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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Retail electric revenues	$	5,961	$	4,551	$	14,363	$	11,492
Wholesale electric revenues	1,197		731		2,798		1,822
Other electric revenues	185		179		554		525
Natural gas revenues (includes alternative revenue programs of $(1), $(1), $—, and $3, respectively)	857		623		3,998		2,994
Other revenues	178		154		519		513
Total operating revenues	8,378		6,238		22,232		17,346
Operating Expenses:
Fuel	2,423		1,234		5,249		2,930
Purchased power	645		288		1,285		712
Cost of natural gas	294		129		1,840		943
Cost of other sales	92		71		275		255
Other operations and maintenance	1,547		1,446		4,621		4,257
Depreciation and amortization	922		896		2,728		2,658
Taxes other than income taxes	352		312		1,073		969
Estimated loss on Plant Vogtle Units 3 and 4	(70)		264		(18)		772


Gain on dispositions, net	(20)		(125)		(53)		(179)
Total operating expenses	6,185		4,515		17,000		13,317
Operating Income	2,193		1,723		5,232		4,029
Other Income and (Expense):
Allowance for equity funds used during construction	59		49		163		140
Earnings from equity method investments	28		30		109		35
Interest expense, net of amounts capitalized	(511)		(451)		(1,461)		(1,352)

Other income (expense), net	132		131		414		290
Total other income and (expense)	(292)		(241)		(775)		(887)
Earnings Before Income Taxes	1,901		1,482		4,457		3,142
Income taxes	414		372		891		550
Consolidated Net Income	1,487		1,110		3,566		2,592

Dividends on preferred stock of subsidiaries	3		4		10		11
Net income (loss) attributable to noncontrolling interests	12		5		(55)		(27)
Consolidated Net Income Attributable to Southern Company	$	1,472	$	1,101	$	3,611	$	2,608
Common Stock Data:
Earnings per share -
Basic	$	1.36	$	1.04	$	3.38	$	2.46
Diluted	$	1.35	$	1.03	$	3.36	$	2.44
Average number of shares of common stock outstanding (in millions)
Basic	1,082		1,061		1,070		1,060
Diluted	1,088		1,068		1,076		1,067

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Consolidated Net Income	$	1,487	$	1,110	$	3,566	$	2,592
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of $2, $1, $(5), and $(4), respectively	—		1		(27)		(15)
Reclassification adjustment for amounts included in net income, net of tax of $8, $10, $32, and $27, respectively	26		31		100		81
Pension and other postretirement benefit plans:

Reclassification adjustment for amounts included in net income, net of tax of $1, $1, $3, and $4, respectively	2		4		8		10
Total other comprehensive income	28		36		81		76
Comprehensive Income	1,515		1,146		3,647		2,668

Dividends on preferred stock of subsidiaries	3		4		10		11
Comprehensive income (loss) attributable to noncontrolling interests	12		5		(55)		(27)
Consolidated Comprehensive Income Attributable to Southern Company	$	1,500	$	1,137	$	3,692	$	2,684

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

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,
	2022		2021
	(in millions)
Operating Activities:
Consolidated net income	$	3,566	$	2,592
Adjustments to reconcile consolidated net income to net cash provided from operating activities —
Depreciation and amortization, total	3,084		2,944
Deferred income taxes	608		89
Utilization of federal investment tax credits	266		256
Allowance for equity funds used during construction	(163)		(140)
Mark-to-market adjustments	(33)		147
Pension, postretirement, and other employee benefits	(322)		(218)
Settlement of asset retirement obligations	(314)		(341)
Stock based compensation expense	116		134

Estimated loss on Plant Vogtle Units 3 and 4	(18)		772



Storm damage accruals	160		166

Gain on dispositions, net	(41)		(171)
Natural gas cost under recovery – long-term	207		(79)
Retail fuel cost under recovery – long-term	(1,701)		(209)
Other, net	(45)		156
Changes in certain current assets and liabilities —
-Receivables	(327)		2


-Materials and supplies	(138)		(91)
-Natural gas for sale, net of temporary LIFO liquidation	(136)		20
-Natural gas cost under recovery	(124)		(432)
-Other current assets	(343)		(180)
-Accounts payable	805		(45)
-Accrued taxes	167		288
-Accrued compensation	(123)		(93)
-Accrued interest	(101)		(110)
-Retail fuel cost over recovery	(1)		(150)


-Other current liabilities	(32)		(226)
Net cash provided from operating activities	5,017		5,081
Investing Activities:
Business acquisitions, net of cash acquired	—		(345)

Property additions	(5,502)		(5,222)


Nuclear decommissioning trust fund purchases	(858)		(1,301)
Nuclear decommissioning trust fund sales	854		1,297
Proceeds from dispositions	120		160
Cost of removal, net of salvage	(518)		(282)


Payments pursuant to LTSAs	(121)		(145)
Other investing activities	73		(12)
Net cash used for investing activities	(5,952)		(5,850)
Financing Activities:
Decrease in notes payable, net	(349)		(203)
Proceeds —
Long-term debt	3,800		6,793

Short-term borrowings	1,200		325
Common stock	1,803		62

Redemptions and repurchases —
Long-term debt	(1,932)		(3,060)



Short-term borrowings	(900)		(25)
Capital contributions from noncontrolling interests	73		415
Distributions to noncontrolling interests	(175)		(204)

Payment of common stock dividends	(2,166)		(2,077)

Other financing activities	(235)		(224)
Net cash provided from financing activities	1,119		1,802
Net Change in Cash, Cash Equivalents, and Restricted Cash	184		1,033
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	1,829		1,068
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	2,013	$	2,101
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $74 and $68 capitalized for 2022 and 2021, respectively)	$	1,425	$	1,417
Income taxes, net	160		92
Noncash transactions —
Accrued property additions at end of period	872		915
Contributions from noncontrolling interests	—		89
Contributions of wind turbine equipment	—		82
Right-of-use assets obtained under leases	141		92
Reassessment of right-of-use assets under operating leases	40		—

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

Table of Contents Index to Financial Statements

THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	2,009	$	1,798

Receivables —
Customer accounts	2,223		1,806

Unbilled revenues	593		711


Other accounts and notes	533		523
Accumulated provision for uncollectible accounts	(80)		(78)
Materials and supplies	1,657		1,543
Fossil fuel for generation	526		450
Natural gas for sale	498		362

Prepaid expenses	373		330

Assets from risk management activities, net of collateral	289		151
Regulatory assets – asset retirement obligations	284		219
Natural gas cost under recovery	390		266

Other regulatory assets	746		653
Other current assets	322		231
Total current assets	10,363		8,965
Property, Plant, and Equipment:
In service	116,236		115,592
Less: Accumulated depreciation	34,922		34,079
Plant in service, net of depreciation	81,314		81,513
Other utility plant, net	602		—
Nuclear fuel, at amortized cost	840		824
Construction work in progress	10,773		8,771
Total property, plant, and equipment	93,529		91,108
Other Property and Investments:
Goodwill	5,280		5,280
Nuclear decommissioning trusts, at fair value	2,031		2,542
Equity investments in unconsolidated subsidiaries	1,292		1,282
Other intangible assets, net of amortization of $331 and $307, respectively	415		445

