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GAS SOUTHERN Co GAS

0000092122 so:SouthernPowerMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2020-03-31
    Table of Contents                                Index to Financial Statements

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to            
 
Commission
File Number
 
Registrant,
State of Incorporation,
Address and Telephone Number
 
I.R.S. Employer
Identification No.
 
 1-3526 The Southern Company 58-0690070 
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta, Georgia 30308
(404) 506-5000
 1-3164 Alabama Power Company 63-0004250 
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35203
(205) 257-1000
 1-6468 Georgia Power Company 58-0257110 
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308
(404) 506-6526
 001-11229 Mississippi Power Company 64-0205820 
(A Mississippi Corporation)
2992 West Beach Boulevard
Gulfport, Mississippi 39501
(228) 864-1211
 001-37803 Southern Power Company 58-2598670 
(A Delaware Corporation)
30 Ivan Allen Jr. Boulevard, N.W.
Atlanta, Georgia 30308
(404) 506-5000
 1-14174 Southern Company Gas 58-2210952 
(A Georgia Corporation)
Ten Peachtree Place, N.E.
Atlanta, Georgia 30309
(404) 584-4000


    Table of Contents                                Index to Financial Statements

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of Each Class
Trading
Symbol(s)
Name of Each Exchange
on Which Registered
The Southern CompanyCommon Stock, par value $5 per shareSONew York Stock Exchange
(NYSE)
The Southern CompanySeries 2015A 6.25% Junior Subordinated Notes due 2075SOJANYSE
The Southern CompanySeries 2016A 5.25% Junior Subordinated Notes due 2076SOJBNYSE
The Southern CompanySeries 2017B 5.25% Junior Subordinated Notes due 2077SOJCNYSE
The Southern Company2019 Series A Corporate UnitsSOLNNYSE
The Southern CompanySeries 2020A 4.95% Junior Subordinated Notes due 2080SOJDNYSE
Alabama Power Company5.00% Series Class A Preferred StockALP PR QNYSE
Georgia Power CompanySeries 2017A 5.00% Junior Subordinated Notes due 2077GPJANYSE
Southern Power CompanySeries 2016A 1.000% Senior Notes due 2022SO/22BNYSE
Southern Power CompanySeries 2016B 1.850% Senior Notes due 2026SO/26ANYSE
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
RegistrantLarge Accelerated Filer
Accelerated
Filer
Non-accelerated Filer
Smaller
Reporting
Company
Emerging
Growth
Company
The Southern CompanyX    
Alabama Power 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.)
RegistrantDescription of Common StockShares Outstanding at March 31, 2020
The Southern CompanyPar Value $5 Per Share1,055,955,711
Alabama Power CompanyPar Value $40 Per Share30,537,500
Georgia Power CompanyWithout Par Value9,261,500
Mississippi Power CompanyWithout Par Value1,121,000
Southern Power CompanyPar Value $0.01 Per Share1,000
Southern Company GasPar Value $0.01 Per Share100
This combined Form 10-Q is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Mississippi Power Company, Southern Power Company, and Southern Company Gas. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.

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TABLE OF CONTENTS
  Page
   
 
 
   
 PART I—FINANCIAL INFORMATION 
   
Item 1.
Item 2.
Item 3.
Item 4.
   
 PART II—OTHER INFORMATION 
   
Item 1.
Item 1A.
Item 2.Unregistered Sales of Equity Securities and Use of ProceedsInapplicable
Item 3.Defaults Upon Senior SecuritiesInapplicable
Item 4.Mine Safety DisclosuresInapplicable
Item 5.Other InformationInapplicable
Item 6.
   
 

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DEFINITIONS

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

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DEFINITIONS
(continued)

TermMeaning
FitchFitch Ratings, Inc.
Form 10-KAnnual Report on Form 10-K of Southern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas for the year ended December 31, 2019, as applicable
GAAPU.S. generally accepted accounting principles
Georgia PowerGeorgia Power Company
Georgia Power 2019 IRPGeorgia Power's modified triennial integrated resource plan approved by the Georgia PSC in July 2019
Guarantee Settlement AgreementThe June 9, 2017 settlement agreement between the Vogtle Owners and Toshiba related to certain payment obligations of the EPC Contractor guaranteed by Toshiba
Gulf PowerGulf Power Company, until January 1, 2019 a wholly-owned subsidiary of Southern Company
Heating Degree DaysA measure of weather, calculated when the average daily temperatures are less than 65 degrees Fahrenheit
Heating SeasonThe period from November through March when Southern Company Gas' natural gas usage and operating revenues are generally higher
HLBVHypothetical liquidation at book value
IGCCIntegrated coal gasification combined cycle, the technology originally approved for Mississippi Power's Kemper County energy facility (Plant Ratcliffe)
IICIntercompany Interchange Contract
ITAACInspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC
ITCInvestment tax credit
JEAJacksonville Electric Authority
KWHKilowatt-hour
LIBORLondon Interbank Offered Rate
LIFOLast-in, first-out
LOCOMLower of weighted average cost or current market price
LTSALong-term service agreement
MarketersMarketers selling retail natural gas in Georgia and certificated by the Georgia PSC
MEAG PowerMunicipal Electric Authority of Georgia
Mississippi PowerMississippi Power Company
mmBtuMillion British thermal units
Moody'sMoody's Investors Service, Inc.
MRAMunicipal and Rural Associations
MWMegawatt
natural gas distribution utilitiesSouthern Company Gas' natural gas distribution utilities (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas)
NCCRGeorgia Power's Nuclear Construction Cost Recovery
NDRAlabama Power's Natural Disaster Reserve
NextEra EnergyNextEra Energy, Inc.
Nicor GasNorthern Illinois Gas Company, a wholly-owned subsidiary of Southern Company Gas
NRCU.S. Nuclear Regulatory Commission
NYMEXNew York Mercantile Exchange, Inc.
OCIOther comprehensive income
PennEast PipelinePennEast Pipeline Company, LLC, a joint venture to construct and operate a natural gas pipeline in which Southern Company Gas has a 20% ownership interest
PEPMississippi Power's Performance Evaluation Plan

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DEFINITIONS
(continued)

TermMeaning
Pivotal LNGPivotal LNG, Inc., through March 24, 2020 a wholly-owned subsidiary of Southern Company Gas
PowerSecurePowerSecure, Inc., a wholly-owned subsidiary of Southern Company
PPAPower purchase agreements, as well as, for Southern Power, contracts for differences that provide the owner of a renewable facility a certain fixed price for the electricity sold to the grid
PSCPublic Service Commission
PTCProduction tax credit
Rate CNPAlabama Power's Rate Certificated New Plant, consisting of Rate CNP New Plant, Rate CNP Compliance, and Rate CNP PPA
Rate ECRAlabama Power's Rate Energy Cost Recovery
Rate NDRAlabama Power's Rate Natural Disaster Reserve
Rate RSEAlabama Power's Rate Stabilization and Equalization
RegistrantsSouthern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power Company, and Southern Company Gas
ROEReturn on equity
S&PS&P Global Ratings, a division of S&P Global Inc.
SCSSouthern Company Services, Inc., the Southern Company system service company and a wholly-owned subsidiary of Southern Company
SECU.S. Securities and Exchange Commission
SNGSouthern Natural Gas Company, L.L.C., a pipeline system in which Southern Company Gas has a 50% ownership interest
Southern CompanyThe Southern Company
Southern Company GasSouthern Company Gas and its subsidiaries
Southern Company Gas CapitalSouthern Company Gas Capital Corporation, a 100%-owned subsidiary of Southern Company Gas
Southern Company power poolThe operating arrangement whereby the integrated generating resources of the traditional electric operating companies and Southern Power (excluding subsidiaries) are subject to joint commitment and dispatch in order to serve their combined load obligations
Southern Company systemSouthern Company, the traditional electric operating companies, Southern Power, Southern Company Gas, Southern Electric Generating Company, Southern Nuclear, SCS, Southern Communications Services, Inc., PowerSecure, and other subsidiaries
Southern NuclearSouthern Nuclear Operating Company, Inc., a wholly-owned subsidiary of Southern Company
Southern PowerSouthern Power Company and its subsidiaries
SP SolarSP Solar Holdings I, LP, a limited partnership indirectly owning substantially all of Southern Power's solar facilities, in which Southern Power has a 67% ownership interest
SP WindSP Wind Holdings II, LLC, a holding company owning a portfolio of eight operating wind facilities, in which Southern Power is the controlling partner in a tax equity arrangement
Subsidiary RegistrantsAlabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas
Tax ReformThe impact of the Tax Cuts and Jobs Act, which became effective on January 1, 2018
ToshibaToshiba Corporation, the parent company of Westinghouse
traditional electric operating companiesAlabama Power, Georgia Power, and Mississippi Power
TritonTriton Container Investments, LLC, an investment of Southern Company Gas through May 29, 2019
VCMVogtle Construction Monitoring
VIEVariable interest entity
Virginia CommissionVirginia State Corporation Commission
Virginia Natural GasVirginia Natural Gas, Inc., a wholly-owned subsidiary of Southern Company Gas

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DEFINITIONS
(continued)

TermMeaning
Vogtle 3 and 4 AgreementAgreement entered into with the EPC Contractor in 2008 by Georgia Power, acting for itself and as agent for the Vogtle Owners, and rejected in bankruptcy in July 2017, pursuant to which the EPC Contractor agreed to design, engineer, procure, construct, and test Plant Vogtle Units 3 and 4
Vogtle OwnersGeorgia Power, Oglethorpe Power Corporation, MEAG Power, and Dalton
Vogtle Services AgreementThe June 2017 services agreement between the Vogtle Owners and the EPC Contractor, as amended and restated in July 2017, for the EPC Contractor to transition construction management of Plant Vogtle Units 3 and 4 to Southern Nuclear and to provide ongoing design, engineering, and procurement services to Southern Nuclear
WACOGWeighted average cost of gas
WestinghouseWestinghouse Electric Company LLC
XcelXcel Energy Inc.

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

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

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
(continued)
in the event Georgia Power becomes obligated to provide funding to MEAG Power with respect to the portion of MEAG Power's ownership interest in Plant Vogtle Units 3 and 4 involving JEA, any inability of Georgia Power to receive repayment of such funding;
the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;
investment performance of the employee and retiree benefit plans and nuclear decommissioning trust funds;
advances in technology;
performance of counterparties under ongoing renewable energy partnerships and development agreements;
state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to ROE, equity ratios, additional generating capacity, and fuel and other cost recovery mechanisms;
the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;
the inherent risks involved in operating and constructing nuclear generating facilities;
the inherent risks involved in transporting and storing natural gas;
the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;
internal restructuring or other restructuring options that may be pursued;
potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;
the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;
the ability to obtain new short- and long-term contracts with wholesale customers;
the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;
interest rate fluctuations and financial market conditions and the results of financing efforts;
access to capital markets and other financing sources;
changes in Southern Company's and any of its subsidiaries' credit ratings;
changes in the method of determining LIBOR or the replacement of LIBOR with an alternative reference rate;
the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;
catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, or other similar occurrences;
the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;
impairments of goodwill or long-lived assets;
the effect of accounting pronouncements issued periodically by standard-setting bodies; and
other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Registrants from time to time with the SEC.
The Registrants expressly disclaim any obligation to update any forward-looking statements.

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PART I
Item 1. Financial Statements (Unaudited).
 Page
 
  
 
  
 
  
 
  
 
  
 
  

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Retail electric revenues$3,078
 $3,084
Wholesale electric revenues418
 499
Other electric revenues151
 168
Natural gas revenues (includes alternative revenue programs of
$9 and $(2), respectively)
1,249
 1,474
Other revenues122
 187
Total operating revenues5,018
 5,412
Operating Expenses:   
Fuel636
 850
Purchased power181
 170
Cost of natural gas439
 686
Cost of other sales55
 118
Other operations and maintenance1,296
 1,314
Depreciation and amortization857
 751
Taxes other than income taxes330
 329
(Gain) loss on dispositions, net(39) (2,497)
Total operating expenses3,755
 1,721
Operating Income1,263
 3,691
Other Income and (Expense):   
Allowance for equity funds used during construction34
 32
Earnings from equity method investments42
 48
Interest expense, net of amounts capitalized(456) (430)
Other income (expense), net103
 78
Total other income and (expense)(277) (272)
Earnings Before Income Taxes986
 3,419
Income taxes145
 1,360
Consolidated Net Income841
 2,059
Dividends on preferred stock of subsidiaries4
 4
Net loss attributable to noncontrolling interests(31) (29)
Consolidated Net Income Attributable to
Southern Company
$868
 $2,084
Common Stock Data:   
Earnings per share -   
Basic$0.82
 $2.01
Diluted$0.81
 $1.99
Average number of shares of common stock outstanding (in millions)   
Basic1,057
 1,038
Diluted1,067
 1,045
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Consolidated Net Income$841
 $2,059
Other comprehensive income (loss):   
Qualifying hedges:   
Changes in fair value, net of tax of $(30) and $(9), respectively(86) (28)
Reclassification adjustment for amounts included in net income,
net of tax of $13 and $9, respectively
38
 28
Pension and other postretirement benefit plans:   
Reclassification adjustment for amounts included in net income,
net of tax of $2 and $-, respectively
1
 
Total other comprehensive income (loss)(47) 
Comprehensive Income794
 2,059
Dividends on preferred stock of subsidiaries4
 4
Comprehensive loss attributable to noncontrolling interests(31) (29)
Consolidated Comprehensive Income Attributable to
Southern Company
$821
 $2,084
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.


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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Consolidated net income$841
 $2,059
Adjustments to reconcile consolidated net income to net cash provided from operating activities —   
Depreciation and amortization, total949
 851
Deferred income taxes(58) 191
Allowance for equity funds used during construction(34) (32)
Pension, postretirement, and other employee benefits(67) (53)
Settlement of asset retirement obligations(86) (62)
Stock based compensation expense72
 64
(Gain) loss on dispositions, net(38) (2,503)
Other, net111
 71
Changes in certain current assets and liabilities —   
-Receivables317
 378
-Prepayments(110) (129)
-Natural gas for sale246
 363
-Other current assets(67) 17
-Accounts payable(504) (783)
-Accrued taxes(102) 928
-Accrued compensation(473) (489)
-Other current liabilities(103) (127)
Net cash provided from operating activities894
 744
Investing Activities:   
Property additions(1,560) (1,678)
Nuclear decommissioning trust fund purchases(254) (197)
Nuclear decommissioning trust fund sales249
 192
Proceeds from dispositions and asset sales982
 4,427
Cost of removal, net of salvage(69) (89)
Change in construction payables, net(141) (146)
Investment in unconsolidated subsidiaries(77) (10)
Payments pursuant to LTSAs(26) (28)
Other investing activities7
 (17)
Net cash provided from (used for) investing activities(889) 2,454
Financing Activities:   
Increase (decrease) in notes payable, net(685) 86
Proceeds —   
Long-term debt2,653
 1,220
Common stock52
 224
Short-term borrowings565
 
Redemptions and repurchases —   
Long-term debt(1,481) (2,429)
Short-term borrowings(100) (1,750)
Distributions to noncontrolling interests(48) (36)
Payment of common stock dividends(655) (623)
Other financing activities(116) (45)
Net cash provided from (used for) financing activities185
 (3,353)
Net Change in Cash, Cash Equivalents, and Restricted Cash190
 (155)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period1,978
 1,519
Cash, Cash Equivalents, and Restricted Cash at End of Period$2,168
 $1,364
Supplemental Cash Flow Information:   
Cash paid (received) during the period for —   
Interest (net of $20 and $18 capitalized for 2020 and 2019, respectively)$490
 $462
Income taxes, net(16) 
Noncash transactions —   
Accrued property additions at end of period733
 899
Right-of-use assets obtained under operating leases24
 15
Right-of-use assets obtained under finance leases4
 29
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $2,164
 $1,975
Receivables —    
Customer accounts receivable 1,603
 1,614
Energy marketing receivables 291
 428
Unbilled revenues 522
 599
Other accounts and notes receivable 560
 817
Accumulated provision for uncollectible accounts (53) (49)
Materials and supplies 1,405
 1,388
Fossil fuel for generation 577
 521
Natural gas for sale 233
 479
Prepaid expenses 667
 314
Assets from risk management activities, net of collateral 134
 183
Regulatory assets – asset retirement obligations 272
 287
Other regulatory assets 876
 885
Assets held for sale 
 188
Other current assets 179
 188
Total current assets 9,430
 9,817
Property, Plant, and Equipment:    
In service 105,931
 105,114
Less: Accumulated depreciation 31,180
 30,765
Plant in service, net of depreciation 74,751
 74,349
Nuclear fuel, at amortized cost 854
 851
Construction work in progress 8,360
 7,880
Total property, plant, and equipment 83,965
 83,080
Other Property and Investments:    
Goodwill 5,280
 5,280
Equity investments in unconsolidated subsidiaries 1,386
 1,303
Other intangible assets, net of amortization of $292 and $280
at March 31, 2020 and December 31, 2019, respectively
 523
 536
Nuclear decommissioning trusts, at fair value 1,787
 2,036
Leveraged leases 795
 788
Miscellaneous property and investments 407
 391
Total other property and investments 10,178
 10,334
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 1,770
 1,800
Deferred charges related to income taxes 798
 798
Unamortized loss on reacquired debt 297
 300
Regulatory assets – asset retirement obligations, deferred 4,384
 4,094
Other regulatory assets, deferred 6,763
 6,805
Assets held for sale, deferred 
 601
Other deferred charges and assets 1,267
 1,071
Total deferred charges and other assets 15,279
 15,469
Total Assets $118,852
 $118,700
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.


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    Table of Contents                                Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholders' Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $1,809
 $2,989
Notes payable 1,710
 2,055
Energy marketing trade payables 298
 442
Accounts payable 1,653
 2,115
Customer deposits 491
 496
Accrued taxes —    
Accrued income taxes 25
 
Other accrued taxes 338
 659
Accrued interest 414
 474
Accrued compensation 502
 992
Asset retirement obligations 514
 504
Other regulatory liabilities 701
 756
Liabilities held for sale 
 5
Operating lease obligations 230
 229
Other current liabilities 868
 830
Total current liabilities 9,553
 12,546
Long-term Debt 44,235
 41,798
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 8,398
 7,888
Deferred credits related to income taxes 5,954
 6,078
Accumulated deferred ITCs 2,271
 2,291
Employee benefit obligations 1,778
 1,814
Operating lease obligations, deferred 1,610
 1,615
Asset retirement obligations, deferred 9,296
 9,282
Accrued environmental remediation 230
 234
Other cost of removal obligations 2,251
 2,239
Other regulatory liabilities, deferred 368
 256
Other deferred credits and liabilities 701
 609
Total deferred credits and other liabilities 32,857
 32,306
Total Liabilities 86,645
 86,650
Redeemable Preferred Stock of Subsidiaries 291
 291
Total Stockholders' Equity (See accompanying statements)
 31,916
 31,759
Total Liabilities and Stockholders' Equity $118,852
 $118,700
The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements

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

 Southern Company Common Stockholders' Equity    
 Number of
Common Shares
 Common Stock   Accumulated
Other
Comprehensive Income
(Loss)
    
 Issued Treasury Par Value Paid-In Capital Treasury Retained Earnings  Noncontrolling Interests Total
 (in millions)
Balance at December 31, 20181,035
 (1) $5,164
 $11,094
 $(38) $8,706
 $(203) $4,316
 $29,039
Consolidated net income attributable to
Southern Company

 
 
 
 
 2,084
 
 
 2,084
Stock issued6
 
 28
 196
 
 
 
 
 224
Stock-based compensation
 
 
 24
 
 
 
 
 24
Cash dividends of $0.60 per share
 
 
 
 
 (622) 
 
 (622)
Contributions from noncontrolling interests
 
 
 
 
 
 
 3
 3
Distributions to noncontrolling interests
 
 
 
 
 
 
 (41) (41)
Net income (loss) attributable
to noncontrolling interests

 
 
 
 
 
 
 (29) (29)
Other
 
 
 7
 (2) (1) 
 1
 5
Balance at March 31, 20191,041
 (1) $5,192
 $11,321
 $(40) $10,167
 $(203) $4,250
 $30,687
Balance at December 31, 20191,054
 (1) $5,257
 $11,734
 $(42) $10,877
 $(321) $4,254
 $31,759
Consolidated net income attributable to
Southern Company

 
 
 
 
 868
 
 
 868
Other comprehensive income (loss)
 
 
 
 
 
 (47) 
 (47)
Stock issued3
 
 9
 43
 
 
 
 
 52
Stock-based compensation
 
 
 5
 
 
 
 
 5
Cash dividends of $0.62 per share
 
 
 
 
 (655) 
 
 (655)
Contributions from noncontrolling interests
 
 
 
 
 
 
 16
 16
Distributions to noncontrolling interests
 
 
 
 
 
 
 (48) (48)
Net income (loss) attributable to
noncontrolling interests

 
 
 
 
 
 
 (31) (31)
Other
 
 
 
 (2) (2) 1
 
 (3)
Balance at March 31, 20201,057
 (1) $5,266
 $11,782
 $(44) $11,088
 $(367) $4,191
 $31,916

The accompanying notes as they relate to Southern Company are an integral part of these condensed consolidated financial statements.


