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ALP-PQ Alabama Power

Filed: 19 Feb 20, 7:00pm
0000092122 so:AtlantaGasLightMember 2019-12-31 0000092122 so:GeorgiaPowerMember so:OtherNaturalGasGasMarketingServicesMember 2019-01-01 2019-12-31 0000092122 so:GeorgiaPowerMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0000092122 us-gaap:FairValueMeasurementsRecurringMember so:DomesticEquityMember 2019-12-31 0000092122 so:SouthernCompanyGasMember us-gaap:OperatingSegmentsMember so:WholesaleGasServicesMember 2018-12-31
    Table of Contents                                Index to Financial Statements

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2019
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
     


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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

Securities registered pursuant to Section 12(g) of the Act:(*) 
RegistrantTitle of Each Class
Alabama Power CompanyPreferred stock, cumulative, $100 par value:
 4.20% Series
 4.52% Series
 4.60% Series
 4.64% Series
 4.72% Series
 4.92% Series
(*)At December 31, 2019
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
RegistrantYesNo
The Southern CompanyX 
Alabama Power CompanyX 
Georgia Power CompanyX 
Mississippi Power Company X
Southern Power Company X
Southern Company Gas X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x (Response applicable to all registrants.)
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 x 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 x No ¨


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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 x (Response applicable to all registrants.)
Aggregate market value of The Southern Company's common stock held by non-affiliates of The Southern Company at June 28, 2019: $57.8 billion. All of the common stock of the other registrants is held by The Southern Company. A description of each registrant's common stock follows:
Registrant 
Description of
Common Stock
 Shares Outstanding at January 31, 2020
The Southern Company Par Value $5 Per Share 1,054,228,409
Alabama Power Company Par Value $40 Per Share 30,537,500
Georgia Power Company Without Par Value 9,261,500
Mississippi Power Company Without Par Value 1,121,000
Southern Power Company Par Value $0.01 Per Share 1,000
Southern Company Gas Par Value $0.01 Per Share 100
Documents incorporated by reference: specified portions of The Southern Company's Definitive Proxy Statement on Schedule 14A relating to the 2020 Annual Meeting of Stockholders are incorporated by reference into PART III. In addition, specified portions of Alabama Power Company's Definitive Proxy Statement on Schedule 14A relating to its 2020 Annual Meeting of Shareholders are incorporated by reference into PART III.
Each of Georgia Power Company, Mississippi Power Company, Southern Power Company, and Southern Company Gas meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2)(b), (c), and (d) of Form 10-K.
This combined Form 10-K 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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DEFINITIONS

When used in this Form 10-K, the following terms will have the meanings indicated.
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
AMEAAlabama Municipal Electric Authority
Amended and Restated Loan Guarantee AgreementLoan guarantee agreement entered into by Georgia Power with the DOE in 2014, as amended and restated on March 22, 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
AOCIAccumulated other comprehensive income
AROAsset retirement obligation
ASCAccounting Standards Codification
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 has a 5% ownership interest
BcfBillion cubic feet
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
CCNCertificate of convenience and necessity
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
Clean Air ActClean Air Act Amendments of 1990
CO2
Carbon dioxide
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
Cooperative EnergyElectric cooperative in Mississippi
CPCNCertificate of public convenience and necessity
CPP
Clean Power Plan, the final action published by the EPA in 2015 that established guidelines for states to develop plans to meet EPA-mandated CO2 emission rates or emission reduction goals for existing electric generating units
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
DSGPDiamond State Generation Partners
Duke Energy FloridaDuke Energy Florida, LLC
ECO PlanMississippi Power's environmental compliance overview plan

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DEFINITIONS
(continued)


TermMeaning
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
EMCElectric membership corporation
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
FitchFitch Ratings, Inc.
GAAPU.S. generally accepted accounting principles
Georgia PowerGeorgia Power Company
Georgia Power Tax Reform Settlement AgreementA settlement agreement between Georgia Power and the staff of the Georgia PSC regarding the retail rate impact of the Tax Reform Legislation, as approved by the Georgia PSC in April 2018
GHGGreenhouse gas
GRAMAtlanta Gas Light's Georgia Rate Adjustment Mechanism
Guarantee Settlement AgreementThe June 9, 2017 settlement agreement between the Vogtle Owners and Toshiba related to certain payment obligations of the EPC Contractor guaranteed by Toshiba
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
IBEWInternational Brotherhood of Electrical Workers
IGCCIntegrated coal gasification combined cycle, the technology originally approved for Mississippi Power's Kemper County energy facility (Plant Ratcliffe)
IICIntercompany Interchange Contract
Illinois CommissionIllinois Commerce Commission
Internal Revenue CodeInternal Revenue Code of 1986, as amended
IPPIndependent power producer
IRPIntegrated resource plan
IRSInternal Revenue Service
ITAACInspections, Tests, Analyses, and Acceptance Criteria, standards established by the NRC
ITCInvestment tax credit
JEAJacksonville Electric Authority
KWKilowatt
KWHKilowatt-hour
LIBORLondon Interbank Offered Rate
LIFOLast-in, first-out
LNGLiquefied natural gas
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

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DEFINITIONS
(continued)


TermMeaning
MergerThe merger, effective July 1, 2016, of a wholly-owned, direct subsidiary of Southern Company with and into Southern Company Gas, with Southern Company Gas continuing as the surviving corporation
MGPManufactured gas plant
Mississippi PowerMississippi Power Company
mmBtuMillion British thermal units
Moody'sMoody's Investors Service, Inc.
MPUSMississippi Public Utilities Staff
MRAMunicipal and Rural Associations
MWMegawatt
MWHMegawatt hour
natural gas distribution utilitiesSouthern Company Gas' natural gas distribution utilities (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, Elizabethtown Gas, Florida City Gas, Chattanooga Gas, and Elkton Gas through June 30, 2018) (Nicor Gas, Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas after July 29, 2018)
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
NOX
Nitrogen oxide
NRCU.S. Nuclear Regulatory Commission
NYMEXNew York Mercantile Exchange, Inc.
NYSENew York Stock Exchange
OCIOther comprehensive income
OPCOglethorpe Power Corporation (an Electric Membership Corporation)
OTCOver-the-counter
PennEast PipelinePennEast Pipeline Company, LLC, a joint venture to construct and operate a natural gas pipeline in which Southern Company Gas has a 20% ownership interest
PEPMississippi Power's Performance Evaluation Plan
Pivotal Home SolutionsNicor Energy Services Company, until June 4, 2018 a wholly-owned subsidiary of Southern Company Gas, doing business as Pivotal Home Solutions
Pivotal LNGPivotal LNG, Inc., a wholly-owned subsidiary of Southern Company Gas
Pivotal Utility HoldingsPivotal Utility Holdings, Inc., until July 29, 2018 a wholly-owned subsidiary of Southern Company Gas, doing business as Elizabethtown Gas (until July 1, 2018), Elkton Gas (until July 1, 2018), and Florida City Gas (until July 29, 2018)
PowerSecurePowerSecure, Inc., a wholly-owned subsidiary of Southern Company
PowerSouthPowerSouth Energy Cooperative
PPAPower purchase agreements, as well as, for Southern Power, contracts for differences that provide the owner of a renewable facility a certain fixed price for the electricity sold to the grid
PRPPipeline Replacement Program, an Atlanta Gas Light infrastructure program through 2013
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

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DEFINITIONS
(continued)


TermMeaning
RegistrantsSouthern Company, Alabama Power, Georgia Power, Mississippi Power, Southern Power Company, and Southern Company Gas
ROEReturn on equity
RUSRural Utilities Service
S&PS&P Global Ratings, a division of S&P Global Inc.
SCSSouthern Company Services, Inc. (the Southern Company system service company and a wholly-owned subsidiary of Southern Company)
SECU.S. Securities and Exchange Commission
SEGCOSouthern Electric Generating Company, 50% owned by each of Alabama Power and Georgia Power
SEPASoutheastern Power Administration
SequentSequent Energy Management, L.P., a wholly-owned subsidiary of Southern Company Gas
SERCSoutheastern Electric Reliability Corporation
SNGSouthern Natural Gas Company, L.L.C., a pipeline system in which Southern Company Gas has a 50% ownership interest
SO2
Sulfur dioxide
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 Gas DispositionsSouthern Company Gas' disposition of Pivotal Home Solutions, Pivotal Utility Holdings' disposition of Elizabethtown Gas and Elkton Gas, and NUI Corporation's disposition of Pivotal Utility Holdings, which primarily consisted of Florida City 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, SEGCO, Southern Nuclear, SCS, Southern Linc, PowerSecure, and other subsidiaries
Southern HoldingsSouthern Company Holdings, Inc., a wholly-owned subsidiary of Southern Company
Southern LincSouthern Communications Services, Inc., a wholly-owned subsidiary of Southern Company, doing business as Southern Linc
Southern NuclearSouthern Nuclear Operating Company, Inc., a wholly-owned subsidiary of Southern Company
Southern PowerSouthern Power Company and its subsidiaries
SouthStarSouthStar Energy Services, LLC, a wholly-owned subsidiary of Southern Company Gas
SP SolarSP Solar Holdings I, LP, a limited partnership indirectly owning substantially all of Southern Power's solar facilities, in which Southern Power has a 67% ownership interest
SP WindSP Wind Holdings II, LLC, a holding company owning a portfolio of eight operating wind facilities, in which Southern Power is the controlling partner in a tax equity arrangement
SRRMississippi Power's System Restoration Rider, a tariff for retail property damage reserve
Subsidiary RegistrantsAlabama Power, Georgia Power, Mississippi Power, Southern Power, and Southern Company Gas
Tax Reform LegislationThe Tax Cuts and Jobs Act, which became effective on January 1, 2018
ToshibaToshiba Corporation, the parent company of Westinghouse
Toshiba GuaranteeCertain payment obligations of the EPC Contractor guaranteed by Toshiba
traditional electric operating companiesAlabama Power, Georgia Power, Gulf Power, and Mississippi Power through December 31, 2018; Alabama Power, Georgia Power, and Mississippi Power as of January 1, 2019
TritonTriton Container Investments, LLC, an investment of Southern Company Gas through May 29, 2019
VCMVogtle Construction Monitoring

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DEFINITIONS
(continued)


TermMeaning
VIEVariable interest entity
Virginia CommissionVirginia State Corporation Commission
Virginia Natural GasVirginia Natural Gas, Inc., a wholly-owned subsidiary of Southern Company Gas
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 Annual Report on Form 10-K contains forward-looking statements. Forward-looking statements include, among other things, 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, projections for the qualified pension plans, postretirement benefit plans, and nuclear decommissioning trust fund contributions, financing activities, completion dates and costs of construction projects, matters related to the abandonment of the Kemper IGCC, completion of announced acquisitions and dispositions, filings with state and federal regulatory authorities, federal and state income tax benefits, estimated sales and purchases under power sale and purchase agreements, 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 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, as described in Note 2 to the financial statements under "Georgia Power – Nuclear Construction" in Item 8 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;
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;

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
(continued)
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, including the pending disposition by Southern Company Gas of its interests in Pivotal LNG and Atlantic Coast Pipeline, 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 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.BUSINESS
Southern Company was incorporated under the laws of Delaware on November 9, 1945. Southern Company owns all of the outstanding common stock of Alabama Power, Georgia Power, and Mississippi Power, each of which is an operating public utility company. These traditional electric operating companies supply electric service in the states of Alabama, Georgia, and Mississippi. More particular information relating to each of the traditional electric operating companies is as follows:
Alabama Power is a corporation organized under the laws of the State of Alabama on November 10, 1927, by the consolidation of a predecessor Alabama Power Company, Gulf Electric Company, and Houston Power Company. The predecessor Alabama Power Company had been in continuous existence since its incorporation in 1906.
Georgia Power was incorporated under the laws of the State of Georgia on June 26, 1930.
Mississippi Power was incorporated under the laws of the State of Mississippi on July 12, 1972 and effective December 21, 1972, by the merger into it of the predecessor Mississippi Power Company, succeeded to the business and properties of the latter company. The predecessor Mississippi Power Company was incorporated under the laws of the State of Maine on November 24, 1924.
On January 1, 2019, Southern Company completed its sale of Gulf Power to NextEra Energy for an aggregate cash purchase price of approximately $5.8 billion (less $1.3 billion of indebtedness assumed). Gulf Power is an electric utility serving retail customers in the northwestern portion of Florida. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for additional information.
In addition, Southern Company owns all of the common stock of Southern Power Company, which is also an operating public utility company. The term "Southern Power" when used herein refers to Southern Power Company and its subsidiaries, while the term "Southern Power Company" when used herein refers only to the Southern Power parent company. 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 Power Company is a corporation organized under the laws of Delaware on January 8, 2001. See "The Southern Company SystemSouthern Power" herein and Note 15 to the financial statements in Item 8 herein for additional information, including Southern Power's recent acquisitions and dispositions.
Southern Company acquired all of the common stock of Southern Company Gas in July 2016. Southern Company Gas is an energy services holding company whose primary business is the distribution of natural gas in four states - Illinois, Georgia, Virginia, and Tennessee - through the natural gas distribution utilities. Southern Company Gas is also involved in several other businesses that are complementary to the distribution of natural gas. Southern Company Gas was incorporated under the laws of the State of Georgia on November 27, 1995 for the primary purpose of becoming the holding company for Atlanta Gas Light, which was founded in 1856. See "The Southern Company SystemSouthern Company Gas" herein and Note 15 to the financial statements in Item 8 herein for additional information, including Southern Company Gas' recent and pending dispositions.
Southern Company also owns all of the outstanding common stock or membership interests of SCS, Southern Linc, Southern Holdings, Southern Nuclear, PowerSecure, and other direct and indirect subsidiaries. SCS, the system service company, has contracted with Southern Company, each traditional electric operating company, Southern Power, Southern Company Gas, Southern Nuclear, SEGCO, and other subsidiaries to furnish, at direct or allocated cost and upon request, the following services: general executive and advisory, general and design engineering, operations, purchasing, accounting, finance, treasury, legal, tax, information technology, marketing, auditing, insurance and pension administration, human resources, systems and procedures, digital wireless communications, cellular tower space, and other services with respect to business and operations, construction management, and Southern Company power pool transactions. Southern Linc provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public and provides fiber optics services within the Southeast. Southern Holdings is an intermediate holding company subsidiary, primarily for Southern Company's leveraged lease and other investments. Southern Nuclear operates and provides services to the Southern Company system's nuclear power plants and is currently managing construction of and developing Plant Vogtle Units 3 and 4, which are co-owned by Georgia Power. PowerSecure provides energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency.
Segment information for Southern Company and Southern Company Gas is included in Note 16 to the financial statements in Item 8 herein.
The Registrants' Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports are made available on Southern Company's website, free of charge, as soon as reasonably

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practicable after such material is electronically filed with or furnished to the SEC. Southern Company's internet address is www.southerncompany.com.
The Southern Company System
Traditional Electric Operating Companies
The traditional electric operating companies are vertically integrated utilities that own generation, transmission, and distribution facilities. See PROPERTIES in Item 2 herein for additional information on the traditional electric operating companies' generating facilities. Each company's transmission facilities are connected to the respective company's own generating plants and other sources of power (including certain generating plants owned by Southern Power) and are interconnected with the transmission facilities of the other traditional electric operating companies and SEGCO. For information on the State of Georgia's integrated transmission system, see "Territory Served by the Southern Company SystemTraditional Electric Operating Companies and Southern Power" herein.
Agreements in effect with principal neighboring utility systems provide for capacity and energy transactions that may be entered into from time to time for reasons related to reliability or economics. Additionally, the traditional electric operating companies have entered into various reliability agreements with certain neighboring utilities, each of which provides for the establishment and periodic review of principles and procedures for planning and operation of generation and transmission facilities, maintenance schedules, load retention programs, emergency operations, and other matters affecting the reliability of bulk power supply. The traditional electric operating companies have joined with other utilities in the Southeast to form the SERC to augment further the reliability and adequacy of bulk power supply. Through the SERC, the traditional electric operating companies are represented at the North American Electric Reliability Corporation.
The utility assets of the traditional electric operating companies and certain utility assets of Southern Power Company are operated as a single integrated electric system, or Southern Company power pool, pursuant to the IIC. Activities under the IIC are administered by SCS, which acts as agent for the traditional electric operating companies and Southern Power Company. The fundamental purpose of the Southern Company power pool is to provide for the coordinated operation of the electric facilities in an effort to achieve the maximum possible economies consistent with the highest practicable reliability of service. Subject to service requirements and other operating limitations, system resources are committed and controlled through the application of centralized economic dispatch. Under the IIC, each traditional electric operating company and Southern Power Company retains its lowest cost energy resources for the benefit of its own customers and delivers any excess energy to the Southern Company power pool for use in serving customers of other traditional electric operating companies or Southern Power Company or for sale by the Southern Company power pool to third parties. The IIC provides for the recovery of specified costs associated with the affiliated operations thereunder, as well as the proportionate sharing of costs and revenues resulting from Southern Company power pool transactions with third parties. In connection with the sale of Gulf Power, an appendix was added to the IIC setting forth terms and conditions governing Gulf Power's continued participation in the IIC for a defined transition period that, subject to certain potential adjustments, is scheduled to end on January 1, 2024.
Southern Power and Southern Linc have secured from the traditional electric operating companies certain services which are furnished in compliance with FERC regulations.
Alabama Power and Georgia Power each have agreements with Southern Nuclear to operate the Southern Company system's existing nuclear plants, Plants Farley, Hatch, and Vogtle. In addition, Georgia Power has an agreement with Southern Nuclear to develop, license, construct, and operate Plant Vogtle Units 3 and 4. See "RegulationNuclear Regulation" herein for additional information.
Southern Power
Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity at market-based rates (under authority from the FERC) in the wholesale market. Southern Power seeks opportunities to execute its strategy to create value through various transactions including acquisitions, dispositions, and sales of partnership interests, development and construction of new generating facilities, and entry into PPAs primarily with investor-owned utilities, IPPs, municipalities, electric cooperatives, and other load-serving entities, as well as commercial and industrial customers. Southern Power's business activities are not subject to traditional state regulation like the traditional electric operating companies, but the majority of its business activities are subject to regulation by the FERC. Southern Power has attempted to insulate itself from significant fuel supply, fuel transportation, and electric transmission risks by generally making such risks the responsibility of the counterparties to its PPAs. However, Southern Power's future earnings will depend on the parameters of the wholesale market and the efficient operation of its wholesale generating assets, as well as Southern Power's ability to execute its growth strategy and to develop and construct generating facilities. For additional information on

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Southern Power's business activities, see MANAGEMENT'S DISCUSSION AND ANALYSIS – OVERVIEW – "Business Activities" in Item 7 herein.
Southern Power Company directly owns and manages generation assets primarily in the Southeast, which are included in the Southern Company power pool, and has various subsidiaries, which were created to own and operate natural gas and renewable generation facilities either wholly or in partnership with various third parties. At December 31, 2019, Southern Power's generation fleet, which is owned in part with various partners, totaled 11,527 MWs of nameplate capacity in commercial operation (including 4,147 MWs of nameplate capacity owned by its subsidiaries and excluding Plant Mankato, which was sold to a subsidiary of Xcel on January 17, 2020). In addition, Southern Power Company has other subsidiaries that are pursuing additional natural gas generation and other renewable generation development opportunities. The generation assets of Southern Power subsidiaries are not included in the Southern Company power pool. See "Traditional Electric Operating Companies" herein for additional information on the Southern Company power pool.
During 2019, Southern Power completed the sale of its equity interests in a 115-MW biomass facility located in Nacogdoches County, Texas to Austin Energy.
A majority of Southern Power's partnerships in renewable facilities allow for the sharing of cash distributions and tax benefits at differing percentages, with Southern Power being the controlling member and thus consolidating the assets and operations of the partnerships. At December 31, 2019, Southern Power has four tax-equity partnership arrangements where the tax-equity investors receive substantially all of the tax benefits from the facilities, including ITCs and PTCs. In addition, Southern Power holds controlling interests in eight partnerships in solar facilities through SP Solar. For seven of these solar partnerships, Southern Power and its 33% partner, Global Atlantic, are entitled to 51% of all cash distributions and the respective partner that holds the Class B membership interests is entitled to 49% of all cash distributions. For the Desert Stateline partnership, Southern Power and Global Atlantic are entitled to 66% of all cash distributions and the Class B member is entitled to 34% of all cash distributions. In addition, Southern Power and Global Atlantic are entitled to substantially all of the federal tax benefits with respect to these eight partnership entities. Finally, for the Roserock partnership, Southern Power is entitled to 51% of all cash distributions and substantially all of the federal tax benefits, with the Class B member entitled to 49% of all cash distributions.
See PROPERTIES in Item 2 herein and Note 15 to the financial statements under "Southern Power" in Item 8 herein for additional information regarding Southern Power's acquisitions, dispositions, construction, and development projects.
Southern Power calculates an 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. With the inclusion of investments associated with the wind facilities currently under construction, as well as other capacity and energy contracts, and excluding Plant Mankato, which was sold on January 17, 2020, Southern Power's average investment coverage ratio at December 31, 2019 was 93% through 2024 and 90% through 2029, with an average remaining contract duration of approximately 14 years.
Southern Power's electricity sales from natural gas generating facilities are primarily through long-term PPAs that consist of two types of agreements. The first type, referred to as a unit or block sale, is a customer purchase from a dedicated plant unit where all or a portion of the generation from that unit is reserved for that customer. Southern Power typically has the ability to serve the unit or block sale customer from an alternate resource. The second type, referred to as requirements service, provides that Southern Power serves the customer's capacity and energy requirements from a combination of the customer's own generating units and from Southern Power resources not dedicated to serve unit or block sales. Southern Power has rights to purchase power provided by the requirements customers' resources when economically viable. Capacity charges that form part of the PPA payments are designed to recover fixed and variable operations and maintenance costs based on dollars-per-kilowatt year and to provide a return on investment.
Southern Power's electricity sales from solar and wind (renewable) generating facilities are also primarily through long-term PPAs; however, these 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 provide Southern Power a certain fixed price for the electricity 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. Generally, under the renewable generation PPAs, the purchasing party retains the right to keep or resell the renewable energy credits.

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The following tables set forth Southern Power's PPAs as of December 31, 2019:
Natural Gas Block Sales PPAs
Facility/Source Counterparty 
MWs(1)

   Contract Term
Addison Units 1 and 3 Georgia Power 297
   through May 2030
Addison Unit 2 MEAG Power 149
   through April 2029
Addison Unit 4 Georgia Energy Cooperative 146
   through May 2030
Cleveland County Unit 1 North Carolina EMC (NCEMC) 180
   through Dec. 2036
Cleveland County Unit 2 NCEMC 183
   through Dec. 2036
Cleveland County Unit 3 North Carolina Municipal Power Agency 1 183
   through Dec. 2031
Dahlberg Units 1, 3, and 5 Cobb EMC 224
   through Dec. 2027
Dahlberg Units 2, 6, 8, and 10 Georgia Power 298
   through May 2025
Dahlberg Units 7 and 9 
Eleven EMCs in Georgia(2)
 65-132
   Jan. 2025 - Dec 2034
Dahlberg Unit 4 Georgia Power 74
   through May 2030
Franklin Unit 1 Duke Energy Florida 434
   through May 2021
Franklin Unit 1 Century Aluminum 16
   through Dec. 2020
Franklin Unit 2 Morgan Stanley Capital Group 250
   through Dec. 2025
Franklin Unit 2 Jackson EMC 60-65
   through Dec. 2035
Franklin Unit 2 GreyStone Power Corporation 35
   through Dec. 2035
Franklin Unit 2 Cobb EMC 100
   through Dec. 2027
Franklin Unit 3 Morgan Stanley Capital Group 200-300
   through Dec. 2033
Franklin Unit 3 Dalton 70
   through Dec. 2027
Harris Unit 1 
Georgia Power(3)
 640
   through May 2030
Harris Unit 2 
AMEA(4)
 25
   through Dec. 2025
Harris Unit 2 PowerSouth Energy Cooperative 200
   June 2020 – Feb. 2023
Mankato(5)
 Northern States Power Company 375
   through Jan 2020
Mankato(5)
 Northern States Power Company 345
   through Jan 2020
NCEMC PPA(6)
 EnergyUnited 100
   through Dec. 2021
Rowan CT Unit 1 North Carolina Municipal Power Agency 1 150
   through Dec. 2030
Rowan CT Units 2 and 3 EnergyUnited 100
   Jan. 2022 – Dec. 2023
Rowan CT Unit 3 EnergyUnited 113
   through Dec. 2023
Rowan CC Unit 4 EnergyUnited 67-239
   through Dec. 2025
Block Sales PPAs (continued)
Facility/Source Counterparty 
MWs(1)

   Contract Term
Rowan CC Unit 4 Macquarie 150
   through Nov. 2020
Rowan CC Unit 4 Duke Energy Progress, LLC 228-415
   Jan. 2020 – Dec. 2025
Wansley Unit 6 Dalton 30
   Jan. 2020 – Dec. 2020
Wansley Unit 6 Century Aluminum 158
   through Dec. 2020
Wansley Unit 6 
Eleven EMCs in Georgia(2)
 133-375
   Jan. 2025 - Dec. 2034
(1)The MWs and related facility units may change due to unit rating changes or assignment of units to contracts.
(2)PPA block sales to current requirement services PPA counterparties.
(3)Georgia Power will be served by Plant Harris Unit 2 through May 2020.
(4)AMEA will be served by Plant Franklin Unit 1 through May 2020.
(5)
On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato. See Note 15 to the financial statements under "Southern PowerSales of Natural Gas and Biomass Plants" in Item 8 herein for additional information.
(6)Represents sale of power purchased from NCEMC under a PPA.

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Natural Gas Requirements Services PPAs
Counterparty 
MWs(1)
 Contract Term
Nine EMCs in Georgia 292-330 through Dec. 2024
Sawnee EMC 267-549 through Dec. 2027
Cobb EMC 0-61 through Dec. 2027
Flint EMC 138-158 through Dec. 2024
Dalton 45-73 through Dec. 2027
EnergyUnited 75-280 through Dec. 2025
City of Blountstown, Florida 10 through April 2022
(1)Represents forecasted incremental capacity needs over the contract term.
Fuel Cell PPAs
Facility/Source Counterparty 
MWs(1)

   Contract Term
Red Lion and Brookside (DSGP) Delmarva Power & Light 28
   through Dec. 2034
(1) MWs shown are for 100% of the PPA, which is based on demonstrated capacity of the facility.
Battery Storage PPAs
Facility/Source Counterparty 
MWs(1)

   Contract Term
Milliken Southern California Edison Company 2
   through Dec. 2026
(1) MWs shown are for 100% of the PPA, which is based on demonstrated capacity of the facility.
Solar/Wind PPAs
FacilityCounterparty
MWs(1)

Contract Term
Solar(2)
   
AdobeSouthern California Edison Company20
through June 2034
ApexNevada Power Company20
through Dec. 2037
Boulder 1Nevada Power Company100
through Dec. 2036
ButlerGeorgia Power100
through Dec. 2046
Butler Solar FarmGeorgia Power20
through Feb. 2036
CalipatriaSan Diego Gas & Electric Company20
through Feb. 2036
Campo VerdeSan Diego Gas & Electric Company139
through Oct. 2033
CimarronTri-State Generation and Transmission Association, Inc.30
through Dec. 2035
Decatur CountyGeorgia Power19
through Dec. 2035
Decatur ParkwayGeorgia Power80
through Dec. 2040
Desert StatelineSouthern California Edison Company300
through Sept. 2036
East PecosAustin Energy119
through April 2032
Garland ASouthern California Edison Company20
through Sept. 2036
GarlandSouthern California Edison Company180
through Oct. 2031
Gaskell West 1Southern California Edison Company20
through March 2038
GranvilleDuke Energy Progress, LLC3
through Oct. 2032
Henrietta
Pacific Gas & Electric Company(3)
100
through Sept. 2036
Imperial ValleySan Diego Gas & Electric Company150
through Nov. 2039
LamesaCity of Garland, Texas102
through April 2032
Lost Hills Blackwell
99% to Pacific Gas & Electric Company(3) and 1% to City of Roseville, California
32
through Dec. 2043
Macho SpringsEl Paso Electric Company50
through May 2034
Morelos
Pacific Gas & Electric Company(3)
15
through Feb. 2036

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Solar/Wind PPAs (continued)
FacilityCounterparty
MWs(1)

Contract Term
Solar(2)
   
North Star
Pacific Gas & Electric Company(3)
60
through June 2035
PawpawGeorgia Power30
through March 2046
RoserockAustin Energy157
through Nov. 2036
RutherfordDuke Energy Carolinas, LLC75
through Dec. 2031
SandhillsCobb EMC111
through Oct. 2041
SandhillsFlint EMC15
through Oct. 2041
SandhillsSawnee EMC15
through Oct. 2041
SandhillsMiddle Georgia and Irwin EMC2
through Oct. 2041
SpectrumNevada Power Company30
through Dec. 2038
TranquillitySouthern California Edison Company204
through Nov. 2034
Wind(4)
   
BethelGoogle Inc.225
through Jan. 2029
Cactus FlatsGeneral Mills, Inc.98
through July 2033
Cactus FlatsGeneral Motors Company50
through July 2030
Grant PlainsOklahoma Municipal Power Authority41
through Dec. 2039
Grant PlainsSteelcase Inc.25
through Dec. 2028
Grant PlainsAllianz Risk Transfer (Bermuda) Ltd.81-122
through March 2027
Grant WindEast Texas Electric Cooperative50
through April 2036
Grant WindNortheast Texas Electric Cooperative50
through April 2036
Grant WindWestern Farmers Electric Cooperative50
through April 2036
Kay WindWestar Energy Inc.200
through Dec. 2035
Kay WindGrand River Dam Authority99
through Dec. 2035
PassadumkeagWestern Massachusetts Electric Company40
through June 2031
Reading(5)
Royal Caribbean Cruises Ltd.200
April 2020 – March 2032
Salt Fork WindCity of Garland, Texas150
through Nov. 2030
Salt Fork WindSalesforce.com, Inc.24
through Nov. 2028
Skookumchuck(5)
Puget Sound Energy, Inc.136
second quarter 2020 – 2039
Tyler Bluff WindThe Proctor & Gamble Company96
through Dec. 2028
Wake WindEquinix Enterprises, Inc.100
through Oct. 2028
Wake WindOwens Corning125
through Oct. 2028
Wildhorse MountainArkansas Electric Cooperative Corporation100
through Sept. 2039
(1) MWs shown are for 100% of the PPA, which is based on demonstrated capacity of the facility.
(2) Southern Power owns a 67% equity interest in SP Solar (a limited partnership indirectly owning all of Southern Power's solar facilities, except the Roserock and Gaskell West facilities). SP Solar is the 51% majority owner of Boulder 1, Garland, Henrietta, Imperial Valley, Lost Hills Blackwell, North Star, and Tranquillity; the 66% majority owner of Desert Stateline; and the sole owner of the remaining SP Solar facilities. Southern Power is the 51% majority owner of Roserock and also the controlling partner in a tax equity partnership owning Gaskell West. All of these entities are consolidated subsidiaries of Southern Power.
(3) See Note 1 to the financial statements under "RevenuesConcentration of Revenue" in Item 8 herein for additional information on Pacific Gas & Electric Company's bankruptcy filing.
(4) Southern Power is the controlling member in SP Wind (a tax equity entity owning all of Southern Power's wind facilities, except Cactus Flats, Wildhorse Mountain, and the two projects under construction, Reading and Skookumchuck). SP Wind is the 90.1% majority owner of Wake Wind and owns 100% of the remaining SP Wind facilities. Southern Power owns 100% of Reading and Skookumchuck and is the controlling partner in tax equity partnerships owning Cactus Flats and Wildhorse Mountain. All of these entities are consolidated subsidiaries of Southern Power.
(5) Subject to commercial operation.
For the year ended December 31, 2019, approximately 9.0% of Southern Power's revenues were derived from Georgia Power. Southern Power actively pursues replacement PPAs prior to the expiration of its current PPAs and anticipates that the revenues attributable to one customer may be replaced by revenues from a new customer; however, the expiration of any of Southern

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Power's current PPAs without the successful remarketing of a replacement PPA could have a material negative impact on Southern Power's earnings but is not expected to have a material impact on Southern Company's earnings.
Southern Company Gas
Southern Company Gas is an energy services holding company whose primary business is the distribution of natural gas through the natural gas distribution utilities. Southern Company Gas is also involved in several other businesses that are complementary to the distribution of natural gas, including gas pipeline investments, wholesale gas services, and gas marketing services. Southern Company Gas also has an "all other" non-reportable segment that includes segments below the quantitative threshold for separate disclosure, including the storage and fuels operations, Pivotal LNG, and other subsidiaries that fall below the quantitative threshold for separate disclosure. See Note 15 under "Southern Company GasProposed Sale of Pivotal LNG and Atlantic Coast Pipeline" in Item 8 herein for information regarding Southern Company Gas' pending disposition of its interests in Pivotal LNG and Atlantic Coast Pipeline.
Gas distribution operations, the largest segment of Southern Company Gas' business, operates, constructs, and maintains approximately 75,585 miles of natural gas pipelines and 14 storage facilities, with total capacity of 157 Bcf, to provide natural gas to residential, commercial, and industrial customers. Gas distribution operations serves approximately 4.3 million customers across four states.
Gas pipeline investments primarily consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG, two significant pipeline construction projects, and a 50% joint ownership interest in the Dalton Pipeline. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas. SNG, the largest natural gas pipeline investment, is the owner of a 7,000-mile pipeline connecting natural gas supply basins in Texas, Louisiana, Mississippi, and Alabama to markets in Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina, and Tennessee. For additional information on Southern Company Gas's pipeline projects, see MANAGEMENT'S DISCUSSION AND ANALYSIS – "Southern Company Gas – Pipeline Construction Projects" in Item 7 herein and Note 15 under "Southern Company GasProposed Sale of Pivotal LNG and Atlantic Coast Pipeline" in Item 8 herein.
Wholesale gas services consists of Sequent and engages in natural gas storage and gas pipeline arbitrage and provides natural gas asset management and related logistical services to most of the natural gas distribution utilities as well as non-affiliate companies.
Gas marketing services is comprised of SouthStar, which serves approximately 631,000 natural gas commodity customers, markets gas to residential, commercial, and industrial customers, and offers energy-related products that provide natural gas price stability and utility bill management in competitive markets or markets that provide for customer choice.
Other Businesses
PowerSecure, which was acquired by Southern Company in 2016, provides energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency.
Southern Holdings is an intermediate holding subsidiary, primarily for Southern Company's leveraged lease and other investments.
Southern Linc provides digital wireless communications for use by Southern Company and its subsidiary companies and also markets these services to the public. Southern Linc delivers multiple wireless communication options including push to talk, cellular service, text messaging, wireless internet access, and wireless data. Its system covers approximately 127,000 square miles in the Southeast. Southern Linc also provides fiber optics services within the Southeast through its subsidiary, Southern Telecom, Inc.

