Item 1. Financial Statements (Unaudited).

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Item 1. Financial Statements (Unaudited).


			Page
The Southern Company and Subsidiary Companies:
Condensed Consolidated Statements of Income			11
Condensed Consolidated Statements of Comprehensive Income			12
Condensed Consolidated Statements of Cash Flows			13
Condensed Consolidated Balance Sheets			14
Condensed Consolidated Statements of Stockholders' Equity			16

Alabama Power Company:
Condensed Statements of Income			18
Condensed Statements of Comprehensive Income			18
Condensed Statements of Cash Flows			19
Condensed Balance Sheets			20
Condensed Statements of Common Stockholder's Equity			22

Georgia Power Company:
Condensed Statements of Income			23
Condensed Statements of Comprehensive Income			23
Condensed Statements of Cash Flows			24
Condensed Balance Sheets			25
Condensed Statements of Common Stockholder's Equity			27

Mississippi Power Company:
Condensed Statements of Income			28
Condensed Statements of Comprehensive Income			28
Condensed Statements of Cash Flows			29
Condensed Balance Sheets			30
Condensed Statements of Common Stockholder's Equity			32

Southern Power Company and Subsidiary Companies:
Condensed Consolidated Statements of Income			33
Condensed Consolidated Statements of Comprehensive Income			33
Condensed Consolidated Statements of Cash Flows			34
Condensed Consolidated Balance Sheets			35
Condensed Consolidated Statements of Stockholders' Equity			37

Southern Company Gas and Subsidiary Companies:
Condensed Consolidated Statements of Income			39
Condensed Consolidated Statements of Comprehensive Income			39
Condensed Consolidated Statements of Cash Flows			40
Condensed Consolidated Balance Sheets			41
Condensed Consolidated Statements of Stockholder's Equity			43

Combined Notes to the Condensed Financial Statements			44

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Retail electric revenues	$	4,551	$	4,243	$	11,492	$	10,503
Wholesale electric revenues	731		584		1,822		1,473
Other electric revenues	179		164		525		484
Natural gas revenues (includes alternative revenue programs of $(1), $(1), $3, and $6, respectively)	623		477		2,994		2,362
Other revenues	154		152		513		436
Total operating revenues	6,238		5,620		17,346		15,258
Operating Expenses:
Fuel	1,234		933		2,930		2,190
Purchased power	288		230		712		611
Cost of natural gas	129		71		943		654
Cost of other sales	71		72		255		201
Other operations and maintenance	1,446		1,286		4,257		3,785
Depreciation and amortization	896		889		2,658		2,619
Taxes other than income taxes	312		304		969		932
Estimated loss on Plant Vogtle Units 3 and 4	264		—		772		149


(Gain) loss on dispositions, net	(125)		—		(179)		(39)
Total operating expenses	4,515		3,785		13,317		11,102
Operating Income	1,723		1,835		4,029		4,156
Other Income and (Expense):
Allowance for equity funds used during construction	49		38		140		106
Earnings from equity method investments	30		33		35		105
Interest expense, net of amounts capitalized	(451)		(443)		(1,352)		(1,343)
Impairment of leveraged leases	—		—		(7)		(154)
Other income (expense), net	131		113		297		319
Total other income and (expense)	(241)		(259)		(887)		(967)
Earnings Before Income Taxes	1,482		1,576		3,142		3,189
Income taxes	372		293		550		443
Consolidated Net Income	1,110		1,283		2,592		2,746

Dividends on preferred stock of subsidiaries	4		4		11		11
Net income (loss) attributable to noncontrolling interests	5		28		(27)		3
Consolidated Net Income Attributable to Southern Company	$	1,101	$	1,251	$	2,608	$	2,732
Common Stock Data:
Earnings per share -
Basic	$	1.04	$	1.18	$	2.46	$	2.58
Diluted	$	1.03	$	1.18	$	2.44	$	2.57
Average number of shares of common stock outstanding (in millions)
Basic	1,061		1,058		1,060		1,058
Diluted	1,068		1,064		1,067		1,064

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

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Consolidated Net Income	$	1,110	$	1,283	$	2,592	$	2,746
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $1, $17, $(4), and $(9), respectively	1		49		(15)		(26)
Reclassification adjustment for amounts included in net income, net of tax of $10, $(11), $27, and $(1), respectively	31		(32)		81		(3)
Pension and other postretirement benefit plans:

Reclassification adjustment for amounts included in net income, net of tax of $1, $1, $4, and $3, respectively	4		3		10		6
Total other comprehensive income (loss)	36		20		76		(23)
Comprehensive Income	1,146		1,303		2,668		2,723

Dividends on preferred stock of subsidiaries	4		4		11		11
Comprehensive income (loss) attributable to noncontrolling interests	5		28		(27)		3
Consolidated Comprehensive Income Attributable to Southern Company	$	1,137	$	1,271	$	2,684	$	2,709

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

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Consolidated net income	$	2,592	$	2,746
Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization, total	2,944		2,903
Deferred income taxes	89		(196)
Utilization of federal investment tax credits	256		319


Pension, postretirement, and other employee benefits	(218)		(190)
Settlement of asset retirement obligations	(341)		(315)
Stock based compensation expense	134		99

Estimated loss on Plant Vogtle Units 3 and 4	772		149



Storm damage accruals	166		171
Impairment charges	91		154
(Gain) loss on dispositions, net	(171)		(36)

Retail fuel cost under recovery – long-term	(209)		—
Other, net	(7)		(14)
Changes in certain current assets and liabilities —
-Receivables	2		125


-Materials and supplies	(91)		(141)

-Natural gas cost under recovery	(432)		—
-Other current assets	(160)		(119)
-Accounts payable	(45)		(428)
-Accrued taxes	288		289
-Accrued compensation	(93)		(183)
-Accrued interest	(110)		(52)
-Retail fuel cost over recovery	(150)		158

-Customer refunds	(58)		(226)
-Other current liabilities	(168)		7
Net cash provided from operating activities	5,081		5,220
Investing Activities:
Business acquisitions, net of cash acquired	(345)		(81)

Property additions	(5,222)		(5,365)


Nuclear decommissioning trust fund purchases	(1,301)		(714)
Nuclear decommissioning trust fund sales	1,297		708
Proceeds from dispositions	160		987
Cost of removal, net of salvage	(282)		(233)


Payments pursuant to LTSAs	(145)		(139)
Other investing activities	(12)		(55)
Net cash used for investing activities	(5,850)		(4,892)
Financing Activities:
Decrease in notes payable, net	(203)		(1,534)
Proceeds —
Long-term debt	6,793		7,543

Common stock	62		63

Short-term borrowings	325		615
Redemptions and repurchases —
Long-term debt	(3,060)		(2,472)



Short-term borrowings	(25)		(840)
Capital contributions from noncontrolling interests	415		173
Distributions to noncontrolling interests	(204)		(164)

Payment of common stock dividends	(2,077)		(2,008)

Other financing activities	(224)		(299)
Net cash provided from financing activities	1,802		1,077
Net Change in Cash, Cash Equivalents, and Restricted Cash	1,033		1,405
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	1,068		1,978
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,101	$	3,383
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $68 and $61 capitalized for 2021 and 2020, respectively)	$	1,417	$	1,346
Income taxes, net	92		66
Noncash transactions —
Accrued property additions at end of period	915		917
Contributions from noncontrolling interests	89		9
Contributions of wind turbine equipment	82		17
Right-of-use assets obtained under leases	92		166

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

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	2,078	$	1,065

Receivables —
Customer accounts	1,831		1,753
Energy marketing	—		516
Unbilled revenues	535		672


Other accounts and notes	611		512
Accumulated provision for uncollectible accounts	(72)		(118)
Materials and supplies	1,504		1,478
Fossil fuel for generation	386		550
Natural gas for sale	368		460

Prepaid expenses	329		276

Assets from risk management activities, net of collateral	365		147
Regulatory assets – asset retirement obligations	233		214
Natural gas cost under recovery	432		—

Other regulatory assets	792		810
Other current assets	282		282
Total current assets	9,674		8,617
Property, Plant, and Equipment:
In service	114,166		110,516
Less: Accumulated depreciation	33,723		32,397
Plant in service, net of depreciation	80,443		78,119

Nuclear fuel, at amortized cost	805		818
Construction work in progress	9,611		8,697
Total property, plant, and equipment	90,859		87,634
Other Property and Investments:
Goodwill	5,280		5,280
Nuclear decommissioning trusts, at fair value	2,446		2,303
Equity investments in unconsolidated subsidiaries	1,278		1,362
Other intangible assets, net of amortization of $296 and $328, respectively	455		487
Leveraged leases	575		556
Miscellaneous property and investments	586		398
Total other property and investments	10,620		10,386
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	1,724		1,802
Deferred charges related to income taxes	815		796


Unamortized loss on reacquired debt	263		280
Regulatory assets – asset retirement obligations, deferred	5,418		4,934
Other regulatory assets, deferred	6,902		7,198


Other deferred charges and assets	1,586		1,288
Total deferred charges and other assets	16,708		16,298
Total Assets	$	127,861	$	122,935

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

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholders' Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	3,286	$	3,507

Notes payable	707		609
Energy marketing trade payables	—		494
Accounts payable	2,229		2,312
Customer deposits	493		487
Accrued taxes —
Accrued income taxes	149		130

Other accrued taxes	797		699
Accrued interest	404		513

Accrued compensation	908		1,025
Asset retirement obligations	690		585





Operating lease obligations	246		241
Other regulatory liabilities	555		509
Other current liabilities	795		968
Total current liabilities	11,259		12,079
Long-term Debt	48,843		45,073
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	8,916		8,175
Deferred credits related to income taxes	5,485		5,767
Accumulated deferred ITCs	2,230		2,235
Employee benefit obligations	1,849		2,213
Operating lease obligations, deferred	1,495		1,611
Asset retirement obligations, deferred	10,919		10,099

Accrued environmental remediation	203		216
Other cost of removal obligations	2,164		2,211
Other regulatory liabilities, deferred	351		251

Other deferred credits and liabilities	637		480
Total deferred credits and other liabilities	34,249		33,258
Total Liabilities	94,351		90,410
Redeemable Preferred Stock of Subsidiaries	291		291


















Total Stockholders' Equity (See accompanying statements)	33,219		32,234
Total Liabilities and Stockholders' Equity	$	127,861	$	122,935

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


	Southern Company Common Stockholders' Equity
	Number of Common Shares		Common Stock								Accumulated Other Comprehensive Income (Loss)
	Issued	Treasury	Par Value		Paid-In Capital		Treasury		Retained Earnings				Noncontrolling Interests	Total
	(in millions)
Balance at December 31, 2019	1,054	(1)	$	5,257	$	11,734	$	(42)	$	10,877	$	(321)		$	4,254	$	31,759
Consolidated net income (loss)	—	—	—		—		—		868		—			(31)		837
Other comprehensive income (loss)	—	—	—		—		—		—		(47)			—		(47)
Stock issued	3	—	9		43		—		—		—			—		52
Stock-based compensation	—	—	—		5		—		—		—			—		5

Cash dividends of $0.62 per share	—	—	—		—		—		(655)		—			—		(655)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			16		16
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(48)		(48)



Other	—	—	—		—		(2)		(2)		1			—		(3)
Balance at March 31, 2020	1,057	(1)	5,266		11,782		(44)		11,088		(367)			4,191		31,916
Consolidated net income	—	—	—		—		—		612		—			5		617
Other comprehensive income	—	—	—		—		—		—		4			—		4
Stock issued	—	—	—		7		—		—		—			—		7
Stock-based compensation	—	—	—		11		—		—		—			—		11

Cash dividends of $0.64 per share	—	—	—		—		—		(677)		—			—		(677)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			165		165
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(70)		(70)




Other	—	—	—		(13)		—		1		—			—		(12)
Balance at June 30, 2020	1,057	(1)	5,266		11,787		(44)		11,024		(363)			4,291		31,961
Consolidated net income	—	—	—		—		—		1,251		—			28		1,279
Other comprehensive income	—	—	—		—		—		—		20			—		20

Stock issued	—	—	1		3		—		—		—			—		4
Stock-based compensation	—	—	—		15		—		—		—			—		15

Cash dividends of $0.64 per share	—	—	—		—		—		(676)		—			—		(676)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			2		2
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(51)		(51)
Purchase of membership interests from noncontrolling interests	—	—	—		5		—		—		—			(60)		(55)



Other	—	—	—		—		—		1		(1)			1		1
Balance at September 30, 2020	1,057	(1)	$	5,267	$	11,810	$	(44)	$	11,600	$	(344)		$	4,211	$	32,500

Table of Contents Index to Financial Statements

SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


	Southern Company Common Stockholders' Equity
	Number of Common Shares		Common Stock								Accumulated Other Comprehensive Income (Loss)
	Issued	Treasury	Par Value		Paid-In Capital		Treasury		Retained Earnings				Noncontrolling Interests	Total
	(in millions)
Balance at December 31, 2020	1,058	(1)	$	5,268	$	11,834	$	(46)	$	11,311	$	(395)		$	4,262	$	32,234
Consolidated net income (loss)	—	—	—		—		—		1,135		—			(32)		1,103
Other comprehensive income	—	—	—		—		—		—		28			—		28
Stock issued	2	—	5		9		—		—		—			—		14
Stock-based compensation	—	—	—		9		—		—		—			—		9

Cash dividends of $0.64 per share	—	—	—		—		—		(678)		—			—		(678)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			403		403
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(46)		(46)



Other	—	—	—		2		—		—		—			(1)		1
Balance at March 31, 2021	1,060	(1)	5,273		11,854		(46)		11,768		(367)			4,586		33,068
Consolidated net income	—	—	—		—		—		372		—			—		372
Other comprehensive income	—	—	—		—		—		—		12			—		12
Stock issued	—	—	1		9		—		—		—			—		10
Stock-based compensation	—	—	—		22		—		—		—			—		22

Cash dividends of $0.66 per share	—	—	—		—		—		(699)		—			—		(699)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			29		29
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(68)		(68)




Other	—	—	—		1		(2)		1		—			—		—
Balance at June 30, 2021	1,060	(1)	5,274		11,886		(48)		11,442		(355)			4,547		32,746
Consolidated net income	—	—	—		—		—		1,101		—			5		1,106
Other comprehensive income	—	—	—		—		—		—		36			—		36

Stock issued	1	—	4		34		—		—		—			—		38
Stock-based compensation	—	—	—		22		—		—		—			—		22

Cash dividends of $0.66 per share	—	—	—		—		—		(700)		—			—		(700)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			72		72
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(94)		(94)



Other	—	—	—		(10)		2		1		—			—		(7)
Balance at September 30, 2021	1,061	(1)	$	5,278	$	11,932	$	(46)	$	11,844	$	(319)		$	4,530	$	33,219

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

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	1,651	$	1,575	$	4,357	$	4,003
Wholesale revenues, non-affiliates	107		73		285		184
Wholesale revenues, affiliates	53		11		109		36
Other revenues	93		70		268		222
Total operating revenues	1,904		1,729		5,019		4,445
Operating Expenses:
Fuel	373		306		927		721
Purchased power, non-affiliates	76		64		173		153
Purchased power, affiliates	45		44		114		93
Other operations and maintenance	401		387		1,175		1,078
Depreciation and amortization	214		205		640		606
Taxes other than income taxes	99		103		303		311
Total operating expenses	1,208		1,109		3,332		2,962
Operating Income	696		620		1,687		1,483
Other Income and (Expense):
Allowance for equity funds used during construction	14		12		38		34
Interest expense, net of amounts capitalized	(84)		(84)		(252)		(255)
Other income (expense), net	29		30		93		78
Total other income and (expense)	(41)		(42)		(121)		(143)
Earnings Before Income Taxes	655		578		1,566		1,340
Income taxes	152		130		366		307
Net Income	503		448		1,200		1,033
Dividends on Preferred Stock	4		4		11		11
Net Income After Dividends on Preferred Stock	$	499	$	444	$	1,189	$	1,022

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Net Income	$	503	$	448	$	1,200	$	1,033
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $1, $—, $1, and $—, respectively	4		—		3		—
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $1, respectively	1		1		3		3
Total other comprehensive income (loss)	5		1		6		3
Comprehensive Income	$	508	$	449	$	1,206	$	1,036

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net income	$	1,200	$	1,033
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	748		731
Deferred income taxes	104		71

Pension, postretirement, and other employee benefits	(74)		(71)
Settlement of asset retirement obligations	(152)		(157)


Other, net	(51)		33
Changes in certain current assets and liabilities —
-Receivables	(128)		(130)
-Fossil fuel stock	91		4
-Prepayments	(24)		(32)
-Materials and supplies	(13)		(55)
-Retail fuel cost under recovery	(79)		—
-Other current assets	(19)		(35)
-Accounts payable	(230)		(248)
-Accrued taxes	178		142
-Accrued compensation	(37)		(55)
-Retail fuel cost over recovery	(18)		74

-Other current liabilities	(77)		(76)
Net cash provided from operating activities	1,419		1,229
Investing Activities:
Property additions	(1,235)		(1,460)
Nuclear decommissioning trust fund purchases	(536)		(213)
Nuclear decommissioning trust fund sales	536		213
Cost of removal, net of salvage	(93)		(68)
Change in construction payables	12		(46)
Other investing activities	(19)		(17)
Net cash used for investing activities	(1,335)		(1,591)
Financing Activities:

Proceeds —
Senior notes	600		600

Pollution control revenue bonds	—		87

Redemptions —

Senior notes	(200)		—
Pollution control revenue bonds	—		(87)
Other long-term debt	(206)		—

Capital contributions from parent company	630		649
Payment of common stock dividends	(738)		(718)
Other financing activities	(30)		(26)
Net cash provided from financing activities	56		505
Net Change in Cash, Cash Equivalents, and Restricted Cash	140		143
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	530		894
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	670	$	1,037
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $11 capitalized for both 2021 and 2020)	$	246	$	249
Income taxes, net	183		203
Noncash transactions —
Accrued property additions at end of period	178		154
Right-of-use assets obtained under leases	2		65

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	670	$	530
Receivables —
Customer accounts	497		429
Unbilled revenues	151		152


Affiliated	53		31
Other accounts and notes	101		66
Accumulated provision for uncollectible accounts	(18)		(43)
Fossil fuel stock	144		235
Materials and supplies	556		546

Prepaid expenses	65		42
Other regulatory assets	289		226
Other current assets	107		33
Total current assets	2,615		2,247
Property, Plant, and Equipment:
In service	32,787		31,816
Less: Accumulated provision for depreciation	10,298		10,009
Plant in service, net of depreciation	22,489		21,807

Nuclear fuel, at amortized cost	241		270
Construction work in progress	1,129		866
Total property, plant, and equipment	23,859		22,943
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	1,259		1,157
Equity investments in unconsolidated subsidiaries	57		63
Miscellaneous property and investments	129		131
Total other property and investments	1,445		1,351
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	119		151
Deferred charges related to income taxes	238		235


