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•	the impact of recent and future federal and state regulatory changes, including tax, environmental, and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

•	the potential effects of the continued COVID-19 pandemic, including, but not limited to, those described in Item 1A "Risk Factors" herein;

•	the extent and timing of costs and legal requirements related to CCR;

•	current and future litigation or regulatory investigations, proceedings, or inquiries, including litigation and other disputes related to the Kemper County energy facility;

•	the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate, including from the development and deployment of alternative energy sources;

•	variations in demand for electricity and natural gas;

•	available sources and costs of natural gas and other fuels;

•	the ability to complete necessary or desirable pipeline expansion or infrastructure projects, limits on pipeline capacity, and operational interruptions to natural gas distribution and transmission activities;

•	transmission constraints;

•	effects of inflation;

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the ability to control costs and avoid cost and schedule overruns during the development, construction, and operation of facilities or other projects, including Plant Vogtle Units 3 and 4, which includes components based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale, and including changes in labor costs, availability, and productivity; challenges with management of contractors or vendors; subcontractor performance; adverse weather conditions; shortages, delays, increased costs, or inconsistent quality of equipment, materials, and labor; contractor or supplier delay; delays due to judicial or regulatory action; nonperformance under construction, operating, or other agreements; operational readiness, including specialized operator training and required site safety programs; engineering or design problems; design and other licensing-based compliance matters, including, for nuclear units, the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel; challenges with start-up activities, including major equipment failure, system integration, or regional transmission upgrades; and/or operational performance;

•	the ability to overcome or mitigate the current challenges at Plant Vogtle Units 3 and 4, including, but not limited to, those related to COVID-19, as described in Note (B) to the Condensed Financial Statements under "Georgia Power – Nuclear Construction" in Item 1 herein, that could impact the cost and schedule for the project;

•	legal proceedings and regulatory approvals and actions related to construction projects, such as Plant Vogtle Units 3 and 4 and pipeline projects, including PSC approvals and FERC and NRC actions;

•	under certain specified circumstances, a decision by holders of more than 10% of the ownership interests of Plant Vogtle Units 3 and 4 not to proceed with construction and the ability of other Vogtle Owners to tender a portion of their ownership interests to Georgia Power following certain construction cost increases;

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•	in the event Georgia Power becomes obligated to provide funding to MEAG Power with respect to the portion of MEAG Power's ownership interest in Plant Vogtle Units 3 and 4 involving JEA, any inability of Georgia Power to receive repayment of such funding;

•	the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;

•	investment performance of the employee and retiree benefit plans and nuclear decommissioning trust funds;

•	advances in technology;

•	performance of counterparties under ongoing renewable energy partnerships and development agreements;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to ROE, equity ratios, additional generating capacity, and fuel and other cost recovery mechanisms;

•	the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;

•	the inherent risks involved in operating and constructing nuclear generating facilities;

•	the inherent risks involved in transporting and storing natural gas;

•	the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;

•	the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	access to capital markets and other financing sources;

•	changes in Southern Company's and any of its subsidiaries' credit ratings;

•	changes in the method of determining LIBOR or the replacement of LIBOR with an alternative reference rate;

•	the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events, or other similar occurrences;

•	the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;

•	impairments of goodwill or long-lived assets;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports (including the Form 10-K) filed by the Registrants from time to time with the SEC.

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The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 2019 have been derived from the audited financial statements of each Registrant. In the opinion of each Registrant's management, the information regarding such Registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended March 31, 2020 and 2019. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the overall results of operations, financial position, or cash flows of any Registrant.

Goodwill and Other Intangible Assets

Goodwill at March 31, 2020 and December 31, 2019 was as follows:

	Goodwill
	(in millions)
Southern Company	$	5,280
Southern Company Gas:
Gas distribution operations	$	4,034
Gas marketing services	981
Southern Company Gas total	$	5,015

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

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Other intangible assets were as follows:

	At March 31, 2020										At December 31, 2019
	Gross Carrying Amount			Accumulated Amortization			Other Intangible Assets, Net				Gross Carrying Amount			Accumulated Amortization			Other Intangible Assets, Net
	(in millions)										(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships	$	212		$	(121	)	$	91			$	212		$	(116	)	$	96
Trade names	64			(26		)	38				64			(25		)	39
Storage and transportation contracts	64			(63		)	1				64			(62		)	2
PPA fair value adjustments	390			(74		)	316				390			(69		)	321
Other	10			(8		)	2				11			(8		)	3
Total other intangible assets subject to amortization	$	740		$	(292	)	$	448			$	741		$	(280	)	$	461
Other intangible assets not subject to amortization:
Federal Communications Commission licenses	75			—			75				75			—			75
Total other intangible assets	$	815		$	(292	)	$	523			$	816		$	(280	)	$	536
Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments	$	390		$	(74	)	$	316			$	390		$	(69	)	$	321
Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships	$	156		$	(108	)	$	48			$	156		$	(104	)	$	52
Trade names	26			(10		)	16				26			(10		)	16
Wholesale gas services
Storage and transportation contracts	64			(63		)	1				64			(62		)	2
Total other intangible assets subject to amortization	$	246		$	(181	)	$	65			$	246		$	(176	)	$	70

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Amortization associated with other intangible assets was as follows:

	Three Months Ended
	March 31, 2020
	(in millions)
Southern Company(a)	$	12
Southern Power(b)	$	5
Southern Company Gas
Gas marketing services	$	4
Wholesale gas services(b)	1
Southern Company Gas total	$	5

(a)	Includes $6 million for the three months ended March 31, 2020, recorded as a reduction to operating revenues.

(b)	Recorded as a reduction to operating revenues.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that total to the amounts shown in the condensed statements of cash flows for the Registrants that had restricted cash at March 31, 2020 and/or December 31, 2019:

	Southern Company								Southern Company Gas
	At March 31, 2020				At December 31, 2019				At March 31, 2020				At December 31, 2019
	(in millions)								(in millions)
Cash and cash equivalents	$	2,164			$	1,975			$	311			$	46
Restricted cash(a):
Other accounts and notes receivable	—				3				—				3
Other current assets	3				—				3				—
Total cash, cash equivalents, and restricted cash	$	2,168		(b)	$	1,978			$	314			$	49

(a)	Represents restricted cash held by Southern Company Gas as collateral for workers' compensation, life insurance, and long-term disability insurance.

(b)	Total does not add due to rounding.

Natural Gas for Sale

Southern Company Gas, with the exception of Nicor Gas, carries natural gas inventory on a WACOG basis. For any declines in market prices below the WACOG considered to be other than temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Southern Company Gas had no material adjustments for any period presented.

Nicor Gas' natural gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during the year that are restored prior to year end are charged to cost of natural gas at the estimated annual replacement cost. Inventory decrements that are not restored prior to year end are charged to cost of natural gas at the actual LIFO cost of the inventory layers liquidated. Nicor Gas' inventory decrement at March 31, 2020 is expected to be restored prior to year end.

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Depreciation and Amortization

See Note 5 to the financial statements under "Depreciation and Amortization – Southern Power" in Item 8 of the Form 10-K for additional information.

Effective January 1, 2020, Southern Power revised the depreciable lives of its natural gas generating facilities from up to 45 years to up to 50 years. This revision resulted in an immaterial decrease in depreciation for the three months ended March 31, 2020 and is expected to result in an immaterial decrease in annual depreciation for 2020.

See Note 2 to the financial statements in Item 8 of the Form 10-K for additional information relating to regulatory matters.

The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at March 31, 2020 and December 31, 2019 were as follows:

Regulatory Clause	Balance Sheet Line Item	March 31, 2020			December 31, 2019
		(in millions)
Alabama Power
Rate CNP Compliance	Other regulatory liabilities, current	$	35		$	55
	Other regulatory liabilities, deferred	17			7
Rate CNP PPA	Deferred under recovered regulatory clause revenues	37			40
Retail Energy Cost Recovery	Other regulatory liabilities, current	74			32
	Other regulatory liabilities, deferred	22			17
Natural Disaster Reserve	Other regulatory liabilities, current	27			37
	Other regulatory liabilities, deferred	104			113
Georgia Power
Fuel Cost Recovery	Other current liabilities	$	6		$	—
	Other deferred credits and liabilities	163			73
Mississippi Power
Fuel Cost Recovery	Over recovered regulatory clause liabilities	$	25		$	23
Ad Valorem Tax	Other regulatory assets	11			47
	Other regulatory assets, deferred	38			—
Property Damage Reserve	Other regulatory liabilities, deferred	53			54
Southern Company Gas
Natural Gas Cost Recovery	Other regulatory liabilities	$	84		$	74

Alabama Power

Petition for Certificate of Convenience and Necessity

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

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Georgia Power

Deferral of Incremental COVID-19 Costs

On April 7, 2020, in response to the COVID-19 pandemic, the Georgia PSC approved an order directing Georgia Power to continue its previous, voluntary suspension of customer disconnections and to defer the resulting incremental bad debt and other incremental costs as a regulatory asset. Georgia Power and the staff of the Georgia PSC will work collaboratively to establish a methodology for identifying these incremental costs. The period over which such costs will be recovered is expected to be determined in Georgia Power's next base rate case. At March 31, 2020, the incremental costs deferred were immaterial. The ultimate outcome of this matter cannot be determined at this time.

Integrated Resource Plan

On March 5, 2020, the Sierra Club filed a petition for judicial review in the Superior Court of Fulton County to appeal the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. The ultimate outcome of this matter cannot be determined at this time.

Fuel Cost Recovery

On March 9, 2020, Georgia Power filed a request with the Georgia PSC to decrease fuel rates by 16% effective June 1, 2020, which is expected to reduce annual billings by approximately $329 million. Georgia Power expects the Georgia PSC to make a final decision on this matter on May 28, 2020. The ultimate outcome of this matter cannot be determined at this time.

Nuclear Construction

In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4. Georgia Power holds a 45.7% ownership interest in Plant Vogtle Units 3 and 4. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the two AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement. In March 2017, the EPC Contractor filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

In connection with the EPC Contractor's bankruptcy filing, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into several transitional arrangements to allow construction to continue. In July 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, entered into the Vogtle Services Agreement, whereby Westinghouse provides facility design and engineering services, procurement and technical support, and staff augmentation on a time and materials cost basis. The Vogtle Services Agreement provides that it will continue until the start-up and testing of Plant Vogtle Units 3 and 4 are complete and electricity is generated and sold from both units. The Vogtle Services Agreement is terminable by the Vogtle Owners upon 30 days' written notice.

In October 2017, Georgia Power, acting for itself and as agent for the other Vogtle Owners, executed the Bechtel Agreement, a cost reimbursable plus fee arrangement, whereby Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, which is subject to adjustment based on Bechtel's performance against cost and schedule targets. Each Vogtle Owner is severally (not jointly) liable for its proportionate share, based on its ownership interest, of all amounts owed to Bechtel under the Bechtel Agreement. The Vogtle Owners may terminate the Bechtel Agreement at any time for their convenience, provided that the Vogtle Owners will be required to pay amounts related to work performed prior to the termination (including the applicable portion of the base fee), certain termination-related costs, and, at certain stages of the work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.

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See Note 8 to the financial statements under "Long-term Debt – DOE Loan Guarantee Borrowings" in Item 8 of the Form 10-K for information on the Amended and Restated Loan Guarantee Agreement, including applicable covenants, events of default, mandatory prepayment events, and conditions to borrowing.

