | | Year-To-Date 2021 |
Total generation (in billions of KWHs)(a) | Total generation (in billions of KWHs)(a) | 16 | | 15 | | 45 | | 41 | Total generation (in billions of KWHs)(a) | 16 | | 16 | | 45 | | 45 |
Total purchased power (in billions of KWHs) | Total purchased power (in billions of KWHs) | 2 | | 2 | | 5 | | 5 | Total purchased power (in billions of KWHs) | 4 | | 2 | | 9 | | 5 |
Sources of generation (percent)(a) — | Sources of generation (percent)(a) — | | | | Sources of generation (percent)(a) — | | | |
Coal | Coal | 50 | | 47 | | 47 | | 38 | Coal | 47 | | 50 | | 45 | | 47 |
Nuclear | Nuclear | 24 | | 25 | | 25 | | 28 | Nuclear | 22 | | 24 | | 24 | | 25 |
Gas | Gas | 18 | | 24 | | 19 | | 23 | Gas | 28 | | 18 | | 23 | | 19 |
Hydro | Hydro | 8 | | 4 | | 9 | | 11 | Hydro | 3 | | 8 | | 8 | | 9 |
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) — | | |
Coal | Coal | 2.85 | | 2.86 | | 2.78 | | 2.78 | Coal | 3.89 | | 2.85 | | 3.40 | | 2.78 |
Nuclear | Nuclear | 0.73 | | 0.76 | | 0.71 | | 0.76 | Nuclear | 0.67 | | 0.73 | | 0.67 | | 0.71 |
Gas(a) | Gas(a) | 3.03 | | 1.80 | | 2.68 | | 1.96 | Gas(a) | 6.55 | | 3.03 | | 5.20 | | 2.68 |
Average cost of fuel, generated (in cents per net KWH)(a) | Average cost of fuel, generated (in cents per net KWH)(a) | 2.33 | | 2.04 | | 2.20 | | 1.93 | Average cost of fuel, generated (in cents per net KWH)(a) | 3.91 | | 2.33 | | 3.13 | | 2.20 |
Average cost of purchased power (in cents per net KWH)(b) | Average cost of purchased power (in cents per net KWH)(b) | 7.96 | | 5.12 | | 6.70 | | 4.76 | Average cost of purchased power (in cents per net KWH)(b) | 8.55 | | 7.96 | | 8.33 | | 6.70 |
(a)Third quarter and year-to-date 2021 excludesExcludes Central Alabama Generating Station KWHs and associated cost of fuel through July 12, 2022 as its fuel iswas previously 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 third quarter 2021,2022, fuel expense was $373$666 million compared to $306$373 million for the corresponding period in 2020.2021. The increase was primarily due to a 68.3% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, and a 15.9% increase in the volume of KWHs generated by coal, partially offset by a 121.6% increase in the volume of KWHs generated by hydro and a 19.8% decrease in the volume of KWHs generated by natural gas.
For year-to-date 2021, fuel expense was $927 million compared to $721 million for the corresponding period in 2020. The increase was primarily due to a 36.7%116.2% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 31.7%36.5% increase in the volumeaverage cost of KWHscoal per KWH generated, by coal, and an 8.1%a 56.8% decrease in the volume of KWHs generated by hydro partially offsetfacilities as a result of less rainfall in the third quarter 2022 compared to the corresponding period in 2021, and a 46.9% increase in the volume of KWHs generated by natural gas.
For year-to-date 2022, fuel expense was $1.4 billion compared to $0.9 billion for the corresponding period in 2021. The increase was primarily due to a 9.3%94.0% increase in the average cost of natural gas per KWH generated, which excludes tolling agreements, a 22.3% increase in the average cost of coal per KWH generated, an 18.3% increase in the volume of KWHs generated by natural gas, and an 8.5% decrease in the volume of KWHs generated by natural gas.hydro facilities as a result of less rainfall for year-to-date 2022 compared to the corresponding period in 2021.
Purchased Power – Non-Affiliates
In the third quarter 2021,2022, purchased power expense from non-affiliates was $76$185 million compared to $64$76 million for the corresponding period in 2020. 2021. The increase was primarily due to a 193.7% increase in the volume of KWHs purchased as a result of warmer weather in the third quarter 2022 compared to the corresponding period in 2021, partially offset by an 11.2% decrease in the average cost per KWH purchased due to fixed capacity costs allocated across a higher level of generation.
For year-to-date 2021,2022, purchased power expense from non-affiliates was $173$347 million compared to $153$173 million for the corresponding period in 2020. These increases for the third quarter and year-to-date 2021 were2021. The increase was primarily due to increases of 20.6% and 16.1%, respectively,a 100.5% increase in the amountvolume of energyKWHs purchased dueas a result of warmer weather for year-to-date 2022 compared to a new PPA that beganthe corresponding period in September 2020 and increases of 12.3% and 14.0%, respectively,2021, as well as an 8.2% increase in the average cost of purchased power per KWH as a result ofpurchased due to higher natural gas and coal prices.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Purchased Power – Affiliates
For year-to-date 2021,In the third quarter 2022, purchased power expense from affiliates was $114$113 million compared to $93$45 million for the corresponding period in 2020.2021. The year-to-date 2021 increase was primarily due to an 88.0%84.5% increase in the average cost of purchased power per KWH as a result ofpurchased due to higher natural gas and coal prices partially offset byand a 35.0% decrease36.4% increase in the volume of KWHKWHs purchased as a result of increased generationwarmer weather in the third quarter 2022 compared to the corresponding period in 2020.2021.
For year-to-date 2022, purchased power expense from affiliates was $260 million compared to $114 million for the corresponding period in 2021. The increase was primarily due to a 71.0% increase in the average cost per KWH purchased due to higher natural gas and coal prices and a 33.6% increase in the volume of KWHs purchased as a result of warmer weather for year-to-date 2022 compared to the corresponding period in 2021.
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.
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$14 | | 3.6 | | $97 | | 9.0 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$17 | | 4.2 | | $95 | | 8.1 |
In the third quarter 2021,2022, other operations and maintenance expenses were $401$418 million compared to $387$401 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, other operations and maintenance expenses were $1.18$1.27 billion compared to $1.08$1.18 billion for the corresponding period in 2020.2021. The increases reflectfor the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic. The third quarter and year-to-date 2021 increases2022 were primarily due to increases of $15$18 million and $49 million, respectively, in generation expenses associated with scheduled outages and Rate CNP Compliance-related expenses primarily related to the addition of new environmental systems in 2021. Also contributing to the third quarter and year-to-date 2021 increases were increases of $6 million and $23 million, respectively, in compensation and benefit expenses and $3 million and $10 million, respectively, related to unregulated services, as well as $9 million and $31$41 million, respectively, in transmission and distribution expenses primarily associated with line maintenance and $6 million and $12 million, respectively, in customer accounts, customer service, and sales expenses related to reliability NDR credits applied in 2020.primarily associated with labor and bad debt expense. The increase for the third quarter and year-to-date 2021 increases were2022 was partially offset by decreases of $22a $15 million decrease in generation expenses primarily associated with scheduled outages and $30maintenance. The year-to-date 2022 increase also included a $24 million respectively,increase in bad debtgeneration expenses primarily associated with scheduled outages and maintenance and 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 AmortizationAllowance for Equity Funds Used During Construction
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$9 | | 4.4 | | $34 | | 5.6 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$4 | | 28.6 | | $13 | | 34.2 |
In the third quarter 2021, depreciation and amortizationFor year-to-date 2022, allowance for equity funds used during construction was $214 $51 million compared to $205 million in the corresponding period in 2020. For year-to-date 2021, depreciation and amortization was $640 million compared to $606$38 million for the corresponding period in 2020. These increases were 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-K2021. The increase for additional information.
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(1) | | (3.3) | | $15 | | 19.2 |
For year-to-date 2021, other income (expense), net was $93 million compared to $78 million for the corresponding period in 2020. The increase2022 was primarily due to an increase in non-service cost-related retirement benefits income. See Note (H)capital expenditures related to the Condensed Financial Statements herein for additional information.Plant Barry Unit 8 construction.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest Expense, Net of Amounts Capitalized
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$14 | | 16.7 | | $26 | | 10.3 |
In the third quarter 2022, interest expense, net of amounts capitalized was $98 million compared to $84 million for the corresponding period in 2021. For year-to-date 2022, interest expense, net of amounts capitalized was $278 million compared to $252 million for the corresponding period in 2021. The increases were primarily due to higher average outstanding borrowings. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings.
Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$22 | | 16.9 | | $59 | | 19.2 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$14 | | 9.2 | | $28 | | 7.7 |
In the third quarter 2021,2022, income taxes were $152$166 million compared to $130$152 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, income taxes were $366$394 million compared to $307$366 million for the corresponding period in 2020.2021. The increases were primarily due to higher pre-tax earnings.
Georgia Power
Net Income
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(237) | | (30.7) | | $(381) | | (27.0) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$322 | | 60.1 | | $821 | | 79.7 |
Georgia Power's net income forin the third quarter 20212022 was $536$858 million compared to $773$536 million for the corresponding period in 2020. The decrease was primarily due to a $197 million after-tax charge in the third quarter 2021 related to the construction of Plant Vogtle Units 3 and 4, higher non-fuel operations and maintenance costs, and lower retail revenues associated with milder weather in the third quarter 2021 as compared to the corresponding period in 2020, partially offset by sales growth.
2021. For year-to-date 2021,2022 net income was $1.03$1.85 billion compared to $1.41$1.03 billion for the corresponding period in 2020.2021. The decrease wasincreases were primarily due to a $465decreases of $249 million increaseand $589 million in the third quarter and year-to-date 2022, respectively, in after-tax charges related to the construction of Plant Vogtle Units 3 and 4. Also contributing to the decrease were4 and increases in retail revenues associated with rates and pricing and sales growth, partially offset by higher non-fuel operations and maintenance costs, partially offset by higher retail revenues associated with sales growth.costs. The increase for year-to-date 2022 was also due to warmer weather in Georgia Power's service territory compared to the corresponding period in 2021.
See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4.
Retail Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$217 | | 8.9 | | $595 | | 10.1 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1,051 | | 39.6 | | $2,164 | | 33.5 |
In the third quarter 2021,2022, retail revenues were $2.65$3.70 billion compared to $2.44$2.65 billion for the corresponding period in 2020.2021. For year-to-date 2021,2022, retail revenues were $6.47$8.63 billion compared to $5.87$6.47 billion for the corresponding period in 2020.2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Details of the changes in retail revenues were as follows:
| | | Third Quarter 2021 | | Year-To-Date 2021 | | Third Quarter 2022 | | Year-To-Date 2022 |
| | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) |
Retail – prior year | Retail – prior year | $ | 2,435 | | | $ | 5,870 | | | Retail – prior year | $ | 2,652 | | | $ | 6,465 | | |
Estimated change resulting from – | Estimated change resulting from – | | Estimated change resulting from – | |
Rates and pricing | Rates and pricing | 10 | | | 0.4 | % | | 30 | | | 0.5 | % | Rates and pricing | 157 | | | 5.9 | % | | 442 | | | 6.8 | % |
Sales growth | Sales growth | 51 | | | 2.1 | | | 110 | | | 1.9 | | Sales growth | 54 | | | 2.0 | | | 101 | | | 1.6 | |
Weather | Weather | (63) | | | (2.6) | | | (4) | | | (0.1) | | Weather | (1) | | | — | | | 89 | | | 1.4 | |
Fuel cost recovery | Fuel cost recovery | 219 | | | 9.0 | | | 459 | | | 7.8 | | Fuel cost recovery | 841 | | | 31.7 | | | 1,532 | | | 23.7 | |
Retail – current year | Retail – current year | $ | 2,652 | | | 8.9 | % | | $ | 6,465 | | | 10.1 | % | Retail – current year | $ | 3,703 | | | 39.6 | % | | $ | 8,629 | | | 33.5 | % |
Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 20212022 when compared to the corresponding periods in 2020.2021. The increases were primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, and fixed residential customer bill programs, partially offset by a decreasebase tariff increases in accordance with the NCCR tariff effective January 1, 2021. The increase in the third quarter 2021 was also partially offset by2019 ARP, and pricing effects associated with decreased residential customer usage. The increase for year-to-date 2021 also reflects increased ECCR tariff revenues associated with higher KWH sales. See Note (B)2 to the Condensed Financial Statementsfinancial statements under "Georgia Power – Nuclear Construction – Regulatory Matters" hereinRate Plans" in Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales increased in the third quarter and year-to-date 20212022 when compared to the corresponding periods in 2020.2021. Weather-adjusted residential KWH sales increased 0.7% in both the third quarter2.7% and year-to-date 2021 when compared to the corresponding periods in 2020 primarily due to customer growth, largely offset by decreased customer usage, primarily due to shelter-in-place orders in effect during 2020. Weather-adjusted commercial KWH sales increased 4.8% and 3.4%1.0% in the third quarter and year-to-date 2021, respectively, and weather-adjusted industrial KWH sales increased 5.5% and 6.7% in the third quarter and year-to-date 2021,2022, respectively, when compared to the corresponding periods in 2020,2021 primarily due to customer growth. The increase for the negativethird quarter 2022 also reflects increased customer usage. Weather-adjusted commercial KWH sales increased 3.2% and 2.9% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 primarily due to impacts on customer usage from increased activity outside the home as customers return to pre-pandemic levels of activity, as well as customer growth. Weather-adjusted industrial KWH sales increased 1.8% and 2.8% in the COVID-19 pandemic on energy salesthird quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2020.2021 primarily due to increases in the pipeline, electronic, and paper sectors, partially offset by decreases in the chemicals and textiles sectors.
Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues increased in the third quarter and year-to-date 20212022 when compared to the corresponding periods in 20202021 due to higher fuel and purchased power costs. Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Fuel Cost Recovery" for additional information.
Wholesale Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$29 | | 85.3 | | $58 | | 68.2 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(7) | | (11.1) | | $43 | | 30.1 |
In the third quarter 2022, wholesale revenues were $56 million compared to $63 million for the corresponding period in 2021. The decrease was primarily due to a $22 million decrease in KWH sales associated with lower market demand and a $3 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021, largely offset by an increase of $20 million related to the average cost of fuel primarily due to higher natural gas and coal prices.
For year-to-date 2022, wholesale revenues were $186 million compared to $143 million for the corresponding period in 2021. The increase was primarily due to an increase of $60 million related to the average cost of fuel primarily due to higher natural gas and coal prices, partially offset by a $10 million decrease in KWH sales
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
associated with lower market demand and an $8 million decrease in capacity revenues due to the expiration of a non-affiliate PPA in 2021.
Wholesale revenues from sales to non-affiliates consist of PPAs and short-term opportunity sales. Wholesale revenues from PPAs have both capacity and energy components. Wholesale capacity revenues from PPAs are recognized in amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(11) | | (7.8) | | $(39) | | (8.8) |
In the third quarter 2021, wholesale2022, other revenues were $63$130 million compared to $34$141 million for the corresponding period in 2020.2021. For year-to-date 2021, wholesale2022, other revenues were $143$403 million compared to $85$442 million for the corresponding period in 2020.2021. The decreases for the third quarter and year-to-date 2022 were primarily due to increases of $14 million and $21 million, respectively, in realized losses associated with price stability products for retail customers on variable demand-driven pricing tariffs, decreases of $9 million and $12 million, respectively, from retail solar programs as a result of higher avoided cost credits to customers, and $6 million and $26 million, respectively, resulting from the termination of a transmission service contract. These reductions were partially offset by increases of $8 million and $22 million, respectively, associated with unregulated outdoor lighting sales and energy conservation projects and $6 million and $16 million, respectively, in open access transmission tariff sales. Also contributing to the decrease for year-to-date 2022 was a decrease of $28 million associated with the timing of revenue recognition for a large, ongoing power delivery construction and maintenance contract.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 vs. Third Quarter 2021 | | Year-to-Date 2022 vs. Year-to-Date 2021 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 409 | | | 94.7 | | | $ | 799 | | | 73.4 | |
Purchased power – non-affiliates | 131 | | | 75.7 | | | 239 | | | 51.8 | |
Purchased power – affiliates | 283 | | | 98.3 | | | 527 | | | 92.0 | |
Total fuel and purchased power expenses | $ | 823 | | | | | $ | 1,565 | | | |
In the third quarter 2022, total fuel and purchased power expenses were $1.7 billion compared to $0.9 billion for the corresponding period in 2021. For year-to-date 2022, total fuel and purchased power expenses were $3.7 billion compared to $2.1 billion for the corresponding period in 2021. The increases for the third quarter and year-to-date 20212022 were primarily due to increases of 25.1%$0.8 billion and 15.1%, respectively, in KWH sales as a result of higher market demand and higher natural gas prices.
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(7) | | (4.7) | | $26 | | 6.3 |
For year-to-date 2021, other revenues were $442 million compared to $416 million for the corresponding period in 2020. The increase for year-to-date 2021 was primarily due to increases of $37 million in unregulated sales associated with power delivery construction and maintenance projects and outdoor lighting and $13 million in customer fees largely resulting from the COVID-19 pandemic-related temporary suspension of disconnections and late fees in 2020. These increases were partially offset by decreases of $11 million associated with the timing of certain unregulated energy conservation projects, $4 million in pole attachment revenues, and $3 million in solar application fees.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 64 | | | 17.4 | | | $ | 262 | | | 31.7 | |
Purchased power – non-affiliates | 27 | | | 18.5 | | | 52 | | | 12.7 | |
Purchased power – affiliates | 146 | | | 102.8 | | | 180 | | | 45.8 | |
Total fuel and purchased power expenses | $ | 237 | | | | | $ | 494 | | | |
In the third quarter 2021, total fuel and purchased power expenses were $893 million compared to $656 million for the corresponding period in 2020. For year-to-date 2021, total fuel and purchased power expenses were $2.12$1.4 billion, compared to $1.63 billion for the corresponding period in 2020. The increases for the third quarter and year-to-date 2021 were due to increases of $206 million and $409 million, respectively, related to the average cost of fuel
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
and purchased power and net increases of $31$30 million and $85$158 million, respectively, related to the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See Note 2 to the financial statements under "Georgia Power – Fuel Cost Recovery" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Fuel Cost Recovery" for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Details of Georgia Power's generation and purchased power were as follows:
| | | Third Quarter 2021 | | Third Quarter 2020 | | Year-To-Date 2021 | | Year-To-Date 2020 | | Third Quarter 2022 | | Third Quarter 2021 | | Year-To-Date 2022 | | Year-To-Date 2021 |
Total generation (in billions of KWHs) | Total generation (in billions of KWHs) | 16 | | 17 | | 46 | | 42 | Total generation (in billions of KWHs) | 15 | | 16 | | 45 | | 46 |
Total purchased power (in billions of KWHs) | Total purchased power (in billions of KWHs) | 10 | | 8 | | 23 | | 25 | Total purchased power (in billions of KWHs) | 11 | | 10 | | 27 | | 23 |
Sources of generation (percent) — | Sources of generation (percent) — | | | | Sources of generation (percent) — | |
Gas | Gas | 45 | | 48 | | 46 | | 53 | Gas | 53 | | 45 | | 48 | | 46 |
| Nuclear | Nuclear | 24 | | 24 | | 26 | | 27 | Nuclear | 28 | | 24 | | 26 | | 26 |
Coal | Coal | 28 | | 26 | | 24 | | 15 | Coal | 16 | | 28 | | 22 | | 24 |
Hydro and solar | 3 | | 2 | | 4 | | 5 | |
Hydro and other | | Hydro and other | 3 | | 3 | | 4 | | 4 |
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) — | |
Gas | Gas | 3.28 | | 2.14 | | 2.84 | | 2.12 | Gas | 6.10 | | 3.28 | | 4.99 | | 2.84 |
Coal | | Coal | 4.73 | | 2.73 | | 3.84 | | 2.89 |
Nuclear | Nuclear | 0.83 | | 0.81 | | 0.80 | | 0.81 | Nuclear | 0.75 | | 0.83 | | 0.76 | | 0.80 |
Coal | 2.73 | | 3.19 | | 2.89 | | 3.31 | |
| Average cost of fuel, generated (in cents per net KWH) | Average cost of fuel, generated (in cents per net KWH) | 2.51 | | 2.09 | | 2.30 | | 1.93 | Average cost of fuel, generated (in cents per net KWH) | 4.32 | | 2.51 | | 3.56 | | 2.30 |
Average cost of purchased power (in cents per net KWH)(*) | Average cost of purchased power (in cents per net KWH)(*) | 5.24 | | 3.76 | | 4.80 | | 3.50 | Average cost of purchased power (in cents per net KWH)(*) | 10.14 | | 5.24 | | 8.00 | | 4.80 |
(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.