Regulatory assets – asset retirement obligations	1,580		1,441
Other regulatory assets, deferred	2,100		2,162
Other deferred charges and assets	348		273
Total deferred charges and other assets	4,385		4,262
Total Assets	$	32,304	$	30,803

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	616	$	311

Accounts payable —
Affiliated	299		316
Other	370		545
Customer deposits	106		104


Accrued taxes	331		152
Accrued interest	79		90

Accrued compensation	191		212

Asset retirement obligations	308		254
Other regulatory liabilities	72		108
Other current liabilities	122		107
Total current liabilities	2,494		2,199
Long-term Debt	8,443		8,558
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	3,425		3,273
Deferred credits related to income taxes	1,973		2,016
Accumulated deferred ITCs	89		94
Employee benefit obligations	136		214
Operating lease obligations	69		119
Asset retirement obligations, deferred	4,015		3,720
Other cost of removal obligations	261		335
Other regulatory liabilities, deferred	139		124

Other deferred credits and liabilities	66		50
Total deferred credits and other liabilities	10,173		9,945
Total Liabilities	21,110		20,702
Redeemable Preferred Stock	291		291








Common Stockholder's Equity (See accompanying statements)	10,903		9,810
Total Liabilities and Stockholder's Equity	$	32,304	$	30,803

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)


	Number of Common Shares Issued	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	(in millions)
Balance at December 31, 2019	31	$	1,222	$	4,755	$	3,001	$	(23)	$	8,955
Net income after dividends on preferred stock	—	—		—		280		—		280

Capital contributions from parent company	—	—		612		—		—		612
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(239)		—		(239)

Balance at March 31, 2020	31	1,222		5,367		3,042		(22)		9,609
Net income after dividends on preferred stock	—	—		—		298		—		298

Capital contributions from parent company	—	—		1		—		—		1
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(239)		—		(239)

Balance at June 30, 2020	31	1,222		5,368		3,101		(21)		9,670
Net income after dividends on preferred stock	—	—		—		444		—		444


Capital contributions from parent company	—	—		40		—		—		40
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(240)		—		(240)

Balance at September 30, 2020	31	$	1,222	$	5,408	$	3,305	$	(20)	$	9,915

Balance at December 31, 2020	31	$	1,222	$	5,413	$	3,194	$	(19)	$	9,810
Net income after dividends on preferred stock	—	—		—		359		—		359

Capital contributions from parent company	—	—		602		—		—		602
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(246)		—		(246)

Balance at March 31, 2021	31	1,222		6,015		3,307		(18)		10,526
Net income after dividends on preferred stock	—	—		—		331		—		331

Capital contributions from parent company	—	—		26		—		—		26
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(246)		—		(246)
Other	—	—		—		(1)		—		(1)
Balance at June 30, 2021	31	1,222		6,041		3,391		(17)		10,637
Net income after dividends on preferred stock	—	—		—		499		—		499


Capital contributions from parent company	—	—		9		—		—		9
Other comprehensive income	—	—		—		—		5		5
Cash dividends on common stock	—	—		—		(246)		—		(246)
Other	—	—		—		—		(1)		(1)
Balance at September 30, 2021	31	$	1,222	$	6,050	$	3,644	$	(13)	$	10,903

The accompanying notes as they relate to Alabama Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	2,652	$	2,435	$	6,465	$	5,870
Wholesale revenues	63		34		143		85

Other revenues	141		148		442		416
Total operating revenues	2,856		2,617		7,050		6,371
Operating Expenses:
Fuel	432		368		1,088		826
Purchased power, non-affiliates	173		146		461		409
Purchased power, affiliates	288		142		573		393
Other operations and maintenance	544		483		1,558		1,411
Depreciation and amortization	345		358		1,025		1,064
Taxes other than income taxes	130		123		365		344
Estimated loss on Plant Vogtle Units 3 and 4	264		—		772		149
Total operating expenses	2,176		1,620		5,842		4,596
Operating Income	680		997		1,208		1,775
Other Income and (Expense):
Allowance for equity funds used during construction	33		22		94		63
Interest expense, net of amounts capitalized	(106)		(106)		(315)		(322)
Other income (expense), net	42		32		124		93
Total other income and (expense)	(31)		(52)		(97)		(166)
Earnings Before Income Taxes	649		945		1,111		1,609
Income taxes	113		172		81		198
Net Income	$	536	$	773	$	1,030	$	1,411

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Net Income	$	536	$	773	$	1,030	$	1,411
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $—, $—, $—, and $(1), respectively	—		—		—		(2)
Reclassification adjustment for amounts included in net income, net of tax of $1, $—, $2, and $2, respectively	2		2		5		4
Total other comprehensive income (loss)	2		2		5		2
Comprehensive Income	$	538	$	775	$	1,035	$	1,413

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net income	$	1,030	$	1,411
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	1,164		1,206
Deferred income taxes	(299)		(167)
Allowance for equity funds used during construction	(94)		(63)


Pension, postretirement, and other employee benefits	(112)		(98)

Settlement of asset retirement obligations	(154)		(130)
Storm damage accruals	160		160
Retail fuel cost under recovery – long-term	(203)		—


Estimated loss on Plant Vogtle Units 3 and 4	772		149
Other, net	88		11
Changes in certain current assets and liabilities —
-Receivables	(85)		(168)
-Fossil fuel stock	77		4

-Materials and supplies	(60)		(74)

-Other current assets	(51)		(69)
-Accounts payable	164		25
-Accrued taxes	154		44

-Retail fuel cost over recovery	(113)		84
-Customer refunds	(5)		(162)
-Other current liabilities	(83)		(38)
Net cash provided from operating activities	2,350		2,125
Investing Activities:
Property additions	(2,411)		(2,519)
Nuclear decommissioning trust fund purchases	(766)		(500)
Nuclear decommissioning trust fund sales	761		495
Cost of removal, net of salvage	(99)		(93)
Change in construction payables, net of joint owner portion	(68)		(14)
Payments pursuant to LTSAs	(38)		(44)
Contributions in aid of construction	71		18
Proceeds from dispositions	4		143

Other investing activities	(26)		(12)
Net cash used for investing activities	(2,572)		(2,526)
Financing Activities:
Decrease in notes payable, net	(60)		(115)
Proceeds —
Senior notes	750		1,500
Pollution control revenue bonds	122		53
FFB loan	371		519
Short-term borrowings	—		250

Redemptions and repurchases —

Senior notes	(325)		(950)
Pollution control revenue bonds	(69)		(148)
Short-term borrowings	—		(375)
FFB loan	(75)		(55)


Capital contributions from parent company	1,054		1,379
Payment of common stock dividends	(1,237)		(1,156)


Other financing activities	(26)		(35)
Net cash provided from financing activities	505		867
Net Change in Cash, Cash Equivalents, and Restricted Cash	283		466
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	9		52
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	292	$	518
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $47 and $34 capitalized for 2021 and 2020, respectively)	$	325	$	316
Income taxes, net	237		311
Noncash transactions —
Accrued property additions at end of period	477		523
Right-of-use assets obtained under operating leases	(3)		30

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	292	$	9

Receivables —
Customer accounts	689		621
Unbilled revenues	258		233

Joint owner accounts	106		123

Affiliated	41		21
Other accounts and notes	46		67
Accumulated provision for uncollectible accounts	(2)		(26)
Fossil fuel stock	201		278
Materials and supplies	647		592



Regulatory assets – storm damage	102		213
Regulatory assets – asset retirement obligations	191		166
Other regulatory assets	243		248
Other current assets	255		143
Total current assets	3,069		2,688
Property, Plant, and Equipment:
In service	40,831		39,682
Less: Accumulated provision for depreciation	12,743		12,251
Plant in service, net of depreciation	28,088		27,431

Nuclear fuel, at amortized cost	564		548
Construction work in progress	7,337		6,857
Total property, plant, and equipment	35,989		34,836
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	1,187		1,145
Equity investments in unconsolidated subsidiaries	50		51
Miscellaneous property and investments	66		63
Total other property and investments	1,303		1,259
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	1,193		1,308
Deferred charges related to income taxes	544		527

Regulatory assets – asset retirement obligations, deferred	3,607		3,291
Other regulatory assets, deferred	2,515		2,692
Other deferred charges and assets	712		479
Total deferred charges and other assets	8,571		8,297
Total Assets	$	48,932	$	47,080

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	672	$	542
Notes payable	—		60
Accounts payable —
Affiliated	719		597
Other	761		753
Customer deposits	263		276


Accrued taxes	457		407
Accrued interest	98		130

Accrued compensation	207		233
Operating lease obligations	153		151
Asset retirement obligations	333		287

Over recovered fuel clause revenues	—		113
Other regulatory liabilities	360		228


Other current liabilities	198		254
Total current liabilities	4,221		4,031
Long-term Debt	13,064		12,428
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	3,222		3,272
Deferred credits related to income taxes	2,386		2,588
Accumulated deferred ITCs	321		273
Employee benefit obligations	461		586
Operating lease obligations, deferred	1,008		1,156
Asset retirement obligations, deferred	6,432		5,978

Other deferred credits and liabilities	456		267
Total deferred credits and other liabilities	14,286		14,120
Total Liabilities	31,571		30,579









Common Stockholder's Equity (See accompanying statements)	17,361		16,501
Total Liabilities and Stockholder's Equity	$	48,932	$	47,080

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)


	Number of Common Shares Issued	Common Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
	(in millions)
Balance at December 31, 2019	9	$	398	$	10,962	$	3,756	$	(51)	$	15,065
Net income	—	—		—		331		—		331

Capital contributions from parent company	—	—		502		—		—		502
Other comprehensive income (loss)	—	—		—		—		(1)		(1)
Cash dividends on common stock	—	—		—		(385)		—		(385)

Balance at March 31, 2020	9	398		11,464		3,702		(52)		15,512
Net income	—	—		—		308		—		308

Capital contributions from parent company	—	—		1		—		—		1
Other comprehensive income	—	—		—		—		2		2
Cash dividends on common stock	—	—		—		(386)		—		(386)

Balance at June 30, 2020	9	398		11,465		3,624		(50)		15,437
Net income	—	—		—		773		—		773

Capital contributions from parent company	—	—		880		—		—		880
Other comprehensive income	—	—		—		—		2		2
Cash dividends on common stock	—	—		—		(386)		—		(386)

Balance at September 30, 2020	9	$	398	$	12,345	$	4,011	$	(48)	$	16,706

Balance at December 31, 2020	9	$	398	$	12,361	$	3,789	$	(47)	$	16,501
Net income	—	—		—		351		—		351

Capital contributions from parent company	—	—		332		—		—		332
Other comprehensive income	—	—		—		—		2		2
Cash dividends on common stock	—	—		—		(412)		—		(412)

Balance at March 31, 2021	9	398		12,693		3,728		(45)		16,774
Net income	—	—		—		143		—		143

Capital contributions from parent company	—	—		40		—		—		40
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(412)		—		(412)

Balance at June 30, 2021	9	398		12,733		3,459		(44)		16,546
Net income	—	—		—		536		—		536

Capital contributions from parent company	—	—		690		—		—		690
Other comprehensive income	—	—		—		—		2		2
Cash dividends on common stock	—	—		—		(413)		—		(413)

Balance at September 30, 2021	9	$	398	$	13,423	$	3,582	$	(42)	$	17,361

The accompanying notes as they relate to Georgia Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	248	$	232	$	670	$	630
Wholesale revenues, non-affiliates	60		61		178		164
Wholesale revenues, affiliates	62		36		120		82
Other revenues	8		7		20		19
Total operating revenues	378		336		988		895
Operating Expenses:
Fuel	139		103		330		266
Purchased power	6		6		21		18

Other operations and maintenance	85		62		230		202
Depreciation and amortization	46		47		138		135
Taxes other than income taxes	33		31		96		90

Total operating expenses	309		249		815		711
Operating Income	69		87		173		184
Other Income and (Expense):

Interest expense, net of amounts capitalized	(16)		(14)		(45)		(45)
Other income (expense), net	7		6		27		19
Total other income and (expense)	(9)		(8)		(18)		(26)
Earnings Before Income Taxes	60		79		155		158
Income taxes	10		12		22		20
Net Income	$	50	$	67	$	133	$	138

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Net Income	$	50	$	67	$	133	$	138
Other comprehensive income (loss):
Qualifying hedges:

Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $—, respectively	—		—		1		1
Total other comprehensive income (loss)	—		—		1		1
Comprehensive Income	$	50	$	67	$	134	$	139

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net income	$	133	$	138
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	161		142




Settlement of asset retirement obligations	(18)		(16)


Other, net	(20)		(11)
Changes in certain current assets and liabilities —
-Receivables	(19)		(3)


-Other current assets	(9)		(7)
-Accounts payable	(12)		(54)
-Accrued taxes	(20)		15


-Retail fuel cost over recovery	(19)		—



-Other current liabilities	(18)		(18)
Net cash provided from operating activities	159		186
Investing Activities:
Property additions	(135)		(174)
Construction payables	(11)		7



Payments pursuant to LTSAs	(21)		(20)
Other investing activities	(15)		(13)
Net cash used for investing activities	(182)		(200)
Financing Activities:
Decrease in notes payable, net	(25)		—
Proceeds —
Senior notes	525		—
Short-term borrowings	—		40
Pollution control revenue bonds	—		34



Other long-term debt	—		100
Redemptions —
Senior notes	—		(275)
Short-term borrowings	—		(40)
Pollution control revenue bonds	—		(41)
Other revenue bonds	(270)		—
Other long-term debt	(75)		—



Capital contributions from parent company	103		80
Return of capital to parent company	—		(74)
Payment of common stock dividends	(118)		(37)
Other financing activities	(10)		(1)
Net cash provided from (used for) financing activities	130		(214)
Net Change in Cash, Cash Equivalents, and Restricted Cash	107		(228)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	39		286
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	146	$	58
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest	$	53	$	49
Income taxes, net	11		9

Noncash transactions — Accrued property additions at end of period	23		42

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	146	$	39
Receivables —
Customer accounts, net	46		34
Unbilled revenues	39		38

Affiliated	45		32
Other accounts and notes	27		32

Fossil fuel stock	27		24
Materials and supplies	71		65
Assets from risk management activities, net of collateral	66		1
Other regulatory assets	54		60

Other current assets	11		19
Total current assets	532		344
Property, Plant, and Equipment:
In service	5,078		5,011
Less: Accumulated provision for depreciation	1,568		1,545
Plant in service, net of depreciation	3,510		3,466

Construction work in progress	117		146
Total property, plant, and equipment	3,627		3,612
Other Property and Investments	180		151
Deferred Charges and Other Assets:

Deferred charges related to income taxes	31		32
Regulatory assets – asset retirement obligations	231		201
Other regulatory assets, deferred	371		388
Accumulated deferred income taxes	119		129

Other deferred charges and assets	100		55
Total deferred charges and other assets	852		805
Total Assets	$	5,191	$	4,912

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	76	$	406


Notes payable	—		25

Accounts payable —
Affiliated	88		63
Other	61		109



Accrued taxes	94		114

Accrued interest	7		15
Accrued compensation	31		34

Asset retirement obligations	19		27
Over recovered regulatory clause liabilities	7		34
Other regulatory liabilities	104		49


Other current liabilities	50		40
Total current liabilities	537		916



Long-term Debt	1,509		1,013
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	464		447
Deferred credits related to income taxes	276		287

Employee benefit obligations	94		113

Asset retirement obligations, deferred	175		150

Other cost of removal obligations	194		194
Other regulatory liabilities, deferred	48		15
Other deferred credits and liabilities	31		35
Total deferred credits and other liabilities	1,282		1,241
Total Liabilities	3,328		3,170








Common Stockholder's Equity (See accompanying statements)	1,863		1,742
Total Liabilities and Stockholder's Equity	$	5,191	$	4,912

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)


	Number of Common Shares Issued	Common Stock		Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total
	(in millions)
Balance at December 31, 2019	1	$	38	$	4,449	$	(2,832)	$	(3)	$	1,652
Net income	—	—		—		32		—		32

Capital contributions from parent company	—	—		76		—		—		76
Return of capital to parent company	—	—		(37)		—		—		(37)


Other	—	—		(1)		—		—		(1)
Balance at March 31, 2020	1	38		4,487		(2,800)		(3)		1,722
Net income	—	—		—		39		—		39

Return of capital to parent company	—	—		(37)		—		—		(37)




Balance at June 30, 2020	1	38		4,450		(2,761)		(3)		1,724
Net income	—	—		—		67		—		67


Capital contributions from parent company	—	—		6		—		—		6

Cash dividends on common stock	—	—		—		(37)		—		(37)

Balance at September 30, 2020	1	$	38	$	4,456	$	(2,731)	$	(3)	$	1,760

Balance at December 31, 2020	1	$	38	$	4,460	$	(2,754)	$	(2)	$	1,742
Net income	—	—		—		45		—		45


Capital contributions from parent company	—	—		100		—		—		100

Cash dividends on common stock	—	—		—		(39)		—		(39)

Balance at March 31, 2021	1	38		4,560		(2,748)		(2)		1,848
Net income	—	—		—		38		—		38


Capital contributions from parent company	—	—		2		—		—		2

Cash dividends on common stock	—	—		—		(39)		—		(39)
Other	—	—		—		(1)		1		—
Balance at June 30, 2021	1	38		4,562		(2,750)		(1)		1,849
Net income	—	—		—		50		—		50


Capital contributions from parent company	—	—		3		—		—		3

Cash dividends on common stock	—	—		—		(39)		—		(39)

Balance at September 30, 2021	1	$	38	$	4,565	$	(2,739)	$	(1)	$	1,863

The accompanying notes as they relate to Mississippi Power are an integral part of these condensed financial statements.