Cost and Schedule

Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4 by the expected in-service dates of November 2021 and November 2022, respectively, is as follows:

	(in billions)
Base project capital cost forecast(a)(b)	$	8.2
Construction contingency estimate	0.2
Total project capital cost forecast(a)(b)	8.4
Net investment as of March 31, 2020(b)	(6.2		)
Remaining estimate to complete(a)	$	2.2

(a)	Excludes financing costs expected to be capitalized through AFUDC of approximately $270 million, of which $36 million had been accrued through March 31, 2020.

(b)	Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.

Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.1 billion, of which $2.3 billion had been incurred through March 31, 2020.

As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of commodity installation, system turnovers, and workforce statistics.

During the first quarter 2020, approximately $66 million of the $366 million construction contingency estimate established in the second quarter 2018 was allocated to the base capital cost forecast for cost risks including, among other things, construction productivity, field support, subcontracts, and procurement, as well as the impacts of the April 2020 reduction in workforce described below.

Through March 31, 2020, a total of approximately $206 million of the $366 million construction contingency estimate established in the second quarter 2018 has been allocated to the base capital cost forecast for cost risks including, among other factors, construction productivity, including the April 2020 reduction in workforce described below; craft labor incentives; adding resources for supervision, field support, project management, initial test program, start-up, and operations and engineering support; subcontracts; and procurement. As and when construction contingency is spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.

In April 2019, Southern Nuclear established aggressive target values for monthly construction production and system turnover activities as part of a strategy to maintain and, where possible, build margin to the regulatory-approved in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. Through early 2020, the project faced challenges with the April 2019 aggressive strategy targets including, but not limited to, electrical and pipefitting labor productivity and closure rates for work packages, which resulted in a backlog of activities and completion percentages below the April 2019 aggressive strategy targets.

In February 2020, Southern Nuclear updated its cost and schedule forecast, which did not change the total project capital cost forecast and confirmed the expected in-service dates of November 2021 for Unit 3 and November 2022 for Unit 4. This update included initiatives to improve productivity while refining and extending system turnover plans and certain near-term milestone dates. Other milestone dates did not change. Achievement of the aggressive site work plan relies on meeting increased monthly production and activity target values during 2020. Through March 2020, Unit 3 mechanical, electrical, and subcontract activities started to build a backlog; however, overall production was generally consistent with the updated aggressive site work plan.

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In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures, isolating individuals who have tested positive for COVID-19, are showing symptoms consistent with COVID-19, are being tested for COVID-19, or have been in close contact with such persons, requiring self-quarantine, and adopting additional precautionary measures. Multiple members of the workforce have tested positive for COVID-19. The COVID-19 pandemic has impacted productivity levels and pace of activity completion.

On April 15, 2020, Georgia Power, acting for itself and as agent for the other Vogtle Owners, announced a reduction in workforce at Plant Vogtle Units 3 and 4 expected to total approximately 20% of the existing workforce. This reduction in workforce was a mitigation action intended to address the impact of the COVID-19 pandemic on the Plant Vogtle Units 3 and 4 workforce and construction site, including ongoing challenges with labor productivity that have been exacerbated by the impact of the COVID-19 pandemic. It is expected to provide operational efficiencies by increasing productivity of the remaining workforce and reducing workforce fatigue and absenteeism. It is also expected to allow for increased social distancing by the workforce and facilitate compliance with the latest recommendations from the Centers for Disease Control and Prevention.

To meet the 2020 targets in the aggressive site work plan for both Unit 3 and Unit 4, construction productivity, including subcontractors, must improve and be sustained above historical average levels. In addition, appropriate levels of craft laborers, particularly electrical and pipefitter craft labor, must be maintained. The workforce levels resulting from the April 2020 reduction are expected to last at least through the summer as Georgia Power continues to monitor the impacts of the COVID-19 pandemic on the construction site. Georgia Power's proportionate share of the estimated incremental cost of this mitigation action, which is currently estimated to total approximately $20 million and is included in the first quarter 2020 contingency allocation, assumes absenteeism rates normalize and the intended productivity efficiencies are realized in the coming months. Based on these assumptions, while this mitigation action has extended and may further extend certain milestone dates in the updated aggressive site work plan, Georgia Power does not expect it to affect either the total project capital cost forecast or the ability to achieve the regulatory-approved in-service dates of November 2021 and November 2022 for Plant Vogtle Units 3 and 4, respectively. Southern Nuclear and Georgia Power continue to believe that pursuit of an aggressive site work plan is an appropriate strategy to achieve completion of the units by their regulatory-approved in-service dates.

As construction, including subcontract work, continues and testing and system turnover activities increase, challenges with management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity, particularly in the installation of electrical and mechanical commodities, ability to attract and retain craft labor, and/or related cost escalation; procurement, fabrication, delivery, assembly, installation, system turnover, and the initial testing and start-up, including any required engineering changes or any remediation related thereto, of plant systems, structures, or components (some of which are based on new technology that only within the last few years began initial operation in the global nuclear industry at this scale), any of which may require additional labor and/or materials; regional transmission upgrades; or other issues could arise and change the projected schedule and estimated cost.

In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction, testing, supervisory, and support activities at Plant Vogtle Units 3 and 4. The ultimate impact of the COVID-19 pandemic on the construction schedule and budget for Plant Vogtle Units 3 and 4 cannot be determined at this time.

There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the NRC. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, may arise, which may result in additional license amendments or require other resolution. As part of the aggressive site work plan, in January 2020,

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Southern Nuclear notified the NRC of its intent to load fuel in 2020. On April 20, 2020, Nuclear Watch South filed a request for hearing and contention with the NRC that challenges the closure of certain ITAAC. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the regulatory-approved project schedule is currently estimated to result in additional base capital costs of approximately $50 million per month, based on Georgia Power's ownership interests, and AFUDC of approximately $10 million per month. While Georgia Power is not precluded from seeking recovery of any future capital cost forecast increase, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.

Joint Owner Contracts

In November 2017, the Vogtle Owners entered into an amendment to their joint ownership agreements for Plant Vogtle Units 3 and 4 to provide for, among other conditions, additional Vogtle Owner approval requirements. Effective in August 2018, the Vogtle Owners further amended the joint ownership agreements to clarify and provide procedures for certain provisions of the joint ownership agreements related to adverse events that require the vote of the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 to continue construction (as amended, and together with the November 2017 amendment, the Vogtle Joint Ownership Agreements). The Vogtle Joint Ownership Agreements also confirm that the Vogtle Owners' sole recourse against Georgia Power or Southern Nuclear for any action or inaction in connection with their performance as agent for the Vogtle Owners is limited to removal of Georgia Power and/or Southern Nuclear as agent, except in cases of willful misconduct.

As a result of an increase in the total project capital cost forecast and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs in conjunction with the nineteenth VCM report in 2018, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 were required to vote to continue construction. In September 2018, the Vogtle Owners unanimously voted to continue construction of Plant Vogtle Units 3 and 4.

Amendments to the Vogtle Joint Ownership Agreements

In connection with the vote to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).

As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion

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over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests.  If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.

In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more over the most recently approved schedule.

The ultimate outcome of these matters cannot be determined at this time.

Regulatory Matters

In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At March 31, 2020, Georgia Power had recovered approximately $2.3 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power will not record AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In December 2019, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $62 million annually, effective January 1, 2020.

Georgia Power is required to file semi-annual VCM reports with the Georgia PSC by February 28 and August 31 of each year. In 2013, in connection with the eighth VCM report, the Georgia PSC approved a stipulation between Georgia Power and the staff of the Georgia PSC to waive the requirement to amend the Plant Vogtle Units 3 and 4 certificate in accordance with the 2009 certification order until the completion of Plant Vogtle Unit 3, or earlier if deemed appropriate by the Georgia PSC and Georgia Power.

In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the amounts paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer

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refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that prudence decisions on cost recovery will be made at a later date, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 ARP) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that upon Unit 3 reaching commercial operation, retail base rates would be adjusted to include carrying costs on those capital costs deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $75 million in 2019 and are estimated to have negative earnings impacts of approximately $145 million, $255 million, and $200 million in 2020, 2021, and 2022, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.

In February 2018, Georgia Interfaith Power & Light, Inc. (GIPL) and Partnership for Southern Equity, Inc. (PSE) filed a petition appealing the Georgia PSC's January 11, 2018 order with the Fulton County Superior Court. In March 2018, Georgia Watch filed a similar appeal to the Fulton County Superior Court for judicial review of the Georgia PSC's decision and denial of Georgia Watch's motion for reconsideration. In December 2018, the Fulton County Superior Court granted Georgia Power's motion to dismiss the two appeals. In January 2019, GIPL, PSE, and Georgia Watch filed an appeal of this decision with the Georgia Court of Appeals. In October 2019, the Georgia Court of Appeals issued an opinion affirming the Fulton County Superior Court's ruling that the Georgia PSC's January 11, 2018 order was not a final, appealable decision. In addition, the Georgia Court of Appeals remanded the case to the Fulton County Superior Court to clarify its ruling as to whether the petitioners showed that review of the Georgia PSC's final order would not provide them an adequate remedy. On April 21, 2020, the Fulton County Superior Court entered an appealable order granting Georgia Power's motion to dismiss the two appeals. Georgia Power believes the petitions have no merit; however, an adverse outcome in the litigation combined with subsequent adverse action by the Georgia PSC could have a material impact on Southern Company's and Georgia Power's results of operations, financial condition, and liquidity.

The Georgia PSC has approved 21 VCM reports covering the periods through June 30, 2019, including total construction capital costs incurred through that date of $6.7 billion (before $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). On February 19, 2020, Georgia Power filed its twenty-second VCM report with the Georgia PSC covering the period from July 1, 2019 through December 31, 2019, requesting approval of $674 million of construction capital costs incurred during that period.

The ultimate outcome of these matters cannot be determined at this time.

Mississippi Power

2019 Base Rate Case

On March 17, 2020, the Mississippi PSC approved a settlement agreement between Mississippi Power and the Mississippi Public Utilities Staff related to Mississippi Power's base rate case filed in November 2019 (Mississippi Power Rate Case Settlement Agreement).

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Under the terms of the Mississippi Power Rate Case Settlement Agreement, annual retail rates decreased approximately $16.7 million, or 1.85%, effective for the first billing cycle of April 2020, based on a test year period of January 1, 2020 through December 31, 2020, a 53% average equity ratio, an allowed maximum actual equity ratio of 55% by the end of 2020, and a 7.57% return on investment.

Additionally, the approved Mississippi Power Rate Case Settlement Agreement: (i) established common amortization periods of four years for regulatory assets and three years for regulatory liabilities included in the approved revenue requirement, including those related to unprotected deferred income taxes; (ii) established new depreciation rates reflecting an annual increase in depreciation of approximately $10 million; and (iii) excluded certain compensation costs totaling approximately $3.9 million. It also eliminated separate rates for costs associated with Plant Ratcliffe and energy efficiency initiatives and includes such costs in the PEP, ECO Plan, and ad valorem tax adjustment factor, as applicable. In accordance with the previous order of the Mississippi PSC suspending the operation of PEP and the ECO Plan for 2018 through 2020, Mississippi Power plans to resume PEP proceedings and ECO Plan filings for 2021.

Performance Evaluation Plan

Under the Mississippi Power Rate Case Settlement Agreement, Mississippi Power is required to file with the Mississippi PSC PEP compliance rate clauses to incorporate Mississippi Power's and the Mississippi Public Utilities Staff's recommended revisions to PEP by May 18, 2020. These revisions include, but are not limited to, changing the filing date for the annual PEP rate filing from November of the immediately preceding year to March of the current year, utilizing a historic test year adjusted for "known and measurable" changes, using discounted cash flow and regression formulas to determine base return on equity, and moving all embedded ad valorem property taxes currently collected in PEP to the ad valorem tax adjustment clause. These revisions are subject to the approval of the Mississippi PSC. The ultimate outcome of this matter cannot be determined at this time.