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    Table of Contents                                Index to Financial Statements


ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Retail revenues$1,205
 $1,213
Wholesale revenues, non-affiliates56
 61
Wholesale revenues, affiliates19
 60
Other revenues71
 74
Total operating revenues1,351
 1,408
Operating Expenses:   
Fuel215
 301
Purchased power, non-affiliates40
 37
Purchased power, affiliates18
 21
Other operations and maintenance350
 409
Depreciation and amortization200
 199
Taxes other than income taxes106
 103
Total operating expenses929
 1,070
Operating Income422
 338
Other Income and (Expense):   
Allowance for equity funds used during construction10
 14
Interest expense, net of amounts capitalized(88) (83)
Other income (expense), net24
 14
Total other income and (expense)(54) (55)
Earnings Before Income Taxes368
 283
Income taxes84
 62
Net Income284
 221
Dividends on Preferred Stock4
 4
Net Income After Dividends on Preferred Stock$280
 $217

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Net Income$284
 $221
Other comprehensive income (loss):   
Qualifying hedges:   
Reclassification adjustment for amounts included in net income,
net of tax of $- and $-, respectively
1
 1
Total other comprehensive income (loss)1
 1
Comprehensive Income$285
 $222
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Net income$284
 $221
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total241
 244
Deferred income taxes10
 
Allowance for equity funds used during construction(10) (14)
Pension, postretirement, and other employee benefits(25) (18)
Settlement of asset retirement obligations(46) (18)
Other, net20
 26
Changes in certain current assets and liabilities —   
-Receivables93
 105
-Prepayments(80) (78)
-Materials and supplies(22) (4)
-Other current assets(29) 19
-Accounts payable(305) (286)
-Accrued taxes100
 80
-Accrued compensation(111) (122)
-Retail fuel cost over recovery47
 2
-Other current liabilities(12) (11)
Net cash provided from operating activities155
 146
Investing Activities:   
Property additions(340) (390)
Nuclear decommissioning trust fund purchases(81) (68)
Nuclear decommissioning trust fund sales81
 68
Cost of removal, net of salvage(15) (16)
Change in construction payables(65) (95)
Other investing activities(4) (10)
Net cash used for investing activities(424) (511)
Financing Activities:   
Proceeds — Capital contributions from parent company610
 1,232
Redemptions —   
Pollution control revenue bonds(87) 
Senior notes
 (200)
Payment of common stock dividends(239) (211)
Other financing activities(11) (10)
Net cash provided from financing activities273
 811
Net Change in Cash, Cash Equivalents, and Restricted Cash4
 446
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period894
 313
Cash, Cash Equivalents, and Restricted Cash at End of Period$898
 $759
Supplemental Cash Flow Information:   
Cash paid during the period for —   
Interest (net of $3 and $5 capitalized for 2020 and 2019, respectively)$92
 $89
Noncash transactions —   
Accrued property additions at end of period135
 176
Right-of-use assets obtained under operating leases2
 2
Right-of-use assets obtained under finance leases1
 
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $898
 $894
Receivables —    
Customer accounts receivable 377
 425
Unbilled revenues 117
 134
Affiliated 40
 37
Other accounts and notes receivable 41
 72
Accumulated provision for uncollectible accounts (19) (22)
Fossil fuel stock 227
 212
Materials and supplies 531
 512
Prepaid expenses 119
 50
Other regulatory assets 242
 242
Other current assets 37
 30
Total current assets 2,610
 2,586
Property, Plant, and Equipment:    
In service 30,348
 30,023
Less: Accumulated provision for depreciation 9,608
 9,540
Plant in service, net of depreciation 20,740
 20,483
Nuclear fuel, at amortized cost 290
 296
Construction work in progress 777
 890
Total property, plant, and equipment 21,807
 21,669
Other Property and Investments:    
Equity investments in unconsolidated subsidiaries 64
 66
Nuclear decommissioning trusts, at fair value 855
 1,023
Miscellaneous property and investments 129
 128
Total other property and investments 1,048
 1,217
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 124
 132
Deferred charges related to income taxes 243
 244
Deferred under recovered regulatory clause revenues 37
 40
Regulatory assets – asset retirement obligations 1,224
 1,019
Other regulatory assets, deferred 1,968
 1,976
Other deferred charges and assets 307
 269
Total deferred charges and other assets 3,903
 3,680
Total Assets $29,368
 $29,152
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.


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    Table of Contents                                Index to Financial Statements

ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $296
 $251
Accounts payable —    
Affiliated 212
 316
Other 271
 514
Customer deposits 101
 100
Accrued taxes 168
 78
Accrued interest 82
 92
Accrued compensation 105
 216
Asset retirement obligations 201
 195
Other regulatory liabilities 155
 193
Other current liabilities 109
 105
Total current liabilities 1,700
 2,060
Long-term Debt 8,141
 8,270
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 3,283
 3,260
Deferred credits related to income taxes 1,946
 1,960
Accumulated deferred ITCs 99
 100
Employee benefit obligations 198
 206
Operating lease obligations 103
 107
Asset retirement obligations, deferred 3,330
 3,345
Other cost of removal obligations 402
 412
Other regulatory liabilities, deferred 225
 146
Other deferred credits and liabilities 41
 40
Total deferred credits and other liabilities 9,627
 9,576
Total Liabilities 19,468
 19,906
Redeemable Preferred Stock 291
 291
Common Stockholder's Equity (See accompanying statements)
 9,609
 8,955
Total Liabilities and Stockholder's Equity $29,368
 $29,152
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

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

 Number of
Common
Shares
Issued
 Common
Stock
 Paid-In
Capital
 Retained
Earnings
 Accumulated
Other
Comprehensive
Income (Loss)
 Total
 (in millions)
Balance at December 31, 201831
 $1,222
 $3,508
 $2,775
 $(28) $7,477
Net income after dividends on
preferred stock

 
 
 217
 
 217
Capital contributions from parent company
 
 1,236
 
 
 1,236
Other comprehensive income
 
 
 
 1
 1
Cash dividends on common stock
 
 
 (211) 
 (211)
Balance at March 31, 201931
 $1,222
 $4,744
 $2,781
 $(27) $8,720
            
Balance at December 31, 201931
 $1,222
 $4,755
 $3,001
 $(23) $8,955
Net income after dividends on
preferred stock

 
 
 280
 
 280
Capital contributions from parent company
 
 612
 
 
 612
Other comprehensive income
 
 
 
 1
 1
Cash dividends on common stock
 
 
 (239) 
 (239)
Balance at March 31, 202031
 $1,222
 $5,367
 $3,042
 $(22) $9,609
The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.


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    Table of Contents                                Index to Financial Statements


GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)

 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Retail revenues$1,675
 $1,668
Wholesale revenues26
 32
Other revenues124
 133
Total operating revenues1,825
 1,833
Operating Expenses:   
Fuel231
 299
Purchased power, non-affiliates129
 118
Purchased power, affiliates129
 176
Other operations and maintenance465
 446
Depreciation and amortization352
 240
Taxes other than income taxes113
 106
Total operating expenses1,419
 1,385
Operating Income406
 448
Other Income and (Expense):   
Interest expense, net of amounts capitalized(111) (96)
Other income (expense), net52
 40
Total other income and (expense)(59) (56)
Earnings Before Income Taxes347
 392
Income taxes16
 81
Net Income$331
 $311
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Net Income$331
 $311
Other comprehensive income (loss):   
Qualifying hedges:   
Changes in fair value, net of tax of $(1) and $-, respectively(2) 
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $-, respectively
1
 1
Total other comprehensive income (loss)(1) 1
Comprehensive Income$330
 $312
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Net income$331
 $311
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total396
 287
Deferred income taxes(73) 127
Pension, postretirement, and other employee benefits(40) (35)
Settlement of asset retirement obligations(33) (34)
Storm damage reserve accruals53
 7
Retail fuel cost over recovery – long-term90
 
Other, net(52) (25)
Changes in certain current assets and liabilities —   
-Receivables22
 91
-Fossil fuel stock(42) (41)
-Prepaid income taxes
 (73)
-Other current assets(15) 33
-Accounts payable(69) (166)
-Accrued taxes(156) (245)
-Accrued compensation(87) (67)
-Customer refunds(107) 32
-Other current liabilities(5) 10
Net cash provided from operating activities213
 212
Investing Activities:   
Property additions(849) (875)
Nuclear decommissioning trust fund purchases(173) (129)
Nuclear decommissioning trust fund sales167
 124
Cost of removal, net of salvage(34) (58)
Change in construction payables, net of joint owner portion(46) (38)
Proceeds from dispositions and asset sales142
 7
Other investing activities(2) (11)
Net cash used for investing activities(795) (980)
Financing Activities:   
Increase (decrease) in notes payable, net11
 (19)
Proceeds —   
FFB loan
 835
Senior notes1,500
 
Pollution control revenue bonds53
 343
Short-term borrowings200
 
Capital contributions from parent company500
 27
Redemptions and repurchases —   
Senior notes(950) 
Pollution control revenue bonds(148) (108)
FFB loan(16) 
Payment of common stock dividends(385) (394)
Other financing activities(23) (19)
Net cash provided from financing activities742
 665
Net Change in Cash, Cash Equivalents, and Restricted Cash160
 (103)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period52
 112
Cash, Cash Equivalents, and Restricted Cash at End of Period$212
 $9
Supplemental Cash Flow Information:   
Cash paid during the period for —   
Interest (net of $11 and $8 capitalized for 2020 and 2019, respectively)$122
 $92
Noncash transactions —   
Accrued property additions at end of period472
 607
Right-of-use assets obtained under operating leases10
 4
Right-of-use assets obtained under finance leases
 28
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $212
 $52
Receivables —    
Customer accounts receivable 545
 533
Unbilled revenues 195
 203
Joint owner accounts receivable 129
 136
Affiliated 24
 21
Other accounts and notes receivable 44
 209
Accumulated provision for uncollectible accounts (2) (2)
Fossil fuel stock 315
 272
Materials and supplies 513
 501
Prepaid expenses 38
 63
Regulatory assets – storm damage reserves 213
 213
Regulatory assets – asset retirement obligations 235
 254
Other regulatory assets 295
 263
Other current assets 69
 77
Total current assets 2,825
 2,795
Property, Plant, and Equipment:    
In service 38,436
 38,137
Less: Accumulated provision for depreciation 11,929
 11,753
Plant in service, net of depreciation 26,507
 26,384
Nuclear fuel, at amortized cost 563
 555
Construction work in progress 6,187
 5,650
Total property, plant, and equipment 33,257
 32,589
Other Property and Investments:    
Equity investments in unconsolidated subsidiaries 52
 52
Nuclear decommissioning trusts, at fair value 932
 1,013
Miscellaneous property and investments 65
 64
Total other property and investments 1,049
 1,129
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 1,401
 1,428
Deferred charges related to income taxes 519
 519
Regulatory assets – asset retirement obligations, deferred 2,970
 2,865
Other regulatory assets, deferred 2,677
 2,716
Other deferred charges and assets 481
 500
Total deferred charges and other assets 8,048
 8,028
Total Assets $45,179
 $44,541
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.


24

    Table of Contents                                Index to Financial Statements

GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $74
 $1,025
Notes payable 451
 365
Accounts payable —    
Affiliated 389
 512
Other 723
 711
Customer deposits 284
 283
Accrued taxes 239
 407
Accrued interest 97
 118
Accrued compensation 120
 233
Operating lease obligations 147
 144
Asset retirement obligations 272
 265
Other regulatory liabilities 342
 447
Other current liabilities 233
 187
Total current liabilities 3,371
 4,697
Long-term Debt 12,297
 10,791
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 3,255
 3,257
Deferred credits related to income taxes 2,792
 2,862
Accumulated deferred ITCs 253
 255
Employee benefit obligations 497
 540
Operating lease obligations, deferred 1,280
 1,282
Asset retirement obligations, deferred 5,547
 5,519
Other deferred credits and liabilities 375
 273
Total deferred credits and other liabilities 13,999
 13,988
Total Liabilities 29,667
 29,476
Common Stockholder's Equity (See accompanying statements)
 15,512
 15,065
Total Liabilities and Stockholder's Equity $45,179
 $44,541
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

25

    Table of Contents                                Index to Financial Statements

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

 Number of
Common
Shares
Issued
 Common
Stock
 Paid-In
Capital
 Retained
Earnings
 Accumulated
Other
Comprehensive
Income (Loss)
 Total    
 (in millions)
Balance at December 31, 20189
 $398
 $10,322
 $3,612
 $(9) $14,323
Net income
 
 
 311
 
 311
Capital contributions from parent company
 
 29
 
 
 29
Other comprehensive income
 
 
 
 1
 1
Cash dividends on common stock
 
 
 (394) 
 (394)
Other
 
 (1) 
 
 (1)
Balance at March 31, 20199
 $398
 $10,350
 $3,529
 $(8) $14,269
            
Balance at December 31, 20199
 $398
 $10,962
 $3,756
 $(51) $15,065
Net income
 
 
 331
 
 331
Capital contributions from parent company
 
 502
 
 
 502
Other comprehensive income (loss)
 
 
 
 (1) (1)
Cash dividends on common stock
 
 
 (385) 
 (385)
Balance at March 31, 20209
 $398
 $11,464
 $3,702
 $(52) $15,512
The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.


26

    Table of Contents                                Index to Financial Statements


MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Retail revenues$199
 $203
Wholesale revenues, non-affiliates51
 57
Wholesale revenues, affiliates21
 22
Other revenues6
 5
Total operating revenues277
 287
Operating Expenses:   
Fuel79
 93
Purchased power5
 3
Other operations and maintenance76
 61
Depreciation and amortization42
 48
Taxes other than income taxes29
 26
Total operating expenses231
 231
Operating Income46
 56
Other Income and (Expense):   
Interest expense, net of amounts capitalized(16) (17)
Other income (expense), net8
 5
Total other income and (expense)(8) (12)
Earnings Before Income Taxes38
 44
Income taxes6
 7
Net Income$32
 $37
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Net Income$32
 $37
Other comprehensive income (loss):   
Qualifying hedges:   
Changes in fair value, net of tax of $- and $-, respectively
 
Reclassification adjustment for amounts included in net income,
net of tax of $- and $-, respectively

 
Total other comprehensive income (loss)
 
Comprehensive Income$32
 $37
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

27

    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Net income$32
 $37
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total44
 50
Deferred income taxes(4) (8)
Settlement of asset retirement obligations(3) (8)
Other, net4
 4
Changes in certain current assets and liabilities —   
-Receivables14
 11
-Other current assets(10) 7
-Accounts payable(24) (38)
-Accrued taxes(54) (62)
-Accrued compensation(19) (22)
-Other current liabilities3
 6
Net cash used for operating activities(17) (23)
Investing Activities:   
Property additions(50) (45)
Construction payables(10) (8)
Payments pursuant to LTSAs(5) (5)
Other investing activities(6) (5)
Net cash used for investing activities(71) (63)
Financing Activities:   
Proceeds —   
Capital contributions from parent company75
 
Short-term borrowings40
 
Pollution control revenue bonds
 43
Other long-term debt100
 
Redemptions — Senior notes(275) 
Return of capital to parent company(37) (38)
Other financing activities(1) 
Net cash provided from (used for) financing activities(98) 5
Net Change in Cash, Cash Equivalents, and Restricted Cash(186) (81)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period286
 293
Cash, Cash Equivalents, and Restricted Cash at End of Period$100
 $212
Supplemental Cash Flow Information:   
Cash paid during the period for —   
Interest (net of $- and $- capitalized for 2020 and 2019, respectively)$18
 $13
Noncash transactions — Accrued property additions at end of period25
 27
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $100
 $286
Receivables —    
Customer accounts receivable 32
 35
Unbilled revenues 33
 39
Affiliated 25
 27
Other accounts and notes receivable 23
 26
Fossil fuel stock 24
 26
Materials and supplies 59
 61
Other regulatory assets 85
 99
Other current assets 10
 10
Total current assets 391
 609
Property, Plant, and Equipment:    
In service 4,900
 4,857
Less: Accumulated provision for depreciation 1,489
 1,463
Plant in service, net of depreciation 3,411
 3,394
Construction work in progress 127
 126
Total property, plant, and equipment 3,538
 3,520
Other Property and Investments 131
 131
Deferred Charges and Other Assets:    
Deferred charges related to income taxes 32
 32
Regulatory assets – asset retirement obligations 197
 210
Other regulatory assets, deferred 386
 360
Accumulated deferred income taxes 137
 139
Other deferred charges and assets 48
 34
Total deferred charges and other assets 800
 775
Total Assets $4,860
 $5,035
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.


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    Table of Contents                                Index to Financial Statements

MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholder's Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $7
 $281
Notes payable 40
 
Accounts payable —    
Affiliated 62
 76
Other 56
 75
Accrued taxes 51
 105
Accrued interest 14
 15
Accrued compensation 16
 35
Asset retirement obligations 28
 33
Over recovered regulatory clause liabilities 32
 29
Other regulatory liabilities 54
 21
Other current liabilities 69
 64
Total current liabilities 429
 734
Long-term Debt 1,406
 1,308
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 422
 424
Deferred credits related to income taxes 320
 352
Employee benefit obligations 98
 99
Asset retirement obligations, deferred 158
 157
Other cost of removal obligations 192
 189
Other regulatory liabilities, deferred 71
 76
Other deferred credits and liabilities 42
 44
Total deferred credits and other liabilities 1,303
 1,341
Total Liabilities 3,138
 3,383
Common Stockholder's Equity (See accompanying statements)
 1,722
 1,652
Total Liabilities and Stockholder's Equity $4,860
 $5,035
The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

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    Table of Contents                                Index to Financial Statements

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

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


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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Wholesale revenues, non-affiliates$286
 $352
Wholesale revenues, affiliates86
 87
Other revenues3
 4
Total operating revenues375
 443
Operating Expenses:   
Fuel107
 145
Purchased power14
 24
Other operations and maintenance79
 83
Depreciation and amortization117
 119
Taxes other than income taxes9
 11
(Gain) loss on dispositions, net(39) 1
Total operating expenses287
 383
Operating Income88
 60
Other Income and (Expense):   
Interest expense, net of amounts capitalized(39) (44)
Other income (expense), net2
 2
Total other income and (expense)(37) (42)
Earnings Before Income Taxes51
 18
Income taxes (benefit)7
 (9)
Net Income44
 27
Net loss attributable to noncontrolling interests(31) (29)
Net Income Attributable to Southern Power$75
 $56
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Net Income$44
 $27
Other comprehensive income (loss):   
Qualifying hedges:   
Changes in fair value, net of tax of $(21) and $(10), respectively(62) (29)
Reclassification adjustment for amounts included in net income,
net of tax of $10 and $8, respectively
28
 25
Pension and other postretirement benefit plans:   
Reclassification adjustment for amounts included in net income,
net of tax of $- and $-, respectively
1
 
Total other comprehensive income (loss)(33) (4)
Comprehensive Income11
 23
Comprehensive loss attributable to noncontrolling interests(31) (29)
Comprehensive Income Attributable to Southern Power$42
 $52
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Net income$44
 $27
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total123
 125
Deferred income taxes(36) 17
Amortization of investment tax credits(14) (14)
(Gain) loss on dispositions, net(39) 
Other, net(10) (7)
Changes in certain current assets and liabilities —   
-Receivables5
 10
-Prepaid income taxes51
 (9)
-Other current assets(2) 3
-Accounts payable(34) (32)
-Accrued taxes8
 5
-Other current liabilities(13) (15)
Net cash provided from operating activities83
 110
Investing Activities:   
Property additions(47) (66)
Proceeds from dispositions and asset sales660
 