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Wholesale revenues, non-affiliates	$	503	$	418	$	1,231	$	1,047
Wholesale revenues, affiliates	167		101		361		279
Other revenues	9		4		18		11
Total operating revenues	679		523		1,610		1,337
Operating Expenses:
Fuel	259		137		540		346
Purchased power	41		19		86		52

Other operations and maintenance	94		89		308		245
Depreciation and amortization	132		129		383		367
Taxes other than income taxes	12		10		35		29

Loss on sales-type lease	15		—		15		—
(Gain) loss on dispositions, net	—		—		(39)		(39)
Total operating expenses	553		384		1,328		1,000
Operating Income	126		139		282		337
Other Income and (Expense):
Interest expense, net of amounts capitalized	(36)		(36)		(111)		(114)
Other income (expense), net	2		13		10		19
Total other income and (expense)	(34)		(23)		(101)		(95)
Earnings Before Income Taxes	92		116		181		242
Income taxes (benefit)	9		14		(3)		27
Net Income	83		102		184		215
Net income (loss) attributable to noncontrolling interests	5		28		(27)		3
Net Income Attributable to Southern Power	$	78	$	74	$	211	$	212

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Net Income	$	83	$	102	$	184	$	215
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $(7), $15, $(16), and $(2), respectively	(21)		44		(48)		(6)
Reclassification adjustment for amounts included in net income, net of tax of $9, $(13), $22, and $(8), respectively	27		(36)		66		(24)
Pension and other postretirement benefit plans:


Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $—, respectively	1		—		2		2
Total other comprehensive income (loss)	7		8		20		(28)
Comprehensive Income	90		110		204		187
Comprehensive income (loss) attributable to noncontrolling interests	5		28		(27)		3
Comprehensive Income Attributable to Southern Power	$	85	$	82	$	231	$	184

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

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net income	$	184	$	215
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	402		386
Deferred income taxes	(16)		(59)
Utilization of federal investment tax credits	237		318
Amortization of investment tax credits	(44)		(44)







(Gain) loss on dispositions, net	(39)		(39)
Other, net	14		(16)
Changes in certain current assets and liabilities —
-Receivables	(117)		(28)

-Prepaid income taxes	63		74
-Other current assets	(5)		(17)
-Accounts payable	55		(12)
-Accrued taxes	15		21


-Other current liabilities	1		(25)
Net cash provided from operating activities	750		774
Investing Activities:
Business acquisitions, net of cash acquired	(345)		(81)
Property additions	(355)		(135)
Proceeds from dispositions	22		663

Change in construction payables	(22)		(12)

Payments pursuant to LTSAs	(61)		(61)


Other investing activities	8		50
Net cash provided from (used for) investing activities	(753)		424
Financing Activities:
Decrease in notes payable, net	(148)		(449)

Proceeds — Senior notes	400		—



Redemptions —
Short-term borrowings	—		(100)
Senior notes	—		(300)

Return of capital to parent company	(271)		—
Capital contributions from noncontrolling interests	415		173
Distributions to noncontrolling interests	(204)		(164)
Purchase of membership interests from noncontrolling interests	—		(60)
Payment of common stock dividends	(153)		(151)
Other financing activities	(6)		(9)
Net cash provided from (used for) financing activities	33		(1,060)
Net Change in Cash, Cash Equivalents, and Restricted Cash	30		138
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	183		279
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	213	$	417
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $5 and $10 capitalized for 2021 and 2020, respectively)	$	118	$	123
Income taxes, net	(235)		(278)
Noncash transactions —
Contributions from noncontrolling interests	89		9
Contributions of wind turbine equipment	82		17
Accrued property additions at end of period	53		44
Right-of-use assets obtained under operating leases	66		30

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

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	192	$	182
Receivables —
Customer accounts, net	178		125
Affiliated	68		37
Other	53		27

Materials and supplies	103		157

Prepaid income taxes	15		11




Other current assets	56		36
Total current assets	665		575
Property, Plant, and Equipment:
In service	14,399		13,904
Less: Accumulated provision for depreciation	3,122		2,842
Plant in service, net of depreciation	11,277		11,062
Construction work in progress	274		127

Total property, plant, and equipment	11,551		11,189
Other Property and Investments:

Intangible assets, net of amortization of $104 and $89, respectively	288		302
Equity investments in unconsolidated subsidiaries	83		19
Net investment in sales-type lease	91		—
Total other property and investments	462		321
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	475		415
Prepaid LTSAs	191		155
Accumulated deferred income taxes	—		262
Income taxes receivable, non-current	33		25


Other deferred charges and assets	234		293
Total deferred charges and other assets	933		1,150
Total Assets	$	13,611	$	13,235

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

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholders' Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	994	$	299
Notes payable	27		175
Accounts payable —
Affiliated	110		65
Other	91		92
Accrued taxes —
Accrued income taxes	8		8
Other accrued taxes	27		22
Accrued interest	26		32



Other current liabilities	125		132
Total current liabilities	1,408		825
Long-term Debt	3,021		3,393
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	156		123
Accumulated deferred ITCs	1,629		1,672





Operating lease obligations	489		426
Other deferred credits and liabilities	201		165
Total deferred credits and other liabilities	2,475		2,386
Total Liabilities	6,904		6,604










Total Stockholders' Equity (See accompanying statements)	6,707		6,631
Total Liabilities and Stockholders' Equity	$	13,611	$	13,235

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

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


	Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Common Stockholders' Equity		Noncontrolling Interests		Total
	(in millions)
Balance at December 31, 2019	$	909	$	1,485	$	(26)	$	2,368	$	4,254	$	6,622
Net income (loss)	—		75		—		75		(31)		44

Other comprehensive income (loss)	—		—		(33)		(33)		—		(33)
Cash dividends on common stock	—		(50)		—		(50)		—		(50)

Capital contributions from noncontrolling interests	—		—		—		—		16		16
Distributions to noncontrolling interests	—		—		—		—		(48)		(48)




Balance at March 31, 2020	909		1,510		(59)		2,360		4,191		6,551
Net income	—		63		—		63		5		68


Other comprehensive income (loss)	—		—		(3)		(3)		—		(3)
Cash dividends on common stock	—		(50)		—		(50)		—		(50)

Capital contributions from noncontrolling interests	—		—		—		—		165		165
Distributions to noncontrolling interests	—		—		—		—		(70)		(70)




Other	(2)		—		—		(2)		—		(2)
Balance at June 30, 2020	907		1,523		(62)		2,368		4,291		6,659
Net income	—		74		—		74		28		102
Return of capital to parent company	(4)		—		—		(4)		—		(4)

Other comprehensive income	—		—		8		8		—		8
Cash dividends on common stock	—		(51)		—		(51)		—		(51)

Capital contributions from noncontrolling interests	—		—		—		—		2		2
Distributions to noncontrolling interests	—		—		—		—		(51)		(51)
Purchase of membership interests from noncontrolling interests	5		—		—		5		(60)		(55)



Other	—		—		—		—		1		1
Balance at September 30, 2020	$	908	$	1,546	$	(54)	$	2,400	$	4,211	$	6,611

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


	Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Common Stockholders' Equity		Noncontrolling Interests		Total
	(in millions)
Balance at December 31, 2020	$	914	$	1,522	$	(67)	$	2,369	$	4,262	$	6,631
Net income (loss)	—		97		—		97		(32)		65
Return of capital to parent company	(271)		—		—		(271)		—		(271)

Other comprehensive income	—		—		16		16		—		16
Cash dividends on common stock	—		(51)		—		(51)		—		(51)

Capital contributions from noncontrolling interests	—		—		—		—		403		403
Distributions to noncontrolling interests	—		—		—		—		(46)		(46)



Other	(2)		1		(1)		(2)		(1)		(3)
Balance at March 31, 2021	641		1,569		(52)		2,158		4,586		6,744
Net income	—		36		—		36		—		36


Other comprehensive income (loss)	—		—		(3)		(3)		—		(3)
Cash dividends on common stock	—		(51)		—		(51)		—		(51)

Capital contributions from noncontrolling interests	—		—		—		—		29		29
Distributions to noncontrolling interests	—		—		—		—		(68)		(68)




Other	2		—		1		3		—		3
Balance at June 30, 2021	643		1,554		(54)		2,143		4,547		6,690
Net income	—		78		—		78		5		83




Other comprehensive income	—		—		7		7		—		7
Cash dividends on common stock	—		(51)		—		(51)		—		(51)

Capital contributions from noncontrolling interests	—		—		—		—		73		73
Distributions to noncontrolling interests	—		—		—		—		(95)		(95)




Balance at September 30, 2021	$	643	$	1,581	$	(47)	$	2,177	$	4,530	$	6,707

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating Revenues:
Natural gas revenues (includes revenue taxes of $12, $10, $89, and $79, respectively)	$	624	$	478	$	2,991	$	2,356
Alternative revenue programs	(1)		(1)		3		6

Total operating revenues	623		477		2,994		2,362
Operating Expenses:
Cost of natural gas	129		71		943		654

Other operations and maintenance	238		217		776		694
Depreciation and amortization	133		125		396		368
Taxes other than income taxes	36		35		166		154

(Gain) loss on dispositions, net	(121)		—		(127)		2

Total operating expenses	415		448		2,154		1,872
Operating Income	208		29		840		490
Other Income and (Expense):
Earnings from equity method investments	25		33		14		106
Interest expense, net of amounts capitalized	(57)		(57)		(175)		(171)
Other income (expense), net	13		12		(66)		33
Total other income and (expense)	(19)		(12)		(227)		(32)
Earnings Before Income Taxes	189		17		613		458
Income taxes	133		3		224		98
Net Income	$	56	$	14	$	389	$	360

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Net Income	$	56	$	14	$	389	$	360
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $8, $1, $11, and $(6), respectively	23		4		32		(17)
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $2, respectively	(2)		1		1		7



Total other comprehensive income (loss)	21		5		33		(10)
Comprehensive Income	$	77	$	19	$	422	$	350

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net income	$	389	$	360
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	396		368
Deferred income taxes	289		(1)




Mark-to-market adjustments	147		104
Impairment of PennEast Pipeline investment	84		—
(Gain) loss on dispositions, net	(127)		2
Natural gas cost under recovery – long-term	(79)		—
Other, net	32		(21)
Changes in certain current assets and liabilities —
-Receivables	311		403

-Prepaid income taxes	(148)		(19)
-Natural gas cost under recovery	(432)		—
-Other current assets	(78)		(1)
-Accounts payable	30		(75)


-Other current liabilities	(57)		2
Net cash provided from operating activities	757		1,122
Investing Activities:
Property additions	(1,045)		(1,045)
Cost of removal, net of salvage	(74)		(60)

Investment in unconsolidated subsidiaries	(3)		(79)

Proceeds from dispositions	126		178
Other investing activities	30		33
Net cash used for investing activities	(966)		(973)
Financing Activities:
Increase (decrease) in notes payable, net	38		(500)
Proceeds —
Short-term borrowings	300		—
First mortgage bonds	100		150
Senior notes	450		500
Redemptions —


Senior notes	(300)		—


Medium-term notes	(30)		—
Capital contributions from parent company	63		215
Payment of common stock dividends	(397)		(399)
Other financing activities	(2)		(3)
Net cash provided from (used for) financing activities	222		(37)
Net Change in Cash, Cash Equivalents, and Restricted Cash	13		112
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	19		49
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	32	$	161
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $6 and $5 capitalized for 2021 and 2020, respectively)	$	173	$	162
Income taxes, net	85		45
Noncash transactions — Accrued property additions at end of period	146		146

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2021		At December 31, 2020
	(in millions)
Current Assets:
Cash and cash equivalents	$	29	$	17
Receivables —
Energy marketing	—		516
Customer accounts	249		353
Unbilled revenues	70		219


Affiliated	1		4
Other accounts and notes	39		51
Accumulated provision for uncollectible accounts	(37)		(40)

Natural gas for sale	368		460


Prepaid expenses	181		48
Assets from risk management activities, net of collateral	75		118
Natural gas cost under recovery	432		—


Other regulatory assets	137		102
Other current assets	44		38
Total current assets	1,588		1,886
Property, Plant, and Equipment:
In service	18,527		17,611
Less: Accumulated depreciation	5,004		4,821
Plant in service, net of depreciation	13,523		12,790
Construction work in progress	691		648
Total property, plant, and equipment	14,214		13,438
Other Property and Investments:
Goodwill	5,015		5,015
Equity investments in unconsolidated subsidiaries	1,174		1,290
Other intangible assets, net of amortization of $142 and $195, respectively	40		51
Miscellaneous property and investments	20		19
Total other property and investments	6,249		6,375
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	72		81


Other regulatory assets, deferred	634		615


Other deferred charges and assets	201		235
Total deferred charges and other assets	907		931
Total Assets	$	22,958	$	22,630

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Liabilities and Stockholder's Equity	At September 30, 2021		At December 31, 2020
	(in millions)
Current Liabilities:
Securities due within one year	$	47	$	333
Notes payable	662		324
Energy marketing trade payables	—		494
Accounts payable —
Affiliated	42		56
Other	399		373
Customer deposits	106		90


Accrued taxes	79		83
Accrued interest	68		58

Accrued compensation	87		106




Temporary LIFO liquidation	18		—

Other regulatory liabilities	18		122
Other current liabilities	154		150
Total current liabilities	1,680		2,189
Long-term Debt	6,766		6,293
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	1,571		1,265
Deferred credits related to income taxes	822		847

Employee benefit obligations	260		283


Operating lease obligations	60		67
Other cost of removal obligations	1,675		1,649
Accrued environmental remediation	203		216



Other deferred credits and liabilities	45		54
Total deferred credits and other liabilities	4,636		4,381
Total Liabilities	13,082		12,863







Common Stockholder's Equity (See accompanying statements)	9,876		9,767
Total Liabilities and Stockholder's Equity	$	22,958	$	22,630

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)


	Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total
	(in millions)
Balance at December 31, 2019	$	9,697	$	(198)	$	7	$	9,506
Net income	—		275		—		275

Return of capital to parent company	(2)		—		—		(2)

Other comprehensive income (loss)	—		—		(15)		(15)
Cash dividends on common stock	—		(133)		—		(133)

Balance at March 31, 2020	9,695		(56)		(8)		9,631
Net income	—		71		—		71

Capital contributions from parent company	200		—		—		200

Cash dividends on common stock	—		(133)		—		(133)

Balance at June 30, 2020	9,895		(118)		(8)		9,769
Net income	—		14		—		14


Capital contributions from parent company	30		—		—		30
Other comprehensive income	—		—		5		5
Cash dividends on common stock	—		(133)		—		(133)

Balance at September 30, 2020	$	9,925	$	(237)	$	(3)	$	9,685

Balance at December 31, 2020	$	9,930	$	(141)	$	(22)	$	9,767
Net income	—		398		—		398


Capital contributions from parent company	57		—		—		57
Other comprehensive income	—		—		4		4
Cash dividends on common stock	—		(132)		—		(132)

Balance at March 31, 2021	9,987		125		(18)		10,094
Net loss	—		(65)		—		(65)


Capital contributions from parent company	25		—		—		25
Other comprehensive income	—		—		8		8
Cash dividends on common stock	—		(133)		—		(133)

Balance at June 30, 2021	10,012		(73)		(10)		9,929
Net income	—		56		—		56

Capital contributions from parent company	2		—		—		2
Other comprehensive income	—		—		21		21
Cash dividends on common stock	—		(132)		—		(132)

Balance at September 30, 2021	$	10,014	$	(149)	$	11	$	9,876

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

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

ALABAMA POWER COMPANY

GEORGIA POWER COMPANY

MISSISSIPPI POWER COMPANY

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

(UNAUDITED)

INDEX TO THE NOTES TO THE CONDENSED FINANCIAL STATEMENTS


Note		Page
A	Introduction	45
B	Regulatory Matters	49
C	Contingencies	60
D	Revenue from Contracts with Customers and Lease Income	63
E	Consolidated Entities and Equity Method Investments	70
F	Financing	72
G	Income Taxes	74
H	Retirement Benefits	75
I	Fair Value Measurements	78
J	Derivatives	83
K	Acquisitions and Dispositions	95
L	Segment and Related Information	98

INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT

The following unaudited notes to the condensed financial statements are a combined presentation; however, information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants. The list below indicates the Registrants to which each footnote applies.


Registrant			Applicable Notes
Southern Company			A, B, C, D, E, F, G, H, I, J, K, L
Alabama Power			A, B, C, D, F, G, H, I, J, K
Georgia Power			A, B, C, D, F, G, H, I, J
Mississippi Power			A, B, C, D, F, G, H, I, J
Southern Power			A, C, D, E, F, G, H, I, J, K
Southern Company Gas			A, B, C, D, E, F, G, H, I, J, K, L

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(A) INTRODUCTION

The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets at December 31, 2020 have been derived from the audited financial statements of each Registrant. In the opinion of each Registrant's management, the information regarding such Registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended September 30, 2021 and 2020. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy and other factors, including the impacts of the COVID-19 pandemic, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.

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

Goodwill and Other Intangible Assets

Goodwill at September 30, 2021 and December 31, 2020 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.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Other intangible assets were as follows:


	At September 30, 2021						At December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net
	(in millions)						(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships	$	212	$	(148)	$	64	$	212	$	(135)	$	77
Trade names	64		(36)		28		64		(31)		33
Storage and transportation contracts(*)	—		—		—		64		(64)		—
PPA fair value adjustments	390		(104)		286		390		(89)		301
Other	10		(8)		2		10		(9)		1
Total other intangible assets subject to amortization	$	676	$	(296)	$	380	$	740	$	(328)	$	412
Other intangible assets not subject to amortization:
Federal Communications Commission licenses	75		—		75		75		—		75
Total other intangible assets	$	751	$	(296)	$	455	$	815	$	(328)	$	487

Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments	$	390	$	(104)	$	286	$	390	$	(89)	$	301

Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships	$	156	$	(128)	$	28	$	156	$	(119)	$	37
Trade names	26		(14)		12		26		(12)		14
Wholesale gas services
Storage and transportation contracts(*)	—		—		—		64		(64)		—
Total other intangible assets subject to amortization	$	182	$	(142)	$	40	$	246	$	(195)	$	51

(*)See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Amortization associated with other intangible assets was as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2021
	(in millions)
Southern Company(a)	$	11	$	33
Southern Power(b)	5		15
Southern Company Gas(c)	4		11

(a)Includes $5 million and $15 million for the three and nine months ended September 30, 2021, respectively, recorded as a reduction to operating revenues.

(b)Recorded as a reduction to operating revenues.

(c)Relates to gas marketing services.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that total to the amount shown in the condensed statements of cash flows for the applicable Registrants:


	Southern Company				Southern Power		Southern Company Gas
	September 30, 2021		December 31, 2020		September 30, 2021		September 30, 2021		December 31, 2020
	(in millions)				(in millions)		(in millions)
Cash and cash equivalents	$	2,078	$	1,065	$	192	$	29	$	17

Restricted cash(a):
Other current assets	3		2		—		3		2
Other deferred charges and assets	21		—		21		—		—
Total cash, cash equivalents, and restricted cash(b)	$	2,101	$	1,068	$	213	$	32	$	19

(a)For Southern Company Gas, reflects restricted cash held as collateral for workers' compensation, life insurance, and long-term disability insurance. For Southern Power, reflects restricted cash held for construction payables.

(b)Total may not add due to rounding.

Natural Gas for Sale

With the exception of Nicor Gas, Southern Company Gas records natural gas inventories on a WACOG basis. For any declines in market prices below the WACOG considered to be other than temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Nicor Gas' natural gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during the year that are restored prior to year end are charged to cost of natural gas at the estimated annual replacement cost. Inventory decrements that are not restored prior to year end are charged to cost of natural gas at the actual LIFO cost of the inventory layers liquidated.

Southern Company Gas recorded no material adjustments to natural gas inventories for any period presented. Nicor Gas' inventory decrement at September 30, 2021 is expected to be restored prior to year end.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Asset Retirement Obligations

See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

Details of changes in AROs for Southern Company, Alabama Power, Georgia Power, and Mississippi Power during the first nine months of 2021 are shown in the following table. There were no material changes in AROs for the other Registrants during the first nine months of 2021.