Miscellaneous property and investments	590		653
Total other property and investments	9,608		10,202
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	1,560		1,701
Deferred charges related to income taxes	854		824
Prepaid pension costs	2,019		1,657

Unamortized loss on reacquired debt	243		258
Deferred under recovered fuel clause revenues	1,697		410
Regulatory assets – asset retirement obligations, deferred	6,519		5,466
Other regulatory assets, deferred	6,121		5,577


Other deferred charges and assets	1,492		1,366
Total deferred charges and other assets	20,505		17,259
Total Assets	$	134,005	$	127,534

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

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	3,241	$	2,157

Notes payable	1,398		1,440

Accounts payable	3,079		2,169
Customer deposits	516		479
Accrued taxes —
Accrued income taxes	129		50

Other accrued taxes	882		641
Accrued interest	431		533

Accrued compensation	961		1,070
Asset retirement obligations	689		697





Operating lease obligations	191		250
Other regulatory liabilities	440		563
Other current liabilities	844		872
Total current liabilities	12,801		10,921
Long-term Debt	50,427		50,120
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	9,916		8,862
Deferred credits related to income taxes	5,271		5,401
Accumulated deferred ITCs	2,154		2,216
Employee benefit obligations	1,466		1,550
Operating lease obligations, deferred	1,393		1,503
Asset retirement obligations, deferred	11,007		10,990


Other cost of removal obligations	1,950		2,103
Other regulatory liabilities, deferred	536		485

Other deferred credits and liabilities	1,366		816
Total deferred credits and other liabilities	35,059		33,926
Total Liabilities	98,287		94,967
Redeemable Preferred Stock of Subsidiaries	242		291


















Total Stockholders' Equity (See accompanying statements)	35,476		32,276
Total Liabilities and Stockholders' Equity	$	134,005	$	127,534

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

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

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, 2021	1,061	(1)	$	5,279	$	11,950	$	(47)	$	10,929	$	(237)		$	4,402	$	32,276
Consolidated net income (loss)	—	—	—		—		—		1,032		—			(45)		987
Other comprehensive income	—	—	—		—		—		—		42			—		42
Stock issued	3	—	7		31		—		—		—			—		38
Stock-based compensation	—	—	—		6		—		—		—			—		6

Cash dividends of $0.66 per share	—	—	—		—		—		(702)		—			—		(702)

Capital contributions from noncontrolling interests	—	—	—		—		—		—		—			73		73
Distributions to noncontrolling interests	—	—	—		—		—		—		—			(98)		(98)



Other	—	—	—		7		(2)		2		—			—		7
Balance at March 31, 2022	1,064	(1)	5,286		11,994		(49)		11,261		(195)			4,332		32,629
Consolidated net income (loss)	—	—	—		—		—		1,107		—			(22)		1,085
Other comprehensive income	—	—	—		—		—		—		11			—		11
Stock issued	—	—	2		21		—		—		—			—		23
Stock-based compensation	—	—	—		14		—		—		—			—		14

Cash dividends of $0.68 per share	—	—	—		—		—		(723)		—			—		(723)


Distributions to noncontrolling interests	—	—	—		—		—		—		—			(28)		(28)




Other	—	—	—		4		(2)		—		—			—		2
Balance at June 30, 2022	1,064	(1)	5,288		12,033		(51)		11,645		(184)			4,282		33,013
Consolidated net income	—	—	—		—		—		1,472		—			12		1,484
Other comprehensive income	—	—	—		—		—		—		28			—		28

Stock issued	26	—	129		1,613		—		—		—			—		1,742
Stock-based compensation	—	—	—		15		—		—		—			—		15

Cash dividends of $0.68 per share	—	—	—		—		—		(741)		—			—		(741)


Distributions to noncontrolling interests	—	—	—		—		—		—		—			(57)		(57)



Other	—	—	—		(4)		(1)		(2)		(1)			—		(8)
Balance at September 30, 2022	1,090	(1)	$	5,417	$	13,657	$	(52)	$	12,374	$	(157)		$	4,237	$	35,476

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	2,008	$	1,651	$	5,015	$	4,357
Wholesale revenues, non-affiliates	250		107		522		285
Wholesale revenues, affiliates	70		53		170		109
Other revenues	116		93		316		268
Total operating revenues	2,444		1,904		6,023		5,019
Operating Expenses:
Fuel	666		373		1,399		927
Purchased power, non-affiliates	185		76		347		173
Purchased power, affiliates	113		45		260		114
Other operations and maintenance	418		401		1,270		1,175
Depreciation and amortization	220		214		652		640
Taxes other than income taxes	106		99		309		303
Total operating expenses	1,708		1,208		4,237		3,332
Operating Income	736		696		1,786		1,687
Other Income and (Expense):
Allowance for equity funds used during construction	18		14		51		38
Interest expense, net of amounts capitalized	(98)		(84)		(278)		(252)
Other income (expense), net	38		29		101		93
Total other income and (expense)	(42)		(41)		(126)		(121)
Earnings Before Income Taxes	694		655		1,660		1,566
Income taxes	166		152		394		366
Net Income	528		503		1,266		1,200
Dividends on Preferred Stock	3		4		10		11
Net Income After Dividends on Preferred Stock	$	525	$	499	$	1,256	$	1,189

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net Income	$	528	$	503	$	1,266	$	1,200
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of $—, $1, $—, and $1, respectively	1		4		(1)		3
Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $1, and $1, respectively	1		1		3		3
Total other comprehensive income	2		5		2		6
Comprehensive Income	$	530	$	508	$	1,268	$	1,206

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

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2022		2021
	(in millions)
Operating Activities:
Net income	$	1,266	$	1,200
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	817		748
Deferred income taxes	210		104

Pension, postretirement, and other employee benefits	(85)		(74)
Settlement of asset retirement obligations	(139)		(152)

Retail fuel cost under recovery – long-term	(413)		—

Other, net	(98)		(51)
Changes in certain current assets and liabilities —
-Receivables	(296)		(128)
-Fossil fuel stock	(40)		91
-Prepayments	(34)		(24)

-Retail fuel cost under recovery	(93)		(79)
-Other current assets	(41)		(32)
-Accounts payable	(22)		(230)
-Accrued taxes	110		178



-Other current liabilities	(70)		(132)
Net cash provided from operating activities	1,072		1,419
Investing Activities:
Property additions	(1,483)		(1,235)
Nuclear decommissioning trust fund purchases	(273)		(536)
Nuclear decommissioning trust fund sales	273		536
Cost of removal, net of salvage	(163)		(93)

Other investing activities	5		(7)
Net cash used for investing activities	(1,641)		(1,335)
Financing Activities:


Proceeds — Senior notes	1,700		600



Redemptions —

Senior notes	(550)		(200)

Other long-term debt	—		(206)

Capital contributions from parent company	660		630
Payment of common stock dividends	(762)		(738)
Other financing activities	(81)		(30)
Net cash provided from financing activities	967		56
Net Change in Cash, Cash Equivalents, and Restricted Cash	398		140
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	1,060		530
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	1,458	$	670
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $14 and $11 capitalized for 2022 and 2021, respectively)	$	278	$	246
Income taxes, net	178		183
Noncash transactions —
Accrued property additions at end of period	186		178
Right-of-use assets obtained under leases	9		2