Deferral of Incremental COVID-19 Costs

On April 14, 2020, in order to mitigate the economic impact of the COVID-19 pandemic on customers, the Mississippi PSC approved an order directing Mississippi Power to continue its previous, voluntary suspension of customer disconnections and to defer as a regulatory asset all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system during the COVID-19 pandemic. The period over which such costs will be recovered is expected to be determined in Mississippi Power's next PEP filing. At March 31, 2020, the incremental costs deferred were immaterial. The ultimate outcome of this matter cannot be determined at this time.

Municipal and Rural Associations Tariff

On April 27, 2020, Mississippi Power filed a request with the FERC for an increase in wholesale base revenues under the MRA tariff as agreed upon in a settlement agreement reached with its wholesale customers. The MRA settlement agreement provides that base rates will increase $2 million annually, effective May 1, 2020. Mississippi Power expects the FERC to rule on the request in the second quarter 2020. The ultimate outcome of this matter cannot be determined at this time.

Southern Company Gas

Rate Proceedings

On February 3, 2020, Virginia Natural Gas filed a notice of intent with the Virginia Commission as required prior to the filing of a base rate case. Virginia Natural Gas planned to file its rate case in April 2020 but, as a result of the COVID-19 pandemic, now expects to file in June 2020. The ultimate outcome of this matter cannot be determined at this time.

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See Note 3 to the financial statements in Item 8 of the Form 10-K for information relating to various lawsuits and other contingencies.

General Litigation Matters

The Registrants are involved in various other matters being litigated and regulatory matters. The ultimate outcome of such pending or potential litigation or regulatory matters against each Registrant and any subsidiaries cannot be determined at this time; however, for current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on such Registrant's financial statements.

The Registrants believe the pending legal challenges discussed below have no merit; however, the ultimate outcome of these matters cannot be determined at this time.

Southern Company

In January 2017, a securities class action complaint was filed against Southern Company, certain of its officers, and certain former Mississippi Power officers in the U.S. District Court for the Northern District of Georgia by Monroe County Employees' Retirement System on behalf of all persons who purchased shares of Southern Company's common stock between April 25, 2012 and October 29, 2013. The complaint alleges that Southern Company, certain of its officers, and certain former Mississippi Power officers made materially false and misleading statements regarding the Kemper County energy facility in violation of certain provisions under the Securities Exchange Act of 1934, as amended. The complaint seeks, among other things, compensatory damages and litigation costs and attorneys' fees. In 2017, the plaintiffs filed an amended complaint that provided additional detail about their claims, increased the purported class period by one day, and added certain other former Mississippi Power officers as defendants. Also in 2017, the defendants filed a motion to dismiss the plaintiffs' amended complaint with prejudice, to which the plaintiffs filed an opposition. In 2018, the court issued an order dismissing certain claims against certain officers of Southern Company and Mississippi Power and dismissing the allegations related to a number of the statements that plaintiffs challenged as being false or misleading. In 2018, the court denied the defendants' motion for reconsideration and also denied a motion to certify the issue for interlocutory appeal. In the third quarter 2019, the court certified the plaintiffs' proposed class and the defendants filed a petition for interlocutory appeal of the class certification order with the U.S. Court of Appeals for the Eleventh Circuit. In December 2019, the U.S. District Court for the Northern District of Georgia entered an order staying all deadlines in the case pending mediation. The stay automatically expired on March 31, 2020; however, in light of the COVID-19 pandemic, the U.S. District Court for the Northern District of Georgia vacated all existing discovery deadlines until at least June 15, 2020.

In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits names as defendants Southern Company, certain of its directors, certain of its officers, and certain former Mississippi Power officers. In 2017, these two shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of Georgia. The complaints allege that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints allege that the defendants were unjustly enriched and caused the waste of corporate assets and also allege that the individual defendants violated their fiduciary duties. Each plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. Each plaintiff also seeks certain changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action.

In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that names as defendants Southern Company, certain of its directors, certain of its

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officers, and certain former Mississippi Power officers. The complaint alleges that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleges that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. The plaintiff seeks to recover, on behalf of Southern Company, unspecified actual damages and disgorgement of profits and, on its behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiff also seeks certain unspecified changes to Southern Company's corporate governance and internal processes. In 2018, the court entered an order staying this lawsuit until 30 days after the resolution of any dispositive motions or any settlement, whichever is earlier, in the securities class action. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.

Georgia Power

In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state tort law claims. In 2016, the Georgia Court of Appeals reversed the trial court's previous dismissal of the case and remanded the case to the trial court. Georgia Power filed a petition for writ of certiorari with the Georgia Supreme Court, which was granted in 2017. In 2018, the Georgia Supreme Court affirmed the judgment of the Georgia Court of Appeals and remanded the case to the trial court for further proceedings. Following a motion by Georgia Power, in February 2019, the Superior Court of Fulton County ordered the parties to submit petitions to the Georgia PSC for a declaratory ruling to address certain terms the court previously held were ambiguous as used in the Georgia PSC's orders. The order entered by the Superior Court of Fulton County also conditionally certified the proposed class. In March 2019, Georgia Power and the plaintiffs filed petitions with the Georgia PSC seeking confirmation of the proper application of the municipal franchise fee schedule pursuant to the Georgia PSC's orders. In October 2019, the Georgia PSC issued an order that found and concluded that Georgia Power has appropriately implemented the municipal franchise fee schedule. On March 11, 2020, the Georgia Court of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification. The Court of Appeals remanded the case to the Superior Court of Fulton County for the entry of a detailed order addressing each class certification factor. The amount of any possible losses cannot be calculated at this time because, among other factors, it is unknown whether a class will be certified, the ultimate composition of any class, and whether any losses would be subject to recovery from any municipalities.

Mississippi Power

In May 2018, Southern Company and Mississippi Power received a notice of dispute and arbitration demand filed by Martin Product Sales, LLC (Martin) based on two agreements, both related to Kemper IGCC byproducts for which Mississippi Power provided termination notices in 2017. Martin alleges breach of contract, breach of good faith and fair dealing, fraud and misrepresentation, and civil conspiracy and makes a claim for damages in the amount of approximately $143 million, as well as additional unspecified damages, attorney's fees, costs, and interest. A portion of the claim for damages was on behalf of Martin Transport, Inc. (Martin Transport), an affiliate of Martin. In May 2019, the arbitration panel denied Mississippi Power's and Southern Company's motions to dismiss. In September 2019, Martin Transport filed a separate complaint against Mississippi Power in the Circuit Court of Kemper County, Mississippi alleging claims of fraud, negligent misrepresentation, promissory estoppel, and equitable estoppel, each arising out of the same alleged facts and circumstances that underlie Martin's arbitration demand. Martin Transport seeks compensatory damages of $5 million and punitive damages of $50 million. In November 2019, Martin Transport's claim was combined with the Martin arbitration case and the separate court case was dismissed. In December 2019, Southern Company and Mississippi Power each filed motions for summary judgment on all claims. On February 17, 2020, the arbitration panel granted Southern Company's motion and dismissed Southern Company from the arbitration. On March 12, 2020, the arbitration panel

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denied Mississippi Power's motions for summary judgment. An adverse outcome in this proceeding could have a material impact on Southern Company's and Mississippi Power's financial statements.

In November 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and three members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. In response to Mississippi Power and the Mississippi PSC each filing a motion to dismiss, the plaintiffs filed an amended complaint in March 2019. The amended complaint included four additional plaintiffs and additional claims for gross negligence, reckless conduct, and intentional wrongdoing. Mississippi Power and the Mississippi PSC have each filed a motion to dismiss the amended complaint. On March 27, 2020, the Mississippi PSC's motion to dismiss was granted. Also on March 27, 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants under a cause of action based on a dormant commerce clause theory under the U.S. Constitution. On April 9, 2020 and April 10, 2020, Mississippi Power and the Mississippi PSC, respectively, filed responses opposing the motion for leave to file a second amended complaint. Mississippi Power's motion to dismiss the first amended complaint filed in 2019 remains pending before the court. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.

See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.

Environmental Remediation

The Southern Company system must comply with environmental laws and regulations governing the handling and disposal of waste and releases of hazardous substances. Under these various laws and regulations, the Southern Company system could incur substantial costs to clean up affected sites. The traditional electric operating companies and the natural gas distribution utilities in Illinois and Georgia have each received authority from their respective state PSCs or other applicable state regulatory agencies to recover approved environmental compliance costs through regulatory mechanisms. These regulatory mechanisms are adjusted annually or as necessary within limits approved by the state PSCs or other applicable state regulatory agencies.

Georgia Power's environmental remediation liability was $15 million at both March 31, 2020 and December 31, 2019. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.

In December 2019, Mississippi Power entered into an agreement with the Mississippi Commission on Environmental Quality related to groundwater conditions arising from the closed ash pond at Plant Watson. Mississippi Power will complete an assessment and remediation consistent with the requirements of the agreement and the CCR Rule. Potential remediation activities and related cost estimates are pending the result of further site assessment and cannot be determined at this time. Mississippi Power expects to recover the retail portion of remedial costs through the ECO Plan and the wholesale portion through MRA rates.

Southern Company Gas' environmental remediation liability was $262 million and $269 million as of March 31, 2020 and December 31, 2019, respectively, based on the estimated cost of environmental investigation and remediation associated with known current and former manufactured gas plant operating sites. These environmental

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remediation expenditures are generally recoverable from customers through rate mechanisms approved by the applicable state regulatory agencies of the natural gas distribution utilities.

The ultimate outcome of these matters cannot be determined at this time; however, as a result of the regulatory treatment for environmental remediation expenses described above, the final disposition of these matters is not expected to have a material impact on the financial statements of the applicable Registrants.

Other Matters

See Note 2 to the financial statements under "Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.

As the mining permit holder, Liberty Fuels Company, LLC has a legal obligation to perform mine reclamation and Mississippi Power has a contractual obligation to fund all reclamation activities related to the lignite mine and equipment and mineral reserves located around the Kemper County energy facility site. As a result of the abandonment of the Kemper IGCC, final mine reclamation began in 2018 and is expected to be substantially completed in 2020, with monitoring expected to continue through 2027. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

Dismantlement of the abandoned gasifier-related assets and site restoration activities are expected to be completed in 2024. The additional pre-tax period costs associated with dismantlement and site restoration activities, including related costs for compliance and safety, ARO accretion, and property taxes, are estimated to total $17 million for the remainder of 2020, $15 million to $17 million annually in 2021 through 2023, and $5 million in 2024. In addition, closure costs for the mine and gasifier-related assets, currently estimated at up to $10 million pre-tax (excluding dismantlement costs, net of salvage), may be incurred during the remainder of 2020.

In 2018, Mississippi Power filed with the DOE its request for property closeout certification under the contract related to the $387 million of grants received for the Kemper County energy facility. Mississippi Power expects to close out the DOE contract in 2020. In connection with the DOE closeout discussions, in April 2019, the Civil Division of the Department of Justice informed Southern Company and Mississippi Power of an investigation related to the Kemper County energy facility. The ultimate outcome of this matter cannot be determined at this time; however, it could have a material impact on Southern Company's and Mississippi Power's financial statements.