	Southern Company		Alabama Power		Georgia Power		Mississippi Power
	(in millions)
Balance at December 31, 2020	$	10,684	$	3,974	$	6,265	$	176
Liabilities incurred	17		—		3		—
Liabilities settled	(341)		(152)		(154)		(18)
Accretion	304		116		176		6
Cash flow revisions	945		385		475		30
Balance at September 30, 2021	$	11,609	$	4,323	$	6,765	$	194

In August 2021, Alabama Power recorded an increase of approximately $385 million to its AROs related to the CCR Rule and the related state rule based on updated estimates for post-closure costs at its ash ponds and inflation rates.

In September 2021, Georgia Power recorded an increase of approximately $435 million to its AROs related to the CCR Rule and the related state rule based on updated estimates for inflation rates and the timing of closure activities.

In September 2021, Mississippi Power recorded an increase of approximately $30 million to its AROs related to the CCR Rule based on updated estimates for the timing of closure activities, post-closure costs at one of its ash ponds, and inflation rates.

The traditional electric operating companies have periodically updated, and expect to continue periodically updating, their related cost estimates and ARO liabilities for each CCR unit as additional information related to these assumptions becomes available. Some of these updates have been, and future updates may be, material. Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costs through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted. See Note (B) under "Georgia Power – Rate Plan" for additional information. The ultimate outcome of these matters cannot be determined at this time.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

(B) REGULATORY MATTERS

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

The recovery balances for certain retail regulatory clauses of the traditional electric operating companies and Southern Company Gas at September 30, 2021 and December 31, 2020 were as follows:


Regulatory Clause	Balance Sheet Line Item	September 30, 2021		December 31, 2020
		(in millions)
Alabama Power
Rate CNP Compliance	Other regulatory liabilities, current	$	—	$	28
	Other regulatory liabilities, deferred	24		—

Rate CNP PPA	Other regulatory assets, deferred	88		58
Retail Energy Cost Recovery	Other regulatory liabilities, current	—		18

	Other regulatory assets, current	79		—
	Other regulatory assets, deferred	6		—

Natural Disaster Reserve	Other regulatory liabilities, deferred	36		77
Georgia Power
Fuel Cost Recovery	Over recovered fuel clause revenues	$	—	$	113
	Other deferred charges and assets	203		—

Mississippi Power
Fuel Cost Recovery	Over recovered regulatory clause liabilities	$	5	$	24
Ad Valorem Tax	Other regulatory assets, current	12		11
	Other regulatory assets, deferred	39		41
Property Damage Reserve	Other regulatory liabilities, deferred	—		4
	Other regulatory assets, deferred	16		—
Southern Company Gas
Natural Gas Cost Recovery(*)	Other regulatory liabilities	$	—	$	88
	Natural gas cost under recovery	432		—
	Other regulatory assets, deferred	79		—

(*)The significant change during the nine months ended September 30, 2021 was primarily driven by an increase in the cost of gas purchased in February 2021 resulting from Winter Storm Uri.

Alabama Power

Certificate of Convenience and Necessity

Energy Alabama, Gasp, Inc., and the Sierra Club filed requests for reconsideration and rehearing with the Alabama PSC regarding the certificate of convenience and necessity (CCN) issued to Alabama Power in August 2020, which authorized, among other things, the construction of Plant Barry Unit 8 and the acquisition of the Central Alabama Generating Station. In December 2020, the Alabama PSC issued an order denying the requests. On January 7, 2021, Energy Alabama and Gasp, Inc. filed a judicial appeal regarding both the Alabama PSC's August 2020 CCN order and the December 2020 order denying reconsideration and rehearing. On March 9, 2021, the Circuit Court of Montgomery County, Alabama granted a motion by Alabama Power to intervene in the appeal. On August 27, 2021, the court affirmed both the August 2020 and December 2020 Alabama PSC orders. On October 7, 2021, Energy Alabama and Gasp, Inc. filed an unopposed motion for voluntary dismissal of their direct appeal previously

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

filed on January 7, 2021. This matter is now concluded. At September 30, 2021, expenditures associated with the construction of Plant Barry Unit 8 included in CWIP totaled approximately $222 million.

Plant Greene County

Alabama Power jointly owns Plant Greene County with an affiliate, Mississippi Power. See Note 5 under "Joint Ownership Agreements" in Item 8 of the Form 10-K for additional information.

On September 9, 2021, the Mississippi PSC issued an order confirming the conclusion of its review of Mississippi Power's 2021 IRP with no deficiencies identified. Mississippi Power's 2021 IRP includes a schedule to retire Mississippi Power's 40% ownership interest in Plant Greene County Units 1 and 2 in December 2025 and 2026, respectively, consistent with each unit's remaining useful life. The Plant Greene County unit retirements identified by Mississippi Power require the completion of transmission and system reliability improvements, as well as agreement by Alabama Power. Alabama Power will continue to monitor the status of the transmission and system reliability improvements. Currently, Alabama Power plans to retire Plant Greene County Units 1 and 2 at the dates indicated. The ultimate outcome of this matter cannot be determined at this time.

Rate NDR

Based on an order from the Alabama PSC, when Alabama Power's NDR balance falls below $50 million, a reserve establishment charge will be activated and the ongoing reserve maintenance charge will be concurrently suspended until the NDR balance reaches $75 million. At September 30, 2021, Alabama Power's NDR balance was $36 million. Effective with October 2021 billings, the reserve maintenance charge component of Rate NDR was suspended and the reserve establishment charge was activated. Alabama Power expects to collect approximately $4 million in the fourth quarter 2021 and $16 million annually under Rate NDR until the NDR balance is restored to $75 million.

Calhoun Generating Station Acquisition

On September 23, 2021, Alabama Power entered into an agreement to acquire all of the equity interests in Calhoun Power Company, LLC, which owns and operates a 743-MW winter peak, simple-cycle, combustion turbine generation facility in Calhoun County, Alabama (Calhoun Generating Station). The total purchase price associated with the acquisition is approximately $180 million, subject to working capital adjustments. The completion of the acquisition is subject to the satisfaction and waiver of certain conditions, including, among other customary conditions, approval by the Alabama PSC and the FERC, as well as the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Alabama Power expects to complete the transaction by September 30, 2022.

On October 28, 2021, Alabama Power filed a petition for a CCN with the Alabama PSC to procure additional generating capacity through the acquisition of the Calhoun Generating Station.

Upon certification, Alabama Power expects to recover costs associated with the Calhoun Generating Station through its existing rate structure, primarily Rate CNP New Plant, Rate CNP Compliance, Rate ECR, and Rate RSE.

The ultimate outcome of this matter cannot be determined at this time.

Georgia Power

Rate Plan

Effective January 1, 2021, Georgia Power reduced its amortization of costs associated with CCR AROs by approximately $90 million as approved by the Georgia PSC in conjunction with Georgia Power's annual compliance filings.

In February 2020, the Georgia PSC denied a motion for reconsideration filed by the Sierra Club regarding the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs, and, in December 2020, the Superior Court of Fulton County affirmed the decision of the Georgia PSC. On October 25,

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

2021, the Georgia Court of Appeals affirmed the Superior Court of Fulton County's December 2020 order. On November 3, 2021, the Sierra Club filed a motion for reconsideration with the Georgia Court of Appeals. The ultimate outcome of this matter cannot be determined at this time.

In accordance with the terms of the 2019 ARP, on October 1, 2021, Georgia Power filed the following tariff adjustments to become effective January 1, 2022 pending approval by the Georgia PSC:

increase traditional base tariffs by approximately $192 million;
decrease the ECCR tariff by approximately $12 million;
decrease Demand-Side Management tariffs by approximately $25 million; and
increase Municipal Franchise Fee tariffs by approximately $2 million.

The ultimate outcome of this matter cannot be determined at this time.

See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information regarding Georgia Power's AROs.

Plant Vogtle Unit 3 and Common Facilities Rate Proceeding

On June 15, 2021, Georgia Power filed an application with the Georgia PSC to adjust retail base rates to include the portion of costs related to its investment in Plant Vogtle Unit 3 and the common facilities shared between Plant Vogtle Units 3 and 4 (Common Facilities) previously deemed prudent by the Georgia PSC ($2.38 billion), as well as the related costs of operation. On November 2, 2021, the Georgia PSC voted to approve Georgia Power's application as filed, with the following modifications pursuant to a stipulated agreement between Georgia Power and the staff of the Georgia PSC. Georgia Power will include in rate base $2.1 billion of the $2.38 billion previously deemed prudent by the Georgia PSC and will recover the related depreciation expense through retail base rates. Financing costs on the remaining portion of the total Unit 3 and the Common Facilities construction costs will continue to be recovered through the NCCR tariff or deferred. Georgia Power will defer as a regulatory asset the remaining depreciation expense (approximately $38 million annually) until Unit 4 costs are placed in retail base rates. In addition, the stipulated agreement clarified that following the prudency review, the remaining amount to be placed in retail base rates will be net of the proceeds from the Guarantee Settlement Agreement and will not be used to offset imprudent costs, if any.

The related increase in annual retail base rates of approximately $302 million also includes recovery of all projected operations and maintenance expenses for Unit 3 and the Common Facilities and other related costs of operation, partially offset by the related production tax credits, and will become effective the month after Unit 3 is placed in service. This increase will be partially offset by a decrease in the NCCR tariff of approximately $78 million expected to be effective January 1, 2022.

See "Nuclear Construction" herein for additional information on Plant Vogtle Units 3 and 4.

Deferral of Incremental COVID-19 Costs

Since June 2021, Georgia Power has continued a review of bad debt amounts deferred under the Georgia PSC-approved methodology, including consideration of actual amounts repaid by customers from arrears and installment plans after the disconnection moratorium period ended in July 2020. As a result, Georgia Power has reduced the balance of deferred incremental costs by a total of approximately $23 million through September 30, 2021. At September 30, 2021, the incremental costs deferred totaled approximately $20 million, including approximately $1 million of incremental bad debt costs and $19 million of other incremental costs. The period over which these costs will be recovered is expected to be determined in Georgia Power's next base rate case. The ultimate outcome of this matter cannot be determined at this time.

Fuel Cost Recovery

Georgia Power has established fuel cost recovery rates approved by the Georgia PSC. On October 12, 2021, Georgia Power filed a notification and plan with the Georgia PSC to implement an interim fuel rider and increase

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(UNAUDITED)

fuel rates by 15% effective January 1, 2022, which is expected to increase annual billings by approximately $252 million. The Georgia PSC has 30 days from the filing to approve the plan; however, if the Georgia PSC elects to take no action, the new rates become effective as requested. Georgia Power is currently scheduled to file its next fuel case by February 28, 2023. 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, in which Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the two AP1000 nuclear units (with electric generating capacity of approximately 1,100 MWs each) and related facilities to begin. Until March 2017, construction on Plant Vogtle Units 3 and 4 continued under the Vogtle 3 and 4 Agreement, which was a substantially fixed price agreement.

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

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

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

Cost and Schedule

Georgia Power's approximate proportionate share of the remaining estimated capital cost to complete Plant Vogtle Units 3 and 4, including contingency, through September 2022 and June 2023, respectively, is as follows:


	(in millions)
Base project capital cost forecast(a)(b)	$	9,342
Construction contingency estimate	137

Total project capital cost forecast(a)(b)	9,479
Net investment at September 30, 2021(b)	(8,159)
Remaining estimate to complete	$	1,320

(a) Includes approximately $570 million of costs that are not shared with the other Vogtle Owners. Excludes financing costs expected to be capitalized through AFUDC of approximately $318 million, of which $169 million had been accrued through September 30, 2021.

(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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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.2 billion, of which $2.8 billion had been incurred through September 30, 2021.

As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers and related test results, and workforce statistics. Southern Nuclear establishes aggressive target values for monthly construction production and system turnover activities. Southern Nuclear's site work plans continue to reflect this approach in support of safely completing Units 3 and 4, while achieving the required construction quality.

In mid-March 2020, Southern Nuclear began implementing policies and procedures designed to mitigate the risk of transmission of COVID-19 at the construction site, including worker distancing measures; isolating individuals who tested positive for COVID-19, showed symptoms consistent with COVID-19, were being tested for COVID-19, or were in close contact with such persons; requiring self-quarantine; and adopting additional precautionary measures. Since March 2020, the number of active cases at the site has fluctuated and impacted productivity levels and pace of activity completion. Through June 2021, the site experienced an overall decline in the number of active cases since the peak in January 2021. During the third quarter 2021, the site experienced a similar peak in August 2021; however, the number of active cases since this peak has declined. The lower productivity levels and slower pace of activity completion experienced since March 2020 contributed to a backlog to the aggressive site work plan established at the beginning of 2020. Georgia Power estimates the productivity impacts of the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embedded in the site work plan for Unit 3 and Unit 4. In addition, the project continued to face challenges including, but not limited to, higher than expected absenteeism; overall construction and subcontractor labor productivity; system turnover and testing activities; and electrical equipment and commodity installation. As a result of these factors, in January 2021, Southern Nuclear further extended certain milestone dates, including the start of hot functional testing and fuel load for Unit 3, from those established in October 2020.

Following the January 2021 milestone extensions, Southern Nuclear has been performing additional construction remediation work necessary to ensure quality and design standards are met as system turnovers are completed to support hot functional testing, which was completed in July 2021, and fuel load for Unit 3. As a result of challenges including, but not limited to, construction productivity, construction remediation work, the pace of system turnovers, spent fuel pool repairs, and the timeframe and duration for hot functional and other testing, at the end of the second quarter 2021, Southern Nuclear further extended certain milestone dates, including the fuel load for Unit 3, from those established in January 2021. Through the third quarter 2021, the project continued to face challenges including, but not limited to, construction productivity, construction remediation work, and the pace of system turnovers. As a result of these continued challenges, at the end of the third quarter 2021, Southern Nuclear further extended certain milestone dates, including fuel load for Unit 3, from those established at the end of the second quarter 2021. The site work plan currently targets fuel load for Unit 3 in the first quarter 2022 and an in-service date of May 2022 and primarily depends on significant improvements in overall construction productivity and production levels, the volume of construction remediation work, the pace of system and area turnovers, and the progression of startup and other testing. As the site work plan includes minimal margin to these milestone dates, an in-service date in the third quarter 2022 for Unit 3 is projected, although any further delays could result in a later in-service date.

As the result of productivity challenges, at the end of the second quarter 2021, Southern Nuclear also further extended milestone dates for Unit 4 from those established in January 2021. These productivity challenges continued into the third quarter 2021 and some craft and support resources were diverted temporarily to support construction efforts on Unit 3. As a result of these factors, at the end of the third quarter 2021, Southern Nuclear further extended the milestone dates for Unit 4 from those established at the end of the second quarter 2021. The site work plan targets an in-service date of March 2023 for Unit 4 and primarily depends on overall construction productivity and production levels significantly improving as well as appropriate levels of craft laborers, particularly electricians and pipefitters, being added and maintained. As the site work plan includes minimal margin

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

to the milestone dates, an in-service date in the second quarter 2023 for Unit 4 is projected, although any further delays could result in a later in-service date.

As of March 31, 2021, approximately $84 million of the construction contingency established in the fourth quarter 2020 was assigned to the base capital cost forecast for costs primarily associated with the schedule extension for Unit 3 to December 2021, construction productivity, support resources, and construction remediation work. Georgia Power increased its total capital cost forecast as of March 31, 2021 by adding $48 million to the remaining construction contingency. As of June 30, 2021, all of the remaining construction contingency previously established and an additional $341 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction remediation work for Unit 3, and construction productivity and support resources for Units 3 and 4. Georgia Power also increased its total capital cost forecast as of June 30, 2021 by adding $119 million to replenish construction contingency. As a result of the factors discussed above, during the third quarter 2021, all of the remaining construction contingency previously established in the second quarter 2021 and an additional $127 million was assigned to the base capital cost forecast for costs primarily associated with the schedule extensions for Units 3 and 4, construction productivity and support resources for Units 3 and 4, and construction remediation work for Unit 3. Georgia Power also increased its total capital cost forecast as of September 30, 2021 by adding $137 million to replenish construction contingency.

After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded pre-tax charges to income in the first quarter 2021, the second quarter 2021, and the third quarter 2021 of $48 million ($36 million after tax), $460 million ($343 million after tax), and $264 million ($197 million after tax), respectively, for the increases in the total project capital cost forecast. As and when these amounts are spent, Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery.

In addition, the continuing effects of the COVID-19 pandemic could further disrupt or delay construction and testing activities at Plant Vogtle Units 3 and 4. Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is currently estimated to be between $160 million and $200 million and is included in the total project capital cost forecast.

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

There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to ensure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. In connection with the additional construction remediation work described above, Southern Nuclear reviewed the project's construction quality programs and, where needed, is implementing improvement plans consistent with these processes. In June 2021, the NRC began a special inspection to review the root cause of this additional construction remediation work and the corresponding corrective action plans. On August 26, 2021, the NRC issued an inspection report with initial findings. Southern Nuclear had already identified and self-reported many of the issues in this report to the NRC and implemented corrective-action plans to resolve these issues. Southern Nuclear responded to the NRC's initial findings on October 5, 2021 and expects a final report from the NRC by November 24, 2021. Findings resulting from this or other inspections could require additional remediation

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and/or further NRC oversight. In addition, certain license amendment requests have been filed and approved or are pending before the NRC. On March 15, 2021, the NRC denied the Blue Ridge Environmental Defense League's (BREDL) December 2020 motion to reopen proceedings on BREDL's petition challenging a requested license amendment, which has been issued by the NRC staff.

The site work plan currently targets fuel load for Unit 3 in the first quarter 2022. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation for each unit and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel, have arisen or may arise, which may result in additional license amendments or require other resolution. If any license amendment requests or other licensing-based compliance issues, including inspections and ITAACs, are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond the third quarter 2022 for Unit 3 or the second quarter 2023 for Unit 4 is currently estimated to result in additional base capital costs for Georgia Power of approximately $25 million per month for Unit 3 and approximately $15 million per month for Unit 4, as well as the related AFUDC and any additional related construction or testing costs. 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).

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As previously disclosed, pursuant to the Global Amendments: (i) each Vogtle Owner must pay its proportionate share of qualifying construction costs for Plant Vogtle Units 3 and 4 based on its ownership percentage up to the estimated cost at completion (EAC) for Plant Vogtle Units 3 and 4 which formed the basis of Georgia Power's forecast of $8.4 billion in the nineteenth VCM plus $800 million; (ii) Georgia Power will be responsible for 55.7% of actual qualifying construction costs between $800 million and $1.6 billion over the EAC in the nineteenth VCM (resulting in $80 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 44.3% of such costs pro rata in accordance with their respective ownership interests; and (iii) Georgia Power will be responsible for 65.7% of qualifying construction costs between $1.6 billion and $2.1 billion over the EAC in the nineteenth VCM (resulting in a further $100 million of potential additional costs to Georgia Power), with the remaining Vogtle Owners responsible for 34.3% of such costs pro rata in accordance with their respective ownership interests. If the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.