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

Table of Contents Index to Financial Statements

ALABAMA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	1,458	$	1,060
Receivables —
Customer accounts	573		410
Unbilled revenues	146		138


Affiliated	84		37
Other accounts and notes	131		55
Accumulated provision for uncollectible accounts	(13)		(14)
Fossil fuel stock	199		159
Materials and supplies	568		548

Prepaid expenses	67		41
Other regulatory assets	298		208
Other current assets	129		67
Total current assets	3,640		2,709
Property, Plant, and Equipment:
In service	33,042		33,135
Less: Accumulated provision for depreciation	10,393		10,313
Plant in service, net of depreciation	22,649		22,822
Other utility plant, net	602		—
Nuclear fuel, at amortized cost	242		247
Construction work in progress	1,524		1,147
Total property, plant, and equipment	25,017		24,216
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	1,067		1,325
Equity investments in unconsolidated subsidiaries	58		57
Miscellaneous property and investments	128		126
Total other property and investments	1,253		1,508
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	70		108
Deferred charges related to income taxes	248		240
Prepaid pension and other postretirement benefit costs	605		513

Regulatory assets – asset retirement obligations	1,952		1,547
Other regulatory assets, deferred	2,048		1,807
Other deferred charges and assets	413		334
Total deferred charges and other assets	5,336		4,549
Total Assets	$	35,246	$	32,982

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	202	$	751

Accounts payable —
Affiliated	401		309
Other	376		459
Customer deposits	106		106


Accrued taxes	209		98
Accrued interest	86		100

Accrued compensation	200		219

Asset retirement obligations	327		320
Other regulatory liabilities	89		215
Other current liabilities	97		125
Total current liabilities	2,093		2,702
Long-term Debt	10,628		8,936
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	3,829		3,573
Deferred credits related to income taxes	1,930		1,968
Accumulated deferred ITCs	82		88
Employee benefit obligations	171		171
Operating lease obligations	65		66
Asset retirement obligations, deferred	3,987		4,014
Other cost of removal obligations	57		192
Other regulatory liabilities, deferred	226		210

Other deferred credits and liabilities	62		58
Total deferred credits and other liabilities	10,409		10,340
Total Liabilities	23,130		21,978
Redeemable Preferred Stock	242		291








Common Stockholder's Equity (See accompanying statements)	11,874		10,713
Total Liabilities and Stockholder's Equity	$	35,246	$	32,982

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

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, 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

Balance at December 31, 2021	31	$	1,222	$	6,056	$	3,448	$	(13)	$	10,713
Net income after dividends on preferred stock	—	—		—		347		—		347

Capital contributions from parent company	—	—		626		—		—		626

Cash dividends on common stock	—	—		—		(254)		—		(254)

Balance at March 31, 2022	31	1,222		6,682		3,541		(13)		11,432
Net income after dividends on preferred stock	—	—		—		383		—		383

Capital contributions from parent company	—	—		32		—		—		32
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(254)		—		(254)

Balance at June 30, 2022	31	1,222		6,714		3,670		(12)		11,594
Net income after dividends on preferred stock	—	—		—		525		—		525


Capital contributions from parent company	—	—		7		—		—		7
Other comprehensive income	—	—		—		—		2		2
Cash dividends on common stock	—	—		—		(254)		—		(254)

Balance at September 30, 2022	31	$	1,222	$	6,721	$	3,941	$	(10)	$	11,874

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	3,703	$	2,652	$	8,629	$	6,465
Wholesale revenues	56		63		186		143

Other revenues	130		141		403		442
Total operating revenues	3,889		2,856		9,218		7,050
Operating Expenses:
Fuel	841		432		1,887		1,088
Purchased power, non-affiliates	304		173		700		461
Purchased power, affiliates	571		288		1,100		573
Other operations and maintenance	595		544		1,686		1,558
Depreciation and amortization	359		345		1,066		1,025
Taxes other than income taxes	155		130		420		365
Estimated loss on Plant Vogtle Units 3 and 4	(70)		264		(18)		772
Total operating expenses	2,755		2,176		6,841		5,842
Operating Income	1,134		680		2,377		1,208
Other Income and (Expense):
Allowance for equity funds used during construction	37		33		102		94
Interest expense, net of amounts capitalized	(123)		(106)		(347)		(315)
Other income (expense), net	36		42		140		124
Total other income and (expense)	(50)		(31)		(105)		(97)
Earnings Before Income Taxes	1,084		649		2,272		1,111
Income taxes	226		113		421		81
Net Income	$	858	$	536	$	1,851	$	1,030

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net Income	$	858	$	536	$	1,851	$	1,030
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of $—, $—, $8, and $—, respectively	—		—		23		—
Reclassification adjustment for amounts included in net income, net of tax of $—, $1, $1, and $2, respectively	1		2		4		5
Total other comprehensive income	1		2		27		5
Comprehensive Income	$	859	$	538	$	1,878	$	1,035

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

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Nine Months Ended September 30,
	2022		2021
	(in millions)
Operating Activities:
Net income	$	1,851	$	1,030
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	1,211		1,164
Deferred income taxes	266		(299)
Utilization of federal investment tax credits	49		19
Allowance for equity funds used during construction	(102)		(94)


Pension, postretirement, and other employee benefits	(178)		(112)

Settlement of asset retirement obligations	(149)		(154)
Storm damage accruals	160		160
Retail fuel cost under recovery – long-term	(1,287)		(203)


Estimated loss on Plant Vogtle Units 3 and 4	(18)		772
Other, net	(71)		70
Changes in certain current assets and liabilities —
-Receivables	(321)		(85)
-Fossil fuel stock	(23)		77

-Materials and supplies	(67)		(60)
-Contract assets	(51)		(32)
-Other current assets	(72)		(20)
-Accounts payable	211		164
-Accrued taxes	151		154

-Retail fuel cost over recovery	—		(113)


-Other current liabilities	(78)		(88)
Net cash provided from operating activities	1,482		2,350
Investing Activities:
Property additions	(2,658)		(2,411)
Nuclear decommissioning trust fund purchases	(585)		(766)
Nuclear decommissioning trust fund sales	581		761
Cost of removal, net of salvage	(250)		(99)
Change in construction payables, net of joint owner portion	148		(68)

Contributions in aid of construction	102		71
Proceeds from dispositions	56		4

Other investing activities	(47)		(64)
Net cash used for investing activities	(2,653)		(2,572)
Financing Activities:
Increase (decrease) in notes payable, net	415		(60)
Proceeds —
Senior notes	1,500		750
Pollution control revenue bonds	—		122
FFB loan	—		371
Short-term borrowings	650		—

Redemptions and repurchases —

Senior notes	(400)		(325)
Pollution control revenue bonds	(53)		(69)
FFB loan	(66)		(75)
Short-term borrowings	(250)		—
Other long-term debt	(125)		—

Capital contributions from parent company	813		1,054
Payment of common stock dividends	(1,268)		(1,237)