Fuel
In the third quarter 2021,2022, fuel expense was $432$841 million compared to $368$432 million for the corresponding period in 2020. For year-to-date 2021, fuel expense2021. The increase was $1.09 billion compared to $0.83 billion for the corresponding period in 2020. The increases for the third quarter and year-to-date 2021 were primarily due to increases of 53.3%86.0% and 34.0%, respectively,73.3% in the average cost of natural gas per KWH generated partially offset by decreases of 14.4%natural gas and 12.7%,coal, respectively, in the average cost of coal per KWH generated and decreases ofan 11.1% and 6.0%, respectively,increase in the volume of KWHs generated by natural gas. Also contributinggas, partially offset by a 44.2% decrease in the volume of KWHs generated by coal.
For year-to-date 2022, fuel expense was $1.89 billion compared to $1.09 billion for the corresponding period in 2021. The increase for year-to-date 2021 was primarily due to increases of 75.7% and 32.9% in the average cost per KWH generated by natural gas and coal, respectively, partially offset by a 76.1% increase9.1% decrease in the volume of KWHs generated by coal.
Purchased Power – Non-Affiliates
In the third quarter 2021,2022, purchased power expense from non-affiliates was $173$304 million compared to $146$173 million infor the corresponding period in 2020.2021. For year-to-date 2021,2022, purchased power expense from non-affiliates was $461$700 million compared to $409$461 million infor the corresponding period in 2020.2021. The increases for the third quarter and year-to-date 20212022 were primarily due to increases of 28.5%50.5% and 24.2%39.4%, respectively, in the volume of KWHs purchased primarily due to less available Georgia Power-owned coal generation and increases of 53.1% and 31.6%, respectively, in the average cost per KWH purchased primarily due to higher natural gas prices, partially offset by decreases of 5.6% and 7.7%, respectively, in the volume of KWHs purchased as Georgia Power units and Southern Company system resources generally dispatched at a lower cost than available market resources.coal prices.
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 third quarter 2021, purchased power expense from affiliates was $288 million compared to $142 million in the corresponding period in 2020. For year-to-date 2021, purchased power expense from affiliates was $573 million compared to $393 million in the corresponding period in 2020. The increases for the third quarter and year-to-date 2021 were primarily due to increases of 113.4% and 68.0%, respectively, in the average cost per KWH purchased
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Purchased Power – Affiliates
In the third quarter 2022, purchased power expense from affiliates was $571 million compared to $288 million for the corresponding period in 2021. For year-to-date 2022, purchased power expense from affiliates was $1.1 billion compared to $573 million for the corresponding period in 2021. The increases for the third quarter and year-to-date 2022 were primarily due to increases of 120.3% and 93.3%, respectively, in the average cost per KWH purchased primarily due to higher natural gas and coal prices. Also contributing to the increase for the third quarter 2021 was an increase of 26.9% in the volume of KWHs purchased due to lower cost Southern Company system resources as compared to available Georgia Power-owned generation.
Energy purchases from affiliates will vary depending on the 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 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$61 | | 12.6 | | $147 | | 10.4 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$51 | | 9.4 | | $128 | | 8.2 |
In the third quarter 2021,2022, other operations and maintenance expenses were $544$595 million compared to $483$544 million for the corresponding period in 2020. For year-to-date 2021, other operations and maintenance2021. The increase was primarily due to increases of $35 million in distribution expenses were $1.56 billion compared to $1.41 billion for the corresponding period in 2020. These increases reflect the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic. The increases for the third quarter and year-to-date 2021 were primarily associated with increases of $37line maintenance, $10 million and $68 million, respectively, in transmission and distribution vegetation and asset management activities, $8 million and $14 million, respectively, in generation expenses associated withprimarily related to non-outage maintenance costs, and environmental projects, and $5$9 million and $24 million, respectively, in certain compensation and benefit expenses. Also contributing to the increase for year-to-date 2021 wasexpenses, partially offset by a net increasedecrease of $12$6 million related to unregulated power delivery construction and maintenance projectsprojects.
For year-to-date 2022, other operations and energy conservation projects as well as anmaintenance expenses were $1.69 billion compared to $1.56 billion for the corresponding period in 2021. The increase was primarily due to increases of $80 million in distribution expenses primarily associated with line maintenance, $37 million in generation expenses primarily related to non-outage maintenance costs, $20 million in certain compensation and benefit expenses, $11 million in legal and regulatory expenses, and $8 million in amortization of cloud software, partially offset by a net decrease of $19 million related to unregulated products and services and $17 million in nuclear property insurance refunds.gains from sales of integrated transmission system assets.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(13) | | (3.6) | | $(39) | | (3.7) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$14 | | 4.1 | | $41 | | 4.0 |
In the third quarter 2021,2022, depreciation and amortization was $345$359 million compared to $358$345 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, depreciation and amortization was $1.03$1.07 billion compared to $1.06$1.03 billion for the corresponding period in 2020.2021. The decreasesincreases for the third quarter and year-to-date 20212022 were primarily reflect decreaseddue to additional plant in service and increases of $3 million and $9 million, respectively, in amortization of regulatory assets related to CCR AROs of $22 million and $66 million, respectively, under the terms of the 2019 ARP, partially offset by increases of $10 million and $30 million, respectively, in depreciation associated with additional plant in service.ARP. See Note (B) to the Condensed Financial Statements under "Georgia Power – Rate Plan" herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Rate Plans – 2019 ARP" in Item 8 of the Form 10-K for additional information regardingon recovery of costs associated with CCR AROs.
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | 5.7 | | $21 | | 6.1 |
In the third quarter 2021, taxes other than income taxes was $130 million compared to $123 million for the corresponding period in 2020. For year-to-date 2021, taxes other than income taxes was $365 million compared to $344 million for the corresponding period in 2020. The increases for the third quarter and year-to-date 2021 were primarily due to increases of $5 million and $14 million, respectively, in municipal franchise fees largely related to
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$25 | | 19.2 | | $55 | | 15.1 |
In the third quarter 2022, taxes other than income taxes were $155 million compared to $130 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $420 million compared to $365 million for the corresponding period in 2021. The increases were primarily due to increases in municipal franchise fees resulting from higher retail revenues and increases of $2 million and $9 million, respectively, in property taxes primarily resulting from an increase in the assessed value of property.revenues.
Estimated Loss on Plant Vogtle Units 3 and 4
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$264 | | N/M | | $623 | | N/M |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(334) | | N/M | | $(790) | | N/M |
N/M - Not meaningful
In the third quarter 2021, Georgia Power recorded anpre-tax charges (credits) to income for the estimated probable loss on Plant Vogtle Units 3 and 4 oftotaling $(70) million and $264 million. For year-to-datemillion in the third quarter 2022 and 2021, respectively, and 2020, Georgia Power recorded estimated probable losses on Plant Vogtle Units 3$(18) million and 4 of $772 million for year-to-date 2022 and $149 million,2021, respectively. These lossesThe charges (credits) reflect revisions to the 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 herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.
Allowance for Equity Funds Used During ConstructionInterest Expense, Net of Amounts Capitalized
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$11 | | 50.0 | | $31 | | 49.2 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$17 | | 16.0 | | $32 | | 10.2 |
In the third quarter 2021, allowance for equity funds used during construction2022, interest expense, net of amounts capitalized was $33$123 million compared to $22$106 million for the corresponding period in 2020.2021. For year-to-date 2021, allowance for equity funds used during construction2022, interest expense, net of amounts capitalized was $94$347 million compared to $63$315 million for the corresponding period in 2020.2021. The increases for the third quarter and year-to-date 2022 were primarily associated with increases of approximately $11 million and $23 million, respectively, related to a higher AFUDC base largely associated with the constructionaverage outstanding borrowings and $10 million and $12 million, respectively, related to higher interest rates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Plant Vogtle Units 3Capital" and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction""Financing Activities" herein for additional information regarding Plant Vogtle Units 3 and 4.on borrowings.
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$10 | | 31.3 | | $31 | | 33.3 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(6) | | (14.3) | | $16 | | 12.9 |
In the third quarter 2021,For year-to-date 2022, other income (expense), net was $42$140 million compared to $32$124 million for the corresponding period in 2020. For year-to-date 2021, other income (expense), net2021. The increase was $124 million compared to $93 million for the corresponding period in 2020. The increases were primarily due to increasesan increase of $12$11 million and $37 million, respectively, in non-service cost-related retirement benefits income. The increase for year-to-date 2021 was partially offset by a $5 million decrease in interest income due to lower short-term cash investments. See Note (H) to the Condensed Financial Statements herein for additional information on retirement benefits.
Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(59) | | (34.3) | | $(117) | | (59.1) |
In the third quarter 2021, income taxes were $113 million compared to $172 million for the corresponding period in 2020. The decrease was primarily due to lower pre-tax earnings largely resulting from the third quarter 2021 charge
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Income Taxes
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Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$113 | | 100.0 | | $340 | | N/M |
In the third quarter 2022, income taxes were $226 million compared to $113 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $421 million compared to $81 million for the corresponding period in 2021. The increases were primarily due to higher pre-tax earnings largely resulting from lower charges associated with the construction of Plant Vogtle Units 3 and 4, partially offset by4. The year-to-date increase also reflects an increaseadjustment in the second quarter 2022 related to a valuation allowance on certainprior year state tax credit carryforwards.
For year-to-date 2021, income taxes were $81 million compared to $198 million for the corresponding period in 2020. The decrease was primarily due to lower pre-tax earnings resulting from higher charges in 2021 compared to the corresponding period in 2020 associated with the construction of Plant Vogtle Units 3 and 4, partially offset by an increase in a valuation allowance on certain state tax credit carryforwards.
carryforward. See Note (B) to the Condensed Financial Statements herein and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" and Note (G) to the Condensed Financial Statements herein for additional information.
Mississippi Power
Net Income
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(17) | | (25.4) | | $(5) | | (3.6) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$12 | | 24.0 | | $17 | | 12.8 |
InMississippi Power's net income in the third quarter 2021, net income2022 was $50$62 million compared to $67$50 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, net income was $133 $150 million compared to $138$133 million for the corresponding period in 2020.2021. The decreasesincreases were primarily due to increasesan increase in operations and maintenance expenses, largelyrevenues, partially offset by an increase in revenues, resulting from anincome taxes. The year-to-date 2022 increase in base rates that became effective for the first billing cycle of April 2021was also partially offset by higher non-fuel operations and higher customer usage when compared to the corresponding periods in 2020.maintenance costs.
Retail Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$16 | | 6.9 | | $40 | | 6.3 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$2 | | 0.8 | | $48 | | 7.2 |
In the third quarter 2021,2022, retail revenues were $248$250 million compared to $232$248 million for the corresponding period in 2020.2021. For year-to-date 2021,2022, retail revenues were $670$718 million compared to $630$670 million for the corresponding period in 2020.2021.
Details of the changes in retail revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | | Year-To-Date 2021 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail – prior year | $ | 232 | | | | | $ | 630 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 7 | | | 3.0 | % | | 8 | | | 1.3 | % |
Sales growth | 5 | | | 2.2 | | | 5 | | | 0.8 | |
Weather | (4) | | | (1.7) | | | 2 | | | 0.3 | |
Fuel and other cost recovery | 8 | | | 3.4 | | | 25 | | | 4.0 | |
Retail – current year | $ | 248 | | | 6.9 | % | | $ | 670 | | | 6.4 | % |
Revenues associated with changes in rates and pricing increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 2020 primarily due to an increase in revenues in accordance with new PEP rates that became effective for the first billing cycle of April 2021. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Performance Evaluation Plan" herein for additional information. | | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 | | Year-To-Date 2022 |
| (in millions) | | (% change) | | (in millions) | | (% change) |
Retail – prior year | $ | 248 | | | | | $ | 670 | | | |
Estimated change resulting from – | | | | | | | |
Rates and pricing | 4 | | | 1.6 | % | | 9 | | | 1.3 | % |
Sales growth (decline) | — | | | — | | | 3 | | | 0.5 | |
Weather | 3 | | | 1.2 | | | 10 | | | 1.5 | |
Fuel and other cost recovery | (5) | | | (2.0) | | | 26 | | | 3.9 | |
Retail – current year | $ | 250 | | | 0.8 | % | | $ | 718 | | | 7.2 | % |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Revenues attributable toassociated with changes in salesrates and increasedpricing increased in the third quarter and year-to-date 20212022 when compared to the corresponding periods in 2020.2021 primarily due to new PEP rates that became effective for the first billing cycle of April 2022, partially offset by a decrease in revenues associated with a tolling arrangement. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Performance Evaluation Plan" herein for additional information.
Revenues attributable to changes in salesdecreased in the third quarter 2022 when compared to the corresponding period in 2021. Revenues attributable to changes in sales increased for year-to-date 2022 when compared to the corresponding period in 2021. Weather-adjusted residential KWH sales decreased 3.3% and 1.2% in the third quarter and year-to-date 2022, respectively, when compared to the corresponding periods in 2021 due to a decrease in customer usage resulting from increased 2.6%activity outside the home as customers return to pre-pandemic levels of activity. Weather-adjusted commercial KWH sales increased 0.3% and 0.2% i1.3% nin the third quarter and year-to-date 2021,2022, respectively, when compared to the corresponding periods in 20202021 due to increased customer usage. Weather-adjusted commercialgrowth. Industrial KWH salesincreased 2.8%1.9% and 2.5%1.8% in the third quarter and year-to-date 2021,2022, respectively, and industrial KWH sales increased 4.9% and 0.2% in the third quarter and year-to-date 2021, respectively, when compared to corresponding periods in 2020, primarily due to the negative impacts of the COVID-19 pandemic on energy sales in 2020.
Fuel and other cost recovery revenues increased in the third quarter and year-to-date 2021 when compared to the corresponding periods in 20202021 primarily due to increases in the petroleum, pipeline, and transportation sectors.
Fuel and other cost recovery revenues decreased in the third quarter 2022 when compared to the corresponding period in 2021 primarily as a result of lower recoverable fuel costs. Fuel and other cost recovery revenues increased for year-to-date 2022 when compared to the corresponding period in 2021 primarily as a result of higher 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, 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. 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 "Mississippi Power" for additional information.
Wholesale Revenues – Non-Affiliates
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(1) | | (1.6) | | $14 | | 8.5 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$— | | — | | $13 | | 7.3 |
For year-to-date 2022, wholesale revenues from sales to non-affiliates were $191 million compared to $178 million for the corresponding period in 2021. The increase was primarily due to higher fuel costs and an increase in base revenue from MRA customers primarily due to increased demand as a result of weather impacts in 2022.
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 and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See Note 2 to the financial statements under "Mississippi Power" in Item 8 of the Form 10-K for additional information. See Note (B) to the Condensed Financial Statements under "Mississippi Power – Municipal and Rural Associations Tariff" herein for additional information.
For year-to-date 2021,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Wholesale Revenues – Affiliates
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$125 | | N/M | | $216 | | N/M |
In the third quarter 2022, wholesale revenues from sales to non-affiliatesaffiliates were $178$187 million compared to $164$62 million for the corresponding period in 2020.2021. For year-to-date 2022, wholesale revenues from sales to affiliates were $336 million compared to $120 million for the corresponding period in 2021. Theincrease was increases were primarily due to increases of $111 million and $197 million, respectively, associated with higher fuel costsprices, primarily for natural gas, and opportunity$14 million and $19 million, respectively, associated with higher KWH sales as well as increases in revenue from MRA customers primarily due to colder weather in the first quarter 2021 and changes in power supply agreements subsequentlower cost available Mississippi Power resources as compared to the third quarter 2020.available affiliate company generation.
Wholesale Revenues – Affiliates
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$26 | | 72.2 | | $38 | | 46.3 |
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.
Other Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$5 | | 62.5 | | $14 | | 70.0 |
In the third quarter 2021, wholesale2022, other revenues from sales to affiliates were $62$13 million compared to $36$8 million for the corresponding period in 2020 .2021. For year-to-date 2021, wholesale2022, other revenues from sales to affiliates were $120$34 million compared to $82$20 million for the corresponding period in 2020.2021. The increases for the third quarter and year-to-date 20212022 were primarily due to increases of $29 $5 million and $52$10 million, respectively, in unregulated sales associated with higherpower delivery construction and maintenance projects.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 vs. Third Quarter 2021 | | Year-to-Date 2022 vs. Year-to-Date 2021 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 103 | | | 74.2 | | $ | 235 | | | 71.1 |
Purchased power | 14 | | | 250.0 | | 15 | | | 70.6 |
Total fuel and purchased power expenses | $ | 117 | | | | | $ | 250 | | | |
In the third quarter 2022, total fuel and purchased power expenses were $262 millioncompared to $145 million for the corresponding period in 2021. Theincrease was due to a $106 millionincrease related to the average cost of fuel and purchased power and an $11 million increase related to the volume of KWHs generated and purchased.
For year-to-date 2022, total fuel and purchased power expenses were $601 millioncompared to $351 million for the corresponding period in 2021. Theincreasewas primarily due to a $233 millionincrease related to the average cost of fuel and purchased power and a $17 millionincrease related to the volume of KWHs generated.
Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
natural gas prices, partially offset by decreases of $2 million and $14 million, respectively, associated with lower KWH sales.
Fuel and Purchased Power Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 36 | | | 35.0 | | $ | 64 | | | 24.1 |
Purchased power | — | | | — | | 3 | | | 16.7 |
Total fuel and purchased power expenses | $ | 36 | | | | | $ | 67 | | | |
In the third quarter 2021, total fuel and purchased power expenses were $145 million compared to $109 million for the corresponding period in 2020. For year-to-date 2021, total fuel and purchased power expenses were $351 million compared to $284 million for the corresponding period in 2020. The increases were primarily due to an increase in the average cost of fuel compared to the corresponding periods in 2020.