Plant Daniel

In conjunction with Southern Company's sale of Gulf Power, Mississippi Power and Gulf Power agreed to seek a restructuring of their 50% undivided ownership interests in Plant Daniel such that each of them would, after the restructuring, own 100% of a generating unit. On April 24, 2020, Mississippi Power and Gulf Power amended the terms of the agreement to extend the deadline from May 1, 2020 to August 1, 2020 for Mississippi Power to notify Gulf Power of which generating unit it has selected for 100% ownership. The impacts of operating the units on an individual basis continue to be evaluated by Mississippi Power and any transfer of ownership would be subject to approval by the FERC and the Mississippi PSC. The ultimate outcome of this matter cannot be determined at this time.

Southern Company Gas

See Notes 3 and 7 to the financial statements in Item 8 of the Form 10-K under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, and Note (E) under "Southern Company Gas" for additional information.

On March 24, 2020, Southern Company Gas completed the sale of its interest in Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.

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On February 20, 2020, the FERC approved a two-year extension for PennEast Pipeline to complete the project by January 19, 2022. Expected project costs related to the PennEast Pipeline for Southern Company Gas total approximately $300 million, excluding financing costs.

The ultimate outcome of the PennEast construction project cannot be determined at this time; however, any work delays, whether caused by judicial or regulatory action, abnormal weather, or other conditions, may result in additional cost or schedule modifications or, ultimately, in project cancellation, any of which could result in impairment of Southern Company Gas' investment and could have a significant impact on Southern Company's financial statements and a material impact on Southern Company Gas' financial statements.

Revenue from Contracts with Customers

The Registrants generate revenues from a variety of sources, some of which are not accounted for as revenue from contracts with customers, such as leases, derivatives, and certain cost recovery mechanisms. See Note 1 to the financial statements under "Revenues" in Item 8 of the Form 10-K for additional information on the revenue policies of the Registrants. See "Lease Income" herein and Note (J) for additional information on revenue accounted for under lease and derivative accounting guidance, respectively.

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The following tables disaggregate revenue from contracts with customers for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
Operating revenues
Retail electric revenues
Residential	$	1,370		$	553		$	760		$	57		$	—		$	—
Commercial	1,146			364			720			62			—			—
Industrial	680			321			281			78			—			—
Other	23			5			16			2			—			—
Total retail electric revenues	3,219			1,243			1,777			199			—			—
Natural gas distribution revenues
Residential	496			—			—			—			—			496
Commercial	130			—			—			—			—			130
Transportation	264			—			—			—			—			264
Industrial	12			—			—			—			—			12
Other	97			—			—			—			—			97
Total natural gas distribution revenues	999			—			—			—			—			999
Wholesale electric revenues
PPA energy revenues	159			27			9			2			125			—
PPA capacity revenues	105			27			12			1			66			—
Non-PPA revenues	51			19			2			69			58			—
Total wholesale electric revenues	315			73			23			72			249			—
Other natural gas revenues
Wholesale gas services	396			—			—			—			—			396
Gas marketing services	163			—			—			—			—			163
Other natural gas revenues	7			—			—			—			—			7
Total natural gas revenues	566			—			—			—			—			566
Other revenues	192			37			95			5			3			—
Total revenue from contracts with customers	5,291			1,353			1,895			276			252			1,565
Other revenue sources(a)	868			(2		)	(70		)	1			123			825
Other adjustments(b)	(1,141		)	—			—			—			—			(1,141		)
Total operating revenues	$	5,018		$	1,351		$	1,825		$	277		$	375		$	1,249

(a)	Other revenue sources primarily relate to revenues from customers accounted for as derivatives and leases, as well as alternative revenue programs at Southern Company Gas and other cost recovery mechanisms at the traditional electric operating companies.

(b)	Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.

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Three Months Ended March 31, 2019	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
Operating revenues
Retail electric revenues
Residential	$	1,327		$	559		$	708		$	60		$	—		$	—
Commercial	1,125			368			692			65			—			—
Industrial	708			338			296			74			—			—
Other	21			6			11			4			—			—
Total retail electric revenues	3,181			1,271			1,707			203			—			—
Natural gas distribution revenues
Residential	601			—			—			—			—			601
Commercial	170			—			—			—			—			170
Transportation	256			—			—			—			—			256
Industrial	17			—			—			—			—			17
Other	116			—			—			—			—			116
Total natural gas distribution revenues	1,160			—			—			—			—			1,160
Wholesale electric revenues
PPA energy revenues	190			31			12			3			151			—
PPA capacity revenues	107			27			13			1			81			—
Non-PPA revenues	55			60			2			74			41			—
Total wholesale electric revenues	352			118			27			78			273			—
Other natural gas revenues
Wholesale gas services	721			—			—			—			—			721
Gas marketing services	221			—			—			—			—			221
Other natural gas revenues	10			—			—			—			—			10
Total natural gas revenues	952			—			—			—			—			952
Other revenues	266			46			92			5			4			—
Total revenue from contracts with customers	5,911			1,435			1,826			286			277			2,112
Other revenue sources(a)	1,361			(27		)	7			1			166			1,222
Other adjustments(b)	(1,860		)	—			—			—			—			(1,860		)
Total operating revenues	$	5,412		$	1,408		$	1,833		$	287		$	443		$	1,474

(a)	Other revenue sources primarily relate to revenues from customers accounted for as derivatives and leases, as well as alternative revenue programs at Southern Company Gas and other cost recovery mechanisms at the traditional electric operating companies.

(b)	Other adjustments relate to the cost of Southern Company Gas' energy and risk management activities. Wholesale gas services revenues are presented net of the related costs of those activities on the statement of income. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services' operating revenues.

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Contract Balances

The following table reflects the closing balances of receivables, contract assets, and contract liabilities related to revenues from contracts with customers at March 31, 2020 and December 31, 2019:

	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
Accounts Receivables
As of March 31, 2020	$	2,224		$	518		$	697		$	70		$	86		$	696
As of December 31, 2019	2,413			586			688			79			97			749
Contract Assets
As of March 31, 2020	$	100		$	—		$	53		$	3		$	—		$	—
As of December 31, 2019	117			—			69			—			—			—
Contract Liabilities
As of March 31, 2020	$	49		$	7		$	11		$	—		$	1		$	1
As of December 31, 2019	52			10			13			—			1			1

As of March 31, 2020 and December 31, 2019, Georgia Power had contract assets primarily related to unregulated service agreements, where payment is contingent on project completion, and fixed retail customer bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over the one-year contract term. Alabama Power had contract liabilities for outstanding performance obligations primarily related to extended service agreements. Contract liabilities for Georgia Power and Southern Power relate to cash collections recognized in advance of revenue for certain unregulated service agreements and certain levelized PPAs, respectively. Southern Company's unregulated distributed generation business had $36 million and $40 million of contract assets and $29 million and $28 million of contract liabilities at March 31, 2020 and December 31, 2019, respectively, for outstanding performance obligations.

Revenues recognized in the three months ended March 31, 2020, which were included in contract liabilities at December 31, 2019, were immaterial for the applicable Registrants.

Remaining Performance Obligations

The traditional electric operating companies and Southern Power have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. These contracts primarily relate to PPAs whereby the traditional electric operating companies and Southern Power provide electricity and generation capacity to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenue from contracts with customers related to these performance obligations remaining at March 31, 2020 are expected to be recognized as follows:

	2020 (remaining)			2021			2022			2023			2024			2025 and Thereafter
	(in millions)
Southern Company	$	367		$	416		$	354		$	334		$	314		$	2,164
Alabama Power	23			33			31			24			7			5
Georgia Power	52			66			36			34			23			61
Southern Power	224			285			287			277			285			2,116

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Revenue expected to be recognized for performance obligations remaining at March 31, 2020 was immaterial for Mississippi Power.

Lease Income

Lease income for the three months ended March 31, 2020 and 2019 is as follows:

	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas
	(in millions)
For the Three Months Ended March 31, 2020
Lease income - interest income on sales-type leases	$	3		$	—		$	—		$	3		$	—		$	—
Lease income - operating leases	51			6			16			—			24			9
Variable lease income	74			—			—			—			80			—
Total lease income	$	128		$	6		$	16		$	3		$	104		$	9
For the Three Months Ended March 31, 2019
Lease income - interest income on sales-type leases	$	2		$	—		$	—		$	2		$	—		$	—
Lease income - operating leases	71			7			19			—			46			9
Variable lease income	66			—			—			—			75			—
Total lease income	$	139		$	7		$	19		$	2		$	121		$	9

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units.

See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information.

Southern Power

Variable Interest Entities

Southern Power has certain subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests.

SP Solar and SP Wind

At March 31, 2020 and December 31, 2019, SP Solar had total assets of $6.3 billion and $6.4 billion, respectively, and total liabilities of $382 million and $381 million, respectively. Noncontrolling interests totaled $1.1 billion at both March 31, 2020 and December 31, 2019. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

At March 31, 2020 and December 31, 2019, SP Wind had total assets of $2.5 billion and total liabilities of $123 million and $128 million, respectively. Noncontrolling interests totaled $45 million at both March 31, 2020 and December 31, 2019. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members

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each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the three financial investors in accordance with the limited liability agreement.

Southern Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.

Other Variable Interest Entities

Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax-equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.

At March 31, 2020 and December 31, 2019, the other VIEs had total assets of $1.1 billion, total liabilities of $109 million and $104 million, respectively, and noncontrolling interests of $396 million and $409 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

At March 31, 2020 and December 31, 2019, Southern Power had equity method investments in several wind and battery storage projects totaling $45 million and $28 million, respectively.

Southern Company Gas

Equity Method Investments

On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.

The carrying amounts of Southern Company Gas' equity method investments as of March 31, 2020 and December 31, 2019 and related income from those investments for the three-month periods ended March 31, 2020 and 2019 were as follows:

Investment Balance	March 31, 2020			December 31, 2019(a)
	(in millions)
SNG(b)	$	1,216		$	1,137
PennEast Pipeline(c)	85			82
Other	32			32
Total	$	1,333		$	1,251

(a)	Excludes investments in Atlantic Coast Pipeline and Pivotal JAX LNG classified as held for sale at December 31, 2019. See Note 15 to the financial statements under "Assets Held for Sale" in Item 8 of the Form 10-K for additional information.

(b)	Increase primarily relates to a capital contribution, partially offset by the continued amortization of deferred tax assets established upon acquisition.

(c)	See Note (C) under "Other Matters – Southern Company Gas" for additional information on the PennEast Pipeline.

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

(*)	Amounts primarily result from AFUDC equity recorded by the project entity.

SNG

Selected financial information of SNG for the three months ended March 31, 2020 and 2019 is as follows:

Income Statement Information	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(in millions)
Revenues	$	158		$	166
Operating income	98			106
Net income	75			84

Bank Credit Arrangements

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

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At March 31, 2020, committed credit arrangements with banks were as follows:

	Expires
Company	2020			2022			2023			2024				Total				Unused			Due within One Year
	(in millions)
Southern Company parent	$	—		$	—		$	—		$	2,000			$	2,000			$	1,999		$	—
Alabama Power	3			525			—			800				1,328				1,328			3
Georgia Power	—			—			—			1,750				1,750				1,733			—
Mississippi Power	—			150			125			—				275				210			—
Southern Power(a)	—			—			—			600				600				591			—
Southern Company Gas(b)	—			—			—			1,750				1,750				1,745			—
SEGCO	30			—			—			—				30				30			30
Southern Company	$	33		$	675		$	125		$	6,900			$	7,733			$	7,636		$	33

(a)	Does not include Southern Power Company's $120 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2021 and 2023, respectively, of which $25 million and $60 million, respectively, was unused at March 31, 2020. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)

Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.25 billion of this arrangement. Southern Company Gas' committed credit arrangement also includes $500 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to this multi-year credit arrangement, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted.