Other financing activities	(45)		(26)
Net cash provided from financing activities	1,171		505
Net Change in Cash, Cash Equivalents, and Restricted Cash	—		283
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	33		9
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	33	$	292
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $52 and $47 capitalized for 2022 and 2021, respectively)	$	332	$	325
Income taxes, net	151		237
Noncash transactions —
Accrued property additions at end of period	609		477
Right-of-use assets obtained under operating leases	7		(3)
Right-of-use assets obtained under finance leases	112		—

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

Table of Contents Index to Financial Statements

GEORGIA POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	33	$	33

Receivables —
Customer accounts, net	866		547
Unbilled revenues	267		231

Joint owner accounts	64		116

Affiliated	66		25
Other accounts and notes	30		44

Fossil fuel stock	272		248
Materials and supplies	713		670




Regulatory assets – asset retirement obligations	244		178
Assets from risk management activities	88		48
Other regulatory assets	299		289
Other current assets	212		130
Total current assets	3,154		2,559
Property, Plant, and Equipment:
In service	41,159		41,332
Less: Accumulated provision for depreciation	12,942		12,854
Plant in service, net of depreciation	28,217		28,478

Nuclear fuel, at amortized cost	598		577
Construction work in progress	8,053		6,688
Total property, plant, and equipment	36,868		35,743
Other Property and Investments:
Nuclear decommissioning trusts, at fair value	964		1,217
Equity investments in unconsolidated subsidiaries	51		50
Miscellaneous property and investments	87		69
Total other property and investments	1,102		1,336
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	1,034		1,157
Deferred charges related to income taxes	573		550
Prepaid pension costs	697		563
Deferred under recovered fuel clause revenues	1,697		410
Regulatory assets – asset retirement obligations, deferred	4,323		3,688
Other regulatory assets, deferred	2,579		1,964
Other deferred charges and assets	519		491
Total deferred charges and other assets	11,422		8,823
Total Assets	$	52,546	$	48,461

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	900	$	675
Notes payable	814		—
Accounts payable —
Affiliated	880		757
Other	1,025		702
Customer deposits	254		259


Accrued taxes	486		335
Accrued interest	127		136

Accrued compensation	213		232
Operating lease obligations	148		156
Asset retirement obligations	309		317


Other regulatory liabilities	197		280


Other current liabilities	243		254
Total current liabilities	5,596		4,103
Long-term Debt	13,831		13,109
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	3,588		3,019
Deferred credits related to income taxes	2,264		2,321
Accumulated deferred ITCs	321		328
Employee benefit obligations	370		402
Operating lease obligations, deferred	854		999
Asset retirement obligations, deferred	6,547		6,507

Other deferred credits and liabilities	518		439
Total deferred credits and other liabilities	14,462		14,015
Total Liabilities	33,889		31,227









Common Stockholder's Equity (See accompanying statements)	18,657		17,234
Total Liabilities and Stockholder's Equity	$	52,546	$	48,461

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

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, 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

Balance at December 31, 2021	9	$	398	$	14,153	$	2,724	$	(41)	$	17,234
Net income	—	—		—		385		—		385

Capital contributions from parent company	—	—		443		—		—		443
Other comprehensive income	—	—		—		—		10		10
Cash dividends on common stock	—	—		—		(423)		—		(423)

Balance at March 31, 2022	9	398		14,596		2,686		(31)		17,649
Net income	—	—		—		608		—		608

Capital contributions from parent company	—	—		46		—		—		46
Other comprehensive income	—	—		—		—		16		16
Cash dividends on common stock	—	—		—		(422)		—		(422)

Balance at June 30, 2022	9	398		14,642		2,872		(15)		17,897
Net income	—	—		—		858		—		858

Capital contributions from parent company	—	—		324		—		—		324
Other comprehensive income	—	—		—		—		1		1
Cash dividends on common stock	—	—		—		(423)		—		(423)

Balance at September 30, 2022	9	$	398	$	14,966	$	3,307	$	(14)	$	18,657

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Retail revenues	$	250	$	248	$	718	$	670
Wholesale revenues, non-affiliates	60		60		191		178
Wholesale revenues, affiliates	187		62		336		120
Other revenues	13		8		34		20
Total operating revenues	510		378		1,279		988
Operating Expenses:
Fuel and purchased power	262		145		601		351


Other operations and maintenance	86		85		252		230
Depreciation and amortization	45		46		135		138
Taxes other than income taxes	32		33		93		96

Total operating expenses	425		309		1,081		815
Operating Income	85		69		198		173
Other Income and (Expense):

Interest expense, net of amounts capitalized	(15)		(16)		(42)		(45)
Other income (expense), net	9		7		32		27
Total other income and (expense)	(6)		(9)		(10)		(18)
Earnings Before Income Taxes	79		60		188		155
Income taxes	17		10		38		22
Net Income	$	62	$	50	$	150	$	133

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net Income	$	62	$	50	$	150	$	133
Other comprehensive income:
Qualifying hedges:

Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $—, respectively	—		—		—		1
Total other comprehensive income	—		—		—		1
Comprehensive Income	$	62	$	50	$	150	$	134

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,
	2022		2021
	(in millions)
Operating Activities:
Net income	$	150	$	133
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	164		161




Settlement of asset retirement obligations	(15)		(18)


Other, net	20		(20)
Changes in certain current assets and liabilities —
-Receivables	(58)		(19)



-Other current assets	(17)		(9)
-Accounts payable	41		(12)
-Accrued taxes	(3)		(20)


-Retail fuel cost over recovery	—		(19)



-Other current liabilities	(3)		(18)
Net cash provided from operating activities	279		159
Investing Activities:
Property additions	(165)		(135)
Construction payables	(9)		(11)



Payments pursuant to LTSAs	(23)		(21)
Other investing activities	(22)		(15)
Net cash used for investing activities	(219)		(182)
Financing Activities:
Decrease in notes payable, net	—		(25)

Proceeds — Senior notes	—		525






Redemptions —



Other revenue bonds	—		(270)
Other long-term debt	—		(75)



Capital contributions from parent company	55		103

Payment of common stock dividends	(128)		(118)
Other financing activities	1		(10)
Net cash provided from (used for) financing activities	(72)		130
Net Change in Cash, Cash Equivalents, and Restricted Cash	(12)		107
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	61		39
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	49	$	146
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest	$	49	$	53
Income taxes, net	18		11

Noncash transactions — Accrued property additions at end of period	16		23

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

Table of Contents Index to Financial Statements

MISSISSIPPI POWER COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	49	$	61
Receivables —
Customer accounts, net	71		37
Unbilled revenues	43		34

Affiliated	39		29
Other accounts and notes	34		28

Fossil fuel stock	37		28
Materials and supplies	80		70
Assets from risk management activities	69		28
Other regulatory assets	60		54

Other current assets	16		13
Total current assets	498		382
Property, Plant, and Equipment:
In service	5,209		5,106
Less: Accumulated provision for depreciation	1,669		1,591
Plant in service, net of depreciation	3,540		3,515

Construction work in progress	168		127
Total property, plant, and equipment	3,708		3,642
Other Property and Investments	171		179
Deferred Charges and Other Assets:

Deferred charges related to income taxes	30		31
Prepaid pension costs	97		79
Regulatory assets – asset retirement obligations	238		232
Other regulatory assets, deferred	271		317
Accumulated deferred income taxes	108		118