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 2021 | | Third Quarter 2020 | | Year-To-Date 2021 | | Year-To-Date 2020 | | Third Quarter 2022 | | Third Quarter 2021 | | Year-To-Date 2022 | | Year-To-Date 2021 |
Total generation (in millions of KWHs) | Total generation (in millions of KWHs) | 4,878 | | 5,011 | | 13,016 | | 13,662 | Total generation (in millions of KWHs) | 5,093 | | 4,878 | | 13,650 | | 13,016 |
Total purchased power (in millions of KWHs) | Total purchased power (in millions of KWHs) | 124 | | 162 | | 562 | | 558 | Total purchased power (in millions of KWHs) | 241 | | 124 | | 527 | | 562 |
Sources of generation (percent) – | Sources of generation (percent) – | | Sources of generation (percent) – | |
Gas | Gas | 93 | | 89 | | 91 | | 94 | Gas | 89 | | 93 | | 89 | | 91 |
Coal | Coal | 7 | | 11 | | 9 | | 6 | Coal | 11 | | 7 | | 11 | | 9 |
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) – | |
Gas | Gas | 2.99 | | 1.99 | | 2.66 | | 1.94 | Gas | 5.10 | | 2.99 | | 4.43 | | 2.66 |
Coal | Coal | 3.16 | | 3.52 | | 3.13 | | 3.70 | Coal | 4.50 | | 3.16 | | 4.12 | | 3.13 |
Average cost of fuel, generated (in cents per net KWH) | Average cost of fuel, generated (in cents per net KWH) | 3.00 | | 2.16 | | 2.70 | | 2.06 | Average cost of fuel, generated (in cents per net KWH) | 5.02 | | 3.00 | | 4.40 | | 2.70 |
Average cost of purchased power (in cents per net KWH) | Average cost of purchased power (in cents per net KWH) | 4.51 | | 3.66 | | 3.78 | | 3.17 | Average cost of purchased power (in cents per net KWH) | 8.15 | | 4.51 | | 6.83 | | 3.78 |
Fuel
In the third quarter 2021,2022, fuel expense was $139$242 million compared to $103$139 million for the corresponding period in 2020.2021. The increasewas primarily due to a 70.6% a 50.3% increase in the average cost of natural gas per KWH generated, partially offset by a 31.5% decrease42.4%increase in the average cost of coal per KWHs generated, and a 61.3%increase in the volume of KWHs generated by coal and a 10.2% decrease in the average cost of coal per KWH generated.coal.
For year-to-date 2021,2022, fuel expense was $330$565 million compared to $266$330 million for the corresponding period in 2020.2021. Theincreasewas due to a 66.5%a 37.1% increase in the average cost of natural gas per KWH generated, and 34.2% a 31.6%increase in the average cost of coal per KWHs generated, a 30.2%increase inin the volume of KWHs generated by coal, partially offset byand a 15.4% decrease2.4%increase in the average cost of coal per KWH generated and an 8.0% decrease in the volume of KWHs generated by natural gas.
Purchased Power
In the third quarter 2022, purchased power expense was $20 million compared to $6 million for the corresponding period in 2021. The increasewas due to a 93.6% increase in the volume of KWHs purchased and an 80.7% increase in the average cost per KWH purchased.
For year-to-date 2022, purchased power expense was $36 million compared to $21 million for the corresponding period in 2021. The increasewas primarily due to an 80.6% increase in the average cost per KWH purchased, partially offset by a 6.3% decrease in the volume of KWHs purchased.
Energy purchases will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$23 | | 37.1 | | $28 | | 13.9 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1 | | 1.2 | | $22 | | 9.6 |
In the third quarter 2021,For year-to-date 2022, other operations and maintenance expenses were $85$252 million compared to $62$230 million for the corresponding period in 2020. The increase reflects the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic. The increase primarily reflects increases of $9 million associated with the Kemper County energy facility (primarily related to increases in dismantlement and closure costs and no salvage proceeds in 2021) and $7 million in generation expenses associated with outage and non-outage maintenance.
For year-to-date 2021, other operations and maintenance expenses were $230 million compared to $202 million for the corresponding period in 2020. The increase reflects the impacts of cost containment activities implemented for 2020 during the COVID-19 pandemic. 2021. The increase was primarily due to increases of $5$9 million related to unregulated power delivery construction and maintenance projects, $6 million associated with storm reserve accruals, $4 million in transmission and distribution line maintenance, and $4 million in sales and use taxes associated with the Kemper County energy facility (primarily related to increases in dismantlement and closure costs and less salvage proceeds in 2021), $8 million in generation expenses associated with outage and non-outage maintenance, and $5 million in compensation and benefit expenses.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(1) | | (2.1) | | $3 | | 2.2 |
For year-to-date, depreciation and amortization was $138 million compared to $135 million for the corresponding period in 2020. The increase was primarily due to a $6 million increase in depreciation due to additional plant in service and an increase in depreciation rates in accordance with the Mississippi Power Rate Case Settlement, partially offset by a $2 million net decrease in amortization associated with regulatory assets and liabilities.facility. See Note 2 to the financial statements under "Mississippi Power – System Restoration Rider" in Item 8 of the Form 10-K and Note (B)(C) to the Condensed Financial Statements herein under "Mississippi"Other Matters – Mississippi Power" herein for additional information.
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$2 | | 6.5 | | $6 | | 6.7 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | 70.0 | | $16 | | 72.7 |
For year-to-date 2021, taxes other thanIn the third quarter 2022, income taxes were $96$17 million compared to $90$10 million for the corresponding period in 2020. The increase primarily reflects an increase in ad valorem taxes due to higher assessed values.
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1 | | 16.7 | | $8 | | 42.1 |
2021. For year-to-date 2021, other2022, income (expense), net was $27taxes were $38 million compared to $19$22 million for the corresponding period in 2020.2021. The increase wasthird quarter and year-to-date 2022 increases primarily relatedrelate to a reduction of $3 million and $8 million, respectively, in the flowback of excess deferred income taxes associated with new PEP rates that became effective in April 2022, as well as increases of $4$4 million in non-service cost-related retirement benefits income, $2and $8 million, in contributions in aid of construction, and $2 million in interest associated with a sales-type lease.respectively, due to higher pre-tax earnings. See See Notes (D) and (H)Note (G) to the Condensed Financial Statements herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Power
Net Income Attributable to Southern Power
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$4 | | 5.4 | | $(1) | | (0.5) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$17 | | 21.8 | | $54 | | 25.6 |
Net income attributable to Southern Power forin the third quarter 20212022 was $78$95 million compared to $74$78 million for the corresponding period in 2020. The increase was primarily due to a net increase in revenues associated with new PPAs.
2021. Net income attributable to Southern Power for year-to-date 20212022 was $211$265 million compared to $212$211 million for the corresponding period in 2020.2021. The decrease wasincreases were primarily due to an increase inhigher revenues driven by higher market prices of energy, partially offset by higher other operations and maintenance expenses in 2021 primarilyexpenses. Also contributing to the year-to-date 2022 increase were higher revenues from new natural gas PPAs and higher income associated with scheduled outages and maintenance and a gain recorded in the third quarter 2020 associated with the Roserock solar facility litigation,tax equity partnerships. The year-to-date 2022 increase was partially offset by a net increasegains from contributions of wind turbine equipment to various equity method investments in revenues associated with new PPAsthe first quarter 2021 and a tax benefit due to changesa change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in Februarythe first quarter 2021.
See Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Operating Revenues
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$156 | | 29.8 | | $273 | | 20.4 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$501 | | 73.8 | | $1,008 | | 62.6 |
Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities, 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.
Natural Gas Capacity and Energy Revenue
Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.
Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.
Solar and Wind Energy Revenue
Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to 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" in Item 7 of the Form 10-K for additional information regarding Southern Power's PPAs.
Operating Revenues Details
Details of Southern Power's operating revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 | | Third Quarter 2021 | | Year-To-Date 2022 | | Year-To-Date 2021 |
| (in millions) |
PPA capacity revenues | $ | 131 | | | $ | 118 | | | $ | 344 | | | $ | 311 | |
PPA energy revenues | 736 | | | 413 | | | 1,657 | | | 954 | |
Total PPA revenues | 867 | | | 531 | | | 2,001 | | | 1,265 | |
Non-PPA revenues | 304 | | | 139 | | | 590 | | | 327 | |
Other revenues | 9 | | | 9 | | | 27 | | | 18 | |
Total operating revenues | $ | 1,180 | | | $ | 679 | | | $ | 2,618 | | | $ | 1,610 | |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Operating Revenues Details
Details of Southern Power's operating revenues were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | | Third Quarter 2020 | | Year-To-Date 2021 | | Year-To-Date 2020 |
| (in millions) |
PPA capacity revenues | $ | 118 | | | $ | 116 | | | $ | 311 | | | $ | 297 | |
PPA energy revenues | 413 | | | 319 | | | 954 | | | 794 | |
Total PPA revenues | 531 | | | 435 | | | 1,265 | | | 1,091 | |
Non-PPA revenues | 139 | | | 84 | | | 327 | | | 235 | |
Other revenues | 9 | | | 4 | | | 18 | | | 11 | |
Total operating revenues | $ | 679 | | | $ | 523 | | | $ | 1,610 | | | $ | 1,337 | |
In the third quarter 2021,2022, total operating revenues were $679 million,$1.2 billion, reflecting a $156$501 million, or 30%74%, increase from the corresponding period in 2020. The increase in operating revenues was primarily due to the following:
•PPA energy revenues increased $94 million, or 29%, primarily due to an increase in sales under existing natural gas PPAs resulting from a $75 million increase in the price of fuel and purchased power and a $20 million increase related to a net increase in natural gas PPAs.
•Non-PPA revenues increased $55 million, or 65%, due to a $60 million increase in the market price of energy, partially offset by a $5 million decrease in the volume of KWHs sold through short-term sales.
For year-to-date 2021, total operating revenues were $1.6 billion, reflecting a $273 million, or 20%, increase from the corresponding period in 2020.2021. The increase in operating revenues was primarily due to the following:
•PPA capacity revenues increased $14$13 million, or 5%11%, primarily due to increased capacity sales under existing contracts.natural gas PPAs.
•PPA energy revenues increased $160$323 million, or 20%78%, primarily due to ana $333 million increase in sales under existing natural gas PPAs resulting from a $139$287 million increase in the price of fuel and purchased power and a $25$45 million increase related to a net increase in natural gas PPAs. Also contributing to the increase was $12 million related to new wind PPAs which began subsequent to the first quarter 2020, partially offset by a $10 million decrease in sales under existing wind PPAs primarily due to a decrease in the volume of KWHs sold.
•Non-PPA revenues increased $92$165 million, or 39%119%, due to a $132$172 million increase in the market price of energy, partially offset by a $40$7 million decrease in the volume of KWHs sold through short-term sales.
For year-to-date 2022, total operating revenues were $2.6 billion, reflecting a $1.0 billion, or 63%, increase from the corresponding period in 2021. The increase in operating revenues was primarily due to the following:
•PPA capacity revenues increased $33 million, or 11%, primarily due to new natural gas PPAs and increased capacity sales under existing natural gas PPAs, partially offset by the contractual expiration of natural gas PPAs.
•PPA energy revenues increased $703 million, or 74%, primarily due to a $540 million increase in sales under existing natural gas PPAs resulting from a $442 million increase in the price of fuel and purchased power and a $98 million increase in the volume of KWHs sold. Also contributing to the increase was a $186 million increase in sales associated with new natural gas PPAs, partially offset by a $17 million decrease due to the contractual expiration of natural gas PPAs.
•Non-PPA revenues increased $263 million, or 80%, due to a $299 million increase in the market price of energy, partially offset by a $35 million decrease in the volume of KWHs sold through short-term sales.
Fuel and Purchased Power Expenses
Details of Southern Power's generation and purchased power were as follows:
| | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | Third Quarter 2020 | | Year-To-Date 2021 | Year-To-Date 2020 |
| (in billions of KWHs) |
Generation | 12.1 | 12.3 | | 31.8 | 34.3 |
Purchased power | 0.8 | 0.7 | | 2.0 | 2.3 |
Total generation and purchased power | 12.9 | 13.0 | | 33.8 | 36.6 |
| | | | | |
Total generation and purchased power, excluding solar, wind, and tolling agreements | 7.7 | 7.4 | | 20.2 | 21.9 |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
| | | | | | | | | | | | | | | | | |
| Third Quarter 2022 | Third Quarter 2021 | | Year-To-Date 2022 | Year-To-Date 2021 |
| (in billions of KWHs) |
Generation | 12.8 | 12.1 | | 36.7 | 31.8 |
Purchased power | 1.2 | 0.8 | | 2.3 | 2.0 |
Total generation and purchased power | 14.0 | 12.9 | | 39.0 | 33.8 |
| | | | | |
Total generation and purchased power (excluding solar, wind, fuel cells, and tolling agreements) | 8.8 | 7.7 | | 23.2 | 20.2 |
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 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 122 | | | 89.1 | | $ | 194 | | | 56.1 |
Purchased power | 22 | | | 115.8 | | 34 | | | 65.4 |
Total fuel and purchased power expenses | $ | 144 | | | | | $ | 228 | | | |
In the third quarter 2021, total fuel and purchased power expenses increased $144 million, or 92%, compared to the corresponding period in 2020. Fuel expense increased $122 million due to a $115 million increase in the average cost of fuel per KWH generated and a $7 million increase associated with the volume of KWHs generated. Purchased power expense increased $22 million primarily due to an increase in the average cost of purchased power.
For year-to-date 2021, total fuel and purchased power expenses increased $228 million, or 57%, compared to the corresponding period in 2020. Fuel expense increased $194 million due to a $221 million increase in the average cost of fuel per KWH generated, partially offset by a $27 million decrease associated with the volume of KWHs generated. Purchased power expense increased $34 million due to a $39 million increase associated with the average cost of purchased power, partially offset by a $5 million decrease associated with the volume of KWHs purchased.
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$5 | | 5.6 | | $63 | | 25.7 |
For year-to-date 2021, other operations and maintenance expenses were $308 million compared to $245 million for the corresponding period in 2020. The increase was primarily due to increases of $22 million in scheduled outage and maintenance expenses, $9 million in transmission expenses, $6 million in expenses associated with new wind facilities placed in service subsequent to the first quarter 2020, and $6 million related to the allocation of uncollected settlements by the Energy Reliability Council of Texas market as a result of Winter Storm Uri.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
DepreciationDetails of Southern Power's fuel and Amortizationpurchased power expenses were as follows:
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$3 | | 2.3 | | $16 | | 4.4 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter 2022 vs. Third Quarter 2021 | | Year-to-Date 2022 vs. Year-to-Date 2021 |
| (change in millions) | | (% change) | | (change in millions) | | (% change) |
Fuel | $ | 346 | | | 133.6 | | $ | 734 | | | 135.9 |
Purchased power | 103 | | | 251.2 | | 147 | | | 170.9 |
Total fuel and purchased power expenses | $ | 449 | | | | | $ | 881 | | | |
In the third quarter 2022, total fuel and purchased power expenses increased $449 million, or 150%, compared to the corresponding period in 2021. Fuel expense increased $346 million due to a $323 million increase associated with the average cost of fuel and a $23 million increase associated with the volume of KWHs generated. Purchased power expense increased $103 million due to a $79 million increase associated with the average cost of purchased power and a $24 million increase associated with the volume of KWHs purchased.
For year-to-date 2021, depreciation2022, total fuel and amortization was $383purchased power expenses increased $881 million, or 141%, compared to the corresponding period in 2021. Fuel expense increased $734 million due to a $651 million increase associated with the average cost of fuel and an $83 million increase associated with the volume of KWHs generated. Purchased power expense increased $147 million due to a $134 million increase associated with the average cost of purchased power and a $13 million increase associated with the volume of KWHs purchased.
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$19 | | 20.1 | | $23 | | 7.4 |
In the third quarter 2022, other operations and maintenance expenses were $113 million compared to $367$94 million for the corresponding period in 2020.2021. For year-to-date 2022, other operations and maintenance expenses were $331 million compared to $308 million for the corresponding period in 2021. The increaseincreases for the third quarter and year-to-date 2022 were primarily resulted from new wind facilities placed in service subsequentdue to increases of $11 million and $13 million, respectively, related to the first quarter 2020.timing of non-outage generation maintenance expenses. Also contributing to the year-to-date 2022 increase was an increase of $11 million in transmission expenses to serve new natural gas PPAs, partially offset by $6 million related to the allocation in 2021 of uncollected settlements by the Energy Reliability Council of Texas market as a result of Winter Storm Uri.
Loss on Sales-Type Lease
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$15 | | N/M | | $15 | | N/M |
N/M - Not meaningful | | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(15) | | (100.0) | | $(14) | | (93.4) |
In the third quarter 2021, a $15 million loss on sales-type lease was recorded upon commencement of the Garland battery energy storage facility PPA, $10 million of which was allocated through noncontrolling interests to Southern Power's partners in the project. See Notes (D)9 and (K)15 to the Condensed Financial Statementsfinancial statements under "Lease Receivables""Lessor" and "Southern Power," respectively, hereinin Item 8 of the Form 10-K for additional information.
(Gain) Loss on Dispositions, Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$— | | — | | $— | | — |
For year-to-date 2021, gains on dispositions totaled $39 million primarily from contributions of wind turbine equipment to various equity method investments in the first quarter 2021. A $39 million gain was also recorded in the first quarter 2020 related to the sale of Plant Mankato. See Notes (E) and (K) to the Condensed Financial
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Statements under "Southern Power" herein andGain on Dispositions, Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$— | | N/M | | $(37) | | (94.9) |
For year-to-date 2022, gain on dispositions, net was $2 million compared to $39 million for the corresponding period in 2021. The decrease primarily resulted from gains associated with contributions of wind turbine equipment to various equity method investments in the first quarter 2021. See Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants"Development Projects" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements under "Southern Power" herein for additional information.
Other Income (Expense), NetTaxes (Benefit)
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(11) | | (84.6) | | $(9) | | (47.4) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$27 | | N/M | | $52 | | N/M |
In the third quarter 2021, other2022, income (expense), nettax expense was $2$36 million compared to $13$9 million for the corresponding period in 2020. 2021. The change was primarily due to higher pre-tax earnings, partially offset by higher wind PTCs.
For year-to-date 2021, other2022, income (expense), nettax expense was $10$49 million compared to $19a benefit of $3 million for the corresponding period in 2020. The decreases primarily related to a $12 million gain recorded in the third quarter 2020 associated with the Roserock solar facility litigation.
Income Taxes (Benefit)
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(5) | | (35.7) | | $(30) | | (111.1) |
For year-to-date 2021, income tax benefit was $3 million compared to income tax expense of $27 million for the corresponding period in 2020.2021. The change was primarily due to changeshigher pre-tax earnings for year-to-date 2022 and a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in Februarythe first quarter 2021, partially offset by higher wind PTCs for year-to-date 2022.
Net Income (Loss) Attributable to Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | N/M | | $(28) | | N/M |
In the third quarter 2022, net income attributable to noncontrolling interests was $12 million compared to $5 million for the corresponding period in 2021. The increase was primarily due to lower HLBV loss allocations to tax equity partners, including loss allocation impacts associated with the Garland battery energy storage facility being placed in service in the third quarter 2021, and higher income allocations to equity partners.
For year-to-date 2022, net loss attributable to noncontrolling interests was $55 million compared to $27 million for the corresponding period in 2021. The increased loss was primarily due to higher HLBV loss allocations to tax impact fromequity partners, partially offset by loss allocation impacts associated with the sale of Plant MankatoGarland battery energy storage facility being placed in January 2020.service in the third quarter 2021 and higher income allocations to equity partners.