As reflected in the table above, in March 2020, Mississippi Power entered into a $125 million revolving credit facility that matures in March 2023.

Subject to applicable market conditions, Southern Company and its subsidiaries expect to renew or replace their bank credit arrangements as needed, prior to expiration. In connection therewith, Southern Company and its subsidiaries may extend the maturity dates and/or increase or decrease the lending commitments thereunder.

These bank credit arrangements, as well as the term loan arrangements of the Registrants and SEGCO, contain covenants that limit debt levels and contain cross-acceleration or, in the case of Southern Power, cross-default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross-default provisions to other indebtedness would trigger an event of default if Southern Power defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross-acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. At March 31, 2020, the Registrants, Nicor Gas, and SEGCO were in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.

A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at March 31, 2020 was approximately $1.4 billion (comprised of approximately $854 million at Alabama Power, $550 million at Georgia Power, and $40 million at Mississippi Power). Subsequent to March 31, 2020, Mississippi Power purchased and held or redeemed all $40 million of its variable rate revenue bonds. In addition, at March 31, 2020, Georgia Power had approximately $188 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

Earnings per Share

For Southern Company, the only differences in computing basic and diluted earnings per share are attributable to awards outstanding under stock-based compensation plans and, as a result of stock price volatility in the first quarter 2020, the equity units issued in August 2019. Earnings per share dilution resulting from stock-based compensation

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plans and the equity units issuance is determined using the treasury stock method. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on the August 2019 equity units issuance and Note 12 to the financial statements in Item 8 of the Form 10-K for information on stock-based compensation plans. Shares used to compute diluted earnings per share were as follows:

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
	(in millions)
As reported shares	1,057		1,038
Effect of stock-based compensation	7		7
Effect of equity units	3		—
Diluted shares	1,067		1,045

An immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive for the three months ended March 31, 2020. There were no such amounts for the three months ended March 31, 2019.

See Note 10 to the financial statements in Item 8 of the Form 10-K for additional tax information.

Current and Deferred Income Taxes

Tax Credit and Net Operating Loss Carryforwards

The utilization of each Registrants' estimated tax credit and net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, potential impacts of the COVID-19 pandemic, and changes in taxable income projections. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.

Effective Tax Rate

Details of significant changes in the effective tax rate for the applicable Registrants are provided herein.

Southern Company

Southern Company's effective tax rate is typically lower than the statutory rate due to employee stock plans' dividend deduction, non-taxable AFUDC equity at the traditional electric operating companies, flowback of excess deferred income taxes at the regulated utilities, and federal income tax benefits from ITCs and PTCs primarily at Southern Power.

Southern Company's effective tax rate was 14.7% for the three months ended March 31, 2020 compared to 39.8% for the corresponding period in 2019. The effective tax rate decrease was primarily due to the tax impact from the sale of Gulf Power in 2019. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information.

Georgia Power

Georgia Power's effective tax rate was 4.6% for the three months ended March 31, 2020 compared to 20.8% for the corresponding period in 2019. The effective tax rate decrease was primarily due to an increase in the flowback of excess deferred income taxes in 2020 as authorized in the 2019 ARP. See Note 2 to the financial statements under "Georgia Power" in Item 8 of the Form 10-K for additional information.

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Southern Power

Southern Power's effective tax rate was 13.5% for the three months ended March 31, 2020 compared to a benefit rate of (49.8)% for the corresponding period in 2019. The effective tax rate increase was primarily due to the tax impact from the sale of Plant Mankato in 2020. See Note (K) under "Southern Power" for additional information.

The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2020. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.

Effective January 1, 2020, Southern Company adopted a change in method of calculating the market-related value of the liability-hedging securities included in its pension plan assets. The market-related value is used to determine the expected return on plan assets component of net periodic pension cost. Southern Company previously used the calculated value approach for all plan assets, which smoothed asset returns and deferred gains and losses by amortizing them into the calculation of the market-related value over five years. Southern Company changed to the fair value approach for liability-hedging securities, which includes measuring the market-related value of that portion of the plan assets at fair value for purposes of determining the expected return on plan assets. The remaining asset classes of plan assets will continue to use the calculated value approach in determining the market-related value. Southern Company considers the fair value approach to be preferable because it results in a current reflection of changes in the value of plan assets in the measurement of net periodic pension cost. Southern Company evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements of all Registrants and therefore did not account for the change retrospectively. The change in accounting principle was recorded through earnings as a prior period adjustment for the amounts related to the unregulated businesses of Southern Company and Southern Power. Amounts related to the traditional electric operating companies and the natural gas distribution utilities have been reflected as adjustments to regulatory assets as appropriate, consistent with the expected regulatory treatment.

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On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three months ended March 31, 2020 and 2019 are presented in the following tables.

Three Months Ended March 31, 2020	Southern Company				Alabama Power				Georgia Power				Mississippi Power				Southern Power				Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	94			$	22			$	24			$	4			$	2			$	8
Interest cost	108				25				33				5				1				8
Expected return on plan assets	(275		)		(66		)		(87		)		(13		)		(3		)		(19		)
Amortization:
Prior service costs	1				—				—				—				—				(1		)
Regulatory asset	—				—				—				—				—				4
Net (gain)/loss	67				18				22				3				1				2
Net periodic pension cost (income)	$	(5	)		$	(1	)		$	(8	)		$	(1	)		$	1			$	2
Postretirement Benefits
Service cost	$	5			$	2			$	1			$	—			$	—			$	—
Interest cost	13				3				5				—				—				2
Expected return on plan assets	(18		)		(7		)		(7		)		—				—				(2		)
Amortization:
Regulatory asset	—				—				—				—				—				2
Net (gain)/loss	1				—				1				—				—				(1		)
Net periodic postretirement benefit cost	$	1			$	(2	)		$	—			$	—			$	—			$	1

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Three Months Ended March 31, 2019	Southern Company				Alabama Power				Georgia Power				Mississippi Power				Southern Power				Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	73			$	17			$	19			$	3			$	2			$	6
Interest cost	123				28				39				6				1				9
Expected return on plan assets	(221		)		(51		)		(73		)		(10		)		(2		)		(15		)
Amortization:
Prior service costs	—				—				—				—				—				(1		)
Regulatory asset	—				—				—				—				—				3
Net (gain)/loss	30				9				11				1				—				1
Net periodic pension cost (income)	$	5			$	3			$	(4	)		$	—			$	1			$	3
Postretirement Benefits
Service cost	$	5			$	1			$	1			$	—			$	—			$	1
Interest cost	17				4				7				1				—				2
Expected return on plan assets	(16		)		(6		)		(6		)		—				—				(2		)
Amortization:
Prior service costs	1				1				—				—				—				—
Regulatory asset	—				—				—				—				—				2
Net (gain)/loss	(1		)		—				—				—				—				(1		)
Net periodic postretirement benefit cost	$	6			$	—			$	2			$	1			$	—			$	2

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As of March 31, 2020, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:

	Fair Value Measurements Using:
As of March 31, 2020:	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Net Asset Value as a Practical Expedient (NAV)				Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$	328			$	164			$	87			$	—			$	579
Interest rate derivatives	—				22				—				—				22
Investments in trusts:(b)(c)
Domestic equity	578				108				—				—				686
Foreign equity	52				171				—				—				223
U.S. Treasury and government agency securities	—				289				—				—				289
Municipal bonds	—				103				—				—				103
Pooled funds – fixed income	—				16				—				—				16
Corporate bonds	23				297				—				—				320
Mortgage and asset backed securities	—				85				—				—				85
Private equity	—				—				—				60				60
Other	24				5				—				—				29
Cash equivalents	1,686				11				—				—				1,697
Other investments	9				29				—				—				38
Total	$	2,700			$	1,300			$	87			$	60			$	4,147
Liabilities:
Energy-related derivatives(a)	$	426			$	212			$	11			$	—			$	649
Interest rate derivatives	—				22				—				—				22
Foreign currency derivatives	—				90				—				—				90
Contingent consideration	—				—				19				—				19
Total	$	426			$	324			$	30			$	—			$	780

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	Fair Value Measurements Using:
As of March 31, 2020:	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Net Asset Value as a Practical Expedient (NAV)				Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—			$	5			$	—			$	—			$	5
Nuclear decommissioning trusts:(b)
Domestic equity	368				99				—				—				467
Foreign equity	52				50				—				—				102
U.S. Treasury and government agency securities	—				22				—				—				22
Municipal bonds	—				1				—				—				1
Corporate bonds	23				141				—				—				164
Mortgage and asset backed securities	—				30				—				—				30
Private equity	—				—				—				60				60
Other	7				—				—				—				7
Cash equivalents	694				11				—				—				705
Other investments	—				29				—				—				29
Total	$	1,144			$	388			$	—			$	60			$	1,592
Liabilities:
Energy-related derivatives	$	—			$	27			$	—			$	—			$	27
Georgia Power
Assets:
Energy-related derivatives	$	—			$	6			$	—			$	—			$	6
Nuclear decommissioning trusts:(b)(c)
Domestic equity	210				1				—				—				211
Foreign equity	—				119				—				—				119
U.S. Treasury and government agency securities	—				267				—				—				267
Municipal bonds	—				102				—				—				102
Corporate bonds	—				156				—				—				156
Mortgage and asset backed securities	—				56				—				—				56
Other	16				5				—				—				21
Cash equivalents	212				—				—				—				212
Total	$	438			$	712			$	—			$	—			$	1,150
Liabilities:
Energy-related derivatives	$	—			$	61			$	—			$	—			$	61

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	Fair Value Measurements Using:
As of March 31, 2020:	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Net Asset Value as a Practical Expedient (NAV)				Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—			$	3			$	—			$	—			$	3
Cash equivalents	79				—				—				—				79
Total	$	79			$	3			$	—			$	—			$	82
Liabilities:
Energy-related derivatives	$	—			$	33			$	—			$	—			$	33
Southern Power
Assets:
Energy-related derivatives	$	—			$	2			$	—			$	—			$	2
Cash equivalents	166				—				—				—				166
Total	$	166			$	2			$	—			$	—			$	168
Liabilities:
Energy-related derivatives	$	—			$	3			$	—			$	—			$	3
Foreign currency derivatives	—				90				—				—				90
Contingent consideration	—				—				19				—				19
Total	$	—			$	93			$	19			$	—			$	112
Southern Company Gas
Assets:
Energy-related derivatives(a)	$	328			$	148			$	87			$	—			$	563
Non-qualified deferred compensation trusts:
Domestic equity	—				9				—				—				9
Foreign equity	—				3				—				—				3
Pooled funds – fixed income	—				16				—				—				16
Cash equivalents and restricted cash	270				—				—				—				270
Total	$	598			$	176			$	87			$	—			$	861
Liabilities:
Energy-related derivatives(a)	$	426			$	88			$	11			$	—			$	525
Interest rate derivatives	—				21				—				—				21
Total	$	426			$	109			$	11			$	—			$	546

(a)	Energy-related derivatives exclude cash collateral of $128 million and $16 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.

(b)	Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

(c)

Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of March 31, 2020, approximately $31 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

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

Fair value increases (decreases)	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(in millions)
Southern Company	$	(247	)	$	152
Alabama Power	(167		)	87
Georgia Power	(80		)	65

Valuation Methodologies

The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note (J) for additional information on how these derivatives are used.