Other deferred charges and assets	130		100
Total deferred charges and other assets	874		877
Total Assets	$	5,251	$	5,080

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	1	$	1




Accounts payable —
Affiliated	96		81
Other	68		47



Accrued taxes	116		120


Accrued compensation	33		36

Asset retirement obligations	20		30

Other regulatory liabilities	102		59


Other current liabilities	80		65
Total current liabilities	516		439



Long-term Debt	1,509		1,510
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	465		464
Deferred credits related to income taxes	258		269

Employee benefit obligations	86		88

Asset retirement obligations, deferred	162		160

Other cost of removal obligations	197		195
Other regulatory liabilities, deferred	87		64
Other deferred credits and liabilities	25		24
Total deferred credits and other liabilities	1,280		1,264
Total Liabilities	3,305		3,213








Common Stockholder's Equity (See accompanying statements)	1,946		1,867
Total Liabilities and Stockholder's Equity	$	5,251	$	5,080

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

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, 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

Balance at December 31, 2021	1	$	38	$	4,582	$	(2,753)	$	—	$	1,867
Net income	—	—		—		42		—		42


Capital contributions from parent company	—	—		51		—		—		51

Cash dividends on common stock	—	—		—		(43)		—		(43)

Balance at March 31, 2022	1	38		4,633		(2,754)		—		1,917
Net income	—	—		—		45		—		45


Capital contributions from parent company	—	—		1		—		—		1

Cash dividends on common stock	—	—		—		(42)		—		(42)

Balance at June 30, 2022	1	38		4,634		(2,751)		—		1,921
Net income	—	—		—		62		—		62


Capital contributions from parent company	—	—		5		—		—		5

Cash dividends on common stock	—	—		—		(42)		—		(42)

Balance at September 30, 2022	1	$	38	$	4,639	$	(2,731)	$	—	$	1,946

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Wholesale revenues, non-affiliates	$	835	$	503	$	1,918	$	1,231
Wholesale revenues, affiliates	336		167		673		361
Other revenues	9		9		27		18
Total operating revenues	1,180		679		2,618		1,610
Operating Expenses:
Fuel	605		259		1,274		540
Purchased power	144		41		233		86

Other operations and maintenance	113		94		331		308
Depreciation and amortization	133		132		384		383
Taxes other than income taxes	13		12		38		35

Loss on sales-type leases	—		15		1		15
Gain on dispositions, net	—		—		(2)		(39)
Total operating expenses	1,008		553		2,259		1,328
Operating Income	172		126		359		282
Other Income and (Expense):
Interest expense, net of amounts capitalized	(32)		(36)		(105)		(111)
Other income (expense), net	3		2		5		10
Total other income and (expense)	(29)		(34)		(100)		(101)
Earnings Before Income Taxes	143		92		259		181
Income taxes (benefit)	36		9		49		(3)
Net Income	107		83		210		184
Net income (loss) attributable to noncontrolling interests	12		5		(55)		(27)
Net Income Attributable to Southern Power	$	95	$	78	$	265	$	211

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net Income	$	107	$	83	$	210	$	184
Other comprehensive income (loss):
Qualifying hedges:
Changes in fair value, net of tax of $(11), $(7), $(35), and $(16), respectively	(35)		(21)		(106)		(48)
Reclassification adjustment for amounts included in net income, net of tax of $9, $9, $35, and $22, respectively	28		27		106		66
Pension and other postretirement benefit plans:


Reclassification adjustment for amounts included in net income, net of tax of $—, $—, $—, and $1, respectively	—		1		1		2
Total other comprehensive income (loss)	(7)		7		1		20
Comprehensive Income	100		90		211		204
Comprehensive income (loss) attributable to noncontrolling interests	12		5		(55)		(27)
Comprehensive Income Attributable to Southern Power	$	88	$	85	$	266	$	231

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

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,
	2022		2021
	(in millions)
Operating Activities:
Net income	$	210	$	184
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	404		402
Deferred income taxes	21		(16)
Utilization of federal investment tax credits	218		237
Amortization of investment tax credits	(44)		(44)







Gain on dispositions, net	(2)		(39)
Other, net	1		14
Changes in certain current assets and liabilities —
-Receivables	(124)		(117)

-Prepaid income taxes	22		63
-Other current assets	(15)		(5)
-Accounts payable	95		55
-Accrued taxes	55		15


-Other current liabilities	(14)		1
Net cash provided from operating activities	827		750
Investing Activities:
Business acquisitions, net of cash acquired	—		(345)
Property additions	(64)		(355)
Proceeds from dispositions	48		22

Change in construction payables	(60)		(22)

Payments pursuant to LTSAs	(52)		(61)


Other investing activities	—		8
Net cash used for investing activities	(128)		(753)
Financing Activities:
Decrease in notes payable, net	(5)		(148)

Proceeds — Senior notes	—		400





Redemptions — Senior notes	(677)		—

Capital contributions from parent company	330		4
Return of capital to parent company	—		(271)
Capital contributions from noncontrolling interests	73		415
Distributions to noncontrolling interests	(175)		(204)

Payment of common stock dividends	(148)		(153)
Other financing activities	(1)		(10)
Net cash provided from (used for) financing activities	(603)		33
Net Change in Cash, Cash Equivalents, and Restricted Cash	96		30
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	135		183
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	231	$	213
Supplemental Cash Flow Information:
Cash paid (received) during the period for —
Interest (net of $— and $5 capitalized for 2022 and 2021, respectively)	$	120	$	118
Income taxes, net	(202)		(235)
Noncash transactions —
Contributions from noncontrolling interests	—		89
Contributions of wind turbine equipment	—		82
Accrued property additions at end of period	30		53
Right-of-use assets obtained under operating leases	—		66
Reassessment of right-of-use assets under operating leases	40		—

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

Table of Contents Index to Financial Statements

SOUTHERN POWER COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	229	$	107
Receivables —
Customer accounts, net	232		139
Affiliated	95		51
Other	24		29

Materials and supplies	112		106

Prepaid income taxes	5		27




Other current assets	51		46
Total current assets	748		505
Property, Plant, and Equipment:
In service	14,641		14,585
Less: Accumulated provision for depreciation	3,589		3,241
Plant in service, net of depreciation	11,052		11,344
Construction work in progress	48		45

Total property, plant, and equipment	11,100		11,389
Other Property and Investments:

Intangible assets, net of amortization of $124 and $109, respectively	268		282
Equity investments in unconsolidated subsidiaries	49		86
Net investment in sales-type leases	155		161
Total other property and investments	472		529
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	491		479
Prepaid LTSAs	210		210




Other deferred charges and assets	262		278
Total deferred charges and other assets	963		967
Total Assets	$	13,283	$	13,390

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

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	290	$	679
Notes payable	208		211
Accounts payable —
Affiliated	179		92
Other	70		85

Accrued taxes	208		14

Accrued interest	22		32



Other current liabilities	96		140
Total current liabilities	1,073		1,253
Long-term Debt	2,642		3,009
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	315		215
Accumulated deferred ITCs	1,571		1,614