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Construction Programs
The subsidiary companies of Southern Company are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. For estimated construction and environmental expenditures for the periods 2020 through 2024, see MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements" and "Contractual Obligations" in Item 7 herein. The Southern Company system's construction program consists of capital investment and capital expenditures to comply with environmental laws and regulations. In 2020, the construction program is expected to be apportioned approximately as follows:
 
Southern Company
      system(a)(b)(c)
Alabama Power(a)(c)
Georgia
Power(a)
Mississippi Power
 (in billions)
New generation$2.3
$0.5
$1.8
$
Environmental compliance(d)
0.2
0.1
0.1

Generation maintenance0.9
0.4
0.5
0.1
Transmission1.0
0.4
0.5
0.1
Distribution1.3
0.5
0.8
0.1
Nuclear fuel0.3
0.1
0.2

General plant0.6
0.3
0.3

 6.5
2.1
4.1
0.3
Southern Power(e)
0.3
   
Southern Company Gas(f)
1.8
   
Other subsidiaries0.2
   
Total(a)
$8.7
$2.1
$4.1
$0.3
(a)Totals may not add due to rounding.
(b)
Includes the Subsidiary Registrants, as well as the other subsidiaries. See "Other Businesses" herein for additional information.
(c)
Includes approximately $0.5 billion contingent upon approval by the Alabama PSC related to Alabama Power's September 6, 2019 CCN filing. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama PowerPetition for Certificate of Convenience and Necessity" in Item 7 herein for additional information.
(d)
Reflects cost estimates for environmental laws and regulations. These estimated expenditures do not include any potential compliance costs associated with pending regulation of CO2 emissions from fossil fuel-fired electric generating units or costs associated with closure and monitoring of ash ponds and landfills in accordance with the CCR Rule and the related state rules. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" and FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements" and "Contractual Obligations" in Item 7 herein for additional information.
(e)Does not include approximately $0.5 billion for planned expenditures for plant acquisitions and placeholder growth, which may vary materially due to market opportunities and Southern Power's ability to execute its growth strategy.
(f)
Includes costs for ongoing capital projects associated with infrastructure improvement programs for certain natural gas distribution utilities that have been previously approved by their applicable state regulatory agencies. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Construction ProgramsSouthern Company Gas" in Item 7 herein for additional information.
The construction programs are subject to periodic review and revision, and actual construction costs may vary from these estimates because of numerous factors. These factors include: changes in business conditions; changes in load projections; changes in environmental laws and regulations; the outcome of any legal challenges to environmental rules; changes in electric generating plants, including unit retirements and replacements and adding or changing fuel sources at existing electric generating units, to meet regulatory requirements; changes in FERC rules and regulations; state regulatory agency approvals; changes in the expected environmental compliance program; changes in legislation; the cost and efficiency of construction labor, equipment, and materials; project scope and design changes; abnormal weather; delays in construction due to judicial or regulatory action; storm impacts; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Additionally, Southern Power's planned expenditures for plant acquisitions may vary due to market opportunities and Southern Power's ability to execute its growth strategy.
The construction program of Georgia Power also includes Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale and which may be subject to additional revised cost estimates during construction. See Note 2 to the financial statements under "Georgia PowerNuclear Construction" in Item 8 herein for additional information regarding Georgia Power's construction of Plant Vogtle Units 3 and 4.

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Also see MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 herein for additional information with respect to certain existing and proposed environmental requirements and PROPERTIES – "ElectricJointly-Owned Facilities" and – "Natural GasJointly-Owned Properties" in Item 2 herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information concerning Alabama Power's, Georgia Power's, and Mississippi Power's joint ownership of certain generating units and related facilities with certain non-affiliated utilities and Southern Company Gas' joint ownership of a pipeline facility.
Financing Programs
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY in Item 7 herein and Note 8 to the financial statements in Item 8 herein for information concerning financing programs.
Fuel Supply
Electric
The traditional electric operating companies' and SEGCO's supply of electricity is primarily fueled by natural gas and coal. Southern Power's supply of electricity is primarily fueled by natural gas. See MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION – "Southern CompanyElectricity BusinessFuel and Purchased Power Expenses" and MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATION under "Fuel and Purchased Power Expenses" for each of the traditional electric operating companies in Item 7 herein for information regarding the electricity generated and the average cost of fuel in cents per net KWH generated for the years 2018 and 2019.
The traditional electric operating companies have agreements in place from which they expect to receive substantially all of their 2020 coal burn requirements. These agreements have terms ranging between one and four years. Fuel procurement specifications, emission allowances, environmental control systems, and fuel changes have allowed the traditional electric operating companies to remain within limits set by applicable environmental regulations. As new environmental regulations are proposed that impact the utilization of coal, the traditional electric operating companies' fuel mix will be monitored to help ensure that the traditional electric operating companies remain in compliance with applicable laws and regulations. Additionally, Southern Company and the traditional electric operating companies will continue to evaluate the need to purchase additional emissions allowances, the timing of capital expenditures for environmental control equipment, and potential unit retirements and replacements. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 herein for additional information on environmental matters.
SCS, acting on behalf of the traditional electric operating companies and Southern Power Company, has agreements in place for the natural gas burn requirements of the Southern Company system. For 2020, SCS has contracted for 530 Bcf of natural gas supply under agreements with remaining terms up to 14 years. In addition to natural gas supply, SCS has contracts in place for both firm natural gas transportation and storage. Management believes these contracts provide sufficient natural gas supplies, transportation, and storage to ensure normal operations of the Southern Company system's natural gas generating units.
Alabama Power and Georgia Power have multiple contracts covering their nuclear fuel needs for uranium, conversion services, enrichment services, and fuel fabrication with remaining terms ranging from one to 14 years. Management believes suppliers have sufficient nuclear fuel production capability to permit the normal operation of the Southern Company system's nuclear generating units.
Changes in fuel prices to the traditional electric operating companies are generally reflected in fuel adjustment clauses contained in rate schedules. See "Rate Matters – Rate Structure and Cost Recovery Plans" herein for additional information. Southern Power's natural gas PPAs generally provide that the counterparty is responsible for substantially all of the cost of fuel.
Alabama Power and Georgia Power have contracts with the United States, acting through the DOE, that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in 1998, as required by the contracts, and Alabama Power and Georgia Power have pursued and are pursuing legal remedies against the government for breach of contract. See Note 3 to the financial statements under "Nuclear Fuel Disposal Costs" in Item 8 herein for additional information.
Natural Gas
Advances in natural gas drilling in shale producing regions of the United States have resulted in historically high supplies of natural gas and low prices for natural gas. Procurement plans for natural gas supply and transportation to serve regulated utility customers are reviewed and approved by the regulatory agencies in the states where Southern Company Gas operates. Southern Company Gas purchases natural gas supplies in the open market by contracting with producers and marketers and, for the natural gas distribution utilities except Nicor Gas, from its wholly-owned subsidiary, Sequent, under asset management agreements approved by the applicable state regulatory agency. Southern Company Gas also contracts for transportation and

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storage services from interstate pipelines that are regulated by the FERC. When firm pipeline services are temporarily not needed, Southern Company Gas may release the services in the secondary market under FERC-approved capacity release provisions or utilize asset management arrangements, thereby reducing the net cost of natural gas charged to customers for most of the natural gas distribution utilities. Peak-use requirements are met through utilization of company-owned storage facilities, pipeline transportation capacity, purchased storage services, peaking facilities, and other supply sources, arranged by either transportation customers or Southern Company Gas.
Territory Served by the Southern Company System
Traditional Electric Operating Companies and Southern Power
The territory in which the traditional electric operating companies provide retail electric service comprises most of the states of Alabama and Georgia, together with southeastern Mississippi. In this territory there are non-affiliated electric distribution systems that obtain some or all of their power requirements either directly or indirectly from the traditional electric operating companies. As of December 31, 2019, the territory had an area of approximately 116,000 square miles and an estimated population of approximately 16 million. Southern Power sells wholesale electricity at market-based rates across various U.S. utility markets, primarily to investor-owned utilities, IPPs, municipalities, and other load-serving entities, as well as commercial and industrial customers.
Alabama Power is engaged, within the State of Alabama, in the generation, transmission, distribution, and purchase of electricity and the sale of electric service, at retail in approximately 400 cities and towns (including Anniston, Birmingham, Gadsden, Mobile, Montgomery, and Tuscaloosa), as well as in rural areas, and at wholesale to 11 municipally-owned electric distribution systems, all of which are served indirectly through sales to AMEA, and two rural distributing cooperative associations. The sales contract with AMEA is scheduled to expire on December 31, 2025. Alabama Power owns coal reserves near its Plant Gorgas site and uses the output of coal from the reserves in its generating plants. In addition, Alabama Power sells, and cooperates with dealers in promoting the sale of, electric appliances and products and also markets and sells outdoor lighting services.
Georgia Power is engaged in the generation, transmission, distribution, and purchase of electricity and the sale of electric service within the State of Georgia, at retail in over 530 cities and towns (including Athens, Atlanta, Augusta, Columbus, Macon, Rome, and Savannah), as well as in rural areas, and at wholesale to OPC, MEAG Power, Dalton, various EMCs, and non-affiliated utilities. Georgia Power also markets and sells outdoor lighting services and other customer-focused utility services.
Mississippi Power is engaged in the generation, transmission, distribution, and purchase of electricity and the sale of electric service within 23 counties in southeastern Mississippi, at retail in 123 communities (including Biloxi, Gulfport, Hattiesburg, Laurel, Meridian, and Pascagoula), as well as in rural areas, and at wholesale to one municipality, six rural electric distribution cooperative associations, and one generating and transmitting cooperative.
For information relating to KWH sales by customer classification for the traditional electric operating companies, see MANAGEMENT'S DISCUSSION AND ANALYSIS – RESULTS OF OPERATIONS in Item 7 herein. For information relating to the number of retail customers served by customer classification for the traditional electric operating companies, see SELECTED FINANCIAL DATA of Southern Company and each traditional electric operating company in Item 6 herein. Also, for information relating to the sources of revenues for Southern Company, each traditional electric operating company, and Southern Power, see Item 7 herein and Note 1 to the financial statements under "RevenuesTraditional Electric Operating Companies" and " – Southern Power" and Note 4 to the financial statements in Item 8 herein.
As of December 31, 2019, there were approximately 62 electric cooperative distribution systems operating in the territories in which the traditional electric operating companies provide electric service at retail or wholesale.
One of these organizations, PowerSouth, is a generating and transmitting cooperative selling power to several distributing cooperatives, municipal systems, and other customers in south Alabama. As of December 31, 2019, PowerSouth owned generating units with approximately 2,100 MWs of nameplate capacity, including an undivided 8.16% ownership interest in Alabama Power's Plant Miller Units 1 and 2. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for details of Alabama Power's joint-ownership with PowerSouth of a portion of Plant Miller. Alabama Power has system supply agreements with PowerSouth to provide 200 MWs of year-round capacity service through January 31, 2024 and 200 MWs of winter-only capacity service through December 31, 2023. In August 2019, Alabama Power agreed to provide PowerSouth an additional 100 MWs of year-round capacity service from November 1, 2020 through February 28, 2023, with the option to extend through May 31, 2023.
Alabama Power has entered into a separate agreement with PowerSouth involving interconnection between their systems. The delivery of capacity and energy from PowerSouth to certain distributing cooperatives in the service territory of Alabama Power is governed by the Southern Company/PowerSouth Network Transmission Service Agreement. The rates for this service to PowerSouth are on file with the FERC.

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OPC is an EMC owned by its 38 retail electric distribution cooperatives, which provide retail electric service to customers in Georgia. OPC provides wholesale electric power to its members through its generation assets, some of which are jointly owned with Georgia Power, and power purchased from other suppliers. OPC and the 38 retail electric distribution cooperatives are members of Georgia Transmission Corporation, an EMC (GTC), which provides transmission services to its members and third parties. See PROPERTIES – "ElectricJointly-Owned Facilities" in Item 2 herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information regarding Georgia Power's jointly-owned facilities.
Mississippi Power has an interchange agreement with Cooperative Energy, a generating and transmitting cooperative, pursuant to which various services are provided.
As of December 31, 2019, there were approximately 72 municipally-owned electric distribution systems operating in the territory in which the traditional electric operating companies provide electric service at retail or wholesale.
As of December 31, 2019, 48 municipally-owned electric distribution systems and one county-owned system received their requirements through MEAG Power, which was established by a Georgia state statute in 1975. MEAG Power serves these requirements from self-owned generation facilities, some of which are jointly-owned with Georgia Power, and purchases from other resources. MEAG Power also has a pseudo scheduling and services agreement with Georgia Power. Dalton serves its requirements from self-owned generation facilities, some of which are jointly-owned with Georgia Power, and through purchases from Southern Power through a service agreement. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information.
Georgia Power has entered into substantially similar agreements with GTC, MEAG Power, and Dalton providing for the establishment of an integrated transmission system to carry the power and energy of all parties. The agreements require an investment by each party in the integrated transmission system in proportion to its respective share of the aggregate system load. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for additional information.
Southern Power has PPAs with Georgia Power, investor-owned utilities, IPPs, municipalities, electric cooperatives, and other load-serving entities, as well as commercial and industrial customers. See "The Southern Company System – Southern Power" herein and MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Southern Power's Power Sales Agreements" in Item 7 herein for additional information.
SCS, acting on behalf of the traditional electric operating companies, also has a contract with SEPA providing for the use of the traditional electric operating companies' facilities at government expense to deliver to certain cooperatives and municipalities, entitled by federal statute to preference in the purchase of power from SEPA, quantities of power equivalent to the amounts of power allocated to them by SEPA from certain U.S. government hydroelectric projects.
Southern Company Gas
Southern Company Gas is engaged in the distribution of natural gas in four states through the natural gas distribution utilities. The natural gas distribution utilities construct, manage, and maintain intrastate natural gas pipelines and distribution facilities. Details of the natural gas distribution utilities at December 31, 2019 are as follows:
UtilityStateNumber of customers
Approximate miles of pipe
  (in thousands) 
Nicor GasIllinois2,245
34,346
Atlanta Gas LightGeorgia1,661
33,844
Virginia Natural GasVirginia303
5,719
Chattanooga GasTennessee68
1,676
Total 4,277
75,585
For information relating to the sources of revenue for Southern Company Gas, see Item 7 herein and Note 1 to the financial statements under "RevenuesSouthern Company Gas" and Note 4 to the financial statements in Item 8 herein.
Competition
Electric
The electric utility industry in the U.S. is continuing to evolve as a result of regulatory and competitive factors. The competition for retail energy sales among competing suppliers of energy is influenced by various factors, including price, availability, technological advancements, service, and reliability. These factors are, in turn, affected by, among other influences, regulatory, political, and environmental considerations, taxation, and supply.

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The retail service rights of all electric suppliers in the State of Georgia are regulated by the Territorial Electric Service Act of 1973. Pursuant to standards set forth in this Act, the Georgia PSC has assigned substantially all of the land area in the state to a supplier. Notwithstanding such assignments, this Act provides that any new customer locating outside of 1973 municipal limits and having a connected load of at least 900 KWs may exercise a one-time choice for the life of the premises to receive electric service from the supplier of its choice.
Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of public convenience and necessity to Mississippi Power and to six distribution rural cooperatives operating in southeastern Mississippi, then served in whole or in part by Mississippi Power, authorizing them to distribute electricity in certain specified geographically described areas of the state. The six cooperatives serve approximately 325,000 retail customers in a certificated area of approximately 10,300 square miles. In areas included in a "Grandfather Certificate," the utility holding such certificate may extend or maintain its electric system subject to certain regulatory approvals; extensions of facilities by such utility, or extensions of facilities into that area by other utilities, may not be made unless the Mississippi PSC grants a CPCN. Areas included in a CPCN that are subsequently annexed to municipalities may continue to be served by the holder of the CPCN, irrespective of whether it has a franchise in the annexing municipality. On the other hand, the holder of the municipal franchise may not extend service into such newly annexed area without authorization by the Mississippi PSC.
Generally, the traditional electric operating companies have experienced, and expect to continue to experience, competition in their respective retail service territories in varying degrees from the development and deployment of alternative energy sources such as self-generation (as described below) and distributed generation technologies, as well as other factors.
Southern Power competes with investor-owned utilities, IPPs, and others for wholesale energy sales across various U.S. utility markets. The needs of these markets are driven by the demands of end users and the generation available. Southern Power's success in wholesale energy sales is influenced by various factors including reliability and availability of Southern Power's plants, availability of transmission to serve the demand, price, and Southern Power's ability to contain costs.
As of December 31, 2019, Alabama Power had cogeneration contracts in effect with six industrial customers. Under the terms of these contracts, Alabama Power purchases excess energy generated by such companies. During 2019, Alabama Power purchased approximately 123 million KWHs from such companies at a cost of $3 million.
As of December 31, 2019, Georgia Power had contracts in effect to purchase generation from 33 small IPPs. During 2019, Georgia Power purchased 2.7 billion KWHs from such companies at a cost of $176 million. Georgia Power also has PPAs for electricity with six cogeneration facilities. Payments are subject to reductions for failure to meet minimum capacity output. During 2019, Georgia Power purchased 390 million KWHs at a cost of $31 million from these facilities.
As of December 31, 2019, Mississippi Power had a cogeneration agreement in effect with one of its industrial customers. Under the terms of this contract, Mississippi Power purchases any excess generation. During 2019, Mississippi Power did not make any such purchases.
Natural Gas
Southern Company Gas' natural gas distribution utilities do not compete with other distributors of natural gas in their exclusive franchise territories but face competition from other energy products. Their principal competitors are electric utilities and fuel oil and propane providers serving the residential, commercial, and industrial markets in their service areas for customers who are considering switching to or from a natural gas appliance.
Competition for heating as well as general household and small commercial energy needs generally occurs at the initial installation phase when the customer or builder makes decisions as to which types of equipment to install. Customers generally use the chosen energy source for the life of the equipment.
Customer demand for natural gas could be affected by numerous factors, including:
changes in the availability or price of natural gas and other forms of energy;
general economic conditions;
energy conservation, including state-supported energy efficiency programs;
legislation and regulations;
the cost and capability to convert from natural gas to alternative energy products; and
technological changes resulting in displacement or replacement of natural gas appliances.
The natural gas-related programs generally emphasize natural gas as the fuel of choice for customers and seek to expand the use of natural gas through a variety of promotional activities. In addition, Southern Company Gas partners with third-party entities to market the benefits of natural gas appliances.
The availability and affordability of natural gas have provided cost advantages and further opportunity for growth of the businesses.

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Seasonality
The demand for electric power and natural gas supply is affected by seasonal differences in the weather. While the electric power sales of some electric utilities peak in the summer, others peak in the winter. In the aggregate, during normal weather conditions, the Southern Company system's electric power sales peak during both the summer and winter. In most of the areas Southern Company Gas serves, natural gas demand peaks during the winter. As a result, the overall operating results of the Registrants in the future may fluctuate substantially on a seasonal basis. In addition, the Subsidiary Registrants have historically sold less power and natural gas when weather conditions are milder.
Regulation
States
The traditional electric operating companies and the natural gas distribution utilities are subject to the jurisdiction of their respective state PSCs or applicable state regulatory agencies. These regulatory bodies have broad powers of supervision and regulation over public utilities operating in the respective states, including their rates, service regulations, sales of securities (except for the Mississippi PSC), and, in the cases of the Georgia PSC and the Mississippi PSC, in part, retail service territories. See "Territory Served by the Southern Company System" and "Rate Matters" herein for additional information.
Federal Power Act
The traditional electric operating companies, Southern Power Company and certain of its generation subsidiaries, and SEGCO are all public utilities engaged in wholesale sales of energy in interstate commerce and, therefore, are subject to the rate, financial, and accounting jurisdiction of the FERC under the Federal Power Act. The FERC must approve certain financings and allows an "at cost standard" for services rendered by system service companies such as SCS and Southern Nuclear. The FERC is also authorized to establish regional reliability organizations which enforce reliability standards, address impediments to the construction of transmission, and prohibit manipulative energy trading practices.
Alabama Power and Georgia Power are also subject to the provisions of the Federal Power Act or the earlier Federal Water Power Act applicable to licensees with respect to their hydroelectric developments. As of December 31, 2019, among the hydroelectric projects subject to licensing by the FERC are 14 existing Alabama Power generating stations having an aggregate installed capacity of 1,670,000 KWs and 17 existing Georgia Power generating stations and one generating station partially owned by Georgia Power, with a combined aggregate installed capacity of 1,101,402 KWs.
In 2013, the FERC issued a new 30-year license to Alabama Power for Alabama Power's seven hydroelectric developments on the Coosa River (Weiss, Henry, Logan Martin, Lay, Mitchell, Jordan, and Bouldin). Alabama Power filed a petition requesting rehearing of the FERC order granting the relicense seeking revisions to several conditions of the license. In 2016, the FERC issued an order granting in part and denying in part Alabama Power's rehearing request. American Rivers and Alabama Rivers Alliance also filed multiple appeals of the FERC's 2013 order for the new 30-year license and, in July 2018, the U.S. Court of Appeals for the District of Columbia Circuit vacated the order and remanded the proceeding to the FERC. Alabama Power continues to operate the Coosa River developments under annual licenses issued by the FERC. The ultimate outcome of this matter cannot be determined at this time.
In 2019, Alabama Power continued the process of developing an application to relicense the Harris Dam project on the Tallapoosa River, which is expected to be filed with the FERC by November 30, 2021. The current Harris Dam project license will expire on November 30, 2023.
In May 2018, Georgia Power filed an application to relicense the Wallace Dam project on the Oconee River. The current Wallace Dam project license will expire on June 1, 2020. In July 2018, Georgia Power filed a Notice of Intent to relicense the Lloyd Shoals project on the Ocmulgee River. The application to relicense the Lloyd Shoals project is expected to be filed with the FERC by December 31, 2021. The current Lloyd Shoals project license will expire on December 31, 2023. In December 2018, Georgia Power filed applications to surrender the Langdale and Riverview hydroelectric projects on the Chattahoochee River upon their license expirations on December 31, 2023. Both projects together represent 1,520 KWs of Georgia Power's hydro fleet capacity.
Georgia Power and OPC also have a license, expiring in 2026, for the Rocky Mountain project, a pure pumped storage facility of 903,000 KW installed capacity. See PROPERTIES – "Jointly-Owned Facilities" in Item 2 herein for additional information.
Licenses for all projects, excluding those discussed above, expire in the years 2034-2066 in the case of Alabama Power's projects and in the years 2035-2044 in the case of Georgia Power's projects.
Upon or after the expiration of each license, the U.S. Government, by act of Congress, may take over the project or the FERC may relicense the project either to the original licensee or to a new licensee. In the event of takeover or relicensing to another, the original licensee is to be compensated in accordance with the provisions of the Federal Power Act, such compensation to

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reflect the net investment of the licensee in the project, not in excess of the fair value of the property, plus reasonable damages to other property of the licensee resulting from the severance therefrom of the property. The FERC may grant relicenses subject to certain requirements that could result in additional costs.
The ultimate outcome of these matters cannot be determined at this time.
Nuclear Regulation
Alabama Power, Georgia Power, and Southern Nuclear are subject to regulation by the NRC. The NRC is responsible for licensing and regulating nuclear facilities and materials and for conducting research in support of the licensing and regulatory process, as mandated by the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and the Nuclear Nonproliferation Act of 1978, as amended; and in accordance with the National Environmental Policy Act of 1969, as amended, and other applicable statutes. These responsibilities also include protecting public health and safety, protecting the environment, protecting and safeguarding nuclear materials and nuclear power plants in the interest of national security, and assuring conformity with antitrust laws.
The NRC licenses for Georgia Power's Plant Hatch Units 1 and 2 expire in 2034 and 2038, respectively. The NRC licenses for Alabama Power's Plant Farley Units 1 and 2 expire in 2037 and 2041, respectively. The NRC licenses for Plant Vogtle Units 1 and 2 expire in 2047 and 2049, respectively.
In 2012, the NRC issued combined construction and operating licenses (COLs) for Plant Vogtle Units 3 and 4. Receipt of the COLs allowed full construction to begin. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Construction ProgramsNuclear Construction" in Item 7 herein and Note 2 to the financial statements under "Georgia PowerNuclear Construction" in Item 8 herein for additional information.
See Notes 3 and 6 to the financial statements under "Nuclear Insurance" and "Nuclear Decommissioning," respectively, in Item 8 herein for information on nuclear insurance and nuclear decommissioning costs.
Environmental Laws and Regulations
See "Construction Programs" herein, MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 herein, and Note 3 to the financial statements under "Environmental Remediation" and Note 6 to the financial statements in Item 8 herein for information concerning environmental laws and regulations impacting the Registrants.
Rate Matters
Rate Structure and Cost Recovery Plans
Electric
The rates and service regulations of the traditional electric operating companies are uniform for each class of service throughout their respective retail service territories. Rates for residential electric service are generally of the block type based upon KWHs used and include minimum charges. Residential and other rates contain separate customer charges. Rates for commercial service are presently of the block type and, for large customers, the billing demand is generally used to determine capacity and minimum bill charges. These large customers' rates are generally based upon usage by the customer and include rates with special features to encourage off-peak usage. Additionally, Alabama Power and Mississippi Power are generally allowed by their respective state PSCs to negotiate the terms and cost of service to large customers. Such terms and cost of service, however, are subject to final state PSC approval.
The traditional electric operating companies recover certain costs through a variety of forward-looking, cost-based rate mechanisms. Fuel and net purchased energy costs are recovered through specific fuel cost recovery provisions. These fuel cost recovery provisions are adjusted to reflect increases or decreases in such costs as needed or on schedules as required by the respective PSCs. Approved compliance, storm damage, and certain other costs are recovered at Alabama Power and Mississippi Power through specific cost recovery mechanisms approved by their respective PSCs. Certain similar costs at Georgia Power are recovered through various base rate tariffs as approved by the Georgia PSC. Costs not recovered through specific cost recovery mechanisms are recovered at Alabama Power and Mississippi Power through annual, formulaic cost recovery proceedings and at Georgia Power through periodic base rate proceedings.
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters" in Item 7 herein and Note 2 to the financial statements in Item 8 herein for a discussion of rate matters and certain cost recovery mechanisms. Also, see "Integrated Resource Planning" herein for additional information.

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The traditional electric operating companies and Southern Power Company and certain of its generation subsidiaries are authorized by the FERC to sell power to non-affiliates, including short-term opportunity sales, at market-based prices. Specific FERC approval must be obtained with respect to a market-based contract with an affiliate.
Mississippi Power serves 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. The contracts with these wholesale customers represented 15.7% of Mississippi Power's total operating revenues in 2019 and are generally subject to 10-year rolling cancellation notices. Historically, these wholesale customers have acted as a group and any changes in contractual relationships for one customer are likely to be followed by the other wholesale customers.
Natural Gas
Southern Company Gas' natural gas distribution utilities are subject to regulation and oversight by their respective state regulatory agencies. Rates charged to these customers vary according to customer class (residential, commercial, or industrial) and rate jurisdiction. These agencies approve rates designed to provide each natural gas distribution utility the opportunity to generate revenues to recover all prudently-incurred costs, including a return on rate base sufficient to pay interest on debt, and provide a reasonable return.
With the exception of Atlanta Gas Light, which operates in a deregulated environment in which Marketers rather than a traditional utility sell natural gas to end-use customers and earns revenue by charging rates to its customers based primarily on monthly fixed charges that are set by the Georgia PSC, the earnings of the natural gas distribution utilities can be affected by customer consumption patterns that are largely a function of weather conditions and price levels for natural gas.
The natural gas distribution utilities, excluding Atlanta Gas Light, are authorized to use natural gas cost recovery mechanisms that adjust rates to reflect changes in the wholesale cost of natural gas and ensure recovery of all costs prudently incurred in purchasing natural gas for customers. In addition to natural gas cost recovery mechanisms, the natural gas distribution utilities have other cost recovery mechanisms, such as regulatory riders, which vary by utility but allow recovery of certain costs, such as those related to infrastructure replacement programs as well as environmental remediation and energy efficiency plans.
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Regulatory Matters – Southern Company Gas" in Item 7 herein and Note 2 to the financial statements under "Southern Company Gas" in Item 8 herein for a discussion of rate matters and certain cost recovery mechanisms.
Integrated Resource Planning
Each of the traditional electric operating companies continually evaluates its electric generating resources in order to ensure that it maintains a cost-effective and reliable mix of resources to meet the existing and future demand requirements of its customers. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters" in Item 7 herein for a discussion of existing and potential environmental regulations that may impact the future generating resource needs of the traditional electric operating companies.
Alabama Power
Triennially, Alabama Power provides an IRP report to the Alabama PSC. This report overviews Alabama Power's resource planning process and contains information that serves as the foundation for certain decisions affecting Alabama Power's portfolio of supply-side and demand-side resources. The IRP report facilitates Alabama Power's ability to provide reliable and cost-effective electric service to customers, while accounting for the risks and uncertainties inherent in planning for resources sufficient to meet expected customer demand. Under State of Alabama law, a CCN must be obtained from the Alabama PSC before Alabama Power constructs any new generating facility, unless such construction is deemed an ordinary extension in the usual course of business. See Note 2 to the financial statements under "Alabama PowerPetition for Certificate of Convenience and Necessity" in Item 8 herein for additional information.
Georgia Power
Triennially, Georgia Power must file an IRP with the Georgia PSC that specifies how it intends to meet the future electric service needs of its customers through a combination of demand-side and supply-side resources. The Georgia PSC, under state law, must certify any new demand-side or supply-side resources for Georgia Power to receive cost recovery. Once certified, the lesser of actual or certified construction costs and purchased power costs is recoverable through rates. Certified costs may be excluded from recovery only on the basis of fraud, concealment, failure to disclose a material fact, imprudence, or criminal misconduct. See Note 2 to the financial statements under "Georgia Power – Rate Plans" and " – Integrated Resource Plan." Also see Note 2 under and "Georgia PowerNuclear Construction" in Item 8 herein for additional information on the Georgia Nuclear Energy Financing Act and the Georgia PSC certification of Plant Vogtle Units 3 and 4, which allow Georgia Power to recover certain financing costs for construction of Plant Vogtle Units 3 and 4.