For fair value measurements of the investments within the nuclear decommissioning trusts and the non-qualified deferred compensation trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. See Note 6 to the financial statements under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.

Southern Power has contingent payment obligations related to certain acquisitions whereby Southern Power is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligation is categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.

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"Other investments" include investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.

As of March 31, 2020, the fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $60 million and unfunded commitments related to the private equity investments totaled $73 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

As of March 31, 2020, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Power			Southern Company Gas(*)
	(in millions)
Long-term debt, including securities due within one year:
Carrying amount	$	45,820		$	8,432		$	12,217		$	1,413		$	4,369		$	5,836
Fair value	49,126			9,239			14,020			1,433			4,376			6,416

(*)	The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the lives of the respective bonds.

The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.

Commodity Contracts with Level 3 Valuation Inputs

As of March 31, 2020, the fair value of Southern Company Gas' Level 3 physical natural gas forward contracts was $76 million. Since commodity contracts classified as Level 3 typically include a combination of observable and unobservable components, the changes in fair value may include amounts due in part to observable market factors, or changes to assumptions on the unobservable components. The following table includes transfers to Level 3, which represent the fair value of Southern Company Gas' commodity derivative contracts that include a significant unobservable component for the first time during the period.

	Three Months Ended March 31, 2020
	(in millions)
Beginning balance	$	14
Transfers to Level 3	70
Transfers from Level 3	(3		)
Instruments realized or otherwise settled during period	(1		)
Changes in fair value	(4		)
Ending balance	$	76

Changes in fair value of Level 3 instruments represent changes in gains and losses for the periods that are reported on Southern Company Gas' statements of income in natural gas revenues.

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

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of unobservable inputs. Observable inputs, including some forward prices used for determining fair value, reflect the best available market information. Unobservable inputs are updated using industry standard techniques such as extrapolation, combining observable forward inputs supplemented by historical market and other relevant data. Level 3 physical natural gas forward contracts include unobservable forward price inputs (ranging from $(0.84) to $0.21 per mmBtu). Forward price increases (decreases) as of March 31, 2020 would have resulted in higher (lower) values on a net basis.

Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas are exposed to market risks, including commodity price risk, interest rate risk, weather risk, and occasionally foreign currency exchange rate risk. To manage the volatility attributable to these exposures, each company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to each company's policies in areas such as counterparty exposure and risk management practices. Southern Company Gas' wholesale gas operations use various contracts in its commercial activities that generally meet the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information.

Energy-Related Derivatives

The traditional electric operating companies, Southern Power, and Southern Company Gas enter into energy-related derivatives to hedge exposures to electricity, natural gas, and other fuel price changes. However, due to cost-based rate regulations and other various cost recovery mechanisms, the traditional electric operating companies and the natural gas distribution utilities have limited exposure to market volatility in energy-related commodity prices. Each of the traditional electric operating companies and certain of the natural gas distribution utilities of Southern Company Gas manage fuel-hedging programs, implemented per the guidelines of their respective state PSCs or other applicable state regulatory agencies, through the use of financial derivative contracts, which are expected to continue to mitigate price volatility. The traditional electric operating companies (with respect to wholesale generating capacity) and Southern Power have limited exposure to market volatility in energy-related commodity prices because their long-term sales contracts shift substantially all fuel cost responsibility to the purchaser. However, the traditional electric operating companies and Southern Power may be exposed to market volatility in energy-related commodity prices to the extent any uncontracted capacity is used to sell electricity. Southern Company Gas retains exposure to price changes that can, in a volatile energy market, be material and can adversely affect its results of operations.

Southern Company Gas also enters into weather derivative contracts as economic hedges of operating margins in the event of warmer-than-normal weather. Exchange-traded options are carried at fair value, with changes reflected in operating revenues. Non-exchange-traded options are accounted for using the intrinsic value method. Changes in the intrinsic value for non-exchange-traded contracts are reflected in operating revenues.

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Energy-related derivative contracts are accounted for under one of three methods:

•

Regulatory Hedges — Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses.

•	Cash Flow Hedges — Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.

•	Not Designated — Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

Some energy-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the electric and natural gas industries. When an energy-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item representing the actual price of the underlying goods being delivered.

At March 31, 2020, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:

	Net Purchased mmBtu		Longest Hedge Date		Longest Non-Hedge Date
	(in millions)
Southern Company(*)	945		2023		2031
Alabama Power	88		2023		—
Georgia Power	168		2023		—
Mississippi Power	100		2023		—
Southern Power	4		2020		2020
Southern Company Gas(*)	585		2022		2031

(*)

Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 4.6 billion mmBtu and short natural gas positions of 4.0 billion mmBtu as of March 31, 2020, which is also included in Southern Company's total volume.

At March 31, 2020, the net volume of Southern Power's energy-related derivative contracts for power to be sold was 1 million MWHs, all of which expire in 2020.

In addition to the volumes discussed above, the traditional electric operating companies and Southern Power enter into physical natural gas supply contracts that provide the option to sell back excess natural gas due to operational constraints. The maximum expected volume of natural gas subject to such a feature is 23 million mmBtu for Southern Company, which includes 6 million mmBtu for Alabama Power, 7 million mmBtu for Georgia Power, 3 million mmBtu for Mississippi Power, and 7 million mmBtu for Southern Power.

For cash flow hedges of energy-related derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to earnings for the 12-month period ending March 31, 2021 are immaterial for all Registrants.

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Interest Rate Derivatives

Southern Company and certain subsidiaries may enter into interest rate derivatives to hedge exposure to changes in interest rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness. Derivatives related to existing variable rate securities or forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and presented on the same income statement line item as the earnings effect of the hedged transactions. Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives' fair value gains or losses and hedged items' fair value gains or losses are both recorded directly to earnings on the same income statement line item. Fair value gains or losses on derivatives that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

At March 31, 2020, the following interest rate derivatives were outstanding:

	Notional Amount				Interest Rate Received	Weighted Average Interest Rate Paid	Hedge Maturity Date		Fair Value Gain (Loss) at March 31, 2020
	(in millions)								(in millions)
Cash Flow Hedges of Forecasted Debt
Southern Company Gas	$	200			3-month LIBOR	1.81%	September 2030		$	(21	)
Cash Flow Hedges of Existing Debt
Mississippi Power	60				1-month LIBOR	0.58%	December 2021		—
Fair Value Hedges of Existing Debt
Southern Company parent	300				2.75%	3-month LIBOR + 0.92%	June 2020		1
Southern Company parent	1,500				2.35%	1-month LIBOR + 0.87%	July 2021		21
Southern Company	$	2,060							$	1

The estimated pre-tax gains (losses) related to interest rate derivatives expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending March 31, 2021 total $(25) million for Southern Company and are immaterial for all other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 2046 for the Southern Company parent entity, 2035 for Alabama Power, 2044 for Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.

Foreign Currency Derivatives

Southern Company and certain subsidiaries, including Southern Power, may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars. Derivatives related to forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and on the same income statement line as the earnings effect of the hedged transactions, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. The derivatives employed as hedging instruments are structured to minimize ineffectiveness.

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At March 31, 2020, the following foreign currency derivatives were outstanding:

	Pay Notional			Pay Rate	Receive Notional			Receive Rate	Hedge Maturity Date	Fair Value Gain (Loss) at March 31, 2020
	(in millions)				(in millions)					(in millions)
Cash Flow Hedges of Existing Debt
Southern Power	$	677		2.95%	€	600		1.00%	June 2022	$	(39	)
Southern Power	564			3.78%	500			1.85%	June 2026	(51		)
Total	$	1,241			€	1,100				$	(90	)

The estimated pre-tax gains (losses) related to Southern Power's foreign currency derivatives expected to be reclassified from accumulated OCI to earnings for the 12-month period ending March 31, 2021 are $(24) million.

Derivative Financial Statement Presentation and Amounts

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

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The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:

	As of March 31, 2020						As of December 31, 2019
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)						(in millions)
Southern Company
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	7		$	100		$	3		$	70
Other deferred charges and assets/Other deferred credits and liabilities	8			40			6			44
Total derivatives designated as hedging instruments for regulatory purposes	$	15		$	140		$	9		$	114
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	3		$	6		$	1		$	6
Interest rate derivatives:
Other current assets/Other current liabilities	12			21			2			23
Other deferred charges and assets/Other deferred credits and liabilities	10			—			—			1
Foreign currency derivatives:
Other current assets/Other current liabilities	—			24			—			24
Other deferred charges and assets/Other deferred credits and liabilities	—			66			16			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	25		$	117		$	19		$	54
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities	$	300		$	297		$	461		$	358
Other deferred charges and assets/Other deferred credits and liabilities	261			206			207			225
Total derivatives not designated as hedging instruments	$	561		$	503		$	668		$	583
Gross amounts recognized	$	601		$	760		$	696		$	751
Gross amounts offset(a)	(383		)	(511		)	(463		)	(562		)
Net amounts recognized in the Balance Sheets(b)	$	218		$	249		$	233		$	189

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

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	As of March 31, 2020						As of December 31, 2019
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)						(in millions)
Mississippi Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	1		$	21		$	—		$	15
Other deferred charges and assets/Other deferred credits and liabilities	2			12			1			12
Total derivatives designated as hedging instruments for regulatory purposes	$	3		$	33		$	1		$	27
Gross amounts recognized	$	3		$	33		$	1		$	27
Gross amounts offset	(3		)	(3		)	(1		)	(1		)
Net amounts recognized in the Balance Sheets	$	—		$	30		$	—		$	26
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	2		$	2		$	1		$	2
Foreign currency derivatives:
Other current assets/Other current liabilities	—			24			—			24
Other deferred charges and assets/Other deferred credits and liabilities	—			66			16			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	2		$	92		$	17		$	26
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities	$	—		$	1		$	2		$	1
Total derivatives not designated as hedging instruments	$	—		$	1		$	2		$	1
Gross amounts recognized	$	2		$	93		$	19		$	27
Gross amounts offset	—			—			—			—
Net amounts recognized in the Balance Sheets	$	2		$	93		$	19		$	27

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	As of March 31, 2020						As of December 31, 2019
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)						(in millions)
Southern Company Gas
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	—		$	19		$	—		$	9
Other deferred charges and assets/Other deferred credits and liabilities	1			—			—			1
Total derivatives designated as hedging instruments for regulatory purposes	$	1		$	19		$	—		$	10
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	1		$	4		$	—		$	4
Interest rate derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	—			21			2			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	1		$	25		$	2		$	4
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	300		$	296		$	459		$	357
Other deferred charges and assets/Other deferred credits and liabilities	261			206			207			225
Total derivatives not designated as hedging instruments	$	561		$	502		$	666		$	582
Gross amounts of recognized	$	563		$	546		$	668		$	596
Gross amounts offset(a)	(370		)	(498		)	(456		)	(555		)
Net amounts recognized in the Balance Sheets(b)	$	193		$	48		$	212		$	41

(a)	Gross amounts offset include cash collateral held on deposit in broker margin accounts of $128 million and $99 million as of March 31, 2020 and December 31, 2019, respectively.

(b)	Net amounts of derivative instruments outstanding exclude premium and intrinsic value associated with weather derivatives of $16 million and $4 million as of March 31, 2020 and December 31, 2019, respectively.

Energy-related derivatives not designated as hedging instruments were immaterial for the traditional electric operating companies at March 31, 2020 and December 31, 2019.