Operating lease obligations	515		497
Other deferred credits and liabilities	287		204
Total deferred credits and other liabilities	2,688		2,530
Total Liabilities	6,403		6,792










Total Stockholders' Equity (See accompanying statements)	6,880		6,598
Total Liabilities and Stockholders' Equity	$	13,283	$	13,390

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

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 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, 2021	$	638	$	1,585	$	(27)	$	2,196	$	4,402	$	6,598
Net income (loss)	—		72		—		72		(45)		27


Other comprehensive income	—		—		5		5		—		5
Cash dividends on common stock	—		(49)		—		(49)		—		(49)

Capital contributions from noncontrolling interests	—		—		—		—		73		73
Distributions to noncontrolling interests	—		—		—		—		(98)		(98)




Balance at March 31, 2022	638		1,608		(22)		2,224		4,332		6,556
Net income (loss)	—		98		—		98		(22)		76

Capital contributions from parent company	322		—		—		322		—		322
Other comprehensive income	—		—		3		3		—		3
Cash dividends on common stock	—		(50)		—		(50)		—		(50)


Distributions to noncontrolling interests	—		—		—		—		(28)		(28)





Balance at June 30, 2022	960		1,656		(19)		2,597		4,282		6,879
Net income	—		95		—		95		12		107

Capital contributions from parent company	9		—		—		9		—		9
Other comprehensive income (loss)	—		—		(7)		(7)		—		(7)
Cash dividends on common stock	—		(49)		—		(49)		—		(49)


Distributions to noncontrolling interests	—		—		—		—		(57)		(57)



Other	—		(1)		(1)		(2)		—		(2)
Balance at September 30, 2022	$	969	$	1,701	$	(27)	$	2,643	$	4,237	$	6,880

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

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,
	2022		2021		2022		2021
	(in millions)				(in millions)
Operating Revenues:
Natural gas revenues (includes revenue taxes of $15, $12, $118, and $89, respectively)	$	858	$	624	$	3,998	$	2,991
Alternative revenue programs	(1)		(1)		—		3

Total operating revenues	857		623		3,998		2,994
Operating Expenses:
Cost of natural gas	294		129		1,840		943

Other operations and maintenance	252		238		829		776
Depreciation and amortization	140		133		414		396
Taxes other than income taxes	45		36		208		166

Gain on dispositions, net	—		(121)		(5)		(127)

Total operating expenses	731		415		3,286		2,154
Operating Income	126		208		712		840
Other Income and (Expense):
Earnings from equity method investments	34		25		105		14
Interest expense, net of amounts capitalized	(65)		(57)		(187)		(175)
Other income (expense), net	15		13		47		(66)
Total other income and (expense)	(16)		(19)		(35)		(227)
Earnings Before Income Taxes	110		189		677		613
Income taxes	27		133		161		224
Net Income	$	83	$	56	$	516	$	389

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net Income	$	83	$	56	$	516	$	389
Other comprehensive income:
Qualifying hedges:
Changes in fair value, net of tax of $8, $8, $16, and $11, respectively	19		23		39		32
Reclassification adjustment for amounts included in net income, net of tax of $(2), $—, $(7), and $1, respectively	(5)		(2)		(17)		1



Total other comprehensive income	14		21		22		33
Comprehensive Income	$	97	$	77	$	538	$	422

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

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,
	2022		2021
	(in millions)
Operating Activities:
Net income	$	516	$	389
Adjustments to reconcile net income to net cash provided from operating activities —
Depreciation and amortization, total	414		396
Deferred income taxes	109		289




Mark-to-market adjustments	(34)		147
Impairment of PennEast Pipeline investment	—		84
Gain on dispositions, net	(5)		(127)
Natural gas cost under recovery – long-term	207		(79)
Other, net	27		32
Changes in certain current assets and liabilities —
-Receivables	301		311
-Natural gas for sale, net of temporary LIFO liquidation	(136)		20
-Prepaid income taxes	(77)		(148)
-Natural gas cost under recovery	(124)		(432)
-Other current assets	7		(98)
-Accounts payable	342		30


-Other current liabilities	(15)		(57)
Net cash provided from operating activities	1,532		757
Investing Activities:
Property additions	(1,063)		(1,045)
Cost of removal, net of salvage	(84)		(74)
Change in construction payables, net	(103)		4


Proceeds from dispositions	—		126
Other investing activities	11		23
Net cash used for investing activities	(1,239)		(966)
Financing Activities:
Increase (decrease) in notes payable, net	(749)		38
Proceeds —
Short-term borrowings	50		300
First mortgage bonds	100		100
Senior notes	500		450
Redemptions —


Short-term borrowings	(150)		—
Senior notes	—		(300)


Medium-term notes	(46)		(30)
Capital contributions from parent company	357		63
Payment of common stock dividends	(389)		(397)
Other financing activities	14		(2)
Net cash provided from (used for) financing activities	(313)		222
Net Change in Cash, Cash Equivalents, and Restricted Cash	(20)		13
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	48		19
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	28	$	32
Supplemental Cash Flow Information:
Cash paid during the period for —
Interest (net of $7 and $6 capitalized for 2022 and 2021, respectively)	$	186	$	173
Income taxes, net	193		85
Noncash transactions — Accrued property additions at end of period	10		146

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

Table of Contents Index to Financial Statements

SOUTHERN COMPANY GAS AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


Assets	At September 30, 2022		At December 31, 2021
	(in millions)
Current Assets:
Cash and cash equivalents	$	26	$	45
Receivables —

Customer accounts	296		462
Unbilled revenues	122		278



Other accounts and notes	58		49
Accumulated provision for uncollectible accounts	(41)		(39)

Natural gas for sale	498		362


Prepaid expenses	192		114

Natural gas cost under recovery	390		266


Other regulatory assets	121		136
Other current assets	118		82
Total current assets	1,780		1,755
Property, Plant, and Equipment:
In service	19,656		18,880
Less: Accumulated depreciation	5,270		5,067
Plant in service, net of depreciation	14,386		13,813
Construction work in progress	871		684
Total property, plant, and equipment	15,257		14,497
Other Property and Investments:
Goodwill	5,015		5,015
Equity investments in unconsolidated subsidiaries	1,125		1,173
Other intangible assets, net of amortization of $154 and $145, respectively	28		37
Miscellaneous property and investments	27		19
Total other property and investments	6,195		6,244
Deferred Charges and Other Assets:
Operating lease right-of-use assets, net of amortization	61		70
Prepaid pension costs	200		175


Other regulatory assets, deferred	468		689


Other deferred charges and assets	136		130
Total deferred charges and other assets	865		1,064
Total Assets	$	24,097	$	23,560

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

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, 2022		At December 31, 2021
	(in millions)
Current Liabilities:
Securities due within one year	$	—	$	47
Notes payable	360		1,209

Accounts payable —
Affiliated	64		58
Other	592		361
Customer deposits	137		95


Accrued taxes	71		124
Accrued interest	67		59

Accrued compensation	92		110






Other regulatory liabilities	15		8
Other current liabilities	168		155
Total current liabilities	1,566		2,226
Long-term Debt	7,361		6,855
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	1,662		1,555
Deferred credits related to income taxes	793		816