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Mississippi Power
In November 2019, the Mississippi PSC established the Integrated Resource Planning and Reporting Rule (IRP Rule), which is intended to allow electric utilities the flexibility to formulate long-term plans to best meet the needs of their customers through a combination of demand-side and supply-side resources and considering transmission needs. The IRP Rule establishes reporting requirements that include the filing of an IRP on a three-year cycle, with supply-side updates midway through the three-year cycle, and an annual report on energy delivery improvements. The IRP filing is not intended to supplant or replace the Mississippi PSC's existing regulatory processes for petition and approval of CCNs for new generating resources. Mississippi Power will file its first triennial IRP in compliance with the IRP Rule in April 2021.
In February 2018, the Mississippi PSC approved a settlement agreement related to cost recovery for the Kemper County energy facility, pursuant to which Mississippi Power filed a Reserve Margin Plan (RMP) in August 2018, which it updated on December 31, 2019. The ultimate outcome of this matter cannot be determined at this time. For additional information, see Note 2 to the financial statements under "Mississippi PowerReserve Margin Plan" in Item 8 herein.
Employee Relations
The Southern Company system had a total of 27,943 employees on its payroll at December 31, 2019.
 
Employees at
December 31, 2019
Alabama Power6,324
Georgia Power6,938
Mississippi Power1,030
PowerSecure910
SCS3,697
Southern Company Gas4,446
Southern Nuclear3,940
Southern Power460
Other198
Total27,943
The traditional electric operating companies and the natural gas distribution utilities have separate agreements with local unions of the IBEW and the Utilities Workers Union of America generally covering wages, working conditions, and procedures for handling grievances and arbitration. These agreements apply with certain exceptions to operating, maintenance, and construction employees.
Alabama Power has agreements with the IBEW in effect through August 14, 2025. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date.
Georgia Power has an agreement with the IBEW covering wages and working conditions, which is in effect through June 30, 2021.
Mississippi Power has an agreement with the IBEW covering wages and working conditions, which is in effect through May 1, 2024.
Southern Nuclear has a five-year agreement with the IBEW covering certain employees at Plants Hatch and Plant Vogtle Units 1 and 2, which is in effect through June 30, 2021. A five-year agreement between Southern Nuclear and the IBEW representing certain employees at Plant Farley is in effect through August 15, 2024. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date.
The agreements also make the terms of the pension plans for the companies discussed above subject to collective bargaining with the unions at either a five-year or a 10-year cycle, depending upon union and company actions.
The natural gas distribution utilities have separate agreements with different local unions of the IBEW covering wages, benefits, working conditions, and procedures for handling grievances and arbitration. Nicor Gas' agreement with the IBEW is effective through February 29, 2020 and negotiations on a new agreement commenced on January 9, 2020. Virginia Natural Gas' agreement with the IBEW is effective through May 15, 2020. Notice has been given to Virginia Natural Gas by the IBEW of their intent to negotiate changes to the agreement prior to the expiration date. A new IBEW local union was certified at Atlanta Gas Light in April 2018 and negotiations for a new agreement are ongoing.

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Item 1A. RISK FACTORS
In addition to the other information in this Form 10-K, including MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL in Item 7, and other documents filed by Southern Company and/or its subsidiaries with the SEC from time to time, the following factors should be carefully considered in evaluating Southern Company and its subsidiaries. Such factors could affect actual results and cause results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, Southern Company and/or its subsidiaries.
UTILITY REGULATORY, LEGISLATIVE, AND LITIGATION RISKS
Southern Company and its subsidiaries are subject to substantial federal, state, and local governmental regulation, including with respect to rates. Compliance with current and future regulatory requirements and procurement of necessary approvals, permits, and certificates may result in substantial costs to Southern Company and its subsidiaries.
Laws and regulations govern the terms and conditions of the services the Southern Company system offers, protection of critical electric infrastructure assets, transmission planning, reliability, pipeline safety, interaction with wholesale markets, and relationships with affiliates, among other matters. The Registrants' businesses are subject to regulatory regimes which could result in substantial monetary penalties if a Registrant is found to be noncompliant.
The traditional electric operating companies and the natural gas distribution utilities seek to recover their costs, including compliance costs (including a reasonable return on invested capital), through their retail rates, which must be approved by the applicable state PSC or other applicable state regulatory agency. Such regulators, in a future rate proceeding, may alter the timing or amount of certain costs for which recovery is allowed or modify the current authorized rate of return. Rate refunds may also be required. Additionally, the rates charged to wholesale customers by the traditional electric operating companies and by Southern Power and the rates charged to natural gas transportation customers by Southern Company Gas' pipeline investments and for some of its storage assets must be approved by the FERC. These wholesale rates could be affected by changes to Southern Power's and the traditional electric operating companies' ability to conduct business pursuant to FERC market-based rate authority.
A small percentage of transmission revenues are collected through wholesale electric tariffs but the majority are collected through retail rates. FERC rules pertaining to regional transmission planning and cost allocation, which are intended to spur the development of new transmission infrastructure to promote the integration of renewable resources as well as facilitate competition in the wholesale market by providing more choices to wholesale customers, present challenges to transmission planning and the wholesale market structure.
The impact of any future revision or changes in interpretations of existing regulations or the adoption of new laws and regulations applicable to Southern Company or any of its subsidiaries is uncertain. Changes in regulation, the imposition of additional regulations, changes in enforcement practices of regulators, or penalties imposed for noncompliance with existing laws or regulations could influence the operating environment of Southern Company and its subsidiaries and may result in substantial costs or otherwise negatively affect their results of operations.
The Southern Company system's costs of compliance with environmental laws and satisfying related AROs are significant and could negatively impact the net income, cash flows, and financial condition of the Registrants.
The Southern Company system's operations are regulated by state and federal environmental agencies through a variety of laws and regulations governing air, water, land, and other natural resources. Compliance with existing environmental requirements involves significant capital and operating costs including the settlement of AROs, a major portion of which is expected to be recovered through retail and wholesale rates. There is no assurance, however, that all such costs will be recovered. The Registrants expect future compliance expenditures will continue to be significant.
The EPA has adopted and is implementing regulations governing air quality under the Clean Air Act and water quality under the Clean Water Act, including regulations governing cooling water intake structures and effluent guidelines for steam electric generating plants. The EPA has also adopted regulations governing the disposal of CCR, including coal ash and gypsum, in landfills and surface impoundments at active generating power plants. The cost estimates for AROs related to the disposal of CCR are based on information using various assumptions related to closure and post-closure costs, timing of future cash outlays, inflation and discount rates, and the potential methods for complying with the CCR Rule. The traditional electric operating companies will continue to periodically update their ARO cost estimates.
Additionally, environmental laws and regulations covering the handling and disposal of waste and release of hazardous substances could require the Southern Company system to incur substantial costs to clean up affected sites, including certain current and former operating sites, and locations subject to contractual obligations.
Litigation over environmental issues and claims of various types, including property damage, personal injury, and citizen enforcement of environmental requirements has occurred throughout the U.S. This litigation has included claims for damages

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alleged to have been caused by CO2 and other emissions, CCR, releases of regulated substances, and alleged exposure to regulated substances, and/or requests for injunctive relief in connection with such matters.
Compliance with any new or revised environmental laws or regulations could affect many areas of operations for the Southern Company system. The Southern Company system's ultimate environmental compliance strategy and future environmental expenditures will depend on various factors, such as state adoption and implementation of requirements, the availability and cost of any deployed control technology, fuel prices, and the outcome of pending and/or future legal challenges. Compliance costs may result from the installation of additional environmental controls, closure and monitoring of CCR facilities, unit retirements, or changing fuel sources for certain existing units, as well as related upgrades to the Southern Company system's transmission and distribution (electric and natural gas) systems. Environmental compliance spending over the next several years may differ materially from the amounts estimated and could affect results of operations, cash flows, and/or financial condition if such costs cannot continue to be recovered on a timely basis. Further, increased costs that are recovered through regulated rates could contribute to reduced demand for electricity and natural gas, which could negatively affect results of operations, cash flows, and/or financial condition. Additionally, many commercial and industrial customers may also be affected by existing and future environmental requirements, which for some may have the potential to affect their demand for electricity or natural gas.
The Southern Company system may be exposed to regulatory and financial risks related to the impact of GHG legislation, regulation, and emission reduction goals.
Costs associated with GHG legislation, regulation, and emission reduction goals could be significant. Additional GHG policies, including legislation, may emerge in the future requiring the United States to transition to a lower GHG emitting economy. However, the ultimate impact will depend on various factors, such as state adoption and implementation of requirements, low natural gas prices, the development, deployment, and advancement of relevant energy technologies, the ability to recover costs through existing ratemaking provisions, and the outcome of pending and/or future legal challenges.
Because natural gas is a fossil fuel with lower carbon content relative to other fossil fuels, future GHG constraints, including, but not limited to, the imposition of a carbon tax, may create additional demand for natural gas, both for production of electricity and direct use in homes and businesses. Future GHG constraints designed to minimize emissions from natural gas could likewise result in increased costs to the Southern Company system and affect the demand for natural gas as well as the prices charged to customers and the competitive position of natural gas.
In April 2018, Southern Company established an intermediate goal of a 50% reduction in carbon emissions from 2007 levels by 2030 and a long-term goal of low- to no-carbon operations by 2050. The Southern Company system's ability to achieve these goals depends on many external factors, including supportive national energy policies, low natural gas prices, and the development, deployment, and advancement of relevant energy technologies. The Southern Company system expects to continue cost-effectively growing its renewable energy portfolio, optimizing technology advancements to modernize its transmission and distribution systems, increasing the use of natural gas for generation, completing Plant Vogtle Units 3 and 4, investing in energy efficiency, and continuing research and development efforts focused on technologies to lower GHG emissions. The Southern Company system is also evaluating methods of removing carbon from the atmosphere.
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters – Global Climate Issues" in Item 7 herein for additional information.
OPERATIONAL RISKS
The financial performance of Southern Company and its subsidiaries may be adversely affected if the subsidiaries are unable to successfully operate their facilities or perform certain corporate functions.
The financial performance of Southern Company and its subsidiaries depends on the successful operation of the electric generation, transmission, and distribution facilities, natural gas distribution and storage facilities, and distributed generation storage technologies and the successful performance of necessary corporate functions. There are many risks that could affect these operations and performance of corporate functions, including operator error or failure of equipment or processes, accidents, operating limitations that may be imposed by environmental or other regulatory requirements or in connection with joint owner arrangements, labor disputes, physical attacks, fuel or material supply interruptions and/or shortages, transmission disruption or capacity constraints, including with respect to the Southern Company system's and third parties' transmission, storage, and transportation facilities, compliance with mandatory reliability standards, including mandatory cyber security standards, implementation of new technologies, information technology (IT) system failures, cyber intrusions, environmental events, such as spills or releases, and catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, or other similar occurrences.

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A decrease or elimination of revenues from the electric generation, transmission, or distribution facilities or natural gas distribution or storage facilities or an increase in the cost of operating the facilities would reduce the net income and cash flows and could adversely impact the financial condition of the affected Registrant.
Operation of nuclear facilities involves inherent risks, including environmental, safety, health, regulatory, natural disasters, cyber intrusions or physical attacks, and financial risks, that could result in fines or the closure of the nuclear units owned by Alabama Power or Georgia Power and which may present potential exposures in excess of insurance coverage.
Alabama Power owns, and contracts for the operation of, two nuclear units and Georgia Power holds undivided interests in, and contracts for the operation of, four existing nuclear units. The six existing units are operated by Southern Nuclear and represented approximately 25% and 26% of the total KWHs generated by Alabama Power and Georgia Power, respectively, in the year ended December 31, 2019. In addition, Southern Nuclear, on behalf of Georgia Power and the other Vogtle Owners, is managing the construction of Plant Vogtle Units 3 and 4. Nuclear facilities are subject to environmental, safety, health, operational, and financial risks such as:
the potential harmful effects on the environment and human health and safety resulting from a release of radioactive materials;
uncertainties with respect to the ability to dispose of spent nuclear fuel and the need for longer term on-site storage;
uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of licensed lives and the ability to maintain and anticipate adequate capital reserves for decommissioning;
limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with any nuclear operations; and
significant capital expenditures relating to maintenance, operation, security, and repair of these facilities.
Damages, decommissioning, or other costs could exceed the amount of decommissioning trusts or external insurance coverage, including statutorily required nuclear incident insurance.
The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear facilities. In the event of non-compliance, the NRC has the authority to impose fines and/or shut down any unit, depending upon its assessment of the severity of the situation, until compliance is achieved. NRC orders or regulations related to increased security measures and any future NRC safety requirements could require Alabama Power and Georgia Power to make substantial operating and capital expenditures at their nuclear plants. In addition, if a serious nuclear incident were to occur, it could result in substantial costs to Alabama Power or Georgia Power and Southern Company. A major incident at a nuclear facility anywhere in the world could cause the NRC to delay or prohibit construction of new nuclear units or require additional safety measures at new and existing units. Moreover, a major incident at any nuclear facility in the U.S., including facilities owned and operated by third parties, could require Alabama Power and Georgia Power to make material contributory payments.
In addition, actual or potential threats of cyber intrusions or physical attacks could result in increased nuclear licensing or compliance costs that are difficult to predict.
Transporting and storing natural gas involves risks that may result in accidents and other operating risks and costs.
Southern Company Gas' natural gas distribution and storage activities involve a variety of inherent hazards and operating risks, such as leaks, accidents, explosions, and mechanical problems, which could result in serious injury, loss of life, significant damage to property, environmental pollution, and impairment of its operations. The location of pipelines and storage facilities near populated areas could increase the level of damage resulting from these risks. Additionally, these pipeline and storage facilities are subject to various state and other regulatory requirements. Failure to comply with these requirements could result in substantial monetary penalties or potential early retirement of storage facilities, which could trigger an associated impairment. The occurrence of any of these events not fully covered by insurance or otherwise could adversely affect Southern Company Gas' and Southern Company's financial condition and results of operations.
Physical attacks, both threatened and actual, could impact the ability of the Subsidiary Registrants to operate and could adversely affect financial results and liquidity.
The Subsidiary Registrants face the risk of physical attacks, both threatened and actual, against their respective generation and storage facilities and the transmission and distribution infrastructure used to transport energy, which could negatively impact their ability to generate, transport, and deliver power, or otherwise operate their respective facilities, or, with respect to Southern Company Gas, its ability to distribute or store natural gas, or otherwise operate its facilities, in the most efficient manner or at all. In addition, physical attacks against third-party providers could have a similar effect on the Southern Company system.
Despite the implementation of robust security measures, all assets are potentially vulnerable to disability, failures, or unauthorized access due to human error, natural disasters, technological failure, or internal or external physical attacks. If assets

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were to fail, be physically damaged, or be breached and were not restored in a timely manner, the affected Subsidiary Registrant may be unable to fulfill critical business functions. Moreover, the amount and scope of insurance maintained against losses resulting from any such events or physical security breaches may not be sufficient to cover losses or otherwise adequately compensate for any disruptions to business that could result.
These events could harm the reputation of and negatively affect the financial results of the Registrants through lost revenues and costs to repair damage, if such costs cannot be recovered.
An information security incident, including a cybersecurity breach, or the failure of one or more key IT systems, networks, or processes could impact the ability of the Registrants to operate and could adversely affect financial results and liquidity.
Information security risks have generally increased in recent years as a result of the proliferation of new technology and increased sophistication and frequency of cyber attacks and data security breaches. The Subsidiary Registrants operate in highly regulated industries that require the continued operation of sophisticated IT systems and network infrastructure, which are part of interconnected distribution systems. Because of the critical nature of the infrastructure, increased connectivity to the internet, and technology systems' inherent vulnerability to disability or failures due to hacking, viruses, acts of war or terrorism, or other types of data security breaches, the Southern Company system faces a heightened risk of cyberattack. Parties that wish to disrupt the U.S. bulk power system or Southern Company system operations could view these computer systems, software, or networks as targets. The Registrants and their third-party vendors have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to their IT systems and confidential data or to attempts to disrupt utility operations. As a result, Southern Company and its subsidiaries face on-going threats to their assets, including assets deemed critical infrastructure, where databases and systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, unauthorized access attempts, phishing, and other cyber attacks. While there have been immaterial incidents of phishing and attempted financial fraud across the Southern Company system, there has been no material impact on business or operations from these attacks. However, the Registrants cannot guarantee that security efforts will prevent breaches, operational incidents, or other breakdowns of IT systems and network infrastructure and cannot provide any assurance that such incidents will not have a material adverse effect in the future.
In addition, in the ordinary course of business, Southern Company and its subsidiaries collect and retain sensitive information, including personally identifiable information about customers, employees, and stockholders, and other confidential information. In some cases, administration of certain functions may be outsourced to third-party service providers that could also be targets of cyber attacks.
Despite the implementation of robust security measures, all assets are potentially vulnerable to internal or external cyber attacks, which may inhibit the affected Registrant's ability to fulfill critical business functions and compromise sensitive and other data. Any cyber breach or theft, damage, or improper disclosure of sensitive electronic data may also subject the affected Registrant to penalties and claims from regulators or other third parties. Moreover, the amount and scope of insurance may not be sufficient to cover losses or otherwise adequately compensate for any disruptions to business that could result. In addition, as cybercriminals become more sophisticated, the cost of proactive defensive measures may increase.
These events could negatively affect the financial results of the Registrants through lost revenues, costs to recover and repair damage, costs associated with governmental actions in response to such attacks, and litigation costs if such costs cannot be recovered through insurance or otherwise.
The Southern Company system may not be able to obtain adequate natural gas, fuel supplies, and other resources required to operate the traditional electric operating companies' and Southern Power's electric generating plants or serve Southern Company Gas' natural gas customers.
The traditional electric operating companies and Southern Power purchase fuel from a number of suppliers. The traditional electric operating companies and Southern Power also need adequate access to water, which is drawn from nearby sources, to aid in the production of electricity and, once it is used, returned to its source. Disruption in the delivery of fuel, including disruptions as a result of, among other things, transportation delays, weather, labor relations, force majeure events, or environmental regulations affecting fuel suppliers, or the availability of water, could limit the ability of the traditional electric operating companies and Southern Power to operate certain facilities, which could result in higher fuel and operating costs and potentially reduce the net income of the affected traditional electric operating company or Southern Power and Southern Company.
Natural gas supplies can be subject to disruption in the event production or distribution is curtailed, such as in the event of a hurricane or a pipeline failure. The Southern Company system also relies on natural gas pipelines and other storage and transportation facilities owned and operated by third parties to deliver natural gas to wholesale markets and to its distribution

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systems. The availability of shale gas and potential regulations affecting its accessibility may have a material impact on the supply and cost of natural gas. Disruption in natural gas supplies could limit the ability to fulfill contractual obligations.
The traditional electric operating companies and Southern Power have become more dependent on natural gas for a majority of their electric generating capacity and expect to continue to increase such dependence. In many instances, the cost of purchased power is influenced by natural gas prices. Historically, natural gas prices have been more volatile than prices of other fuels. In recent years, domestic natural gas prices have been depressed by robust supplies, including production from shale gas. These market conditions, together with additional regulation of coal-fired generating units, have increased the traditional electric operating companies' reliance on natural gas-fired generating units.
The traditional electric operating companies are also dependent on coal for a portion of their electric generating capacity. The traditional electric operating companies depend on coal supply contracts, and the counterparties to these agreements may not fulfill their obligations to supply coal because of financial or technical problems. In addition, the suppliers may not be required to supply coal under certain circumstances, such as in the event of a natural disaster. If the traditional electric operating companies are unable to obtain their contracted coal requirements, they may be required to purchase their coal requirements at higher prices, which may not be recoverable through rates.
The revenues of Southern Company, the traditional electric operating companies, and Southern Power depend in part on sales under PPAs. The failure of a PPA counterparty to perform its obligations, the failure of a Southern Company subsidiary to satisfy minimum requirements under the PPAs, or the failure to renew the PPAs or successfully remarket the related generating capacity could have a negative impact on the net income and cash flows of the affected traditional electric operating company or Southern Power and/or of Southern Company.
Most of Southern Power's generating capacity has been sold to purchasers under PPAs. Southern Power's top three customers, Georgia Power, Southern California Edison, and Morgan Stanley Capital Group accounted for 9.0%, 6.8%, and 4.9%, respectively, of Southern Power's total revenues for the year ended December 31, 2019. The traditional electric operating companies have entered into PPAs with non-affiliated parties.
The revenues related to PPAs are dependent on the continued performance by the purchasers of their obligations. The failure of a purchaser to perform its obligations, including as a result of a general default or bankruptcy, could have a negative impact on the net income and cash flows of the affected traditional electric operating company or Southern Power and of Southern Company. Although the credit evaluations undertaken and contractual protections implemented by Southern Power and the traditional electric operating companies take into account the possibility of default by a purchaser, actual exposure to a default by a purchaser may be greater than predicted or specified in the applicable contract. See Note 1 to the financial statements under "RevenuesConcentration of Revenue" in Item 8 herein for additional information on the potential impacts of Pacific Gas & Electric Company's bankruptcy filing.
Additionally, neither Southern Power nor any traditional electric operating company can predict whether the PPAs will be renewed at the end of their respective terms or on what terms any renewals may be made. The failure of a Southern Company subsidiary to satisfy minimum operational or availability requirements under these PPAs, including PPAs related to fuel cell technology, could result in payment of damages or termination of the PPAs.
The asset management arrangements between Southern Company Gas' wholesale gas services and its customers, including the natural gas distribution utilities, may not be renewed or may be renewed at lower levels, which could have a significant impact on Southern Company Gas' financial results.
Southern Company Gas' wholesale gas services currently manages the storage and transportation assets of the natural gas distribution utilities (except Nicor Gas) as well as certain non-affiliated customers. Southern Company Gas' wholesale gas services has a concentration of credit risk for services it provides to its counterparties, which is generally concentrated in 20 of its counterparties.
The profits earned from the management of affiliate assets are shared with the respective affiliate's customers (and for Atlanta Gas Light with the Georgia PSC's Universal Service Fund), except for Chattanooga Gas where wholesale gas services are provided under annual fixed-fee agreements. These asset management agreements are subject to regulatory approval and such agreements may not be renewed or may be renewed with less favorable terms.
The financial results of Southern Company Gas' wholesale gas services could be significantly impacted if any of its agreements with its affiliated or non-affiliated customers are not renewed or are amended or renewed with less favorable terms. Sustained low natural gas prices could reduce the demand for these types of asset management arrangements.

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Increased competition from other companies that supply energy or generation and storage technologies could negatively impact Southern Company's and its subsidiaries' revenues, results of operations, and financial condition.
A key element of the business models of the traditional electric operating companies and Southern Power is that generating power at central station power plants achieves economies of scale and produces power at a competitive cost. Advances in technology or changes in laws or regulations could reduce the cost of distributed generation storage technologies or other alternative methods of producing power to a level that is competitive with that of most central station power electric production or result in smaller-scale, more fuel efficient, and/or more cost effective distributed generation that allows for increased self-generation by customers. Broader use of distributed generation by retail energy customers may also result from customers' changing perceptions of the merits of utilizing existing generation technology or tax or other economic incentives. Additionally, a state PSC or legislature may modify certain aspects of the traditional electric operating companies' business as a result of these advances in technology.
It is also possible that rapid advances in central station power generation technology could reduce the value of the current electric generating facilities owned by the traditional electric operating companies and Southern Power. Changes in technology could also alter the channels through which electric customers buy or utilize power, which could reduce the revenues or increase the expenses of Southern Company, the traditional electric operating companies, or Southern Power.
Southern Company Gas' business is dependent on natural gas prices remaining competitive as compared to other forms of energy. Southern Company Gas' gas marketing services segment also is affected by competition from other energy marketers providing similar services in Southern Company Gas' unregulated service territories, most notably in Illinois and Georgia. Southern Company Gas' wholesale gas services competes for sales with national and regional full-service energy providers, energy merchants and producers, and pipelines based on the ability to aggregate competitively-priced commodities with transportation and storage capacity. Southern Company Gas competes with natural gas facilities in the Gulf Coast region of the U.S., as the majority of the existing and proposed high deliverability salt-dome natural gas storage facilities in North America are located in the Gulf Coast region.
If new technologies become cost competitive and achieve sufficient scale, the market share of the Subsidiary Registrants could be eroded, and the value of their respective electric generating facilities or natural gas distribution and storage facilities could be reduced. Additionally, Southern Company Gas' market share could be reduced if Southern Company Gas cannot remain price competitive in its unregulated markets. If state PSCs or other applicable state regulatory agencies fail to adjust rates to reflect the impact of any changes in loads, increasing self-generation, and the growth of distributed generation, the financial condition, results of operations, and cash flows of Southern Company and the affected traditional electric operating company or Southern Company Gas could be materially adversely affected.
Failure to attract and retain an appropriately qualified workforce could negatively impact Southern Company's and its subsidiaries' results of operations.
Events such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, or unavailability of contract resources may lead to operating challenges such as lack of resources, loss of knowledge, and a lengthy time period associated with skill development, including with the workforce needs associated with major construction projects and ongoing operations. The Southern Company system's costs, including costs for contractors to replace employees, productivity costs, and safety costs, may rise. Failure to hire and adequately obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect Southern Company and its subsidiaries' ability to manage and operate their businesses.
As a result of the increased demand for skilled linemen in California and the Northeast, portions of the Southern Company system experienced higher than normal turnover in 2019. The Southern Company system is diligently working to attract and train qualified linemen.
If Southern Company and its subsidiaries are unable to successfully attract and retain an appropriately qualified workforce, results of operations could be negatively impacted.
CONSTRUCTION RISKS
The Registrants have incurred and may incur additional costs or delays in the construction of new plants or other facilities and may not be able to recover their investments. Also, existing facilities of the Subsidiary Registrants require ongoing expenditures, including those to meet AROs and other environmental standards and goals.
General
The businesses of the Registrants require substantial expenditures for investments in new facilities and, for the traditional electric operating companies, capital improvements to transmission, distribution, and generation facilities, for Southern Power, capital improvements to generation facilities, and, for Southern Company Gas, capital improvements to natural gas distribution

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and storage facilities. These expenditures also include those to settle AROs and meet environmental standards and goals. The traditional electric operating companies and Southern Power are in the process of constructing new generating facilities and adding environmental modifications to certain existing generating facilities. The traditional electric operating companies also are in the process of closing ash ponds to comply with the CCR Rule and, where applicable, state CCR rules. Southern Company Gas is replacing certain pipelines in its natural gas distribution system and is involved in two new gas pipeline construction projects. The Southern Company system intends to continue its strategy of developing and constructing new electric generating facilities, expanding and improving the electric transmission and electric and natural gas distribution systems, and undertaking projects to comply with environmental laws and regulations. These projects are long term in nature and in some cases may include the development and construction of facilities with designs that have not been finalized or previously constructed. The completion of these types of projects without delays or significant cost overruns is subject to substantial risks that have occurred or may occur, including:
shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor;
challenges with management of contractors, subcontractors, or vendors;
work stoppages;
contractor or supplier delay;
nonperformance under construction, operating, or other agreements;
delays in or failure to receive necessary permits, approvals, tax credits, and other regulatory authorizations;
challenges with start-up activities (including major equipment failure, system integration, or regional transmission upgrades) and/or operational performance;
operational readiness, including specialized operator training and required site safety programs;
impacts of new and existing laws and regulations, including environmental laws and regulations;
the outcome of any legal challenges to projects, including legal challenges to regulatory approvals;
failure to construct in accordance with permits and licenses (including satisfaction of NRC requirements);
failure to satisfy any environmental performance standards and the requirements of tax credits and other incentives;
continued public and policymaker support for projects;
adverse weather conditions or natural disasters;
engineering or design problems;
design and other licensing-based compliance matters;
environmental and geological conditions;
delays or increased costs to interconnect facilities to transmission grids; and
increased financing costs as a result of changes in market interest rates or as a result of project delays.
If a Subsidiary Registrant is unable to complete the development or construction of a project or decides to delay or cancel construction of a project, it may not be able to recover its investment in that project and may incur substantial cancellation payments under equipment purchase orders or construction contracts, as well as other costs associated with the closure and/or abandonment of the construction project.
In addition, partnership and joint ownership agreements may provide partners or co-owners with certain decision-making authority in connection with projects under construction, including rights to cause the cancellation of a construction project under certain circumstances. Any failure by a partner or co-owner to perform its obligations under the applicable agreements could have a material negative impact on the applicable project under construction. Certain Southern Company Gas pipeline development projects involve separate joint venture participants that own a majority of the project, Southern Power participates in partnership agreements with respect to a majority of its renewable energy projects, Georgia Power jointly owns Plant Vogtle Units 3 and 4 with other co-owners, and Mississippi Power jointly owns Plant Daniel with Gulf Power. See Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information regarding jointly-owned facilities.
If construction projects are not completed according to specification, a Registrant may incur liabilities and suffer reduced plant efficiency, higher operating costs, and reduced net income. Furthermore, construction delays associated with renewable projects could result in the loss of otherwise available tax credits and incentives.
Even if a construction project (including a joint venture construction project) is completed, the total costs may be higher than estimated and may not be recoverable through regulated rates, if applicable. In addition, construction delays and contractor performance shortfalls can result in the loss of revenues and may, in turn, adversely affect the net income and financial position of the affected Registrant. The largest construction project currently underway in the Southern Company system is Plant Vogtle Units 3 and 4. Southern Company and Georgia Power recorded a pre-tax estimated probable loss of $1.1 billion ($0.8 billion after tax) in 2018 to reflect Georgia Power's revised estimate to complete construction and start-up of Plant Vogtle Units 3 and 4. See Note 2 to the financial statements under "Georgia Power – Nuclear Construction" in Item 8 herein for information regarding Plant Vogtle Units 3 and 4. Also see Note 3 to the financial statements under "Other MattersSouthern Company

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GasGas Pipeline Projects" for information regarding the construction delays and the associated cost increases for Southern Company Gas' pipeline construction projects and Note 15 to the financial statements under "Southern Company Gas – Proposed Sale of Pivotal LNG and Atlantic Coast Pipeline" in Item 8 herein for information regarding the proposed sale of Southern Company Gas' interests in Atlantic Coast Pipeline.
Once facilities become operational, ongoing capital expenditures are required to maintain reliable levels of operation. Significant portions of the traditional electric operating companies' existing facilities were constructed many years ago. Older equipment, even if maintained in accordance with good engineering practices, may require significant expenditures to maintain efficiency, to comply with changing environmental requirements, to provide safe and reliable operations, and/or to meet related retirement obligations.
Southern Company Gas' significant investments in pipelines and pipeline development projects involve financial and execution risks.
Southern Company Gas has made significant investments in existing pipelines and pipeline development projects. Many of the existing pipelines are, and, when completed, the pipeline development projects will be, operated by third parties. If one of these agents fails to perform in a proper manner, the value of the investment could decline and Southern Company Gas could lose part or all of its investment. In addition, Southern Company Gas is required to fulfill capital obligations to pipeline joint ventures or, as necessary, guarantee the obligations of such joint venture.
With respect to certain pipeline development projects, Southern Company Gas will rely on its joint venture partners for construction management and will not exercise direct control over the process. All of the pipeline development projects are dependent on contractors for the successful and timely completion of the projects. Further, the development of pipeline projects involves numerous regulatory, environmental, construction, safety, political, and legal uncertainties and may require the expenditure of significant amounts of capital. These projects may not be completed on schedule, at the budgeted cost, or at all. There may be cost overruns and construction difficulties that cause Southern Company Gas' capital expenditures to exceed its initial expectations, which may impact the earnings of the joint venture partnerships. Moreover, Southern Company Gas' income will not increase immediately upon the expenditure of funds on a pipeline project. Pipeline construction occurs over an extended period of time and Southern Company Gas will not receive material increases in income until the project is placed in service.
At December 31, 2019, Southern Company Gas was involved in two gas pipeline development projects, the Atlantic Coast Pipeline project and the PennEast Pipeline project. See Note 3 to the financial statements under "Other Matters – Southern Company Gas – Gas Pipeline Projects" in Item 8 herein for information regarding these projects and Note 15 to the financial statements under "Southern Company Gas – Proposed Sale of Pivotal LNG and Atlantic Coast Pipeline" in Item 8 herein for information regarding the proposed sale of Southern Company Gas' interests in Atlantic Coast Pipeline.
FINANCIAL, ECONOMIC, AND MARKET RISKS
The electric generation and energy marketing operations of the traditional electric operating companies and Southern Power and the natural gas operations of Southern Company Gas are subject to risks, many of which are beyond their control, including changes in energy prices and fuel costs, which may reduce revenues and increase costs.
The generation, energy marketing, and natural gas operations of the Southern Company system are subject to changes in energy prices and fuel costs, which could increase the cost of producing power, decrease the amount received from the sale of energy, and/or make electric generating facilities less competitive. The market prices for these commodities may fluctuate significantly over relatively short periods of time. Among the factors that could influence energy prices and fuel costs are:
prevailing market prices for coal, natural gas, uranium, fuel oil, and other fuels, as applicable, used in the generation facilities of the traditional electric operating companies and Southern Power and, in the case of natural gas, distributed by Southern Company Gas, including associated transportation costs, and supplies of such commodities;
demand for energy and the extent of additional supplies of energy available from current or new competitors;
liquidity in the general wholesale electricity and natural gas markets;
weather conditions impacting demand for electricity and natural gas;
seasonality;
transmission or transportation constraints, disruptions, or inefficiencies;
availability of competitively priced alternative energy sources;
forced or unscheduled plant outages for the Southern Company system, its competitors, or third party providers;
the financial condition of market participants;
the economy in the Southern Company system's service territory, the nation, and worldwide, including the impact of economic conditions on demand for electricity and the demand for fuels, including natural gas;
natural disasters, wars, embargos, physical or cyber attacks, and other catastrophic events; and
federal, state, and foreign energy and environmental regulation and legislation.