See Note (G) to the Condensed Financial Statements herein, MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters – Alabama State Tax Reform Legislation" in Item 7 of the Form 10-K,Notes 9 and Note 15 to the financial statements under "Lessor" and "Southern Power"Power," respectively, in Item 8 of the Form 10-K for additional information.
Net Income (Loss) Attributable to Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(23) | | (82.1) | | $(30) | | N/M |
N/M - Not meaningful
In the third quarter 2021, net income attributable to noncontrolling interests was $5 million compared to $28 million for the corresponding period in 2020. For year-to-date 2021, net loss attributable to noncontrolling interests was $27 million compared to net income of $3 million for the corresponding period in 2020. These changes were primarily due to loss allocations of $13 million related to the commencement of the Garland battery energy storage facility PPA in the third quarter 2021, which includes $10 million allocated from the loss on sales-type lease. In addition, these changes were due to lower income allocations to solar equity partners and higher HLBV loss allocations to wind tax equity partners, including new partnerships entered into subsequent to the third quarter 2020, totaling $10 million and $16 million for the third quarter and year-to-date 2021, respectively. See Notes (D) and (K) to the Condensed Financial Statements under "Lease Receivables" and "Southern Power," respectively, herein 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
utility's respective service 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 and 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. Prior to the sale of Sequent, wholesale gas services' operating revenues occasionally were 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. 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
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$42 | | N/M | | $29 | | 8.1 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$27 | | 48.2 | | $127 | | 32.6 |
N/M - Not meaningful
In the third quarter 2021,2022, net incomeincome was $56$83 million compared to $14$56 million for the corresponding period in 2020. For year-to-date 2021, net2021. Net income was $389increased $14 million compared to $360 million for the corresponding period in 2020. The increases for the third quarter and year-to-date 2021 primarily reflect increases of $139 million and $153 million, respectively, at wholesale gas services primarily due to the gain on the sale of Sequent and higher revenues, partially offset by$85 million of deferred income taxes. The third quarter 2021 change also reflects a decrease of $13 million at gas pipeline investments primarily from after-tax charges related to the PennEast Pipeline project. The year-to-date 2021 increase also reflects a $24 million increase at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement partially offset by a decrease of $71and $14 million at gas pipeline investments primarily related to after-tax impairment chargesas a result of higher earnings at SNG and lower income taxes related to the PennEast Pipeline project. The third quarter 2021 results also included a $93 million after-tax gain and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.
See Note (C)For year-to-date 2022, net income was $516 million compared to $389 million for the corresponding period in 2021. Net income increased $73 million at gas pipeline investments primarily as a result of a 2021 impairment charge related to the Condensed Financial Statements under "Other Matters – Southern Company Gas" hereinPennEast Pipeline project and $57 million at gas distribution operations primarily due to base rate increases and continued investment in infrastructure replacement. The year-to-date 2021 results also included $108 million of net income from Sequent, including the $93 million after-tax gain, and $85 million of additional tax expense as a result of the July 1, 2021 sale of Sequent.
See Notes (E)2, 7, and (K) to the Condensed Financial Statements under "Southern Company Gas" herein, as well as Note 215 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 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$234 | | 37.6 | | $1,004 | | 33.5 |
In the third quarter 2022, natural gas revenues, including alternative revenue programs, were $857 million compared to $623 million for the corresponding period in 2021. For year-to-date 2022, natural gas revenues, including alternative revenue programs, were $4.0 billion compared to $3.0 billion for the corresponding period in 2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Natural Gas Revenues, including Alternative Revenue Programs
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$146 | | 30.6 | | $632 | | 26.8 |
In the third quarter 2021, natural gas revenues, including alternative revenue programs, were $623 million compared to $477 million for the corresponding period in 2020. For year-to-date 2021, natural gas revenues, including alternative revenue programs, were $3.0 billion compared to $2.4 billion for the corresponding period in 2020.
Details of the changes in natural gas revenues, including alternative revenue programs, were as follows:
| | | Third Quarter 2021 | | Year-To-Date 2021 | | Third Quarter 2022 | | Year-To-Date 2022 |
| | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) | | (in millions) | | (% change) |
Natural gas revenues – prior year | Natural gas revenues – prior year | $ | 477 | | | $ | 2,362 | | | Natural gas revenues – prior year | $ | 623 | | | $ | 2,994 | | |
Estimated change resulting from – | Estimated change resulting from – | | Estimated change resulting from – | |
Infrastructure replacement programs and base rate changes | Infrastructure replacement programs and base rate changes | 28 | | | 5.9 | % | | 109 | | | 4.6 | % | Infrastructure replacement programs and base rate changes | 54 | | | 8.7 | % | | 186 | | | 6.2 | % |
Gas costs and other cost recovery | Gas costs and other cost recovery | 54 | | | 11.3 | | | 294 | | | 12.5 | | Gas costs and other cost recovery | 172 | | | 27.6 | | | 955 | | | 31.9 | |
| Gas marketing services | | Gas marketing services | 1 | | | 0.2 | | | 14 | | | 0.5 | |
Wholesale gas services | Wholesale gas services | 51 | | | 10.7 | | | 207 | | | 8.8 | | Wholesale gas services | — | | | — | | | (187) | | | (6.2) | |
| Other | Other | 13 | | | 2.7 | | | 22 | | | 0.9 | | Other | 7 | | | 1.1 | | | 36 | | | 1.1 | |
Natural gas revenues – current year | Natural gas revenues – current year | $ | 623 | | | 30.6 | % | | $ | 2,994 | | | 26.8 | % | Natural gas revenues – current year | $ | 857 | | | 37.6 | % | | $ | 3,998 | | | 33.5 | % |
Revenues from infrastructure replacement programs and base rate changeschanges increased in the third quarter and year-to-date 20212022 compared to the corresponding periods in 20202021 primarily due to rate increases at Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investment in infrastructure 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 increased in the third quarter and year-to-date 20212022 compared to the corresponding periods in 20202021 primarily due to higher volumes of natural gas sold and higher natural gas cost recovery. See "Cost of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.
ForRevenues from gas marketing services increased for year-to-date 2022 compared to the third quartercorresponding period in 2021 the changedue to higher commodity prices and higher sales to commercial customers.
The changes in year-to-date 2022 revenues related to Southern Company Gas' wholesale gas services waswere due to the sale of Sequent on July 1, 2021. The year-to-date 2021 change reflects higher volumes of natural gas sold and higher commercial activities as a result of Winter Storm Uri, partially offset by derivative losses all priorSee Note 15 to the sale of Sequent on July 1, 2021. See "Segment Information – Wholesale Gas Services" herein for additional information. Also see Note (K) to the Condensed Financial Statementsfinancial statements under "Southern Company Gas" hereinin Item 8 of the Form 10-K for additional information.
Southern Company Gas' natural gas distribution utilities have various regulatory mechanisms that limit their exposure to weather changes. Southern Company Gas also uses hedges for the majority of any remaining exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services; therefore, weather typically does not have a significant net income 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 Quarter | | 2022 vs. normal | 2022 vs. 2021 | | Year-to-Date | | 2022 vs. normal | 2022 vs. 2021 |
| Normal(*) | 2022 | 2021 | | colder (warmer) | colder (warmer) | | Normal(*) | 2022 | 2021 | | colder (warmer) | colder (warmer) |
| (in thousands) | | | | | (in thousands) | | | |
Illinois | 42 | | 56 | | 14 | | | 33.3 | % | 300.0 | % | | 3,686 | | 3,683 | | 3,594 | | | (0.1) | % | 2.5 | % |
Georgia | 3 | | — | | 3 | | | — | % | — | % | | 1,431 | | 1,361 | | 1,396 | | | (4.9) | % | (2.5) | % |
(*)Normal represents the 10-year average from January 1, 2012 through September 30, 2021 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter | | 2021 vs. normal | 2021 vs. 2020 | | Year-to-Date | | 2021 vs. normal | 2021 vs. 2020 |
| Normal(*) | 2021 | 2020 | | (warmer) | (warmer) | | Normal(*) | 2021 | 2020 | | (warmer) | colder |
| (in thousands) | | | | | (in thousands) | | | |
Illinois | 53 | | 14 | | 54 | | | (73.6) | % | (74.1) | % | | 3,734 | | 3,594 | | 3,548 | | | (3.7) | % | 1.3 | % |
Georgia | 3 | | 3 | | 15 | | | — | % | (80.0) | % | | 1,454 | | 1,396 | | 1,294 | | | (4.0) | % | 7.9 | % |
(*)Normal represents the 10-year average from January 1, 2011 through September 30, 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, 20212022 and 2020:2021:
| | | September 30, | | | September 30, | |
| | 2021 | | 2020 | | 2021 vs. 2020 | | 2022 | | 2021 | | 2022 vs. 2021 |
| | (in thousands, except market share %) | | (% change) | | (in thousands, except market share %) | | (% change) |
Gas distribution operations | Gas distribution operations | 4,283 | | | 4,258 | | | 0.6 | % | Gas distribution operations | 4,300 | | | 4,283 | | | 0.4 | % |
Gas marketing services | Gas marketing services | | Gas marketing services | |
Energy customers(*) | Energy customers(*) | 603 | | | 659 | | | (8.5) | % | Energy customers(*) | 598 | | | 603 | | | (0.8) | % |
Market share of energy customers in Georgia | Market share of energy customers in Georgia | 28.9 | % | | 28.9 | % | | — | % | Market share of energy customers in Georgia | 28.3 | % | | 28.9 | % | | |
|
(*)Gas marketing services' customers are primarily located in Georgia and Illinois. September 30, 2020 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 customer growth and uses a variety of targeted marketing programs to attract new customers and to retain existing customers.
Cost of Natural Gas
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$58 | | 81.7 | | $289 | | 44.2 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$165 | | N/M | | $897 | | 95.1 |
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 representedrepresented 78% and 85% 87% of the total cost of natural gas forin the third quarter and year-to-date 2021,2022, respectively. 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 third quarter 2021,2022, cost of natural gas was $129$294 million compared to $71$129 million for the corresponding period in 2020.2021. For year-to-date 2022, cost of natural gas was $1.8 billion compared to $943 million for the corresponding period in 2021. The increase reflectsincreases reflect higher gas cost recovery driven byas a 103% increaseresult of increases of 104% and 113% in natural gas prices in the third quarter 2021and year-to-date 2022, respectively, compared to the corresponding periodperiods in 2020.
For year-to-date 2021, cost of natural gas was $943 million compared to $654 million for the corresponding period in 2020. The increase reflects higher volumes sold due to colder weather and higher gas cost recovery for year-to-date 2021 compared to the corresponding period in 2020. The increase also reflects a 69% increase in natural gas prices for year-to-date 2021 compared to the corresponding period in 2020.2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
The following table details the volumes of natural gas sold during all periods presented.
| | | Third Quarter | 2021 vs. 2020 | | Year-to-Date | 2021 vs. 2020 | | Third Quarter | 2022 vs. 2021 | | Year-to-Date | 2022 vs. 2021 |
| | 2021 | 2020 | | 2021 | 2020 | | 2022 | 2021 | | 2022 | 2021 |
Gas distribution operations (mmBtu in millions) | Gas distribution operations (mmBtu in millions) | | Gas distribution operations (mmBtu in millions) | |
Firm | Firm | 74 | | 68 | | 8.8 | % | | 465 | | 425 | | 9.4 | % | Firm | 70 | | 74 | | (5.4) | % | | 485 | | 465 | | 4.3 | % |
Interruptible | Interruptible | 23 | | 21 | | 9.5 | | | 73 | | 67 | | 9.0 | | Interruptible | 22 | | 23 | | (4.3) | | | 69 | | 73 | | (5.5) | |
Total | Total | 97 | | 89 | | 9.0 | % | | 538 | | 492 | | 9.3 | % | Total | 92 | | 97 | | (5.2) | % | | 554 | | 538 | | 3.0 | % |
Wholesale gas services (mmBtu in millions/day) | | |
Daily physical sales | — | | 7.1 | | (100.0) | % | | 6.6 | | 6.8 | | (2.9) | % | |
| | Gas marketing services (mmBtu in millions) | Gas marketing services (mmBtu in millions) | | Gas marketing services (mmBtu in millions) | |
Firm: | Firm: | | Firm: | |
Georgia | Georgia | 3 | | 3 | | — | % | | 26 | | 21 | | 23.8 | % | Georgia | 3 | | 3 | | — | % | | 24 | | 26 | | (7.7) | % |
Illinois | Illinois | — | | 1 | | (100.0) | | | 5 | | 6 | | (16.7) | | Illinois | — | | — | | — | | | 4 | | 5 | | (20.0) | |
| Other | Other | 2 | | 2 | | — | | | 10 | | 9 | | 11.1 | | Other | 2 | | 2 | | — | | | 8 | | 10 | | (20.0) | |
Interruptible large commercial and industrial | Interruptible large commercial and industrial | 3 | | 3 | | — | | | 10 | | 10 | | — | | Interruptible large commercial and industrial | 3 | | 3 | | — | | | 11 | | 10 | | 10.0 | |
Total | Total | 8 | | 9 | | (11.1) | % | | 51 | | 46 | | 10.9 | % | Total | 8 | | 8 | | — | % | | 47 | | 51 | | (7.8) | % |
Other Operations and Maintenance Expenses
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$21 | | 9.7 | | $82 | | 11.8 |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$14 | | 5.9 | | $53 | | 6.8 |
In the third quarter 2021,2022, other operations and maintenance expenses were $238$252 million compared to $217$238 million for the corresponding period in 2020.2021. The increase was primarily due to higher compensation and benefit expenses and higher expenses passed through directly to customers primarily related to bad debt at gas distribution operations.
For year-to-date 2022, other operations and bad debt expenses. Formaintenance expenses were $829 million compared to $776 million for the corresponding period in 2021. Excluding $53 million of expenses related to Sequent for year-to-date 2021, other operations and maintenance expenses were $776increased approximately $106 million. The increase was primarily due to increases of $47 million in compensation and benefit expenses, $30 million in expenses passed through directly to customers primarily related to bad debt at gas distribution operations, $18 million in customer accounts expenses, and $15 million in technology-related costs.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$7 | | 5.3 | | $18 | | 4.5 |
In the third quarter 2022, depreciation and amortization was $140 million compared to $694$133 million for the corresponding period in 2020. The increase was primarily due2021. to higher compensation expenses primarily at distribution operations and wholesale gas services.
Depreciation and Amortization
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$8 | | 6.4 | | $28 | | 7.6 |
In the third quarter 2021,For year-to-date 2022, depreciation and amortization was $133$414 million compared to $125$396 million for the corresponding period in 2020. For year-to-date 2021, depreciation and amortization was $396 million compared to $368 million for the corresponding period in 2020.2021. The increases were primarily due to continued infrastructure investments at the natural gas distribution utilities.
Taxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1 | | 2.9 | | $12 | | 7.8 |
For year-to-date 2021, taxes other than income taxes were $166 million compared to $154 million for the corresponding period in 2020. The increase primarily reflects an increase in revenue tax expenses as a result of higher natural gas revenues at Nicor Gas. These revenue tax expenses are passed directly to customers and have no impact on net income.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
(Gain) Loss on Dispositions, NetTaxes Other Than Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$121 | | N/M | | $129 | | N/M |
N/M - Not meaningful | | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$9 | | 25.0 | | $42 | | 25.3 |
In the third quarter 2022, taxes other than income taxes were $45 million compared to $36 million for the corresponding period in 2021. For year-to-date 2022, taxes other than income taxes were $208 million compared to $166 million for the corresponding period in 2021. The increases primarily reflect an increase in revenue tax expenses as a result of higher natural gas revenues and year-to-date 2021, gainan increase in invested capital tax expense at Nicor Gas. Revenue tax expenses are passed through directly to customers and have no impact on dispositions was $121 million and $127 million, respectively, and primarily related to the $121 million gainnet income.
Gain on theDispositions, Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(121) | | (100.0) | | $(122) | | (96.1) |
The sale of Sequent recorded in the third quarter 2021. The year-to-date 2021 resulted in a gain also includes $5 millionon dispositions, net of contingent payment from the sale of Pivotal LNG recorded in the second quarter 2021.$121 million. 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.
Earnings from Equity Method Investments
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(8) | | (24.2) | | $(92) | | (86.8) |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$9 | | 36.0 | | $91 | | N/M |
In the third quarter 2021,2022, earnings from equity method investments was $25were $34 million compared to $33$25 million for the corresponding period in 2020. 2021. The decreaseincrease was primarily due to lowerhigher earnings at SNG resulting from lowerhigher revenues and an impairment charge relatedprimarily due to the PennEast Pipeline project.increased demand.
For year-to-date 2021,2022, earnings from equity method investments was $14were $105 million compared to $106$14 million for the corresponding period in 2020. The decrease2021. The increase was primarily due to pre-tax impairment charges totaling $84 million in 2021 related to the PennEast Pipeline project and lowerhigher earnings at SNG resulting from lower revenues.higher revenues primarily due to increased demand.
See Notes (C)Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (E) to the Condensed Financial Statements herein under "Other Matters – Southern"Southern Company Gas" and "Southern Company Gas," respectively, for additional information.
Other Income (Expense), Net
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$1 | | 8.3 | | $(99) | | N/M |
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$2 | | 15.4 | | $113 | | N/M |
N/M - Not meaningful
For year-to-date 2021,2022, other income (expense), net was $47 million of income compared to $66 million of expense compared to $33 million of income for the correspondingcorresponding period in 2020.2021. The change was largely due to charitable contributions oftotaling $101 million induring the first and second quarter 2021.
Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2021 vs. Third Quarter 2020 | | Year-To-Date 2021 vs. Year-To-Date 2020 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$130 | | N/M | | $126 | | 128.6 |
N/M - Not meaningful
In the third quarterquarters of 2021 income taxes were $133and an increase of $12 million compared to $3 million for the corresponding period in 2020. For year-to-date 2021, income taxes were $224 million compared to $98 million for the corresponding period in 2020. The increases wereat gas distribution operations primarily the result of $85 million in additional tax expense resulting from changes in state apportionment rates as a result of the sale of Sequent, $28 million of tax expense related to an increase in non-service cost-related retirement benefits income. See Note (H) to the sale of Sequent, and higher pre-tax earnings at wholesale gas services and gas distribution operations. Partially offsetting the year-to-date 2021 increase was $18 million of tax benefit resulting from the impairment charge in the second quarter 2021Condensed Financial Statements herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Income Taxes
| | | | | | | | | | | | | | | | | | | | |
Third Quarter 2022 vs. Third Quarter 2021 | | Year-To-Date 2022 vs. Year-To-Date 2021 |
(change in millions) | | (% change) | | (change in millions) | | (% change) |
$(106) | | (79.7) | | $(63) | | (28.1) |
In the third quarter 2022, income taxes were$27 million compared to $133 million for the corresponding period in 2021. For year-to-date 2022, income taxes were $161 million compared to $224 million for the corresponding period in 2021. The decreases were primarily the result of $113 million in additional tax expense in the third quarter 2021 as a result of the sale of Sequent. Partially offsetting the third quarter 2022 decrease was an increase of $9 million in income tax expense at gas distribution operations primarily as a result of higher pre-tax earnings. The year-to-date 2022 decrease was partially offset by increases in income tax expense of $25 million at gas distribution operations primarily as a result of higher pre-tax earnings and $20 million at gas pipeline investments primarily from $18 million of tax benefits resulting from the impairment charge in the second quarter 2021 related to the PennEast Pipeline project. See Notes (C)7 and (E)15 to the Condensed Financial Statements hereinfinancial statements under "Other Matters – Southern"Southern Company Gas" and "Southern Company Gas," respectively, as well as Note (G) toin Item 8 of the Condensed Financial Statements hereinForm 10-K for additional information.