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

Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments or the extent to which COVID-19-related costs impact the calculation. Based on the definition in the Global Amendments, Georgia Power believes the starting dollar amount is $18.38 billion and does not believe estimated project costs have reached a level where cost-sharing would be triggered. However, the other Vogtle Owners have asserted the cost increases through September 30, 2021 have reached the cost-sharing thresholds and could be sufficient to trigger the tender provisions under the Global Amendments, which could require Georgia Power to record additional pre-tax charges to income of up to approximately $350 million. On October 29, 2021, Georgia Power and the other Vogtle Owners entered into an agreement to clarify the process for the tender provisions of the Global Amendments, which will provide additional time to resolve these matters.

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

Regulatory Matters

In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At September 30, 2021, Georgia Power had recovered approximately $2.7 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

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$7.3 billion) and not requested for rate recovery. On October 1, 2021, Georgia Power filed a request to decrease the NCCR tariff by $78 million annually, effective January 1, 2022, pending approval by the Georgia PSC.

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

In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that a prudence proceeding on cost recovery will occur following Unit 4 fuel load, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that effective the first month after Unit 3 reaches commercial operation, retail base rates would be adjusted to include the costs related to Unit 3 and common facilities deemed prudent in the Vogtle Cost Settlement Agreement. The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $150 million in 2020 and are estimated to have negative earnings impacts of approximately $270 million, $260 million, and $135 million in 2021, 2022, and 2023, respectively. In its January 11, 2018 order, the Georgia PSC also stated if other conditions change and assumptions upon which Georgia Power's seventeenth VCM report are based do not materialize, the Georgia PSC reserved the right to reconsider the decision to continue construction.

The Georgia PSC has approved 24 VCM reports covering periods through December 31, 2020, including total construction capital costs incurred through December 31, 2020 of $7.3 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). In the August 24, 2021 order approving the twenty-fourth VCM report, the Georgia PSC also approved a stipulation addressing the following matters: (i) beginning with its twenty-fifth VCM report, Georgia Power will continue to report to the Georgia PSC all costs incurred during the period for review and will request for approval costs up to the $7.3 billion determined to be reasonable in the Georgia PSC's seventeenth VCM order and (ii) Georgia Power will not seek rate recovery of the $0.7 billion increase to the base capital cost forecast included in the nineteenth VCM report and charged to income by Georgia Power in the second quarter 2018. In addition, the stipulation

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confirms Georgia Power may request verification and approval of costs above $7.3 billion for inclusion in rate base at a later time, but no earlier than the prudence review contemplated by the seventeenth VCM order described previously. Georgia Power filed its twenty-fifth VCM report with the Georgia PSC on August 31, 2021, which reflects the revised capital cost forecast as of June 30, 2021 of $9.2 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds). See "Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" herein for information on Georgia Power's request to adjust retail base rates to include a portion of costs related to its investment in Plant Vogtle Unit 3 and Common Facilities.

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

Mississippi Power

Performance Evaluation Plan

On June 8, 2021, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2021, resulting in an annual increase in revenues of approximately $16 million, or 1.8%, which became effective with the first billing cycle of April 2021 in accordance with the PEP rate schedule.

Integrated Resource Plan

In December 2020, the Mississippi PSC issued an order in the Reserve Margin Plan docket requiring Mississippi Power to incorporate into its 2021 IRP a schedule reflecting the retirement of 950 MWs of fossil-steam generation by year-end 2027 to reduce Mississippi Power's excess reserve margin. On September 9, 2021, the Mississippi PSC issued an order confirming the conclusion of its review of Mississippi Power's 2021 IRP with no deficiencies identified. The 2021 IRP includes a schedule to retire Plant Watson Unit 4 (268 MWs) and Mississippi Power's 40% ownership interest in Plant Greene County Units 1 and 2 (103 MWs each) in December 2023, 2025, and 2026, respectively, consistent with each unit's remaining useful life in the most recent approved depreciation studies. In addition, the schedule reflects the early retirement of Mississippi Power's 50% undivided ownership interest in Plant Daniel Units 1 and 2 (502 MWs) by the end of 2027. The Plant Greene County unit retirements require the completion by Alabama Power of transmission and system reliability improvements, as well as agreement by Alabama Power.

The remaining net book value of Plant Daniel Units 1 and 2 was approximately $520 million at September 30, 2021 and Mississippi Power is continuing to depreciate these units using the current approved rates through the end of 2027. Mississippi Power expects to reclassify the net book value remaining at retirement, which is expected to total approximately $390 million, to a regulatory asset to be amortized over a period to be determined by the Mississippi PSC in future proceedings, consistent with the December 2020 order. The Plant Watson and Greene County units are expected to be fully depreciated upon retirement. The ultimate outcome of these matters cannot be determined at this time.

Environmental Compliance Overview Plan

On June 8, 2021, the Mississippi PSC approved Mississippi Power's ECO Plan filing for 2021, resulting in an annual decrease in revenues of approximately $9 million, primarily due to a change in the amortization periods of certain regulatory assets and liabilities. The rate decrease became effective with the first billing cycle of July 2021.

Ad Valorem Tax Adjustment

On April 6, 2021, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2021, which requested an annual increase in revenues of approximately $28 million, including approximately $19 million of ad valorem taxes previously recovered through PEP in accordance with the Mississippi Power Rate Case Settlement Agreement. The rate increase became effective with the first billing cycle of May 2021.

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System Restora****tion Rider

On October 14, 2021, the Mississippi PSC issued an accounting order giving Mississippi Power the authority to reclassify the retail costs associated with Hurricanes Zeta and Ida to a regulatory asset to be recovered through PEP over a period to be determined in Mississippi Power's 2022 PEP proceeding. At September 30, 2021, these costs totaled approximately $49 million.

On October 25, 2021, Mississippi Power made its annual System Restoration Rider filing with the Mississippi PSC, which requested an annual increase in retail revenues of approximately $9 million primarily for an increase in the property damage reserve accrual. The requested increase is expected to become effective with the first billing cycle following approval by the Mississippi PSC. The filing excludes recovery of the costs associated with Hurricanes Zeta and Ida.

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

Southern Company Gas

Infrastructure Replacement Programs and Capital Projects

Capital expenditures incurred under specific infrastructure replacement programs during the first nine months of 2021 were as follows:


Utility	Program	Nine Months Ended September 30, 2021
		(in millions)
Nicor Gas	Investing in Illinois	$	307
Virginia Natural Gas	Steps to Advance Virginia's Energy	36
Total		$	343

Atlanta Gas Light

On April 28, 2021, Atlanta Gas Light filed its first Integrated Capacity and Delivery Plan (i-CDP) with the Georgia PSC, which includes a series of ongoing and proposed pipeline safety, reliability, and growth programs for the next 10 years (2022 through 2031), as well as the required capital investments and related costs to implement the programs. The i-CDP reflects capital investments totaling approximately $0.5 billion to $0.6 billion annually.

Recovery of the related revenue requirements will be included in either subsequent annual GRAM filings or the new System Reinforcement Rider for authorized large pressure improvement and system reliability projects. On October 14, 2021, Atlanta Gas Light and the staff of the Georgia PSC filed a joint stipulation agreement, under which, for the years 2022 through 2024, Atlanta Gas Light would incrementally reduce its combined GRAM and System Reinforcement Rider request by 10% through Atlanta Gas Light's GRAM mechanism, or $5 million for 2022 based on the initial July 21, 2021 GRAM filing. The stipulation agreement also would provide for $1.7 billion of total capital investment for the years 2022 through 2024. The Georgia PSC is scheduled to vote on this matter later in November 2021. The ultimate outcome of this matter cannot be determined at this time. See "Rate Proceedings – Atlanta Gas Light" herein for additional information.

Virginia Natural Gas

On April 6, 2021, the Virginia Commission approved a motion filed by Virginia Natural Gas to withdraw the application for its 9.5-mile interconnect project due to a change in the capacity needs of one of the project's customers. No further action is necessary and this matter is now concluded.

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Rate Proceedings

Virginia Natural Gas

On September 14, 2021, the Virginia Commission approved a stipulation agreement related to Virginia Natural Gas' June 2020 general rate case filing, which allows for a $43 million increase in annual base rate revenues, including $14 million related to the recovery of investments under the SAVE program, based on a ROE of 9.5% and an equity ratio of 51.9%. Interim rate adjustments became effective as of November 1, 2020, subject to refund, based on Virginia Natural Gas' original request for an increase of approximately $50 million. Refunds to customers related to the difference between the approved rates and the interim rates will be completed during the fourth quarter 2021.

Atlanta Gas Light

On July 21, 2021, Atlanta Gas Light filed its annual GRAM filing with the Georgia PSC. The filing requested an annual base rate increase of $49 million based on the projected 12-month period beginning January 1, 2022. Later in November 2021, Atlanta Gas Light expects to file an amended GRAM filing in accordance with the reduction agreed to in the October 14, 2021 joint stipulation agreement, as discussed previously under "Infrastructure Replacement Programs and Capital Projects – Atlanta Gas Light" herein. Resolution of the GRAM filing is expected by December 31, 2021, with the new rates to become effective January 1, 2022. The ultimate outcome of this matter cannot be determined at this time.

Deferral of Incremental COVID-19 Costs

Nicor Gas

On March 18, 2021, the Illinois Commission approved a phased-in schedule for disconnections related to non-payment. Nicor Gas began certain disconnections in late April 2021 and resumed normal disconnections in June 2021.

Virginia Natural Gas

On June 30, 2021, the declared state of emergency in Virginia expired, ending the suspension of disconnections related to non-payment. Virginia Natural Gas began certain disconnections in July 2021 and late payment fees resumed in October 2021.

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

General Litigation Matters

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

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

Southern Company

In February 2017, Jean Vineyard and Judy Mesirov each filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of Georgia. Each of these lawsuits names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. In 2017, these two shareholder derivative lawsuits were consolidated in the U.S. District Court for the Northern District of

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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.

In May 2017, Helen E. Piper Survivor's Trust filed a shareholder derivative lawsuit in the Superior Court of Gwinnett County, Georgia that names as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint alleges that the individual defendants, among other things, breached their fiduciary duties in connection with schedule delays and cost overruns associated with the construction of the Kemper County energy facility. The complaint further alleges that the individual defendants authorized or failed to correct false and misleading statements regarding the Kemper County energy facility schedule and cost and failed to implement necessary internal controls to prevent harm to Southern Company. In August 2019, the court granted a motion filed by the plaintiff in July 2019 to substitute a new named plaintiff, Martin J. Kobuck, in place of Helen E. Piper Survivor's Trust.

The plaintiffs in each of these cases seek to recover, on behalf of Southern Company, unspecified actual damages and, on each plaintiff's own behalf, attorneys' fees and costs in bringing the lawsuit. The plaintiffs also seek certain changes to Southern Company's corporate governance and internal processes. In 2018, the court in each case entered an order staying each lawsuit until 30 days after the settlement of a securities class action filed in January 2017 against Southern Company, certain of its current and former officers, and certain former Mississippi Power officers. In September 2020, the plaintiffs in each case filed a status report noting the settlement of the securities class action and informing the court that the parties had scheduled mediation, which occurred in November 2020. In September 2021, the parties executed a term sheet memorializing a settlement-in-principle of both pending derivative lawsuits. The parties are negotiating a global stipulation of settlement that will apply to both lawsuits and will be subject to approval by the federal court. If approved, the terms of the settlement-in-principle are not expected to have a material impact on Southern Company's financial statements.

Georgia Power

In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state law claims. This case has been ruled upon and appealed numerous times over the last several years. In one recent appeal, the Georgia Supreme Court remanded the case and noted that the trial court could refer the matter to the Georgia PSC to interpret its tariffs. Following a motion by Georgia Power, in February 2019, the Superior Court of Fulton County ordered the parties to submit petitions to the Georgia PSC for a declaratory ruling and also conditionally certified the proposed class. In March 2019, Georgia Power and the plaintiffs filed petitions with the Georgia PSC seeking confirmation of the proper application of the municipal franchise fee schedule pursuant to the Georgia PSC's orders. Also in March 2019, Georgia Power appealed the class certification decision to the Georgia Court of Appeals. In October 2019, the Georgia PSC issued an order that found Georgia Power has appropriately implemented the municipal franchise fee schedule. In March 2020, the Georgia Court of Appeals vacated the Superior Court of Fulton County's February 2019 order granting conditional class certification and remanded the case to the Superior Court of Fulton County for further proceedings. In September 2020, the plaintiffs and Georgia Power each filed motions for summary judgment and the plaintiffs renewed their motion for class certification. On March 16, 2021, the Superior Court of Fulton County granted class certification and Georgia Power's motion for summary judgment. On March 22, 2021, the plaintiffs filed a notice of appeal, and, on April 2, 2021, Georgia Power filed a notice of cross appeal on the issue of class certification. The amount of any possible losses cannot be estimated at this time because, among other factors, it is unknown whether any losses would be subject to recovery from any municipalities.

In July 2020, a group of individual plaintiffs filed a complaint in the Superior Court of Fulton County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater, surface water, and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary

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damages including punitive damages, a medical monitoring fund, and injunctive relief. In September 2020, Georgia Power filed a motion to dismiss. On October 8, 2021, three additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages. The amount of any possible losses from these matters cannot be estimated at this time.

Mississippi Power

In 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and the three then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. In response to Mississippi Power and the Mississippi PSC each filing a motion to dismiss, the plaintiffs filed an amended complaint in March 2019. The amended complaint included four additional plaintiffs and additional claims for gross negligence, reckless conduct, and intentional wrongdoing. Mississippi Power and the Mississippi PSC each filed a motion to dismiss the amended complaint, which occurred in May 2020 and March 2020, respectively. Also in March 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants based on a dormant commerce clause theory under the U.S. Constitution. In July 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which included the same federal claims as the proposed second amended complaint, as well as several additional state law claims based on the allegation that Mississippi Power failed to disclose the annual percentage rate of interest applicable to refunds. In November 2020, the court denied each of the plaintiffs' pending motions and entered final judgment in favor of Mississippi Power. On January 22, 2021, the court denied further motions by the plaintiffs to vacate the judgment and to file a revised second amended complaint. On February 19, 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.

See Note 3 to the financial statements under "Other Matters – Mississippi Power – Kemper County Energy Facility" in Item 8 of the Form 10-K for additional information.

Environmental Remediation

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

Georgia Power's environmental remediation liability was $19 million and $15 million at September 30, 2021 and December 31, 2020, respectively. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.

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(UNAUDITED)

Southern Company Gas' environmental remediation liability was $255 million and $245 million at September 30, 2021 and December 31, 2020, respectively, based on the estimated cost of environmental investigation and remediation associated with known former manufactured gas plant operating sites.

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

Other Matters

Southern Company Gas

PennEast Pipeline Project

On June 29, 2021, the U.S. Supreme Court ruled in favor of PennEast Pipeline regarding its federal eminent domain authority over lands in which a state has property rights interests.

Southern Company Gas tests its equity method investments for impairment whenever events or changes in circumstances indicate that the investment may be impaired. Following the U.S. Supreme Court ruling, during the second quarter 2021, Southern Company Gas management reassessed the project construction timing, including the anticipated timing for receipt of the FERC certificate and all remaining state and local permits for both Phase 1 (the construction of 68 miles of pipe entirely within Pennsylvania) and Phase 2 (the construction of the remaining 50 miles in Pennsylvania and New Jersey), as well as potential challenges thereto, and performed an impairment analysis. The outcome of the analysis resulted in a pre-tax impairment charge of $82 million ($58 million after tax).

On September 27, 2021, PennEast Pipeline announced that further development of the project is no longer supported, and, as a result, all further development of the project has ceased. During the third quarter 2021, Southern Company Gas recorded a pre-tax charge of $2 million ($2 million after tax) related to its share of the project level impairment, as well as $7 million of additional tax expense, resulting in total pre-tax charges of $84 million ($67 million after tax) during 2021 related to the project.

See Note (E) under "Southern Company Gas" for additional information.

SNG

As a 50% equity investor in SNG, Southern Company Gas is required to make additional capital contributions as necessary pursuant to the terms of its operating agreement with SNG. Southern Company Gas previously committed to fund up to $150 million as a contingent capital contribution if SNG was unable to refinance or otherwise satisfy $300 million of debt maturing in June 2021. On April 29, 2021, SNG successfully refinanced the debt obligation. See Note (E) under "Southern Company Gas" for additional information.