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These factors could increase the expenses and/or reduce the revenues of the Registrants. For the traditional electric operating companies and Southern Company Gas' regulated gas distribution operations, such impacts may not be fully recoverable through rates.
Historically, the traditional electric operating companies and Southern Company Gas from time to time have experienced underrecovered fuel and/or purchased gas cost balances and may experience such balances in the future. While the traditional electric operating companies and Southern Company Gas are generally authorized to recover fuel and/or purchased gas costs through cost recovery clauses, recovery may be denied if costs are deemed to be imprudently incurred and there may be delays in the authorization of such recovery. These factors could negatively impact the cash flows of the affected traditional electric operating company or Southern Company Gas and of Southern Company.
The Registrants are subject to risks associated with a changing economic environment, customer behaviors, including increased energy conservation, and adoption patterns of technologies by the customers of the Subsidiary Registrants.
The consumption and use of energy are linked to economic activity. This relationship is affected over time by changes in the economy, customer behaviors, and technologies. Any economic downturn could negatively impact customer growth and usage per customer, thus reducing the sales of energy and revenues. Additionally, any economic downturn or disruption of financial markets, both nationally and internationally, could negatively affect the financial stability of customers and counterparties of the Subsidiary Registrants.
Outside of economic disruptions, changes in customer behaviors in response to energy efficiency programs, changing conditions and preferences, or changes in the adoption of technologies could affect the relationship of economic activity to the consumption of energy. For example, some cities in the United States recently banned the use of natural gas in new construction.
Both federal and state programs exist to influence how customers use energy, and several of the traditional electric operating companies and Southern Company Gas have PSC or other applicable state regulatory agency mandates to promote energy efficiency. Conservation programs could impact the financial results of the Registrants in different ways. For example, if any traditional electric operating company or Southern Company Gas is required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these measures could have a negative financial impact on such traditional electric operating company or Southern Company Gas and Southern Company. Customers could also voluntarily reduce their consumption of energy in response to decreases in their disposable income, increases in energy prices, or individual conservation efforts.
In addition, the adoption of technology by customers can have both positive and negative impacts on sales. Many new technologies utilize less energy than in the past. However, electric and natural gas technologies such as electric and natural gas vehicles can create additional demand. The Southern Company system uses best available methods and experience to incorporate the effects of changes in customer behavior, state and federal programs, PSC or other applicable state regulatory agency mandates, and technology, but the Southern Company system's planning processes may not estimate and incorporate these effects.
All of the factors discussed above could adversely affect a Registrant's results of operations, financial condition, and liquidity.
The operating results of the Registrants are affected by weather conditions and may fluctuate on a seasonal basis. In addition, catastrophic events could result in substantial damage to or limit the operation of the properties of a Subsidiary Registrant and could negatively impact results of operation, financial condition, and liquidity.
Electric power and natural gas supply are generally seasonal businesses. In the aggregate, during normal weather conditions, the Southern Company system's electric power sales peak during both the summer and winter. Additionally, Southern Power has variability in its revenues from renewable generation facilities due to seasonal weather patterns primarily from wind and sun. In most of the areas Southern Company Gas serves, natural gas demand peaks during the winter. In addition, the Subsidiary Registrants have historically sold less power and natural gas when weather conditions are milder. Unusually mild weather in the future could reduce the revenues, net income, and available cash of the affected Registrant.
Volatile or significant weather events could result in substantial damage to the transmission and distribution lines of the traditional electric operating companies, the generating facilities of the traditional electric operating companies and Southern Power, and the natural gas distribution and storage facilities of Southern Company Gas. The Subsidiary Registrants have significant investments in the Atlantic and Gulf Coast regions and Southern Power and Southern Company Gas have investments in various states which could be subject to severe weather and natural disasters, including hurricanes and wildfires. Further, severe drought conditions can reduce the availability of water and restrict or prevent the operation of certain generating facilities.
In the event a traditional electric operating company or Southern Company Gas experiences any of these weather events or any natural disaster or other catastrophic event, recovery of costs in excess of reserves and insurance coverage is subject to the

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approval of its state PSC or other applicable state regulatory agency. Historically, the traditional electric operating companies from time to time have experienced deficits in their storm cost recovery reserve balances and may experience such deficits in the future. Any denial by the applicable state PSC or other applicable state regulatory agency or delay in recovery of any portion of such costs could have a material negative impact on a traditional electric operating company's or Southern Company Gas' and on Southern Company's results of operations, financial condition, and liquidity.
In addition, damages resulting from significant weather events within the service territory of any traditional electric operating company or Southern Company Gas or affecting Southern Power's customers may result in the loss of customers and reduced demand for energy for extended periods and may impact customers' ability to perform under existing PPAs. See Note 1 to the financial statements under "RevenuesConcentration of Revenue" in Item 8 herein for additional information on Pacific Gas & Electric Company's bankruptcy filing. Any significant loss of customers or reduction in demand for energy could have a material negative impact on a Registrant's results of operations, financial condition, and liquidity.
Acquisitions, dispositions, or other strategic ventures or investments may not result in anticipated benefits and may present risks not originally contemplated, which may have a material adverse effect on the liquidity, results of operations, and financial condition of Southern Company and its subsidiaries.
Southern Company and its subsidiaries have made significant acquisitions and investments in the past, as well as dispositions, and may in the future make additional acquisitions, dispositions, or other strategic ventures or investments, including the pending disposition by Southern Company Gas of its interests in Pivotal LNG and Atlantic Coast Pipeline, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries. Southern Company and its subsidiaries continually seek opportunities to create value through various transactions, including acquisitions or sales of assets. Specifically, Southern Power continually seeks opportunities to execute its strategy to create value through various transactions, including acquisitions, dispositions, and sales of partnership interests, development and construction of new generating facilities, and entry into PPAs primarily with investor-owned utilities, IPPs, municipalities, and other load-serving entities, as well as commercial and industrial customers.
Southern Company and its subsidiaries may face significant competition for transactional opportunities and anticipated transactions may not be completed on acceptable terms or at all. In addition, these transactions are intended to, but may not, result in the generation of cash or income, the realization of savings, the creation of efficiencies, or the reduction of risk. These transactions may also affect the liquidity, results of operations, and financial condition of Southern Company and its subsidiaries.
These transactions also involve risks, including:
they may not result in an increase in income or provide adequate or expected funds or return on capital or other anticipated benefits;
they may result in Southern Company or its subsidiaries entering into new or additional lines of business, which may have new or different business or operational risks;
they may not be successfully integrated into the acquiring company's operations and/or internal control processes;
the due diligence conducted prior to a transaction may not uncover situations that could result in financial or legal exposure or may not appropriately evaluate the likelihood or quantify the exposure from identified risks;
they may result in decreased earnings, revenues, or cash flow;
they may involve retained obligations in connection with transitional agreements or deferred payments related to dispositions that subject Southern Company or its subsidiaries to additional risk;
Southern Company or the applicable subsidiary may not be able to achieve the expected financial benefits from the use of funds generated by any dispositions;
expected benefits of a transaction may be dependent on the cooperation, performance, or credit risk of a counterparty; or
for the traditional electric operating companies and Southern Company Gas, costs associated with such investments that were expected to be recovered through regulated rates may not be recoverable.
Southern Company and Southern Company Gas are holding companies and Southern Power owns many of its assets indirectly through subsidiaries. Each of these companies is dependent on cash flows from their respective subsidiaries to meet their ongoing and future financial obligations, including making interest and principal payments on outstanding indebtedness and, for Southern Company, to pay dividends on its common stock.
Southern Company and Southern Company Gas are holding companies and, as such, they have no operations of their own. Substantially all of Southern Company's and Southern Company Gas' and many of Southern Power's respective consolidated assets are held by subsidiaries. Southern Company's, Southern Company Gas' and, to a certain extent, Southern Power's ability to meet their respective financial obligations, including making interest and principal payments on outstanding indebtedness, and, for Southern Company, to pay dividends on its common stock, is dependent on the net income and cash flows of their

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respective subsidiaries and the ability of those subsidiaries to pay upstream dividends or to repay borrowed funds. Prior to funding Southern Company, Southern Company Gas, or Southern Power, the respective subsidiaries have financial obligations and, with respect to Southern Company and Southern Company Gas, regulatory restrictions that must be satisfied, including among others, debt service and preferred stock dividends. In addition, Southern Company, Southern Company Gas, and Southern Power may provide capital contributions or debt financing to subsidiaries under certain circumstances, which would reduce the funds available to meet their respective financial obligations, including making interest and principal payments on outstanding indebtedness, and to pay dividends on Southern Company's common stock.
A downgrade in the credit ratings of any of the Registrants, Southern Company Gas Capital, or Nicor Gas could negatively affect their ability to access capital at reasonable costs and/or could require posting of collateral or replacing certain indebtedness.
There are a number of factors that rating agencies evaluate to arrive at credit ratings for the Registrants, Southern Company Gas Capital, and Nicor Gas, including capital structure, regulatory environment, the ability to cover liquidity requirements, and other commitments for capital. The Registrants, Southern Company Gas Capital, and Nicor Gas could experience a downgrade in their ratings if any rating agency concludes that the level of business or financial risk of the industry or the applicable company has deteriorated. Changes in ratings methodologies by the agencies could also have a negative impact on credit ratings. If one or more rating agencies downgrade any Registrant, Southern Company Gas Capital, or Nicor Gas borrowing costs likely would increase, including automatic increases in interest rates under applicable term loans and credit facilities, the pool of investors and funding sources would likely decrease, and, particularly for any downgrade to below investment grade, significant collateral requirements may be triggered in a number of contracts. Any credit rating downgrades could require altering the mix of debt financing currently used, and could require the issuance of secured indebtedness and/or indebtedness with additional restrictive covenants binding the applicable company.
Uncertainty in demand for energy can result in lower earnings or higher costs. If demand for energy falls short of expectations, it could result in potentially stranded assets. If demand for energy exceeds expectations, it could result in increased costs for purchasing capacity in the open market or building additional electric generation and transmission facilities or natural gas distribution and storage facilities.
Southern Company, the traditional electric operating companies, and Southern Power each engage in a long-term planning process to estimate the optimal mix and timing of new generation assets required to serve future load obligations. Southern Company Gas engages in a long-term planning process to estimate the optimal mix and timing of building new pipelines and storage facilities, replacing existing pipelines, rewatering storage facilities, and entering new markets and/or expanding in existing markets. These planning processes must look many years into the future in order to accommodate the long lead times associated with the permitting and construction of new generation and associated transmission facilities and natural gas distribution and storage facilities. Inherent risk exists in predicting demand as future loads are dependent on many uncertain factors, including economic conditions, customer usage patterns, efficiency programs, and customer technology adoption. Because regulators may not permit the traditional electric operating companies or Southern Company Gas' regulated operating companies to adjust rates to recover the costs of new generation and associated transmission assets and/or new pipelines and related infrastructure in a timely manner or at all, these subsidiaries may not be able to fully recover these costs or may have exposure to regulatory lag associated with the time between the incurrence of costs and the recovery in customers' rates. In addition, under Southern Power's model of selling capacity and energy at negotiated market-based rates under long-term PPAs, Southern Power might not be able to fully execute its business plan if market prices drop below original forecasts. Southern Power and/or the traditional electric operating companies may not be able to extend existing PPAs or find new buyers for existing generation assets as existing PPAs expire, or they may be forced to market these assets at prices lower than originally intended. These situations could have negative impacts on net income and cash flows for the affected Registrant.
The traditional electric operating companies are currently obligated to supply power to retail customers and wholesale customers under long-term PPAs. Southern Power is currently obligated to supply power to wholesale customers under long-term PPAs. At peak times, the demand for power required to meet this obligation could exceed the Southern Company system's available generation capacity. Market or competitive forces may require that the traditional electric operating companies purchase capacity on the open market or build additional generation and transmission facilities and that Southern Power purchase energy or capacity on the open market. Because regulators may not permit the traditional electric operating companies to pass all of these purchase or construction costs on to their customers, the traditional electric operating companies may not be able to recover some or all of these costs or may have exposure to regulatory lag associated with the time between the incurrence of costs of purchased or constructed capacity and the traditional electric operating companies' recovery in customers' rates. Under Southern Power's long-term fixed price PPAs, Southern Power may not be able to recover all of these costs. These situations could have negative impacts on net income and cash flows for the affected Registrant.

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The businesses of the Registrants, SEGCO, and Nicor Gas are dependent on their ability to successfully access funds through capital markets and financial institutions. The inability of any of the Registrants, SEGCO, or Nicor Gas to access funds may limit its ability to execute its business plan by impacting its ability to fund capital investments or acquisitions that it may otherwise rely on to achieve future earnings and cash flows.
The Registrants, SEGCO, and Nicor Gas rely on access to both short-term money markets and longer-term capital markets as a significant source of liquidity for capital requirements not satisfied by the cash flow from their respective operations. If any of the Registrants, SEGCO, or Nicor Gas is not able to access capital at competitive rates or on favorable terms, its ability to implement its business plan will be limited by impacting its ability to fund capital investments or acquisitions that it may otherwise rely on to achieve future earnings and cash flows. In addition, the Registrants, SEGCO, and Nicor Gas rely on committed bank lending agreements as back-up liquidity which allows them to access low cost money markets. Each of the Registrants, SEGCO, and Nicor Gas believes that it will maintain sufficient access to these financial markets based upon current credit ratings. However, certain events or market disruptions may increase the cost of borrowing or adversely affect the ability to raise capital through the issuance of securities or other borrowing arrangements or the ability to secure committed bank lending agreements used as back-up sources of capital. Such disruptions could include an economic downturn or uncertainty; bankruptcy or financial distress at an unrelated energy company, financial institution, or sovereign entity; capital markets volatility and disruption, either nationally or internationally; changes in tax policy; volatility in market prices for electricity and natural gas; actual or threatened cyber or physical attacks on the Southern Company system's facilities or unrelated energy companies' facilities; war or threat of war; or the overall health of the utility and financial institution industries.
Additionally, due to a portion of the Registrants' indebtedness bearing interest at fluctuating rates based on LIBOR or other benchmark rates, the potential phasing out of these rates may adversely affect the costs of financing. The discontinuation, reform, or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual relationships in the credit markets or cause disruption to the broader financial markets and could result in adverse consequences to the return on, value of, and market for the Registrants' securities and other instruments whose returns are linked to any such benchmark.
Failure to comply with debt covenants or conditions could adversely affect the ability of the Registrants, SEGCO, Southern Company Gas Capital, or Nicor Gas to execute future borrowings.
The debt and credit agreements of the Registrants, SEGCO, Southern Company Gas Capital, and Nicor Gas contain various financial and other covenants. Georgia Power's loan guarantee agreement with the DOE contains additional covenants, events of default, and mandatory prepayment events relating to the construction of Plant Vogtle Units 3 and 4. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements, which would negatively affect the applicable company's financial condition and liquidity.
Volatility in the securities markets, interest rates, and other factors could substantially increase defined benefit pension and other postretirement plan costs and the funding available for nuclear decommissioning.
The costs of providing pension and other postretirement benefit plans are dependent on a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plan, changes in actuarial assumptions, government regulations, and/or life expectancy, and the frequency and amount of the Southern Company system's required or voluntary contributions made to the plans. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as a significant decline in the value of investments that fund the pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and the Southern Company system could be required from time to time to fund the pension plans with significant amounts of cash. Such cash funding obligations could have a material impact on liquidity by reducing cash flows and could negatively affect results of operations. See MANAGEMENT'S DISCUSSION AND ANALYSIS – ACCOUNTING POLICIES – "Application of Critical Accounting Policies and Estimates – Pension and Other Postretirement Benefits" in Item 7 herein and Note 11 to the financial statements in Item 8 herein for additional information regarding the defined benefit pension and other postretirement plans. Additionally, Alabama Power and Georgia Power each hold significant assets in their nuclear decommissioning trusts to satisfy obligations to decommission their nuclear plants. The rate of return on assets held in those trusts can significantly impact both the funding available for decommissioning and the funding requirements for the trusts. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 herein for additional information.
The Registrants are subject to risks associated with their ability to obtain adequate insurance at acceptable costs.
The financial condition of some insurance companies, actual or threatened physical or cyber attacks, and natural disasters, among other things, could have disruptive effects on insurance markets. The availability of insurance may decrease, and the insurance that the Registrants are able to obtain may have higher deductibles, higher premiums, and more restrictive policy terms. Further, the insurance policies may not cover all of the potential exposures or the actual amount of loss incurred.

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Any losses not covered by insurance, or any increases in the cost of applicable insurance, could adversely affect the results of operations, cash flows, or financial condition of the affected Registrant.
The use of derivative contracts by Southern Company and its subsidiaries in the normal course of business could result in financial losses that negatively impact the net income of the Registrants or in reported net income volatility.
Southern Company and its subsidiaries use derivative instruments, such as swaps, options, futures, and forwards, to manage their commodity and interest rate exposures and, to a lesser extent, manage foreign currency exchange rate exposure and engage in limited trading activities. The Registrants could recognize financial losses as a result of volatility in the market values of these contracts or if a counterparty fails to perform. These risks are managed through risk management policies, limits, and procedures, which might not work as planned and cannot entirely eliminate the risks associated with these activities. In addition, derivative contracts entered into for hedging purposes might not offset the underlying exposure being hedged as expected, resulting in financial losses. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these financial instruments can involve management's judgment or use of estimates. The factors used in the valuation of these instruments become more difficult to predict and the calculations become less reliable further into the future. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts.
In addition, Southern Company Gas utilizes derivative instruments to lock in economic value in wholesale gas services, which may not qualify as, or may not be designated as, hedges for accounting purposes. The difference in accounting treatment for the underlying position and the financial instrument used to hedge the value of the contract can cause volatility in reported net income of Southern Company and Southern Company Gas while the positions are open due to mark-to-market accounting.
See Notes 13 and 14 to the financial statements in Item 8 herein for additional information.
Future impairments of goodwill or long-lived assets could have a material adverse effect on the Registrants' results of operations.
Goodwill is assessed for impairment at least annually and more frequently if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value and long-lived assets are assessed for impairment whenever events or circumstances indicate that an asset's carrying amount may not be recoverable. In connection with the completion of the Merger, the application of the acquisition method of accounting was pushed down to Southern Company Gas. The excess of the purchase price over the fair values of Southern Company Gas' assets and liabilities was recorded as goodwill. This resulted in a significant increase in the goodwill recorded on Southern Company's and Southern Company Gas' consolidated balance sheets. At December 31, 2019, goodwill was $5.3 billion and $5.0 billion for Southern Company and Southern Company Gas, respectively.
In addition, Southern Company and its subsidiaries have long-lived assets recorded on their balance sheets. To the extent the value of goodwill or long-lived assets become impaired, the affected Registrant may be required to incur impairment charges that could have a material impact on their results of operations. For example, Southern Company Gas has two natural gas storage facilities located in California and Texas, which could be impacted by ongoing changes in the U.S. natural gas storage market. Recent sales of natural gas storage facilities have resulted in losses for the sellers and may imply an impact on future rates and/or asset values. Sustained diminished natural gas storage values could trigger impairment of either of these natural gas storage facilities. See Note 3 to the financial statements under "Other Matters" in Item 8 herein for information regarding certain impairment charges at Southern Company and Southern Company Gas.
Item 1B.UNRESOLVED STAFF COMMENTS.
None.

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Item 2. PROPERTIES
Electric
Electric Properties
The traditional electric operating companies, Southern Power, and SEGCO, at December 31, 2019, owned and/or operated 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear generating stations, 13 combined cycle/cogeneration stations, 42 solar facilities, 10 wind facilities, one fuel cell facility, and one battery storage facility. The amounts of capacity for each company at December 31, 2019 are shown in the table below. The traditional electric operating companies have certain jointly-owned generating stations. For these facilities, the nameplate capacity shown represents the Registrant's portion of total plant capacity, with ownership percentages provided if less than 100%.
Generating Station/Ownership PercentageLocation
Nameplate
Capacity(a)

 
  (KWs)
 
FOSSIL STEAM   
GadsdenGadsden, AL120,000
 
BarryMobile, AL1,300,000
 
Greene County (60%)Demopolis, AL300,000
 
Gaston Unit 5Wilsonville, AL880,000
 
Miller (95.92%)Birmingham, AL2,532,288
 
Alabama Power Total 5,132,288
 
BowenCartersville, GA3,160,000
 
Scherer (8.4% of Units 1 and 2 and 75% of Unit 3)Macon, GA750,924
 
Wansley (53.5%)Carrollton, GA925,550
 
YatesNewnan, GA700,000
 
Georgia Power Total 5,536,474
 
Daniel (50%)Pascagoula, MS500,000
 
Greene County (40%)Demopolis, AL200,000
 
WatsonGulfport, MS750,000
 
Mississippi Power Total 1,450,000
 
Gaston Units 1-4Wilsonville, AL  
SEGCO Total 1,000,000
(b) 
Total Fossil Steam 13,118,762
 
NUCLEAR STEAM   
FarleyDothan, AL  
Alabama Power Total 1,720,000
 
Hatch (50.1%)Baxley, GA899,612
 
Vogtle Units 1 and 2 (45.7%)Augusta, GA1,060,240
 
Georgia Power Total 1,959,852
 
Total Nuclear Steam 3,679,852
 

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Generating Station/Ownership PercentageLocation
Nameplate
Capacity(a)

 
COMBUSTION TURBINES   
Greene CountyDemopolis, AL  
Alabama Power Total 720,000
 
BoulevardSavannah, GA19,700
 
McDonough Unit 3Atlanta, GA78,800
 
McIntosh Units 1 through 8Effingham County, GA640,000
 
McManusBrunswick, GA481,700
 
RobinsWarner Robins, GA158,400
 
Wansley (53.5%)Carrollton, GA26,322
 
WilsonAugusta, GA354,100
 
Georgia Power Total 1,759,022
 
SweattMeridian, MS39,400
 
WatsonGulfport, MS39,360
 
Mississippi Power Total 78,760
 
AddisonThomaston, GA668,800
 
Cleveland CountyCleveland County, NC720,000
 
DahlbergJackson County, GA756,000
 
RowanSalisbury, NC455,250
 
Southern Power Total 2,600,050
 
Gaston (SEGCO)
Wilsonville, AL19,680
(b) 
Total Combustion Turbines 5,177,512
 
COGENERATION   
Washington CountyWashington County, AL123,428
 
Lowndes CountyBurkeville, AL104,800
 
TheodoreTheodore, AL236,418
 
Alabama Power Total 464,646
 
Chevron Cogenerating StationPascagoula, MS147,292
(c) 
Mississippi Power Total 147,292
 
Total Cogeneration 611,938
 
COMBINED CYCLE   
BarryMobile, AL  
Alabama Power Total 1,070,424
 
McIntosh Units 10 and 11Effingham County, GA1,318,920
 
McDonough-Atkinson Units 4 through 6Atlanta, GA2,520,000
 
Georgia Power Total 3,838,920
 
DanielPascagoula, MS1,070,424
 
RatcliffeKemper County, MS769,898
 
Mississippi Power Total 1,840,322
 
FranklinSmiths, AL1,857,820
 
HarrisAutaugaville, AL1,318,920
 
MankatoMankato, MN720,000
(d) 
RowanSalisbury, NC530,550
 
Wansley Units 6 and 7Carrollton, GA1,073,000
 
Southern Power Total 5,500,290
 
Total Combined Cycle 12,249,956
 

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Generating Station/Ownership PercentageLocation
Nameplate
Capacity(a)

 
HYDROELECTRIC FACILITIES   
BankheadHolt, AL53,985
 
BouldinWetumpka, AL225,000
 
HarrisWedowee, AL132,000
 
HenryOhatchee, AL72,900
 
HoltHolt, AL46,944
 
JordanWetumpka, AL100,000
 
LayClanton, AL177,000
 
Lewis SmithJasper, AL157,500
 
Logan MartinVincent, AL135,000
 
MartinDadeville, AL182,000
 
MitchellVerbena, AL170,000
 
ThurlowTallassee, AL81,000
 
WeissLeesburg, AL87,750
 
YatesTallassee, AL47,000
 
Alabama Power Total 1,668,079
 
Bartletts FerryColumbus, GA173,000
 
BurtonClayton, GA6,120
 
Flint RiverAlbany, GA5,400
 
Goat RockColumbus, GA38,600
 
Lloyd ShoalsJackson, GA14,400
 
Morgan FallsAtlanta, GA16,800
 
NacoocheeLakemont, GA4,800
 
North HighlandsColumbus, GA29,600
 
Oliver DamColumbus, GA60,000
 
Rocky Mountain (25.4%)Rome, GA229,362
(e) 
Sinclair DamMilledgeville, GA45,000
 
Tallulah FallsClayton, GA72,000
 
TerroraClayton, GA16,000
 
TugaloClayton, GA45,000
 
Wallace DamEatonton, GA321,300
 
YonahToccoa, GA22,500
 
Georgia Power Total 1,099,882
 
Total Hydroelectric Facilities 2,767,961
 

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Generating Station/Ownership PercentageLocation
Nameplate
Capacity(a)

 
RENEWABLE SOURCES:   
SOLAR FACILITIES   
Fort RuckerCalhoun County, AL10,560
 
Anniston Army DepotDale County, AL7,380
 
Alabama Power Total 17,940
 
Fort BenningColumbus, GA30,005
 
Fort GordonAugusta, GA30,000
 
Fort StewartFort Stewart, GA30,000
 
Kings BayCamden County, GA30,161
 
DaltonDalton, GA6,508
 
Marine Corps Logistics BaseAlbany, GA31,161
 
6 Other PlantsVarious Georgia locations11,171
 
Georgia Power Total 169,006
 
AdobeKern County, CA20,000
 
ApexNorth Las Vegas, NV20,000
 
Boulder IClark County, NV100,000
 
ButlerTaylor County, GA104,000
 
Butler Solar FarmTaylor County, GA22,000
 
CalipatriaImperial County, CA20,000
 
Campo VerdeImperial County, CA147,420
 
CimarronSpringer, NM30,640
 
Decatur CountyDecatur County, GA20,000
 
Decatur ParkwayDecatur County, GA84,000
 
Desert StatelineSan Bernadino County, CA299,900
 
East PecosPecos County, TX120,000
 
GarlandKern County, CA205,290
 
Gaskell West IKern County, CA20,000
 
GranvilleOxford, NC2,500
 
HenriettaKings County, CA102,000
 
Imperial ValleyImperial County, CA163,200
 
LamesaDawson County, TX102,000
 
Lost Hills - BlackwellKern County, CA32,000
 
Macho SpringsLuna County, NM55,000
 
Morelos del SolKern County, CA15,000
 
North StarFresno County, CA61,600
 
PawpawTaylor County, GA30,480
 
RoserockPecos County, TX160,000
 
RutherfordRutherford County, NC74,800
 
SandhillsTaylor County, GA148,000
 
SpectrumClark County, NV30,240
 
TranquillityFresno County, CA205,300
 
Southern Power Total 2,395,370
(f) 
Total Solar 2,582,316
 

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Generating Station/Ownership PercentageLocation
Nameplate
Capacity(a)

 
WIND FACILITIES   
BethelCastro County, TX276,000
 
Cactus FlatsConcho County, TX148,350
 
Grant PlainsGrant County, OK147,200
 
Grant WindGrant County, OK151,800
 
Kay WindKay County, OK299,000
 
PassadumkeagPenobscot County, ME42,900
 
Salt ForkDonley & Gray Counties TX174,000
 
Tyler BluffCooke County, TX125,580
 
Wake WindCrosby & Floyd Counties, TX257,250
 
Wildhorse MountainPushmataha County, OK100,000
 
Southern Power Total 1,722,080
(g) 
FUEL CELL FACILITY   
Redlion and Brookside (DSGP)New Castle and Newark, DE27,500
(h) 
Southern Power Total 27,500
 
BATTERY STORAGE FACILITY   
MillikenOrange County, CA2,000
(i) 
Southern Power Total 2,000
 
    
Total Alabama Power Generating Capacity 10,793,377
 
Total Georgia Power Generating Capacity 14,363,156
 
Total Mississippi Power Generating Capacity 3,516,374
 
Total Southern Power Generating Capacity 12,247,290
 
Total Generating Capacity 41,939,877
 
(a)
See "Jointly-Owned Facilities" and "Titles to Property" herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information.
(b)
Alabama Power and Georgia Power each own 50% of the outstanding common stock of SEGCO, an operating public utility company. Alabama Power and Georgia Power are each entitled to one-half of SEGCO's capacity and energy. Alabama Power acts as SEGCO's agent in the operation of SEGCO's units and furnishes fuel to SEGCO for its units. See Note 7 to the financial statements under "SEGCO" in Item 8 herein for additional information.
(c)
Generation is dedicated to a single industrial customer. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Credit Rating Risk" in Item 7 herein.
(d)
On January 17, 2020, Southern Power completed the sale of its equity interest in Plant Mankato to a subsidiary of Xcel. See Note 15 to the financial statements under "Southern PowerSales of Natural Gas and Biomass Plants" in Item 8 herein for additional information.
(e)Operated by OPC.
(f)Southern Power owns a 67% equity interest in SP Solar (a limited partnership indirectly owning all of Southern Power's solar facilities, except the Roserock and Gaskell West facilities). SP Solar is the 51% majority owner of Boulder 1, Garland, Henrietta, Imperial Valley, Lost Hills Blackwell, North Star, and Tranquillity; the 66% majority owner of Desert Stateline; and the sole owner of the remaining SP Solar facilities. Southern Power is the 51% majority owner of Roserock and also the controlling partner in a tax equity partnership owning Gaskell West. All of these entities are consolidated subsidiaries of Southern Power and the capacity shown in the table is 100% of the nameplate capacity for the respective facility.
(g)Southern Power is the controlling member in SP Wind (a tax equity entity owning all of Southern Power's wind facilities, except Cactus Flats and Wildhorse Mountain). SP Wind is the 90.1% majority owner of Wake Wind and owns 100% of the remaining SP Wind facilities. Southern Power is the controlling partner in tax equity partnerships owning Cactus Flats and Wildhorse Mountain. All of these entities are consolidated subsidiaries of Southern Power and the capacity shown in the table is 100% of the nameplate capacity for the respective facility.
(h)Southern Power has two noncontrolling interest partners that own approximately 10 MWs of the facility.
(i)Southern Power has an equity method investment in the facility as the Class B member.
Except as discussed below under "Titles to Property," the principal plants and other important units of the traditional electric operating companies, Southern Power, and SEGCO are owned in fee by the respective companies. It is the opinion of management of each such company that its operating properties are adequately maintained and are substantially in good operating condition, and suitable for their intended purpose.
Mississippi Power owns a 79-mile length of 500-kilovolt transmission line which is leased to Entergy Gulf States Louisiana, LLC. The line extends from Plant Daniel to the Louisiana state line. Entergy Gulf States Louisiana, LLC is paying a use fee through 2024 covering all expenses and the amortization of the original cost. At December 31, 2019, the unamortized portion was approximately $10 million.