Change in construction payables(15) (7)
Payments pursuant to LTSAs(15) (15)
Other investing activities17
 9
Net cash provided from (used for) investing activities600
 (79)
Financing Activities:   
Increase (decrease) in notes payable, net(449) 5
Redemptions — Short-term borrowings(100) 
Distributions to noncontrolling interests(48) (36)
Capital contributions from noncontrolling interests16
 3
Payment of common stock dividends(50) (51)
Other financing activities(1) 
Net cash used for financing activities(632) (79)
Net Change in Cash, Cash Equivalents, and Restricted Cash51
 (48)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period279
 181
Cash, Cash Equivalents, and Restricted Cash at End of Period$330
 $133
Supplemental Cash Flow Information:   
Cash paid (received) during the period for —   
Interest (net of $4 capitalized for both 2020 and 2019)$28
 $28
Income taxes, net(5) 1
Noncash transactions — Accrued property additions at end of period27
 19
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $330
 $279
Receivables —    
Customer accounts receivable 109
 107
Affiliated 26
 30
Other 54
 73
Materials and supplies 198
 191
Prepaid income taxes 452
 36
Other current assets 24
 43
Total current assets 1,193
 759
Property, Plant, and Equipment:    
In service 13,282
 13,270
Less: Accumulated provision for depreciation 2,580
 2,464
Plant in service, net of depreciation 10,702
 10,806
Construction work in progress 534
 515
Total property, plant, and equipment 11,236
 11,321
Other Property and Investments:    
Intangible assets, net of amortization of $74 and $69
at March 31, 2020 and December 31, 2019, respectively
 317
 322
Equity investments in unconsolidated subsidiaries 45
 28
Total other property and investments 362
 350
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 368
 369
Prepaid LTSAs 134
 128
Accumulated deferred income taxes 129
 551
Income taxes receivable, non-current 8
 5
Assets held for sale 
 601
Other deferred charges and assets 216
 216
Total deferred charges and other assets 855
 1,870
Total Assets $13,646
 $14,300
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Liabilities and Stockholders' Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Securities due within one year $824
 $824
Notes payable 
 549
Accounts payable —    
Affiliated 43
 56
Other 59
 85
Accrued taxes —    
Accrued income taxes 9
 
Other accrued taxes 20
 26
Accrued interest 36
 32
Other current liabilities 119
 132
Total current liabilities 1,110
 1,704
Long-term Debt 3,545
 3,574
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 114
 115
Accumulated deferred ITCs 1,717
 1,731
Operating lease obligations 375
 376
Other deferred credits and liabilities 234
 178
Total deferred credits and other liabilities 2,440
 2,400
Total Liabilities 7,095
 7,678
Total Stockholders' Equity (See accompanying statements)
 6,551
 6,622
Total Liabilities and Stockholders' Equity $13,646
 $14,300
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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

 Paid-In
Capital
 Retained
Earnings
 Accumulated
Other
Comprehensive
Income (Loss)
 Total Common
Stockholders' Equity
 Noncontrolling Interests Total
 (in millions)
Balance at December 31, 2018$1,600
 $1,352
 $16
 $2,968
 $4,316
 $7,284
Net income attributable to Southern Power
 56
 
 56
 
 56
Capital contributions from parent company1
 
 
 1
 
 1
Other comprehensive income (loss)
 
 (4) (4) 
 (4)
Cash dividends on common stock
 (51) 
 (51) 
 (51)
Capital contributions from
noncontrolling interests

 
 
 
 3
 3
Distributions to noncontrolling interests
 
 
 
 (41) (41)
Net income (loss) attributable
to noncontrolling interests

 
 
 
 (29) (29)
Other(1) (1) 
 (2) 1
 (1)
Balance at March 31, 2019$1,600
 $1,356
 $12
 $2,968
 $4,250
 $7,218
Balance at December 31, 2019$909
 $1,485
 $(26) $2,368
 $4,254
 $6,622
Net income attributable to Southern Power
 75
 
 75
 
 75
Other comprehensive income (loss)
 
 (33) (33) 
 (33)
Cash dividends on common stock
 (50) 
 (50) 
 (50)
Capital contributions from
noncontrolling interests

 
 
 
 16
 16
Distributions to noncontrolling interests
 
 
 
 (48) (48)
Net income (loss) attributable
to noncontrolling interests

 
 
 
 (31) (31)
Balance at March 31, 2020$909
 $1,510
 $(59) $2,360
 $4,191
 $6,551
The accompanying notes as they relate to Southern Power are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Revenues:   
Natural gas revenues (includes revenue taxes of $47 and $55, respectively)$1,240
 $1,476
Alternative revenue programs9
 (2)
Total operating revenues1,249
 1,474
Operating Expenses:   
Cost of natural gas439
 686
Other operations and maintenance258
 235
Depreciation and amortization120
 118
Taxes other than income taxes72
 82
Total operating expenses889
 1,121
Operating Income360
 353
Other Income and (Expense):   
Earnings from equity method investments43
 48
Interest expense, net of amounts capitalized(58) (59)
Other income (expense), net9
 5
Total other income and (expense)(6) (6)
Earnings Before Income Taxes354
 347
Income taxes79
 77
Net Income$275
 $270
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Net Income$275
 $270
Other comprehensive income (loss):   
Qualifying hedges:   
Changes in fair value, net of tax of $(7) and $-, respectively(20) 
Reclassification adjustment for amounts included in net income,
net of tax of $2 and $-, respectively
5
 
Pension and other postretirement benefit plans:   
Reclassification adjustment for amounts included in net income,
net of tax of $1 and $-, respectively

 (1)
Total other comprehensive income (loss)(15) (1)
Comprehensive Income$260
 $269
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
 2020 2019
 (in millions)
Operating Activities:   
Net income$275
 $270
Adjustments to reconcile net income to net cash provided from operating activities —   
Depreciation and amortization, total120
 118
Deferred income taxes22
 42
Mark-to-market adjustments13
 45
Other, net(19) (20)
Changes in certain current assets and liabilities —   
-Receivables112
 238
-Natural gas for sale246
 363
-Other current assets33
 59
-Accounts payable(185) (353)
-Accrued taxes27
 21
-Accrued compensation(42) (50)
-Other current liabilities41
 (50)
Net cash provided from operating activities643
 683
Investing Activities:   
Property additions(261) (256)
Cost of removal, net of salvage(15) (12)
Change in construction payables, net(18) 1
Investment in unconsolidated subsidiaries(77) (10)
Proceeds from dispositions and asset sales178
 
Other investing activities
 (13)
Net cash used for investing activities(193) (290)
Financing Activities:   
Decrease in notes payable, net(39) (289)
Payment of common stock dividends(133) (118)
Other financing activities(13) 5
Net cash used for financing activities(185) (402)
Net Change in Cash, Cash Equivalents, and Restricted Cash265
 (9)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period49
 70
Cash, Cash Equivalents, and Restricted Cash at End of Period$314
 $61
Supplemental Cash Flow Information:   
Cash paid (received) during the period for —   
Interest (net of $2 capitalized for both 2020 and 2019)$49
 $55
Income taxes, net(12) (1)
Noncash transactions — Accrued property additions at end of period104
 98
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.

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    Table of Contents                                Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
Assets At March 31, 2020 At December 31, 2019
  (in millions)
Current Assets:    
Cash and cash equivalents $311
 $46
Receivables —    
Energy marketing receivables 291
 428
Customer accounts receivable 407
 323
Unbilled revenues 136
 183
Affiliated 3
 5
Other accounts and notes receivable 102
 114
Accumulated provision for uncollectible accounts (25) (18)
Natural gas for sale 233
 479
Prepaid expenses 53
 65
Assets from risk management activities, net of collateral 119
 177
Other regulatory assets 69
 92
Assets held for sale 
 171
Other current assets 43
 41
Total current assets 1,742
 2,106
Property, Plant, and Equipment:    
In service 16,456
 16,344
Less: Accumulated depreciation 4,651
 4,650
Plant in service, net of depreciation 11,805
 11,694
Construction work in progress 680
 613
Total property, plant, and equipment 12,485
 12,307
Other Property and Investments:    
Goodwill 5,015
 5,015
Equity investments in unconsolidated subsidiaries 1,333
 1,251
Other intangible assets, net of amortization of $181 and $176
at March 31, 2020 and December 31, 2019, respectively
 65
 70
Miscellaneous property and investments 20
 20
Total other property and investments 6,433
 6,356
Deferred Charges and Other Assets:    
Operating lease right-of-use assets, net of amortization 91
 93
Other regulatory assets, deferred 605
 618
Other deferred charges and assets 261
 207
Total deferred charges and other assets 957
 918
Total Assets $21,617
 $21,687
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.


39

    Table of Contents                                Index to Financial Statements

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

Liabilities and Stockholder's Equity At March 31, 2020 At December 31, 2019
  (in millions)
Current Liabilities:    
Notes payable $611
 $650
Energy marketing trade payables 298
 442
Accounts payable —    
Affiliated 39
 41
Other 258
 315
Customer deposits 89
 96
Accrued taxes —    
Accrued income taxes 37
 
Other accrued taxes 61
 71
Accrued interest 64
 52
Accrued compensation 58
 100
Liabilities from risk management activities, net of collateral 41
 21
Other regulatory liabilities 149
 94
Other current liabilities 121
 128
Total current liabilities 1,826
 2,010
Long-term Debt 5,836
 5,845
Deferred Credits and Other Liabilities:    
Accumulated deferred income taxes 1,235
 1,219
Deferred credits related to income taxes 867
 874
Employee benefit obligations 252
 265
Operating lease obligations 76
 78
Other cost of removal obligations 1,625
 1,606
Accrued environmental remediation 230
 233
Other deferred credits and liabilities 39
 51
Total deferred credits and other liabilities 4,324
 4,326
Total Liabilities 11,986
 12,181
Common Stockholder's Equity (See accompanying statements)
 9,631
 9,506
Total Liabilities and Stockholder's Equity $21,617
 $21,687
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.



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    Table of Contents                                Index to 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    
 (in millions)
Balance at December 31, 2018$8,856
 $(312) $26
 $8,570
Net income
 270
 
 270
Capital contributions from parent company17
 
 
 17
Other comprehensive income (loss)
 
 (1) (1)
Cash dividends on common stock
 (118) 
 (118)
Balance at March 31, 2019$8,873
 $(160) $25
 $8,738
        
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
The accompanying notes as they relate to Southern Company Gas are an integral part of these condensed consolidated financial statements.


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


INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS



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


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    Table of Contents                                Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(A) INTRODUCTION
The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 2019 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 March 31, 2020 and 2019. 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, 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 March 31, 2020 and December 31, 2019 was as follows:
 Goodwill
 (in millions)
Southern Company$5,280
Southern Company Gas: 
Gas distribution operations$4,034
Gas marketing services981
Southern Company Gas total$5,015

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

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(UNAUDITED)

Other intangible assets were as follows:
 At March 31, 2020 At December 31, 2019
 Gross Carrying AmountAccumulated Amortization
Other
Intangible Assets, Net
 Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net
 (in millions) (in millions)
Southern Company       
Other intangible assets subject to amortization:       
Customer relationships$212
$(121)$91
 $212
$(116)$96
Trade names64
(26)38
 64
(25)39
Storage and transportation contracts64
(63)1
 64
(62)2
PPA fair value adjustments390
(74)316
 390
(69)321
Other10
(8)2
 11
(8)3
Total other intangible assets subject to amortization$740
$(292)$448

$741
$(280)$461
Other intangible assets not subject to amortization:       
Federal Communications Commission licenses75

75
 75

75
Total other intangible assets$815
$(292)$523
 $816
$(280)$536
        
Southern Power       
Other intangible assets subject to amortization:       
PPA fair value adjustments$390
$(74)$316
 $390
$(69)$321
        
Southern Company Gas       
Other intangible assets subject to amortization:       
Gas marketing services       
Customer relationships$156
$(108)$48
 $156
$(104)$52
Trade names26
(10)16
 26
(10)16
Wholesale gas services       
Storage and transportation contracts64
(63)1
 64
(62)2
Total other intangible assets subject to amortization$246
$(181)$65
 $246
$(176)$70


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(UNAUDITED)

Amortization associated with other intangible assets was as follows:
 Three Months Ended
 March 31, 2020
 (in millions)
Southern Company(a)
$12
Southern Power(b)
$5
Southern Company Gas 
Gas marketing services$4
Wholesale gas services(b)
1
Southern Company Gas total$5

(a)Includes $6 million for the three months ended March 31, 2020, recorded as a reduction to operating revenues.
(b)Recorded as a reduction to operating revenues.
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 amounts shown in the condensed statements of cash flows for the Registrants that had restricted cash at March 31, 2020 and/or December 31, 2019:
 Southern Company Southern Company Gas
 At March 31, 2020 At December 31, 2019 At March 31, 2020 At December 31, 2019
 (in millions) (in millions)
Cash and cash equivalents$2,164
 $1,975
 $311
 $46
Restricted cash(a):
       
Other accounts and notes receivable
 3
 
 3
Other current assets3
 
 3
 
Total cash, cash equivalents, and restricted cash$2,168
(b) 
$1,978
 $314
 $49
(a)Represents restricted cash held by Southern Company Gas as collateral for workers' compensation, life insurance, and long-term disability insurance.
(b)Total does not add due to rounding.
Natural Gas for Sale
Southern Company Gas, with the exception of Nicor Gas, carries natural gas inventory on a WACOG basis. For any declines in market prices below the WACOG considered to be other than temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Southern Company Gas had 0 material adjustments for any period presented.
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. Nicor Gas' inventory decrement at March 31, 2020 is expected to be restored prior to year end.

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(UNAUDITED)

Depreciation and Amortization
See Note 5 to the financial statements under "Depreciation and Amortization – Southern Power" in Item 8 of the Form 10-K for additional information.
Effective January 1, 2020, Southern Power revised the depreciable lives of its natural gas generating facilities from up to 45 years to up to 50 years. This revision resulted in an immaterial decrease in depreciation for the three months ended March 31, 2020 and is expected to result in an immaterial decrease in annual depreciation for 2020.
(B) REGULATORY MATTERS
See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information relating to regulatory matters.
The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at March 31, 2020 and December 31, 2019 were as follows:
Regulatory ClauseBalance Sheet Line ItemMarch 31,
2020
December 31,
2019
  (in millions)
Alabama Power   
Rate CNP ComplianceOther regulatory liabilities, current$35
$55
 Other regulatory liabilities, deferred17
7
Rate CNP PPADeferred under recovered regulatory clause revenues37
40
Retail Energy Cost RecoveryOther regulatory liabilities, current74
32
 Other regulatory liabilities, deferred22
17
Natural Disaster ReserveOther regulatory liabilities, current27
37
 Other regulatory liabilities, deferred104
113
Georgia Power   
Fuel Cost RecoveryOther current liabilities$6
$
 Other deferred credits and liabilities163
73
Mississippi Power   
Fuel Cost RecoveryOver recovered regulatory clause liabilities$25
$23
Ad Valorem TaxOther regulatory assets11
47
 Other regulatory assets, deferred38

Property Damage ReserveOther regulatory liabilities, deferred53
54
Southern Company Gas   
Natural Gas Cost RecoveryOther regulatory liabilities$84
$74

Alabama Power
Petition for Certificate of Convenience and Necessity
During March 2020, a hearing was held before the Alabama PSC regarding Alabama Power's petition for a certificate of convenience and necessity (CCN) to procure additional capacity, including the Autauga Combined Cycle Acquisition. On April 22, 2020, the FERC approved the Autauga Combined Cycle Acquisition. The Autauga Combined Cycle Acquisition, as well as procurement of the other resources identified in Alabama Power's CCN petition, remain subject to approval by the Alabama PSC. The ultimate outcome of this matter cannot be determined at this time.

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(UNAUDITED)

Georgia Power
Deferral of Incremental COVID-19 Costs
On April 7, 2020, in response to the COVID-19 pandemic, the Georgia PSC approved an order directing Georgia Power to continue its previous, voluntary suspension of customer disconnections and to defer the resulting incremental bad debt and other incremental costs as a regulatory asset. Georgia Power and the staff of the Georgia PSC will work collaboratively to establish a methodology for identifying these incremental costs. The period over which such costs will be recovered is expected to be determined in Georgia Power's next base rate case. At March 31, 2020, the incremental costs deferred were immaterial. The ultimate outcome of this matter cannot be determined at this time.
Integrated Resource Plan
On March 5, 2020, the Sierra Club filed a petition for judicial review in the Superior Court of Fulton County to appeal the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. The ultimate outcome of this matter cannot be determined at this time.
Fuel Cost Recovery
On March 9, 2020, Georgia Power filed a request with the Georgia PSC to decrease fuel rates by 16% effective June 1, 2020, which is expected to reduce annual billings by approximately $329 million. Georgia Power expects the Georgia PSC to make a final decision on this matter on May 28, 2020. The ultimate outcome of this matter cannot be determined at this time.
Nuclear Construction
In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4. Georgia Power holds a 45.7% ownership interest in Plant Vogtle Units 3 and 4. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the 2 AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement. In March 2017, the EPC Contractor filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.
In connection with the EPC Contractor's bankruptcy filing, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into several transitional arrangements to allow construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Vogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are complete and electricity is generated and sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.
In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement, a cost reimbursable plus fee arrangement, whereby Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, which is subject to adjustment based on Bechtel's performance against cost and schedule targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay amounts related to work performed prior to the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.

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(UNAUDITED)

See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, mandatory prepayment events, and conditions to borrowing.
Cost and Schedule
Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4 by the expected in-service dates of November 2021 and November 2022, respectively, is as follows:
 (in billions)
Base project capital cost forecast(a)(b)
$8.2
Construction contingency estimate0.2
Total project capital cost forecast(a)(b)
8.4
Net investment as of March 31, 2020(b)
(6.2)
Remaining estimate to complete(a)
$2.2
(a)Excludes financing costs expected to be capitalized through AFUDC of approximately $270 million, of which $36 million had been accrued through March 31, 2020.
(b)Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.
Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.1 billion, of which $2.3 billion had been incurred through March 31, 2020.
As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of commodity installation, system turnovers, and workforce statistics.
During the first quarter 2020, approximately $66 million of the $366 million construction contingency estimate established in the second quarter 2018 was allocated to the base capital cost forecast for cost risks including, among other things, construction productivity, field support, subcontracts, and procurement, as well as the impacts of the April 2020 reduction in workforce described below.
Through March 31, 2020, a total of approximately $206 million of the $366 million construction contingency estimate established in the second quarter 2018 has been allocated to the base capital cost forecast for cost risks including, among other factors, construction productivity, including the April 2020 reduction in workforce described below; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement. As and when construction contingency is spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.
In April 2019, Southern Nuclear established aggressive target values for monthly construction production and system turnover activities as part of a strategy to maintain and, where possible, build margin to the regulatory-approved in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. Through early 2020, the project faced challenges with the April 2019 aggressive strategy targets including, but not limited to, electrical and pipefitting labor productivity and closure rates for work packages, which resulted in a backlog of activities and completion percentages below the April 2019 aggressive strategy targets.
In February 2020, Southern Nuclear updated its cost and schedule forecast, which did not change the total project capital cost forecast and confirmed the expected in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. This update included initiatives to improve productivity while refining and extending system turnover plans and certain near-term milestone dates. Other milestone dates did not change. Achievement of the aggressive site work plan relies on meeting increased monthly production and activity target values during 2020. Through March 2020, Unit 3 mechanical, electrical, and subcontract activities started to build a backlog; however, overall production was generally consistent with the updated aggressive site work plan.