Segment Information
Operating revenues, operating expenses, and net income (loss) 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 2021 | | Third Quarter 2020 | | 2022 | | 2021 |
| | Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income (Loss) |
| | (in millions) | | (in millions) | | (in millions) | | (in millions) |
Third Quarter | | Third Quarter |
Gas distribution operations | Gas distribution operations | $ | 556 | | | $ | 459 | | | $ | 45 | | | $ | 479 | | | $ | 384 | | | $ | 46 | | Gas distribution operations | $ | 751 | | | $ | 629 | | | $ | 59 | | | $ | 556 | | | $ | 459 | | | $ | 45 | |
Gas pipeline investments | Gas pipeline investments | 8 | | | 3 | | | 10 | | | 8 | | | 3 | | | 23 | | Gas pipeline investments | 8 | | | 3 | | | 24 | | | 8 | | | 3 | | | 10 | |
Wholesale gas services | — | | | (120) | | | 94 | | | (51) | | | 11 | | | (45) | | |
Wholesale gas services(*) | | Wholesale gas services(*) | — | | | — | | | — | | | — | | | (120) | | | 94 | |
Gas marketing services | Gas marketing services | 52 | | | 52 | | | (2) | | | 39 | | | 45 | | | (3) | | Gas marketing services | 85 | | | 87 | | | (2) | | | 52 | | | 52 | | | (2) | |
All other | All other | 11 | | | 25 | | | (91) | | | 8 | | | 11 | | | (7) | | All other | 16 | | | 12 | | | 2 | | | 11 | | | 25 | | | (91) | |
Intercompany eliminations | Intercompany eliminations | (4) | | | (4) | | | — | | | (6) | | | (6) | | | — | | Intercompany eliminations | (3) | | | — | | | — | | | (4) | | | (4) | | | — | |
Consolidated | Consolidated | $ | 623 | | | $ | 415 | | | $ | 56 | | | $ | 477 | | | $ | 448 | | | $ | 14 | | Consolidated | $ | 857 | | | $ | 731 | | | $ | 83 | | | $ | 623 | | | $ | 415 | | | $ | 56 | |
| Year-to-Date | | Year-to-Date |
Gas distribution operations | | Gas distribution operations | $ | 3,533 | | | $ | 2,922 | | | $ | 365 | | | $ | 2,466 | | | $ | 1,936 | | | $ | 308 | |
Gas pipeline investments | | Gas pipeline investments | 24 | | | 8 | | | 76 | | | 24 | | | 9 | | | 3 | |
Wholesale gas services(*) | | Wholesale gas services(*) | — | | | — | | | — | | | 188 | | | (53) | | | 108 | |
Gas marketing services | | Gas marketing services | 420 | | | 327 | | | 65 | | | 311 | | | 226 | | | 60 | |
All other | | All other | 43 | | | 48 | | | 10 | | | 29 | | | 60 | | | (90) | |
Intercompany eliminations | | Intercompany eliminations | (22) | | | (19) | | | — | | | (24) | | | (24) | | | — | |
Consolidated | | Consolidated | $ | 3,998 | | | $ | 3,286 | | | $ | 516 | | | $ | 2,994 | | | $ | 2,154 | | | $ | 389 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year-To-Date 2021 | | Year-To-Date 2020 |
| Operating Revenues | | Operating Expenses | | Net Income (Loss) | | Operating Revenues | | Operating Expenses | | Net Income (Loss) |
| (in millions) | | (in millions) |
Gas distribution operations | $ | 2,466 | | | $ | 1,936 | | | $ | 308 | | | $ | 2,086 | | | $ | 1,609 | | | $ | 284 | |
Gas pipeline investments | 24 | | | 9 | | | 3 | | | 24 | | | 9 | | | 74 | |
Wholesale gas services | 188 | | | (53) | | | 108 | | | (19) | | | 40 | | | (45) | |
Gas marketing services | 311 | | | 226 | | | 60 | | | 272 | | | 194 | | | 59 | |
All other | 29 | | | 60 | | | (90) | | | 24 | | | 45 | | | (12) | |
Intercompany eliminations | (24) | | | (24) | | | — | | | (25) | | | (25) | | | — | |
Consolidated | $ | 2,994 | | | $ | 2,154 | | | $ | 389 | | | $ | 2,362 | | | $ | 1,872 | | | $ | 360 | |
(*)As a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the third quarter and year-to-date 2022. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
In the third quarter and year-to-date 2021,2022, net income decreased $1increased $14 million, or 2.2%31.1%, and increased $24$57 million, or 8.5%18.5%, respectively, when compared to the corresponding periods in 2020. In the third quarter and year-to-date 2021,
•
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
operating revenueOperating revenues increased $77$195 million and $380 million,$1.07 billion, respectively, when compared to the corresponding periods in 20202021 primarily due to higher gas cost recovery, rate increases, for Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas and continued investment in infrastructure replacement. Gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas. In the third quarter and year-to-date 2021, operating
•Operating expenses increased $75$170 million and $327$986 million, respectively, when compared to the corresponding periods in 20202021 primarily due to increases of $44$129 million and $245$802 million, respectively, in the cost of gas as a result of higher natural gas prices compared to 2021, higher compensation and higher volumes sold,benefit expenses, and higher depreciation resulting from additional assets placed in service,service. The increase in operating expenses also includes higher taxes other thancosts passed through directly to customers, primarily related to bad debt expenses and revenue taxes.
•Other income taxes due to higher pass through taxes, and higher compensation expenses. In the third quarter and year-to-date 2021, other income and expense decreased $4(expense) increased $3 million and $8$12 million, respectively, when compared to the corresponding periods in 2020,2021, primarily due to a decreasean increase in non-service cost-related retirement benefits income. InSee Note (H) to the third quarter and year-to-date 2021, interestCondensed Financial Statements herein for additional information.
•Interest expense, net of amounts capitalized increased $6$5 million and $16$11 million, respectively, when compared to the corresponding periods in 20202021 primarily due to additional debt issued to finance continued investments. In the third quarterSee FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and year-to-date 2021, income"Financing Activities" herein for additional information on borrowings.
•Income taxes decreased $7increased $9 million and increased $5$25 million, respectively, when compared to the corresponding periods in 2020,2021 primarily due to changes inhigher pre-tax earnings and a lower estimated tax rate.earnings.
See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K 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).PennEast Pipeline. See Note (E) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
In the third quarter 2022, net income increased $14 million when compared to the corresponding period in 2021 primarily due to higher earnings at SNG resulting from higher revenues primarily due to increased demand and lower income taxes related to the PennEast Pipeline project.
For year-to-date 2022, net income increased $73 million when compared to the corresponding period in 2021 primarily due to pre-tax impairment charges totaling $84 million ($67 million after tax) in 2021 related to the equity method investment in the PennEast Pipeline project and higher earnings at SNG resulting from higher revenues primarily due to increased demand. See Note 157 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information. Also see Note (C) to the Condensed Financial Statements under "Other Matters – Southern Company Gas" herein for information regarding the September 2021 cancellation of the PennEast Pipeline project.
In the third quarter 2021, net income decreased $13 million, or 56.5%, compared to the corresponding period in 2020. The decrease primarily relates to an impairment charge related to the PennEast Pipeline project.
For year-to-date 2021, net income decreased $71 million, or 95.9% when compared to the corresponding period in 2020. The decrease was primarily due to pre-tax impairment charges totaling $84 million ($67 million after tax) related to the equity method investment in the PennEast Pipeline project, as well as lower earnings at SNG due to lower revenues.
Wholesale Gas Services
Prior to the sale of Sequent on July 1, 2021, wholesale gas services was 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 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 increased, wholesale gas services was positioned to capture significant value and generate stronger results. Operating expenses primarily reflect employee compensation and benefits. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding the sale of Sequent on July 1, 2021.
In the third quarter 2021, net income increased $139 million, or 308.9%, compared to the corresponding period in 2020. The sale of Sequent on July 1, 2021 resulted in $94 million of net income in the third quarter 2021. In the third quarter 2020, wholesale gas services had $51 million of commercial activity and derivative losses and $11 million in operating expenses, which resulted in a net loss of $45 million.
For year-to-date 2021, net income increased $153 million, or 340.0% when compared to the corresponding period in 2020. The increase primarily relates to a $207 million increase in operating revenue and a $121 million gain on the sale of Sequent, partially offset by a $28 million increase in operating expenses primarily related to an increase in
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
variable compensation, a $101 million decrease in other income and (expense) related to higher charitable contributions, and a $47 million increase in income tax expense due to higher pre-tax earnings.
Change in Commercial Activity
The commercial activity at wholesale gas services includes recognition of storage and transportation values that were generated in prior periods, which reflect the impact of prior period hedge gains and losses as associated physical transactions occur. Due to the sale of Sequent on July 1, 2021, the change in the third quarter 2021 reflects the commercial activities and derivative losses in the third quarter 2020. The increase in commercial activity for year-to-date 2021 compared to the corresponding period in 2020 was primarily due to natural gas price volatility that was generated by cold weather, particularly in the Midwest and Texas, resulting in wider transportation spreads.
Change in Storage and Transportation Derivatives
Volatility in the natural gas market arises from a number of factors, such as weather fluctuations or changes in supply or demand for natural gas in different regions of the U.S. The volatility of natural gas commodity prices has a significant impact on Southern Company Gas' customer rates, long-term competitive position against other energy sources, and the ability of wholesale gas services to capture value from locational and seasonal spreads. Forward storage or time spreads applicable to the locations of wholesale gas services' specific storage positions in 2021 resulted in storage derivative losses. Transportation and forward commodity derivative losses in 2021 were a result of widening transportation spreads.
Gas Marketing Services
Gas marketing services provides energy-related products and services to natural gas markets and participants in customer choice programs that were approved in various states to increase competition. These programs allow customers to choose their natural gas supplier while the local distribution utility continues to provide distribution and transportation services. Gas marketing services is weather sensitive and uses a variety of hedging strategies, such as weather derivative instruments and other risk management tools, to partially mitigate potential weather impacts.
In the third quarter and year-to-date 2021, operating revenue increased $13 million and $39 million, respectively,2022, net income was flat when compared to the corresponding periodsperiod in 2020. These increases2021 primarily relatedue to an increase of $35 million in operating expenses primarily due to higher natural gas prices and increased retail price spreads. In the third quarter and year-to-date 2021, cost of salesgas, largely offset by a related increase of $33 million in operating revenues.
For year-to-date 2022, net income increased $10$5 million, and $39 million, respectively,or 8.3%, when compared to the corresponding periodsperiod in 20202021 primarily due to a $109 million increase in operating revenues as a result of higher commodity prices and higher sales to commercial customers, partially offset by a $101 million increase in operating expenses primarily due to $95 million in higher cost of natural gas prices.and an increase of $4 million in income taxes as a result of higher pre-tax earnings.
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,a renewable natural gas business, 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) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.
In the third quarter 2021, net loss increased $84 million and for year-to-date 2021,2022, net income decreased $78increased $93 million when compared to the corresponding periodsperiod in 2020.2021. The changeschange primarily relaterelates to additional tax expense due to changes in state apportionment rates as a result of the sale of Sequent.
See Note 15Sequent in 2021 and a decrease of $13 million in operating expenses related to the financial statements under "Southern Company Gas"lower depreciation in Item 8 of the Form 10-K for additional information on2022 and transaction costs in 2021 related to the sale of its interestSequent.
For year-to-date 2022, net income increased $100 million when compared to the corresponding period in Pivotal LNG and2021. The change primarily relates to additional tax expense as a result of the sale of Jefferson Island. Also see Notes (G)Sequent in 2021 and (K)an increase in operating revenues of $14 million primarily related to higher demand fees and favorable hedge gains at the Condensed Financial Statements herein.natural gas storage businesses, higher sales from the renewable natural gas business, and lower depreciation in 2022.
FUTURE EARNINGS POTENTIAL
Each Registrant's results of operations are not necessarily indicative of its future earnings potential. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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, including those related to projected long-term demand growth, stringent environmental standards, including CCR rules, safety, system reliability and resiliency, fuel, restoration following major storms, and capital expenditures, including constructing new electric generating plants and expanding and improving the transmission and distribution systems; continued customer growth,growth; and the trendtrends of higher inflation and reduced electricity usage per customer, especially in residential and commercial markets. For Georgia Power, completing construction of Plant Vogtle Units 3 and 4 and the related cost recovery proceedings 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Global and U.S. economic conditions have been significantly affected by a series of demand and supply shocks that caused a global and national economic recession in 2020. The drivers, speed, and depth of the 2020 economic contraction were unprecedented and continue to reduce energy demand across the Southern Company system's service territory, primarily in the commercial class. Retail electric revenues attributable to changes in sales increased in the first nine months of 2022 when compared to the corresponding period in 2021 primarily due to the normalization of economic activity; however, total retail electric sales for the Southern Company system continued to be negatively impacted by the COVID-19 pandemic when compared to pre-pandemic trends. Most prominently, the COVID-19 pandemic has negatively impacted global supply chains and business operations as suppliers continue to experience difficulties keeping up with strong demand for factory goods, which is being driven by low business inventories. In addition, rising inflation in 2021 and 2022 has resulted in increasing costs for many goods and services. The combinationAs a result of rising inoculationpersistently high inflation, interest rates in the U.S. population and the federal COVID-19 relief package contributed to increased economic recovery in 2021; however, fiscal support of business and personal incomes is declining. The drivers, speed, and depth of the 2020 economic contraction were 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 recessionbeen on the Southern Company system's retail electric sales began to improve in the middle of May 2020. Retail electric revenues attributable to changes in sales increased in the first nine months of 2021 when compared to the corresponding period in 2020 primarily due to the normalization of economic activity; however, retail electric sales continued to be negatively impacted by the COVID-19 pandemic when compared to pre-pandemic trends. Recovery isrise and are expected to continue throughrising in the remaindernear term, which has impacted, and may continue to impact, the Registrants' borrowing costs. Based on these factors, the probability of 2021, butthe U.S. economy falling into a recession has heightened. The impacts of new COVID-19 variants, responses to the COVID-19 pandemic by both customers and governments, could significantly affectongoing geopolitical threats, such as the pace of recovery. The ultimate extentescalation of the negative impact on revenues depends onRussia-Ukraine war, and the depthpotential of future COVID-19-related lockdowns in Asia or elsewhere could further disrupt global supply chains and durationincrease the severity of thea possible economic contractiondownturn in the Southern Company system's service territory and cannot be determined at this time.territory. 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 2021.2022.
The level of future earnings for Southern Power's competitive wholesale electric business depends on numerous factors including the parameters of the wholesale market and the efficient operation of its wholesale generating assets; 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 ascosts; regulatory matters, creditworthiness of customers,matters; customer creditworthiness; total electric generating capacity available in Southern Power's market areas, andareas; Southern Power's ability to successfully remarket capacity as current contracts expire. In addition,expire; renewable portfolio standards,standards; availability of federal and state ITCs and PTCs, which could be impacted by future tax credits,legislation; transmission constraints,constraints; cost of generation from units within the Southern Company power pool,pool; and operational limitations could influence Southern Power's future earnings.limitations. See "Income Tax Matters" herein for additional information on recent tax legislation expanding the availability of federal ITCs and PTCs.
The level of future earnings for Southern Company Gas' primary business of distributing natural gas and its complementary businesses in the gas pipeline investments 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, including those related to projected long-term demand growth, safety, system reliability and resiliency, natural gas, and capital expenditures, including expanding and improving the natural gas distribution systems; the completion and subsequent operation of ongoing infrastructure and other construction projects, creditworthinessprojects; customer creditworthiness; and certain policies to limit the use of customers, and Southern Company Gas' ability to re-contract storage rates at favorable prices.natural gas, such as the potential across certain parts of the U.S. for state or municipal bans on the use of natural gas. 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 business to capture value from locational and seasonal spreads. Additionally, changes in commodity prices, primarily driven by tight gas supplies, geopolitical events, and diminished gas production, subject a portion of Southern Company Gas' operations to earnings variability.variability and have recently resulted in higher natural gas prices. 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. However, if economic conditions continue to improve, theenvironment. The demand for natural gas may increase, which may cause natural gas prices to rise and drive higher volatility in the natural gas markets on a longer-term basis. Alternatively, a significant drop in oil and natural gas prices could lead to a consolidation of natural gas producers or reduced levels of natural gas production.
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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Earnings for bothgas; costs and availability of labor and materials in a time of rising costs, impacted by heightened inflation caused by unprecedented shocks to the electricitybroader economy, 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,supply chain disruptions; 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, or the sale of interests in, certain assets or businesses, internal restructuring, or some combination thereof. Furthermore, Southern Company may engage in new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations, risks, and financial condition of Southern Company. In addition, Southern Power and Southern Company Gas regularly consider and evaluate joint development arrangements as well as acquisitions and dispositions of businesses and assets as part of their business strategies. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein for additional information.
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.
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 "General Litigation Matters" and "Environmental Remediation" herein, for additional information.
Environmental Laws and Regulations
WaterAir Quality
On July 26, 2021,August 30, 2022, the EPA announced its intentfound that 15 states, including Alabama and Mississippi, failed to further revisesubmit regional haze state implementation plans for the ELG Rules, withsecond 10-year planning period (2018 through 2028) by July 31, 2021. The finding of failure to submit establishes a proposed rule expected intwo-year deadline for the fall of 2022.EPA to promulgate a Federal Implementation Plan (FIP) to address these requirements for each applicable state unless, before the EPA promulgates a FIP, the state submits, and the EPA approves, a state implementation plan that meets the requirements. The ultimate outcome of this matter, including any potential impacts to Alabama Power, Mississippi Power, and Southern Power, cannot be determined at this time; however, any revisions could require changestime.
Global Climate Issues
On June 30, 2022, the U.S. Supreme Court issued an opinion limiting the EPA's authority to regulate greenhouse gas emissions under the Clean Air Act. The Court's review in the traditionalcase focused on whether the EPA's authority under the Clean Air Act allows the EPA to regulate the electric operating companies' compliance strategies.
On October 13, 2021,industry in accordance witha manner as broad as the ELG Rules' requirementClean Power Plan (CPP), which was repealed and replaced by the Affordable Clean Energy rule (ACE Rule). The Court held that the generation shifting to lower carbon emitting sources approach in the CPP is not authorized by the Clean Air Act. However, the Court did not decide whether the EPA may adopt measures only applied at the individual electric generating source, which is the basis for electric utilitiesthe ACE Rule. The EPA has announced its intent to identify compliance plans either through certain compliance pathways or by permanently ceasing combustion of coal by certain deadlines, Alabama Power and Georgia Power each submitted initial notices of planned participation (NOPP)propose a rule for applicable units with its state permitting authority, as detailed further below.