(D) REVENUE FROM CONTRACTS WITH CUSTOMERS AND LEASE INCOME

Revenue from Contracts with Customers

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

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(UNAUDITED)

The following table disaggregates revenue from contracts with customers for the three and nine months ended September 30, 2021 and 2020:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended September 30, 2021
Operating revenues
Retail electric revenues
Residential	$	1,974	$	750	$	1,138	$	86	$	—	$	—
Commercial	1,432		471		882		79		—		—
Industrial	902		394		428		80		—		—
Other	24		4		18		2		—		—
Total retail electric revenues	4,332		1,619		2,466		247		—		—
Natural gas distribution revenues
Residential	218		—		—		—		—		218
Commercial	55		—		—		—		—		55
Transportation	239		—		—		—		—		239
Industrial	6		—		—		—		—		6
Other	31		—		—		—		—		31
Total natural gas distribution revenues	549		—		—		—		—		549
Wholesale electric revenues
PPA energy revenues	359		61		41		2		261		—
PPA capacity revenues	125		14		14		1		97		—
Non-PPA revenues	63		54		3		120		134		—
Total wholesale electric revenues	547		129		58		123		492		—
Other natural gas revenues


Gas marketing services	45		—		—		—		—		45
Other natural gas revenues	11		—		—		—		—		11
Total natural gas revenues	56		—		—		—		—		56
Other revenues	248		53		112		8		9		—
Total revenue from contracts with customers	5,732		1,801		2,636		378		501		605
Other revenue sources(a)	506		103		220		—		178		18

Total operating revenues	$	6,238	$	1,904	$	2,856	$	378	$	679	$	623

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(UNAUDITED)


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Nine Months Ended September 30, 2021
Operating revenues
Retail electric revenues
Residential	$	4,910	$	1,931	$	2,765	$	214	$	—	$	—
Commercial	3,727		1,229		2,293		205		—		—
Industrial	2,299		1,048		1,034		217		—		—
Other	70		13		51		6		—		—
Total retail electric revenues	11,006		4,221		6,143		642		—		—
Natural gas distribution revenues
Residential	1,143		—		—		—		—		1,143
Commercial	298		—		—		—		—		298
Transportation	775		—		—		—		—		775
Industrial	29		—		—		—		—		29
Other	187		—		—		—		—		187
Total natural gas distribution revenues	2,432		—		—		—		—		2,432
Wholesale electric revenues
PPA energy revenues	782		143		71		9		575		—
PPA capacity revenues	375		86		41		4		247		—
Non-PPA revenues	181		108		14		283		273		—
Total wholesale electric revenues	1,338		337		126		296		1,095		—
Other natural gas revenues

Wholesale gas services	2,168		—		—		—		—		2,168
Gas marketing services	303		—		—		—		—		303
Other natural gas revenues	27		—		—		—		—		27
Total natural gas revenues	2,498		—		—		—		—		2,498
Other revenues	792		150		362		22		18		—
Total revenue from contracts with customers	18,066		4,708		6,631		960		1,113		4,930
Other revenue sources(a)	2,979		311		419		28		497		1,763
Other adjustments(b)	(3,699)		—		—		—		—		(3,699)
Total operating revenues	$	17,346	$	5,019	$	7,050	$	988	$	1,610	$	2,994

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(UNAUDITED)


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended September 30, 2020
Operating revenues
Retail electric revenues
Residential	$	2,019	$	752	$	1,183	$	84	$	—	$	—
Commercial	1,354		447		833		74		—		—
Industrial	783		358		352		73		—		—
Other	22		5		15		2		—		—
Total retail electric revenues	4,178		1,562		2,383		233		—		—
Natural gas distribution revenues
Residential	170		—		—		—		—		170
Commercial	41		—		—		—		—		41
Transportation	224		—		—		—		—		224
Industrial	4		—		—		—		—		4
Other	35		—		—		—		—		35
Total natural gas distribution revenues	474		—		—		—		—		474
Wholesale electric revenues
PPA energy revenues	214		40		13		2		165		—
PPA capacity revenues	136		26		15		1		95		—
Non-PPA revenues	59		10		3		93		68		—
Total wholesale electric revenues	409		76		31		96		328		—
Other natural gas revenues

Wholesale gas services	431		—		—		—		—		431
Gas marketing services	38		—		—		—		—		38
Other natural gas revenues	7		—		—		—		—		7
Total natural gas revenues	476		—		—		—		—		476
Other revenues	218		33		115		6		4		—
Total revenue from contracts with customers	5,755		1,671		2,529		335		332		950
Other revenue sources(a)	968		58		88		1		191		630
Other adjustments(b)	(1,103)		—		—		—		—		(1,103)
Total operating revenues	$	5,620	$	1,729	$	2,617	$	336	$	523	$	477

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(UNAUDITED)


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Nine Months Ended September 30, 2020
Operating revenues
Retail electric revenues
Residential	$	4,802	$	1,839	$	2,760	$	203	$	—	$	—
Commercial	3,589		1,152		2,242		195		—		—
Industrial	2,081		956		907		218		—		—
Other	68		16		46		6		—		—
Total retail electric revenues	10,540		3,963		5,955		622		—		—
Natural gas distribution revenues
Residential	906		—		—		—		—		906
Commercial	229		—		—		—		—		229
Transportation	723		—		—		—		—		723
Industrial	21		—		—		—		—		21
Other	179		—		—		—		—		179
Total natural gas distribution revenues	2,058		—		—		—		—		2,058
Wholesale electric revenues
PPA energy revenues	550		94		38		7		425		—
PPA capacity revenues	339		78		30		3		231		—
Non-PPA revenues	159		33		7		235		184		—
Total wholesale electric revenues	1,048		205		75		245		840		—
Other natural gas revenues

Wholesale gas services	1,168		—		—		—		—		1,168
Gas marketing services	258		—		—		—		—		258
Other natural gas revenues	22		—		—		—		—		22
Total natural gas revenues	1,448		—		—		—		—		1,448
Other revenues	677		117		329		19		11		—
Total revenue from contracts with customers	15,771		4,285		6,359		886		851		3,506
Other revenue sources(a)	2,604		160		12		9		486		1,973
Other adjustments(b)	(3,117)		—		—		—		—		(3,117)
Total operating revenues	$	15,258	$	4,445	$	6,371	$	895	$	1,337	$	2,362

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

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

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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 September 30, 2021 and December 31, 2020:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Accounts Receivable
At September 30, 2021	$	2,343	$	712	$	904	$	90	$	170	$	329
At December 31, 2020	2,614		632		806		77		112		788
Contract Assets
At September 30, 2021	$	165	$	5	$	103	$	—	$	1	$	—
At December 31, 2020	158		2		71		—		—		—
Contract Liabilities
At September 30, 2021	$	65	$	6	$	39	$	1	$	2	$	—
At December 31, 2020	61		6		27		1		1		1

At September 30, 2021 and December 31, 2020, Georgia Power had contract assets primarily related to fixed retail customer bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over a one-year contract term, and unregulated service agreements, where payment is contingent on project completion. Contract liabilities for Georgia Power relate to cash collections recognized in advance of revenue for unregulated service agreements. Southern Company's unregulated distributed generation business had $55 million and $81 million of contract assets and $19 million and $27 million of contract liabilities at September 30, 2021 and December 31, 2020, respectively, for outstanding performance obligations.

Revenues recognized by Southern Company in the three and nine months ended September 30, 2021, which were included in contract liabilities at December 31, 2020, were $5 million and $25 million, respectively, and immaterial for all other 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. Revenues from contracts with customers related to these performance obligations remaining at September 30, 2021 are expected to be recognized as follows:


	2021 (remaining)		2022		2023		2024		2025		Thereafter
	(in millions)
Southern Company	$	156	$	543	$	347	$	327	$	307	$	2,667
Alabama Power	13		32		24		7		5		—
Georgia Power	22		64		43		23		21		41

Southern Power	70		323		281		297		281		2,644

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(UNAUDITED)

Revenue expected to be recognized for performance obligations remaining at September 30, 2021 was immaterial for Mississippi Power.

Lease Income

Lease income for the three and nine months ended September 30, 2021 and 2020 is as follows:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2021
Lease income - interest income on sales-type leases	$	4	$	—	$	—	$	4	$	—	$	—
Lease income - operating leases	56		21		11		—		21		9
Variable lease income	143		—		—		—		151		—
Total lease income	$	203	$	21	$	11	$	4	$	172	$	9

For the Nine Months Ended September 30, 2021
Lease income - interest income on sales-type leases	$	11	$	—	$	—	$	10	$	—	$	—
Lease income - operating leases	168		62		31		1		64		26
Variable lease income	355		—		—		—		379		—
Total lease income	$	534	$	62	$	31	$	11	$	443	$	26

For the Three Months Ended September 30, 2020
Lease income - interest income on sales-type leases	$	3	$	—	$	—	$	3	$	—	$	—
Lease income - operating leases	50		11		14		—		21		9
Variable lease income	145		—		—		—		153		—
Total lease income	$	198	$	11	$	14	$	3	$	174	$	9

For the Nine Months Ended September 30, 2020
Lease income - interest income on sales-type leases	$	8	$	—	$	—	$	8	$	—	$	—
Lease income - operating leases	148		24		44		1		66		26
Variable lease income	345		—		—		—		368		—
Total lease income	$	501	$	24	$	44	$	9	$	434	$	26

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

Lease Receivables

Mississippi Power

Mississippi Power completed construction of additional leased assets under an existing sales-type lease during the second quarter 2021. Upon completion of construction, the book value was transferred from CWIP to lease receivables. At September 30, 2021, the lease receivable related to the additional leased assets totaled $39 million and is primarily included in other property and investments. The transfer represents a noncash investing transaction for purposes of the statements of cash flows.

Southern Power

During the third quarter 2021, Southern Power completed construction of a portion of the Garland battery energy storage facility assets and recorded a $15 million loss upon commencement of the related PPA, which Southern

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(UNAUDITED)

Power accounts for as a sales-type lease. The lease has an initial term of 20 years. Upon commencement of the lease, the $113 million book value of the assets was derecognized from CWIP and a lease receivable was recorded. At September 30, 2021, the current portion of the lease receivable of $8 million is included in other current assets and the long-term portion of $91 million is included in net investment in sales-type lease on the balance sheet. The transfer represented a noncash investing transaction for purposes of the statement of cash flows. The undiscounted cash flows expected to be received by Southern Power for assets under the lease are as follows:


	At September 30, 2021
	(in millions)
2021 (remaining)	$	2
2022	8
2023	8
2024	8
2025	8
2026	8
Thereafter	115
Total undiscounted cash flows	$	157
Net investment in sales-type lease(*)	99
Difference between undiscounted cash flows and discounted cash flows	$	58

(*)Included in other current assets and other property and investments on the balance sheet.

See Note (K) under "Southern Power" for additional information on the Garland battery energy storage facility.

(E) CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

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

Southern Power

Variable Interest Entities

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

SP Solar and SP Wind

At September 30, 2021 and December 31, 2020, SP Solar had total assets of $6.2 billion and $6.1 billion, respectively, total liabilities of $364 million and $387 million, respectively, and noncontrolling interests of $1.1 billion. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

At September 30, 2021 and December 31, 2020, SP Wind had total assets of $2.3 billion and $2.4 billion, respectively, total liabilities of $157 million and $138 million, respectively, and noncontrolling interests of $42 million and $43 million, respectively. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the three financial investors in accordance with the limited liability agreement.

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(UNAUDITED)

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

Other Variable Interest Entities

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

At September 30, 2021 and December 31, 2020, the other VIEs had total assets of $1.9 billion and $1.1 billion, respectively, total liabilities of $263 million and $110 million, respectively, and noncontrolling interests of $902 million and $454 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

At September 30, 2021 and December 31, 2020, Southern Power had equity method investments in wind and battery energy storage projects totaling $83 million and $19 million, respectively. Earnings (loss) from these investments were immaterial for all periods presented.

Southern Company Gas

Equity Method Investments

The carrying amounts of Southern Company Gas' equity method investments at September 30, 2021 and December 31, 2020 and related earnings (loss) from those investments for the three and nine months ended September 30, 2021 and 2020 were as follows:


Investment Balance	September 30, 2021		December 31, 2020
	(in millions)
SNG	$	1,130	$	1,167
PennEast Pipeline(*)	11		91
Other	33		32
Total	$	1,174	$	1,290

(*)Investment balance at September 30, 2021 reflects pre-tax impairment charges totaling $84 million recorded during 2021. See Note (C) under "Other Matters – Southern Company Gas" for additional information, including the September 2021 cancellation of the project.

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(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
Earnings (Loss) from Equity Method Investments	2021		2020		2021		2020
	(in millions)
SNG	$	27	$	30	$	93	$	95
PennEast Pipeline(a)(b)	(2)		2		(81)		5
Other(a)(c)	—		1		2		6
Total	$	25	$	33	$	14	$	106

(a)Earnings primarily result from AFUDC equity recorded by the project entity.

(b)Includes pre-tax impairment charges totaling $2 million and $84 million for the three and nine months ended September 30, 2021, respectively. See Note (C) under "Other Matters – Southern Company Gas" for additional information, including the September 2021 cancellation of the project.

(c)On March 24, 2020, Southern Company Gas completed the sale of its interests in Atlantic Coast Pipeline and Pivotal LNG. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(F) FINANCING

Bank Credit Arrangements

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

At September 30, 2021, committed credit arrangements with banks were as follows:


	Expires
Company	2022		2023		2024		2026		Total		Unused		Due within One Year
	(in millions)
Southern Company parent	$	—	$	—	$	—	$	2,000	$	2,000	$	1,999	$	—
Alabama Power	—		—		550		700		1,250		1,250		—
Georgia Power	—		—		—		1,750		1,750		1,726		—
Mississippi Power	—		125		150		—		275		250		—
Southern Power(a)	—		—		—		600		600		568		—
Southern Company Gas(b)	250		—		—		1,500		1,750		1,747		250
SEGCO	30		—		—		—		30		30		30
Southern Company	$	280	$	125	$	700	$	6,550	$	7,655	$	7,570	$	280

(a)Does not include Southern Power Company's $75 million and $60 million continuing letter of credit facilities for standby letters of credit expiring in 2023, of which $23 million and $1 million, respectively, was unused at September 30, 2021. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $800 million of the arrangement expiring in 2026 and all $250 million of the arrangement expiring in 2022. Southern Company Gas' committed credit arrangement expiring in 2026 also includes $700 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to the multi-year credit arrangement expiring in 2026, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted.

As reflected in the table above, in May 2021, Southern Company, Alabama Power, Georgia Power, and Southern Power each amended and restated certain of its multi-year credit arrangements, which, among other things, extended the maturity dates from 2024 to 2026. Alabama Power also decreased the borrowing capacity under its credit arrangement now maturing in 2026 from $800 million to $700 million. Also in May 2021, Southern Company Gas Capital, along with Nicor Gas, amended and restated their multi-year credit arrangement to extend the maturity date from 2024 to 2026 and decrease the aggregate borrowing capacity from $1.75 billion to $1.5 billion. In addition,

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(UNAUDITED)

Southern Company Gas Capital entered into a new $250 million credit arrangement, which is guaranteed by Southern Company Gas, that matures in 2022. In June 2021, Mississippi Power amended and restated certain of its multi-year credit arrangements aggregating $150 million, which, among other things, extended the maturity dates from 2022 to 2024. In August 2021, Alabama Power amended and restated one of its multi-year credit arrangements, which, among other things, extended the maturity date from 2022 to 2024 and increased the borrowing capacity from $525 million to $550 million.

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

These bank credit arrangements, as well as the term loan arrangements of the Registrants, Nicor Gas, and SEGCO, contain covenants that limit debt levels and contain cross-acceleration or, in the case of Southern Power, cross-default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross-default provisions to other indebtedness would trigger an event of default if Southern Power defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross-acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. At September 30, 2021, 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 September 30, 2021 was approximately $1.6 billion (comprised of approximately $854 million at Alabama Power, $672 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2021, Georgia Power and Mississippi Power had approximately $262 million and $50 million, respectively, 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 the equity units issued in 2019. Earnings per share dilution resulting from stock-based compensation plans and the equity units issuance is determined using the treasury stock method. See Note 8 to the financial statements under "Equity Units" in Item 8 of the Form 10-K for information on the equity units and Note 12 to the financial statements in Item 8 of the Form 10-K for information on stock-based compensation plans. Shares used to compute diluted earnings per share were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(in millions)
As reported shares	1,061	1,058	1,060	1,058
Effect of stock-based compensation	7	6	7	6

Diluted shares	1,068	1,064	1,067	1,064

For all periods presented, an immaterial number of stock-based compensation awards was not included in the diluted earnings per share calculation because the awards were anti-dilutive.

An immaterial number of shares related to the equity units issued in 2019 was included in the calculations of diluted earnings per share for the nine months ended September 30, 2020. There were no such amounts for all other periods presented.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

(G) INCOME TAXES

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

Current and Deferred Income Taxes

Tax Credit and Net Operating Loss Carryforwards

Southern Company had federal ITC and PTC carryforwards (primarily related to Southern Power) totaling $1.2 billion at September 30, 2021 compared to $1.4 billion at December 31, 2020.

The federal ITC and PTC carryforwards begin expiring in 2036 and 2032, respectively, but are expected to be fully utilized by 2024. The utilization of each Registrant's estimated tax credit and state net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, changes in taxable income projections, and potential income tax rate changes. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.

Valuation Allowances

Details of significant changes in valuation allowances for the applicable Registrants are provided below:


	Southern Company		Georgia Power
	(in millions)
Federal	$	20	$	—
State (net of federal benefit)	92		28
Balance at December 31, 2020	$	112	$	28

Federal	$	20	$	—
State (net of federal benefit)	122		58
Balance at September 30, 2021	$	142	$	58

The increase in valuation allowances, net of federal benefit, for Southern Company and Georgia Power during 2021 was primarily due to Georgia Power's projected inability to utilize certain state tax credit carryforwards.

Effective Tax Rate

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

Southern Company

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

Southern Company's effective tax rate was 17.5% for the nine months ended September 30, 2021 compared to 13.9% for the corresponding period in 2020. The effective tax rate increase was primarily related to changes in state apportionment rates as a result of the sale of Sequent, an increase in the valuation allowance on certain state tax credit carryforwards, and the tax impact of the second quarter 2020 charge to earnings associated with a leveraged lease investment. See "Valuation Allowances" herein, Note (K) under "Southern Company Gas," and Note 3 to the financial statements in Item 8 of the Form 10-K under "Other Matters – Southern Company" for additional information.

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(UNAUDITED)

Georgia Power

Georgia Power's effective tax rate was 7.3% for the nine months ended September 30, 2021 compared to 12.3% for the corresponding period in 2020. The effective tax rate decrease was primarily due to higher charges to earnings in 2021 associated with the construction of Plant Vogtle Units 3 and 4, partially offset by an increase in the valuation allowance on certain state tax credit carryforwards. See "Valuation Allowances" herein and Note (B) under "Georgia Power – Nuclear Construction" for additional information.

Southern Power

Southern Power's effective tax benefit rate was (1.6)% for the nine months ended September 30, 2021 compared to an effective tax rate of 11.3% for the corresponding period in 2020. The effective tax rate decrease was primarily due to changes in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in February 2021, as well as the tax impact from the sale of Plant Mankato in January 2020. See Note 15 to the financial statements under "Southern Power" in Item 8 of the Form 10-K for additional information.

Southern Company Gas

Southern Company Gas' effective tax rate was 36.6% for the nine months ended September 30, 2021 compared to 21.4% for the corresponding period in 2020. The effective tax rate increase was primarily related to changes in state apportionment rates as a result of the sale of Sequent. See Note (K) under "Southern Company Gas" for additional information.

(H) RETIREMENT BENEFITS

The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2021. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

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

On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three and nine months ended September 30, 2021 and 2020 are presented in the following tables.