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(UNAUDITED)

In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures. Multiple members of the workforce have tested positive for COVID-19. The COVID-19 pandemic has impacted productivity levels and pace of activity completion.
On April 15, 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4 expected to total approximately 20% of the existing workforce. This reduction in workforce was a mitigation action intended to address the impact of the COVID-19 pandemic on the Plant Vogtle Units 3 and 4 workforce and construction site, including ongoing challenges with labor productivity that have been exacerbated by the impact of the COVID-19 pandemic. It is expected to provide operational efficiencies by increasing productivity of the remaining workforce and reducing workforce fatigue and absenteeism. It is also expected to allow for increased social distancing by the workforce and facilitate compliance with the latest recommendations from the Centers for Disease Control and Prevention.
To meet the 2020 targets in the aggressive site work plan for both Unit 3 and Unit 4, construction productivity, including subcontractors, must improve and be sustained above historical average levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, must be maintained. The workforce levels resulting from the April 2020 reduction are expected to last at least through the summer as Georgia Power continues to monitor the impacts of the COVID-19 pandemic on the construction site. Georgia Power's proportionate share of the estimated incremental cost of this mitigation action, which is currently estimated to total approximately $20 million and is included in the first quarter 2020 contingency allocation, assumes absenteeism rates normalize and the intended productivity efficiencies are realized in the coming months. Based on these assumptions, while this mitigation action has extended and may further extend certain milestone dates in the updated aggressive site work plan, Georgia Power does not expect it to affect either the total project capital cost forecast or the ability to achieve the regulatory-approved in-service dates of November 2021 and November 2022 for Plant Vogtle Units 3 and 4, respectively. Southern Nuclear and Georgia Power continue to believe that pursuit of an aggressive site work plan is an appropriate strategy to achieve completion of the units by their regulatory-approved in-service dates.
As construction, including subcontract work, continues and testing and system turnover activities increase, challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularly in the installation of electrical and mechanical commodities, ability to attract and retain craft labor, and/or related cost escalation; procurement, fabrication, delivery, assembly, installation, system turnover, and the initial testing and start-up, including any required engineering changes or any remediation related thereto, of plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale), any of which may require additional labor and/or materials; regional transmission upgrades; or other issues could arise and change the projected schedule and estimated cost.
In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. The ultimate impact of the COVID-19 pandemic on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.
There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, may arise, which may result in additional license amendments or require other resolution. As part of the aggressive site work plan, in January 2020,

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(UNAUDITED)

Southern Nuclear notified the NRC of its intent to load fuel in 2020. On April 20, 2020, Nuclear Watch South filed a request for hearing and contention with the NRC that challenges the closure of certain ITAAC. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.
The ultimate outcome of these matters cannot be determined at this time. However, any extension of the regulatory-approved project schedule is currently estimated to result in additional base capital costs of approximately $50 million per month, based on Georgia Power's ownership interests, and AFUDC of approximately $10 million per month. While Georgia Power is not precluded from seeking recovery of any future capital cost forecast increase, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.
Joint Owner Contracts
In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.
As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.
Amendments to the Vogtle Joint Ownership Agreements
In connection with the vote to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).
As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion

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(UNAUDITED)

over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests.  If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.
In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more over the most recently approved schedule.
The ultimate outcome of these matters cannot be determined at this time.
Regulatory Matters
In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At March 31, 2020, Georgia Power had recovered approximately $2.3 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In December 2019, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $62 million annually, effective January 1, 2020.
Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.
In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the amounts paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer

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(UNAUDITED)

refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that prudence decisions on cost recovery will be made at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 ARP) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that upon Unit 3 reaching commercial operation, retail base rates would be adjusted to include carrying costs on those capital costs deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $75 million in 2019 and are estimated to have negative earnings impacts of approximately $145 million, $255 million, and $200 million in 2020, 2021, and 2022, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.
In February 2018, Georgia Interfaith Power & Light, Inc. (GIPL) and Partnership for Southern Equity, Inc. (PSE) filed a petition appealing the Georgia PSC's January 11, 2018 order with the Fulton County Superior Court. In March 2018, Georgia Watch filed a similar appeal to the Fulton County Superior Court for judicial review of the Georgia PSC's decision and denial of Georgia Watch's motion for reconsideration. In December 2018, the Fulton County Superior Court granted Georgia Power's motion to dismiss the 2 appeals. In January 2019, GIPL, PSE, and Georgia Watch filed an appeal of this decision with the Georgia Court of Appeals. In October 2019, the Georgia Court of Appeals issued an opinion affirming the Fulton County Superior Court's ruling that the Georgia PSC's January 11, 2018 order was not a final, appealable decision. In addition, the Georgia Court of Appeals remanded the case to the Fulton County Superior Court to clarify its ruling as to whether the petitioners showed that review of the Georgia PSC's final order would not provide them an adequate remedy. On April 21, 2020, the Fulton County Superior Court entered an appealable order granting Georgia Power's motion to dismiss the two appeals. Georgia Power believes the petitions have no merit; however, an adverse outcome in the litigation combined with subsequent adverse action by the Georgia PSC could have a material impact on Southern Company's and Georgia Power's results of operations, financial condition, and liquidity.
The Georgia PSC has approved 21 VCM reports covering the periods through June 30, 2019, including total construction capital costs incurred through that date of $6.7 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). On February 19, 2020, Georgia Power filed its twenty-second VCM report with the Georgia PSC covering the period from July 1, 2019 through December 31, 2019, requesting approval of $674 million of construction capital costs incurred during that period.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
2019 Base Rate Case
On March 17, 2020, the Mississippi PSC approved a settlement agreement between Mississippi Power and the Mississippi Public Utilities Staff related to Mississippi Power's base rate case filed in November 2019 (Mississippi Power Rate Case Settlement Agreement).

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(UNAUDITED)

Under the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%, effective for the first billing cycle of April 2020, based on a test year period of January 1, 2020 through December 31, 2020, a 53% average equity ratio, an allowed maximum actual equity ratio of 55% by the end of 2020, and a 7.57% return on investment.
Additionally, the approved Mississippi Power Rate Case Settlement Agreement: (i) established common amortization periods of four years for regulatory assets and three years for regulatory liabilities included in the approved revenue requirement, including those related to unprotected deferred income taxes; (ii) established new depreciation rates reflecting an annual increase in depreciation of approximately $10 million; and (iii) excluded certain compensation costs totaling approximately $3.9 million. It also eliminated separate rates for costs associated with Plant Ratcliffe and energy efficiency initiatives and includes such costs in the PEP, ECO Plan, and ad valorem tax adjustment factor, as applicable. In accordance with the previous order of the Mississippi PSC suspending the operation of PEP and the ECO Plan for 2018 through 2020, Mississippi Power plans to resume PEP proceedings and ECO Plan filings for 2021.
Performance Evaluation Plan
Under the Mississippi Power Rate Case Settlement Agreement, Mississippi Power is required to file with the Mississippi PSC PEP compliance rate clauses to incorporate Mississippi Power's and the Mississippi Public Utilities Staff's recommended revisions to PEP by May 18, 2020. These revisions include, but are not limited to, changing the filing date for the annual PEP rate filing from November of the immediately preceding year to March of the current year, utilizing a historic test year adjusted for "known and measurable" changes, using discounted cash flow and regression formulas to determine base return on equity, and moving all embedded ad valorem property taxes currently collected in PEP to the ad valorem tax adjustment clause. These revisions are subject to the approval of the Mississippi PSC. The ultimate outcome of this matter cannot be determined at this time.
Deferral of Incremental COVID-19 Costs
On April 14, 2020, in order to mitigate the economic impact of the COVID-19 pandemic on customers, the Mississippi PSC approved an order directing Mississippi Power to continue its previous, voluntary suspension of customer disconnections and to defer as a regulatory asset all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system during the COVID-19 pandemic. The period over which such costs will be recovered is expected to be determined in Mississippi Power's next PEP filing. At March 31, 2020, the incremental costs deferred were immaterial. The ultimate outcome of this matter cannot be determined at this time.
Municipal and Rural Associations Tariff
On April 27, 2020, Mississippi Power filed a request with the FERC for an increase in wholesale base revenues under the MRA tariff as agreed upon in a settlement agreement reached with its wholesale customers. The MRA settlement agreement provides that base rates will increase $2 million annually, effective May 1, 2020. Mississippi Power expects the FERC to rule on the request in the second quarter 2020. The ultimate outcome of this matter cannot be determined at this time.
Southern Company Gas
Rate Proceedings
On February 3, 2020, Virginia Natural Gas filed a notice of intent with the Virginia Commission as required prior to the filing of a base rate case. Virginia Natural Gas planned to file its rate case in April 2020 but, as a result of the COVID-19 pandemic, now expects to file in June 2020. The ultimate outcome of this matter cannot be determined at this time.

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(UNAUDITED)

(C) CONTINGENCIES
See Note 3 to the financial statements in Item 8 of the Form 10-K for information relating to various lawsuits and other contingencies.
General Litigation Matters
The Registrants are involved in various other matters being litigated and regulatory matters. The ultimate outcome of such pending or potential litigation or regulatory matters against each Registrant and any subsidiaries cannot be determined at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on such Registrant's financial statements.
The Registrants believe the pending legal challenges discussed below have no merit; however, the ultimate outcome of these matters cannot be determined at this time.
Southern Company
In January 2017, a securities class action complaint was filed against Southern Company, certain of its officers, and certain former Mississippi Power officers in the U.S. District Court for the Northern District of Georgia by Monroe County Employees' Retirement System on behalf of all persons who purchased shares of Southern Company's common stock between April 25, 2012 and October 29, 2013. The complaint alleges that Southern Company, certain of its officers, and certain former Mississippi Power officers made materially false and misleading statements regarding the Kemper County energy facility in violation of certain provisions under the Securities Exchange Act of 1934, as amended. The complaint seeks, among other things, compensatory damages and litigation costs and attorneys' fees. In 2017, the plaintiffs filed an amended complaint that provided additional detail about their claims, increased the purported class period by one day, and added certain other former Mississippi Power officers as defendants. Also in 2017, the defendants filed a motion to dismiss the plaintiffs' amended complaint with prejudice, to which the plaintiffs filed an opposition. In 2018, the court issued an order dismissing certain claims against certain officers of Southern Company and Mississippi Power and dismissing the allegations related to a number of the statements that plaintiffs challenged as being false or misleading. In 2018, the court denied the defendants' motion for reconsideration and also denied a motion to certify the issue for interlocutory appeal. In the third quarter 2019, the court certified the plaintiffs' proposed class and the defendants filed a petition for interlocutory appeal of the class certification order with the U.S. Court of Appeals for the Eleventh Circuit. In December 2019, the U.S. District Court for the Northern District of Georgia entered an order staying all deadlines in the case pending mediation. The stay automatically expired on March 31, 2020; however, in light of the COVID-19 pandemic, the U.S. District Court for the Northern District of Georgia vacated all existing discovery deadlines until at least June 15, 2020.
In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits names as defendants Southern Company, certain of its directors, certain of its officers, and certain former Mississippi Power officers. In 2017, these 2 shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of Georgia. The complaints allege that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints allege that the defendants were unjustly enriched and caused the waste of corporate assets and also allege that the individual defendants violated their fiduciary duties. Each plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. Each plaintiff also seeks certain changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action.
In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that names as defendants Southern Company, certain of its directors, certain of its

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(UNAUDITED)

officers, and certain former Mississippi Power officers. The complaint alleges that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleges that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. The plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and disgorgement of profits and, on its behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiff also seeks certain unspecified changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.
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 tort law claims. In 2016, the Georgia Court of Appeals reversed the trial court's previous dismissal of the case and remanded the case to the trial court. Georgia Power filed a petition for writ of certiorari with the Georgia Supreme Court, which was granted in 2017. In 2018, the Georgia Supreme Court affirmed the judgment of the Georgia Court of Appeals and remanded the case to the trial court for further proceedings. 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 to address certain terms the court previously held were ambiguous as used in the Georgia PSC's orders. The order entered by the Superior Court of Fulton County 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. In October 2019, the Georgia PSC issued an order that found and concluded that Georgia Power has appropriately implemented the municipal franchise fee schedule. On March 11, 2020, the Georgia Court of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification. The Court of Appeals remanded the case to the Superior Court of Fulton County for the entry of a detailed order addressing each class certification factor. The amount of any possible losses cannot be calculated at this time because, among other factors, it is unknown whether a class will be certified, the ultimate composition of any class, and whether any losses would be subject to recovery from any municipalities.
Mississippi Power
In May 2018, Southern Company and Mississippi Power received a notice of dispute and arbitration demand filed by Martin Product Sales, LLC (Martin) based on 2 agreements, both related to Kemper IGCC byproducts for which Mississippi Power provided termination notices in 2017. Martin alleges breach of contract, breach of good faith and fair dealing, fraud and misrepresentation, and civil conspiracy and makes a claim for damages in the amount of approximately $143 million, as well as additional unspecified damages, attorney's fees, costs, and interest. A portion of the claim for damages was on behalf of Martin Transport, Inc. (Martin Transport), an affiliate of Martin. In May 2019, the arbitration panel denied Mississippi Power's and Southern Company's motions to dismiss. In September 2019, Martin Transport filed a separate complaint against Mississippi Power in the Circuit Court of Kemper County, Mississippi alleging claims of fraud, negligent misrepresentation, promissory estoppel, and equitable estoppel, each arising out of the same alleged facts and circumstances that underlie Martin's arbitration demand. Martin Transport seeks compensatory damages of $5 million and punitive damages of $50 million. In November 2019, Martin Transport's claim was combined with the Martin arbitration case and the separate court case was dismissed. In December 2019, Southern Company and Mississippi Power each filed motions for summary judgment on all claims. On February 17, 2020, the arbitration panel granted Southern Company's motion and dismissed Southern Company from the arbitration. On March 12, 2020, the arbitration panel

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(UNAUDITED)

denied Mississippi Power's motions for summary judgment. An adverse outcome in this proceeding could have a material impact on Southern Company's and Mississippi Power's financial statements.
In November 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and 3 members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. In response to Mississippi Power and the Mississippi PSC each filing a motion to dismiss, the plaintiffs filed an amended complaint in March 2019. The amended complaint included 4 additional plaintiffs and additional claims for gross negligence, reckless conduct, and intentional wrongdoing. Mississippi Power and the Mississippi PSC have each filed a motion to dismiss the amended complaint. On March 27, 2020, the Mississippi PSC's motion to dismiss was granted. Also on March 27, 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants under a cause of action based on a dormant commerce clause theory under the U.S. Constitution. On April 9, 2020 and April 10, 2020, Mississippi Power and the Mississippi PSC, respectively, filed responses opposing the motion for leave to file a second amended complaint. Mississippi Power's motion to dismiss the first amended complaint filed in 2019 remains pending before the court. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
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 compliance 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 $15 million at both March 31, 2020 and December 31, 2019. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.
In December 2019, Mississippi Power entered into an agreement with the Mississippi Commission on Environmental Quality related to groundwater conditions arising from the closed ash pond at Plant Watson. Mississippi Power will complete an assessment and remediation consistent with the requirements of the agreement and the CCR Rule. Potential remediation activities and related cost estimates are pending the result of further site assessment and cannot be determined at this time. Mississippi Power expects to recover the retail portion of remedial costs through the ECO Plan and the wholesale portion through MRA rates.
Southern Company Gas' environmental remediation liability was $262 million and $269 million as of March 31, 2020 and December 31, 2019, respectively, based on the estimated cost of environmental investigation and remediation associated with known current and former manufactured gas plant operating sites. These environmental

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(UNAUDITED)

remediation expenditures are generally recoverable from customers through rate mechanisms approved by the applicable state regulatory agencies of the natural gas distribution utilities.
The ultimate outcome of these matters cannot be determined at this time; however, as a result of the regulatory treatment for environmental remediation expenses described above, the final disposition of these matters is not expected to have a material impact on the financial statements of the applicable Registrants.
Other Matters
Mississippi Power
Kemper County Energy Facility
See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.
As the mining permit holder, Liberty Fuels Company, LLC has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities related to the lignite mine and equipment and mineral reserves located around the Kemper County energy facility site. As a result of the abandonment of the Kemper IGCC, final mine reclamation began in 2018 and is expected to be substantially completed in 2020, with monitoring expected to continue through 2027. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Dismantlement of the abandoned gasifier-related assets and site restoration activities are expected to be completed in 2024. The additional pre-tax period costs associated with dismantlement and site restoration activities, including related costs for compliance and safety, ARO accretion, and property taxes, are estimated to total $17 million for the remainder of 2020, $15 million to $17 million annually in 2021 through 2023, and $5 million in 2024. In addition, closure costs for the mine and gasifier-related assets, currently estimated at up to $10 million pre-tax (excluding dismantlement costs, net of salvage), may be incurred during the remainder of 2020.
In 2018, Mississippi Power filed with the DOE its request for property closeout certification under the contract related to the $387 million of grants received for the Kemper County energy facility. Mississippi Power expects to close out the DOE contract in 2020. In connection with the DOE closeout discussions, in April 2019, the Civil Division of the Department of Justice informed Southern Company and Mississippi Power of an investigation related to the Kemper County energy facility. The ultimate outcome of this matter cannot be determined at this time; however, it could have a material impact on Southern Company's and Mississippi Power's financial statements.
Plant Daniel
In conjunction with Southern Company's sale of Gulf Power, Mississippi Power and Gulf Power agreed to seek a restructuring of their 50% undivided ownership interests in Plant Daniel such that each of them would, after the restructuring, own 100% of a generating unit. On April 24, 2020, Mississippi Power and Gulf Power amended the terms of the agreement to extend the deadline from May 1, 2020 to August 1, 2020 for Mississippi Power to notify Gulf Power of which generating unit it has selected for 100% ownership. The impacts of operating the units on an individual basis continue to be evaluated by Mississippi Power and any transfer of ownership would be subject to approval by the FERC and the Mississippi PSC. The ultimate outcome of this matter cannot be determined at this time.
Southern Company Gas
See Notes 3 and 7 to the financial statements in Item 8 of the Form 10-K under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, and Note (E) under "Southern Company Gas" for additional information.
On March 24, 2020, Southern Company Gas completed the sale of its interest in Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.

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(UNAUDITED)

On February 20, 2020, the FERC approved a two-year extension for PennEast Pipeline to complete the project by January 19, 2022. Expected project costs related to the PennEast Pipeline for Southern Company Gas total approximately $300 million, excluding financing costs.
The ultimate outcome of the PennEast construction project cannot be determined at this time; however, any work delays, whether caused by judicial or regulatory action, abnormal weather, or other conditions, may result in additional cost or schedule modifications or, ultimately, in project cancellation, any of which could result in impairment of Southern Company Gas' investment and could have a significant impact on Southern Company's financial statements and a material impact on Southern Company Gas' financial statements.
(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.

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(UNAUDITED)

The following tables disaggregate revenue from contracts with customers for the three months ended March 31, 2020 and 2019:
Three Months Ended March 31, 2020Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Operating revenues      
Retail electric revenues      
Residential$1,370
$553
$760
$57
$
$
Commercial1,146
364
720
62


Industrial680
321
281
78


Other23
5
16
2


Total retail electric revenues3,219
1,243
1,777
199


Natural gas distribution revenues      
Residential496




496
Commercial130




130
Transportation264




264
Industrial12




12
Other97




97
Total natural gas distribution revenues999




999
Wholesale electric revenues      
PPA energy revenues159
27
9
2
125

PPA capacity revenues105
27
12
1
66

Non-PPA revenues51
19
2
69
58

Total wholesale electric revenues315
73
23
72
249

Other natural gas revenues      
Wholesale gas services396




396
Gas marketing services163




163
Other natural gas revenues7




7
Total natural gas revenues566




566
Other revenues192
37
95
5
3

Total revenue from contracts with customers5,291
1,353
1,895
276
252
1,565
Other revenue sources(a)
868
(2)(70)1
123
825
Other adjustments(b)
(1,141)



(1,141)
Total operating revenues$5,018
$1,351
$1,825
$277
$375
$1,249
(a)Other revenue sources primarily relate to revenues from customers accounted for as derivatives and leases, as well as alternative revenue programs at Southern Company Gas and other cost recovery mechanisms at the traditional electric operating companies.
(b)
Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.

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

Three Months Ended March 31, 2019Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Operating revenues      
Retail electric revenues      
Residential$1,327
$559
$708
$60
$
$
Commercial1,125
368
692
65


Industrial708
338
296
74


Other21
6
11
4


Total retail electric revenues3,181
1,271
1,707
203


Natural gas distribution revenues      
Residential601




601
Commercial170




170
Transportation256




256
Industrial17




17
Other116




116
Total natural gas distribution revenues1,160




1,160
Wholesale electric revenues      
PPA energy revenues190
31
12
3
151

PPA capacity revenues107
27
13
1
81

Non-PPA revenues55
60
2
74
41

Total wholesale electric revenues352
118
27
78
273

Other natural gas revenues      
Wholesale gas services721




721
Gas marketing services221




221
Other natural gas revenues10




10
Total natural gas revenues952




952
Other revenues266
46
92
5
4

Total revenue from contracts with customers5,911
1,435
1,826
286
277
2,112
Other revenue sources(a)
1,361
(27)7
1
166
1,222
Other adjustments(b)
(1,860)



(1,860)
Total operating revenues$5,412
$1,408
$1,833
$287
$443
$1,474
(a)Other revenue sources primarily relate to revenues from customers accounted for as derivatives and leases, as well as alternative revenue programs at Southern Company Gas and other cost recovery mechanisms at the traditional electric operating companies.
(b)
Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.