Alabama Power submitted its NOPPexisting power plants pursuant to the Alabama Department of Environmental Management indicating plans to retire Plant Barry Unit 5 (700 MWs) and to cease using coal and begin operating solely on natural gas at Plant Barry Unit 4 (350 MWs) and Plant Gaston Unit 5 (880 MWs). Alabama Power, as agent for SEGCO, which is equally ownedClean Air Act by Alabama Power and Georgia Power, indicated plans to retire Plant Gaston Units 1 through 4 (1,000 MWs). These plans are expected to be completed on or before the compliance date of December 31, 2028.March 2023. The NOPP submittals are subject to the reviewultimate impact of the Alabama Department of Environmental Management. Retirement of Plant Barry Unit 5 could occur as early as 2023, subject to completion of the acquisition of the Calhoun Generating Station and certain operating conditions. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements under "Alabama Power – Calhoun Generating Station Acquisition" herein for additional information.
The assets for which Alabama Power has indicated retirement, due to early closure or repowering of the unit to natural gas, have net book values totaling approximately $1.5 billion (excluding capitalized asset retirement costsCourt's decision cannot be determined at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
which are recovered through Rate CNP Compliance) at September 30, 2021. Based on an Alabama PSC order, Alabama Power is authorized to establish a regulatory asset to record the unrecovered investment costs, including the plant asset balance and the costs associated with site removal and closure, associated with future unit retirements caused by environmental regulations (Environmental Accounting Order). Under the Environmental Accounting Order, 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.
Georgia Power submitted its NOPP to the Georgia Environmental Protection Division indicating plans to retire Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), Plant Bowen Units 1 and 2 (1,400 MWs), and Plant Scherer Unit 3 (614 MWs based on 75% ownership) on or before the compliance date of December 31, 2028. Georgia Power intends to pursue compliance with the ELG Rules for Plant Scherer Units 1 and 2 (137 MWs based on 8.4% ownership) through the voluntary incentive program by no later than December 31, 2028. Georgia Power intends to comply with the ELG Rules for Plant Bowen Units 3 and 4 through the generally applicable requirements by December 31, 2025; therefore, no NOPP submission was required for these units. The NOPP submittals and generally applicable requirements are subject to the review of the Georgia Environmental Protection Division.
The units for which Georgia Power has indicated early retirement plans have net book values totaling approximately $2.2 billion (excluding capitalized asset retirement costs which are recovered through the ECCR tariff) at September 30, 2021. A final decision regarding the future operation of Georgia Power's impacted units and the timing of any retirements will be subject to review by the Georgia PSC in Georgia Power's next IRP, which is required to be filed by January 31, 2022.
The ultimate outcome of these matters cannot be determined at this time.
Coal Combustion Residuals
Based on requirements for closure and monitoring of landfills and ash ponds pursuant to the CCR Rule and applicable state rules, the traditional electric operating companies have periodically updated, and expect to continue periodically updating, their related cost estimates and ARO liabilities for each CCR unit as additional information related to ash pond closure methodologies, schedules, and/or costs becomes available. Some of these updates have been, and future updates may 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 (A) to the Condensed Financial Statements under "Asset Retirement Obligations" herein for information regarding increases in AROs recorded during the third quarter 2021 at Alabama Power, Georgia Power, and Mississippi Power.
Regulatory Matters
See OVERVIEW – "Recent Developments" and Note 2 to the financial statements in Item 8 of the Form 10-K, OVERVIEW – "Recent Developments" herein, and Note (B) to the Condensed Financial Statements herein for a discussion of regulatory matters related to Alabama Power, Georgia Power, Mississippi Power, and Southern Company Gas, including items that could impact the applicable registrants'Registrants' future earnings, cash flows, and/or financial condition.
Alabama Power
On August 11,September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, issued an order approving an extension ofand the new depreciation rates will be reflected in Alabama Power's Renewable Generation Certificate (RGC) through September 16, 2027.future rate filings. The RGC authorizes Alabama Power to procure up to 500 MWs of capacity and energy from renewable energy resources and to separately market the related energy and environmental attributes to customers and other third parties. Alabama Power has four solar projects under the RGC totaling approximately 170 MWs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Georgia Power
In 2021, as authorized in its 2019 IRP, Georgia Power requested and received certification from the Georgia PSC for 970 MWs of utility-scale PPAs for solar generation resources, whichupdated depreciation rates are expected to beresult in operation byan approximately $500 million increase in annual depreciation expense. See Notes 2 and 5 to the endfinancial statements under "Alabama Power" and "Depreciation and Amortization," respectively, in Item 8 of 2023. The ultimate outcome of this matter cannot be determined at this time.the Form 10-K for additional information.
Construction Programs
The Subsidiary Registrants are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. The Southern Company system intendsstrategy continues to continue its strategy ofinclude developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations.
For the traditional electric operating companies, major generation construction projects are subject to state PSC approval in order to be included in retail rates. The largest construction project currently underway in the Southern Company system is Plant Vogtle Units 3 and 4. See Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein for additional information. Also see Note 2 to the financial statements under "Alabama Power – Certificates of Convenience and Necessity" 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.
See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for additional information about costs relating to Southern Power's acquisitions that involve construction of renewable energy facilities.
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, reduce emissions, 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 Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Southern Company Gas" for additional information on Southern Company Gas' construction program.
See FINANCIAL CONDITION AND LIQUIDITY – "Cash Requirements" herein for additional information regarding the Registrants' capital requirements for their construction programs.
Income Tax Matters
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Income Tax Matters" in Item 7 of the Form 10-K for additional information.
On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA extends, expands, and increases ITCs and PTCs for clean energy projects, allows PTCs for solar projects, adds ITCs for stand-alone energy storage projects with an option to elect out of the tax normalization requirement, and allows for the transferability of the tax credits. The IRA extends and increases the tax credits for carbon capture and sequestration projects and adds tax credits for clean hydrogen and nuclear projects. Additional ITC and PTC amounts are available if the projects meet domestic content requirements or are located in low-income or energy communities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
The IRA also enacted a 15% corporate minimum tax on book income, with some adjustments including adjustments for pension and tax depreciation. The 15% corporate minimum tax on book income can be reduced by energy tax credits.
For solar projects placed in service in 2022 through 2032, the IRA provides for a 30% ITC and an option to claim a PTC instead of an ITC. Starting in 2023 and through 2032, the IRA provides for a 30% ITC for stand-alone energy storage projects. For wind projects placed in service in 2022 through 2032, the IRA provides for a 100% PTC. The PTC rate for 2022 is 2.6 cents per KWH and will be adjusted for inflation annually. The same PTC rate applies for solar projects for which the PTC option has been elected. To realize the full value of ITCs and PTCs, the IRA requires satisfaction of prevailing wage and apprenticeship requirements.
Implementation of the IRA provisions is subject to the issuance of additional guidance by the U.S. Treasury Department, and the ultimate impacts cannot be determined at this time; however, the IRA is not expected to have a material impact on the Registrants' financial statements for the year ending December 31, 2022.
General Litigation and Other Matters
The Registrants are involved in various matters being litigated and/or regulatory and other matters that could affect future earnings, cash flows, and/or financial condition. The ultimate outcome of such pending or potential litigation against each Registrant and any subsidiaries or regulatory and other matters cannot be determined at this time; however, for current proceedings and/or matters not specifically reported herein or in Notes (B) and (C) to the Condensed Financial Statements herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings and/or matters would have a material effect on such Registrant's financial statements. See Notes (B) and (C) to the Condensed Financial Statements for a discussion of various contingencies, including matters being litigated, regulatory matters, and other matters 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 agreement, which includes combined operations (including joint commitment and dispatch), is expected to create 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 to net income is expected. Alabama Power has the right to participate in a portion of PowerSouth's future incremental load growth. All regulatory approvals have been received and the agreement was implemented on September 1, 2021.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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.
As a result of the sale of Sequent on July 1, 2021, Southern Company and Southern Company Gas no longer consider valuations regarding derivatives and hedging activities to be a critical accounting estimate. Except as described herein, there were no other significant changes to the Registrants' critical accounting policies and estimates during the nine months ended September 30, 2021. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding the sale of Sequent.
Estimated Cost, Schedule, and Rate Recovery for the Construction of Plant Vogtle Units 3 and 4
(Southern Company and Georgia Power)
Following milestone extensionsAs of September 30, 2022, Georgia Power revised its total project capital cost forecast to $10.4 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in January 2021, Southern Nuclear has been performing additionalrelated customer refunds). This forecast includes construction remediation work necessary to ensure qualitycontingency of $49 million and design standards are met as system turnovers are completed to support hot functional testing, which was completed in July 2021, and fuel load for Unit 3. As a result of challenges including, but not limited to, construction productivity, construction remediation work, the pace of system turnovers, spent fuel pool repairs, and the timeframe and duration for hot functional and other testing,is based on projected in-service dates at the end of the secondfirst quarter 2021, Southern Nuclear further extended certain milestone dates, including2023 and the fuel loadfourth quarter 2023 for Units 3 and 4, respectively.
The projected schedule for Unit 3 from those established in January 2021. Through the third quarter 2021, the project continued to face challenges including, but not limited to, construction productivity, construction remediation work, andprimarily depends on the pace of system turnovers. As a resultand area transitions to operations, including the completion of these continued challenges, atclosure documentation necessary to support start-up testing, and the endprogression of the third quarter 2021, Southern Nuclear further extended certain milestone dates, including fuel loadstart-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. The projected schedule for Unit 3, from those established at the end of the second quarter 2021. The site work plan currently targets fuel load for Unit 3 in the first quarter 2022 and an in-service date of May 2022 and4 primarily depends on significant improvements inUnit 3 progress through start-up and testing; overall construction productivity and production levels the volume of construction remediation work, the pace of systemimproving, particularly in electrical installation, including terminations; and area turnovers, and the progression of startup and other testing. As the site work plan includes minimal margin to these milestone dates, an in-service date in the third quarter 2022 for Unit 3 is projected, although any further delays could result in a later in-service date.
As the result of productivity challenges, at the end of the second quarter 2021, Southern Nuclear also further extended milestone dates for Unit 4 from those established in January 2021. These productivity challenges continued into the third quarter 2021 and some craft and support resources were diverted temporarily to support construction efforts on Unit 3. As a result of these factors, at the end of the third quarter 2021, Southern Nuclear further extended the milestone dates for Unit 4 from those established at the end of the second quarter 2021. The site work plan targets an in-service date of March 2023 for Unit 4 and primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electricians, and pipefitters, being added and maintained. As the site work plan includes minimal margin to the milestone dates, an in-service date in the second quarter 2023 for Unit 4 is projected, although anyAny further delays could result in a later in-service date.
As of March 31, 2021, approximately $84 million of the construction contingency established in the fourth quarter 2020 was assigned to the base capitaldates and cost forecast for costs primarily associated with the schedule extension for Unit 3 to December 2021, construction productivity, support resources, and construction remediation work. Georgiaincreases.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Power increased its total capital cost forecast asDuring the first nine months of March 31, 2021 by adding $48 million to the remaining construction contingency. As of June 30, 2021, all of the remaining2022, established construction contingency previously established and an additional $341totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction remediation work for Unit 3, and construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total project capital cost forecast asand recorded pre-tax charges of June 30, 2021 by adding $119$36 million ($27 million after tax) and $32 million ($24 million after tax) to replenish construction contingency. As a result of the factors discussed above, during the third quarter 2021, all of the remaining construction contingency previously established in the second quarter 20212022 and an additional $127 million was assignedthe third quarter 2022, respectively.
Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the base capital cost forecastcost-sharing and tender provisions of the Global Amendments (as defined in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein) or the extent to which COVID-19-related costs impact those provisions. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for costs primarily associated with the schedule extensionstender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4, construction productivity and support resources for Units 3 and 4, and construction remediation work for Unit 3.4; (ii) Georgia Power also increased its total capital cost forecast aswill pay a portion of September 30, 2021 by adding $137 million to replenishMEAG Power's costs of construction contingency. Georgia Power's revised base capital cost forecast and contingency to complete construction and start-up offor Plant Vogtle Units 3 and 4 is $9.34 billionas such costs are incurred and $0.14 billion, respectively,with no further adjustment for aforce majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, of $9.48 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds).with no further adjustment for force majeure costs.
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 additional pre-tax charges (credits) to income in the first quarter 2021, the second quarter 2021,2022 and the third quarter 20212022 of $48approximately $16 million ($3612 million after tax), $460 and $(102) million ($343 million after tax), and $264 million ($197(76) million after tax), respectively, forassociated with the increasescost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast. AsThe settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, regarding the cost-sharing and when these amounts are spent,tender provisions of the Global Amendments described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction – Joint Owner Contracts" herein. Georgia Power may requestbe required to record further pre-tax charges to income of up to approximately $300 million associated with these provisions for OPC and Dalton based on the Georgia PSC to evaluate those expenditures for rate recovery.current project capital cost forecast.
The ultimate impactoutcome of these matters on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time. SeeHowever, any extension of the in-service date beyond the first quarter 2023 for Unit 3 or the fourth quarter 2023 for Unit 4, including the current level of cost sharing described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" herein, is estimated to result in additional base capital costs for Georgia Power of up to $15 million per month for Unit 3 and $35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. 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 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, 2021.2022. The Registrants intend to continue to monitor their access to short-term and long-term capital markets as well as their bank credit arrangements to meet future capital and liquidity needs. See "Cash Requirements," "Sources of Capital," and "Financing Activities" herein and Note (K) to the Condensed Financial Statements herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
At the end of the third quarter 2021,2022, the market price of Southern Company's common stock was $61.97$68.00 per share (based on the closing price as reported on the NYSE) and the book value was $27.07$28.69 per share, representing a market-to-book ratio of 229%237%, compared to $61.43, $26.48,$68.58, $26.30, and 232%261%, respectively, at the end of 2020.2021. Southern Company's common stock dividend for the third quarter 20212022 was $0.66$0.68 per share compared to $0.64$0.66 per share in the third quarter 2020.2021.
Cash Requirements
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Cash"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. programs and, for the traditional electric operating companies, operating cash flows related to fuel cost under recovery. The fuel cost under recovery balances are primarily the result of higher than forecasted prices for natural gas and purchased power.
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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation;legislation and/or regulation; the cost, availability, 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 impacts of the COVID-19 pandemic could also impair the ability to develop, construct, and operate facilities, as discussed further in Item 1A of the Form 10-K. In addition, there can be no assurance that costs related to capital expenditures and AROs will be fully recovered. Additionally, expenditures associated with Southern Power's planned acquisitions may vary due to market opportunities and the execution of its growth strategy. See Note 15 to the financial statements in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements herein under "Southern Power" for additional information regarding Southern Power's plant acquisitions and construction projects.
The construction program of Georgia Power includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale and which may be subject to additional revised cost estimates during construction. See Note 2 to the financial statements in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein under "Georgia Power – Nuclear Construction" for information regarding Plant Vogtle Units 3 and 4 and additional factors that may impact construction expenditures.
In October 2021, Alabama Power's Board of Directors approved updates to its construction program that is currently estimated to total $1.9 billion for 2022, $1.8 billion for 2023, and $1.7 billion for each of 2024, 2025, and 2026. These amounts include capital expenditures related to Plant Barry Unit 8, nuclear fuel, and 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 any future regulation of CO2 emissions from fossil fuel-fired electric generating units. 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 on the construction of Plant Barry Unit 8.
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, 2020.2021.
Sources of Capital
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Sources"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. 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 20252026, but may issue equity through its stock plans during this time. 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 plansOperating cash flows provide a
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
substantial portion of the Form 10-K) andRegistrants' cash needs. During the nine months ended September 30, 2022, Southern Power utilized tax credits, which provided $218 million in operating cash flows. In addition, Southern Power plans to utilize tax equity partnership contributions (as discussed further herein). Georgia Power intends to utilize short-term floating rate bank loans and commercial paper issuances to fund operating cash flows related to fuel cost under recovery. Subsequent to September 30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement and intends to borrow up to an additional $1.2 billion pursuant to a short-term floating rate bank loan in November 2022.
The amount, type, and timing of any financings in 2021,2022, 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
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
financial statements and are accounted for using HLBV methodology to allocate partnership gains and losses. During the first nine months of 2021,ended September 30, 2022, Southern Power obtained tax equity funding for the Deuel Harvest wind facility, the Garland and Tranquillity battery energy storage facilities, and existing tax equity partnerships totaling $256$51 million. 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, 2021,2022, the amount of subsidiary retained earnings restricted to dividend totaled $1.1$1.4 billion. This restriction did not impact Southern Company Gas' ability to meet its cash obligations, nor does management expect such restriction to materially impact Southern Company Gas' ability to meet its currently anticipated cash obligations.
Certain Registrants' current liabilities frequently exceed their current assets because of long-term debt maturities and the periodic use of short-term debt as a funding source, as well as significant seasonal fluctuations in cash needs. The Registrants generally plan to refinance long-term debt as it matures. The following table shows the amount by which current liabilities exceeded current assets at September 30, 20212022 for the applicable Registrants:
| At September 30, 2021 | Southern Company | | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas | |
At September 30, 2022 | | At September 30, 2022 | Southern Company | | Georgia Power | Mississippi Power | Southern Power | |
| | (in millions) | | (in millions) |
Current liabilities in excess of current assets | Current liabilities in excess of current assets | $ | 1,585 | | | $ | 1,152 | | $ | 5 | | $ | 743 | | $ | 92 | | Current liabilities in excess of current assets | $ | 2,438 | | | $ | 2,442 | | $ | 18 | | $ | 325 | | |
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Bank Credit Arrangements
At September 30, 2021,2022, the Registrants' unused committed credit arrangements with banks were as follows:
| At September 30, 2021 | Southern Company parent | Alabama Power | Georgia Power | Mississippi Power | Southern Power(a) | Southern Company Gas(b) | SEGCO | Southern Company | |
At September 30, 2022 | | At September 30, 2022 | Southern Company parent | Alabama Power | Georgia Power | Mississippi Power | Southern Power(a) | Southern Company Gas(b) | SEGCO | Southern Company |
| | (in millions) | | (in millions) |
Unused committed credit | Unused committed credit | $ | 1,999 | | $ | 1,250 | | $ | 1,726 | | $ | 250 | | $ | 568 | | $ | 1,747 | | $ | 30 | | $ | 7,570 | | Unused committed credit | $ | 1,998 | | $ | 1,250 | | $ | 1,726 | | $ | 275 | | $ | 569 | | $ | 1,748 | | $ | 30 | | $ | 7,596 | |
(a)At September 30, 2021,2022, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $24$16 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(b)Includes $1.047 billion$798 million and $700$950 million at Southern Company Gas Capital and Nicor Gas, respectively.
Subject to applicable market conditions, the Registrants, Nicor Gas, and SEGCO expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, the Registrants, Nicor Gas, and SEGCO may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at September 30, 20212022 was approximately $1.6$1.4 billion (comprised of approximately $854$789 million at Alabama Power, $672$619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2021,2022, Georgia Power and Mississippi Power had approximately $262$288 million and $50 million, respectively, of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
See Note 8 to the financial statements in Item 8 of the Form 10-K and Note (F) to the Condensed Financial Statements herein under "Bank Credit Arrangements" for additional information.