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Mississippi Power owns a lignite mine and equipment that were intended to provide fuel for the Kemper IGCC. Mississippi Power also has mineral reserves located around the Kemper County energy facility. Liberty Fuels Company, LLC, the operator of the mine, has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities. 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 2 to the financial statements under "Mississippi PowerKemper County Energy FacilityLignite Mine and CO2 Pipeline Facilities" in Item 8 herein for additional information.
In December 2019, Mississippi Power updated its proposed RMP, originally filed in August 2018, which identified alternatives that, if implemented, could impact Mississippi Power's generating stations, including Plant Greene County, which is jointly owned with Alabama Power. See BUSINESS in Item 1 herein under "Rate MattersIntegrated Resource PlanningMississippi Power" and Note 2 to the financial statements under "Mississippi PowerReserve Margin Plan" in Item 8 herein for additional information.
In conjunction with Southern Company's sale of Gulf Power, NextEra Energy held back $75 million of the purchase price pending Mississippi Power and Gulf Power negotiating a mutually acceptable revised operating agreement for Plant Daniel. In addition, Mississippi Power and Gulf Power committed 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 January 15, 2019, Gulf Power provided notice to Mississippi Power that Gulf Power will retire its share of the generating capacity of Plant Daniel on January 15, 2024. Mississippi Power has the option to purchase Gulf Power's ownership interest for $1 on January 15, 2024, provided that Mississippi Power exercises the option no later than 120 days prior to that date. Mississippi Power is assessing the potential operational and economic effects of Gulf Power's notice. The ultimate outcome of these matters remains subject to completion of Mississippi Power's evaluations and applicable regulatory approvals, including by the FERC and the Mississippi PSC, and cannot be determined at this time. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for information regarding the sale of Gulf Power.
In 2019, the maximum demand on the traditional electric operating companies, Southern Power Company, and SEGCO was 34,209,000 KWs and occurred on August 13, 2019. The all-time maximum demand of 38,777,000 KWs on the traditional electric operating companies (including Gulf Power), Southern Power Company, and SEGCO occurred on August 22, 2007. These amounts exclude demand served by capacity retained by MEAG Power, OPC, and SEPA. The reserve margin for the traditional electric operating companies, Southern Power Company, and SEGCO in 2019 was 28.1%. See SELECTED FINANCIAL DATA in Item 6 herein for additional information.
Jointly-Owned Facilities
Alabama Power, Georgia Power, and Mississippi Power at December 31, 2019 had undivided interests in certain generating plants and other related facilities with non-affiliated parties. The percentages of ownership of the total plant or facility are as follows:
    Percentage Ownership  
  
Total
Capacity
 
Alabama
Power
 
Power
South
 
Georgia
Power
 
Mississippi
Power
 OPC 
MEAG
Power
 Dalton 
Gulf
Power
  (MWs)                
Plant Miller Units 1 and 2 1,320
 91.8% 8.2% % % % % % %
Plant Hatch 1,796
 
 
 50.1
 
 30.0
 17.7
 2.2
 
Plant Vogtle Units 1 and 2 2,320
 
 
 45.7
 
 30.0
 22.7
 1.6
 
Plant Scherer Units 1 and 2 1,636
 
 
 8.4
 
 60.0
 30.2
 1.4
 
Plant Scherer Unit 3 818
 
 
 75.0
 
 
 
 
 25.0
Plant Wansley 1,779
 
 
 53.5
 
 30.0
 15.1
 1.4
 
Rocky Mountain 903
 
 
 25.4
 
 74.6
 
 
 
Plant Daniel Units 1 and 2 1,000
 
 
 
 50.0
 
 
 
 50.0
Alabama Power, Georgia Power, and Mississippi Power have contracted to operate and maintain the respective units in which each has an interest (other than Rocky Mountain) as agent for the joint owners. Southern Nuclear operates and provides services to Alabama Power's and Georgia Power's nuclear plants.
In addition, Georgia Power has commitments, in the form of capacity purchases, regarding a portion of a 5% interest in the original cost of Plant Vogtle Units 1 and 2 owned by MEAG Power that are in effect until the later of the retirement of the plant or the latest stated maturity date of MEAG Power's bonds issued to finance such ownership interest. The payments for capacity

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are required whether or not any capacity is available. Portions of the capacity payments made to MEAG Power for its Plant Vogtle Units 1 and 2 investment relate to costs in excess of Georgia Power's allowed investment for ratemaking purposes. The present value of these portions at the time of the disallowance was written off. Generally, the cost of such capacity is included in purchased power from non-affiliates in Georgia Power's statements of income in Item 8 herein. Also see Note 3 to the financial statements under "Commitments" in Item 8 herein for additional information.
Construction continues on Plant Vogtle Units 3 and 4, which are jointly owned by the Vogtle Owners (with each owner holding the same undivided ownership interest as shown in the table above with respect to Plant Vogtle Units 1 and 2). See Note 2 to the financial statements under "Georgia PowerNuclear Construction" in Item 8 herein.
Titles to Property
The traditional electric operating companies', Southern Power's, and SEGCO's interests in the principal plants and other important units of the respective companies are owned in fee by such companies, subject to the following major encumbrances: (1) liens pursuant to the assumption of debt obligations by Mississippi Power in connection with the acquisition of Plant Daniel Units 3 and 4, (2) a leasehold interest granted by Mississippi Power's largest retail customer, Chevron Products Company (Chevron), at the Chevron refinery, on which five combustion turbines of Mississippi Power are located, (3) liens pursuant to agreements with Chevron on Mississippi Power's co-generation assets located at the Chevron refinery, and (4) liens associated with Georgia Power's reimbursement obligations to the DOE under its loan guarantee, which are secured by a first priority lien on (a) Georgia Power's 45.7% undivided ownership interest in Plant Vogtle Units 3 and 4 and (b) Georgia Power's rights and obligations under the principal contracts relating to Plant Vogtle Units 3 and 4. See Note 5 to the financial statements under "Assets Subject to Lien" and Note 8 to the financial statements under "Secured Debt" and "Long-term DebtDOE Loan Guarantee Borrowings" in Item 8 herein for additional information. The traditional electric operating companies own the fee interests in certain of their principal plants as tenants in common. See "Jointly-Owned Facilities" herein and Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information. Properties such as electric transmission and distribution lines, steam heating mains, and gas pipelines are constructed principally on rights-of-way, which are maintained under franchise or are held by easement only. A substantial portion of lands submerged by reservoirs is held under flood right easements. In addition, certain of the renewable generating facilities occupy or use real property that is not owned, primarily through various leases, easements, rights-of-way, permits, or licenses from private landowners or governmental entities.
Natural Gas
Southern Company Gas considers its properties to be adequately maintained, substantially in good operating condition, and suitable for their intended purpose. The following provides the location and general character of the materially important properties that are used by the segments of Southern Company Gas. Substantially all of Nicor Gas' properties are subject to the lien of the indenture securing its first mortgage bonds. See Note 8 to the financial statements in Item 8 herein for additional information.
Distribution and Transmission Mains
Southern Company Gas' distribution systems transport natural gas from its pipeline suppliers to customers in its service areas. These systems consist primarily of distribution and transmission mains, compressor stations, peak shaving/storage plants, service lines, meters, and regulators. At December 31, 2019, Southern Company Gas' gas distribution operations segment owned approximately 75,585 miles of underground distribution and transmission mains, which are located on easements or rights-of-way that generally provide for perpetual use.
Storage Assets
Gas Distribution Operations
Southern Company Gas owns and operates eight underground natural gas storage fields in Illinois with a total working capacity of approximately 150 Bcf, approximately 135 Bcf of which is usually cycled on an annual basis. This system is designed to meet about 50% of the estimated peak-day deliveries and approximately 40% of the normal winter deliveries in Illinois. This level of storage capability provides Nicor Gas with supply flexibility, improves the reliability of deliveries, and helps mitigate the risk associated with seasonal price movements.
Southern Company Gas also has four LNG plants located in Georgia and Tennessee with total LNG storage capacity of approximately 7.0 Bcf. In addition, Southern Company Gas owns two propane storage facilities in Virginia, each with storage capacity of approximately 0.3 Bcf. The LNG plants and propane storage facility are used by Southern Company Gas' gas distribution operations segment to supplement natural gas supply during peak usage periods.

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All Other
Southern Company Gas subsidiaries own three high-deliverability natural gas storage and hub facilities that are included in the all other segment. Jefferson Island Storage & Hub, LLC operates a storage facility in Louisiana consisting of two salt dome gas storage caverns. See Note 3 to the financial statements under "Other MattersSouthern Company GasNatural Gas Storage Facilities" in Item 8 herein for additional information on a related impairment charge recorded in 2019. Golden Triangle Storage, Inc. operates a storage facility in Texas consisting of two salt dome caverns. Central Valley Gas Storage, LLC operates a depleted field storage facility in California. In addition, Southern Company Gas has a LNG facility in Alabama that produces LNG for Pivotal LNG to support its business of selling LNG as a substitute fuel in various markets. See Notes 3, 7, and 15 to the financial statements under "Southern Company Gas – Gas Pipeline Projects," "Southern Company Gas – Equity Method Investments," and "Southern Company Gas – Proposed Sale of Pivotal LNG and Atlantic Coast Pipeline," respectively, in Item 8 herein for additional information.
Jointly-Owned Properties
Southern Company Gas' gas pipeline investments segment has a 50% undivided ownership interest in a 115-mile pipeline facility in northwest Georgia that was placed in service in 2017. Southern Company Gas also has an agreement to lease its 50% undivided ownership in the pipeline facility. See Note 5 to the financial statements under "Joint Ownership Agreements" in Item 8 herein for additional information.

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Item 3.LEGAL PROCEEDINGS
See Note 3 to the financial statements in Item 8 herein for descriptions of legal and administrative proceedings discussed therein.
Item 4.MINE SAFETY DISCLOSURES
Not applicable.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS – SOUTHERN COMPANY
(Identification of executive officers of Southern Company is inserted in Part I in accordance with Regulation S-K, Item 401) The ages of the officers set forth below are as of December 31, 2019.
Thomas A. Fanning
Chairman, President, and Chief Executive Officer
Age 62
First elected in 2003. Chairman and Chief Executive Officer since December 2010 and President since August 2010.
Andrew W. Evans
Executive Vice President and Chief Financial Officer
Age 53
First elected in 2016. Executive Vice President since July 2016 and Chief Financial Officer since June 2018. Previously served as Chief Executive Officer and Chairman of Southern Company Gas' Board of Directors from January 2016 through June 2018, President of Southern Company Gas from May 2015 through June 2018, Chief Operating Officer of Southern Company Gas from May 2015 through December 2015, and Executive Vice President and Chief Financial Officer of Southern Company Gas from May 2006 through May 2015.
W. Paul Bowers
Chairman, President and Chief Executive Officer of Georgia Power
Age 63
First elected in 2001. Chief Executive Officer, President, and Director of Georgia Power since January 2011. Chairman of Georgia Power's Board of Directors since May 2014.
Stanley W. Connally, Jr.
Executive Vice President of SCS
Age 50
First elected in 2012. Executive Vice President for Operations of SCS since June 2018. Previously served as President, Chief Executive Officer, and Director of Gulf Power from July 2012 through December 2018 and Chairman of Gulf Power's Board of Directors from July 2015 through December 2018.
Mark A. Crosswhite
Chairman, President and Chief Executive Officer of Alabama Power
Age 57
First elected in 2011. President, Chief Executive Officer, and Director of Alabama Power since March 2014. Chairman of Alabama Power's Board of Directors since May 2014.
Kimberly S. Greene
Chairman, President, and Chief Executive Officer of Southern Company Gas
Age 53
First elected in 2013. Chairman, President, and Chief Executive Officer of Southern Company Gas since June 2018. Director of Southern Company Gas since July 2016. Previously served as Executive Vice President and Chief Operating Officer of Southern Company from March 2014 through June 2018.
James Y. Kerr II
Executive Vice President, Chief Legal Officer, and Chief Compliance Officer
Age 55
First elected in 2014. Executive Vice President, Chief Legal Officer (formerly known as General Counsel), and Chief Compliance Officer since March 2014.
Stephen E. Kuczynski
Chairman, President, and Chief Executive Officer of Southern Nuclear
Age 57
First elected in 2011. Chairman, President, and Chief Executive Officer of Southern Nuclear since July 2011.
Mark S. Lantrip
Executive Vice President
Age 65
First elected in 2014. Executive Vice President since February 2019. Chairman, President, and Chief Executive Officer of SCS since March 2014 and Chairman and Chief Executive Officer of Southern Power since March 2018. Previously served as President of Southern Power from March 2018 to May 2019.

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Anthony L. Wilson
Chairman, President, and Chief Executive Officer of Mississippi Power
Age 55
First elected in 2015. President of Mississippi Power since October 2015 and Chief Executive Officer and Director since January 2016. Chairman of Mississippi Power's Board of Directors since August 2016. Previously served as Executive Vice President of Mississippi Power from May 2015 to October 2015 and Executive Vice President of Georgia Power from January 2012 to May 2015.
Christopher C. Womack
Executive Vice President
Age 61
First elected in 2008. Executive Vice President and President of External Affairs since January 2009.
The officers of Southern Company were elected at the first meeting of the directors following the last annual meeting of stockholders held on May 22, 2019, for a term of one year or until their successors are elected and have qualified.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS – ALABAMA POWER
(Identification of executive officers of Alabama Power is inserted in Part I in accordance with Regulation S-K, Item 401.) The ages of the officers set forth below are as of December 31, 2019.
Mark A. Crosswhite
Chairman, President, and Chief Executive Officer
Age 57
First elected in 2014. President, Chief Executive Officer, and Director since March 1, 2014. Chairman since May 2014.
Greg J. Barker
Executive Vice President
Age 56
First elected in 2016. Executive Vice President for Customer Services since February 2016. Previously served as Senior Vice President of Marketing and Economic Development from April 2012 to February 2016.
Philip C. Raymond
Executive Vice President, Chief Financial Officer, and Treasurer
Age 60
First elected in 2010. Executive Vice President, Chief Financial Officer, and Treasurer since August 2010.
Zeke W. Smith
Executive Vice President
Age 60
First elected in 2010. Executive Vice President of External Affairs since November 2010.
James P. Heilbron
Senior Vice President and Senior Production Officer
Age 48
First elected in 2013. Senior Vice President and Senior Production Officer of Alabama Power since March 2013 and Senior Vice President and Senior Production Officer – West of SCS and Senior Production Officer of Mississippi Power since October 2018.
R. Scott Moore
Senior Vice President
Age 52
First elected in 2017. Senior Vice President of Power Delivery since May 2017. Previously served as Vice President of Transmission from August 2012 to May 2017.
The officers of Alabama Power were elected at the meeting of the directors held on April 26, 2019 for a term of one year or until their successors are elected and have qualified.

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PART II

Item 5.MARKET FOR REGISTRANTS' COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)(1) The common stock of Southern Company is listed and traded on the NYSE under the ticker symbol SO. The common stock is also traded on regional exchanges across the U.S.
There is no market for the other Registrants' common stock, all of which is owned by Southern Company.
(a)(2) Number of Southern Company's common stockholders of record at January 31, 2020: 110,780
Southern Company has paid dividends on its common stock since 1948. Dividends paid per share of common stock were $2.46 in 2019 and $2.38 in 2018. In January 2020, Southern Company declared a quarterly dividend of 62 cents per share. Dividends on Southern Company's common stock are payable at the discretion of Southern Company's Board of Directors and depend upon earnings, financial condition, and other factors. See Note 8 to the financial statements under "Dividend Restrictions" in Item 8 herein for additional information.
Each of the other Registrants have one common stockholder, Southern Company.
(a)(3) Securities authorized for issuance under equity compensation plans.
See Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(b) Use of Proceeds
Not applicable.
(c) Issuer Purchases of Equity Securities
None.

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Item 6.SELECTED FINANCIAL DATA

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019
Southern Company and Subsidiary Companies 2019 Annual Report
 
2019(d)
 2018 2017 
2016(e)
 2015
Operating Revenues (in millions)$21,419
 $23,495
 $23,031
 $19,896
 $17,489
Total Assets (in millions)$118,700
 $116,914
 $111,005
 $109,697
 $78,318
Gross Property Additions (in millions)$7,814
 $8,205
 $5,984
 $7,624
 $6,169
Return on Average Common Equity (percent)(a)
18.15
 9.11
 3.44
 10.80
 11.68
Cash Dividends Paid Per Share of
 Common Stock
$2.4600
 $2.3800
 $2.3000
 $2.2225
 $2.1525
Consolidated Net Income Attributable to
   Southern Company (in millions)(a)
$4,739
 $2,226
 $842
 $2,448
 $2,367
Earnings Per Share —         
Basic$4.53
 $2.18
 $0.84
 $2.57
 $2.60
Diluted4.50
 2.17
 0.84
 2.55
 2.59
Capitalization (in millions):         
Common stockholders' equity$27,505
 $24,723
 $24,167
 $24,758
 $20,592
Preferred and preference stock of subsidiaries and
   noncontrolling interests(b)
4,254
 4,316
 1,361
 1,854
 1,390
Redeemable preferred stock of subsidiaries291
 291
 324
 118
 118
Redeemable noncontrolling interests
 
 
 164
 43
Long-term debt(c)
41,798
 40,736
 44,462
 42,629
 24,688
Total (excluding amounts due within one year)(c)
$73,848
 $70,066
 $70,314
 $69,523
 $46,831
Capitalization Ratios (percent):         
Common stockholders' equity37.2
 35.3
 34.4
 35.6
 44.0
Preferred and preference stock of subsidiaries and
   noncontrolling interests(b)
5.8
 6.2
 1.9
 2.7
 3.0
Redeemable preferred stock of subsidiaries0.4
 0.4
 0.5
 0.2
 0.3
Redeemable noncontrolling interests
 
 
 0.2
 0.1
Long-term debt(c)
56.6
 58.1
 63.2
 61.3
 52.6
Total (excluding amounts due within one year)(c)
100.0
 100.0
 100.0
 100.0
 100.0
Other Common Stock Data:         
Book value per share$26.11
 $23.91
 $23.99
 $25.00
 $22.59
Market price per share:         
High$64.26
 $49.43
 $53.51
 $54.64
 $53.16
Low43.26
 42.38
 46.71
 46.00
 41.40
Close (year-end)63.70
 43.92
 48.09
 49.19
 46.79
Market-to-book ratio (year-end) (percent)243.9
 183.7
 200.5
 196.8
 207.2
Price-earnings ratio (year-end) (times)14.1
 20.1
 57.3
 19.1
 18.0
Dividends paid (in millions)$2,570
 $2,425
 $2,300
 $2,104
 $1,959
Dividend yield (year-end) (percent)3.9
 5.4
 4.8
 4.5
 4.6
Dividend payout ratio (percent)54.2
 108.9
 273.2
 86.0
 82.7
Shares outstanding (in thousands):         
Average1,046,023
 1,020,247
 1,000,336
 951,332
 910,024
Year-end1,053,251
 1,033,788
 1,007,603
 990,394
 911,721
Stockholders of record (year-end)111,252
 116,135
 120,803
 126,338
 131,771
(a)Southern Company recorded a $2.6 billion pre-tax ($1.4 billion after tax) gain associated with the sale of Gulf Power in 2019. Georgia Power recorded a pre-tax estimated probable loss of $1.1 billion ($0.8 billion after tax) in the second quarter 2018 to reflect its revised estimate to complete construction and start-up of Plant Vogtle Units 3 and 4. In addition, pre-tax charges of $3.4 billion ($2.4 billion after tax) were recorded by Mississippi Power related to the suspension of the Kemper IGCC in 2017. Earnings in all periods presented were impacted by losses related to the Kemper IGCC. See Notes 2 and 15 to the financial statements in Item 8 herein for additional information.
(b)See Note 15 to the financial statements under "Southern Power – Sales of Renewable Facility Interests" in Item 8 herein for additional information on 2018 changes in noncontrolling interests.
(c)
Amounts related to Gulf Power were reclassified to liabilities held for sale at December 31, 2018. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for additional information.
(d)
The 2019 selected financial and operating data excludes Gulf Power, which was sold effective January 1, 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for additional information.
(e)The 2016 selected financial and operating data includes the operations of Southern Company Gas from the date of the Merger, July 1, 2016, through December 31, 2016.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Southern Company and Subsidiary Companies 2019 Annual Report
 
2019(a)
 2018 2017 
2016(b)
 2015
Operating Revenues (in millions):         
Residential$6,012
 $6,608
 $6,515
 $6,614
 $6,383
Commercial4,936
 5,266
 5,439
 5,394
 5,317
Industrial3,021
 3,224
 3,262
 3,171
 3,172
Other115
 124
 114
 55
 115
Total retail14,084
 15,222
 15,330
 15,234
 14,987
Wholesale2,152
 2,516
 2,426
 1,926
 1,798
Total revenues from sales of electricity16,236
 17,738
 17,756
 17,160
 16,785
Natural gas revenues3,792
 3,854
 3,791
 1,596
 
Other revenues1,391
 1,903
 1,484
 1,140
 704
Total$21,419
 $23,495
 $23,031
 $19,896
 $17,489
Kilowatt-Hour Sales (in millions):         
Residential48,528
 54,590
 50,536
 53,337
 52,121
Commercial49,101
 53,451
 52,340
 53,733
 53,525
Industrial50,106
 53,341
 52,785
 52,792
 53,941
Other726
 799
 846
 883
 897
Total retail148,461
 162,181
 156,507
 160,745
 160,484
Wholesale sales48,027
 49,963
 49,034
 37,043
 30,505
Total196,488
 212,144
 205,541
 197,788
 190,989
Average Revenue Per Kilowatt-Hour (cents):         
Residential12.39
 12.10
 12.89
 12.40
 12.25
Commercial10.05
 9.85
 10.39
 10.04
 9.93
Industrial6.03
 6.04
 6.18
 6.01
 5.88
Total retail9.49
 9.39
 9.80
 9.48
 9.34
Wholesale4.48
 5.04
 4.95
 5.20
 5.89
Total sales8.26
 8.36
 8.64
 8.68
 8.79
Average Annual Kilowatt-Hour         
Use Per Residential Customer12,135
 12,514
 11,618
 12,387
 13,318
Average Annual Revenue         
Per Residential Customer$1,503
 $1,555
 $1,498
 $1,541
 $1,630
Plant Nameplate Capacity         
Ratings (year-end) (megawatts)41,940
 45,824
 46,936
 46,291
 44,223
Maximum Peak-Hour Demand (megawatts):         
Winter30,022
 36,429
 31,956
 32,272
 36,794
Summer34,209
 34,841
 34,874
 35,781
 36,195
System Reserve Margin (at peak) (percent)28.1
 29.8
 30.8
 34.2
 33.2
Annual Load Factor (percent)60.3
 61.2
 61.4
 61.5
 59.9
Plant Availability (percent):         
Fossil-steam83.8
 81.4
 84.5
 86.4
 86.1
Nuclear92.5
 94.0
 94.7
 93.3
 93.5
(a)
The 2019 selected financial and operating data excludes Gulf Power, which was sold effective January 1, 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for additional information.
(b)The 2016 selected financial and operating data includes the operations of Southern Company Gas from the date of the Merger, July 1, 2016, through December 31, 2016.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Southern Company and Subsidiary Companies 2019 Annual Report
 
2019(a)
 2018 2017 
2016(b)
 2015
Source of Energy Supply (percent):         
Gas47.0
 43.0
 42.6
 41.9
 42.8
Coal20.3
 25.7
 26.5
 30.2
 32.2
Nuclear14.7
 13.8
 14.5
 14.6
 15.3
Hydro3.2
 2.9
 2.1
 2.1
 2.6
Other5.9
 5.4
 5.3
 2.3
 0.8
Purchased power8.9
 9.2
 9.0
 8.9
 6.3
Total100.0
 100.0
 100.0
 100.0
 100.0
Gas Sales Volumes (mmBtu in millions):         
Firm737
 791
 729
 296
 
Interruptible106
 109
 109
 53
 
Total843
 900
 838
 349
 
Traditional Electric Operating Company
   Customers (year-end) (in thousands):
         
Residential3,688
 4,053
 4,011
 3,970
 3,928
Commercial549
 603
 599
 595
 590
Industrial17
 17
 18
 17
 17
Other12
 12
 12
 11
 11
Total electric customers4,266
 4,685
 4,640
 4,593
 4,546
Gas distribution operations customers4,277
 4,248
 4,623
 4,586
 
Total utility customers8,543
 8,933
 9,263
 9,179
 4,546
Employees (year-end)27,943
 30,286
 31,344
 32,015
 26,703
(a)
The 2019 selected financial and operating data excludes Gulf Power, which was sold effective January 1, 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 herein for additional information.
(b)The 2016 selected financial and operating data includes the operations of Southern Company Gas from the date of the Merger, July 1, 2016, through December 31, 2016.

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SELECTED FINANCIAL AND OPERATING DATA 2015-2019
Alabama Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions)$6,125
 $6,032
 $6,039
 $5,889
 $5,768
Net Income After Dividends
on Preferred and Preference Stock (in millions)
$1,070
 $930
 $848
 $822
 $785
Cash Dividends on Common Stock (in millions)$844
 $801
 $714
 $765
 $571
Return on Average Common Equity (percent)13.03
 13.00
 12.89
 13.34
 13.37
Total Assets (in millions)$29,152
 $26,730
 $23,864
 $22,516
 $21,721
Gross Property Additions (in millions)$1,862
 $2,273
 $1,949
 $1,338
 $1,492
Capitalization (in millions):         
Common stockholder's equity$8,955
 $7,477
 $6,829
 $6,323
 $5,992
Preference stock
 
 
 196
 196
Redeemable preferred stock291
 291
 291
 85
 85
Long-term debt8,270
 7,923
 7,628
 6,535
 6,654
Total (excluding amounts due within one year)$17,516
 $15,691
 $14,748
 $13,139
 $12,927
Capitalization Ratios (percent):         
Common stockholder's equity51.1
 47.7
 46.3
 48.1
 46.4
Preference stock
 
 
 1.5
 1.5
Redeemable preferred stock1.7
 1.9
 2.0
 0.7
 0.7
Long-term debt47.2
 50.4
 51.7
 49.7
 51.4
Total (excluding amounts due within one year)100.0
 100.0
 100.0
 100.0
 100.0
Customers (year-end):         
Residential1,280,955
 1,273,526
 1,268,271
 1,262,752
 1,253,875
Commercial200,349
 200,032
 199,840
 199,146
 197,920
Industrial6,173
 6,158
 6,171
 6,090
 6,056
Other758
 760
 766
 762
 757
Total1,488,235
 1,480,476
 1,475,048
 1,468,750
 1,458,608
Employees (year-end)6,324
 6,650
 6,613
 6,805
 6,986



























II-6

    Table of Contents                                Index to Financial Statements

SELECTED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Alabama Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions):
         
Residential$2,449
 $2,335
 $2,302
 $2,322
 $2,207
Commercial1,635
 1,578
 1,649
 1,627
 1,564
Industrial1,393
 1,428
 1,477
 1,416
 1,436
Other24
 26
 30
 (43) 27
Total retail5,501
 5,367
 5,458
 5,322
 5,234
Wholesale — non-affiliates258
 279
 276
 283
 241
Wholesale — affiliates81
 119
 97
 69
 84
Total revenues from sales of electricity5,840
 5,765
 5,831
 5,674
 5,559
Other revenues285
 267
 208
 215
 209
Total$6,125
 $6,032
 $6,039
 $5,889
 $5,768
Kilowatt-Hour Sales (in millions):
         
Residential18,264
 18,626
 17,219
 18,343
 18,082
Commercial13,567
 13,868
 13,606
 14,091
 14,102
Industrial22,148
 23,006
 22,687
 22,310
 23,380
Other173
 187
 198
 208
 201
Total retail54,152
 55,687
 53,710
 54,952
 55,765
Wholesale — non-affiliates5,057
 5,018
 5,415
 5,744
 3,567
Wholesale — affiliates3,530
 4,565
 4,166
 3,177
 4,515
Total62,739
 65,270
 63,291
 63,873
 63,847
Average Revenue Per Kilowatt-Hour (cents):
         
Residential13.41
 12.54
 13.37
 12.66
 12.21
Commercial12.05
 11.38
 12.12
 11.55
 11.09
Industrial6.29
 6.21
 6.51
 6.35
 6.14
Total retail10.16
 9.64
 10.16
 9.68
 9.39
Wholesale3.95
 4.15
 3.89
 3.95
 4.02
Total sales9.31
 8.83
 9.21
 8.88
 8.71
Residential Average Annual
Kilowatt-Hour Use Per Customer
14,290
 14,660
 13,601
 14,568
 14,454
Residential Average Annual
Revenue Per Customer
$1,916
 $1,878
 $1,819
 $1,844
 $1,764
Plant Nameplate Capacity
Ratings (year-end) (megawatts)
10,793
 11,815
 11,797
 11,797
 11,797
Maximum Peak-Hour Demand (megawatts):
         
Winter10,104
 11,744
 10,513
 10,282
 12,162
Summer11,211
 10,652
 10,711
 10,932
 11,292
Annual Load Factor (percent)
60.8
 60.1
 63.5
 63.5
 58.4
Plant Availability (percent):
         
Fossil-steam85.9
 81.6
 82.8
 83.0
 81.5
Nuclear91.0
 91.6
 97.6
 88.0
 92.1
Source of Energy Supply (percent):
         
Coal38.7
 43.8
 44.8
 47.1
 49.1
Nuclear21.3
 20.5
 22.2
 20.3
 21.3
Gas18.5
 17.2
 18.1
 17.1
 14.6
Hydro7.3
 6.7
 5.4
 4.8
 5.6
Purchased power —         
From non-affiliates6.0
 5.4
 4.6
 4.8
 4.4
From affiliates8.2
 6.4
 4.9
 5.9
 5.0
Total100.0
 100.0
 100.0
 100.0
 100.0


II-7

    Table of Contents                                Index to Financial Statements

SELECTED FINANCIAL AND OPERATING DATA 2015-2019
Georgia Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions)$8,408
 $8,420
 $8,310
 $8,383
 $8,326
Net Income After Dividends
on Preferred and Preference Stock (in millions)
(*)
$1,720
 $793
 $1,414
 $1,330
 $1,260
Cash Dividends on Common Stock (in millions)$1,576
 $1,396
 $1,281
 $1,305
 $1,034
Return on Average Common Equity (percent)(*)
11.71
 6.04
 12.15
 12.05
 11.92
Total Assets (in millions)$44,541
 $40,365
 $36,779
 $34,835
 $32,865
Gross Property Additions (in millions)$3,659
 $3,176
 $1,080
 $2,314
 $2,332
Capitalization (in millions):
        
Common stockholder's equity$15,065
 $14,323
 $11,931
 $11,356
 $10,719
Preferred and preference stock
 
 
 266
 266
Long-term debt10,791
 9,364
 11,073
 10,225
 9,616
Total (excluding amounts due within one year)$25,856
 $23,687
 $23,004
 $21,847
 $20,601
Capitalization Ratios (percent):
        
Common stockholder's equity58.3
 60.5
 51.9
 52.0
 52.0
Preferred and preference stock
 
 
 1.2
 1.3
Long-term debt41.7
 39.5
 48.1
 46.8
 46.7
Total (excluding amounts due within one year)100.0
 100.0
 100.0
 100.0
 100.0
Customers (year-end):         
Residential2,253,188
 2,220,240
 2,185,782
 2,155,945
 2,127,658
Commercial315,328
 312,474
 308,939
 305,488
 302,891
Industrial10,622
 10,571
 10,644
 10,537
 10,429
Other9,819
 9,838
 9,766
 9,585
 9,261
Total2,588,957
 2,553,123
 2,515,131
 2,481,555
 2,450,239
Employees (year-end)6,938
 6,967
 6,986
 7,527
 7,989
(*)Georgia Power recorded a pre-tax estimated probable loss of $1.1 billion ($0.8 billion after tax) in the second quarter 2018 to reflect its revised estimate to complete construction and start-up of Plant Vogtle Units 3 and 4.