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(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 March 31, 2020 and December 31, 2019:
 Southern CompanyAlabama PowerGeorgia PowerMississippi PowerSouthern PowerSouthern Company Gas
 (in millions)
Accounts Receivables      
As of March 31, 2020$2,224
$518
$697
$70
$86
$696
As of December 31, 20192,413
586
688
79
97
749
Contract Assets      
As of March 31, 2020$100
$
$53
$3
$
$
As of December 31, 2019117

69



Contract Liabilities      
As of March 31, 2020$49
$7
$11
$
$1
$1
As of December 31, 201952
10
13

1
1
As of March 31, 2020 and December 31, 2019, Georgia Power had contract assets primarily related to unregulated service agreements, where payment is contingent on project completion, and fixed retail customer bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over the one-year contract term. Alabama Power had contract liabilities for outstanding performance obligations primarily related to extended service agreements. Contract liabilities for Georgia Power and Southern Power relate to cash collections recognized in advance of revenue for certain unregulated service agreements and certain levelized PPAs, respectively. Southern Company's unregulated distributed generation business had $36 million and $40 million of contract assets and $29 million and $28 million of contract liabilities at March 31, 2020 and December 31, 2019, respectively, for outstanding performance obligations.
Revenues recognized in the three months ended March 31, 2020, which were included in contract liabilities at December 31, 2019, were immaterial for the applicable Registrants.
Remaining Performance Obligations
The traditional electric operating companies and Southern Power have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. These contracts primarily relate to PPAs whereby the traditional electric operating companies and Southern Power provide electricity and generation capacity to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenue from contracts with customers related to these performance obligations remaining at March 31, 2020 are expected to be recognized as follows:
 
2020
(remaining)
2021202220232024
2025 and
Thereafter
 (in millions)
Southern Company$367
$416
$354
$334
$314
$2,164
Alabama Power23
33
31
24
7
5
Georgia Power52
66
36
34
23
61
Southern Power224
285
287
277
285
2,116

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(UNAUDITED)

Revenue expected to be recognized for performance obligations remaining at March 31, 2020 was immaterial for Mississippi Power.
Lease Income
Lease income for the three months ended March 31, 2020 and 2019 is as follows:
 
Southern
Company
Alabama PowerGeorgia Power
Mississippi
Power
Southern PowerSouthern Company Gas
 (in millions)
For the Three Months Ended March 31, 2020      
Lease income - interest income on sales-type leases$3
$
$
$3
$
$
Lease income - operating leases51
6
16

24
9
Variable lease income74



80

Total lease income$128
$6
$16
$3
$104
$9
       
For the Three Months Ended March 31, 2019      
Lease income - interest income on sales-type leases$2
$
$
$2
$
$
Lease income - operating leases71
7
19

46
9
Variable lease income66



75

Total lease income$139
$7
$19
$2
$121
$9

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units.
(E) CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS
See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information.
Southern Power
Variable Interest Entities
Southern Power has certain subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests.
SP Solar and SP Wind
At March 31, 2020 and December 31, 2019, SP Solar had total assets of $6.3 billion and $6.4 billion, respectively, and total liabilities of $382 million and $381 million, respectively. Noncontrolling interests totaled $1.1 billion at both March 31, 2020 and December 31, 2019. 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 March 31, 2020 and December 31, 2019, SP Wind had total assets of $2.5 billion and total liabilities of $123 million and $128 million, respectively. Noncontrolling interests totaled $45 million at both March 31, 2020 and December 31, 2019. 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

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

each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the 3 financial investors in accordance with the limited liability agreement.
Southern Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.
Other Variable Interest Entities
Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax-equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.
At March 31, 2020 and December 31, 2019, the other VIEs had total assets of $1.1 billion, total liabilities of $109 million and $104 million, respectively, and noncontrolling interests of $396 million and $409 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.
Equity Method Investments
At March 31, 2020 and December 31, 2019, Southern Power had equity method investments in several wind and battery storage projects totaling $45 million and $28 million, respectively.
Southern Company Gas
Equity Method Investments
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.
The carrying amounts of Southern Company Gas' equity method investments as of March 31, 2020 and December 31, 2019 and related income from those investments for the three-month periods ended March 31, 2020 and 2019 were as follows:
Investment BalanceMarch 31, 2020
December 31, 2019(a)
 (in millions)
SNG(b)
$1,216
$1,137
PennEast Pipeline(c)
85
82
Other32
32
Total$1,333
$1,251

(a)Excludes investments in Atlantic Coast Pipeline and Pivotal JAX LNG classified as held for sale at December 31, 2019. See Note 15 to the financial statements under "Assets Held for Sale" in Item 8 of the Form 10-K for additional information.
(b)Increase primarily relates to a capital contribution, partially offset by the continued amortization of deferred tax assets established upon acquisition.
(c)See Note (C) under "Other Matters – Southern Company Gas" for additional information on the PennEast Pipeline.

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

Earnings from Equity Method InvestmentsThree Months Ended March 31, 2020Three Months Ended March 31, 2019
 (in millions)
SNG$37
$42
Atlantic Coast Pipeline(*)
3
3
PennEast Pipeline(*)
2
2
Other1
1
Total$43
$48

(*)
Amounts primarily result from AFUDC equity recorded by the project entity.
SNG
Selected financial information of SNG for the three months ended March 31, 2020 and 2019 is as follows:
Income Statement InformationThree Months Ended March 31, 2020Three Months Ended March 31, 2019
 (in millions)
Revenues$158
$166
Operating income98
106
Net income75
84

(F) FINANCING
Bank Credit Arrangements
See Note 8 to the financial statements under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information.

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(UNAUDITED)

At March 31, 2020, committed credit arrangements with banks were as follows:
 Expires   
Company2020202220232024 Total UnusedDue within One Year
 (in millions)
Southern Company parent$
$
$
$2,000
 $2,000
 $1,999
$
Alabama Power3
525

800
 1,328
 1,328
3
Georgia Power


1,750
 1,750
 1,733

Mississippi Power
150
125

 275
 210

Southern Power(a)



600
 600
 591

Southern Company Gas(b)



1,750
 1,750
 1,745

SEGCO30



 30
 30
30
Southern Company$33
$675
$125
$6,900
 $7,733
 $7,636
$33

(a)Does not include Southern Power Company's $120 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2021 and 2023, respectively, of which $25 million and $60 million, respectively, was unused at March 31, 2020. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.
(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.25 billion of this arrangement. Southern Company Gas' committed credit arrangement also includes $500 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to this multi-year credit arrangement, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted.
As reflected in the table above, in March 2020, Mississippi Power entered into a $125 million revolving credit facility that matures in March 2023.
Subject to applicable market conditions, Southern Company and its subsidiaries expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, Southern Company and its subsidiaries may extend the maturity dates and/or increase or decrease the lending commitments thereunder.
These bank credit arrangements, as well as the term loan arrangements of the Registrants 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 March 31, 2020, the Registrants, Nicor Gas, and SEGCO were in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.
A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at March 31, 2020 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $40 million at Mississippi Power). Subsequent to March 31, 2020, Mississippi Power purchased and held or redeemed all $40 million of its variable rate revenue bonds. In addition, at March 31, 2020, Georgia Power had approximately $188 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.
Earnings per Share
For Southern Company, the only differences in computing basic and diluted earnings per share are attributable to awards outstanding under stock-based compensation plans and, as a result of stock price volatility in the first quarter 2020, the equity units issued in August 2019. Earnings per share dilution resulting from stock-based compensation

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(UNAUDITED)

plans and the equity units issuance is determined using the treasury stock method. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on the August 2019 equity units issuance and Note 12 to the financial statements in Item 8 of the Form 10-K for information on stock-based compensation plans. Shares used to compute diluted earnings per share were as follows:
 Three Months Ended March 31, 2020Three Months Ended March 31, 2019
 (in millions)
As reported shares1,057
1,038
Effect of stock-based compensation7
7
Effect of equity units3

Diluted shares1,067
1,045

An immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive for the three months ended March 31, 2020. There were 0 such amounts for the three months ended March 31, 2019.
(G) INCOME TAXES
See Note 10 to the financial statements in Item 8 of the Form 10-K for additional tax information.
Current and Deferred Income Taxes
Tax Credit and Net Operating Loss Carryforwards
The utilization of each Registrants' estimated tax credit and net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, potential impacts of the COVID-19 pandemic, and changes in taxable income projections. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.
Effective Tax Rate
Details of significant changes in the effective tax rate for the applicable Registrants are provided herein.
Southern Company
Southern Company's effective tax rate is typically lower than the statutory rate due to employee stock plans' dividend deduction, non-taxable AFUDC equity at the traditional electric operating companies, flowback of excess deferred income taxes at the regulated utilities, and federal income tax benefits from ITCs and PTCs primarily at Southern Power.
Southern Company's effective tax rate was 14.7% for the three months ended March 31, 2020 compared to 39.8% for the corresponding period in 2019. The effective tax rate decrease was primarily due to the tax impact from the sale of Gulf Power in 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.
Georgia Power
Georgia Power's effective tax rate was 4.6% for the three months ended March 31, 2020 compared to 20.8% for the corresponding period in 2019. The effective tax rate decrease was primarily due to an increase in the flowback of excess deferred income taxes in 2020 as authorized in the 2019 ARP. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.

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(UNAUDITED)

Southern Power
Southern Power's effective tax rate was 13.5% for the three months ended March 31, 2020 compared to a benefit rate of (49.8)% for the corresponding period in 2019. The effective tax rate increase was primarily due to the tax impact from the sale of Plant Mankato in 2020. See Note (K) under "Southern Power" for additional information.
(H) RETIREMENT BENEFITS
The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). NaN mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2020. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.
See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.
Effective January 1, 2020, Southern Company adopted a change in method of calculating the market-related value of the liability-hedging securities included in its pension plan assets. The market-related value is used to determine the expected return on plan assets component of net periodic pension cost. Southern Company previously used the calculated value approach for all plan assets, which smoothed asset returns and deferred gains and losses by amortizing them into the calculation of the market-related value over five years. Southern Company changed to the fair value approach for liability-hedging securities, which includes measuring the market-related value of that portion of the plan assets at fair value for purposes of determining the expected return on plan assets. The remaining asset classes of plan assets will continue to use the calculated value approach in determining the market-related value. Southern Company considers the fair value approach to be preferable because it results in a current reflection of changes in the value of plan assets in the measurement of net periodic pension cost. Southern Company evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements of all Registrants and therefore did not account for the change retrospectively. The change in accounting principle was recorded through earnings as a prior period adjustment for the amounts related to the unregulated businesses of Southern Company and Southern Power. Amounts related to the traditional electric operating companies and the natural gas distribution utilities have been reflected as adjustments to regulatory assets as appropriate, consistent with the expected regulatory treatment.

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

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 months ended March 31, 2020 and 2019 are presented in the following tables.
Three Months Ended March 31, 2020
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$94
 $22
 $24
 $4
 $2
 $8
Interest cost108
 25
 33
 5
 1
 8
Expected return on plan assets(275) (66) (87) (13) (3) (19)
Amortization:           
Prior service costs1
 
 
 
 
 (1)
Regulatory asset
 
 
 
 
 4
Net (gain)/loss67
 18
 22
 3
 1
 2
Net periodic pension cost (income)$(5) $(1) $(8) $(1) $1
 $2
Postretirement Benefits
Service cost$5
 $2
 $1
 $
 $
 $
Interest cost13
 3
 5
 
 
 2
Expected return on plan assets(18) (7) (7) 
 
 (2)
Amortization:           
Regulatory asset
 
 
 
 
 2
Net (gain)/loss1
 
 1
 
 
 (1)
Net periodic postretirement benefit cost$1
 $(2) $
 $
 $
 $1


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(UNAUDITED)

Three Months Ended March 31, 2019
Southern
Company
 
Alabama
Power
 
Georgia
Power
 
Mississippi
Power
 Southern Power Southern Company Gas
 (in millions)
Pension Plans
Service cost$73

$17

$19

$3

$2

$6
Interest cost123

28

39

6

1

9
Expected return on plan assets(221)
(51)
(73)
(10)
(2)
(15)
Amortization:           
Prior service costs









(1)
Regulatory asset
 
 
 
 
 3
Net (gain)/loss30

9

11

1



1
Net periodic pension cost (income)$5

$3

$(4)
$

$1

$3
Postretirement Benefits
Service cost$5
 $1
 $1
 $
 $
 $1
Interest cost17
 4
 7
 1
 
 2
Expected return on plan assets(16) (6) (6) 
 
 (2)
Amortization:           
Prior service costs1
 1
 
 
 
 
Regulatory asset
 
 
 
 
 2
Net (gain)/loss(1) 
 
 
 
 (1)
Net periodic postretirement benefit cost$6
 $
 $2
 $1
 $
 $2


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(UNAUDITED)

(I) FAIR VALUE MEASUREMENTS
As of March 31, 2020, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:
 Fair Value Measurements Using:  
As of March 31, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Southern Company         
Assets:         
Energy-related derivatives(a)
$328
 $164
 $87
 $
 $579
Interest rate derivatives
 22
 
 
 22
Investments in trusts:(b)(c)
         
Domestic equity578
 108
 
 
 686
Foreign equity52
 171
 
 
 223
U.S. Treasury and government agency securities
 289
 
 
 289
Municipal bonds
 103
 
 
 103
Pooled funds – fixed income
 16
 
 
 16
Corporate bonds23
 297
 
 
 320
Mortgage and asset backed securities
 85
 
 
 85
Private equity
 
 
 60
 60
Other24
 5
 
 
 29
Cash equivalents1,686
 11
 
 
 1,697
Other investments9
 29
 
 
 38
Total$2,700
 $1,300
 $87
 $60
 $4,147
Liabilities:         
Energy-related derivatives(a)
$426
 $212
 $11
 $
 $649
Interest rate derivatives
 22
 
 
 22
Foreign currency derivatives
 90
 
 
 90
Contingent consideration
 
 19
 
 19
Total$426
 $324
 $30
 $
 $780
          

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

 Fair Value Measurements Using:  
As of March 31, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Alabama Power         
Assets:         
Energy-related derivatives$
 $5
 $
 $
 $5
Nuclear decommissioning trusts:(b)
        

Domestic equity368
 99
 
 
 467
Foreign equity52
 50
 
 
 102
U.S. Treasury and government agency securities
 22
 
 
 22
Municipal bonds
 1
 
 
 1
Corporate bonds23
 141
 
 
 164
Mortgage and asset backed securities
 30
 
 
 30
Private equity
 
 
 60
 60
Other7
 
 
 
 7
Cash equivalents694
 11
 
 
 705
Other investments
 29
 
 
 29
Total$1,144
 $388
 $
 $60
 $1,592
Liabilities:         
Energy-related derivatives$
 $27
 $
 $
 $27
          
Georgia Power         
Assets:         
Energy-related derivatives$
 $6
 $
 $
 $6
Nuclear decommissioning trusts:(b)(c)
         
Domestic equity210
 1
 
 
 211
Foreign equity
 119
 
 
 119
U.S. Treasury and government agency securities
 267
 
 
 267
Municipal bonds
 102
 
 
 102
Corporate bonds
 156
 
 
 156
Mortgage and asset backed securities
 56
 
 
 56
Other16
 5
 
 
 21
Cash equivalents212
 
 
 
 212
Total$438
 $712
 $
 $
 $1,150
Liabilities:         
Energy-related derivatives$
 $61
 $
 $
 $61
          

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

 Fair Value Measurements Using:  
As of March 31, 2020:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Net Asset Value as a Practical Expedient (NAV) Total
 (in millions)
Mississippi Power         
Assets:         
Energy-related derivatives$
 $3
 $
 $
 $3
Cash equivalents79
 
 
 
 79
Total$79
 $3
 $
 $
 $82
Liabilities:         
Energy-related derivatives$
 $33
 $
 $
 $33
          
Southern Power         
Assets:         
Energy-related derivatives$
 $2
 $
 $
 $2
Cash equivalents166
 
 
 
 166
Total$166
 $2
 $
 $
 $168
Liabilities:         
Energy-related derivatives$
 $3
 $
 $
 $3
Foreign currency derivatives
 90
 
 
 90
Contingent consideration
 
 19
 
 19
Total$

$93

$19

$

$112
          
Southern Company Gas         
Assets:         
Energy-related derivatives(a)
$328
 $148
 $87
 $
 $563
Non-qualified deferred compensation trusts:         
Domestic equity
 9
 
 
 9
Foreign equity
 3
 
 
 3
Pooled funds – fixed income
 16
 
 
 16
Cash equivalents and restricted cash270
 
 
 
 270
Total$598

$176

$87

$

$861
Liabilities:         
Energy-related derivatives(a)
$426
 $88
 $11
 $
 $525
Interest rate derivatives
 21
 
 
 21
Total$426

$109

$11

$

$546
(a)Energy-related derivatives exclude cash collateral of $128 million and $16 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.
(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of March 31, 2020, approximately $31 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.

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

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the three months ended March 31, 2020 and 2019. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.
Fair value increases (decreases)Three Months Ended March 31, 2020Three Months Ended March 31, 2019
 (in millions)
Southern Company$(247)$152
Alabama Power(167)87
Georgia Power(80)65

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

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(UNAUDITED)

"Other investments" include investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.
As of March 31, 2020, 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 $60 million and unfunded commitments related to the private equity investments totaled $73 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.
As of March 31, 2020, other financial instruments for which the carrying amount did not equal fair value were as follows:
 
Southern
Company
Alabama PowerGeorgia PowerMississippi PowerSouthern Power
Southern Company Gas(*)
 (in millions)
Long-term debt, including securities due within one year:    
Carrying amount$45,820
$8,432
$12,217
$1,413
$4,369
$5,836
Fair value49,126
9,239
14,020
1,433
4,376
6,416

(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the lives of the respective bonds.
The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.
Commodity Contracts with Level 3 Valuation Inputs
As of March 31, 2020, the fair value of Southern Company Gas' Level 3 physical natural gas forward contracts was $76 million. Since commodity contracts classified as Level 3 typically include a combination of observable and unobservable components, the changes in fair value may include amounts due in part to observable market factors, or changes to assumptions on the unobservable components. The following table includes transfers to Level 3, which represent the fair value of Southern Company Gas' commodity derivative contracts that include a significant unobservable component for the first time during the period.
 Three Months Ended March 31, 2020
 (in millions)
Beginning balance$14
Transfers to Level 370
Transfers from Level 3(3)
Instruments realized or otherwise settled during period(1)
Changes in fair value(4)
Ending balance$76

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

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of unobservable inputs. Observable inputs, including some forward prices used for determining fair value, reflect the best available market information. Unobservable inputs are updated using industry standard techniques such as extrapolation, combining observable forward inputs supplemented by historical market and other relevant data. Level 3 physical natural gas forward contracts include unobservable forward price inputs (ranging from $(0.84) to $0.21 per mmBtu). Forward price increases (decreases) as of March 31, 2020 would have resulted in higher (lower) values on a net basis.
(J) DERIVATIVES
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas are exposed to market risks, including commodity price risk, interest rate risk, weather risk, and occasionally foreign currency exchange rate risk. To manage the volatility attributable to these exposures, each company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to each company's policies in areas such as counterparty exposure and risk management practices. Southern Company Gas' wholesale gas operations use various contracts in its commercial activities that generally meet the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information.
Energy-Related Derivatives
The traditional electric operating companies, Southern Power, and Southern Company Gas enter into energy-related derivatives to hedge exposures to electricity, natural gas, and other fuel price changes. However, due to cost-based rate regulations and other various cost recovery mechanisms, the traditional electric operating companies and the natural gas distribution utilities have limited exposure to market volatility in energy-related commodity prices. Each of the traditional electric operating companies and certain of the natural gas distribution utilities of Southern Company Gas manage fuel-hedging programs, implemented per the guidelines of their respective state PSCs or other applicable state regulatory agencies, through the use of financial derivative contracts, which are expected to continue to mitigate price volatility. The traditional electric operating companies (with respect to wholesale generating capacity) and Southern Power have limited exposure to market volatility in energy-related commodity prices because their long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, the traditional electric operating companies and Southern Power may be exposed to market volatility in energy-related commodity prices to the extent any uncontracted capacity is used to sell electricity. Southern Company Gas retains exposure to price changes that can, in a volatile energy market, be material and can adversely affect its results of operations.
Southern Company Gas also enters into weather derivative contracts as economic hedges of operating margins in the event of warmer-than-normal weather. Exchange-traded options are carried at fair value, with changes reflected in operating revenues. Non-exchange-traded options are accounted for using the intrinsic value method. Changes in the intrinsic value for non-exchange-traded contracts are reflected in operating revenues.

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Energy-related derivative contracts are accounted for under one of three methods:
Regulatory Hedges — Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses.
Cash Flow Hedges — Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
Not Designated — 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 March 31, 2020, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:
 
Net
Purchased
mmBtu
 
Longest
Hedge
Date
 
Longest
Non-Hedge
Date
 (in millions)    
Southern Company(*)
945 2023 2031
Alabama Power88 2023 
Georgia Power168 2023 
Mississippi Power100 2023 
Southern Power4 2020 2020
Southern Company Gas(*)
585 2022 2031
(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 4.6 billion mmBtu and short natural gas positions of 4.0 billion mmBtu as of March 31, 2020, which is also included in Southern Company's total volume.
At March 31, 2020, the net volume of Southern Power's energy-related derivative contracts for power to be sold was 1 million MWHs, all of which expire in 2020.
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 23 million mmBtu for Southern Company, which includes 6 million mmBtu for Alabama Power, 7 million mmBtu for Georgia Power, 3 million mmBtu for Mississippi Power, and 7 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 March 31, 2021 are immaterial for all Registrants.

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Interest Rate Derivatives
Southern Company and certain subsidiaries may enter into interest rate derivatives to hedge exposure to changes in interest rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow 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 March 31, 2020, 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 March 31, 2020
 (in millions)     (in millions)
Cash Flow Hedges of Forecasted Debt ��    
Southern Company Gas$200
 3-month LIBOR1.81%September 2030 $(21)
Cash Flow Hedges of Existing Debt      
Mississippi Power60
 1-month LIBOR0.58%December 2021 
Fair Value Hedges of Existing Debt      
Southern Company parent300
 2.75%3-month LIBOR + 0.92%June 2020 1
Southern Company parent1,500
 2.35%1-month LIBOR + 0.87%July 2021 21
Southern Company$2,060
     $1

The estimated pre-tax gains (losses) related to interest rate derivatives expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending March 31, 2021 total $(25) million for Southern Company and are immaterial for all other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 2046 for the Southern Company parent entity, 2035 for Alabama Power, 2044 for Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.
Foreign Currency Derivatives
Southern Company and certain subsidiaries, including Southern Power, may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars. Derivatives related to forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and on the same income statement line as the earnings effect of the hedged transactions, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness.