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, 2021 | | Short-term Debt During the Period(*) | | Short-term Debt at September 30, 2022 | | 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 Company | Southern Company | $ | 707 | | | 0.4 | % | | $ | 1,331 | | | 0.3 | % | | $ | 1,716 | | Southern Company | $ | 1,398 | | | 3.5 | % | | $ | 1,859 | | | 2.5 | % | | $ | 2,809 | |
Alabama Power | Alabama Power | — | | | — | | | 7 | | | 0.1 | | | 70 | | Alabama Power | — | | | — | | | — | | | — | | | — | |
Georgia Power | Georgia Power | — | | | — | | | 81 | | | 0.2 | | | 310 | | Georgia Power | 814 | | | 3.4 | | | 443 | | | 2.7 | | | 815 | |
Mississippi Power | Mississippi Power | — | | | — | | | — | | | — | | | — | | Mississippi Power | — | | | — | | | 3 | | | 2.1 | | | 23 | |
Southern Power | Southern Power | 27 | | | 0.2 | | | 66 | | | 0.2 | | | 123 | | Southern Power | 208 | | | 3.6 | | | 199 | | | 2.5 | | | 306 | |
Southern Company Gas: | Southern Company Gas: | | Southern Company Gas: | |
Southern Company Gas Capital | Southern Company Gas Capital | $ | 72 | | | 0.2 | % | | $ | 325 | | | 0.2 | % | | $ | 484 | | Southern Company Gas Capital | $ | 35 | | | 3.4 | % | | $ | 347 | | | 2.5 | % | | $ | 547 | |
Nicor Gas | Nicor Gas | 590 | | | 0.4 | | | 451 | | | 0.5 | | | 590 | | Nicor Gas | 325 | | | 3.5 | | | 218 | | | 2.7 | | | 330 | |
Southern Company Gas Total | Southern Company Gas Total | $ | 662 | | | 0.4 | % | | $ | 776 | | | 0.4 | % | | Southern Company Gas Total | $ | 360 | | | 3.5 | % | | $ | 565 | | | 2.6 | % | |
(*)Average and maximum amounts are based upon daily balances during the three-month period ended September 30, 2021.2022.
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 are presented in the following table:
| | | | | | | | | | | | | | | | | | | | |
Net cash provided from (used for): | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| (in millions) |
Nine Months Ended September 30, 2022 | | | | | | |
Operating activities | $ | 5,017 | | $ | 1,072 | | $ | 1,482 | | $ | 279 | | $ | 827 | | $ | 1,532 | |
Investing activities | (5,952) | | (1,641) | | (2,653) | | (219) | | (128) | | (1,239) | |
Financing activities | 1,119 | | 967 | | 1,171 | | (72) | | (603) | | (313) | |
| | | | | | |
Nine Months Ended September 30, 2021 | | | | | | |
Operating activities | $ | 5,081 | | $ | 1,419 | | $ | 2,350 | | $ | 159 | | $ | 750 | | $ | 757 | |
Investing activities | (5,850) | | (1,335) | | (2,572) | | (182) | | (753) | | (966) | |
Financing activities | 1,802 | | 56 | | 505 | | 130 | | 33 | | 222 | |
Fluctuations in cash flows from financing activities vary from year to year based on capital needs and the maturity or redemption of securities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Analysis of Cash Flows
Net cash flows provided from (used for) operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 are presented in the following table:
| | | | | | | | | | | | | | | | | | | | |
Net cash provided from (used for): | Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas |
| (in millions) |
Nine Months Ended September 30, 2021 | | | | | | |
Operating activities | $ | 5,081 | | $ | 1,419 | | $ | 2,350 | | $ | 159 | | $ | 750 | | $ | 757 | |
Investing activities | (5,850) | | (1,335) | | (2,572) | | (182) | | (753) | | (966) | |
Financing activities | 1,802 | | 56 | | 505 | | 130 | | 33 | | 222 | |
| | | | | | |
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 activities | 1,077 | | 505 | | 867 | | (214) | | (1,060) | | (37) | |
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 decreased $139$64 million for the nine months ended September 30, 20212022 as compared to the corresponding period in 20202021 primarily due to decreased fuel cost recovery at the traditional electric operating companies resulting from an increase inand the costtiming of fuel and under recovered natural gas costs at Southern Company Gas resulting from Winter Storm Uri, partiallycustomer receivable collections, largely offset by the timing of vendor payments and customer bill credits issued in 2020increased natural gas cost recovery at Georgia Power.the natural gas distribution utilities.
The net cash used for investing activities for the nine months ended September 30, 20212022 was primarily related to the Subsidiary Registrants' construction programs.
The net cash provided from financing activities for the nine months ended September 30, 20212022 was primarily related to net issuances of long-term debt and the issuance of common stock to settle the purchase contracts entered into as part of the 2019 Series A Equity Units (Equity Units) (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments.
Alabama Power
Net cash provided from operating activities increased $190decreased $347 million for the nine months ended September 30, 20212022 as compared to the corresponding period in 20202021 primarily due to an increase in retail revenues associated with a Rate RSE adjustment effective in January 2021 and higher customer usage, as well asdecreased fuel cost recovery, the timing of customer receivable collections, and fossil fuel stock purchases, partially offset by decreased fuel cost recovery.the timing of vendor payments.
The net cash used for investing activities for the nine months ended September 30, 20212022 was primarily related to gross property additions.additions, including approximately $182 million related to the construction of Plant Barry Unit 8 and $171 million related to the acquisition of the Calhoun Generating Station. See Notes (B) and (K) to the Condensed Financial Statements under "Alabama Power" herein for additional information.
The net cash provided from financing activities for the nine months ended September 30, 20212022 was primarily related to capital contributions from Southern Company and the net issuance of long-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments.
Georgia Power
Net cash provided from operating activities increased $225decreased $868 million for the nine months ended September 30, 20212022 as compared to the corresponding period in 20202021 primarily due to customer bill credits issued in 2020 associated
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
with Tax Reform and 2018 earnings in excess of the allowed retail ROE range, the timing of vendor payments, lower income tax payments,decreased fuel cost recovery and the timing of customer receivable collections and fossil fuel stock purchases, partially offset by decreased fuel cost recovery.the timing of vendor payments.
The net cash used for investing activities for the nine months ended September 30, 20212022 was primarily related to gross property additions, including a total of approximately $830$820 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 nine months ended September 30, 20212022 was primarily related to capital contributions from Southern Company, net issuances of senior notes, a net increase in short-term borrowings, and borrowingscapital contributions from the FFB for construction of Plant Vogtle Units 3 and 4,Southern Company, partially offset by common stock dividend payments.
Mississippi Power
Net cash provided from operating activities decreased $27increased $120 million for the nine months ended September 30, 20212022 as compared to the corresponding period in 20202021 primarily due to decreased fuel cost recovery and the timing of receivable collections,vendor payments, partially offset by the timing of vendor payments.customer receivable collections.
The net cash used for investing activities for the nine months ended September 30, 20212022 was primarily related to gross property additions.
The net cash provided fromused for financing activities for the nine months ended September 30, 20212022 was primarily related to the issuance of senior notes andcommon stock dividend payments, partially offset by capital contributions from Southern Company, partially offset by debt redemptions, common stock dividend payments, and a decrease in commercial paper borrowings.
Southern Power
Net cash provided from operating activities decreased $24 million for the nine months ended September 30, 2021 as compared to the corresponding period in 2020 primarily due to a decrease in the utilization of tax credits in 2021.
The net cash used for investing activities for the nine months ended September 30, 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 nine months ended September 30, 2021 was primarily related to the issuance of senior notes and net capital contributions from noncontrolling interests, partially offset by a return of capital to Southern Company, common stock dividend payments, and net repayments of commercial paper.
Southern Company Gas
Net cash provided from operating activities decreased $365 million for the nine months ended September 30, 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 the timing of vendor payments.
The net cash used for investing activities for the nine months ended September 30, 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, partially offset by proceeds from dispositions.
The net cash provided from financing activities for the nine months ended September 30, 2021 was primarily related to net issuances of long-term and short-term debt and capital contributions from Southern Company, partially offset by common stock dividend payments.Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Power
Net cash provided from operating activities increased $77 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to an increase in wholesale revenues driven by higher market prices of energy and the timing of vendor payments, partially offset by the timing of customer receivable collections.
The net cash used for investing activities for the nine months ended September 30, 2022 was primarily related to construction payments. See Note (K) to the Condensed Financial Statements under "Southern Power" herein for additional information.
The net cash used for financing activities for the nine months ended September 30, 2022 was primarily related to the repayment of senior notes at maturity, common stock dividend payments, net capital distributions to noncontrolling interests, and a decrease in commercial paper borrowings, partially offset by a capital contribution from Southern Company.
Southern Company Gas
Net cash provided from operating activities increased $775 million for the nine months ended September 30, 2022 as compared to the corresponding period in 2021 primarily due to increased natural gas cost recovery and the timing of vendor payments, partially offset by an increase in natural gas for sale as a result of higher prices for natural gas purchases.
The net cash used for investing activities for the nine months ended September 30, 2022 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 used for financing activities for the nine months ended September 30, 2022 was primarily related to common stock dividend payments and net repayments of short-term debt, partially offset by net issuances of long-term debt and capital contributions from Southern Company.
Significant Balance Sheet Changes
Southern Company
Significant balance sheet changes for the nine months ended September 30, 20212022 included:
•an increase of $3.5$3.2 billion in total stockholders' equity primarily related to net income and the issuance of common stock to settle the purchase contracts entered into as part of the Equity Units (as discussed in Note (F) to the Condensed Financial Statements under "Equity Units" herein), partially offset by common stock dividend payments;
•an increase of $2.4 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs, net of the reclassification of $0.6 billion to other regulatory assets and $0.4 billion to regulatory assets associated with AROs upon Georgia Power's retirement of Plant Wansley Units 1 and 2;
•an increase of $1.4 billion in long-term debt (including securities due within one year) related to new issuances;
•an increase of $3.2$1.3 billion in total property, plant,deferred under recovered fuel clause revenues due to higher fuel and equipment primarily related to the Subsidiary Registrants' construction programs (net of pre-tax charges totaling $772 million recorded during 2021purchased power costs at Georgia Power for estimated probable losses associated with the construction of Plant Vogtle Units 3 and 4);Power;
•an increase of $1.0 billion in total stockholders' equity primarily related to net income, partially offset by common stock dividend payments;
•an increase of $1.0 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Southern Company" herein;
•increases of $0.9 billion and $0.5 billion in AROs and regulatory assets associated with AROs, respectively, primarily related to cost estimate updates at the traditional electric operating companies for ash pond facilities;
•an increase of $0.7$1.1 billion in accumulated deferred income taxes primarily related to the utilization and expected further utilization of tax creditsITCs in 2021;
•decreases of $0.5 billion each2022 and the increase in energy marketing receivables and payables due to Southern Company Gas' sale of Sequent; andunder recovered fuel clause revenues;
•an increase of $0.4$0.9 billion in natural gas cost under recovery,accounts payable primarily resultingrelated to the timing of vendor payments;
•an increase of $0.7 billion in regulatory assets associated with AROs, net of the reclassification from Southern Company Gas' costproperty, plant, and equipment discussed above, primarily due to a decrease of gas purchased during Winter Storm Uri.$0.5 billion in the fair value of the investments held in Alabama Power's and Georgia Power's nuclear decommissioning trusts; and
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
•an increase of $0.6 billion in other deferred credits and liabilities primarily due to changes in the fair value of interest rate and foreign currency derivatives.
See "Financing Activities" herein and Notes (A)(B), (B)(F), (G), (I), and (K)(J) to the Condensed Financial Statements herein for additional information.
Alabama Power
Significant balance sheet changes for the nine months ended September 30, 20212022 included:
•an increase of $1.1$1.2 billion in common stockholder's equity primarily due to capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
•an increase of $916 million in total property, plant, and equipment primarily related to construction of distribution and transmission facilities, increases to AROs, construction of Plant Barry Unit 8, and the installation of equipment to comply with environmental standards;
•an increase of $349 million in AROs primarily related to cost estimate updates for ash pond facilities; and
•an increase of $190 million$1.1 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;
•an increase of $0.8 billion in total property, plant, and equipment primarily related to the construction of Plant Barry Unit 8, the acquisition of the Calhoun Generating Station, and construction of distribution and transmission facilities;
•an increase of $0.4 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Alabama Power" herein; and
•an increase of $0.4 billion in regulatory assets associated with AROs primarily due to a net increasedecrease of $0.3 billion in outstanding senior notes.the fair value of the investments held in Alabama Power's nuclear decommissioning trust.
See "Financing Activities – Alabama Power" herein and Note (A)Notes (I) and (K) to the Condensed Financial Statements herein for additional information.
Georgia Power
Significant balance sheet changes for the nine months ended September 30, 2022 included:
•an increase of $1.4 billion in common stockholder's equity primarily due to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
•an increase of $1.3 billion in deferred under "Asset Retirement Obligations"recovered fuel clause revenues due to higher fuel and purchased power costs;
•an increase of $1.1 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $956 million for Plant Vogtle Units 3 and 4, net of $0.6 billion reclassified to other regulatory assets and $0.4 billion reclassified to regulatory assets associated with AROs due to the retirement of Plant Wansley Units 1 and 2 as approved in Georgia Power's 2022 IRP;
•an increase of $0.9 billion in long-term debt (including securities due within one year) primarily due to net issuances of senior notes;
•an increase of $0.8 billion in notes payable due to an increase in commercial paper and short-term bank debt;
•an increase of $0.6 billion in accumulated deferred income taxes primarily due to the increase in under recovered fuel clause revenues and the expected reduction in federal and state credit carryforward balances in 2022;
•an increase of $0.3 billion in regulatory assets associated with AROs, net of the reclassification from property, plant, and equipment discussed above, primarily due to a decrease in the fair value of the investments held in Georgia Power's nuclear decommissioning trust;
•an increase of $0.3 billion in other accounts payable due to the timing of vendor payments; and
•an increase of $0.3 billion in customer accounts receivable primarily due to higher customer usage and the timing of collections.
See "Financing Activities – Georgia Power" herein and Note (B) under "Georgia Power – Nuclear Construction" and " – Integrated Resource Plans" and Note (I) to the Condensed Financial Statements herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Georgia Power
Significant balance sheet changes for the nine months ended September 30, 2021 included:
•an increase of $1.2 billion in total property, plant, and equipment primarily related to the construction of generation, transmission, and distribution facilities, including $217 million for Plant Vogtle Units 3 and 4 (net of pre-tax charges totaling $772 million recorded during 2021 for estimated probable losses);
•an increase of $0.9 billion in common stockholder's equity primarily due to capital contributions from Southern Company;
•an increase of $0.8 billion in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notes and borrowings from the FFB for construction of Plant Vogtle Units 3 and 4;
•increases of $0.5 billion and $0.3 billion in AROs and regulatory assets associated with AROs, respectively, primarily due to cost estimate updates for ash pond closures; and
•an increase of $0.3 billion in cash and cash equivalents, as discussed further under "Analysis of Cash Flows – Georgia Power" herein.
See "Financing Activities – Georgia Power" herein and Notes (A) and (B) 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, 20212022 included:
•an increase of $166 million in long-term debt (including securities due within one year) primarily due to the issuance of senior notes, partially offset by the redemption of revenue bonds and bank term loans;
•an increase of $121$79 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;Company and
•an increase of $107$66 million in cashtotal property, plant, and cash equivalentsequipment primarily related to the , as discussed further under "Analysisconstruction of Cash Flows – Mississippi Power" hereintransmission and distribution facilities..
See "Financing Activities – Mississippi Power" herein for additional information.
Southern Power
Significant balance sheet changes for the nine months ended September 30, 20212022 included:
•an increasea decrease of $495$756 million in property, plant, and equipment in service primarily due to the acquisition of the Deuel Harvest wind facility;
•an increase of $323 million in long-term debt (including securities due within one year) primarily relateddue to the issuanceredemption of senior notes;
•a decrease of $262$289 million in total property, plant, and equipment primarily due to continued depreciation of assets;
•an increase of $282 million in common stockholder's equity primarily due to capital contributions from Southern Company and net income, partially offset by dividends paid to Southern Company and distributions to noncontrolling interests; and
•increases of $194 million in accrued taxes and $100 million in accumulated deferred income tax assetsliabilities primarily related to the expected utilization of ITCs in 2021; and
•a decrease of $148 million in notes payable due to net repayments of commercial paper.2022.
See "Financing Activities – Southern Power" herein and NotesNote (G) to the Condensed Financial Statements herein for additional information.
Southern Company Gas
Significant balance sheet changes for the nine months ended September 30, 2022 included:
•a decrease of $849 million in notes payable due to repayments of short-term debt and (K)commercial paper borrowings;
•an increase of $760 million in total property, plant, and equipment primarily related to the construction of transportation and distribution assets and additional infrastructure investment;
•an increase of $522 million in common stockholder's equity related to net income and capital contributions from Southern Company, partially offset by dividends paid to Southern Company;
•an increase of $459 million in long-term debt (including securities due with one year) due to issuances of senior notes and first mortgage bonds, partially offset by the repayment of medium-term notes and adjustments related to fair value hedges;
•a decrease of $313 million in total accounts receivable primarily relating to decreases of $166 million in customer accounts receivable and $156 million in unbilled revenues as a result of seasonality;
•an increase of $231 million in other accounts payable due to seasonality and the timing of vendor payments; and
•a decrease of $221 million in other regulatory assets, deferred primarily due to a $207 million reduction in natural gas cost under recovery.
See "Financing Activities – Southern Company Gas" herein and Note (B) to the Condensed Financial Statements herein for additional information.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Southern Company Gas
Significant balance sheet changes for the nine months ended September 30, 2021 included:
•an increase of $776 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;
•decreases of $516 million in energy marketing receivables and $494 million in energy marketing trade payables due to the sale of Sequent;
•an increase of $432 million in natural gas cost under recovery reflecting an increase in the cost of gas purchased during Winter Storm Uri;
•an increase of $338 million in notes payable due to issuances of short-term debt and an increase in commercial paper borrowings;
•an increase of $306 million in accumulated deferred income taxes primarily due to the increase in natural gas cost under recovery, as discussed above, and changes in state apportionment rates as a result of the sale of Sequent;
•a decrease of $265 million in customer accounts receivable due to the timing of collections; and
•an increase of $187 million in long-term debt (including securities due within one year) primarily due to net issuances of senior notes and first mortgage bonds.
See "Financing Activities – Southern Company Gas" herein and Notes (B) and (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
Financing Activities
The following table outlines the Registrants' long-term debt financing activities for the first nine months of 2021:2022:
| | | Issuances/Reofferings | | | Maturities, Redemptions, and Repurchases | | Issuances | | | Maturities and Redemptions |
Company | Company | Senior Notes | Revenue Bonds | Other Long-Term Debt | | | Senior Notes | Revenue Bonds | Other Long-Term Debt(a) | Company | Senior Notes | | Other Long-Term Debt | | | Senior Notes | Revenue Bonds | Other Long-Term Debt(a) |
| | (in millions) | | (in millions) |
Southern Company parent | $ | 1,000 | | $ | — | | $ | 2,476 | | | | $ | 1,500 | | $ | — | | $ | — | | |
| Alabama Power | Alabama Power | 600 | | — | | — | | | | 200 | | — | | 207 | | Alabama Power | $ | 1,700 | | | $ | — | | | | $ | 550 | | $ | — | | $ | 1 | |
Georgia Power | Georgia Power | 750 | | 122 | | 371 | | | | 325 | | 69 | | 83 | | Georgia Power | 1,500 | | | — | | | | 400 | | 53 | | 201 | |
Mississippi Power | 525 | | — | | — | | | | — | | 270 | | 75 | | |
| Southern Power | Southern Power | 400 | | — | | — | | | | — | | — | | — | | Southern Power | — | | | — | | | | 677 | | — | | — | |
Southern Company Gas | Southern Company Gas | 450 | | — | | 100 | | | | 300 | | — | | 30 | | Southern Company Gas | 500 | | | 100 | | | | — | | — | | 46 | |
Other | Other | — | | — | | — | | | | — | | — | | 8 | | Other | — | | | — | | | | — | | — | | 8 | |
Elimination(b) | Elimination(b) | — | | — | | — | | | | — | | — | | (7) | | Elimination(b) | — | | | — | | | | — | | — | | (4) | |
Southern Company | Southern Company | $ | 3,725 | | $ | 122 | | $ | 2,947 | | | | $ | 2,325 | | $ | 339 | | $ | 396 | | Southern Company | $ | 3,700 | | | $ | 100 | | | | $ | 1,627 | | $ | 53 | | $ | 252 | |
(a)Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments totaling $66 million for FFB borrowings. 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.