Employee benefit obligations	158		176


Operating lease obligations	53		59
Other cost of removal obligations	1,696		1,683
Accrued environmental remediation	217		197



Other deferred credits and liabilities	153		77
Total deferred credits and other liabilities	4,732		4,563
Total Liabilities	13,659		13,644







Common Stockholder's Equity (See accompanying statements)	10,438		9,916
Total Liabilities and Stockholder's Equity	$	24,097	$	23,560

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

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, 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

Balance at December 31, 2021	$	10,024	$	(132)	$	24	$	9,916
Net income	—		319		—		319


Capital contributions from parent company	50		—		—		50
Other comprehensive income	—		—		20		20
Cash dividends on common stock	—		(130)		—		(130)

Balance at March 31, 2022	10,074		57		44		10,175
Net income	—		115		—		115


Capital contributions from parent company	312		—		—		312
Other comprehensive income (loss)	—		—		(12)		(12)
Cash dividends on common stock	—		(130)		—		(130)

Balance at June 30, 2022	10,386		42		32		10,460
Net income	—		83		—		83

Capital contributions from parent company	11		—		—		11
Other comprehensive income	—		—		14		14
Cash dividends on common stock	—		(130)		—		(130)

Balance at September 30, 2022	$	10,397	$	(5)	$	46	$	10,438

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

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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	48
C	Contingencies	60
D	Revenue from Contracts with Customers and Lease Income	64
E	Consolidated Entities and Equity Method Investments	69
F	Financing and Leases	72
G	Income Taxes	74
H	Retirement Benefits	75
I	Fair Value Measurements	78
J	Derivatives	83
K	Acquisitions and Dispositions	94
L	Segment and Related Information	95

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, 2021 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, 2022 and 2021. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy and other factors, 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, 2022 and December 31, 2021 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 during the fourth quarter of each year, or more frequently if impairment indicators arise.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Other intangible assets were as follows:


	At September 30, 2022						At December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net		Gross Carrying Amount		Accumulated Amortization		Other Intangible Assets, Net
	(in millions)						(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships	$	212	$	(159)	$	53	$	212	$	(150)	$	62
Trade names	64		(44)		20		64		(38)		26
PPA fair value adjustments	390		(124)		266		390		(109)		281
Other	5		(4)		1		11		(10)		1
Total other intangible assets subject to amortization	$	671	$	(331)	$	340	$	677	$	(307)	$	370
Other intangible assets not subject to amortization:
Federal Communications Commission licenses	75		—		75		75		—		75
Total other intangible assets	$	746	$	(331)	$	415	$	752	$	(307)	$	445

Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments	$	390	$	(124)	$	266	$	390	$	(109)	$	281

Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships	$	156	$	(137)	$	19	$	156	$	(130)	$	26
Trade names	26		(17)		9		26		(15)		11
Total other intangible assets subject to amortization	$	182	$	(154)	$	28	$	182	$	(145)	$	37

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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, 2022
	(in millions)
Southern Company(a)	$	11	$	30
Southern Power(b)	5		15
Southern Company Gas	4		9

(a)Includes $5 million and $15 million for the three and nine months ended September 30, 2022, respectively, recorded as a reduction to operating revenues.

(b)Recorded as a reduction to operating revenues.

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, 2022		December 31, 2021		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
	(in millions)
Cash and cash equivalents	$	2,009	$	1,798	$	229	$	107	$	26	$	45
Restricted cash(a):
Other current assets	2		2		—		—		2		2
Other deferred charges and assets	3		29		3		29		—		—
Total cash, cash equivalents, and restricted cash(b)	$	2,013	$	1,829	$	231	$	135	$	28	$	48

(a)For Southern Power, reflects $3 million and $10 million at September 30, 2022 and December 31, 2021, respectively, held to fund estimated construction completion costs at the Deuel Harvest wind facility and $19 million at December 31, 2021 related to tax equity contributions restricted until the Garland battery energy storage facility achieved final contracted capacity. For Southern Company Gas, reflects collateral for workers' compensation, life insurance, and long-term disability insurance.

(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 either period presented. Nicor Gas had no inventory decrement at September 30, 2022.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Depreciation and Amortization

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

Alabama Power

On September 23, 2022, the FERC authorized Alabama Power to use updated depreciation rates from its 2021 depreciation study effective January 1, 2023. The study was also provided to the Alabama PSC, and the new depreciation rates will be reflected in Alabama Power's future rate filings. See Note 2 to the financial statements under "Alabama Power" in Item 8 of the Form 10-K for additional information.

Southern Power

Effective January 1, 2022, Southern Power revised the depreciable lives of its wind generating facilities from up to 30 years to up to 35 years. This revision resulted in an immaterial decrease in depreciation for the three and nine months ended September 30, 2022.

(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, 2022 and December 31, 2021 were as follows:


Regulatory Clause	Balance Sheet Line Item	September 30, 2022		December 31, 2021
		(in millions)
Alabama Power

Rate CNP Compliance	Other regulatory liabilities, deferred	$	4	$	—
	Other regulatory assets, deferred	—		16

Rate CNP PPA	Other regulatory assets, deferred	125		84


Retail Energy Cost Recovery(*)	Other regulatory assets, current	93		—
	Other regulatory assets, deferred	413		126


Georgia Power

Fuel Cost Recovery	Deferred under recovered fuel clause revenues	$	1,697	$	410

Mississippi Power

Fuel Cost Recovery	Other customer accounts receivable	$	13	$	4
Ad Valorem Tax	Other regulatory assets, current	12		12
	Other regulatory assets, deferred	22		37


Southern Company Gas

Natural Gas Cost Recovery	Natural gas cost under recovery	$	390	$	266
	Other regulatory assets, deferred	—		207

(*)In accordance with an Alabama PSC order issued on February 1, 2022, Alabama Power applied $126 million of its 2021 Rate RSE refund to reduce the Rate ECR under recovered balance.

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(UNAUDITED)

Alabama Power

Certificates of Convenience and Necessity

On July 12, 2022, the Alabama PSC approved a certificate of convenience and necessity (CCN) authorizing Alabama Power to complete the acquisition of the Calhoun Generating Station, which was approved by the FERC on March 25, 2022. The transaction closed on September 30, 2022 and, on October 3, 2022, Alabama Power filed Rate CNP New Plant with the Alabama PSC to recover the related costs. The filing reflected an increase in annual revenues of $34 million, or 0.6%, effective with the billing month of November 2022. Alabama Power expects to recover all approved costs associated with the acquisition through existing rate mechanisms as outlined in Note 2 to the financial statements in Item 8 of the Form 10-K. See Note (K) under "Alabama Power" for additional information.

With the completion of the Calhoun Generating Station acquisition, Alabama Power expects to retire Plant Barry Unit 5 as early as 2023. In September 2022, Alabama Power reclassified approximately $600 million for Plant Barry Unit 5 from plant in service, net of depreciation to other utility plant, net and will continue to depreciate the asset according to the original depreciation rates. At retirement, Alabama Power will reclassify the remaining net investment costs of the unit to a regulatory asset to be recovered over the unit's remaining useful life, as established prior to the decision to retire, through Rate CNP Compliance. See Note 2 to the financial statements under "Alabama Power – Environmental Accounting Order" in Item 8 of the Form 10-K for additional information.