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At March 31, 2020, the following foreign currency derivatives were outstanding:
 Pay NotionalPay RateReceive NotionalReceive RateHedge
Maturity Date
Fair Value Gain (Loss) at March 31, 2020
 (in millions) (in millions)  (in millions)
Cash Flow Hedges of Existing Debt     
Southern Power$677
2.95%600
1.00%June 2022$(39)
Southern Power564
3.78%500
1.85%June 2026(51)
Total$1,241
 1,100
  $(90)

The estimated pre-tax gains (losses) related to Southern Power's foreign currency derivatives expected to be reclassified from accumulated OCI to earnings for the 12-month period ending March 31, 2021 are $(24) million.
Derivative Financial Statement Presentation and Amounts
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas enter into derivative contracts that may contain certain provisions that permit intra-contract netting of derivative receivables and payables for routine billing and offsets related to events of default and settlements. Southern Company and certain subsidiaries also utilize master netting agreements to mitigate exposure to counterparty credit risk. These agreements may contain provisions that permit netting across product lines and against cash collateral. The fair value amounts of derivative assets and liabilities on the balance sheet are presented net to the extent that there are netting arrangements or similar agreements with the counterparties.

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The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:
 As of March 31, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Southern Company    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$7
$100
$3
$70
Other deferred charges and assets/Other deferred credits and liabilities8
40
6
44
Total derivatives designated as hedging instruments for regulatory purposes$15
$140
$9
$114
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Other current assets/Other current liabilities$3
$6
$1
$6
Interest rate derivatives:    
Other current assets/Other current liabilities12
21
2
23
Other deferred charges and assets/Other deferred credits and liabilities10


1
Foreign currency derivatives:    
Other current assets/Other current liabilities
24

24
Other deferred charges and assets/Other deferred credits and liabilities
66
16

Total derivatives designated as hedging instruments in cash flow and fair value hedges$25
$117
$19
$54
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Other current assets/Other current liabilities$300
$297
$461
$358
Other deferred charges and assets/Other deferred credits and liabilities261
206
207
225
Total derivatives not designated as hedging instruments$561
$503
$668
$583
Gross amounts recognized$601
$760
$696
$751
Gross amounts offset(a)
(383)(511)(463)(562)
Net amounts recognized in the Balance Sheets(b)
$218
$249
$233
$189
     

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(UNAUDITED)

 As of March 31, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Alabama Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$3
$18
$2
$14
Other deferred charges and assets/Other deferred credits and liabilities2
9
2
10
Total derivatives designated as hedging instruments for regulatory purposes$5
$27
$4
$24
Gross amounts recognized$5
$27
$4
$24
Gross amounts offset(4)(4)(2)(2)
Net amounts recognized in the Balance Sheets$1
$23
$2
$22
     
Georgia Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$3
$42
$1
$32
Other deferred charges and assets/Other deferred credits and liabilities3
19
3
21
Total derivatives designated as hedging instruments for regulatory purposes$6
$61
$4
$53
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Interest rate derivatives:    
Other current assets/Other current liabilities$
$
$
$17
Total derivatives designated as hedging instruments in cash flow and fair value hedges$
$
$
$17
Gross amounts recognized$6
$61
$4
$70
Gross amounts offset(6)(6)(3)(3)
Net amounts recognized in the Balance Sheets$
$55
$1
$67
     

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(UNAUDITED)

 As of March 31, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Mississippi Power    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Other current assets/Other current liabilities$1
$21
$
$15
Other deferred charges and assets/Other deferred credits and liabilities2
12
1
12
Total derivatives designated as hedging instruments for regulatory purposes$3
$33
$1
$27
Gross amounts recognized$3
$33
$1
$27
Gross amounts offset(3)(3)(1)(1)
Net amounts recognized in the Balance Sheets$
$30
$
$26
     
Southern Power    
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Other current assets/Other current liabilities$2
$2
$1
$2
Foreign currency derivatives:    
Other current assets/Other current liabilities
24

24
Other deferred charges and assets/Other deferred credits and liabilities
66
16

Total derivatives designated as hedging instruments in cash flow and fair value hedges$2
$92
$17
$26
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Other current assets/Other current liabilities$
$1
$2
$1
Total derivatives not designated as hedging instruments$
$1
$2
$1
Gross amounts recognized$2
$93
$19
$27
Gross amounts offset



Net amounts recognized in the Balance Sheets$2
$93
$19
$27
     

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 As of March 31, 2020As of December 31, 2019
Derivative Category and Balance Sheet LocationAssetsLiabilitiesAssetsLiabilities
 (in millions)(in millions)
Southern Company Gas    
Derivatives designated as hedging instruments for regulatory purposes    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$
$19
$
$9
Other deferred charges and assets/Other deferred credits and liabilities1


1
Total derivatives designated as hedging instruments for regulatory purposes$1
$19
$
$10
Derivatives designated as hedging instruments in cash flow and fair value hedges    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$1
$4
$
$4
Interest rate derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current
21
2

Total derivatives designated as hedging instruments in cash flow and fair value hedges$1
$25
$2
$4
Derivatives not designated as hedging instruments    
Energy-related derivatives:    
Assets from risk management activities/Liabilities from risk management activities-current$300
$296
$459
$357
Other deferred charges and assets/Other deferred credits and liabilities261
206
207
225
Total derivatives not designated as hedging instruments$561
$502
$666
$582
Gross amounts of recognized$563
$546
$668
$596
Gross amounts offset(a)
(370)(498)(456)(555)
Net amounts recognized in the Balance Sheets(b)
$193
$48
$212
$41
(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $128 million and $99 million as of March 31, 2020 and December 31, 2019, respectively.
(b)Net amounts of derivative instruments outstanding exclude premium and intrinsic value associated with weather derivatives of $16 million and $4 million as of March 31, 2020 and December 31, 2019, respectively.
Energy-related derivatives not designated as hedging instruments were immaterial for the traditional electric operating companies at March 31, 2020 and December 31, 2019.

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At March 31, 2020 and December 31, 2019, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:
Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet at March 31, 2020
Derivative Category and Balance Sheet
Location
Southern
Company(*)
Alabama
Power
Georgia
Power
Mississippi
Power
Southern Company Gas(*)
 (in millions)
Energy-related derivatives:     
Other regulatory assets, current$(79)$(17)$(39)$(19)$(4)
Other regulatory assets, deferred(33)(7)(16)(10)
Other regulatory liabilities, current5
1


4
Total energy-related derivative gains (losses)$(107)$(23)$(55)$(29)$

(*)Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $19 million at March 31, 2020.
Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet at December 31, 2019
Derivative Category and Balance Sheet
Location
Southern
Company(*)
Alabama
Power
Georgia
Power
Mississippi
Power
Southern Company Gas(*)
 (in millions)
Energy-related derivatives:     
Other regulatory assets, current$(63)$(14)$(31)$(15)$(3)
Other regulatory assets, deferred(37)(8)(18)(11)
Other regulatory liabilities, current6
2


4
Total energy-related derivative gains (losses)$(94)$(20)$(49)$(26)$1

(*)Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $11 million at December 31, 2019.
For the three months ended March 31, 2020 and 2019, the pre-tax effects of cash flow hedge accounting on accumulated OCI were as follows:
Gain (Loss) Recognized in OCI on DerivativeFor the Three Months Ended March 31,
20202019
 (in millions)
Southern Company  
Energy-related derivatives$(4)$
Interest rate derivatives(26)
Foreign currency derivatives(83)(39)
Total$(113)$(39)
Southern Power  
Foreign currency derivatives$(83)$(39)
Southern Company Gas  
Energy-related derivatives$(4)$
Interest rate derivatives(23)
Total$(27)$

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(UNAUDITED)

For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.
For the three months ended March 31, 2020 and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:
 Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging RelationshipsFor the Three Months Ended March 31,
 
 20202019
  (in millions)
 Southern Company  
 Total cost of natural gas$439
$686
 
Gain (loss) on energy-related cash flow hedges(a)
(7)1
 Total depreciation and amortization857
751
 
Gain (loss) on energy-related cash flow hedges(a)
(1)(3)
 Total interest expense, net of amounts capitalized(456)(430)
 
Gain (loss) on interest rate cash flow hedges(a)
(6)(5)
 
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
 
Gain (loss) on interest rate fair value hedges(b)
29
14
 Total other income (expense), net103
78
 
Gain (loss) on foreign currency cash flow hedges(a)(c)
(31)(24)
 Southern Power  
 Total depreciation and amortization$117
$119
 
Gain (loss) on energy-related cash flow hedges(a)
(1)(3)
 Total interest expense, net of amounts capitalized(39)(44)
 
Gain (loss) on foreign currency cash flow hedges(a)
(6)(6)
 Total other income (expense), net2
2
 
Gain (loss) on foreign currency cash flow hedges(a)(c)
(31)(24)
(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 months ended March 31, 2020 and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income for energy-related derivatives and interest rate derivatives were immaterial for the traditional electric operating companies and Southern Company Gas.
As of March 31, 2020 and December 31, 2019, 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
Balance Sheet Location of Hedged ItemsAs of March 31, 2020As of December 31, 2019
As of March 31, 2020As of December 31, 2019

(in millions) (in millions)
Southern Company     
Securities due within one year$(600)$(599) $(1)$
Long-term debt(1,519)(1,494) (22)3


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For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:
  Gain (Loss)
  Three Months Ended March 31,
Derivatives in Non-Designated Hedging RelationshipsStatements of Income Location20202019
  (in millions)
Energy-related derivatives:
Natural gas revenues(*)
$70
$33
 Cost of natural gas7
8
Total derivatives in non-designated hedging relationships$77
$41
(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.
For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives not designated as hedging instruments were immaterial for all other Registrants.
Contingent Features
Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. At March 31, 2020, the Registrants had 0 collateral posted with derivative counterparties to satisfy these arrangements.
For the Registrants with interest rate derivatives at March 31, 2020, the fair value of interest rate derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, was immaterial. At March 31, 2020, the fair value of energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial for all Registrants. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Gulf Power is continuing to participate in the Southern Company power pool for a defined transition period that, subject to certain potential adjustments, is scheduled to end on January 1, 2024.
Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivatives executed with the same counterparty.
Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Alabama Power and Southern Power may be required to post collateral. At March 31, 2020, 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 March 31, 2020, cash collateral held on deposit in broker margin accounts was $128 million.
The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have

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(UNAUDITED)

investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk. Prior to entering into a physical transaction, Southern Company Gas assigns physical wholesale counterparties an internal credit rating and credit limit based on the counterparties' Moody's, S&P, and Fitch ratings, commercially available credit reports, and audited financial statements. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.
In addition, Southern Company Gas conducts credit evaluations and obtains appropriate internal approvals for the counterparty's line of credit before any transaction with the counterparty is executed. In most cases, the counterparty must have an investment grade rating, which includes a minimum long-term debt rating of Baa3 from Moody's and BBB- from S&P. Generally, Southern Company Gas requires credit enhancements by way of a guaranty, cash deposit, or letter of credit for transaction counterparties that do not have investment grade ratings.
Southern Company Gas also utilizes master netting agreements whenever possible to mitigate exposure to counterparty credit risk. When Southern Company Gas is engaged in more than one outstanding derivative transaction with the same counterparty and it also has a legally enforceable netting agreement with that counterparty, the "net" mark-to-market exposure represents the netting of the positive and negative exposures with that counterparty and a reasonable measure of Southern Company Gas' credit risk. Southern Company Gas also uses other netting agreements with certain counterparties with whom it conducts significant transactions. Master netting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty. Southern Company Gas also nets across product lines and against cash collateral provided the master netting and cash collateral agreements include such provisions. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.
The Registrants do not anticipate a material adverse effect on their respective financial statements as a result of counterparty nonperformance.
(K) ACQUISITIONS AND DISPOSITIONS
See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information, including details of assets and liabilities held for sale at December 31, 2019 for Southern Company, Southern Power, and Southern Company Gas. No Registrant had assets or liabilities held for sale at March 31, 2020.
Alabama Power
On April 22, 2020, the FERC approved the Autauga Combined Cycle Acquisition. The Autauga Combined Cycle Acquisition remains subject to approval by the Alabama PSC. See Note (B) under "Alabama Power" for additional information. The ultimate outcome of this matter cannot be determined at this time.
Southern Power
Acquisitions
In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, which is expected to occur in the fourth quarter 2020. The facility's output is contracted under 2 long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.
Construction Projects
During the three months ended March 31, 2020, Southern Power continued construction of the Reading and Skookumchuck wind facilities. Total aggregate construction costs, excluding acquisition costs, are expected to be between $490 million and $535 million for the two facilities under construction. At March 31, 2020, total costs of

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

construction incurred for these projects were $447 million and are included in CWIP. The ultimate outcome of these matters cannot be determined at this time.
Project FacilityResource
Approximate Nameplate Capacity (MW)
LocationActual/Expected CODPPA Contract Period
Projects Under Construction as of March 31, 2020
Reading(a)
Wind200Osage and Lyon Counties, KSMay 202012 years
Skookumchuck(b)
Wind136Lewis and Thurston Counties, WASecond half of 202020 years

(a)In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. Southern Power may enter into a tax equity partnership, in which case it would then own 100% of the Class B membership interests. The ultimate outcome of this matter cannot be determined at this time.
(b)
In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. In December 2019, Southern Power entered into a tax equity agreement as the Class B member with funding of the tax equity amounts expected to occur upon commercial operation. Shortly after commercial operation, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. The ultimate outcome of this matter cannot be determined at this time.
Development Projects
Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 to development and construction projects. During the three months ended March 31, 2020, certain wind turbine equipment was sold, resulting in an immaterial gain.
Sales of Natural Gas and Biomass Plants
On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments. The sale resulted in a gain of approximately $39 million ($23 million after tax). The assets and liabilities of Plant Mankato were classified as held for sale on Southern Company's and Southern Power's balance sheets at December 31, 2019.
Plants Nacogdoches (sold in June 2019) and Mankato represented individually significant components of Southern Power; therefore, pre-tax income for these components for the three months ended March 31, 2020 and 2019 is presented below:
 Three Months Ended March 31,
 20202019
 (in millions)
Southern Power's earnings before income taxes:(*)
  
Plant NacogdochesN/A
$6
Plant Mankato$2
$1
(*)Earnings before income taxes for components reflect the cessation of depreciation and amortization on the long-lived assets being sold upon classification as held for sale in November 2018 and April 2019 for Plant Mankato and Plant Nacogdoches, respectively.
Southern Company Gas
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline to Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceeds of $178 million, including estimated working capital adjustments. The preliminary loss associated with the transactions was immaterial. Southern Company Gas may also receive 2 future payments of $5 million each, contingent upon certain milestones related to Pivotal LNG being met by Dominion Modular LNG

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

Holdings, Inc. The assets and liabilities of Pivotal LNG and the interest in Atlantic Coast Pipeline were classified as held for sale at December 31, 2019. See Notes 3 and 7 under "Other Matters – Southern Company Gas – Gas Pipeline Projects" and "Southern Company Gas – Equity Method Investments," respectively, in Item 8 of the Form 10-K and Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively.
(L) SEGMENT AND RELATED INFORMATION
Southern Company
The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The traditional electric operating companies – Alabama Power, Georgia Power, and Mississippi Power – are vertically integrated utilities providing electric service in 3 Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through its natural gas distribution utilities and is involved in several other complementary businesses including gas pipeline investments, wholesale gas services, and gas marketing services.
Southern Company's reportable business segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $86 million for the three months ended March 31, 2020 and $87 million for the three months ended March 31, 2019. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for the three months ended March 31, 2020 and 2019. Revenues from sales of natural gas from Southern Company Gas to Southern Power were $10 million for the three months ended March 31, 2020 and $17 million for the three months ended March 31, 2019. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency, as well as investments in telecommunications and leveraged lease projects. All other inter-segment revenues are not material.

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

Financial data for business segments and products and services for the three months ended March 31, 2020 and 2019 was as follows:
 Electric Utilities    
 
Traditional
Electric Operating
Companies
Southern
Power
EliminationsTotalSouthern Company Gas
All
Other
EliminationsConsolidated
 (in millions)
Three Months Ended March 31, 2020   

   
Operating revenues$3,407
$375
$(87)$3,695
$1,249
$114
$(40)$5,018
Segment net income (loss)(a)(b)
642
75

717
275
(121)(3)868
At March 31, 2020        
Goodwill$
$2
$
$2
$5,015
$263
$
$5,280
Total assets81,765
13,646
(695)94,716
21,617
3,467
(948)118,852
Three Months Ended March 31, 2019       
Operating revenues$3,445
$443
$(93)$3,795
$1,474
$182
$(39)$5,412
Segment net income (loss)(a)(c)
565
56

621
270
1,195
(2)2,084
At December 31, 2019        
Goodwill$
$2
$
$2
$5,015
$263
$
$5,280
Total assets81,063
14,300
(713)94,650
21,687
3,511
(1,148)118,700
(a)Attributable to Southern Company.
(b)
Segment net income (loss) for Southern Power includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato for the three months ended March 31, 2020. See Note (K) under "Southern Power" for additional information.
(c)Segment net income (loss) for the "All Other" column includes the preliminary pre-tax gain associated with the sale of Gulf Power of $2.5 billion ($1.3 billion after tax) for the three months ended March 31, 2019. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company" for additional information.
Products and Services
 Electric Utilities' Revenues
 RetailWholesaleOtherTotal
 (in millions)
Three Months Ended March 31, 2020$3,078
$418
$199
$3,695
Three Months Ended March 31, 20193,084
499
212
3,795
 Southern Company Gas' Revenues
 Gas
Distribution
Operations
Wholesale
Gas
Services(*)
Gas
Marketing
Services
OtherTotal
 (in millions)
Three Months Ended March 31, 2020$1,013
$51
$177
$8
$1,249
Three Months Ended March 31, 20191,161
86
229
(2)1,474
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein for additional information.

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

Southern Company Gas
Southern Company Gas manages its business through 4 reportable segments – gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. The non-reportable segments are combined and presented as all other.
Gas distribution operations is the largest component of Southern Company Gas' business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in 4 states.
Gas pipeline investments consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG, a 20% ownership interest in the PennEast Pipeline construction project, a 50% joint ownership interest in the Dalton Pipeline, and a 5% ownership interest in the Atlantic Coast Pipeline construction project through its sale on March 24, 2020. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas.
Wholesale gas services provides natural gas asset management and/or related logistics services for each of Southern Company Gas' utilities except Nicor Gas as well as for non-affiliated companies. Additionally, wholesale gas services engages in natural gas storage and gas pipeline arbitrage and related activities.
Gas marketing services provides natural gas marketing to end-use customers primarily in Georgia and Illinois through SouthStar Energy Services, LLC.
The all other column includes segments below the quantitative threshold for separate disclosure, including natural gas storage businesses, fuels operations through the sale of Southern Company Gas' interest in Pivotal LNG on March 24, 2020, the investment in Triton through its sale on May 29, 2019, and other subsidiaries that fall below the quantitative threshold for separate disclosure. See Notes (E) and (K) under "Southern Company Gas" for additional information.
Business segment financial data for the three months ended March 31, 2020 and 2019 was as follows:
 Gas Distribution OperationsGas Pipeline Investments
Wholesale Gas Services(*)
Gas Marketing ServicesTotalAll OtherEliminationsConsolidated
 (in millions)
Three Months Ended March 31, 2020      
Operating revenues$1,020
$8
$51
$177
$1,256
$8
$(15)$1,249
Segment net income (loss)164
30
23
57
274
1

275
Total assets at March 31, 202018,166
1,652
643
1,517
21,978
11,094
(11,455)21,617
Three Months Ended March 31, 2019       
Operating revenues$1,172
$8
$86
$229
$1,495
$11
$(32)$1,474
Segment net income (loss)133
32
47
61
273
(3)
270
Total assets at December 31, 201918,204
1,678
850
1,496
22,228
10,759
(11,300)21,687
(*)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.
 Third Party Gross RevenuesIntercompany RevenuesTotal Gross RevenuesLess Gross Gas CostsOperating Revenues
 (in millions)
Three Months Ended March 31, 2020$1,185
$29
$1,214
$1,163
$51
Three Months Ended March 31, 20191,926
88
2,014
1,928
86


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations is a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW
Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies (Alabama Power, Georgia Power, and Mississippi Power), as well as Southern Power and Southern Company Gas, and owns other direct and indirect subsidiaries. The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. Southern Company's reportable segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Southern Company Gas' reportable segments are gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. See Note (L) to the Condensed Financial Statements herein for additional information on segment reporting. For additional information on the Registrants' primary business activities, see BUSINESS – "The Southern Company System" in Item 1 of the Form 10-K.
The Registrants continue to focus on several key performance indicators. For the traditional electric operating companies and Southern Company Gas, these indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. For Southern Power, these indicators include, but are not limited to, the equivalent forced outage rate and contract availability to evaluate operating results and help ensure its ability to meet its contractual commitments to customers. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share and net income, respectively, as a key performance indicator.
Recent Developments
COVID-19
During March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the United States. The Southern Company system provides a critical service to its customers; therefore, it is essential that Southern Company system employees are able to continue to perform their critical duties safely and effectively. The Southern Company system has implemented applicable business continuity plans, including teleworking, canceling non-essential business travel, increasing cleaning frequency at business locations, implementing applicable safety and health guidelines issued by federal and state officials, and establishing protocols for required work on customer premises. To date, these procedures have been effective in maintaining the Southern Company system's critical operations. As a result of the COVID-19 pandemic, there have been economic disruptions in the Registrants' operating territories. The traditional electric operating companies and the natural gas distribution utilities have temporarily suspended disconnections for non-payment by customers and waived late fees. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters" herein for information regarding requested and/or approved deferral of certain incremental COVID-19-related costs, including bad debt, to a regulatory asset by certain of the traditional electric operating companies and the natural gas distribution utilities. In addition, the COVID-19 pandemic has resulted in a planned reduction in workforce at Plant Vogtle Units 3 and 4, as discussed further herein, and has caused volatility in capital markets. Additional information regarding COVID-19 and its potential impacts on the Registrants is provided throughout Management's Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A herein.
Georgia Power
Plant Vogtle Units 3 and 4 Status
In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4 (with electric generating capacity of approximately 1,100 MWs each). Georgia Power holds a 45.7% ownership interest in Plant Vogtle Units 3 and 4. In March 2017, the EPC Contractor filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. In December 2017, the Georgia PSC approved Georgia Power's recommendation to continue construction. The current expected in-service dates remain November 2021 for Unit 3 and November 2022 for Unit 4.