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(UNAUDITED)


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended September 30, 2021
Pension Plans
Service cost	$	109	$	26	$	28	$	4	$	2	$	10
Interest cost	87		20		26		4		2		6
Expected return on plan assets	(298)		(72)		(94)		(14)		(4)		(21)
Amortization:
Prior service costs	—		—		—		—		—		(1)
Regulatory asset	—		—		—		—		—		3
Net (gain)/loss	78		21		25		4		1		3
Net periodic pension cost (income)	$	(24)	$	(5)	$	(15)	$	(2)	$	1	$	—

Postretirement Benefits
Service cost	$	6	$	2	$	2	$	1	$	1	$	—
Interest cost	9		2		3		—		—		1
Expected return on plan assets	(19)		(8)		(7)		(1)		—		(2)
Amortization:

Regulatory asset	—		—		—		—		—		2
Net (gain)/loss	1		—		1		—		—		(1)
Net periodic postretirement benefit cost (income)	$	(3)	$	(4)	$	(1)	$	—	$	1	$	—

Nine Months Ended September 30, 2021
Pension Plans
Service cost	$	326	$	77	$	84	$	13	$	7	$	28
Interest cost	260		61		78		12		4		18
Expected return on plan assets	(893)		(215)		(282)		(41)		(11)		(64)
Amortization:
Prior service costs	—		—		1		—		—		(2)
Regulatory asset	—		—		—		—		—		11
Net (gain)/loss	235		62		75		11		3		9
Net periodic pension cost (income)	$	(72)	$	(15)	$	(44)	$	(5)	$	3	$	—

Postretirement Benefits
Service cost	$	18	$	5	$	5	$	1	$	1	$	1
Interest cost	26		6		9		1		—		3
Expected return on plan assets	(57)		(22)		(20)		(2)		—		(6)
Amortization:
Prior service costs	(1)		—		—		—		—		—
Regulatory asset	—		—		—		—		—		5
Net (gain)/loss	3		—		2		—		—		(2)
Net periodic postretirement benefit cost (income)	$	(11)	$	(11)	$	(4)	$	—	$	1	$	1

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended September 30, 2020
Pension Plans
Service cost	$	94	$	23	$	24	$	3	$	2	$	8
Interest cost	108		25		33		5		1		8
Expected return on plan assets	(274)		(66)		(87)		(13)		(4)		(20)
Amortization:
Prior service costs	—		1		—		—		—		(1)
Regulatory asset	—		—		—		—		—		4
Net (gain)/loss	67		17		22		4		1		2
Net periodic pension cost (income)	$	(5)	$	—	$	(8)	$	(1)	$	—	$	1

Postretirement Benefits
Service cost	$	6	$	1	$	2	$	(1)	$	1	$	—
Interest cost	13		4		5		1		—		2
Expected return on plan assets	(18)		(7)		(7)		—		—		(2)
Amortization:
Prior service costs	—		—		(1)		—		—		—
Regulatory asset	—		—		—		—		—		2
Net (gain)/loss	1		—		1		—		—		(1)
Net periodic postretirement benefit cost (income)	$	2	$	(2)	$	—	$	—	$	1	$	1

Nine Months Ended September 30, 2020
Pension Plans
Service cost	$	282	$	67	$	72	$	11	$	6	$	24
Interest cost	324		75		100		15		4		23
Expected return on plan assets	(824)		(198)		(261)		(38)		(10)		(59)
Amortization:
Prior service costs	1		1		1		—		—		(2)
Regulatory asset	—		—		—		—		—		12
Net (gain)/loss	201		53		65		10		2		7
Net periodic pension cost (income)	$	(16)	$	(2)	$	(23)	$	(2)	$	2	$	5

Postretirement Benefits
Service cost	$	17	$	4	$	5	$	—	$	1	$	1
Interest cost	40		10		15		2		—		5
Expected return on plan assets	(54)		(21)		(20)		(1)		—		(5)
Amortization:
Prior service costs	(1)		—		(1)		—		—		—
Regulatory asset	—		—		—		—		—		5
Net (gain)/loss	2		—		2		—		—		(2)
Net periodic postretirement benefit cost (income)	$	4	$	(7)	$	1	$	1	$	1	$	4

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

(I) FAIR VALUE MEASUREMENTS

At September 30, 2021, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:


	Fair Value Measurements Using:
At September 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$	75	$	425	$	—	$	—	$	500
Interest rate derivatives	—		25		—		—		25
Foreign currency derivatives	—		20		—		—		20
Investments in trusts:(b)(c)
Domestic equity	738		237		—		—		975
Foreign equity	167		183		—		—		350
U.S. Treasury and government agency securities	—		352		—		—		352
Municipal bonds	—		48		—		—		48
Pooled funds – fixed income	—		14		—		—		14
Corporate bonds	2		472		—		—		474
Mortgage and asset backed securities	—		92		—		—		92
Private equity	—		—		—		123		123
Cash and cash equivalents	5		—		—		—		5
Other	29		13		—		—		42
Cash equivalents	1,498		9		—		—		1,507
Other investments	9		26		—		—		35
Total	$	2,523	$	1,916	$	—	$	123	$	4,562
Liabilities:
Energy-related derivatives(a)	$	27	$	17	$	—	$	—	$	44
Interest rate derivatives	—		16		—		—		16
Foreign currency derivatives	—		43		—		—		43
Contingent consideration	—		—		16		—		16
Other	—		13		—		—		13
Total	$	27	$	89	$	16	$	—	$	132

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Fair Value Measurements Using:
At September 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	104	$	—	$	—	$	104
Interest rate derivatives	—		5		—		—		5
Nuclear decommissioning trusts:(b)
Domestic equity	444		227		—		—		671
Foreign equity	167		—		—		—		167
U.S. Treasury and government agency securities	—		22		—		—		22
Municipal bonds	—		1		—		—		1
Corporate bonds	2		243		—		—		245
Mortgage and asset backed securities	—		22		—		—		22
Private equity	—		—		—		123		123
Other	6		—		—		—		6
Cash equivalents	443		9		—		—		452
Other investments	—		26		—		—		26
Total	$	1,062	$	659	$	—	$	123	$	1,844
Liabilities:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4



Georgia Power
Assets:
Energy-related derivatives	$	—	$	166	$	—	$	—	$	166

Nuclear decommissioning trusts:(b)(c)
Domestic equity	294		1		—		—		295
Foreign equity	—		180		—		—		180
U.S. Treasury and government agency securities	—		330		—		—		330
Municipal bonds	—		47		—		—		47
Corporate bonds	—		229		—		—		229
Mortgage and asset backed securities	—		70		—		—		70
Other	23		13		—		—		36
Cash equivalents	240		—		—		—		240
Total	$	557	$	1,036	$	—	$	—	$	1,593
Liabilities:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Fair Value Measurements Using:
At September 30, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	105	$	—	$	—	$	105

Cash equivalents	121		—		—		—		121
Total	$	121	$	105	$	—	$	—	$	226
Liabilities:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3



Southern Power
Assets:
Energy-related derivatives	$	—	$	10	$	—	$	—	$	10
Foreign currency derivatives	—		20		—		—		20

Total	$	—	$	30	$	—	$	—	$	30
Liabilities:
Energy-related derivatives	$	—	$	2	$	—	$	—	$	2
Foreign currency derivatives	—		11		—		—		11
Contingent consideration	—		—		16		—		16
Other	—		13		—		—		13
Total	$	—	$	26	$	16	$	—	$	42

Southern Company Gas
Assets:
Energy-related derivatives(a)	$	75	$	40	$	—	$	—	$	115
Interest rate derivatives	—		6		—		—		6
Non-qualified deferred compensation trusts:
Domestic equity	—		9		—		—		9
Foreign equity	—		3		—		—		3
Pooled funds – fixed income	—		14		—		—		14
Cash equivalents	5		—		—		—		5


Total	$	80	$	72	$	—	$	—	$	152
Liabilities:
Energy-related derivatives(a)	$	27	$	4	$	—	$	—	$	31
Interest rate derivatives	—		4		—		—		4

Total	$	27	$	8	$	—	$	—	$	35

(a)Excludes cash collateral of $(20) million.

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

(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. At September 30, 2021, approximately $57 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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(UNAUDITED)

See Note (K) under "Assets Held for Sale" for information regarding assets recorded at fair value on a nonrecurring basis.

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the nine months ended September 30, 2021 and 2020. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.


Fair value increases (decreases)	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
	(in millions)
Southern Company	$	9	$	108	$	173	$	85
Alabama Power	15		66		133		24
Georgia Power	(6)		42		40		61

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 it is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligations are categorized as Level 3 under Fair Value Measurements as

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

the fair value is determined using significant unobservable inputs for the forecasted facility generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.

Southern Power also has payment obligations through 2040 whereby it must reimburse the transmission owners for interconnection facilities and network upgrades constructed to support connection of a Southern Power generating facility to the transmission system. The obligations are categorized as Level 2 under Fair Value Measurements as the fair value is determined using observable inputs for the contracted amounts and reimbursement period, as well as a discount rate. The fair value of the obligations reflects the net present value of expected payments.

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

At September 30, 2021, the fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $123 million and unfunded commitments related to the private equity investments totaled $72 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

At September 30, 2021, 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 billions)
Long-term debt, including securities due within one year:
Carrying amount	$	51.9	$	9.1	$	13.6	$	1.6	$	4.0	$	6.8
Fair value	57.6		10.4		15.2		1.7		4.4		7.8

(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.

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

Commodity Contracts with Level 3 Valuation Inputs

Prior to July 1, 2021, Southern Company Gas had Level 3 physical natural gas forward contracts related to Sequent. See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent. Since commodity contracts classified as Level 3 typically include a combination of observable and unobservable components, the changes in fair value may include amounts due in part to observable market factors, or changes to assumptions on

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

the unobservable components. The following table provides a reconciliation of Southern Company Gas' Level 3 contracts during the three and nine months ended September 30, 2021.


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
	(in millions)
Beginning balance	$	18	$	28


Instruments realized or otherwise settled during period	—		(6)
Changes in fair value	—		(4)
Sale of Sequent	(18)		(18)
Ending balance	$	—	$	—

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

(J) DERIVATIVES

Southern Company, the traditional electric operating companies, Southern Power, and Southern Company 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. Through the sale of Sequent on July 1, 2021, Southern Company Gas' wholesale gas operations used various contracts in its commercial activities that generally met the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with the classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information. See Note (K) under "Southern Company Gas" for information regarding Southern Company Gas' sale of Sequent.

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.

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(UNAUDITED)

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

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

Regulatory Hedges – Energy-related derivative contracts designated as regulatory hedges relate primarily to the traditional electric operating companies' and the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through an approved cost recovery mechanism.
Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in accumulated OCI before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

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

At September 30, 2021, 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(*)	336	2030	2024
Alabama Power	75	2024	—
Georgia Power	99	2024	—
Mississippi Power	79	2025	—
Southern Power	6	2030	2022
Southern Company Gas(*)	77	2024	2024

(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 91.4 million mmBtu and short natural gas positions of 14.3 million mmBtu at September 30, 2021, which is also included in Southern Company's total volume. See Note (K) under "Southern Company Gas" for information regarding Southern Company Gas' sale of Sequent.

In addition to the volumes discussed above, the traditional electric operating companies and Southern Power enter into physical natural gas supply contracts that provide the option to sell back excess natural gas due to operational constraints. The maximum expected volume of natural gas subject to such a feature is 41 million mmBtu for Southern Company, which includes 10 million mmBtu for Alabama Power, 13 million mmBtu for Georgia Power, 5 million mmBtu for Mississippi Power, and 13 million mmBtu for Southern Power.

For cash flow hedges of energy-related derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2022 are immaterial for all Registrants.

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(UNAUDITED)

Interest Rate Derivatives

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

At September 30, 2021, the following interest rate derivatives were outstanding:


	Notional Amount		Interest Rate Received	Weighted Average Interest Rate Paid	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2021
	(in millions)					(in millions)
Cash Flow Hedges of Forecasted Debt
Alabama Power	$	150	—	1.91%	August 2051	$	5





Fair Value Hedges of Existing Debt
Southern Company parent	400		1.75%	1-month LIBOR + 0.68%	March 2028	(2)
Southern Company parent	1,000		3.70%	1-month LIBOR + 2.36%	April 2030	3
Southern Company Gas	500		1.75%	1-month LIBOR + 0.38%	January 2031	2
Southern Company	$	2,050				$	8

For cash flow hedge interest rate derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending September 30, 2022 total $(22) 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 2051 for the Southern Company parent entity, 2051 for Alabama Power, 2044 for Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.

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(UNAUDITED)

Foreign Currency Derivatives

Southern Company and certain subsidiaries, including Southern Power, may enter into foreign currency derivatives to hedge exposure to changes in foreign currency exchange rates, such as that arising from the issuance of debt denominated in a currency other than U.S. dollars. Derivatives related to forecasted transactions are accounted for as cash flow hedges where the derivatives' fair value gains or losses are recorded in OCI and are reclassified into earnings at the same time and on the same income statement line as the earnings effect of the hedged transactions, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Derivatives related to existing fixed rate securities are accounted for as fair value hedges, where the derivatives' fair value gains or losses and hedged items' fair value gains or losses are both recorded directly to earnings on the same income statement line item, including foreign currency gains or losses arising from changes in the U.S. currency exchange rates. Southern Company has elected to exclude the cross-currency basis spread from the assessment of effectiveness in the fair value hedges of its foreign currency risk and record any difference between the change in the fair value of the excluded components and the amounts recognized in earnings as a component of OCI.

At September 30, 2021, the following foreign currency derivatives were outstanding:


	Pay Notional		Pay Rate	Receive Notional		Receive Rate	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2021
	(in millions)			(in millions)				(in millions)
Fair Value Hedges of Existing Debt
Southern Company parent	$	1,476	3.39%	€	1,250	1.88%	September 2027	$	(32)

Cash Flow Hedges of Existing Debt
Southern Power	$	677	2.95%	€	600	1.00%	June 2022	$	9
Southern Power	564		3.78%	500		1.85%	June 2026	—
Southern Power total	$	1,241		€	1,100			$	9

Southern Company	$	2,717		€	2,350			$	(23)

The estimated pre-tax gain (loss) related to Southern Power's foreign currency derivatives accounted for as cash flow hedges expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2022 is $(4) 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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(UNAUDITED)

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


	At September 30, 2021				At December 31, 2020
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:
Assets from risk management activities/Other current liabilities	$	308	$	9	$	24	$	11
Other deferred charges and assets/Other deferred credits and liabilities	118		6		18		19


Total derivatives designated as hedging instruments for regulatory purposes	$	426	$	15	$	42	$	30
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	41	$	—	$	3	$	5
Other deferred charges and assets/Other deferred credits and liabilities	4		—		—		—
Interest rate derivatives:
Assets from risk management activities/Other current liabilities	25		—		20		—
Other deferred charges and assets/Other deferred credits and liabilities	—		16		—		—
Foreign currency derivatives:
Assets from risk management activities/Other current liabilities	9		33		—		23
Other deferred charges and assets/Other deferred credits and liabilities	11		10		87		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	90	$	59	$	110	$	28
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	29	$	29	$	388	$	331
Other deferred charges and assets/Other deferred credits and liabilities	1		—		270		232

Total derivatives not designated as hedging instruments	$	30	$	29	$	658	$	563
Gross amounts recognized	$	546	$	103	$	810	$	621
Gross amounts offset(a)	(57)		(37)		(529)		(557)
Net amounts recognized in the Balance Sheets(b)	$	489	$	66	$	281	$	64

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(UNAUDITED)


	At September 30, 2021				At December 31, 2020
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	$	67	$	2	$	7	$	2
Other deferred charges and assets/Other deferred credits and liabilities	37		2		5		5
Total derivatives designated as hedging instruments for regulatory purposes	$	104	$	4	$	12	$	7
Derivatives designated as hedging instruments in cash flow and fair value hedges
Interest rate derivatives:
Other current assets/Other current liabilities	$	5	$	—	$	—	$	—


Gross amounts recognized	$	109	$	4	$	12	$	7
Gross amounts offset	(3)		(3)		(7)		(7)
Net amounts recognized in the Balance Sheets	$	106	$	1	$	5	$	—

Georgia Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	124	$	2	$	7	$	5
Other deferred charges and assets/Other deferred credits and liabilities	42		2		8		8
Total derivatives designated as hedging instruments for regulatory purposes	$	166	$	4	$	15	$	13





Gross amounts recognized	$	166	$	4	$	15	$	13
Gross amounts offset	(3)		(3)		(12)		(12)
Net amounts recognized in the Balance Sheets	$	163	$	1	$	3	$	1

Mississippi Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	66	$	1	$	4	$	3
Other deferred charges and assets/Other deferred credits and liabilities	39		2		5		6
Total derivatives designated as hedging instruments for regulatory purposes	$	105	$	3	$	9	$	9





Gross amounts recognized	$	105	$	3	$	9	$	9
Gross amounts offset	(2)		(2)		(7)		(7)
Net amounts recognized in the Balance Sheets	$	103	$	1	$	2	$	2

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(UNAUDITED)


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	8	$	—	$	2	$	2
Other deferred charges and assets/Other deferred credits and liabilities	1		—		—		—
Foreign currency derivatives:
Other current assets/Other current liabilities	9		11		—		23
Other deferred charges and assets/Other deferred credits and liabilities	11		—		87		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	29	$	11	$	89	$	25
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	$	30	$	13	$	89	$	26
Gross amounts offset	(1)		(1)		—		—
Net amounts recognized in the Balance Sheets	$	29	$	12	$	89	$	26

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(UNAUDITED)


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Company Gas
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	51	$	4	$	6	$	1

Total derivatives designated as hedging instruments for regulatory purposes	$	51	$	4	$	6	$	1
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	33	$	—	$	1	$	3
Other deferred charges and assets/Other deferred credits and liabilities	3		—		—		—
Interest rate derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	6		—		—		—
Other deferred charges and assets/Other deferred credits and liabilities	—		4		—		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	42	$	4	$	1	$	3
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	28	$	27	$	388	$	330
Other deferred charges and assets/Other deferred credits and liabilities	1		—		270		232

Total derivatives not designated as hedging instruments	$	29	$	27	$	658	$	562
Gross amounts recognized	$	122	$	35	$	665	$	566
Gross amounts offset(a)	(48)		(28)		(503)		(531)
Net amounts recognized in the Balance Sheets(b)	$	74	$	7	$	162	$	35

(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $(20) million and $28 million at September 30, 2021 and December 31, 2020, respectively.

(b)Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for both periods presented.

The traditional electric operating companies had no energy-related derivatives not designated as hedging instruments at September 30, 2021 or December 31, 2020.

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(UNAUDITED)

At September 30, 2021 and December 31, 2020, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:


Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet Location	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Company Gas
	(in millions)
At September 30, 2021:
Energy-related derivatives:
Other regulatory assets, current	$	(5)	$	(1)	$	(1)	$	—	$	(3)



Other regulatory liabilities, current	297		66		123		66		42
Other regulatory liabilities, deferred	112		35		40		37		—
Total energy-related derivative gains (losses)	$	404	$	100	$	162	$	103	$	39

At December 31, 2020:
Energy-related derivatives:

Other regulatory assets, deferred	$	(2)	$	—	$	(1)	$	(1)	$	—
Other regulatory liabilities, current	12		5		2		1		4
Other regulatory liabilities, deferred	2		1		1		—		—
Total energy-related derivative gains (losses)	$	12	$	6	$	2	$	—	$	4

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of cash flow and fair value hedge accounting on accumulated OCI were as follows:


Gain (Loss) Recognized in OCI on Derivative	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
2021	2020		2021		2020
	(in millions)				(in millions)
Southern Company
Cash flow hedges:
Energy-related derivatives	$	38	$	9	$	59	$	2
Interest rate derivatives	5		1		7		(27)
Foreign currency derivatives	(36)		54		(79)		(10)
Fair value hedges(*):
Foreign currency derivatives	(4)		—		(4)		—
Total	$	3	$	64	$	(17)	$	(35)







Southern Power
Cash flow hedges:
Energy-related derivatives	$	8	$	5	$	16	$	2

Foreign currency derivatives	(36)		54		(79)		(10)
Total	$	(28)	$	59	$	(63)	$	(8)
Southern Company Gas
Cash flow hedges:
Energy-related derivatives	$	30	$	4	$	43	$	—
Interest rate derivatives	—		1		—		(24)
Total	$	30	$	5	$	43	$	(24)

(*)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in OCI.