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At March 31, 2020 and December 31, 2019, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:

Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet at March 31, 2020
Derivative Category and Balance Sheet Location	Southern Company(*)			Alabama Power			Georgia Power			Mississippi Power			Southern Company Gas(*)
	(in millions)
Energy-related derivatives:
Other regulatory assets, current	$	(79	)	$	(17	)	$	(39	)	$	(19	)	$	(4	)
Other regulatory assets, deferred	(33		)	(7		)	(16		)	(10		)	—
Other regulatory liabilities, current	5			1			—			—			4
Total energy-related derivative gains (losses)	$	(107	)	$	(23	)	$	(55	)	$	(29	)	$	—

(*)	Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $19 million at March 31, 2020.

Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet at December 31, 2019
Derivative Category and Balance Sheet Location	Southern Company(*)			Alabama Power			Georgia Power			Mississippi Power			Southern Company Gas(*)
	(in millions)
Energy-related derivatives:
Other regulatory assets, current	$	(63	)	$	(14	)	$	(31	)	$	(15	)	$	(3	)
Other regulatory assets, deferred	(37		)	(8		)	(18		)	(11		)	—
Other regulatory liabilities, current	6			2			—			—			4
Total energy-related derivative gains (losses)	$	(94	)	$	(20	)	$	(49	)	$	(26	)	$	1

(*)	Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $11 million at December 31, 2019.

For the three months ended March 31, 2020 and 2019, the pre-tax effects of cash flow hedge accounting on accumulated OCI were as follows:

Gain (Loss) Recognized in OCI on Derivative	For the Three Months Ended March 31,
	2020			2019
	(in millions)
Southern Company
Energy-related derivatives	$	(4	)	$	—
Interest rate derivatives	(26		)	—
Foreign currency derivatives	(83		)	(39		)
Total	$	(113	)	$	(39	)
Southern Power
Foreign currency derivatives	$	(83	)	$	(39	)
Southern Company Gas
Energy-related derivatives	$	(4	)	$	—
Interest rate derivatives	(23		)	—
Total	$	(27	)	$	—

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For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.

For the three months ended March 31, 2020 and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:

	Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships	For the Three Months Ended March 31,
		2020			2019
		(in millions)
	Southern Company
	Total cost of natural gas	$	439		$	686
	Gain (loss) on energy-related cash flow hedges(a)	(7		)	1
	Total depreciation and amortization	857			751
	Gain (loss) on energy-related cash flow hedges(a)	(1		)	(3		)
	Total interest expense, net of amounts capitalized	(456		)	(430		)
	Gain (loss) on interest rate cash flow hedges(a)	(6		)	(5		)
	Gain (loss) on foreign currency cash flow hedges(a)	(6		)	(6		)
	Gain (loss) on interest rate fair value hedges(b)	29			14
	Total other income (expense), net	103			78
	Gain (loss) on foreign currency cash flow hedges(a)(c)	(31		)	(24		)
	Southern Power
	Total depreciation and amortization	$	117		$	119
	Gain (loss) on energy-related cash flow hedges(a)	(1		)	(3		)
	Total interest expense, net of amounts capitalized	(39		)	(44		)
	Gain (loss) on foreign currency cash flow hedges(a)	(6		)	(6		)
	Total other income (expense), net	2			2
	Gain (loss) on foreign currency cash flow hedges(a)(c)	(31		)	(24		)

(a)	Reclassified from accumulated OCI into earnings.

(b)	For fair value hedges, changes in the fair value of the derivative contracts are generally equal to changes in the fair value of the underlying debt and have no material impact on income.

(c)	The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record the euro-denominated notes.

For the three months ended March 31, 2020 and 2019, the pre-tax effects of cash flow and fair value hedge accounting on income for energy-related derivatives and interest rate derivatives were immaterial for the traditional electric operating companies and Southern Company Gas.

As of March 31, 2020 and December 31, 2019, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:

	Carrying Amount of the Hedged Item							Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged Items	As of March 31, 2020			As of December 31, 2019				As of March 31, 2020			As of December 31, 2019
	(in millions)							(in millions)
Southern Company
Securities due within one year	$	(600	)	$	(599	)		$	(1	)	$	—
Long-term debt	(1,519		)	(1,494		)		(22		)	3

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For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:

		Gain (Loss)
		Three Months Ended March 31,
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	2020			2019
		(in millions)
Energy-related derivatives:	Natural gas revenues(*)	$	70		$	33
	Cost of natural gas	7			8
Total derivatives in non-designated hedging relationships		$	77		$	41

(*)	Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.

For the three months ended March 31, 2020 and 2019, the pre-tax effects of energy-related derivatives and interest rate derivatives not designated as hedging instruments were immaterial for all other Registrants.

Contingent Features

Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. At March 31, 2020, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements.

For the Registrants with interest rate derivatives at March 31, 2020, the fair value of interest rate derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, was immaterial. At March 31, 2020, the fair value of energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial for all Registrants. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Gulf Power is continuing to participate in the Southern Company power pool for a defined transition period that, subject to certain potential adjustments, is scheduled to end on January 1, 2024.

Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivatives executed with the same counterparty.

Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Alabama Power and Southern Power may be required to post collateral. At March 31, 2020, cash collateral posted in these accounts was immaterial. Southern Company Gas maintains accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Southern Company Gas may be required to deposit cash into these accounts. At March 31, 2020, cash collateral held on deposit in broker margin accounts was $128 million.

The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have

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investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk. Prior to entering into a physical transaction, Southern Company Gas assigns physical wholesale counterparties an internal credit rating and credit limit based on the counterparties' Moody's, S&P, and Fitch ratings, commercially available credit reports, and audited financial statements. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.

In addition, Southern Company Gas conducts credit evaluations and obtains appropriate internal approvals for the counterparty's line of credit before any transaction with the counterparty is executed. In most cases, the counterparty must have an investment grade rating, which includes a minimum long-term debt rating of Baa3 from Moody's and BBB- from S&P. Generally, Southern Company Gas requires credit enhancements by way of a guaranty, cash deposit, or letter of credit for transaction counterparties that do not have investment grade ratings.

Southern Company Gas also utilizes master netting agreements whenever possible to mitigate exposure to counterparty credit risk. When Southern Company Gas is engaged in more than one outstanding derivative transaction with the same counterparty and it also has a legally enforceable netting agreement with that counterparty, the "net" mark-to-market exposure represents the netting of the positive and negative exposures with that counterparty and a reasonable measure of Southern Company Gas' credit risk. Southern Company Gas also uses other netting agreements with certain counterparties with whom it conducts significant transactions. Master netting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty. Southern Company Gas also nets across product lines and against cash collateral provided the master netting and cash collateral agreements include such provisions. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.

The Registrants do not anticipate a material adverse effect on their respective financial statements as a result of counterparty nonperformance.

See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information, including details of assets and liabilities held for sale at December 31, 2019 for Southern Company, Southern Power, and Southern Company Gas. No Registrant had assets or liabilities held for sale at March 31, 2020.

Alabama Power

On April 22, 2020, the FERC approved the Autauga Combined Cycle Acquisition. The Autauga Combined Cycle Acquisition remains subject to approval by the Alabama PSC. See Note (B) under "Alabama Power" for additional information. The ultimate outcome of this matter cannot be determined at this time.

Southern Power

Acquisitions

In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, which is expected to occur in the fourth quarter 2020. The facility's output is contracted under two long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.

Construction Projects

During the three months ended March 31, 2020, Southern Power continued construction of the Reading and Skookumchuck wind facilities. Total aggregate construction costs, excluding acquisition costs, are expected to be between $490 million and $535 million for the two facilities under construction. At March 31, 2020, total costs of

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construction incurred for these projects were $447 million and are included in CWIP. The ultimate outcome of these matters cannot be determined at this time.

Project Facility	Resource	Approximate Nameplate Capacity (MW)	Location	Actual/Expected COD	PPA Contract Period
Projects Under Construction as of March 31, 2020
Reading(a)	Wind	200	Osage and Lyon Counties, KS	May 2020	12 years
Skookumchuck(b)	Wind	136	Lewis and Thurston Counties, WA	Second half of 2020	20 years

(a)	In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. Southern Power may enter into a tax equity partnership, in which case it would then own 100% of the Class B membership interests. The ultimate outcome of this matter cannot be determined at this time.

(b)

In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. In December 2019, Southern Power entered into a tax equity agreement as the Class B member with funding of the tax equity amounts expected to occur upon commercial operation. Shortly after commercial operation, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. The ultimate outcome of this matter cannot be determined at this time.

Development Projects

Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 to development and construction projects. During the three months ended March 31, 2020, certain wind turbine equipment was sold, resulting in an immaterial gain.

Sales of Natural Gas and Biomass Plants

On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments. The sale resulted in a gain of approximately $39 million ($23 million after tax). The assets and liabilities of Plant Mankato were classified as held for sale on Southern Company's and Southern Power's balance sheets at December 31, 2019.

Plants Nacogdoches (sold in June 2019) and Mankato represented individually significant components of Southern Power; therefore, pre-tax income for these components for the three months ended March 31, 2020 and 2019 is presented below:

	Three Months Ended March 31,
	2020			2019
	(in millions)
Southern Power's earnings before income taxes:(*)
Plant Nacogdoches	N/A			$	6
Plant Mankato	$	2		$	1

(*)	Earnings before income taxes for components reflect the cessation of depreciation and amortization on the long-lived assets being sold upon classification as held for sale in November 2018 and April 2019 for Plant Mankato and Plant Nacogdoches, respectively.

Southern Company Gas

On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline to Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceeds of $178 million, including estimated working capital adjustments. The preliminary loss associated with the transactions was immaterial. Southern Company Gas may also receive two future payments of $5 million each, contingent upon certain milestones related to Pivotal LNG being met by Dominion Modular LNG

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Holdings, Inc. The assets and liabilities of Pivotal LNG and the interest in Atlantic Coast Pipeline were classified as held for sale at December 31, 2019. See Notes 3 and 7 under "Other Matters – Southern Company Gas – Gas Pipeline Projects" and "Southern Company Gas – Equity Method Investments," respectively, in Item 8 of the Form 10-K and Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively.

Southern Company

The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The traditional electric operating companies – Alabama Power, Georgia Power, and Mississippi Power – are vertically integrated utilities providing electric service in three Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through its natural gas distribution utilities and is involved in several other complementary businesses including gas pipeline investments, wholesale gas services, and gas marketing services.

Southern Company's reportable business segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $86 million for the three months ended March 31, 2020 and $87 million for the three months ended March 31, 2019. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for the three months ended March 31, 2020 and 2019. Revenues from sales of natural gas from Southern Company Gas to Southern Power were $10 million for the three months ended March 31, 2020 and $17 million for the three months ended March 31, 2019. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing energy solutions to electric utilities and their customers in the areas of distributed generation, energy storage and renewables, and energy efficiency, as well as investments in telecommunications and leveraged lease projects. All other inter-segment revenues are not material.

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Financial data for business segments and products and services for the three months ended March 31, 2020 and 2019 was as follows:

	Electric Utilities
	Traditional Electric Operating Companies			Southern Power			Eliminations			Total			Southern Company Gas			All Other			Eliminations			Consolidated
	(in millions)
Three Months Ended March 31, 2020
Operating revenues	$	3,407		$	375		$	(87	)	$	3,695		$	1,249		$	114		$	(40	)	$	5,018
Segment net income (loss)(a)(b)	642			75			—			717			275			(121		)	(3		)	868
At March 31, 2020
Goodwill	$	—		$	2		$	—		$	2		$	5,015		$	263		$	—		$	5,280
Total assets	81,765			13,646			(695		)	94,716			21,617			3,467			(948		)	118,852
Three Months Ended March 31, 2019
Operating revenues	$	3,445		$	443		$	(93	)	$	3,795		$	1,474		$	182		$	(39	)	$	5,412
Segment net income (loss)(a)(c)	565			56			—			621			270			1,195			(2		)	2,084
At December 31, 2019
Goodwill	$	—		$	2		$	—		$	2		$	5,015		$	263		$	—		$	5,280
Total assets	81,063			14,300			(713		)	94,650			21,687			3,511			(1,148		)	118,700

(a)	Attributable to Southern Company.