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

Although Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, multiple members of the workforce have tested positive for the disease and the pandemic has impacted productivity levels and pace of activity completion. On April 15, 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4 expected to total approximately 20% of the existing workforce. The workforce levels resulting from this reduction are expected to last at least through the summer as Georgia Power continues to monitor the impacts of the COVID-19 pandemic on the construction site. Georgia Power's proportionate share of the estimated incremental cost of this mitigation action, which is currently estimated to total approximately $20 million and is included in the first quarter 2020 contingency allocation of $66 million, assumes absenteeism rates normalize and the intended productivity efficiencies are realized in the coming months. Based on these assumptions, while this mitigation action has extended and may further extend certain milestone dates in the updated aggressive site work plan, Georgia Power does not expect it to affect either the total project capital cost forecast or the ability to achieve the regulatory-approved in-service dates of November 2021 and November 2022 for Plant Vogtle Units 3 and 4, respectively.
The continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. The ultimate impact of the COVID-19 pandemic on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.
See FUTURE EARNINGS POTENTIAL – "Construction Programs – Nuclear Construction" for additional information.
Mississippi Power
On March 17, 2020, the Mississippi PSC approved a settlement agreement between Mississippi Power and the Mississippi Public Utilities Staff related to Mississippi Power's base rate case filed in November 2019 (Mississippi Power Rate Case Settlement Agreement). Under the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%, effective for the first billing cycle of April 2020. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersMississippi Power2019 Base Rate Case" herein for additional information.
Southern Power
During the three months ended March 31, 2020, Southern Power continued construction of the 200-MW Reading and the 136-MW Skookumchuck wind facilities. See FUTURE EARNINGS POTENTIAL "Construction ProgramsSouthern Power" herein for additional information.
On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments.
In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, which is expected to occur in the fourth quarter 2020. The facility's output is contracted under two long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.
At March 31, 2020, 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 2024 and 91% through 2029, with an average remaining contract duration of approximately 14 years.

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

Southern Company Gas
On February 3, 2020, Virginia Natural Gas filed a notice of intent with the Virginia Commission as required prior to the filing of a base rate case. Virginia Natural Gas planned to file its rate case in April 2020 but, as a result of the COVID-19 pandemic, now expects to file in June 2020. The ultimate outcome of this matter cannot be determined at this time.
On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline with aggregate proceeds of $178 million, including estimated working capital adjustments. See Note (K) to the Condensed Financial Statements under "Southern Company Gas" herein for additional information.
RESULTS OF OPERATIONS
Southern Company
Net Income
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(1,216) (58.3)
Consolidated net income attributable to Southern Company was $0.9 billion ($0.82 per share) for first quarter 2020 compared to $2.1 billion ($2.01 per share) for the corresponding period in 2019. The decrease was primarily due to the $2.5 billion ($1.3 billion after tax) preliminary gain on the sale of Gulf Power recorded in the first quarter 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information regarding the sale of Gulf Power.
Retail Electric Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(6) (0.2)
In the first quarter 2020 and 2019, retail electric revenues were $3.1 billion.
Details of the changes in retail electric revenues were as follows:
 First Quarter 2020
 (in millions) (% change)
Retail electric – prior year$3,084
  
Estimated change resulting from –   
Rates and pricing143
 4.6 %
Sales growth7
 0.2
Weather(26) (0.8)
Fuel and other cost recovery(130) (4.2)
Retail electric – current year$3,078
 (0.2)%
Revenues associated with changes in rates and pricing increased in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to an increase in revenue recognized under the Environmental Compliance Cost Recovery (ECCR) tariff as authorized in the Georgia Power 2019 ARP, as well as the impacts of Georgia Power accruals for customer refunds and Alabama Power customer bill credits in the first quarter 2019 related to Tax Reform.

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

See Note 2 to the financial statements under "Alabama Power" and "Georgia Power" in Item 8 of the Form 10-K and Note (B) to the Condensed Financial Statements herein for additional information.
Revenues attributable to changes in sales increased in the first quarter 2020 when compared to the corresponding period in 2019. Weather-adjusted residential KWH sales increased 3.1% in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to increased customer usage and customer growth. Weather-adjusted commercial KWH sales decreased 0.7% in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to lower customer usage resulting from customer initiatives in energy savings. Industrial KWH sales decreased 1.8% in the first quarter 2020 when compared to the corresponding period in 2019 as a result of a decrease in demand resulting from changes in production levels primarily in the paper and textile sectors, partially offset by increased demand from the pipeline sector. Social distancing and shelter-in-place guidelines related to the COVID-19 pandemic, which began to be implemented in the last few weeks of the first quarter 2020, had a small impact on retail sales relative to other primary drivers. In general, COVID-19-related impacts depressed commercial sales and, to a lesser extent, industrial sales and increased residential sales.
Fuel and other cost recovery revenues decreased $130 million in the first quarter 2020 compared to the corresponding period in 2019 primarily due to decreases in generation and the average cost of fuel and purchased power. 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.
Wholesale Electric Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(81) (16.2)
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 first quarter 2020, wholesale electric revenues were $418 million compared to $499 million for the corresponding period in 2019. This decrease was related to a $57 million decrease in energy revenues and a $24 million decrease in capacity revenues. The decrease in energy revenues was primarily at Southern Power and included a decrease in PPA revenues, primarily resulting from decreased sales from natural gas facilities resulting from a decrease in the volume of KWHs sold and a decrease in the average cost of fuel and purchased power, partially offset by increased sales primarily driven by the volume of KWHs from solar and wind facilities as well as a decrease in non-PPA revenues primarily resulting from a decrease in the volume of KWHs sold through short-term sales and a decrease in the market price of energy. The decrease in capacity revenues was primarily related to

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

Southern Power's sales of Plant Nacogdoches in the second quarter 2019 and Plant Mankato in the first quarter 2020. See Note (K) to the Condensed Financial Statements under "Southern Power" herein and Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" in Item 8 of the Form 10-K for additional information.
Other Electric Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(17) (10.1)
In the first quarter 2020, other electric revenues were $151 million compared to $168 million for the corresponding period in 2019. The decrease was primarily related to pole attachment revenues at Georgia Power and transmission revenues at Alabama Power and Georgia Power.
Natural Gas Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(225) (15.3)
In the first quarter 2020, natural gas revenues were $1.2 billion compared to $1.5 billion for the corresponding period in 2019.
Details of the changes in natural gas revenues were as follows:
 First Quarter 2020
 (in millions) (% change)
Natural gas revenues – prior year$1,474
  
Estimated change resulting from –   
Infrastructure replacement programs and base rate changes76
 5.2 %
Gas costs and other cost recovery(249) (16.9)
Weather(10) (0.7)
Wholesale gas services(35) (2.4)
Other(7) (0.5)
Natural gas revenues – current year$1,249
 (15.3)%
Revenues attributable to infrastructure replacement programs and base rate changes at the natural gas distribution utilities increased in the first quarter 2020 compared to the corresponding period in 2019 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light and continued investments recovered through infrastructure replacement programs. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings" in Item 8 of the Form 10-K for additional information.
Revenues attributable to gas costs and other cost recovery decreased in the first quarter 2020 compared to the corresponding period in 2019. The decrease in the first quarter 2020 is primarily due to lower natural gas prices and decreased volumes of natural gas sold. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from the natural gas distribution utilities.
Revenues attributable to Southern Company Gas' wholesale gas services business decreased in the first quarter 2020 compared to the corresponding period in 2019. The decrease in the first quarter 2020 is primarily due to decreased commercial activity as a result of warmer weather, partially offset by derivative gains.

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

Other Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(65) (34.8)
In the first quarter 2020, other revenues were $122 million compared to $187 million for the corresponding period in 2019. The decrease primarily relates to changes in PowerSecure's business, including the sale of its utility infrastructure services business in June 2019 and the wind-down of a segment of its distributed infrastructure business in the first quarter 2020.
Fuel and Purchased Power Expenses
 First Quarter 2020 vs. First Quarter 2019
 (change in millions) (% change)
Fuel$(214) (25.2)
Purchased power11
 6.5
Total fuel and purchased power expenses$(203)  
In the first quarter 2020, total fuel and purchased power expenses were $0.8 billion compared to $1.0 billion for the corresponding period in 2019. The decrease was primarily the result of a $168 million decrease in the average cost of fuel and purchased power and a $35 million net decrease in the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions at the traditional electric operating companies are generally offset by fuel revenues and do not have a significant impact on net income. See FUTURE EARNINGS POTENTIAL – "Regulatory Matters" herein for additional information. Fuel expenses incurred under Southern Power's PPAs are generally the responsibility of the counterparties and do not significantly impact net income.
Details of the Southern Company system's generation and purchased power were as follows:
 First Quarter 2020First Quarter 2019
Total generation (in billions of KWHs)
4243
Total purchased power (in billions of KWHs)
54
Sources of generation (percent) —
  
Gas5348
Nuclear1816
Coal1422
Hydro88
Other76
Cost of fuel, generated (in cents per net KWH)
  
Gas1.952.56
Nuclear0.780.79
Coal2.882.92
Average cost of fuel, generated (in cents per net KWH)
1.862.32
Average cost of purchased power (in cents per net KWH)(*)
3.904.64
(*)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

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AND RESULTS OF OPERATIONS (Continued)

Fuel
In the first quarter 2020, fuel expense was $636 million compared to $850 million for the corresponding period in 2019. The decrease was primarily due to a 38.6% decrease in the volume of KWHs generated by coal, a 23.8% decrease in the average cost of natural gas per KWH generated, and a 1.4% decrease in the average cost of coal per KWH generated, partially offset by a 4.7% increase in the volume of KWHs generated by natural gas.
Purchased Power
In the first quarter 2020, purchased power expense was $181 million compared to $170 million for the corresponding period in 2019. The increase was primarily due to a 26.3% increase in the volume of KWHs purchased, partially offset by a 16.0% decrease in the average cost of KWH purchased primarily due to lower energy prices.
Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.
Cost of Natural Gas
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(247) (36.0)
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 87% of total cost of natural gas for the first quarter 2020.
In the first quarter 2020, cost of natural gas was $439 million compared to $686 million for the corresponding period in 2019. The decrease reflects a 38.0% decrease in natural gas prices compared to 2019 and decreased volumes primarily as a result of warmer weather, as determined by Heating Degree Days, in the first quarter 2020 compared to the corresponding period in 2019.
Cost of Other Sales
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(63) (53.4)
In the first quarter 2020, cost of other sales was $55 million compared to $118 million for the corresponding period in 2019. The decrease primarily relates to changes in PowerSecure's business, including the sale of its utility infrastructure services business in June 2019 and the wind-down of a segment of its distributed infrastructure business in the first quarter 2020.
Other Operations and Maintenance Expenses
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(18) (1.4)
In the first quarter 2020, other operations and maintenance expenses were $1.30 billion compared to $1.31 billion for the corresponding period in 2019. The decrease was primarily due to decreases of $29 million in scheduled

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generation outage and maintenance expenses, $29 million in transmission and distribution maintenance expenses, primarily related to reliability NDR credits and vegetation management expenses at Alabama Power and distribution line operating and maintenance expenses at Georgia Power, and $24 million related to nuclear property insurance refunds, partially offset by a $46 million increase in storm damage recovery at Georgia Power as authorized in the Georgia Power 2019 ARP and a $20 million increase in medical and retirement benefit expenses primarily at the traditional electric operating companies and Southern Company Gas. See Note 2 to the financial statements under "Alabama Power – Rate NDR" and " – Rate CNP Compliance" and "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$106 14.1
In the first quarter 2020, depreciation and amortization was $857 million compared to $751 million for the corresponding period in 2019. The increase was primarily due to increases at Georgia Power of $51 million and $45 million resulting from the amortization of regulatory assets related to CCR AROs and higher depreciation rates, respectively, as authorized in Georgia Power's 2019 ARP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" in Item 8 of the Form 10-K for additional information.
(Gain) Loss on Dispositions, Net
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(2,458) N/M
N/M - Not meaningful
In the first quarter 2020, gain on dispositions, net was $39 million compared to $2.5 billion in the corresponding period in 2019. The decrease was primarily due to the $2.5 billion ($1.3 billion after tax) preliminary gain on the sale of Gulf Power recorded in the first quarter 2019 compared to the $39 million ($23 million after tax) gain recorded on the sale of Southern Power's Plant Mankato in the first quarter 2020. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K and Note (K) to the Condensed Financial Statements under "Southern Power – Sales of Natural Gas and Biomass Plants" herein for additional information.
Interest Expense, Net of Amounts Capitalized
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$26 6.0
In the first quarter 2020, interest expense, net of amounts capitalized was $456 million compared to $430 million in the corresponding period in 2019. The increase was primarily due to an increase in average outstanding long-term borrowings primarily at Georgia Power and the parent company.
See FINANCIAL CONDITION AND LIQUIDITY – "Financing Activities" herein and Note 8 to the financial statements in Item 8 of the Form 10-K for additional information.

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Other Income (Expense), Net
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$25 32.1
In the first quarter 2020, other income (expense), net was $103 million compared to $78 million for the corresponding period in 2019. The increase was primarily related to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(1,215) (89.3)
In the first quarter 2020, income taxes were $145 million compared to $1.4 billion for the corresponding period in 2019. The decrease was primarily due to the tax impact from the sale of Gulf Power in 2019. See Note (G) to the Condensed Financial Statements herein for additional information.
Alabama Power
Net Income
First Quarter 2020 vs. First Quarter 2019
(change in millions)
(% change)
$63 29.0
Alabama Power's net income after dividends on preferred stock for the first quarter 2020 was $280 million compared to $217 million for the corresponding period in 2019. This increase was primarily due to a decrease in operations and maintenance expenses and an increase in retail revenues associated with the impact of customer bill credits issued in 2019 related to Tax Reform. These increases to income were partially offset by decreases in retail revenues associated with milder weather in the first quarter 2020 compared to the same period in 2019 and lower customer usage. See Note 2 to the financial statements under "Alabama Power – Rate RSE" in Item 8 of the Form 10-K for additional information.
Retail Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(8) (0.7)
In the first quarter 2020 and 2019, retail revenues were $1.21 billion.

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Details of the changes in retail revenues were as follows:
 First Quarter 2020
 (in millions)
(% change)
Retail – prior year$1,213
  
Estimated change resulting from –   
Rates and pricing50
 4.1 %
Sales decline(6) (0.5)
Weather(12) (1.0)
Fuel and other cost recovery(40) (3.3)
Retail – current year$1,205
 (0.7)%
Revenues associated with changes in rates and pricing increased in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to customer bill credits issued in the first quarter 2019 related to Tax Reform.
Revenues attributable to changes in sales decreased in the first quarter 2020 when compared to the corresponding period in 2019. Weather-adjusted residential KWH sales increased 2.6% in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to increased customer usage and customer growth. Weather-adjusted commercial KWH sales decreased 2.0% in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to lower customer usage resulting from customer initiatives in energy savings. Industrial KWH sales decreased 1.8% in the first quarter 2020 when compared to the corresponding period in 2019 as a result of a decrease in demand resulting from changes in production levels primarily in the chemicals, air separation, and paper sectors, partially offset by the primary metals and stone, clay, and glass sectors. Social distancing and shelter-in-place guidelines related to the COVID-19 pandemic, which began to be implemented in the last few weeks of the first quarter 2020, had a small impact on retail sales relative to other primary drivers. In general, COVID-19-related impacts depressed commercial sales and, to a lesser extent, industrial sales and increased residential sales.
Revenues attributable to changes in weather decreased in the first quarter 2020 primarily due to milder weather when compared to the corresponding period in 2019. The resulting decrease for residential sales was 2.6%, partially offset by an increase to commercial sales of 0.6% due to weather having a larger negative impact on commercial sales in the first quarter 2019 when compared to the corresponding period in 2020.
Fuel and other cost recovery revenues decreased in the first quarter 2020 when compared to the corresponding period in 2019 primarily due to decreases in generation and the average cost of fuel.
Electric rates include provisions to recognize the recovery of fuel costs, purchased power costs, PPAs certificated by the Alabama PSC, and costs associated with the natural disaster reserve. Under these provisions, fuel and other cost recovery revenues generally equal fuel and other cost recovery expenses and do not affect net income. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.
Wholesale Revenues Affiliates
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(41) (68.3)
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 and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.

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In the first quarter 2020, wholesale revenues from sales to affiliates were $19 million compared to $60 million for the corresponding period in 2019. The decrease was primarily due to a 58% decrease in KWH sales as a result of decreased coal generation largely due to lower natural gas prices and a 24% decrease in the price of energy due to lower natural gas prices in 2020 compared to the corresponding period in 2019.
Fuel and Purchased Power Expenses
 First Quarter 2020 vs. First Quarter 2019
 (change in millions) (% change)
Fuel$(86) (28.6)
Purchased power – non-affiliates3
 8.1
Purchased power – affiliates(3) (14.3)
Total fuel and purchased power expenses$(86)  
In the first quarter 2020, fuel and purchased power expenses were $273 million compared to $359 million for the corresponding period in 2019. The decrease was primarily due to a $56 million net decrease in the volume of KWHs generated (excluding hydro) and purchased and a $30 million decrease in the average cost of generation and purchased power.
Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Alabama Power's energy cost recovery clause. See Note 2 to the financial statements under "Alabama Power – Rate ECR" in Item 8 of the Form 10-K for additional information.
Details of Alabama Power's generation and purchased power were as follows:
 First Quarter 2020
First Quarter 2019
Total generation (in billions of KWHs)
14 16
Total purchased power (in billions of KWHs)
1 1
Sources of generation (percent) —
   
Coal34 43
Nuclear28 23
Gas20 19
Hydro18 15
Cost of fuel, generated (in cents per net KWH) 
   
Coal2.64 2.78
Nuclear0.76 0.78
Gas2.19 2.57
Average cost of fuel, generated (in cents per net KWH)
1.88 2.19
Average cost of purchased power (in cents per net KWH)(*)
4.86 5.75
(*)Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.
Fuel
In the first quarter 2020, fuel expense was $215 million compared to $301 million for the corresponding period in 2019. The decrease was primarily due to a 32.8% decrease in the volume of KWHs generated by coal, a 14.8% decrease in the average cost of natural gas per KWH generated, which excludes fuel associated with tolling agreements, and increases of 5.7% and 5.5% in the volume of KWHs generated by nuclear and hydro, respectively.

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Other Operations and Maintenance Expenses
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(59) (14.4)
In the first quarter 2020, other operations and maintenance expenses were $350 million compared to $409 million for the corresponding period in 2019. This decrease was primarily due to decreases of $30 million in generation expenses associated with scheduled outages, the closure of Plant Gorgas in 2019, and CNP Compliance-related expenses, $19 million in transmission and distribution maintenance expenses primarily related to reliability NDR credits and vegetation management expenses, and $12 million in expenses related to nuclear property insurance refunds. These decreases were partially offset by a $6 million increase in retirement benefit 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.
Other Income (Expense), Net
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$10 71.4
In the first quarter 2020, other income (expense), net was $24 million compared to $14 million for the corresponding period in 2019. This increase was primarily due to an increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$22 35.5
In the first quarter 2020, income taxes were $84 million compared to $62 million for the corresponding period in 2019. This increase was primarily due to higher pre-tax earnings in the current year.
Georgia Power
Net Income
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$20 6.4
Georgia Power's net income for the first quarter 2020 was $331 million compared to $311 million for the corresponding period in 2019. The increase was primarily due to impacts of the 2019 ARP effective January 1, 2020, including increased retail rates and lower income tax expense, largely offset by higher depreciation and amortization. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.