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:


Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships	For the Three Months Ended September 30,				For the Nine Months Ended September 30,

2021	2020		2021		2020
	(in millions)				(in millions)
Southern Company
Total cost of natural gas	$	129	$	71	$	943	$	654
Gain (loss) on energy-related cash flow hedges(a)	2		—		—		(8)
Total depreciation and amortization	896		889		2,658		2,619
Gain (loss) on energy-related cash flow hedges(a)	3		(1)		6		(3)
Total interest expense, net of amounts capitalized	(451)		(443)		(1,352)		(1,343)
Gain (loss) on interest rate cash flow hedges(a)	(7)		(6)		(20)		(19)
Gain (loss) on foreign currency cash flow hedges(a)	(6)		(6)		(18)		(18)
Gain (loss) on interest rate fair value hedges(b)	(4)		(3)		(16)		27
Total other income (expense), net	131		113		297		319
Gain (loss) on foreign currency cash flow hedges(a)(c)	(34)		56		(76)		52
Gain (loss) on foreign currency fair value hedges	(32)		—		(32)		—
Amount excluded from effectiveness testing recognized in earnings	4		—		4		—










Southern Power
Total depreciation and amortization	$	132	$	129	$	383	$	367
Gain (loss) on energy-related cash flow hedges(a)	3		(1)		6		(3)
Total interest expense, net of amounts capitalized	(36)		(36)		(111)		(114)
Gain (loss) on foreign currency cash flow hedges(a)	(6)		(6)		(18)		(18)
Total other income (expense), net	2		13		10		19
Gain (loss) on foreign currency cash flow hedges(a)(c)	(34)		56		(76)		52

(a)Reclassified from accumulated OCI into earnings.

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

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

For the three and nine months ended September 30, 2021 and 2020, 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.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

At September 30, 2021 and December 31, 2020, 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	At September 30, 2021		At December 31, 2020		At September 30, 2021		At December 31, 2020
	(in millions)				(in millions)
Southern Company
Securities due within one year	$	—	$	(1,509)	$	—	$	(10)
Long-term debt	(3,320)		—		—		—

Southern Company Gas

Long-term debt	$	(497)	$	—	$	(1)	$	—

For the three and nine months ended September 30, 2021 and 2020, 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 September 30,				Nine Months Ended September 30,
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	2021		2020		2021		2020
		(in millions)				(in millions)

Energy-related derivatives:	Natural gas revenues(*)	$	(2)	$	(30)	$	(122)	$	54

	Cost of natural gas	20		5		36		18
Total derivatives in non-designated hedging relationships		$	18	$	(25)	$	(86)	$	72

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

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of energy-related derivatives not designated as hedging instruments were immaterial for all other Registrants.

Contingent Features

Southern Company, the traditional electric operating companies, Southern Power, and Southern Company Gas do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. At September 30, 2021, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements.

At September 30, 2021, the Registrants had no interest rate derivative liabilities with contingent features. At September 30, 2021, the fair value of energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial for all Registrants. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Inc., Gulf Power is continuing to participate in the Southern Company power pool for a defined transition period that, subject to certain potential adjustments, is scheduled to end on January 1, 2024.

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(UNAUDITED)

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

Alabama Power and Southern Power maintain accounts with certain regional transmission organizations to facilitate financial derivative transactions and they may be required to post collateral based on the value of the positions in these accounts and the associated margin requirements. At September 30, 2021, cash collateral posted in these accounts was immaterial. Southern Company Gas maintains accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Southern Company Gas may be required to deposit cash into these accounts. At September 30, 2021, cash collateral held on deposit in broker margin accounts was $(20) million.

The Registrants are exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Registrants only enter into agreements and material transactions with counterparties that have investment grade credit ratings by Moody's and S&P or with counterparties who have posted collateral to cover potential credit exposure. The Registrants have also established risk management policies and controls to determine and monitor the creditworthiness of counterparties in order to mitigate their exposure to counterparty credit risk.

Southern Company Gas uses established credit policies to determine and monitor the creditworthiness of counterparties, including requirements to post collateral or other credit security, as well as the quality of pledged collateral. Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade financial institution, but may also include cash or U.S. government securities held by a trustee. Prior to entering a physical transaction, Southern Company Gas assigns its counterparties an internal credit rating and credit limit based on the counterparties' Moody's, S&P, and Fitch ratings, commercially available credit reports, and audited financial statements. Southern Company Gas may require counterparties to pledge additional collateral when deemed necessary.

Southern Company Gas utilizes netting agreements whenever possible to mitigate exposure to counterparty credit risk. Netting agreements enable Southern Company Gas to net certain assets and liabilities by counterparty across product lines and against cash collateral, provided the netting and cash collateral agreements include such provisions. While the amounts due from, or owed to, counterparties are settled net, they are recorded on a gross basis on the balance sheet as energy marketing receivables and energy marketing payables.

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

(K) ACQUISITIONS AND DISPOSITIONS

See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information.

Southern Company

On October 29, 2021, Southern Company completed the sale of assets subject to a leveraged lease to the lessee for $45 million. No gain or loss was recognized on the sale. During the fourth quarter 2021, income tax benefits of approximately $16 million will be recognized as a result of the sale. At September 30, 2021, the leveraged lease investment was classified as held for sale. See Note 3 to the financial statements under "Other Matters – Southern Company" in Item 8 of the Form 10-K and "Assets Held for Sale" herein for additional information.

Alabama Power

On September 23, 2021, Alabama Power entered into an agreement to acquire all of the equity interests in Calhoun Power Company, LLC, which owns and operates the Calhoun Generating Station. See Note (B) under "Alabama Power – Calhoun Generating Station Acquisition" for additional information.

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(UNAUDITED)

Southern Power

Asset Acquisition

During the nine months ended September 30, 2021, Southern Power acquired a controlling membership interest in the wind facility listed below. Acquisition-related costs were expensed as incurred and were not material.


Project Facility			Resource			Seller			Approximate Nameplate Capacity (MW)			Location			Southern Power Ownership Percentage			COD			PPA Contract Period
Deuel Harvest(*)			Wind			Invenergy Renewables, LLC			300			Deuel County, SD			100% of Class B			February 2021			25 years and 15 years

(*)On March 26, 2021, Southern Power acquired a controlling interest in the project from Invenergy Renewables LLC and, on March 30, 2021, Southern Power completed a tax equity transaction whereby it sold the Class A membership interests in the project. Southern Power consolidates the project's operating results in its financial statements and the tax equity partner and Invenergy Renewables LLC each own a noncontrolling interest.

Construction Projects

During the nine months ended September 30, 2021, Southern Power completed construction of and placed in service 45 MWs of the Garland battery energy storage facility and continued construction of the Tranquillity battery energy storage facility, the Glass Sands wind facility, and the remainder of the Garland battery energy storage facility. Total aggregate construction costs, excluding acquisition costs, are expected to be between $400 million and $460 million for the facilities under construction. At September 30, 2021, total costs of construction incurred for these projects were $341 million, of which $228 million remains 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 at September 30, 2021
Garland Solar Storage(a)	Battery energy storage system	88	Kern County, CA	September 2021 and fourth quarter 2021(b)	20 years
Tranquillity Solar Storage(a)	Battery energy storage system	72	Fresno County, CA	Fourth quarter 2021 and first quarter 2022	20 years
Glass Sands(c)	Wind	118	Murray County, OK	Fourth quarter 2021	12 years

(a)During the third quarter 2021, Southern Power further restructured its ownership in the Garland and Tranquillity battery energy storage projects and completed tax equity transactions whereby it sold the Class A membership interests in the projects. Southern Power consolidates each project's operating results in its financial statements and the tax equity partner and two other partners each own a noncontrolling interest.

(b)The facility has a total capacity of 88 MWs, of which 45 MWs were placed in service in September 2021 and 43 MWs are expected to be placed in service later in the fourth quarter 2021.

(c)In December 2020, Southern Power purchased 100% of the membership interests of the Glass Sands facility.

Development Projects

Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 for development and construction projects. During the nine months ended September 30, 2021, gains on wind turbine equipment contributed to various equity method investments totaled approximately $37 million.

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(UNAUDITED)

Southern Company Gas

Sale of Sequent

On July 1, 2021, Southern Company Gas affiliates completed the sale of Sequent to Williams Field Services Group for a total cash purchase price of $159 million, including final working capital adjustments. The preliminary pre-tax gain associated with the transaction is approximately $121 million ($93 million after tax). As a result of the sale, changes in state apportionment rates resulted in $85 million of additional tax expense.

Prior to the sale, Southern Company Gas had existing agreements in place in which it guaranteed the payment performance of Sequent. Southern Company Gas will continue to guarantee Sequent's payment performance for a period of time as Williams Field Services Group obtains releases from these obligations. At September 30, 2021, the obligations subject to the payment performance guarantee totaled $36 million. Changes in the price of natural gas, market conditions, and the number of open contracts may change the amount that Southern Company Gas is required to guarantee for Sequent each month. The maximum potential exposure over the period of the payment performance guarantee generally is capped at $1 billion. At closing, Williams Field Services Group issued a payment performance guarantee to Southern Company Gas, equal to the outstanding guarantee obligation throughout this period.

Southern Company Gas' sale of Sequent did not represent a strategic shift in operations that has, or is expected to have, a major effect on its operations and financial results; therefore, none of the assets were classified as discontinued operations for any of the periods presented.

Sale of Pivotal LNG

In connection with its March 2020 sale of Pivotal LNG, Southern Company Gas was entitled to two $5 million payments contingent upon Dominion Modular LNG Holdings, Inc. meeting certain milestones related to Pivotal LNG. Southern Company Gas received the first payment on April 22, 2021 and expects to receive the second payment in February 2022.

Assets Held for Sale

The following table provides the major classes of assets classified as held for sale by Southern Company at September 30, 2021 and December 31, 2020:


	Southern Company
	At September 30,		At December 31,
	2021		2020
	(in millions)
Assets Held for Sale:
Total property, plant, and equipment	$	6	$	8
Leveraged leases	45		52
Total Assets Held for Sale	$	51	$	60

Southern Company's assets held for sale at September 30, 2021 and December 31, 2020 were recorded at fair value on a nonrecurring basis, based primarily on unobservable inputs (Level 3). See "Southern Company" herein for additional information.

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(L) SEGMENT AND RELATED INFORMATION

Southern Company

The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The traditional electric operating companies – Alabama Power, Georgia Power, and Mississippi Power – are vertically integrated utilities providing electric service in three Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy and battery energy storage projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through its natural gas distribution utilities and is involved in several other complementary businesses including gas pipeline investments, wholesale gas services (through June 30, 2021), and gas marketing services.

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 $167 million and $361 million for the three and nine months ended September 30, 2021, respectively, and $101 million and $279 million for the three and nine months ended September 30, 2020, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for all periods presented. Revenues from sales of natural gas from Southern Company Gas to Southern Power were $18 million for the nine months ended September 30, 2021, which represented sales from Sequent through June 30, 2021, and $9 million and $22 million for the three and nine months ended September 30, 2020, respectively. 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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(UNAUDITED)

Financial data for business segments and products and services for the three and nine months ended September 30, 2021 and 2020 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 September 30, 2021
Operating revenues	$	5,018	$	679	$	(170)	$	5,527	$	623	$	124	$	(36)	$	6,238
Segment net income (loss)(a)(b)(c)	1,085		78		—		1,163		56		(121)		3		1,101
Nine Months Ended September 30, 2021
Operating revenues	$	12,813	$	1,610	$	(372)	$	14,051	$	2,994	$	412	$	(111)	$	17,346
Segment net income (loss)(a)(b)(c)(d)(e)(f)	2,352		211		—		2,563		389		(338)		(6)		2,608
At September 30, 2021
Goodwill	$	—	$	2	$	—	$	2	$	5,015	$	263	$	—	$	5,280
Assets held for sale	3		—		—		3		—		48		—		51
Total assets	89,057		13,611		(708)		101,960		22,958		3,704		(761)		127,861
Three Months Ended September 30, 2020
Operating revenues	$	4,629	$	523	$	(103)	$	5,049	$	477	$	132	$	(38)	$	5,620
Segment net income (loss)(a)	1,284		74		—		1,358		14		(122)		1		1,251
Nine Months Ended September 30, 2020
Operating revenues	$	11,576	$	1,337	$	(285)	$	12,628	$	2,362	$	380	$	(112)	$	15,258
Segment net income (loss)(a)(c)(f)(g)	2,571		212		—		2,783		360		(420)		9		2,732
At December 31, 2020
Goodwill	$	—	$	2	$	—	$	2	$	5,015	$	263	$	—	$	5,280
Assets held for sale	5		—		—		5		—		55		—		60
Total assets	85,486		13,235		(680)		98,041		22,630		3,168		(904)		122,935

(a)Attributable to Southern Company.

(b)For Southern Company Gas, includes a preliminary pre-tax gain of $121 million ($93 million after tax) related to its sale of Sequent, as well as the resulting $85 million of additional tax expense due to changes in state apportionment rates. See Note (K) under "Southern Company Gas" for additional information.

(c)For the traditional electric operating companies, includes pre-tax charges at Georgia Power for estimated losses associated with the construction of Plant Vogtle Units 3 and 4 of $264 million ($197 million after tax) and $772 million ($576 million after tax) for the three and nine months ended September 30, 2021, respectively, and $149 million ($111 million after tax) for the nine months ended September 30, 2020. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

(d)For Southern Power, includes gains on wind turbine equipment contributed to various equity method investments totaling approximately $37 million pre-tax ($28 million after tax). See Notes (E) and (K) under "Southern Power" for additional information.

(e)For Southern Company Gas, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to its equity method investment in the PennEast Pipeline project. See Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, for additional information.

(f)For the "All Other" column, includes pre-tax impairment charges related to leveraged lease investments of $7 million ($6 million after tax) and $154 million ($74 million after tax) for the nine months ended September 30, 2021 and 2020, respectively. See Note 3 to the financial statements in Item 8 of the Form 10-K under "Other Matters – Southern Company" for additional information.

(g)For Southern Power, includes a $39 million pre-tax gain ($23 million gain after tax) on the sale of Plant Mankato. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Power" for additional information.

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(UNAUDITED)

Products and Services


	Electric Utilities' Revenues
	Retail		Wholesale		Other		Total
	(in millions)
Three Months Ended September 30, 2021	$	4,551	$	731	$	245	$	5,527
Three Months Ended September 30, 2020	4,243		584		222		5,049
Nine Months Ended September 30, 2021	$	11,492	$	1,822	$	737	$	14,051
Nine Months Ended September 30, 2020	10,503		1,473		652		12,628


	Southern Company Gas' Revenues
	Gas Distribution Operations		Wholesale Gas Services*()**		Gas Marketing Services		Other		Total
	(in millions)
Three Months Ended September 30, 2021	$	553	$	—	$	52	$	18	$	623
Three Months Ended September 30, 2020	476		(51)		39		13		477
Nine Months Ended September 30, 2021	$	2,451	$	188	$	311	$	44	$	2,994
Nine Months Ended September 30, 2020	2,072		(19)		272		37		2,362

(*)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. Also see Note (K) under "Southern Company Gas" regarding the July 1, 2021 sale of Sequent.

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. See Note 15 to the financial statements in Item 8 of the Form 10-K under "Southern Company Gas" for additional information on the disposition activities described herein.

Gas distribution operations is the largest component of Southern Company Gas' business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in 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 project, and a 50% joint ownership interest in the Dalton Pipeline. These natural gas pipelines enable the provision of diverse sources of natural gas supplies to the customers of Southern Company Gas. Gas pipeline investments also included a 5% ownership interest in the Atlantic Coast Pipeline construction project prior to its sale on March 24, 2020. See Note (C) under "Other Matters – Southern Company Gas" for information regarding the September 2021 cancellation of the PennEast Pipeline project.

Wholesale gas services (until the sale of Sequent on July 1, 2021) provided natural gas asset management and/or related logistics services for each of Southern Company Gas' utilities except Nicor Gas as well as for non-affiliated companies. The Virginia Natural Gas asset management agreement ended on March 31, 2021 and was not extended. Additionally, wholesale gas services engaged in natural gas storage and gas pipeline arbitrage and related activities. See Note (K) under "Southern Company Gas" for information regarding the sale of Sequent on July 1, 2021.

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

The all other column includes segments and subsidiaries that fall below the quantitative threshold for separate disclosure, including storage and fuels operations. The all other column included Jefferson Island through its sale on December 1, 2020 and Pivotal LNG through its sale on March 24, 2020.

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(UNAUDITED)

Business segment financial data for the three and nine months ended September 30, 2021 and 2020 was as follows:


	Gas Distribution Operations		Gas Pipeline Investments		Wholesale Gas Services(a)		Gas Marketing Services		Total		All Other		Eliminations		Consolidated
	(in millions)
Three Months Ended September 30, 2021
Operating revenues	$	556	$	8	$	—	$	52	$	616	$	11	$	(4)	$	623
Segment net income (loss)(b)(c)	45		10		94		(2)		147		(91)		—		56
Nine Months Ended September 30, 2021
Operating revenues	$	2,466	$	24	$	188	$	311	$	2,989	$	29	$	(24)	$	2,994
Segment net income (loss)(b)(c)(d)	308		3		108		60		479		(90)		—		389
Total assets at September 30, 2021	20,619		1,478		132		1,534		23,763		11,387		(12,192)		22,958
Three Months Ended September 30, 2020
Operating revenues	$	479	$	8	$	(51)	$	39	$	475	$	8	$	(6)	$	477
Segment net income (loss)	46		23		(45)		(3)		21		(7)		—		14
Nine Months Ended September 30, 2020
Operating revenues	$	2,086	$	24	$	(19)	$	272	$	2,363	$	24	$	(25)	$	2,362
Segment net income (loss)	284		74		(45)		59		372		(12)		—		360
Total assets at December 31, 2020	19,090		1,597		850		1,503		23,040		11,336		(11,746)		22,630

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


	Third Party Gross Revenues		Intercompany Revenues		Total Gross Revenues		Less Gross Gas Costs		Operating Revenues
	(in millions)
Three Months Ended September 30, 2021	$	—	$	—	$	—	$	—	$	—
Three Months Ended September 30, 2020	1,050		33		1,083		1,134		(51)
Nine Months Ended September 30, 2021	$	3,881	$	90	$	3,971	$	3,783	$	188
Nine Months Ended September 30, 2020	3,089		81		3,170		3,189		(19)

(b)For wholesale gas services, includes a preliminary pre-tax gain of $121 million ($93 million after tax) related to the sale of Sequent. See Note (K) under "Southern Company Gas" for additional information.

(c)For the "All Other" column, includes $85 million of additional tax expense due to changes in state apportionment rates as a result of the sale of Sequent. See Note (K) under "Southern Company Gas" for additional information.

(d)For gas pipeline investments, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to the equity method investment in the PennEast Pipeline project. See Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively, for additional information.

Table of Contents Index to Financial Statements

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