II-8

    Table of Contents                                Index to Financial Statements

SELECTED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Georgia Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions):         
Residential$3,287
 $3,301
 $3,236
 $3,318
 $3,240
Commercial3,014
 3,023
 3,092
 3,077
 3,094
Industrial1,326
 1,344
 1,321
 1,291
 1,305
Other80
 84
 89
 86
 88
Total retail7,707
 7,752
 7,738
 7,772
 7,727
Wholesale — non-affiliates129
 163
 163
 175
 215
Wholesale — affiliates11
 24
 26
 42
 20
Total revenues from sales of electricity7,847
 7,939
 7,927
 7,989
 7,962
Other revenues561
 481
 383
 394
 364
Total$8,408
 $8,420
 $8,310
 $8,383
 $8,326
Kilowatt-Hour Sales (in millions):         
Residential28,201
 28,331
 26,144
 27,585
 26,649
Commercial32,818
 32,958
 32,155
 32,932
 32,719
Industrial23,163
 23,655
 23,518
 23,746
 23,805
Other518
 549
 584
 610
 632
Total retail84,700
 85,493
 82,401
 84,873
 83,805
Wholesale — non-affiliates2,646
 3,140
 3,277
 3,415
 3,501
Wholesale — affiliates335
 526
 800
 1,398
 552
Total87,681
 89,159
 86,478
 89,686
 87,858
Average Revenue Per Kilowatt-Hour (cents):         
Residential11.66
 11.65
 12.38
 12.03
 12.16
Commercial9.18
 9.17
 9.62
 9.34
 9.46
Industrial5.72
 5.68
 5.62
 5.44
 5.48
Total retail9.10
 9.07
 9.39
 9.16
 9.22
Wholesale4.70
 5.10
 4.64
 4.51
 5.80
Total sales8.95
 8.90
 9.17
 8.91
 9.06
Residential Average Annual
Kilowatt-Hour Use Per Customer
12,600
 12,849
 12,028
 12,864
 12,582
Residential Average Annual
Revenue Per Customer
$1,469
 $1,555
 $1,489
 $1,557
 $1,529
Plant Nameplate Capacity
Ratings (year-end) (megawatts)
14,363
 15,308
 15,274
 15,274
 15,455
Maximum Peak-Hour Demand (megawatts):         
Winter14,394
 15,372
 13,894
 14,527
 15,735
Summer16,572
 15,748
 16,002
 16,244
 16,104
Annual Load Factor (percent)60.8
 64.5
 61.1
 61.9
 61.9
Plant Availability (percent):         
Fossil-steam81.0
 81.5
 85.0
 87.4
 85.6
Nuclear93.1
 95.0
 93.5
 95.6
 94.1
Source of Energy Supply (percent):         
Gas32.3
 29.1
 28.6
 28.2
 28.3
Nuclear17.4
 17.6
 17.8
 17.6
 17.6
Coal16.4
 21.1
 22.4
 26.4
 24.5
Hydro1.8
 1.9
 1.0
 1.1
 1.6
Other0.3
 0.3
 0.3
 
 
Purchased power —         
From non-affiliates11.3
 7.3
 7.8
 6.7
 5.0
From affiliates20.5
 22.7
 22.1
 20.0
 23.0
Total100.0
 100.0
 100.0
 100.0
 100.0


II-9

    Table of Contents                                Index to Financial Statements

SELECTED FINANCIAL AND OPERATING DATA 2015-2019
Mississippi Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions)$1,264
 $1,265
 $1,187
 $1,163
 $1,138
Net Income (Loss) After Dividends
on Preferred Stock (in millions)
(a)(b)
$139
 $235
 $(2,590) $(50) $(8)
Return on Average Common Equity (percent)(a)(b)
8.54
 15.83
 (120.43) (1.87) (0.34)
Total Assets (in millions)$5,035
 $4,886
 $4,866
 $8,235
 $7,840
Gross Property Additions (in millions)$197
 $206
 $536
 $946
 $972
Capitalization (in millions):         
Common stockholder's equity$1,652
 $1,609
 $1,358
 $2,943
 $2,359
Redeemable preferred stock
 
 33
 33
 33
Long-term debt1,308
 1,539
 1,097
 2,424
 1,886
Total (excluding amounts due within one year)$2,960
 $3,148
 $2,488
 $5,400
 $4,278
Capitalization Ratios (percent):         
Common stockholder's equity55.8
 51.1
 54.6
 54.5
 55.1
Redeemable preferred stock
 
 1.3
 0.6
 0.8
Long-term debt44.2
 48.9
 44.1
 44.9
 44.1
Total (excluding amounts due within one year)100.0
 100.0
 100.0
 100.0
 100.0
Customers (year-end):         
Residential154,205
 153,423
 153,115
 153,172
 153,158
Commercial33,552
 33,968
 33,992
 33,783
 33,663
Industrial444
 445
 452
 451
 467
Other189
 188
 173
 175
 175
Total188,390
 188,024
 187,732
 187,581
 187,463
Employees (year-end)1,030
 1,053
 1,242
 1,484
 1,478
(a)As a result of the Tax Reform Legislation, Mississippi Power recorded an income tax expense (benefit) of $(35) million and $372 million in 2018 and 2017, respectively.
(b)Pre-tax charges of $3.4 billion ($2.4 billion after tax) were recorded by Mississippi Power related to the suspension of the Kemper IGCC in 2017. Earnings in all periods presented were impacted by losses related to the Kemper IGCC.


II-10

    Table of Contents                                Index to Financial Statements

SELECTED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Mississippi Power Company 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions):         
Residential$276
 $273
 $257
 $260
 $238
Commercial287
 286
 285
 279
 256
Industrial302
 321
 321
 313
 287
Other12
 9
 (9) 7
 (5)
Total retail877
 889
 854
 859
 776
Wholesale — non-affiliates237
 263
 259
 261
 270
Wholesale — affiliates132
 91
 56
 26
 76
Total revenues from sales of electricity1,246
 1,243
 1,169
 1,146
 1,122
Other revenues18
 22
 18
 17
 16
Total$1,264
 $1,265
 $1,187
 $1,163
 $1,138
Kilowatt-Hour Sales (in millions):         
Residential2,062
 2,113
 1,944
 2,051
 2,025
Commercial2,715
 2,797
 2,764
 2,842
 2,806
Industrial4,795
 4,924
 4,841
 4,906
 4,958
Other36
 37
 39
 39
 40
Total retail9,608
 9,871
 9,588
 9,838
 9,829
Wholesale — non-affiliates3,967
 3,980
 3,672
 3,920
 3,852
Wholesale — affiliates4,758
 2,584
 2,024
 1,108
 2,807
Total18,333
 16,435
 15,284
 14,866
 16,488
Average Revenue Per Kilowatt-Hour (cents):         
Residential13.39
 12.92
 13.22
 12.68
 11.75
Commercial10.57
 10.23
 10.31
 9.82
 9.12
Industrial6.30
 6.52
 6.63
 6.38
 5.79
Total retail9.13
 9.01
 8.91
 8.73
 7.90
Wholesale4.23
 5.39
 5.53
 5.71
 5.20
Total sales6.80
 7.56
 7.65
 7.71
 6.80
Residential Average Annual
Kilowatt-Hour Use Per Customer
13,391
 13,768
 12,692
 13,383
 13,242
Residential Average Annual
Revenue Per Customer
$1,795
 $1,780
 $1,680
 $1,697
 $1,556
Plant Nameplate Capacity
Ratings (year-end) (megawatts)
3,516
 3,516
 3,628
 3,481
 3,561
Maximum Peak-Hour Demand (megawatts):         
Winter2,129
 2,763
 2,390
 2,195
 2,548
Summer2,310
 2,346
 2,322
 2,384
 2,403
Annual Load Factor (percent)64.6
 55.8
 63.1
 64.0
 60.6
Plant Availability Fossil-Steam (percent)89.1
 82.4
 89.1
 91.4
 90.6
Source of Energy Supply (percent):         
Gas91.7
 87.4
 90.4
 86.4
 82.3
Coal5.5
 6.9
 7.6
 8.1
 16.6
Purchased power —         
From non-affiliates2.1
 3.3
 (2.1) (2.0) (0.4)
From affiliates0.7
 2.4
 4.1
 7.5
 1.5
Total100.0
 100.0
 100.0
 100.0
 100.0


II-11

    Table of Contents                                Index to Financial Statements

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019
Southern Power Company and Subsidiary Companies 2019 Annual Report
 2019 2018 2017 2016 2015
Operating Revenues (in millions):         
Wholesale — non-affiliates$1,528
 $1,757
 $1,671
 $1,146
 $964
Wholesale — affiliates398
 435
 392
 419
 417
Total revenues from sales of electricity1,926
 2,192
 2,063
 1,565
 1,381
Other revenues12
 13
 12
 12
 9
Total$1,938
 $2,205
 $2,075
 $1,577
 $1,390
Net Income Attributable to
   Southern Power (in millions)(a)
$339
 $187
 $1,071
 $338
 $215
Cash Dividends
   on Common Stock (in millions)
$206
 $312
 $317
 $272
 $131
Return on Average Common Equity (percent)(a)
12.69
 4.62
 22.39
 9.79
 10.16
Total Assets (in millions)$14,300
 $14,883
 $15,206
 $15,169
 $8,905
Property, Plant, and Equipment
   In Service (in millions)
$13,270
 $13,271
 $13,755
 $12,728
 $7,275
Capitalization (in millions):         
Common stockholders' equity(b)
$2,368
 $2,968
 $5,138
 $4,430
 $2,483
Noncontrolling interests(b)
4,254
 4,316
 1,360
 1,245
 781
Redeemable noncontrolling interests
 
 
 164
 43
Long-term debt3,574
 4,418
 5,071
 5,068
 2,719
Total (excluding amounts due within one year)$10,196
 $11,702
 $11,569
 $10,907
 $6,026
Capitalization Ratios (percent):         
Common stockholders' equity(b)
23.2
 25.4
 44.4
 40.6
 41.2
Noncontrolling interests(b)
41.7
 36.9
 11.8
 11.4
 13.0
Redeemable noncontrolling interests
 
 
 1.5
 0.7
Long-term debt35.1
 37.7
 43.8
 46.5
 45.1
Total (excluding amounts due within one year)100.0
 100.0
 100.0
 100.0
 100.0
Kilowatt-Hour Sales (in millions):         
Wholesale — non-affiliates36,358
 37,164
 35,920
 23,213
 18,544
Wholesale — affiliates12,928
 12,603
 12,811
 15,950
 16,567
Total49,286
 49,767
 48,731
 39,163
 35,111
Plant Nameplate Capacity
   Ratings (year-end) (megawatts)
12,247
 11,888
 12,940
 12,442
 9,808
Maximum Peak-Hour Demand (megawatts):         
Winter3,436
 2,867
 3,421
 3,469
 3,923
Summer4,460
 4,210
 4,224
 4,303
 4,249
Annual Load Factor (percent)49.8
 52.2
 49.1
 50.0
 49.0
Plant Availability (percent)98.8
 99.9
 99.9
 91.6
 93.1
Source of Energy Supply (percent):         
Natural gas69.5
 68.1
 67.7
 79.4
 89.5
Solar, Wind, and Biomass23.7
 23.6
 22.8
 12.1
 4.3
Purchased power —         
From non-affiliates6.1
 6.6
 7.8
 6.8
 4.7
From affiliates0.7
 1.7
 1.7
 1.7
 1.5
Total100.0
 100.0
 100.0
 100.0
 100.0
Employees (year-end)(c)
460
 491
 541
 
 
(a)As a result of the Tax Reform Legislation, Southern Power recorded an income tax expense (benefit) of $79 million and $(743) million in 2018 and 2017, respectively.
(b)See Note 15 to the financial statements under "Southern Power – Sales of Renewable Facility Interests" in Item 8 herein for additional information on 2018 changes in noncontrolling interests.
(c)Prior to December 2017, Southern Power had no employees but was billed for employee-related costs from SCS.


II-12

    Table of Contents                                Index to Financial Statements

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019
Southern Company Gas and Subsidiary Companies 2019 Annual Report
 
Successor(a)
  
Predecessor(a)
 2019 
2018(b)
 2017 July 1, 2016 through December 31, 2016  January 1, 2016 through June 30, 2016 2015
Operating Revenues (in millions)$3,792
 $3,909
 $3,920
 $1,652
  $1,905
 $3,941
Net Income Attributable to
Southern Company Gas
(in millions)
(c)
$585
 $372
 $243
 $114
  $131
 $353
Cash Dividends on Common Stock
(in millions)
$471
 $468
 $443
 $126
  $128
 $244
Return on Average Common Equity
(percent)
(c)
6.47
 4.23
 2.68
 1.74
  3.31
 9.05
Total Assets (in millions)$21,687
 $21,448
 $22,987
 $21,853
  $14,488
 $14,754
Gross Property Additions
(in millions)
$1,418
 $1,399
 $1,525
 $632
  $548
 $1,027
Capitalization (in millions):            
Common stockholders' equity$9,506
 $8,570
 $9,022
 $9,109
  $3,933
 $3,975
Long-term debt5,845
 5,583
 5,891
 5,259
  3,709
 3,275
Total (excluding amounts due within
one year)
$15,351
 $14,153
 $14,913
 $14,368
  $7,642
 $7,250
Capitalization Ratios (percent):            
Common stockholders' equity61.9
 60.6
 60.5
 63.4
  51.5
 54.8
Long-term debt38.1
 39.4
 39.5
 36.6
  48.5
 45.2
Total (excluding amounts due within
one year)
100.0
 100.0
 100.0
 100.0
  100.0
 100.0
Service Contracts (period-end)
 
 1,184,257
 1,198,263
  1,197,096
 1,205,476
Customers (period-end)            
Gas distribution operations4,277,219
 4,247,804
 4,623,249
 4,586,477
  4,544,489
 4,557,729
Gas marketing services630,682
 697,384
 773,984
 655,999
  630,475
 654,475
Total4,907,901
 4,945,188
 5,397,233
 5,242,476
  5,174,964
 5,212,204
Employees (period-end)4,446
 4,389
 5,318
 5,292
  5,284
 5,203
(a)As a result of the Merger, pushdown accounting was applied to create a new cost basis for Southern Company Gas' assets, liabilities, and equity as of the acquisition date. Accordingly, the successor financial statements reflect the new basis of accounting, and successor and predecessor period financial results are presented but are not comparable.
(b)During 2018, Southern Company Gas completed the Southern Company Gas Dispositions. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 herein for additional information.
(c)As a result of the Tax Reform Legislation, Southern Company Gas recorded income tax expense of $93 million in 2017.


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    Table of Contents                                Index to Financial Statements

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 2015-2019 (continued)
Southern Company Gas and Subsidiary Companies 2019 Annual Report
 
Successor(a)
  
Predecessor(a)
 2019 
2018(b)
 2017 July 1, 2016 through December 31, 2016  January 1, 2016 through June 30, 2016 2015
Operating Revenues (in millions)            
Residential$1,737
 $1,886
 $2,100
 $899
  $1,101
 $2,129
Commercial485
 546
 641
 260
  310
 617
Transportation907
 944
 811
 269
  290
 526
Industrial121
 140
 159
 74
  72
 203
Other542
 393
 209
 150
  132
 466
Total$3,792
 $3,909
 $3,920
 $1,652
  $1,905
 $3,941
Heating Degree Days:            
Illinois6,136
 6,101
 5,246
 1,903
  3,340
 5,433
Georgia2,157
 2,588
 1,970
 727
  1,448
 2,204
Gas Sales Volumes
(mmBtu in millions):
            
Gas distribution operations            
Firm677
 721
 667
 274
  396
 695
Interruptible92
 95
 95
 47
  49
 99
Total769
 816
 762
 321
  445
 794
Gas marketing services            
Firm:            
Georgia33
 37
 32
 13
  21
 35
Illinois12
 13
 12
 4
  8
 13
Other15
 20
 18
 5
  7
 11
Interruptible large commercial and
industrial
14
 14
 14
 6
  8
 14
Total74
 84
 76
 28
  44
 73
Market share in Georgia (percent)28.9
 29.0
 29.2
 29.4
  29.3
 29.7
Wholesale gas services            
Daily physical sales (mmBtu in
millions/day
)
6.4
 6.7
 6.4
 7.2
  7.6
 6.8
(a)As a result of the Merger, pushdown accounting was applied to create a new cost basis for Southern Company Gas' assets, liabilities, and equity as of the acquisition date. Accordingly, the successor financial statements reflect the new basis of accounting, and successor and predecessor period financial results are presented but are not comparable.
(b)During 2018, Southern Company Gas completed the Southern Company Gas Dispositions. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 herein for additional information.



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Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in Item 7 of each Registrant's Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 19, 2019. 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.
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See MANAGEMENT'S DISCUSSION AND ANALYSIS – FINANCIAL CONDITION AND LIQUIDITY – "Market Price Risk" in Item 7 herein and Note 1 to the financial statements under "Financial Instruments" in Item 8 herein. Also see Notes 13 and 14 to the financial statements in Item 8 herein.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS
Southern Company and Subsidiary Companies 2019 Annual Report

OVERVIEW
Business Activities
Southern Company is a holding company that owns all of the common stock of three traditional electric operating companies, as well as the parent entities of 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.
The traditional electric operating companies – Alabama Power, Georgia Power, and Mississippi Power – are vertically integrated utilities providing electric service to retail customers in three Southeastern states in addition to wholesale customers in the Southeast.
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 Power continually seeks opportunities to execute its strategy to create value through various transactions including acquisitions, dispositions, and sales of partnership interests, development and construction of new generating facilities, and entry into PPAs primarily with investor-owned utilities, IPPs, municipalities, electric cooperatives, and other load-serving entities, as well as commercial and industrial customers. In general, Southern Power commits to the construction or acquisition of new generating capacity only after entering into or assuming long-term PPAs for the new facilities.
Southern Company Gas is an energy services holding company whose primary business is the distribution of natural gas. Southern Company Gas owns natural gas distribution utilities in four states – Illinois, Georgia, Virginia, and Tennessee – and is also involved in several other complementary businesses. Southern Company Gas manages its business through four reportable segments – gas distribution operations, gas pipeline investments, wholesale gas services, which includes Sequent, a natural gas asset optimization company, and gas marketing services, which includes SouthStar, a provider of energy-related products and services to natural gas markets – and one non-reportable segment, all other. See Notes 7 and 16 to the financial statements for additional information.
Many factors affect the opportunities, challenges, and risks of the Southern Company system's electric service and natural gas businesses. These factors include the ability to maintain constructive regulatory environments, to maintain and grow sales and customers, and to effectively manage and secure timely recovery of prudently-incurred costs. These costs include those related to projected long-term demand growth; stringent environmental standards, including CCR rules; safety; system reliability and resilience; fuel; natural gas; restoration following major storms; and capital expenditures, including constructing new electric generating plants and expanding and improving the electric transmission and electric and natural gas distribution systems.
The traditional electric operating companies and natural gas distribution utilities have various regulatory mechanisms that address cost recovery. Effectively operating pursuant to these regulatory mechanisms and appropriately balancing required costs and capital expenditures with customer prices will continue to challenge the Southern Company system for the foreseeable future. See Note 2 to the financial statements for additional information.
Southern Power's future earnings will depend upon the parameters of the wholesale market and the efficient operation of its wholesale generating assets, as well as Southern Power's ability to execute its growth strategy and to develop and construct generating facilities. In addition, Southern Power's future earnings will depend upon the availability of federal and state ITCs and PTCs on its renewable energy projects, which could be impacted by future tax legislation. See FUTURE EARNINGS POTENTIAL – "Acquisitions and Dispositions," "Construction Programs," and "Income Tax Matters" herein and Notes 10 and 15 to the financial statements for additional information.
Southern Company's other business activities include providing energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency. Other business activities also include investments in telecommunications, leveraged lease projects, and gas storage facilities. Management continues to evaluate the contribution of each of these activities to total shareholder return and may pursue acquisitions, dispositions, and other strategic ventures or investments accordingly.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Recent Developments
Southern Company
On January 1, 2019, Southern Company completed the sale of Gulf Power to NextEra Energy for an aggregate cash purchase price of approximately $5.8 billion (less $1.3 billion of indebtedness assumed), including the final working capital adjustments. The gain associated with the sale of Gulf Power totaled $2.6 billion pre-tax ($1.4 billion after tax).
Alabama Power
On September 6, 2019, Alabama Power filed a petition for a CCN with the Alabama PSC for authorization to procure additional generating capacity through the turnkey construction of a new combined cycle facility and long-term contracts for the purchase of power from others, as well as the acquisition of an existing combined cycle facility for a total capital investment of approximately $1.1 billion. The related costs would be recovered through existing rate mechanisms. In addition, Alabama Power will pursue approximately 200 MWs of certain demand side management and distributed energy resource programs. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama Power" herein for additional information.
Georgia Power
Rate Case
On December 17, 2019, the Georgia PSC voted to approve the 2019 ARP, including estimated rate increases totaling $342 million, $181 million, and $386 million effective January 1, 2020, January 1, 2021, and January 1, 2022, respectively. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersGeorgia PowerRate Plans2019 ARP" herein for additional information.
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.
In the second quarter 2018, Georgia Power revised its total project capital cost forecast to complete construction and start-up of Plant Vogtle Units 3 and 4 to $8.4 billion (net of $1.7 billion received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds), with respect to Georgia Power's ownership interest. As of December 31, 2019, approximately $140 million of the $366 million construction contingency estimate established in the second quarter 2018 was allocated to the base capital cost forecast.
As a result of the 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, 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. Following the vote to continue construction, Georgia Power entered into agreements to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners and to provide funding with respect to a MEAG Power wholly-owned subsidiary's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances.
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. In February 2020, Southern Nuclear updated its cost and schedule forecast, which did not change the projected overall capital cost forecast and confirmed the expected in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4.
In March 2019, Georgia Power entered into the Amended and Restated Loan Guarantee Agreement with the DOE, 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, up to approximately $5.130 billion. At December 31, 2019, Georgia Power had a total of $3.8 billion of borrowings outstanding under the related multi-advance credit facilities.
The ultimate outcome of these matters cannot be determined at this time.
See FUTURE EARNINGS POTENTIAL – "Construction ProgramsNuclear Construction" herein and Note 8 to the financial statements under "Long-term DebtDOE Loan Guarantee Borrowings" for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Mississippi Power
In 2019, Mississippi Power recorded pre-tax and after-tax charges to income of $24 million related to the Kemper County energy facility, which was suspended in 2017, primarily associated with the expected close out of a DOE contract related to the Kemper County energy facility, as well as other abandonment and related closure costs and ongoing period costs, net of salvage proceeds, for the mine and gasifier-related assets. The after-tax amount for 2019 includes an adjustment related to the tax abandonment of the Kemper IGCC following the filing of the 2018 tax return. In December 2019, Mississippi Power transferred ownership of the CO2 pipeline to an unrelated gas pipeline company, with no resulting impact on income. Mine reclamation activities are expected to be substantially completed in 2020 and 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 in 2020, $15 million to $16 million annually in 2021 through 2023, and $5 million in 2024. See Note 2 to the financial statements under "Mississippi PowerKemper County Energy Facility" and Note 3 to the financial statements for additional information, including remaining contingencies related to the Kemper IGCC.
On November 26, 2019, Mississippi Power filed a base rate case (Mississippi Power 2019 Base Rate Case) with the Mississippi PSC. The filing includes a requested annual decrease in Mississippi Power's retail rates of $5.8 million, or 0.6%, which is driven primarily by changes in the amortization rates of certain regulatory assets and liabilities and cost reductions, partially offset by an increase in Mississippi Power's requested return on investment and depreciation associated with the filing of an updated depreciation study. The revenue requirements included in the filing are based on a 53% average equity ratio and a 7.728% return on investment. On December 10, 2019, the Mississippi PSC suspended the base rate case filing through no later than March 25, 2020. If no further action is taken by the Mississippi PSC, the proposed rates may be effective beginning on March 26, 2020. The ultimate outcome of this matter cannot be determined at this time. See Note 2 to the financial statements under "Mississippi Power2019 Base Rate Case" for additional information.
Southern Power
During 2019, Southern Power completed construction and achieved commercial operation of the 100-MW Wildhorse Mountain wind facility, acquired and continued construction of the 136-MW Skookumchuck wind facility, and continued construction of the 200-MW Reading wind facility. In addition, Southern Power acquired a majority interest in DSGP, an affiliate of Bloom Energy, that owns and operates fuel cell generation facilities, for a total purchase price of approximately $167 million.
On June 13, 2019, Southern Power completed the sale of its equity interests in Plant Nacogdoches, a 115-MW biomass facility located in Nacogdoches County, Texas, to Austin Energy, for a purchase price of approximately $461 million, including working capital adjustments.
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 estimated working capital adjustments.
Southern Power calculates an 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. With the inclusion of investments associated with the wind facilities currently under construction, as well as other capacity and energy contracts, and excluding Plant Mankato, which was sold on January 17, 2020, Southern Power's average investment coverage ratio at December 31, 2019 was 93% through 2024 and 90% through 2029, with an average remaining contract duration of approximately 14 years.
See FUTURE EARNINGS POTENTIAL – "Acquisitions and DispositionsSouthern Power" and Construction ProgramsSouthern Power" herein for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Southern Company Gas
During 2019, the natural gas distribution utilities have been involved in the following regulatory proceedings:
On September 25, 2019, the Virginia Commission approved Virginia Natural Gas' Steps to Advance Virginia's Energy (SAVE) program request to amend and extend the program through 2024 with estimated capital spend totaling approximately $365 million.
On October 2, 2019, the Illinois Commission approved a $168 million annual base rate increase for Nicor Gas, including $65 million related to the recovery of investments under the Investing in Illinois program, which became effective October 8, 2019.
On December 19, 2019, the Georgia PSC approved a $65 million annual base rate increase for Atlanta Gas Light, effective January 1, 2020.
See FUTURE EARNINGS POTENTIAL – "Regulatory MattersSouthern Company GasRate Proceedings" herein and Note 2 to the financial statements under "Southern Company GasRate Proceedings" for additional information.
Also during 2019, Southern Company Gas recorded a pre-tax impairment charge of $91 million ($69 million after tax) related to a natural gas storage facility in Louisiana. See Note 3 to the financial statements under "Other MattersSouthern Company Gas" for additional information.
On February 7, 2020, Southern Company Gas entered into agreements with Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC for the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline, respectively, for an aggregate purchase price of $165 million, including estimated working capital and timing adjustments. Southern Company Gas may also receive two payments of $5 million each, contingent upon certain milestones related to Pivotal LNG being met by Dominion Modular LNG Holdings, Inc. after the completion of the sale. Based on the terms of these pending transactions, Southern Company Gas recorded an asset impairment charge, exclusive of the contingent payments, for Pivotal LNG of approximately $24 million ($17 million after tax) as of December 31, 2019. The completion of each transaction is subject to the satisfaction or waiver of certain conditions, including, among other customary closing conditions, the completion of the other transaction and, for the sale of the interest in Atlantic Coast Pipeline, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transactions are expected to be completed in the first half of 2020; however, the ultimate outcome cannot be determined at this time. The assets and liabilities of Pivotal LNG and the interest in Atlantic Coast Pipeline are classified as held for sale as of December 31, 2019. See Notes 3, 7, and 15 to the financial statements under "Southern Company Gas – Gas Pipeline Projects," "Southern Company Gas – Equity Method Investments," and "Southern Company Gas – Proposed Sale of Pivotal LNG and Atlantic Coast Pipeline," respectively, for additional information.
See FUTURE EARNINGS POTENTIAL – "Acquisitions and DispositionsSouthern Company Gas" herein for information regarding Southern Company Gas' 2018 disposition activity.
Key Performance Indicators
In striving to achieve attractive risk-adjusted returns while providing cost-effective energy to more than eight million electric and gas utility customers collectively, the traditional electric operating companies and Southern Company Gas continue to focus on several key performance indicators. These indicators include, but are not limited to, customer satisfaction, plant availability, electric and natural gas system reliability, and execution of major construction projects. In addition, Southern Company and the Subsidiary Registrants focus on earnings per share (EPS) and net income, respectively, as a key performance indicator. See RESULTS OF OPERATIONS herein for information on the Registrants' financial performance. See RESULTS OF OPERATIONS – "Southern Company GasOperating Metrics" for additional information on Southern Company Gas' operating metrics, including Heating Degree Days, customer count, and volumes of natural gas sold.
The financial success of the traditional electric operating companies and Southern Company Gas is directly tied to customer satisfaction. Key elements of ensuring customer satisfaction include outstanding service, high reliability, and competitive prices. The traditional electric operating companies use customer satisfaction surveys to evaluate their results and generally target the top quartile of these surveys in measuring performance. Reliability indicators are also used to evaluate results. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama PowerRate RSE" and " – Mississippi PowerPerformance Evaluation Plan" herein for additional information on Alabama Power's Rate RSE and Mississippi Power's PEP rate plan, respectively, both of which contain mechanisms that directly tie customer service indicators to the allowed equity return.
Southern Power continues to focus on several key performance indicators, including, but 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.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

RESULTS OF OPERATIONS
Southern Company
Consolidated net income attributable to Southern Company was $4.7 billion in 2019, an increase of $2.5 billion, or 112.9%, from the prior year. The increase was primarily due to the $2.6 billion ($1.4 billion after tax) gain on the sale of Gulf Power in 2019 and a $1.1 billion ($0.8 billion after tax) charge in the second quarter 2018 for an estimated probable loss related to Georgia Power's construction of Plant Vogtle Units 3 and 4. See "Electricity BusinessEstimated Loss on Plants Under Construction" herein and Notes 2 and 15 to the financial statements under "Georgia PowerNuclear Construction" and "Southern Company," respectively, for additional information.
Basic EPS was $4.53 in 2019 and $2.18 in 2018. Diluted EPS, which factors in additional shares related to stock-based compensation, was $4.50 in 2019 and $2.17 in 2018. EPS for 2019 and 2018 was negatively impacted by $0.11 and $0.04 per share, respectively, as a result of increases in the average shares outstanding. See Note 8 to the financial statements under "Outstanding Classes of Capital Stock – Southern Company" for additional information.
Southern Company has paid dividends on its common stock since 1948. Dividends paid per share of common stock were $2.46 in 2019 and $2.38 in 2018. In January 2020, Southern Company declared a quarterly dividend of 62 cents per share. For 2019, the dividend payout ratio was 54% compared to 109% for 2018. The decrease was due to the increase in earnings in 2019.
Discussion of Southern Company's results of operations is divided into three parts – the Southern Company system's primary business of electricity sales, its gas business, and its other business activities.
 2019 2018
 (in millions)
Electricity business$3,268
 $2,304
Gas business585
 372
Other business activities886
 (450)
Net Income$4,739
 $2,226
Electricity Business
Southern Company's electric utilities generate and sell electricity to retail and wholesale customers. The results of operations discussed below include the results of Gulf Power through December 31, 2018. See Note 15 to the financial statements under "Southern Company" for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

A condensed statement of income for the electricity business follows:
 2019 
Increase
(Decrease)
from 2018
 (in millions)
Electric operating revenues$17,095
 $(1,476)
Fuel3,622
 (1,015)
Purchased power816

(155)
Cost of other sales76
 10
Other operations and maintenance4,479
 (156)
Depreciation and amortization2,472
 (93)
Taxes other than income taxes1,011
 (87)
Estimated loss on plants under construction24
 (1,073)
Impairment charges3
 (153)
(Gain) loss on dispositions, net(21) (21)
Total electric operating expenses12,482
 (2,743)
Operating income4,613
 1,267
Allowance for equity funds used during construction121
 (10)
Interest expense, net of amounts capitalized987
 (48)
Other income (expense), net234
 90
Income taxes708
 501
Net income3,273
 894
Less:   
Dividends on preferred and preference stock of subsidiaries15
 (1)
Net income (loss) attributable to noncontrolling interests(10) (69)
Net Income Attributable to Southern Company$3,268
 $964
Electric Operating Revenues
Electric operating revenues for 2019 were $17.1 billion, reflecting a $1.5 billion decrease from 2018. Details of electric operating revenues were as follows:
 2019 2018
 (in millions)
Retail electric — prior year$15,222
  
Estimated change resulting from —   
Rates and pricing581
  
Sales decline(143)  
Weather29
  
Fuel and other cost recovery(392)  
Gulf Power disposition(1,213)  
Retail electric — current year14,084
 $15,222
Wholesale electric revenues2,152
 2,516
Other electric revenues636
 664
Other revenues223
 169
Electric operating revenues$17,095
 $18,571
Percent change(7.9)% 0.2%

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Retail electric revenues decreased $1.1 billion, or 7.5%, in 2019 as compared to the prior year. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing in 2019 was primarily due to the impacts of Alabama Power's customer bill credits issued in 2018 related to the Tax Reform Legislation, additional capital investments recovered through Rate CNP Compliance, and lower Rate RSE customer refund in 2019 as compared to the prior year; Georgia Power's higher contributions from commercial and industrial customers with variable demand-driven pricing, NCCR rate increase effective January 1, 2019, and pricing effects associated with a milder winter in 2019 compared to 2018; and Mississippi Power's PEP and ECO Plan rate increases effective for the first billing cycle of September 2018.
Electric rates for the traditional electric operating companies include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these provisions, fuel revenues generally equal fuel expenses, including the energy component of PPA costs, and do not affect net income. The traditional electric operating companies each have one or more regulatory mechanisms to recover other costs such as environmental and other compliance costs, storm damage, new plants, and PPA capacity costs.
See Note 2 to the financial statements under "Alabama Power," "Georgia Power," and "Mississippi Power" for additional information. Also see "Energy Sales" below for a discussion of changes in the volume of energy sold, including changes related to sales growth (decline) and weather.
Wholesale electric revenues consist of 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 MRA sales 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.
Wholesale electric revenues from power sales were as follows:
 2019 2018
 (in millions)
Capacity and other$529
 $620
Energy1,623
 1,896
Total$2,152
 $2,516
In 2019, wholesale revenues decreased $364 million, or 14.5%, as compared to the prior year due to decreases of $273 million in energy revenues and $91 million in capacity revenues. Excluding the $28 million decrease associated with the sale of Gulf Power, energy revenues decreased $165 million at Southern Power and $80 million at the traditional electric operating companies. The decrease at Southern Power related to a $113 million decrease primarily in non-PPA short-term sales and a decrease in the market price of energy, as well as a $51 million decrease primarily in sales under PPAs from natural gas facilities. The decrease at the traditional electric operating companies was primarily due to lower natural gas prices. Excluding the $26 million decrease associated with the sale of Gulf Power, the decrease in capacity revenues was primarily related to the sales of Southern Power's Plant Oleander and Plant Stanton Unit A (together, the Florida Plants) in December 2018 and Southern Power's Plant Nacogdoches in June 2019. See Note 15 to the financial statements for additional information.
Other Electric Revenues
Other electric revenues decreased $28 million, or 4.2%, in 2019 as compared to the prior year. The decrease was primarily due to a decrease of $66 million related to the sale of Gulf Power, partially offset by increases at Georgia Power of $13 million in regulated power delivery construction and maintenance contracts and $11 million from outdoor lighting LED conversions and sales, as well as an increase at Alabama Power of $9 million from pole attachment agreements.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Energy Sales
Changes in revenues are influenced heavily by the change in the volume of energy sold from year to year. KWH sales for 2019 and the percent change from the prior year were as follows:
 2019
       