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AND RESULTS OF OPERATIONS (Continued)

Retail Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$7 0.4
In the first quarter 2020, retail revenues were $1.68 billion compared to $1.67 billion for the corresponding period in 2019.
Details of the changes in retail revenues were as follows:
 First Quarter 2020
 (in millions) (% change)
Retail – prior year$1,668
  
Estimated change resulting from –   
Rates and pricing93
 5.5 %
Sales growth16
 1.0
Weather(19) (1.1)
Fuel cost recovery(83) (5.0)
Retail – current year$1,675
 0.4 %
Revenues associated with changes in rates and pricing increased in the first quarter 2020 when compared to the corresponding period in 2019. The increase was primarily due to an increase in revenue recognized under the ECCR tariff effective January 1, 2020 as authorized in the 2019 ARP and the impacts of accruals for customer refunds in the first quarter 2019 related to Tax Reform. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.
Revenues attributable to changes in sales increased in the first quarter 2020 when compared to the corresponding period in 2019. Weather-adjusted residential KWH sales increased 3.6% in the first quarter 2020 due to increased average customer usage and customer growth. Weather-adjusted commercial KWH sales were flat in the first quarter 2020. Weather-adjusted industrial KWH sales decreased 3.1% in the first quarter 2020 primarily due to decreases in the paper and textile sectors, partially offset by an increase in the pipeline sector. Social distancing and shelter-in-place guidelines related to the COVID-19 pandemic, which began to be implemented in the last few weeks of the first quarter 2020, had a small impact on retail sales relative to other primary drivers. In general, COVID-19-related impacts depressed commercial sales and, to a lesser extent, industrial sales and increased residential sales.
Fuel revenues and costs are allocated between retail and wholesale jurisdictions. Retail fuel cost recovery revenues decreased in the first quarter 2020 when compared to the corresponding period in 2019 due to lower fuel and purchased power costs. Electric rates include provisions to periodically adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Georgia Power – Fuel Cost Recovery" in Item 7 of the Form 10-K for additional information.

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AND RESULTS OF OPERATIONS (Continued)

Fuel and Purchased Power Expenses
 First Quarter 2020 vs. First Quarter 2019
 (change in millions) (% change)
Fuel$(68) (22.7)
Purchased power – non-affiliates11
 9.3
Purchased power – affiliates(47) (26.7)
Total fuel and purchased power expenses$(104)  
In the first quarter 2020, total fuel and purchased power expenses were $489 million compared to $593 million in the corresponding period in 2019. The decrease was due to a $96 million decrease related to the average cost of fuel and purchased power and a net decrease of $8 million related to the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings since these fuel expenses are generally offset by fuel revenues through Georgia Power's fuel cost recovery mechanism. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Georgia Power – Fuel Cost Recovery" in Item 7 of the Form 10-K for additional information.
Details of Georgia Power's generation and purchased power were as follows:
 First Quarter 2020 First Quarter 2019
Total generation (in billions of KWHs)
13 13
Total purchased power (in billions of KWHs)
9 8
Sources of generation (percent) —
   
Gas58 50
Nuclear27 26
Coal8 18
Hydro7 6
Cost of fuel, generated (in cents per net KWH) 
   
Gas2.12 2.59
Nuclear0.80 0.81
Coal3.83 3.23
Average cost of fuel, generated (in cents per net KWH)
1.87 2.21
Average cost of purchased power (in cents per net KWH)(*)
3.17 3.94
(*)Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.
Fuel
In the first quarter 2020, fuel expense was $231 million compared to $299 million in the corresponding period in 2019. The decrease was primarily due to a 15.4% decrease in the average cost of fuel primarily related to lower cost of natural gas and a 3.5% decrease in the volume of KWHs generated largely due to lower customer demand driven by milder weather.
Purchased Power – Non-Affiliates
In the first quarter 2020, purchased power expense from non-affiliates was $129 million compared to $118 million in the corresponding period in 2019. The increase was primarily due to a 32.4% increase in the volume of KWHs purchased primarily due to scheduled outages at Georgia Power-owned generating units, largely offset by a 17.6% decrease in the average cost per KWH purchased primarily due to lower energy prices.

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Energy purchases from non-affiliates will vary depending on the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.
Purchased Power – Affiliates
In the first quarter 2020, purchased power expense from affiliates was $129 million compared to $176 million in the corresponding period in 2019. The decrease was primarily due to a 26.4% decrease in the average cost per KWH purchased primarily resulting from lower energy prices, a 6.7% decrease in the volume of KWHs purchased as Georgia Power units generally dispatched at a lower cost than other Southern Company system resources, and the expiration of a PPA.
Energy purchases from affiliates will vary depending on demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, all as approved by the FERC.
Other Operations and Maintenance Expenses
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$19 4.3
In the first quarter 2020, other operations and maintenance expenses were $465 million compared to $446 million in the corresponding period in 2019. The increase was primarily due to a $46 million increase in storm damage recovery as authorized in the 2019 ARP, partially offset by decreases of $12 million related to scheduled generation outages and $12 million related to nuclear property insurance refunds. See Note 2 to the financial statements under "Georgia Power – Storm Damage Recovery" in Item 8 of the Form 10-K for additional information.
Depreciation and Amortization
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$112 46.7
In the first quarter 2020, depreciation and amortization was $352 million compared to $240 million in the corresponding period in 2019. The increase was primarily due to increases of $51 million and $45 million resulting from the amortization of regulatory assets related to CCR AROs and higher depreciation rates, respectively, as authorized in the 2019 ARP and $12 million resulting from the amortization of regulatory assets related to the retirement of certain generating plants as approved in the Georgia Power 2019 IRP. See Note 2 to the financial statements under "Georgia Power – Rate Plans" and " – Integrated Resource Plan" in Item 8 of the Form 10-K for additional information.
Interest Expense, Net of Amounts Capitalized
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$15 15.6
In the first quarter 2020, interest expense, net of amounts capitalized was $111 million compared to $96 million in the corresponding period in 2019. The increase was primarily due to a $19 million increase in interest expense associated with an increase in average outstanding long-term borrowings, partially offset by a $5 million increase in amounts capitalized associated with Plant Vogtle Units 3 and 4. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings and Note (B) to

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AND RESULTS OF OPERATIONS (Continued)

the Condensed Financial Statements under "Nuclear Construction" herein for additional information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$12 30.0
In the first quarter 2020, other income (expense), net was $52 million compared to $40 million in the corresponding period in 2019. The increase was primarily due to an $11 million increase in non-service cost-related retirement benefits income. See Note (H) to the Condensed Financial Statements herein for additional information.
Income Taxes
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(65) (80.2)
In the first quarter 2020, income taxes were $16 million compared to $81 million in the corresponding period in 2019. The decrease was primarily due to the flowback of excess deferred income taxes as authorized in the 2019 ARP and lower pre-tax earnings. See Note 2 to the financial statements under "Georgia Power – Rate Plans – Tax Reform Settlement Agreement" in Item 8 of the Form 10-K and Note (G) to the Condensed Financial Statements herein for additional information.
Mississippi Power
Net Income
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(5) (13.5)
Mississippi Power's net income for the first quarter 2020 was $32 million compared to $37 million for the corresponding period in 2019. The decrease was primarily due to an increase in scheduled generation outage costs, partially offset by a decrease in amortization associated with ECO Plan regulatory assets. See Note 2 to the financial statements under "Mississippi Power – Environmental Compliance Overview Plan" in Item 8 of the Form 10-K for additional information.
Retail Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(4) (2.0)
In the first quarter 2020, retail revenues were $199 million compared to $203 million for the corresponding period in 2019.

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AND RESULTS OF OPERATIONS (Continued)

Details of the changes in retail revenues were as follows:
 First Quarter 2020
 (in millions) (% change)
Retail – prior year$203
  
Estimated change resulting from –   
Rates and pricing
  %
Sales decline(3) (1.5)
Weather5
 2.5
Fuel and other cost recovery(6) (3.0)
Retail – current year$199
 (2.0)%
Revenues attributable to changes in sales decreased in the first quarter 2020 when compared to the corresponding period in 2019. Weather-adjusted residential KWH sales decreased 0.5% in the first quarter 2020 primarily due to an increase in energy saving initiatives. Weather-adjusted commercial KWH sales decreased 3.9% in the first quarter 2020 primarily due to the temporary closure of casinos and other non-essential businesses as a result of the COVID-19 pandemic. Industrial KWH sales increased 4.7% in the first quarter 2020 primarily due to increased production by several large industrial customers. Social distancing and shelter-in-place guidelines related to the COVID-19 pandemic, which began to be implemented in the last few weeks of the first quarter 2020, had no significant impact on residential and industrial sales relative to other primary drivers.
Fuel and other cost recovery revenues decreased in the first quarter 2020 when compared to the corresponding period in 2019 primarily as a result of lower 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.
Wholesale Revenues – Non-Affiliates
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(6) (10.5)
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Mississippi Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. In addition, Mississippi Power provides service under long-term contracts with rural electric cooperative associations and municipalities located in southeastern Mississippi under cost-based electric tariffs which are subject to regulation by the FERC. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Mississippi Power" in Item 7 of the Form 10-K for additional information.
In the first quarter 2020, wholesale revenues from sales to non-affiliates were $51 million compared to $57 million for the corresponding period in 2019. This decrease was primarily due to a decrease in revenue from MRA customers as a result of lower fuel costs and milder weather.

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AND RESULTS OF OPERATIONS (Continued)

Wholesale Revenues – Affiliates
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(1) (4.5)
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost.
In the first quarter 2020, wholesale revenues from sales to affiliates were $21 million compared to $22 million for the corresponding period in 2019. This decrease was primarily due to a $9 million decrease associated with lower natural gas prices, partially offset by an $8 million increase associated with higher KWH sales due to the dispatch of Mississippi Power's lower cost generation resources to serve the Southern Company system's territorial load.
Fuel and Purchased Power Expenses
 First Quarter 2020 vs. First Quarter 2019
 (change in millions) (% change)
Fuel$(14) (15.1)
Purchased power2
 66.7
Total fuel and purchased power expenses$(12)  
In the first quarter 2020, total fuel and purchased power expenses were $84 million compared to $96 million for the corresponding period in 2019. The decrease was primarily due to a $22 million decrease related to the cost of fuel and purchased power primarily due to the lower average cost of natural gas, partially offset by a $10 million increase associated with the volume of KWHs generated and purchased.
Fuel and purchased power energy transactions do not have a significant impact on earnings since energy expenses are generally offset by energy revenues through Mississippi Power's fuel cost recovery clause.
Details of Mississippi Power's generation and purchased power were as follows:
 First Quarter 2020 First Quarter 2019
Total generation (in millions of KWHs)
4,167 3,950
Total purchased power (in millions of KWHs)
188 90
Sources of generation (percent) –
   
Coal3 4
Gas97 96
Cost of fuel, generated (in cents per net KWH) 
   
Coal4.30 4.42
Gas1.95 2.46
Average cost of fuel, generated (in cents per net KWH)
2.02 2.53
Average cost of purchased power (in cents per net KWH)
2.64 3.71
Fuel
In the first quarter 2020, fuel expense was $79 million compared to $93 million for the corresponding period in 2019. This decrease was due to a 20% decrease in the average cost of fuel per KWH generated, partially offset by a 7% increase in the volume of KWHs generated.

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Purchased Power
In the first quarter 2020, purchased power expense was $5 million compared to $3 million for the corresponding period in 2019. This increase was primarily the result of a 109% increase in the volume of KWHs purchased, partially offset by a 29% decrease in the average cost per KWH 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.
Other Operations and Maintenance Expenses
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$15 24.6
In the first quarter 2020, other operations and maintenance expenses were $76 million compared to $61 million for the corresponding period in 2019. The increase was primarily due to increases of $10 million in scheduled generation outage costs and $2 million in employee compensation and benefit expenses.
Depreciation and Amortization
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(6) (12.5)
In the first quarter 2020, depreciation and amortization was $42 million compared to $48 million for the corresponding period in 2019 primarily related to a decrease in amortization associated with ECO Plan regulatory assets. See Note 2 to the financial statements under "Mississippi Power – Environmental Compliance Overview Plan" in Item 8 of the Form 10-K for additional information.
Southern Power
Net Income Attributable to Southern Power
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$19 33.9
Net income attributable to Southern Power for the first quarter 2020 was $75 million compared to $56 million for the corresponding period in 2019. The increase was primarily due to the impacts from the dispositions of Plant Nacogdoches in the second quarter 2019 and Plant Mankato in the first quarter 2020, including a $39 million ($23 million after tax) gain on sale, partially offset by PPA capacity revenue decreases in 2020. See Note (K) to the Condensed Financial Statements herein and Note 15 to the financial statements in Item 8 of the Form 10-K for additional information.

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Operating Revenues
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(68) (15.3)
Total operating revenues include PPA capacity revenues, which are derived primarily from long-term contracts involving natural gas facilities and a biomass generating facility (through the second quarter 2019 sale of Plant Nacogdoches), and PPA energy revenues from Southern Power's generation facilities. To the extent Southern Power has capacity not contracted under a PPA, it may sell power into an accessible wholesale market, or, to the extent those generation assets are part of the FERC-approved IIC, it may sell power into the Southern Company power pool.
Natural Gas and Biomass Capacity and Energy Revenue
Capacity revenues generally represent the greatest contribution to operating income and are designed to provide recovery of fixed costs plus a return on investment.
Energy is generally sold at variable cost or is indexed to published natural gas indices. Energy revenues will vary depending on the energy demand of Southern Power's customers and their generation capacity, as well as the market prices of wholesale energy compared to the cost of Southern Power's energy. Energy revenues also include fees for support services, fuel storage, and unit start charges. Increases and decreases in energy revenues under PPAs that are driven by fuel or purchased power prices are accompanied by an increase or decrease in fuel and purchased power costs and do not have a significant impact on net income.
Solar and Wind Energy Revenue
Southern Power's energy sales from solar and wind generating facilities are predominantly through long-term PPAs that do not have capacity revenue. Customers either purchase the energy output of a dedicated renewable facility through an energy charge or pay a fixed price related to the energy generated from the respective facility and sold to 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" herein for additional information regarding Southern Power's PPAs.
Operating Revenues Details
Details of Southern Power's operating revenues were as follows:
 First Quarter 2020 First Quarter 2019
 (in millions)
PPA capacity revenues$90
 $127
PPA energy revenues205
 227
Total PPA revenues295
 354
Non-PPA revenues77
 85
Other revenues3
 4
Total operating revenues$375
 $443

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In the first quarter 2020, total operating revenues were $375 million, reflecting a $68 million, or 15%, decrease from the corresponding period in 2019. The decrease in operating revenues was primarily due to the following:
PPA capacity revenues decreased $37 million, or 29%, primarily due to a $22 million decrease related to the sale of Plant Nacogdoches in the second quarter 2019 and the sale of Plant Mankato in the first quarter 2020. In addition, the change reflects a reduction of $14 million from the contractual expiration of an affiliate natural gas PPA.
PPA energy revenues decreased $22 million, or 10%, due to a $32 million decrease in sales from natural gas facilities resulting from a $22 million decrease in the average cost of fuel and purchased power and a $10 million decrease in the volume of KWHs sold. This decrease was partially offset by a $10 million increase in sales primarily driven by the volume of KWHs generated by solar and wind facilities.
Non-PPA revenues decreased $8 million, or 9%, due to a $32 million decrease in the market price of energy, partially offset by a $24 million increase 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:
 First Quarter 2020First Quarter 2019
 (in billions of KWHs)
Generation10.710.1
Purchased power0.70.7
Total generation and purchased power11.410.8
   
Total generation and purchased power, excluding solar, wind, and tolling agreements7.26.6
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:
 First Quarter 2020 vs. First Quarter 2019
 (change in millions) (% change)
Fuel$(38) (26.2)
Purchased power(10) (41.7)
Total fuel and purchased power expenses$(48)  
In the first quarter 2020, total fuel and purchased power expenses decreased $48 million, or 28%, compared to the corresponding period in 2019. Fuel expense decreased $38 million due to a $53 million decrease in the average cost of fuel per KWH generated, partially offset by a $15 million increase associated with the volume of KWHs

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generated. Purchased power expense decreased $10 million due to a $7 million decrease associated with the average cost of purchased power and a $3 million decrease associated with the volume of KWHs purchased.
(Gain) Loss on Dispositions, Net
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(40) N/M
N/M - Not meaningful
In the first quarter 2020, the sale of Plant Mankato resulted in a $39 million gain. See Note (K) to the Condensed Financial Statements under "Southern Power – Sales of Natural Gas and Biomass Plants" herein for additional information.
Income Taxes (Benefit)
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$16 177.8
In the first quarter 2020, income tax expense was $7 million compared to a $9 million benefit for the corresponding period in 2019. This change was primarily due to the tax impact from the sale of Plant Mankato in the first quarter 2020. See Notes (G) and (K) to the Condensed Financial Statements 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.
Southern Company Gas measures weather and the effect on its business using Heating Degree Days. Generally, increased Heating Degree Days result in higher demand for natural gas on Southern Company Gas' distribution system. Southern Company Gas has various regulatory mechanisms, such as weather and revenue normalization and straight-fixed-variable rate design, which limit its exposure to weather changes within typical ranges in each of its utility's respective service territory, including Nicor Gas following the approval of a revenue decoupling mechanism for residential customers in its recent rate case. Southern Company Gas also utilizes weather hedges to limit the negative income impacts in the event of warmer-than-normal weather.
The number of customers served by gas distribution operations and gas marketing services can be impacted by natural gas prices, economic conditions, and competition from alternative fuels. Gas distribution operations and gas marketing services' customers are primarily located in Georgia, Illinois, and Ohio.
Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services illustrate the effects of weather and customer demand for natural gas. Wholesale gas services' physical sales volumes represent the daily average natural gas volumes sold to its customers.
Seasonality of Results
During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. Occasionally in the summer, wholesale gas services' operating revenues are impacted due to peak usage by power generators in response to summer energy demands. Southern Company Gas' base operating expenses, excluding cost of natural gas, bad debt expense, and certain incentive compensation costs, are incurred relatively evenly throughout the year. Seasonality also affects the comparison of certain balance sheet items across quarters, including receivables,

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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
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$5 1.9
In the first quarter 2020, net income was $275 million compared to $270 million for the corresponding period in 2019. This increase in net income was primarily due to a $31 million increase at gas distribution operations primarily due to base rate increases for Nicor Gas and Atlanta Gas Light and continued investment in infrastructure replacement programs, partially offset by a $24 million decrease at wholesale gas services primarily due to reduced natural gas price volatility compared to the prior year. See Note 2 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.
Natural Gas Revenues, including Alternative Revenue Programs
First Quarter 2020 vs. First Quarter 2019
(change in millions) (% change)
$(225) (15.3)
In the first quarter 2020, natural gas revenues, including alternative revenue programs, were $1.2 billion compared to $1.5 billion for the corresponding period in 2019.
Details of the changes in natural gas revenues, including alternative revenue programs, were as follows:
 First Quarter 2020
 (in millions) (% change)
Natural gas revenues – prior year$1,474



Estimated change resulting from –   
Infrastructure replacement programs and base rate changes76

5.2 %
Gas costs and other cost recovery(249)
(16.9)
Weather(10)
(0.7)
Wholesale gas services(35)
(2.4)
Other(7)
(0.5)
Natural gas revenues – current year$1,249
 (15.3)%
Revenues from infrastructure replacement programs and base rate changes increased in the first quarter 2020 compared to the corresponding period in 2019 primarily due to base rate increases at Nicor Gas and Atlanta Gas Light and continued investments recovered through infrastructure replacement programs. 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 decreased in the first quarter 2020 compared to the corresponding period in 2019 primarily due to lower natural gas prices and decreased volumes of natural gas sold. Natural gas distribution rates include provisions to adjust billings for fluctuations in natural gas costs. Therefore, gas costs recovered through natural gas revenues generally equal the amount expensed in cost of natural gas and do not affect net income from gas distribution operations. See "Cost of Natural Gas" herein for additional information. Revenue impacts from weather and customer growth are described further below.

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Revenues from wholesale gas services decreased in the first quarter 2020 compared to the corresponding period in 2019 primarily due to decreased commercial activity as a result of warmer weather, partially offset by derivative gains. See "Segment InformationWholesale Gas Services" herein for additional information.
Southern Company Gas hedged the majority of its exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services. See Heating Degree Days information below.
During Heating Season, natural gas usage and operating revenues are generally higher. Weather typically does not have a significant net income impact other than during the Heating Season. The following table presents Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.
 First Quarter 2020 vs. normal2020 vs. 2019
 
Normal(a)
20202019 colder (warmer)colder (warmer)
 (in thousands)   
Illinois(b)
3,053
2,759
3,297
 (9.6)%(16.3)%
Georgia1,427