(b)	Segment net income (loss) for Southern Power includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato for the three months ended March 31, 2020. See Note (K) under "Southern Power" for additional information.

(c)	Segment net income (loss) for the "All Other" column includes the preliminary pre-tax gain associated with the sale of Gulf Power of $2.5 billion ($1.3 billion after tax) for the three months ended March 31, 2019. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company" for additional information.

Products and Services

	Electric Utilities' Revenues
	Retail			Wholesale			Other			Total
	(in millions)
Three Months Ended March 31, 2020	$	3,078		$	418		$	199		$	3,695
Three Months Ended March 31, 2019	3,084			499			212			3,795

	Southern Company Gas' Revenues
	Gas Distribution Operations			Wholesale Gas Services(*)			Gas Marketing Services			Other			Total
	(in millions)
Three Months Ended March 31, 2020	$	1,013		$	51		$	177		$	8		$	1,249
Three Months Ended March 31, 2019	1,161			86			229			(2		)	1,474

(*)	The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein for additional information.

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Southern Company Gas

Southern Company Gas manages its business through four reportable segments – gas distribution operations, gas pipeline investments, wholesale gas services, and gas marketing services. The non-reportable segments are combined and presented as all other.

Gas distribution operations is the largest component of Southern Company Gas' business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in four states.

Gas pipeline investments consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG, a 20% ownership interest in the PennEast Pipeline construction project, a 50% joint ownership interest in the Dalton Pipeline, and a 5% ownership interest in the Atlantic Coast Pipeline construction project through its sale on March 24, 2020. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas.

Wholesale gas services provides natural gas asset management and/or related logistics services for each of Southern Company Gas' utilities except Nicor Gas as well as for non-affiliated companies. Additionally, wholesale gas services engages in natural gas storage and gas pipeline arbitrage and related activities.

Gas marketing services provides natural gas marketing to end-use customers primarily in Georgia and Illinois through SouthStar Energy Services, LLC.

The all other column includes segments below the quantitative threshold for separate disclosure, including natural gas storage businesses, fuels operations through the sale of Southern Company Gas' interest in Pivotal LNG on March 24, 2020, the investment in Triton through its sale on May 29, 2019, and other subsidiaries that fall below the quantitative threshold for separate disclosure. See Notes (E) and (K) under "Southern Company Gas" for additional information.

Business segment financial data for the three months ended March 31, 2020 and 2019 was as follows:

	Gas Distribution Operations			Gas Pipeline Investments			Wholesale Gas Services(*)			Gas Marketing Services			Total			All Other			Eliminations			Consolidated
	(in millions)
Three Months Ended March 31, 2020
Operating revenues	$	1,020		$	8		$	51		$	177		$	1,256		$	8		$	(15	)	$	1,249
Segment net income (loss)	164			30			23			57			274			1			—			275
Total assets at March 31, 2020	18,166			1,652			643			1,517			21,978			11,094			(11,455		)	21,617
Three Months Ended March 31, 2019
Operating revenues	$	1,172		$	8		$	86		$	229		$	1,495		$	11		$	(32	)	$	1,474
Segment net income (loss)	133			32			47			61			273			(3		)	—			270
Total assets at December 31, 2019	18,204			1,678			850			1,496			22,228			10,759			(11,300		)	21,687

(*)	The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.

	Third Party Gross Revenues			Intercompany Revenues			Total Gross Revenues			Less Gross Gas Costs			Operating Revenues
	(in millions)
Three Months Ended March 31, 2020	$	1,185		$	29		$	1,214		$	1,163		$	51
Three Months Ended March 31, 2019	1,926			88			2,014			1,928			86

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(*)	Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

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(*)	Average cost of purchased power includes fuel, energy, and transmission purchased by Alabama Power for tolling agreements where power is generated by the provider.

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(*)	Average cost of purchased power includes fuel purchased by Georgia Power for tolling agreements where power is generated by the provider.

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•	PPA capacity revenues decreased $37 million, or 29%, primarily due to a $22 million decrease related to the sale of Plant Nacogdoches in the second quarter 2019 and the sale of Plant Mankato in the first quarter 2020. In addition, the change reflects a reduction of $14 million from the contractual expiration of an affiliate natural gas PPA.

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PPA energy revenues decreased $22 million, or 10%, due to a $32 million decrease in sales from natural gas facilities resulting from a $22 million decrease in the average cost of fuel and purchased power and a $10 million decrease in the volume of KWHs sold. This decrease was partially offset by a $10 million increase in sales primarily driven by the volume of KWHs generated by solar and wind facilities.

•	Non-PPA revenues decreased $8 million, or 9%, due to a $32 million decrease in the market price of energy, partially offset by a $24 million increase in the volume of KWHs sold through short-term sales.

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(a)	Normal represents the 10-year average from January 1, 2010 through March 31, 2019 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.

(b)	Heating Degree Days in Illinois are expected to have a limited financial impact in future years. In October 2019, Nicor Gas received approval for a volume balancing adjustment, a revenue decoupling mechanism for residential customers that provides a monthly benchmark level of revenue per rate class for recovery.

(*)	Gas marketing services' customers are primarily located in Georgia and Illinois. Also included as of March 31, 2019 were approximately 70,000 customers in Ohio contracted through an annual auction process to serve for 12 months beginning April 1, 2018.

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(a)	Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.

(b)	Nicor Gas' revenue tax expenses, which are passed through directly to customers.

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(*)	Adjusted operating margin and operating expenses are adjusted for Nicor Gas' revenue tax expenses, which are passed through directly to customers.

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(a)	At March 31, 2020, the WACOG of wholesale gas services' expected natural gas withdrawals from storage was $1.80 per mmBtu.

(b)	Represents expected operating gains from planned storage withdrawals associated with existing inventory positions and could change as wholesale gas services adjusts its daily injection and withdrawal plans in response to changes in future market conditions and forward NYMEX price fluctuations.

(c)	Represents the transportation derivative gains and (losses) that will be settled during the period and the physical transportation transactions that offset the derivative gains and losses previously recognized.

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(a)	Includes other operations and maintenance, depreciation and amortization, and taxes other than income taxes.

(b)	Nicor Gas' revenue tax expenses, which are passed through directly to customers.

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(a)	Excludes financing costs expected to be capitalized through AFUDC of approximately $270 million, of which $36 million had been accrued through March 31, 2020.

(b)	Net of $1.7 billion received from Toshiba under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds.

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(a)	In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. Southern Power may enter into a tax equity partnership, in which case it would then own 100% of the Class B membership interests. The ultimate outcome of this matter cannot be determined at this time.

(b)

In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. In December 2019, Southern Power entered into a tax equity agreement as the Class B member with funding of the tax equity amounts expected to occur upon commercial operation. Shortly after commercial operation, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. The ultimate outcome of this matter cannot be determined at this time.

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•	an increase of $1.3 billion in long-term debt (including amounts due within one year) related to new issuances;

•	an increase of $0.9 billion in total property, plant, and equipment primarily related to the Subsidiary Registrants' construction programs;

•	a decrease of $0.8 billion in assets held for sale related to the completion of Southern Power's sale of Plant Mankato and Southern Company Gas' sale of its interests in Pivotal LNG and Atlantic Coast Pipeline;

•	decreases of $0.5 billion in both accounts payable and accrued compensation related to the timing of payments; and

•	an increase of $0.5 billion in accumulated deferred income taxes related to the expected utilization of tax credits in 2020.

•	an increase of $654 million in common stockholder's equity primarily due to capital contributions from Southern Company;

•	a decrease of $243 million in accounts payable, other related to the timing of vendor payments;

•	an increase of $205 million in regulatory assets associated with AROs and a decrease of $168 million in nuclear decommissioning trusts, at fair value, primarily due to unrealized losses on nuclear decommissioning trust fund investments resulting from a decline in market prices; and

•	an increase of $138 million in total property, plant, and equipment primarily related to Alabama Power's construction program.

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•	an increase of $668 million in total property, plant, and equipment to comply with environmental standards and the construction of generation, transmission, and distribution facilities;

•	an increase of $555 million in long-term debt (including securities due within one year) primarily due to a net increase in outstanding senior notes; and

•	an increase of $447 million in common stockholder's equity primarily due to capital contributions from Southern Company.

•	a decrease of $186 million in cash and cash equivalents and a decrease of $176 million in long-term debt (including amounts due within one year) primarily related to the redemption of senior notes and

•	a decrease of $54 million in accrued taxes primarily due to the payment of ad valorem taxes.

•	a decrease of $618 million in assets held for sale (of which $17 million related to current assets) due to completion of the sale of Plant Mankato;

•	a decrease of $549 million in notes payable due to lower commercial paper borrowings and repayment of a $100 million short-term floating rate bank loan; and

•	an increase of $416 million in prepaid income taxes and a decrease of $422 million in accumulated deferred income tax assets primarily related to the expected utilization of tax credits in 2020.

•	an increase of $265 million in cash and cash equivalents primarily related to proceeds from the sale of interests in Pivotal LNG and Atlantic Coast Pipeline and short-term borrowings;

•	a decrease of $246 million in natural gas for sale due to the use of stored natural gas;

•	an increase of $178 million in total property, plant, and equipment primarily due to utility capital expenditures and infrastructure investments recovered through replacement programs;

•	a decrease of $171 million in assets held for sale due to the completed sale of interests in Pivotal LNG and Atlantic Coast Pipeline; and

•	decreases of $137 million and $144 million in energy marketing receivables and payables, respectively, due to lower natural gas prices and volumes of natural gas sold.

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(*)	Includes $600 million and $585 million of securities due within one year and notes payable, respectively, at the parent company.

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(a)	At March 31, 2020, Southern Power also had two continuing letters of credit facilities for standby letters of credit, of which $85 million was unused. Southern Power's subsidiaries are not parties to its bank credit arrangement or to the letter of credit facilities.

(b)	Includes $1.245 billion and $500 million at Southern Company Gas Capital and Nicor Gas, respectively.

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(*)	Average and maximum amounts are based upon daily balances during the three-month period ended March 31, 2020.

(*)	Includes reductions in finance lease obligations resulting from cash payments under finance leases and, for Georgia Power, principal amortization payments for FFB borrowings.

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(*)

Southern Power has PPAs that could require collateral, but not accelerated payment, in the event of a downgrade of Southern Power's credit. The PPAs require credit assurances without stating a specific credit rating. The amount of collateral required would depend upon actual losses resulting from a credit downgrade. Southern Power had $105 million of cash collateral posted related to PPA requirements at March 31, 2020.

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(a)	Current period changes also include the fair value of new contracts entered into during the period, if any.

(b)	Excludes premium and intrinsic value associated with weather derivatives of $16 million at March 31, 2020 and an immaterial amount at March 31, 2019.

(a)	Valued using NYMEX futures prices.

(b)	Valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers.

(c)	Valued using a combination of observable and unobservable inputs.

(d)	Excludes cash collateral of $128 million and $16 million of premium and intrinsic value associated with weather derivatives.

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(a)	Evaluation of disclosure controls and procedures.

(b)	Changes in internal controls over financial reporting.

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