Adjusted(b)
 Total
KWHs
 Total KWH
Percent Change
 
Weather-Adjusted
Percent Change
(a)
 Total KWH Percent Change 
Weather-Adjusted Percent Change(a)
 (in billions)        
Residential48.5
 (11.1)% (10.7)% (1.1)% (0.8)%
Commercial49.1
 (8.1) (8.6) (1.1) (1.6)
Industrial50.1
 (6.1) (6.1) (2.9) (2.9)
Other0.8
 (9.1) (9.0) (5.8) (5.7)
Total retail148.5
 (8.5) (8.4)% (1.7) (1.8)%
Wholesale48.0
 (3.9)   (2.6)  
Total energy sales196.5
 (7.4)%   (1.9)%  
(a)Weather-adjusted KWH sales are estimated by removing from KWH sales the effect of deviations from normal temperature conditions, based on statistical models of the historical relationship between temperatures and energy sales. Normal temperature conditions are defined as those experienced in the applicable service territory over a specified historical period. This metric is useful because it allows trends in historical operations to be evaluated apart from the influence of weather conditions. Management also considers this metric in developing long-term capital and financial plans.
(b)Kilowatt-hour sales comparisons to the prior year were significantly impacted by the disposition of Gulf Power on January 1, 2019. These changes exclude Gulf Power.
Changes in retail energy sales are generally the result of changes in electricity usage by customers, changes in weather, and changes in the number of customers. Excluding the impact of the Gulf Power disposition on January 1, 2019, weather-adjusted retail energy sales decreased 2.7 billion KWHs in 2019 as compared to the prior year primarily due to lower customer usage. Weather-adjusted residential usage decreases are primarily attributable to an increase in energy-efficient residential appliances and energy saving initiatives, partially offset by customer growth. Weather-adjusted commercial usage decreases are primarily attributable to an increase in energy saving initiatives and an ongoing migration to the electronic commerce business model. Industrial usage decreases are a result of changes in production levels primarily in the primary metals, paper, chemicals, and textiles sectors.
See "Electric Operating Revenues" above for a discussion of significant changes in wholesale revenues related to changes in price and KWH sales.
Other Revenues
Other revenues increased $54 million, or 32.0%, in 2019 as compared to the prior year. The increase was primarily due to increases at Georgia Power of $20 million from unregulated sales associated with new energy conservation projects and $14 million from unregulated power delivery construction and maintenance contracts, as well as an increase at Alabama Power of $11 million in unregulated sales of products and services.
Fuel and Purchased Power Expenses
The mix of fuel sources for the generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, the electric utilities purchase a portion of their electricity needs from the wholesale market.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Details of the Southern Company system's generation and purchased power were as follows:
 2019 
2018(a)
Total generation (in billions of KWHs)
187
 191
Total purchased power (in billions of KWHs)
18
 14
Sources of generation (percent) —

 
Gas52
 48
Coal22
 27
Nuclear16
 16
Hydro3
 3
Other7
 6
Cost of fuel, generated (in cents per net KWH) 

 
Gas2.36
 2.76
Coal2.87
 2.93
Nuclear0.79
 0.80
Average cost of fuel, generated (in cents per net KWH)
2.20
 2.46
Average cost of purchased power (in cents per net KWH)(b)
5.01
 5.94
(a)Excludes Gulf Power, which was sold on January 1, 2019.
(b)Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.
In 2019, total fuel and purchased power expenses were $4.4 billion, a decrease of $1.2 billion, or 20.9%, as compared to the prior year. Excluding approximately $511 million associated with the sale of Gulf Power, the decrease was primarily the result of a $575 million decrease in the average cost of fuel and purchased power and an $84 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.
Fuel
In 2019, fuel expense was $3.6 billion, a decrease of $1.0 billion, or 21.9%, as compared to the prior year. Excluding approximately $309 million related to Gulf Power in 2018, the decrease was primarily due to an 18.1% decrease in the volume of KWHs generated by coal, a 14.5% decrease in the average cost of natural gas per KWH generated, and a 2.1% decrease in the average cost of coal per KWH generated, partially offset by a 5.0% increase in the volume of KWHs generated by natural gas.
Purchased Power
In 2019, purchased power expense was $816 million, a decrease of $155 million, or 16.0%, as compared to the prior year. Excluding approximately $202 million associated with the sale of Gulf Power, the change was primarily due to a 9.6% increase in the volume of KWHs purchased, partially offset by a 15.7% decrease in the average cost of KWH purchased.
Energy purchases will vary depending on demand for energy within the Southern Company system's electric service territory, the market prices of wholesale energy as compared to the cost of the Southern Company system's generation, and the availability of the Southern Company system's generation.
Other Operations and Maintenance Expenses
Other operations and maintenance expenses decreased $156 million, or 3.4%, in 2019 as compared to the prior year. The decrease reflects approximately $356 million related to Gulf Power in 2018 and $17 million related to the dispositions of Southern Power's Florida Plants and Plant Nacogdoches, partially offset by additional accruals of $123 million to the NDR at Alabama Power, $21 million of increased transmission and distribution expenses primarily due to overhead line maintenance and vegetation management at the traditional electric operating companies, $18 million from costs associated with unregulated sales at Georgia Power primarily associated with new energy conservation projects and power delivery construction and maintenance contracts, and $16 million related to an adjustment for FERC fees at Georgia Power following the conclusion of a multi-year audit of

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

headwater benefits associated with hydro facilities. See Notes 2 and 15 to the financial statements under "Alabama Power – Rate NDR" and "Southern PowerSales of Natural Gas and Biomass Plants," respectively, for additional information.
Depreciation and Amortization
Depreciation and amortization decreased $93 million, or 3.6%, in 2019 as compared to the prior year. The decrease was primarily due to a decrease of $191 million related to Gulf Power in 2018, partially offset by an increase in depreciation of $62 million primarily resulting from additional plant in service and an increase in the amortization of regulatory assets of $47 million primarily at Mississippi Power and Georgia Power. See Note 2 to the financial statements under "Southern CompanyRegulatory Assets and Liabilities" and Note 5 to the financial statements under "Depreciation and Amortization" for additional information.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased $87 million, or 7.9%, in 2019 as compared to the prior year primarily due to a decrease of $118 million related to the sale of Gulf Power, partially offset by higher property taxes of $30 million primarily at Georgia Power.
Estimated Loss on Plants Under Construction
The $1.1 billion charge in 2018 reflects Georgia Power's revised estimate to complete construction and start-up of Plant Vogtle Units 3 and 4. The 2019 charges of $24 million were associated with abandonment and closure activities for the mine and gasifier-related assets of the Kemper IGCC at Mississippi Power, net of sales proceeds. See Note 2 to the financial statements under "Georgia PowerNuclear Construction" and "Mississippi PowerKemper County Energy Facility" for additional information.
Impairment Charges
In the second quarter 2018, Southern Power recorded a $119 million asset impairment charge related to the sale of the Florida Plants and in the third quarter 2018 recorded a $36 million asset impairment charge on wind turbine equipment held for development projects. Asset impairment charges recorded in 2019 were immaterial. See Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" and " – Development Projects" for additional information.
(Gain) Loss on Dispositions, Net
Gain on dispositions, net increased $21 million in 2019 as compared to the prior year primarily due to Southern Power's sale of Plant Nacogdoches in the second quarter 2019. See Note 15 to the financial statements under "Southern PowerSales of Natural Gas and Biomass Plants" for additional information.
Interest Expense, Net of Amounts Capitalized
Interest expense, net of amounts capitalized decreased $48 million, or 4.6%, in 2019 as compared to the prior year primarily related to the sale of Gulf Power.
Other Income (Expense), Net
Other income (expense), net increased $90 million, or 62.5%, in 2019 as compared to the prior year primarily due to a $36 million gain arising from the Roserock solar facility litigation settlement at Southern Power in 2019, $37 million from decreased charitable donations in 2019 at the traditional electric operating companies, $23 million of increased non-service cost-related retirement benefits income, and $16 million of increased interest income primarily associated with a new tolling arrangement accounted for as a sales-type lease at Mississippi Power as well as temporary cash investments, primarily at Alabama Power. These increases were partially offset by $24 million related to the settlement of Mississippi Power's Deepwater Horizon claim in 2018 and a $14 million gain from a joint-development wind project at Southern Power in 2018 attributable to its partner in the project. See Note 3 to the financial statements under "General Litigation Matters Southern Power" and "Other Matters – Mississippi Power" and Note 11 to the financial statements under "Pension Plans" for additional information.
Income Taxes
Income taxes increased $501 million, or 242.0%, in 2019 as compared to the prior year. Excluding an income tax benefit of approximately $20 million related to Gulf Power in 2018, income taxes increased $481 million. The increase was primarily due to increases in pre-tax earnings, including the $1.1 billion charge in 2018 associated with Plant Vogtle Units 3 and 4 construction at Georgia Power. See Notes 10 and 15 to the financial statements for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Net Income Attributable to Noncontrolling Interests
Substantially all noncontrolling interests relate to renewable projects at Southern Power. Net income attributable to noncontrolling interests decreased $69 million, or 116.9%, in 2019, as compared to the prior year. The decrease was primarily due to $92 million of losses attributable to noncontrolling interests related to the tax equity partnerships entered into in 2018 and $14 million attributable to a joint-development wind project in 2018, partially offset by an allocation of approximately $29 million of income to the noncontrolling interest partner related to the Roserock solar facility litigation settlement. See Note 3 to the financial statements under "General Litigation MattersSouthern Power" and Note 7 to the financial statements under "Southern Power" for additional information regarding the litigation settlement and tax equity partnerships, respectively.
Gas Business
Southern Company Gas distributes natural gas through utilities in four states and is involved in several other complementary businesses including gas pipeline investments, wholesale gas services, and gas marketing services.
A condensed statement of income for the gas business follows:
 2019 
Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$3,792
 $(117)
Cost of natural gas1,319
 (220)
Cost of other sales
 (12)
Other operations and maintenance888
 (93)
Depreciation and amortization487
 (13)
Taxes other than income taxes213
 2
Impairment charges115
 73
(Gain) loss on dispositions, net
 291
Total operating expenses3,022
 28
Operating income770
 (145)
Earnings from equity method investments157
 9
Interest expense, net of amounts capitalized232
 4
Other income (expense), net20
 19
Income taxes130
 (334)
Net income$585
 $213
The Southern Company Gas Dispositions were completed by July 29, 2018 and represent the primary variance driver for 2019 compared to 2018. Detailed variance explanations are provided herein. See Note 15 to the financial statements under "Southern Company Gas" for additional information on the Southern Company Gas Dispositions.
Seasonality of Results
During the period from November through March when natural gas usage and operating revenues are generally higher (Heating Season), more customers are connected to Southern Company Gas' distribution systems and natural gas usage is higher in periods of colder weather. Occasionally in the summer, 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 equally over any given year. Thus, operating results can vary significantly from quarter to quarter as a result of seasonality. For 2019, the percentage of operating revenues and net income generated during the Heating Season (January through March and November through December) were 68.7% and 86.8%, respectively. For 2018, the percentage of operating revenues and net income generated during the Heating Season were 68.7% and 96.0%, respectively.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues
Operating revenues in 2019 were $3.8 billion, a $117 million decrease compared to 2018. Details of operating revenues were as follows:
 2019
 (in millions)
Operating revenues – prior year$3,909
Estimated change resulting from –
Infrastructure replacement programs and base rate changes96
Gas costs and other cost recovery(89)
Wholesale gas services150
Southern Company Gas Dispositions(*)
(300)
Other26
Operating revenues – current year$3,792
Percent change(3.0)%
(*)
Includes a $245 million decrease related to natural gas revenues, including alternative revenue programs, and a $55 million decrease related to other revenues. See Note 15 to the financial statements under "Southern Company Gas" for additional information.
Revenues from infrastructure replacement programs and base rate changes increased in 2019 compared to the prior year primarily due to increases of $74 million at Nicor Gas and $16 million at Atlanta Gas Light. These amounts include the natural gas distribution utilities' continued investments recovered through infrastructure replacement programs and base rate increases as well as customer refunds in 2018 as a result of the Tax Reform Legislation. See Note 2 to the financial statements under "Southern Company Gas" for additional information.
Revenues attributable to gas costs and other cost recovery decreased in 2019 compared to the prior year 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 from wholesale gas services increased in 2019 primarily due to derivative gains, partially offset by decreased commercial activity.
Other natural gas revenues increased in 2019 primarily due to increases in customers at the natural gas distribution utilities and recovery of prior period hedge losses at gas marketing services.
Cost of Natural Gas
Excluding Atlanta Gas Light, which does not sell natural gas to end-use customers, the natural gas distribution utilities charge their utility customers for natural gas consumed using natural gas cost recovery mechanisms set by the applicable state regulatory agencies. Under these mechanisms, all prudently-incurred natural gas costs are passed through to customers without markup, subject to regulatory review. The natural gas distribution utilities defer or accrue the difference between the actual cost of natural gas and the amount of commodity revenue earned in a given period. The deferred or accrued amount is either billed or refunded to customers prospectively through adjustments to the commodity rate. Deferred natural gas costs are reflected as regulatory assets and accrued natural gas costs are reflected as regulatory liabilities. 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 84.5% of the total cost of natural gas for 2019.
Gas marketing services customers are charged for actual and estimated natural gas consumed. Cost of natural gas includes the cost of fuel and associated transportation costs, lost and unaccounted for gas, adjustments to reduce the value of inventories to market value, if applicable, and gains and losses associated with certain derivatives.
In 2019, cost of natural gas was $1.3 billion, a decrease of $220 million, or 14.3%, compared to the prior year. Excluding a $106 million decrease related to the Southern Company Gas Dispositions, cost of natural gas decreased by $114 million, which reflects a 14.8% decrease in natural gas prices compared to 2018.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Cost of Other Sales
Cost of other sales related to Pivotal Home Solutions, which was sold on June 4, 2018. See Note 15 to the financial statements under "Southern Company GasSale of Pivotal Home Solutions" for additional information.
Other Operations and Maintenance Expenses
Other operations and maintenance expenses decreased $93 million, or 9.5%, in 2019 compared to the prior year. Excluding a $65 million decrease related to the Southern Company Gas Dispositions, other operations and maintenance expenses decreased $28 million. This decrease was primarily due to $28 million of disposition-related costs incurred during 2018, a $12 million adjustment in 2018 for the adoption of a new paid time off policy, an $11 million expense for a litigation settlement to facilitate the sale of Pivotal Home Solutions in 2018, and a $7 million decrease in compensation and benefits costs, partially offset by a $22 million increase in rider expenses, primarily at Nicor Gas, passed through directly to customers. See FUTURE EARNINGS POTENTIAL – "Southern Company GasUtility Regulation and Rate Design" herein for additional information.
Depreciation and Amortization
Depreciation and amortization decreased $13 million, or 2.6%, in 2019 compared to the prior year. Excluding a $27 million decrease related to the Southern Company Gas Dispositions, depreciation and amortization increased $14 million. This increase was primarily due to continued infrastructure investments at the natural gas distribution utilities, partially offset by accelerated depreciation related to assets retired in 2018. See Note 2 to the financial statements under "Southern Company GasInfrastructure Replacement Programs and Capital Projects" for additional information.
Impairment Charges
In 2019, Southern Company Gas recorded impairment charges of $91 million related to a natural gas storage facility in Louisiana and $24 million in contemplation of the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline. In 2018, a goodwill impairment charge of $42 million was recorded in contemplation of the sale of Pivotal Home Solutions. See Notes 1, 3, and 15 to the financial statements under "Goodwill and Other Intangible Assets and Liabilities," "Other MattersSouthern Company Gas," and "Southern Company Gas," respectively, for additional information.
(Gain) Loss on Dispositions, Net
Gain on dispositions, net was $291 million in 2018 and was associated with the Southern Company Gas Dispositions. The income tax expense on these gains included income tax expense on goodwill not deductible for tax purposes and for which a deferred tax liability had not been recorded previously.
Earnings from Equity Method Investments
Earnings from equity method investments increased $9 million, or 6.1%, in 2019 compared to the prior year and reflect higher earnings from SNG as a result of rate increases that became effective September 2018, partially offset by a $6 million pre-tax loss on the sale of Triton in May 2019. See Note 7 to the financial statements under "Southern Company Gas" for additional information.
Other Income (Expense), Net
Other income (expense), net increased $19 million in 2019 compared to the prior year. This increase primarily resulted from a $23 million decrease in charitable donations in 2019.
Income Taxes
Income taxes decreased $334 million, or 72.0%, in 2019 compared to the prior year. This decrease primarily reflects a reduction of $348 million related to the Southern Company Gas Dispositions, as well as $29 million in benefits associated with impairment charges in 2019 and additional benefits from the flowback of excess deferred income taxes in 2019 primarily at Atlanta Gas Light as previously authorized by the Georgia PSC, partially offset by $48 million of additional taxes associated with increased pre-tax earnings at wholesale gas services.
See FUTURE EARNINGS POTENTIAL – "Income Tax Matters" herein and Note 10 to the financial statements for additional information. Also see Notes 2, 3, and 15 to the financial statements under "Southern Company Gas," "Other MattersSouthern Company Gas," and "Southern Company GasProposed Sale of Pivotal LNG and Atlantic Coast Pipeline," respectively, for additional information on Atlanta Gas Light's regulatory treatment of the impacts of the Tax Reform Legislation and the impairment charges.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Other Business Activities
Southern Company's other business activities primarily include the parent company (which does not allocate operating expenses to business units); PowerSecure, a provider of energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency; Southern Holdings, which invests in various projects, including leveraged lease projects; and Southern Linc, which provides digital wireless communications for use by the Southern Company system and also markets these services to the public and provides fiber optics services within the Southeast.
A condensed statement of income for Southern Company's other business activities follows:
 2019 
Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$532
 $(483)
Cost of other sales359
 (369)
Other operations and maintenance233
 (40)
Depreciation and amortization79
 13
Taxes other than income taxes6
 
Impairment charges50
 38
(Gain) loss on dispositions, net(2,548) (2,548)
Total operating expenses(1,821) (2,906)
Operating income (loss)2,353
 2,423
Interest expense517
 (62)
Other income (expense), net10
 33
Income taxes (benefit)960
 1,182
Net income (loss)$886
 $1,336
Operating Revenues
Southern Company's operating revenues for these other business activities decreased $483 million, or 47.6%, in 2019 as compared to the prior year primarily related to PowerSecure's 2018 storm restoration services in Puerto Rico and the sale of PowerSecure's utility infrastructure services business in June 2019.
Cost of Other Sales
Cost of other sales for these other business activities decreased $369 million, or 50.7%, in 2019 as compared to the prior year primarily related to PowerSecure's 2018 storm restoration services in Puerto Rico and the sale of PowerSecure's utility infrastructure services business in June 2019.
Other Operations and Maintenance Expenses
Other operations and maintenance expenses for these other business activities decreased $40 million, or 14.7%, in 2019 as compared to the prior year. The decrease was primarily due to PowerSecure's lower employee compensation and benefits in 2019 and 2018 storm restoration services in Puerto Rico.
Impairment Charges
In 2019, goodwill and asset impairment charges totaling $50 million were recorded related to the sale of PowerSecure's utility infrastructure services and lighting businesses. In 2018, asset impairment charges of $12 million associated with Southern Linc's tower leases were recorded in contemplation of the sale of Gulf Power.
(Gain) Loss on Dispositions, Net
The 2019 gain on dispositions, net primarily relates to the gain of $2.6 billion ($1.4 billion after tax) on the sale of Gulf Power. See Note 15 to the financial statements under "Southern Company" for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Interest Expense
Interest expense for these other business activities decreased $62 million, or 10.7%, in 2019 as compared to the prior year primarily due to a decrease in average outstanding long-term debt at the parent company. See Note 8 to the financial statements for additional information.
Other Income (Expense), Net
Other income (expense), net for these other business activities increased $33 million in 2019 as compared to the prior year primarily due to a $43 million decrease in charitable donations at the parent company, partially offset by a $17 million impairment charge associated with a leveraged lease at Southern Holdings in 2019. See Notes 1 and 3 to the financial statements under "Leveraged Leases" and "Other MattersSouthern Company," respectively, for additional information.
Income Taxes (Benefit)
The income tax for these other business activities increased $1.2 billion in 2019 as compared to the prior year primarily due to the tax impacts related to the sale of Gulf Power. See Note 10 to the financial statements and Note 15 to the financial statements under "Southern Company" for additional information.
Alabama Power
Alabama Power's 2019 net income after dividends on preferred and preference stock was $1.07 billion, representing a $140 million, or 15.1%, increase over the previous year. The increase was primarily due to an increase in retail revenues associated with the impacts of customer bill credits issued in 2018 related to the Tax Reform Legislation and a lower Rate RSE customer refund in 2019 as compared to the prior year, as well as additional capital investments recovered through Rate CNP Compliance. The increase in revenue is partially offset by increases in operations and maintenance and depreciation expenses and lower customer usage. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama PowerRate RSE" and " – Rate CNP Compliance" herein for additional information.
A condensed income statement for Alabama Power follows:
 2019 Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$6,125
 $93
Fuel1,112
 (189)
Purchased power403
 (29)
Other operations and maintenance1,821
 152
Depreciation and amortization793
 29
Taxes other than income taxes403
 14
Total operating expenses4,532
 (23)
Operating income1,593
 116
Allowance for equity funds used during construction52
 (10)
Interest expense, net of amounts capitalized336
 13
Other income (expense), net46
 26
Income taxes270
 (21)
Net income1,085
 140
Dividends on preferred and preference stock15
 
Net income after dividends on preferred and preference stock$1,070
 $140

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues
Operating revenues for 2019 were $6.1 billion, reflecting a $0.1 billion increase from 2018. Details of operating revenues were as follows:
 2019 2018
 (in millions)
Retail — prior year$5,367
  
Estimated change resulting from —   
Rates and pricing347
  
Sales decline(79)  
Weather(3)  
Fuel and other cost recovery(131)  
Retail — current year5,501
 $5,367
Wholesale revenues —   
Non-affiliates258
 279
Affiliates81
 119
Total wholesale revenues339
 398
Other operating revenues285
 267
Total operating revenues$6,125
 $6,032
Percent change1.5% (0.1)%
Retail revenues in 2019 were $5.5 billion. These revenues increased $134 million, or 2.5%, in 2019 as compared to the prior year. The increase in 2019 was primarily due to increases in rates and pricing associated with the impact of customer bill credits issued in 2018 related to the Tax Reform Legislation and additional capital investments recovered through Rate CNP Compliance, as well as a lower Rate RSE customer refund in 2019 as compared to the prior year, partially offset by decreases in fuel revenues and customer usage, as well as milder weather in 2019 as compared to 2018.
See Note 2 to the financial statements under "Alabama PowerRate RSE" and " – Rate CNP Compliance" for additional information. See "Energy Sales" herein for a discussion of changes in the volume of energy sold, including changes related to sales decline and weather.
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 FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama PowerRate ECR" herein for additional information.
Wholesale revenues from power sales to non-affiliated utilities were as follows:
 2019 2018
 (in millions)
Capacity and other$102
 $101
Energy156
 178
Total non-affiliated$258
 $279
Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Alabama Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not affect net income. Short-term opportunity energy sales are also included in wholesale energy sales to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Alabama Power's variable cost to produce the energy.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

In 2019, wholesale revenues from sales to non-affiliates decreased $21 million, or 7.5%, as compared to the prior year primarily as a result of an 8.2% decrease in energy prices due to lower natural gas prices, partially offset by a 1% increase in the amount of KWHs sold.
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 and purchases are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since this energy is generally sold at marginal cost and energy purchases are generally offset by energy revenues through Alabama Power's energy cost recovery clause.
In 2019, wholesale revenues from sales to affiliates decreased $38 million, or 31.9%, as compared to the prior year. In 2019, KWH sales decreased 22.7% due to the decreased availability of coal generation associated with the retirement of Plant Gorgas Units 8, 9, and 10, and the price of energy decreased 11.8% as a result of lower natural gas prices.
In 2019, other operating revenues increased $18 million, or 6.7%, as compared to the prior year primarily due to an increase in unregulated sales of products and services and pole attachment agreements.
Energy Sales
Changes in revenues are influenced heavily by the change in the volume of energy sold from year to year. KWH sales for 2019 and the percent change from the prior year were as follows:
 2019
 
Total
KWHs
 
Total KWH
Percent Change
 
Weather-Adjusted
Percent Change
 (in billions)    
Residential18.3
 (1.9)% (1.5)%
Commercial13.6
 (2.2) (2.2)
Industrial22.1
 (3.7) (3.7)
Other0.2
 (7.3) (7.3)
Total retail54.2
 (2.8) (2.6)%
Wholesale     
Non-affiliates5.1
 1.2
  
Affiliates3.5
 (22.7)  
Total wholesale8.6
 (10.1)  
Total energy sales62.8
 (3.8)%  
Changes in retail energy sales are generally the result of changes in electricity usage by customers, changes in weather, and changes in the number of customers. Retail energy sales in 2019 decreased 2.8% primarily due to lower customer usage and milder weather in 2019 compared to 2018. Weather-adjusted residential sales were 1.5% lower in 2019 primarily due to lower customer usage resulting from an increase in penetration of energy-efficient residential appliances, partially offset by customer growth. Weather-adjusted commercial sales were 2.2% lower in 2019 primarily due to lower customer usage resulting from customer initiatives in energy savings and an ongoing migration to the electronic commerce business model, partially offset by customer growth. Industrial sales decreased 3.7% in 2019 as compared to 2018 primarily as a result of changes in production levels in the primary metals and chemicals sectors.
See "Operating Revenues" above for a discussion of significant changes in wholesale revenues from sales to non-affiliates and wholesale revenues from sales to affiliated companies related to changes in price and KWH sales.
Fuel and Purchased Power Expenses
The mix of fuel sources for generation of electricity is determined primarily by the unit cost of fuel consumed, demand, and the availability of generating units. Additionally, Alabama Power purchases a portion of its electricity needs from the wholesale market.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Details of Alabama Power's generation and purchased power were as follows:
 2019 2018
Total generation (in billions of KWHs)
56.9
 60.5
Total purchased power (in billions of KWHs)
9.4
 8.1
Sources of generation (percent) —
   
Coal45
 50
Nuclear25
 23
Gas21
 19
Hydro9
 8
Cost of fuel, generated (in cents per net KWH) —
   
Coal2.69
 2.73
Nuclear0.77
 0.77
Gas2.47
 2.84
Average cost of fuel, generated (in cents per net KWH)(a)(b)
2.11
 2.26
Average cost of purchased power (in cents per net KWH)(c)
4.39
 5.47
(a)
For 2018, cost of fuel, generated and average cost of fuel, generated excludes a $30 million adjustment associated with a May 2018 Alabama PSC accounting order related to excess deferred income taxes. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersAlabama PowerTax Reform Accounting Order" herein for additional information.
(b)KWHs generated by hydro are excluded from the average cost of fuel, generated.
(c)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 and purchased power expenses were $1.5 billion in 2019, a decrease of $218 million, or 12.6%, compared to 2018. The decrease was primarily due to a $102 million decrease in the average cost of purchased power, a $56 million decrease in the average cost of fuel, a $30 million net decrease related to the volume of KWHs purchased and generated, and a $30 million decrease in fuel expense associated with the May 2018 Alabama PSC accounting order.
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. Alabama Power, along with the Alabama PSC, continuously monitors the under/over recovered balance to determine whether adjustments to billing rates are required. See Note 2 to the financial statements under "Alabama PowerRate ECR" for additional information.
Fuel
Fuel expenses were $1.1 billion in 2019, a decrease of $189 million, or 14.5%, compared to 2018. The decrease was primarily due to a 13% decrease in the average cost of KWHs generated by natural gas, which excludes tolling agreements, a 14.4% decrease in the volume of KWHs generated by coal, and a 5.2% increase in the volume of KWHs generated by hydro, as well as a $30 million decrease in fuel expense associated with the May 2018 Alabama PSC accounting order.
Purchased Power Non-Affiliates
Purchased power expense from non-affiliates was $203 million in 2019, a decrease of $13 million, or 6.0%, compared to 2018. This decrease was primarily due to a 12.6% decrease in the average cost per KWH purchased due to lower natural gas prices. The decrease was partially offset by a 9.1% increase in the amount of energy purchased as a result of decreased coal generation due to the retirement of Plant Gorgas Units 8, 9, and 10.
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 service territory, and the availability of the Southern Company system's generation.
Purchased Power Affiliates
Purchased power expense from affiliates was $200 million in 2019, a decrease of $16 million, or 7.4%, compared to 2018. This decrease was primarily due to a 25.2% decrease in the average cost per KWH purchased due to lower natural gas prices. The decrease was partially offset by a 24.1% increase in the amount of energy purchased primarily due to the availability of lower-cost

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

generation compared to Alabama Power's owned generation and a decrease in coal generation due to the retirement of Plant Gorgas Units 8, 9, and 10.
Energy purchases from affiliates will vary depending on demand for energy and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, as approved by the FERC.
Other Operations and Maintenance Expenses
In 2019, other operations and maintenance expenses increased $152 million, or 9.1%, as compared to the prior year primarily due to additional accruals of $123 million to the NDR as well as $11 million in Rate CNP Compliance-related expenses. See Note 2 to the financial statements under "Alabama Power – Rate NDR" and " – Rate CNP Compliance" for additional information.
Depreciation and Amortization
Depreciation and amortization increased $29 million, or 3.8%, in 2019 as compared to the prior year primarily due to additional plant in service. See Note 5 to the financial statements under "Depreciation and Amortization" for additional information.
Other Income (Expense), Net
Other income (expense), net increased $26 million, or 130.0%, in 2019 as compared to the prior year primarily due to a decrease of $17 million in charitable donations and an increase of $9 million in interest income from temporary cash investments.
Income Taxes
Income taxes decreased $21 million, or 7.2%, in 2019 as compared to the prior year primarily due to additional benefits from the flowback of excess deferred income taxes in accordance with an Alabama PSC accounting order, partially offset by an increase in pre-tax net income. See Note 2 to the financial statements under "Alabama Power – Tax Reform Accounting Order" for additional information.
Georgia Power
Georgia Power's 2019 net income was $1.7 billion, representing a $927 million, or 116.9%, increase from the previous year. The increase was primarily due to a $1.1 billion ($0.8 billion after tax) charge in the second quarter 2018 for an estimated probable loss related to Georgia Power's construction of Plant Vogtle Units 3 and 4, an increase in retail base revenues associated with higher contributions from commercial and industrial customers with variable demand-driven pricing, and an increase in other revenues primarily related to unregulated sales. Partially offsetting the increase were higher non-fuel operations and maintenance expenses and depreciation and amortization.
A condensed income statement for Georgia Power follows:
 2019 
Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$8,408
 $(12)
Fuel1,444
 (254)
Purchased power1,096
 (57)
Other operations and maintenance1,972
 112
Depreciation and amortization981
 58
Taxes other than income taxes454
 17
Estimated loss on Plant Vogtle Units 3 and 4
 (1,060)
Total operating expenses5,947
 (1,184)
Operating income2,461
 1,172
Interest expense, net of amounts capitalized409
 12
Other income (expense), net140
 25
Income taxes472
 258
Net income$1,720
 $927

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues
Operating revenues for 2019 were $8.4 billion, a $12 million decrease from 2018. Details of operating revenues were as follows:
 2019 2018
 (in millions)
Retail — prior year$7,752
  
Estimated change resulting from —   
Rates and pricing202
  
Sales decline(66)  
Weather39
  
Fuel cost recovery(220)  
Retail — current year7,707
 $7,752
Wholesale revenues —   
Non-affiliates129
 163
Affiliates11
 24
Total wholesale revenues140
 187
Other operating revenues561
 481
Total operating revenues$8,408
 $8,420
Percent change(0.1)% 1.3%
Retail revenues of $7.7 billion in 2019 decreased $45 million, or 0.6%, compared to 2018. The significant factors driving this change are shown in the preceding table. The increase in rates and pricing was primarily due to higher contributions from commercial and industrial customers with variable demand-driven pricing, an increase in the NCCR tariff effective January 1, 2019, and pricing effects associated with a milder winter in 2019 compared to 2018. See Note 2 to the financial statements under "Georgia PowerNuclear Construction" for additional information related to the NCCR tariff.
See "Energy Sales" below for a discussion of changes in the volume of energy sold, including changes related to the sales decline in 2019.
Electric rates include provisions to adjust billings for fluctuations in fuel costs, including the energy component of purchased power costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses and do not affect net income. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersGeorgia PowerFuel Cost Recovery" herein for additional information.
Wholesale revenues from power sales to non-affiliated utilities were as follows:
 2019 2018
 (in millions)
Capacity and other$55
 $54
Energy74
 109
Total non-affiliated$129
 $163
Wholesale capacity revenues from PPAs are recognized either on a levelized basis over the appropriate contract period or the amounts billable under the contract terms and provide for recovery of fixed costs and a return on investment. Wholesale revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Georgia Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation. Increases and decreases in energy revenues that are driven by fuel prices are accompanied by an increase or decrease in fuel costs and do not have a significant impact on net income. Short-term opportunity sales are made at market-based rates that generally provide a margin above Georgia Power's variable cost of energy.
Wholesale revenues from non-affiliated sales decreased $34 million, or 20.9%, in 2019 as compared to 2018 primarily due to lower energy prices and lower demand.