(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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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 nine months of 2021,2022, Southern Company issued approximately 3.33.5 million shares of common stock primarily through employee equity compensation plans and received proceeds of approximately $62$78 million.
In January 2021,May 2022, Southern Company remarketed its Series 2019A and Series 2019B Remarketable Junior Subordinated Notes pursuant to the terms of its 2019 Series A Equity Units (Equity Units). Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. See Note (F) to the Condensed Financial Statements herein under "Equity Units" for additional information.
In March 2022, Southern Company entered into a $400 million short-term floating rate bank loan bearing interest based on term SOFR, which it repaid in August 2022.
In May 2022, Southern Company borrowed $25$100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate, which it repaid in March 2021.August 2022.
In February 2021,Subsequent to September 30, 2022, Southern Company issued $600$500 million aggregate principal amount of Series 2021A 0.60%2022A 5.15% Senior Notes due February 26, 2024October 6, 2025 and $400$500 million aggregate principal amount of Series 2021B 1.75%2022B 5.70% Senior Notes due MarchOctober 15, 2028.2032.
Alabama Power
In May 2021, Southern Company issued $1.0 billion aggregate principal amount of Series 2021A 3.75% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due September 15, 2051.
Also in May 2021, Southern CompanyFebruary 2022, Alabama Power redeemed all of its $1.5 billion aggregate principal amount of 2.35% Senior Notes due July 1, 2021.
In September 2021, Southern Company issued €1.25 billion (approximately $1.476 billion) aggregate principal amount of Series 2021B 1.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due September 15, 2081. Southern Company's obligations under these notes were effectively converted to fixed-rate U.S. dollars at issuance for the first six years through cross-currency swaps, mitigating foreign currency exchange risk associated with the interest and principal payments during this period. See Note (J) to the Condensed Financial Statements under "Foreign Currency Derivatives" herein for additional information.
Subsequent to September 30, 2021, Southern Company redeemed all $800$550 million aggregate principal amount of its Series 2016A 5.25% Junior Subordinated Notes due October 1, 2076.
Alabama Power
In March 2021, Alabama Power extended the maturity dates 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.
In June 2021, Alabama Power repaid at maturity $200 million aggregate principal amount of its Series 2011B 3.950% Senior Notes.
Also in June 2021, Alabama Power issued $600 million aggregate principal amount of Series 2021A 3.125% Senior Notes due July 15, 2051.
In July 2021, Alabama Power redeemed all of its approximately $206 million aggregate principal amount of Series E Junior Subordinated Notes due October 1, 2042. The Series E Junior Subordinated Notes were held by an affiliated trust, Alabama Power Capital Trust V, which applied the redemption proceeds to the simultaneous redemption of (i) its Flexible Trust Preferred Securities totaling approximately $200 million, which were guaranteed by Alabama Power, and (ii) shares of its common securities totaling approximately $6 million that were held by Alabama Power.
Subsequent to September 30, 2021, Alabama Power repaid at maturity $65 million aggregate principal amount of The Industrial Development Board of the Town of Columbia (Alabama) Tax Exempt Variable Rate Demand Revenue Bonds (Alabama Power Company Project), Series 1997.
Georgia Power
In February 2021, Georgia Power issued $750 million aggregate principal amount of Series 2021A 3.25%2017A 2.45% Senior Notes due March 15, 2051. An amount equal to the net proceeds of the senior notes is being allocated to finance or30, 2022.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
refinance, in whole or in part, one or more renewable energy projects and/or expenditures and programs related to enabling opportunities for diverse and small businesses/suppliers.
In March 2021, Georgia Power redeemed all $325 million aggregate principal amount of its Series 2016B 2.40% Senior Notes due April 1, 2021.
Also in March 2021, Georgia Power extended the maturity date of its $125 million term loan from June 2021 to June 2022.
In June 2021, Georgia Power purchased and held approximately $69 million aggregate principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Vogtle Project), First Series 2008. In August 2021, Georgia Power reoffered these bonds to the public.
Also in June 2021, Georgia Power made additional borrowings under the FFB Credit Facilities in an aggregate principal amount of $371 million at an interest rate of 2.434% 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 nine months ended September 30, 2021, Georgia Power made principal amortization payments of $75 million under the FFB Credit Facilities. At September 30, 2021, the outstanding principal balance under the FFB Credit Facilities was $4.9 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.
In August 2021, Georgia Power reoffered to the public $53 million aggregate principal amount of Development Authority of Floyd County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Hammond Project), First Series 2010, which it had previously purchased and held.
Mississippi Power
In June 2021, Mississippi Power issued $200 million aggregate principal amount of Series 2021A Floating Rate Senior Notes due June 28, 2024 and $325 million aggregate principal amount of Series 2021B 3.10% Senior Notes due July 30, 2051. An amount equal to the net proceeds of the Series 2021B 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 July 2021, Mississippi Power redeemed all $270 million aggregate principal amount of its Mississippi Business Finance Corporation Taxable Revenue Bonds, 7.13% Series 1999A due October 20, 2021 at par plus accrued interest and a make-whole premium.
Also in July 2021, Mississippi Power repaid its $60 million and $15 million floating rate bank term loans, with maturity dates in December 2021 and January 2022, respectively.
Subsequent to September 30, 2021, Mississippi Power repaid $25 million previously borrowed under its $125 million revolving credit arrangement that matures in March 2023.
Southern 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 was allocated to finance or refinance, in whole or in part, one or more renewable energy projects.
Subsequent to September 30, 2021, Southern Power announced the planned redemption on November 15, 2021 of all $300 million aggregate principal amount of its Series 2016E 2.500% Senior Notes due December 15, 2021.
Southern Company Gas
In February 2021, Atlanta Gas Light repaid at maturity $30 million aggregate principal amount of 9.1% medium-term notes.
In March 2021, Nicor Gas entered into three short-term floating rate bank loans in an aggregate principal amount of $300 million, each bearing interest based on one-month LIBOR.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
In March 2022, Alabama Power issued $700 million aggregate principal amount of Series 2022A 3.05% Senior Notes due March 15, 2032.
In June 2021, Southern Company Gas2022, Alabama Power redeemed the following series of preferred stock: 4.20% Preferred Stock, Par Value $100 Per Share, 4.60% Preferred Stock, Par Value $100 Per Share, 4.92% Preferred Stock, Par Value $100 Per Share, 4.52% Preferred Stock, Par Value $100 Per Share, 4.64% Preferred Stock, Par Value $100 Per Share, and 4.72% Preferred Stock, Par Value $100 Per Share. The redemption price per share for each series of preferred stock equaled the redemption price per share provided in Note 8 to the financial statements under "Outstanding Classes of Capital Stock – Alabama Power" in Item 8 of the Form 10-K, plus accrued and unpaid dividends to the redemption date.
In August 2022, Alabama Power issued $550 million aggregate principal amount of Series 2022B 3.75% Senior Notes due September 1, 2027 and $450 million aggregate principal amount of Series 2022C 3.94% Senior Notes due September 1, 2032. An amount equal to the net proceeds of the Series 2022C Senior Notes will be 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.
Subsequent to September 30, 2022, Alabama Power redeemed all $300of its 5.00% Class A Preferred Stock, Par Value $1 Per Share (Stated Capital $25 Per Share) at a redemption price of $25.00 per share plus accrued and unpaid dividends to the redemption date.
Georgia Power
In January 2022, Georgia Power redeemed all $400 million aggregate principal amount of its 3.50%Series 2012B 2.85% Senior Notes due May 15, 2022.
In February 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement, which it repaid in May 2022.
In each of March and April 2022, Georgia Power entered into a $200 million short-term floating rate bank loan bearing interest based on term SOFR.
In May 2022, Georgia Power issued $700 million aggregate principal amount of Series 2022A 4.70% Senior Notes due May 15, 2032 and $800 million aggregate principal amount of Series 2022B 5.125% Senior Notes due May 15, 2052. An amount equal to the net proceeds of the Series 2022B Senior Notes will be 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 May 2022, Georgia Power repaid its $125 million long-term bank loan that was scheduled to mature in June 2022.
In July 2022, Georgia Power repaid at maturity $53 million aggregate principal amount of Development Authority of Floyd County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Hammond Project), First Series 2010.
Subsequent to September 15,30, 2022, Georgia Power borrowed $250 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.
Mississippi Power
In June 2022, Mississippi Power repaid $20 million, which was borrowed in March 2022 under its $125 million revolving credit arrangement.
Southern Power
In June 2022, Southern Power repaid at maturity €600 million (approximately $677 million) aggregate principal amount of Series 2016A 1.00% Senior Notes.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Subsequent to September 30, 2022, Southern Power borrowed $100 million pursuant to a short-term uncommitted bank credit arrangement bearing interest at a mutually agreed upon rate and payable on demand.
Southern Company Gas
During the first quarter 2022, Nicor Gas repaid one of its three $100 million short-term floating rate bank loans entered into in March 2021. Nicor Gas also repaid $50 million of one of the other loans and increased the borrowing amount under the other loan to $150 million. In addition, both loans were renewed and amended to extend the maturity dates and change the interest rate provisions so the loans bear interest based on term SOFR.
During the second quarter 2022, Atlanta Gas Light repaid at maturity $46 million aggregate principal amount of medium-term notes with a weighted average interest rate of 8.63%.
In August 2021,2022, Nicor Gas issued in a private placement $50$100 million aggregate principal amount of 1.42%2.21% Series First Mortgage Bonds due August 31, 2026 and $50 million aggregate principal amount of 2.19% Series First Mortgage Bonds due August 31, 2033. Nicor Gas also entered into an agreement to issue in a private placement additional first mortgage bonds with aggregate principal amounts of $100 million, which were issued subsequent to September 30, 2021, and $100 million and $75 million expected to be issued in August 2022 and October 2022, respectively.2032.
In September 2021,2022, Southern Company Gas Capital as borrower, and Southern Company Gas, as guarantor, issued $450$500 million aggregate principal amount of Series 2021A 3.15%2022A 5.15% Senior Notes due September 30, 2051.15, 2032, guaranteed by Southern Company Gas.
Credit Rating Risk
At September 30, 2021,2022, 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 Registrants 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.
The maximum potential collateral requirements under these contracts at September 30, 20212022 were as follows:
| Credit Ratings | Credit Ratings | Southern Company(*) | Alabama Power | Georgia Power | Mississippi Power | Southern Power(*) | Southern Company Gas | Credit Ratings | Southern Company(*) | Alabama Power | Georgia Power | Mississippi Power | Southern Power(*) | Southern Company Gas |
| | (in millions) | | (in millions) |
At BBB and/or Baa2 | At BBB and/or Baa2 | $ | 43 | | $ | 1 | | $ | — | | $ | — | | $ | 42 | | $ | — | | At BBB and/or Baa2 | $ | 33 | | $ | 1 | | $ | — | | $ | — | | $ | 32 | | $ | — | |
At BBB- and/or Baa3 | At BBB- and/or Baa3 | 416 | | 2 | | 61 | | 1 | | 354 | | — | | At BBB- and/or Baa3 | 395 | | 2 | | 61 | | 1 | | 333 | | — | |
At BB+ and/or Ba1 or below | At BB+ and/or Ba1 or below | 1,934 | | 394 | | 953 | | 308 | | 1,195 | | 5 | | At BB+ and/or Ba1 or below | 2,042 | | 409 | | 907 | | 306 | | 1,205 | | 5 | |
(*)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$106 million of cash collateral posted related to PPA requirements at September 30, 2021.2022.
The amounts in the previous table for the traditional electric operating companies and Southern Power include certain agreements that could require collateral if 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 October 27, 2021, S&PFebruary 22, 2022, Fitch downgraded the Southern Company issuer credit rating to BBB+ from A-. Due to S&P's consolidated rating methodology, the downgrade of Southern Company's issuer credit rating resulted in the downgrade of the senior unsecured long-term debt rating of Alabama Power and the long-term issuer rating of Nicor Gas to A- from A, the senior unsecured long-term debt ratings of Atlanta Gas Light, Georgia Power Mississippi Power, and Southern Company Gas Capital to BBB+ from A-, and with a stable outlook.
Also on February 22, 2022, Fitch revised the senior unsecured long-term debt ratings outlook of Southern Company, andAlabama Power, Southern Power, Nicor Gas, and SEGCO to BBBnegative from BBB+. S&P revised its credit rating outlook for Southern Company and its subsidiaries 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 third quarter 2021. For an in-depth discussion of Southern Companystable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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 Notes (I) and (J) to the Condensed Financial Statements herein for information relating to derivative instruments. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding Southern Company Gas' sale of Sequent on July 1, 2021.
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 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 (primarily Sequent until its sale on July 1, 2021) 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.
The changes in net fair value of Southern Company Gas' energy-related derivative contracts for the periods presented are provided in the table below.
| | | | | | | | | | | | | | | | | |
| Third Quarter 2021 | Third Quarter 2020 | | Year-To-Date 2021 | Year-To-Date 2020 |
| (in millions) |
Contracts outstanding at beginning of period, assets (liabilities), net | $ | (44) | | $ | 49 | | | $ | 101 | | $ | 70 | |
Contracts realized or otherwise settled | (10) | | (31) | | | (68) | | (130) | |
Current period changes(*) | 62 | | — | | | (25) | | 78 | |
Sale of Sequent | 76 | | — | | | 76 | | — | |
Contracts outstanding at the end of period, assets (liabilities), net | $ | 84 | | $ | 18 | | | $ | 84 | | $ | 18 | |
Netting of cash collateral | (20) | | 70 | | | (20) | | 70 | |
Cash collateral and net fair value of contracts outstanding at end of period | $ | 64 | | $ | 88 | | | $ | 64 | | $ | 88 | |
(*)Current period changes also include the fair value of new contracts entered into during the period, if any.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
During the nine months ended September 30, 2021,2022, there were no material changes to Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, and Southern Power's, or Southern Company Gas' disclosures about market risk. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for information regarding Southern Company Gas' sale of Sequent on July 1, 2021. 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 noIn July 2022, Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas implemented a new human resources and payroll application. In August 2022, Southern Company Gas implemented new financial accounting and reporting applications. As a result of these implementations, there were certain changes to processes and procedures, which resulted in changes to Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, orand 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 third quarter 2021 that have materially affected or are reasonably likely. These changes included automation of certain previously manual controls. These changes in internal controls were not made in response to materially affect Southern Company's, Alabama Power's, Georgia Power's, Mississippi Power's, Southern Power's, or Southern Company Gas'any identified internal control over financial reporting.deficiency.
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. There have been no material changes to these risk factors from those previously disclosed in the Form 10-K.
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 | - | TwelfthTwenty-Fifth Supplemental Indenture to SubordinatedSenior Note Indenture dated as of September 16, 2021,October 6, 2022, providing for the issuance of the Series 2021B 1.875% Fixed-to-Fixed Reset Rate Junior Subordinated2022A 5.15% Senior Notes due September 15, 2081.October 6, 2025. (Designated in Form 8-K dated September 13, 2021,October 3, 2022, File No. 1-3526, as Exhibit 4.44.4(a).) |
| | | | |
| | (a)2 | - | |
| | | | |
| | Alabama Power |
| | | | |
| | (b)1 | - | |
| | | | |
| | (b)2 | - | |
| | | | |
| | Southern Company Gas |
| | | | |
| | (f)1 | - | |
| | | | |
| | (f)2 | - | |
| | | | |
| | (f)3 | - | |
| | | | |
| * | (f)4 | - | |
| | | | |
| | (10) Material Contracts |
| | | | |
| | Southern Company |
| | | | |
# | | (a)1 | - | |
| | | | |
# | | (a)2 | - | |
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| | | | | | | | | | | | | | |
# | * | (a)3 | - | |
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# | * | (a)4 | - | |
| | | | |
| | Alabama Power |
| | | | |
# | | (b)1 | - | Amended and Restated Southern Company Change In Control Benefits Protection Plan, effective August 23, 2021.15, 2022. See Exhibit 10(a)1 herein. |
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# | | (b)2 | - | Southern Company Senior Executive Change in Control Severance Plan, Amended and Restated effective August 15, 2022. See Exhibit 10(a)2 herein. |
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# | | (b)3 | - | Southern Company Executive Change In Control Severance Plan, Amended and Restated effective August 15, 2022. See Exhibit 10(a)3 herein. |
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| | (24) Power of Attorney and Resolutions |
| | | | |
| | Southern Company |
| | | | |
| | (a)1 | - | |
| | | | |
| * | (a)2 | - | |
| | | | |
| | Alabama Power |
| | | | |
| | (b) | - | |
| | | | |
| | | | | | | | | | | | | | |
| | 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 | - | |
| | | | |
| | Southern Power |
| | | | |
| * | (e)1 | - | |
| | | | |
| * | (e)2 | - | |
| | | | |
| | | | | | | | | | | | | | |
| | Southern Company Gas |
| | | | |
| * | (f)1 | - | |
| | | | |
| * | (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. |
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 |
| | | |
By | | Thomas A. Fanning |
| | Chairman, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | Daniel S. Tucker |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | | |
By | | /s/ Melissa K. Caen | |
| | (Melissa K. Caen, Attorney-in-fact) | |
Date: November 3, 2021October 26, 2022
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 |
| | | |
By | | Mark A. Crosswhite | |
| | Chairman, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | Philip 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: November 3, 2021October 26, 2022
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 |
| | | |
By | | Christopher C. Womack |
| | Chairman, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | Aaron P. Abramovitz |
| | Executive Vice President, Chief Financial Officer, and Treasurer |
| | (Principal Financial Officer) |
| | | |
By | | /s/ Melissa K. Caen | |
| | (Melissa K. Caen, Attorney-in-fact) | |
Date: November 3, 2021October 26, 2022
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 |
| | | |
By | | Anthony L. Wilson |
| | Chairman, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | Moses 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: November 3, 2021October 26, 2022
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 |
| | | |
By | | Christopher Cummiskey |
| | Chairman and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | Elliott L. SpencerGary Kerr |
| | Senior Vice President, Chief Financial Officer, and Treasurer |
| | (Principal Financial Officer) |
| | | |
By | | /s/ Melissa K. Caen | |
| | (Melissa K. Caen, Attorney-in-fact) | |
Date: November 3, 2021October 26, 2022
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 |
| | | |
By | | Kimberly S. Greene |
| | Chairman, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | | |
By | | David 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: November 3, 2021October 26, 2022