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Southern Company and Subsidiary Companies 2019 Annual Report

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 2019, wholesale revenues from sales to affiliates decreased $13 million, or 54.2%, as compared to 2018 primarily due to a 36.3% decrease in KWH sales as a result of the lower market cost of available energy compared to the cost of Georgia Power-owned generation.
Other operating revenues increased $80 million, or 16.6%, in 2019 from the prior year primarily due to revenue increases of $27 million from power delivery construction and maintenance contracts, $20 million from unregulated sales associated with new energy conservation projects, $11 million from outdoor lighting LED conversions and sales, $7 million from OATT sales, and $6 million in wholesale operating fees associated with contractual targets.
Energy Sales
Changes in revenues are influenced heavily by the change in the volume of energy sold from year to year. KWH sales for 2019 and the percent change from the prior year were as follows:
 2019
 
Total
KWHs
 
Total KWH
Percent Change
 
Weather-Adjusted
Percent Change
 (in billions)    
Residential28.2
 (0.5)% (0.4)%
Commercial32.8
 (0.4) (1.3)
Industrial23.2
 (2.1) (2.2)
Other0.5
 (5.6) (5.5)
Total retail84.7
 (0.9) (1.2)%
Wholesale     
Non-affiliates2.7
 (15.8)  
Affiliates0.3
 (36.3)  
Total wholesale3.0
 (18.7)  
Total energy sales87.7
 (1.7)%  
Changes in retail energy sales are generally the result of changes in electricity usage by customers, changes in weather, and changes in the number of customers.
In 2019, weather-adjusted residential and commercial KWH sales decreased 0.4% and 1.3%, respectively, compared to 2018 primarily due to a decline in average customer usage resulting from an increase in energy saving initiatives. The decreases in weather-adjusted residential and commercial KWH sales were largely and partially, respectively, offset by customer growth. Weather-adjusted industrial KWH sales decreased 2.2% primarily due to decreases in the paper, textile, stone, clay, and glass, and lumber sectors, partially offset by an increase in the pipeline sector.
See "Operating Revenues" above for a discussion of significant changes in wholesale sales to non-affiliates and affiliated companies.
Fuel and Purchased Power Expenses
Fuel costs constitute one of the largest expenses for Georgia Power. The mix of fuel sources for the generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, Georgia Power purchases a portion of its electricity needs from the wholesale market.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Details of Georgia Power's generation and purchased power were as follows:
 2019 2018
Total generation (in billions of KWHs)
62.6
 65.2
Total purchased power (in billions of KWHs)
29.1
 27.9
Sources of generation (percent) —
   
Gas47
 42
Nuclear26
 25
Coal24
 30
Hydro3
 3
Cost of fuel, generated (in cents per net KWH) 
   
Gas2.42
 2.75
Nuclear0.81
 0.82
Coal3.09
 3.21
Average cost of fuel, generated (in cents per net KWH)
2.16
 2.40
Average cost of purchased power (in cents per net KWH)(*)
4.21
 4.79
(*) Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.
Fuel and purchased power expenses were $2.5 billion in 2019, a decrease of $311 million, or 10.9%, compared to 2018. The decrease was primarily due to a $289 million decrease related to the average cost of fuel and purchased power.
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 FUTURE EARNINGS POTENTIAL – "Regulatory MattersGeorgia PowerFuel Cost Recovery" herein for additional information.
Fuel
Fuel expense was $1.4 billion in 2019, a decrease of $254 million, or 15.0%, compared to 2018. The decrease was primarily due to a 10% decrease in the average cost of fuel, primarily related to lower natural gas prices, and a 3.9% decrease in the volume of KWHs generated, primarily due to the lower market cost of energy compared to available Georgia Power resources.
Purchased Power - Non-Affiliates
Purchased power expense from non-affiliates was $521 million in 2019, an increase of $91 million, or 21.2%, compared to 2018. The increase was primarily due to a 53.1% increase in the volume of KWHs purchased primarily due to the lower market cost of energy compared to available Southern Company system resources and warmer weather in the third quarter 2019 resulting in higher customer demand, partially offset by a 22.1% decrease in the average cost per KWH purchased primarily due to lower energy prices.
The volume increase also reflects purchases from Gulf Power which were classified as affiliate prior to January 1, 2019. See Note 15 to the financial statements for information regarding the sale of Gulf Power.
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
Purchased power expense from affiliates was $575 million in 2019, a decrease of $148 million, or 20.5%, compared to 2018. The decrease was primarily due to an 11.1% decrease in the volume of KWHs purchased as Georgia Power units generally dispatched at a lower cost than other Southern Company system resources and a 13.0% decrease in the average cost per KWH purchased resulting from lower energy prices.
The decrease in purchased power expense from affiliates also reflects a change in the classification of capacity expenses of $24 million related to PPAs with Southern Power accounted for as finance leases following the adoption of FASB ASC Topic 842, Leases (ASC 842). In 2019, these expenses are included in depreciation and amortization and interest expense, net of amounts capitalized. The decrease in the volume of KWHs purchased also includes the effect of classifying purchases from Gulf Power as

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

non-affiliate beginning January 1, 2019. See Notes 9 and 15 to the financial statements for additional information regarding ASC 842 and the sale of Gulf Power, respectively.
Energy purchases from affiliates will vary depending on the demand and the availability and cost of generating resources at each company within the Southern Company system. These purchases are made in accordance with the IIC or other contractual agreements, all as approved by the FERC.
Other Operations and Maintenance Expenses
In 2019, other operations and maintenance expenses increased $112 million, or 6.0%, compared to 2018. The increase reflects increases in expenses of $30 million from unregulated sales primarily associated with new energy conservation projects and power delivery construction and maintenance contracts, $26 million related to scheduled generation outages, $16 million related to an adjustment for FERC fees following the conclusion of a multi-year audit of headwater benefits associated with hydro facilities, $12 million primarily due to the timing of vegetation management and other transmission-related expenses, and $10 million associated with generation maintenance.
Depreciation and Amortization
Depreciation and amortization increased $58 million, or 6.3%, in 2019 compared to 2018. The increase was primarily due to a $31 million increase in depreciation associated with additional plant in service and a $19 million increase in the amortization of regulatory assets related to the retirement of certain generating units. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersGeorgia PowerIntegrated Resource Plan" herein for additional information on unit retirements.
The increase also reflects the classification of approximately $9 million related to PPAs with Southern Power accounted for as finance leases following the adoption of ASC 842. In prior periods, the expenses related to these PPAs were included in purchased power, affiliates. See Note 9 to the financial statements for additional information regarding ASC 842.
See Note 5 to the financial statements under "Depreciation and Amortization" for additional information.
Taxes Other Than Income Taxes
In 2019, taxes other than income taxes increased $17 million, or 3.9%, compared to 2018 primarily due to higher property taxes of $25 million as a result of increases in the assessed value of property, partially offset by a decrease of $11 million in municipal franchise fees, largely due to adjustments associated with the Georgia Power Tax Reform Settlement Agreement. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersGeorgia PowerRate Plans – Tax Reform Settlement Agreement" herein for additional information.
Estimated Loss on Plant Vogtle Units 3 and 4
In the second quarter 2018, an estimated probable loss of $1.1 billion was recorded to reflect Georgia Power's revised estimate to complete construction and start-up of Plant Vogtle Units 3 and 4. See ACCOUNTING POLICIES – "Estimated Cost, Schedule, and Rate Recovery for the Construction of Plant Vogtle Units 3 and 4" herein and Note 2 to the financial statements under "Georgia PowerNuclear Construction" for additional information.
Interest Expense, Net of Amounts Capitalized
In 2019, interest expense, net of amounts capitalized increased $12 million, or 3.0%, compared to 2018. The increase was primarily due to the reclassification of $15 million related to PPAs with Southern Power accounted for as finance leases following the adoption of ASC 842 and a $6 million increase in interest expense associated with an increase in outstanding short-term borrowings, partially offset by a $9 million increase in amounts capitalized largely associated with Plant Vogtle Units 3 and 4.
In prior periods, the expenses related to the PPAs with Southern Power were included in purchased power, affiliates. See FINANCIAL CONDITION AND LIQUIDITY – "Sources of Capital" and "Financing Activities" herein for additional information on borrowings, Note 9 to the financial statements for additional information regarding ASC 842, and Note 2 to the financial statements under "Georgia PowerNuclear Construction" for additional information regarding Plant Vogtle Units 3 and 4.
Other Income (Expense), Net
In 2019, other income (expense), net increased $25 million compared to the prior year primarily due to a $16 million increase in non-service cost-related retirement benefits income and a $13 million decrease in charitable donations, partially offset by a $4 million decrease in interest income from temporary cash investments. See Note 11 to the financial statements for additional information on Georgia Power's net periodic pension and other postretirement benefit costs.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Income Taxes
Income taxes increased $258 million, or 120.6%, in 2019 compared to the prior year primarily as a result of higher pre-tax earnings largely due to the 2018 charge associated with Plant Vogtle Units 3 and 4 construction. This increase was partially offset by additional state ITCs recognized in 2019 and the recognition of a valuation allowance in 2018. See Note 10 to the financial statements for additional information.
Mississippi Power
Mississippi Power's net income after dividends on preferred stock was $139 million in 2019 compared to $235 million in 2018. The change was primarily the result of higher income tax expense following the 2018 partial reversal of a valuation allowance.
A condensed statement of operations follows:
 2019 Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$1,264
 $(1)
Fuel407
 2
Purchased power20
 (21)
Other operations and maintenance283
 (30)
Depreciation and amortization192
 23
Taxes other than income taxes113
 6
Estimated loss on Kemper IGCC24
 (13)
Total operating expenses1,039
 (33)
Operating income225
 32
Allowance for equity funds used during construction1
 1
Interest expense, net of amounts capitalized69
 (7)
Other income (expense), net12
 (5)
Income taxes (benefit)30
 132
Net income139
 (97)
Dividends on preferred stock
 (1)
Net income after dividends on preferred stock$139
 $(96)

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues
Operating revenues for 2019 were approximately $1.3 billion, a $1 million decrease from 2018. Details of operating revenues were as follows:
 2019 2018
 (in millions)
Retail — prior year$889
  
Estimated change resulting from —   
Rates and pricing31
  
Weather(2)  
Fuel and other cost recovery(41)  
Retail — current year877
 $889
Wholesale revenues —   
Non-affiliates237
 263
Affiliates132
 91
Total wholesale revenues369
 354
Other operating revenues18
 22
Total operating revenues$1,264
 $1,265
Percent change(0.1)% 6.6%
Total retail revenues for 2019 decreased $12 million, or 1.3%, compared to 2018 primarily due to a fuel rate decrease that became effective for the first billing cycle of February 2019. This decrease was largely offset by an increase in rates and pricing, primarily related to PEP and ECO Plan rate changes that became effective for the first billing cycle of September 2018, net of a new tolling arrangement accounted for as a sales-type lease effective January 2019. See Note 2 to the financial statements under "Mississippi PowerEnvironmental Compliance Overview Plan" and " – Performance Evaluation Plan" and Note 9 to the financial statements under "Lessor" for additional information.
See "Energy Sales" below for a discussion of changes in the volume of energy sold, including changes related to sales and weather.
Electric rates for Mississippi Power 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. Recoverable fuel costs include fuel and purchased power expenses reduced by the fuel and emissions portion of wholesale revenues from energy sold to customers outside Mississippi Power's service territory. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersMississippi PowerFuel Cost Recovery" herein for additional information.
Wholesale revenues from power sales to non-affiliated utilities, including FERC-regulated MRA sales as well as market-based sales, were as follows:
 2019 2018
 (in millions)
Capacity and other$3
 $6
Energy234
 257
Total non-affiliated$237
 $263
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. The contracts with these wholesale customers represented 15.7% of Mississippi Power's total

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

operating revenues in 2019 and are generally subject to 10-year rolling cancellation notices. Historically, these wholesale customers have acted as a group and any changes in contractual relationships for one customer are likely to be followed by the other wholesale customers. Short-term opportunity energy sales are also included in sales for resale to non-affiliates. These opportunity sales are made at market-based rates that generally provide a margin above Mississippi Power's variable cost to produce the energy.
Wholesale revenues from sales to non-affiliates decreased $26 million, or 9.9%, compared to 2018. This decrease primarily reflects decreases of $14 million from lower fuel prices, $6 million from decreased customer usage, and $8 million from lower PPA capacity and energy sales.
Wholesale revenues from sales to affiliates 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.
Wholesale revenues from sales to affiliates increased $41 million, or 45.1%, in 2019 compared to 2018. This increase was primarily due to a $76 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, partially offset by a $35 million decrease associated with lower natural gas prices.
Energy Sales
Changes in revenues are influenced heavily by the change in the volume of energy sold from year to year. KWH sales for 2019 and the percent change from the prior year were as follows:
 2019
 
Total
KWHs
 
Total KWH
Percent Change
 Weather-Adjusted Percent Change
 (in millions)    
Residential2,062
 (2.4)% (0.8)%
Commercial2,715
 (2.9) (2.7)
Industrial4,795
 (2.6) (2.6)
Other36
 (1.9) (1.9)
Total retail9,608
 (2.7) (2.2)%
Wholesale     
Non-affiliated3,966
 (0.3)  
Affiliated4,758
 84.1
  
Total wholesale8,724
 32.9
  
Total energy sales18,332
 11.5 %  
Changes in retail energy sales are generally the result of changes in electricity usage by customers, changes in weather, and changes in the number of customers. Retail energy sales decreased 2.7% in 2019 as compared to the prior year, primarily due to decreased demand by several large industrial customers. Weather-adjusted residential and commercial KWH sales decreased 0.8% and 2.7%, respectively, in 2019 primarily due to decreased customer usage as a result of an increase in energy saving initiatives, slightly offset by customer growth.
See "Operating Revenues" above for a discussion of significant changes in wholesale revenues to affiliated companies.
Fuel and Purchased Power Expenses
The mix of fuel sources for generation of electricity is determined primarily by demand, the unit cost of fuel consumed, and the availability of generating units. Additionally, Mississippi Power purchases a portion of its electricity needs from the wholesale market.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Details of Mississippi Power's generation and purchased power were as follows:
 2019 2018
Total generation (in millions of KWHs)
18,269
 15,966
Total purchased power (in millions of KWHs)
529
 960
Sources of generation (percent) –
   
Gas94
 93
Coal6
 7
Cost of fuel, generated (in cents per net KWH) –
   
Gas2.26
 2.65
Coal4.05
 3.50
Average cost of fuel, generated (in cents per net KWH)
2.37
 2.72
Average cost of purchased power (in cents per net KWH)
3.71
 4.27
Fuel and purchased power expenses were $427 million in 2019, a decrease of $19 million, or 4.3%, as compared to the prior year. The decrease was primarily due to a $60 million decrease related to the average cost of fuel and purchased power primarily due to the lower average cost of natural gas, partially offset by a $41 million net increase associated with the volume of KWHs generated and purchased primarily due to the availability of Mississippi Power's lower-cost generation resources.
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 clauses. See FUTURE EARNINGS POTENTIAL – "Regulatory MattersMississippi PowerFuel Cost Recovery" herein and Note 1 to the financial statements under "Fuel Costs" for additional information.
Fuel
Fuel expense increased $2 million, or 0.5%, in 2019 compared to 2018 primarily due to a 15% increase in the volume of KWHs generated, partially offset by a 13% net decrease in the average cost of fuel per KWH generated.
Purchased Power
Purchased power expense decreased $21 million, or 51.2%, in 2019 compared to 2018. The decrease was primarily the result of a 45% decrease in the volume of KWHs purchased due to the availability of Mississippi Power's lower-cost generation resources and a 13% 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 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
Other operations and maintenance expenses decreased $30 million, or 9.6%, in 2019 compared to the prior year. The decrease was primarily due to decreases of $21 million in compensation and benefit expenses primarily due to an employee attrition plan implemented in the third quarter 2018, $5 million in amortization of previously deferred Plant Ratcliffe expenses as a result of a settlement agreement reached with wholesale customers (MRA Settlement Agreement), $5 million in planned generation outage costs, and $4 million in Plant Ratcliffe waste water treatment expenses. These decreases were partially offset by a $9 million increase in overhead line maintenance and vegetation management expenses. See Note 2 to the financial statements under "Mississippi PowerMunicipal and Rural Associations Tariff" for additional information.
Depreciation and Amortization
Depreciation and amortization increased $23 million, or 13.6%, in 2019 compared to 2018 primarily related to increases in amortization associated with ECO Plan regulatory assets. See Note 2 to the financial statements under "Mississippi Power – Environmental Compliance Overview Plan" for additional information.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Taxes Other Than Income Taxes
Taxes other than income taxes increased $6 million, or 5.6%, in 2019 compared to 2018 primarily due to increases of $4 million in ad valorem taxes and $2 million in franchise taxes.
Estimated Loss on Kemper IGCC
In 2019 and 2018, charges of $24 million and $37 million, respectively, were recorded associated with the abandonment and closure activities and period costs, net of sales proceeds for the mine and gasifier-related assets. The 2019 charge primarily related to the expected close out of a DOE contract related to the Kemper County energy facility. See Note 2 to the financial statements under "Kemper County Energy Facility" for additional information.
Interest Expense, Net of Amounts Capitalized
Interest expense, net of amounts capitalized decreased $7 million, or 9.2%, in 2019 compared to 2018, primarily as the result of a decrease in outstanding long-term borrowings. See Note 8 to the financial statements for additional information.
Other Income (Expense), Net
Other income (expense), net decreased $5 million in 2019 compared to 2018. The decrease was primarily due to the $24 million settlement of Mississippi Power's Deepwater Horizon claim in 2018, partially offset by a $9 million increase in interest income associated with a new tolling arrangement accounted for as a sales-type lease and a $7 million decrease in charitable donations. See Notes 3 and 9 to the financial statements under "Other MattersMississippi Power" and "Lessor," respectively, for additional information.
Income Taxes (Benefit)
Income tax expense increased $132 million, or 129.4%, in 2019 compared to 2018 primarily due to a $92 million increase related to the 2018 reduction of a valuation allowance for a state income tax net operating loss (NOL) carryforward, a $42 million increase associated with the revaluation of deferred tax assets related to the Kemper IGCC recorded in 2018 in accordance with the Tax Reform Legislation, and a $9 million increase due to higher pre-tax earnings in 2019. These increases were partially offset by $15 million associated with the flowback of excess deferred income taxes resulting from the MRA Settlement Agreement and a new tolling arrangement accounted for as a sales-type lease. See FUTURE EARNINGS POTENTIAL – "Income Tax Matters" herein and Note 10 to the financial statements for additional information.
Southern Power
Net income attributable to Southern Power for 2019 was $339 million, a $152 million increase from 2018, primarily due to net impacts totaling approximately $141 million from the dispositions of the Florida Plants in 2018 and Plant Nacogdoches in the second quarter 2019, which include an asset impairment charge in 2018, a gain on sale in 2019 (including the recognition of deferred ITCs), and a decrease in operations and maintenance expense, partially offset by PPA capacity revenue decreases in 2019. The increase in net income also reflects $79 million in tax expense recognized in 2018 related to the Tax Reform Legislation, a $27 million wind turbine equipment impairment charge in 2018, and net gains in 2019 of $25 million from the Roserock solar facility litigation settlement and sales of wind equipment. These increases were partially offset by $65 million in state income tax benefits recorded in 2018 arising from the reorganization of Southern Power's legal entities and reductions in net income of approximately $60 million related to the SP Wind tax equity partnership entered into in 2018.
See Note 15 to the financial statements under "Southern Power – Sales of Natural Gas and Biomass Plants" and " – Development Projects" for additional information on the Florida Plants and Plant Nacogdoches dispositions and sales of wind turbine equipment. See Notes 7 and 10 to the financial statements under "Southern Power" and "Legal Entity Reorganizations" for additional information on the tax equity partnerships and the legal entity reorganization, respectively. Also see Note 3 to the financial statements under "General Litigation – Southern Power" for additional information on the Roserock solar facility litigation settlement.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

A condensed statement of income follows:
 2019 Increase
(Decrease)
from 2018
 (in millions)
Operating revenues$1,938
 $(267)
Fuel577
 (122)
Purchased power108
 (68)
Other operations and maintenance359
 (36)
Depreciation and amortization479
 (14)
Taxes other than income taxes40
 (6)
Asset impairment3
 (153)
Gain on disposition(23) (21)
Total operating expenses1,543
 (420)
Operating income395
 153
Interest expense, net of amounts capitalized169
 (14)
Other income (expense), net47
 24
Income taxes (benefit)(56) 108
Net income329
 83
Net income (loss) attributable to noncontrolling interests(10) (69)
Net income attributable to Southern Power$339
 $152
Operating Revenues
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.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues Details
Details of Southern Power's operating revenues were as follows:
 2019 2018
 (in millions)
PPA capacity revenues$482
 $580
PPA energy revenues1,081
 1,140
Total PPA revenues1,563
 1,720
Non-PPA revenues363
 472
Other revenues12
 13
Total operating revenues$1,938
 $2,205
Operating revenues for 2019 were $1.9 billion, a $267 million, or 12%, decrease from 2018. The decrease in operating revenues was primarily due to the following:
PPA capacity revenues decreased $98 million, or 17%, primarily due to the sales of the Florida Plants in December 2018 and Plant Nacogdoches in June 2019. In addition, the change reflects a reduction of $34 million from the expiration of an affiliate natural gas PPA, offset by a $36 million increase in new PPA capacity revenues from existing natural gas facilities, of which $13 million related to the expansion unit at Plant Mankato.
PPA energy revenues decreased $59 million, or 5%, primarily due to a $67 million decrease in sales from natural gas facilities primarily driven by a $103 million decrease in the average cost of fuel and purchased power, partially offset by a $36 million increase in the volume of KWHs sold due to increased customer load.
Non-PPA revenues decreased $109 million, or 23%, primarily due to a $72 million decrease in the volume of KWHs sold through short-term sales and a $37 million decrease in the market price of energy.
Fuel and Purchased Power Expenses
Details of Southern Power's generation and purchased power were as follows:
 Total
KWHs
Total KWH % ChangeTotal
KWHs
 2019 2018
 (in billions of KWHs)
Generation47 46
Purchased power3 4
Total generation and purchased power50—%50
Total generation and purchased power, excluding solar, wind, and tolling agreements29—%29
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.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Details of Southern Power's fuel and purchased power expenses were as follows:
 2019 2018
 (in millions)
Fuel$577
 $699
Purchased power108
 176
Total fuel and purchased power expenses$685
 $875
In 2019, total fuel and purchased power expenses decreased $190 million, or 22%, compared to 2018. Fuel expense decreased $122 million, or 17%, due to a $137 million decrease in the average cost of fuel per KWH generated, partially offset by a $15 million increase associated with the volume of KWHs generated. Purchased power expense decreased $68 million, or 39%, due to a $37 million decrease associated with the average cost of purchased power and a $31 million decrease associated with the volume of KWHs purchased.
Other Operations and Maintenance Expenses
In 2019, other operations and maintenance expenses decreased $36 million, or 9%, compared to 2018. The decrease was due to gains totaling $17 million on the sale of wind turbine equipment, decreased expense of $17 million related to the dispositions of the Florida Plants and Plant Nacogdoches, and the recovery of $5 million in legal costs related to the Roserock solar facility litigation settlement in the first quarter 2019. See Note 15 to the financial statements under "Southern PowerDevelopment Projects" and " – Sales of Natural Gas and Biomass Plants" for additional information on the sale of wind turbine equipment and the dispositions, respectively. Also see Note 3 to the financial statements under "General Litigation Matters – Southern Power" for additional information on the litigation settlement.
Asset Impairment
Asset impairment charges totaling $156 million were recorded in 2018, including $119 million related to the sale of the Florida Plants and $36 million related to wind turbine equipment held for development projects. Asset impairment charges in 2019 were immaterial. See Note 15 to the financial statements under "Southern PowerSales of Natural Gas and Biomass Plants" and " – Development Projects" for additional information.
Gain on Dispositions, Net
The sale of Plant Nacogdoches in 2019 resulted in a $23 million gain. See Note 15 to the financial statements under "Southern PowerSales of Natural Gas and Biomass Plants" for additional information.
Interest Expense, Net of Amounts Capitalized
In 2019, interest expense, net of amounts capitalized decreased $14 million, or 8%, compared to 2018, primarily due to a decrease in the amount of outstanding debt.
Other Income (Expense), Net
In 2019, other income (expense), net increased $24 million, or 104%, compared to 2018 primarily due to a $36 million gain arising from the Roserock solar facility litigation settlement in 2019, partially offset by a $14 million gain from a joint-development wind project in 2018 attributable to Southern Power's partner in the project, which was offset by a $14 million loss within noncontrolling interests. See Note 3 to the financial statements under "Southern Power" for additional information regarding the litigation settlement.
Income Taxes (Benefit)
In 2019, income tax benefit was $56 million compared to $164 million for 2018, a decrease of $108 million, primarily attributable to reductions in tax benefits of $127 million from wind PTCs primarily following the 2018 sale of a noncontrolling tax equity interest in SP Wind and $65 million from changes in state apportionment rates following the 2018 reorganizations of certain legal entities, as well as a $64 million increase in income tax expense as a result of higher pre-tax earnings, partially offset by $79 million in tax expense recognized in 2018 related to the Tax Reform Legislation and a $75 million tax benefit resulting from the recognition of deferred ITCs remaining from the original construction recognized in connection with the sale of Plant Nacogdoches.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

See FUTURE EARNINGS POTENTIAL – "Income Tax MattersFederal Tax Reform Legislation" herein and Notes 1, 10, and 15 to the financial statements under "Income Taxes," "Effective Tax Rate," and "Southern Power," respectively, for additional information.
Net Income Attributable to Noncontrolling Interests
In 2019, net income attributable to noncontrolling interests decreased $69 million, or 117%, compared to 2018. The decrease was primarily due to $92 million of losses attributable to noncontrolling interests related to the tax equity partnerships entered into in 2018 and $14 million attributable to a joint-development wind project in 2018, partially offset by an allocation of approximately $29 million of income to the noncontrolling interest partner related to the Roserock solar facility litigation settlement. See Note 3 to the financial statements under "General Litigation MattersSouthern Power" and Note 7 to the financial statements under "Southern Power" for additional information regarding the litigation settlement and tax equity partnerships, respectively.
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 and Illinois.
Southern Company Gas' natural gas volume metrics for gas distribution operations and gas marketing services illustrate the effects of weather and customer demand for natural gas. Wholesale gas services' physical sales volumes represent the daily average natural gas volumes sold to its customers.
Seasonality of Results
During the Heating Season, natural gas usage and operating revenues are generally higher as more customers are connected to the gas distribution systems and natural gas usage is higher in periods of colder weather. 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, 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 can vary significantly from quarter to quarter as a result of seasonality, which is illustrated in the table below.
  
Percent Generated During
Heating Season
  Operating Revenues 
Net
Income
2019 68.7% 86.8%
2018 68.7% 96.0%
Net Income
Net income attributable to Southern Company Gas in 2019 was $585 million, an increase of $213 million, or 57.3%, compared to the prior year. The change in net income includes a $125 million increase at wholesale gas services, an increase of $57 million in continued investment in infrastructure replacement programs and base rate changes at gas distribution operations, net of depreciation, a $34 million decrease in income taxes primarily at Atlanta Gas Light due to increased flowback of excess deferred income taxes in lieu of a rate increase as previously authorized by the Georgia PSC, and an $11 million increase in earnings from equity method investments in 2019. This increase also includes a $51 million net loss in 2018 from the Southern Company Gas

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Dispositions (including the goodwill impairment charge) and $21 million in disposition-related costs in 2018, partially offset by $86 million in after-tax impairment charges in 2019. See Notes 3 and 15 to the financial statements under "Other MattersSouthern Company Gas" and "Southern Company GasProposed Sale of Pivotal LNG and Atlantic Coast Pipeline," respectively, for additional information on the impairment charges. See Note 2 to the financial statements under "Southern Company Gas – Rate Proceedings – Nicor Gas" and " – Atlanta Gas Light" for additional information on the impacts of the Tax Reform Legislation. Also see FUTURE EARNINGS POTENTIAL – "Income Tax Matters" herein and Notes 10 and 15 to the financial statements for additional information.
A condensed income statement for Southern Company Gas follows:
 2019 Increase (Decrease) from 2018
 (in millions)
Operating revenues$3,792
 $(117)
Cost of natural gas1,319
 (220)
Cost of other sales
 (12)
Other operations and maintenance888
 (93)
Depreciation and amortization487
 (13)
Taxes other than income taxes213
 2
Impairment charges115
 73
(Gain) loss on dispositions, net
 291
Total operating expenses3,022
 28
Operating income770
 (145)
Earnings from equity method investments157
 9
Interest expense, net of amounts capitalized232
 4
Other income (expense), net20
 19
Earnings before income taxes715
 (121)
Income taxes130
 (334)
Net Income$585
 $213
The Southern Company Gas Dispositions were completed by July 29, 2018 and represent the primary variance driver for 2019 compared to 2018. Detailed variance explanations are provided herein. See Note 15 to the financial statements under "Southern Company Gas" for additional information on the Southern Company Gas Dispositions.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Operating Revenues
Operating revenues in 2019 were $3.8 billion, a $117 million decrease, compared to 2018. Details of operating revenues were as follows:
 2019
 (in millions)
Operating revenues – prior year$3,909
Estimated change resulting from –
Infrastructure replacement programs and base rate changes96
Gas costs and other cost recovery(89)
Wholesale gas services150
Southern Company Gas Dispositions(*)
(300)
Other26
Operating revenues – current year$3,792
Percent change(3.0)%
(*)
Includes a $245 million decrease related to natural gas revenues, including alternative revenue programs, and a $55 million decrease related to other revenues. See Note 15 to the financial statements under "Southern Company Gas" for additional information.
Revenues from infrastructure replacement programs and base rate changes increased in 2019 compared to the prior year primarily due to increases of $74 million at Nicor Gas and $16 million at Atlanta Gas Light. These amounts include gas distribution operations' continued investments recovered through infrastructure replacement programs and base rate increases as well as customer refunds in 2018 as a result of the Tax Reform Legislation. See Note 2 to the financial statements under "Southern Company Gas" for additional information.
Revenues associated with gas costs and other cost recovery decreased in 2019 compared to the prior year 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.
Revenues from wholesale gas services increased in 2019 primarily due to derivative gains, partially offset by decreased commercial activity. See "Segment InformationWholesale Gas Services" herein for additional information.
Other revenues increased in 2019 primarily due to increases in customers at gas distribution operations and recovery of prior period hedge losses at gas marketing services.
Heating Degree Days
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 the Heating Degree Days information for Illinois and Georgia, the primary locations where Southern Company Gas' operations are impacted by weather.
  Years Ended December 31, 2019 vs. normal 2019 vs. 2018
  
Normal(a)
 2019 2018 colder (warmer) colder (warmer)
  (in thousands)    
Illinois(b)
 5,782
 6,136
 6,101
 6.1 % 0.6 %
Georgia 2,529
 2,157
 2,588
 (14.7)% (16.7)%
(a)Normal represents the 10-year average from January 1, 2009 through December 31, 2018 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.
(b)Heating Degree Days in Illinois are expected to have a limited financial impact in future years. On October 2, 2019, Nicor Gas received approval for a volume balancing adjustment, a revenue decoupling mechanism for residential customers that provides a monthly benchmark level of revenue per rate class for recovery.

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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 2019 Annual Report

Southern Company Gas hedged its exposure to warmer-than-normal weather in Illinois for gas distribution operations and in Illinois and Georgia for gas marketing services. The remaining impacts of weather on earnings were immaterial.
Customer Count
The following table provides the number of customers served by Southern Company Gas at December 31, 2019 and 2018:
  2019 2018
  (in thousands, except market share %)
Gas distribution operations 4,277
 4,248
Gas marketing services    
Energy customers(*)
 631
 697
Market share of energy customers in Georgia 28.9% 29.0%