In its 2020 order authorizing the CCN for Alabama Power's construction of Plant Barry Unit 8, the Alabama PSC authorized recovery of estimated actual in-service costs of $652 million. At September 30, 2022, project expenditures associated with Plant Barry Unit 8 included in CWIP totaled approximately $484 million and the unit is expected to be placed in service in November 2023. The ultimate outcome of this matter cannot be determined at this time.

Rate ECR

On July 12, 2022, the Alabama PSC approved an adjustment to Rate ECR from 1.960 cents per KWH to 2.557 cents per KWH, or approximately $310 million annually, effective with August 2022 billings. The approved increase in the Rate ECR factor has no significant effect on Alabama Power's net income, but does increase operating cash flows related to fuel cost recovery. The rate will adjust to 5.910 cents per KWH in January 2025 absent a further order from the Alabama PSC.

Rate NDR

On July 12, 2022, the Alabama PSC approved modifications to Rate NDR, which include an adjustment to the charges to establish and maintain the reserve and an adjustment to the recovery period for any existing deferred storm-related operations and maintenance costs and future reserve deficits from 24 months to 48 months. As modified, the maximum total Rate NDR charge to recover a deficit is limited to $5.00 per month per non-residential customer account and $2.50 per month per residential customer account.

Beginning with August 2022 billings, the reserve establishment charge was suspended and the reserve maintenance charge was activated as a result of the NDR balance exceeding $75 million. Alabama Power expects to collect $6 million in the second half of 2022 and approximately $12 million annually beginning in 2023 under Rate NDR unless the NDR balance falls below $50 million. At September 30, 2022, Alabama Power's NDR balance was $103 million. Alabama Power continues to have the authority to accrue additional amounts to the NDR as circumstances warrant.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Reliability Reserve Accounting Order

On July 12, 2022, the Alabama PSC approved an accounting order authorizing Alabama Power to create a reliability reserve separate from the NDR and transition the previous Rate NDR authority related to reliability expenditures to the reliability reserve. Alabama Power may make accruals to the reliability reserve if the NDR balance exceeds $35 million.

Renewable Generation Certificate

Through the issuance of a Renewable Generation Certificate (RGC), Alabama Power is authorized by the Alabama PSC to procure up to 500 MWs of renewable capacity and energy by September 16, 2027 and to market the related energy and environmental attributes to customers and other third parties. In April 2022, one of the existing solar projects which was expected to be served through a PPA commencing in first quarter 2024 was terminated, resulting in the restoration of 80 MWs of capacity under the RGC. On October 4, 2022, the Alabama PSC approved two new solar PPAs totaling 160 MWs. Alabama Power has procured solar capacity totaling approximately 330 MWs under the RGC. The ultimate outcome of this matter cannot be determined at this time.

Georgia Power

Rate Plans

2022 Base Rate Case

On June 24, 2022, Georgia Power filed a base rate case (Georgia Power 2022 Base Rate Case) with the Georgia PSC. The filing, as modified on August 22, 2022, proposes a three-year alternate rate plan with requested rate increases totaling $889 million, $107 million, and $45 million effective January 1, 2023, January 1, 2024, and January 1, 2025, respectively. These increases are based on a proposed retail ROE of 11.00% using the currently approved equity ratio of 56% and reflect levelized revenue requirements during the three-year period, with the exception of incremental compliance costs related to CCR AROs, Demand-Side Management (DSM) programs, and related adjustments to the Municipal Franchise Fee tariff.

Georgia Power has requested recovery of the proposed increases through its existing base rate tariffs as follows:


Tariff	2023		2024		2025
	(in millions)
Traditional base	$	762	$	—	$	—
ECCR
Traditional	5		—		—
CCR ARO(a)	64		78		47
DSM(a)	37		27		(2)
Municipal Franchise Fee	21		2		1
Total(b)	$	889	$	107	$	45

(a)As determined by the Georgia PSC through annual compliance filings.

(b)Totals may not add due to rounding.

Georgia Power's filing primarily reflects requests to (i) recover the costs of recent and future capital investments in the electric grid including the transmission and distribution systems and the continuation of its grid investment plan, all designed to support customer long-term reliability and resiliency needs, (ii) recover the cost of coal-fired generation units proposed for retirement, or made unavailable, as requested in the 2022 IRP, as Georgia Power continues the transition of the generation fleet to more economical and cleaner resources, (iii) make the necessary investments and recover costs to comply with federal and state environmental regulations, including costs

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(UNAUDITED)

associated with the CCR AROs related to ash pond and landfill closures and post-closure care, and (iv) reduce operating costs despite significant inflationary pressures. In addition, the filing includes the following provisions:

Continuation of an allowed retail ROE range of 9.50% to 12.00%.
Continuation of the process whereby 80% of any earnings above the top of the allowed ROE range are shared with Georgia Power's customers and the remaining 20% are retained by Georgia Power.
Continuation of the option to file an Interim Cost Recovery tariff in the event earnings are projected to fall below the bottom of the allowed ROE range during the three-year term of the plan.

Georgia Power expects the Georgia PSC to render a final decision in this matter on December 20, 2022. The ultimate outcome of this matter cannot be determined at this time.

2019 ARP

In 2020, the Georgia PSC denied a motion for reconsideration filed by Sierra Club regarding the Georgia PSC's decision in the 2019 ARP allowing Georgia Power to recover compliance costs for CCR AROs. The Superior Court of Fulton County subsequently affirmed the Georgia PSC's decision and, in October 2021, the Georgia Court of Appeals affirmed the Superior Court of Fulton County's order. In December 2021, Sierra Club filed a petition for writ of certiorari to the Georgia Supreme Court, which was denied on July 14, 2022. This matter is now concluded. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information regarding Georgia Power's AROs.

Integrated Resource Plans

In response to supply chain challenges in the solar industry, the Georgia PSC approved Georgia Power's request to amend 970 MWs of utility-scale solar PPAs that were authorized by the Georgia PSC in Georgia Power's 2019 IRP. The amendments extended the required commercial operation dates for the PPAs from 2023 to 2024.

On July 21, 2022, the Georgia PSC approved the 2022 IRP, as modified by a stipulated agreement among Georgia Power, the staff of the Georgia PSC, and certain intervenors and as further modified by the Georgia PSC. In the 2022 IRP decision, the Georgia PSC approved the following requests:

Decertification and retirement of Plant Wansley Units 1 and 2 (926 MWs based on 53.5% ownership), which occurred on August 31, 2022, and reclassification to regulatory asset accounts of the remaining net book values and any remaining unusable materials and supplies inventories upon retirement. The regulatory asset accounts for the remaining net book values of the units ($299 million and $277 million for Unit 1 and Unit 2, respectively, at September 30, 2022) are being amortized at a rate equal to the unit depreciation rates authorized in the 2019 ARP through December 31, 2022. In the Georgia Power 2022 Base Rate Case, Georgia Power requested recovery of the remaining regulatory asset balances for the net book values of the units through 2030 and requested that the timing of recovery of the regulatory asset account for the unusable materials and supplies inventories be determined in a future base rate case.
Decertification and retirement of Plant Scherer Unit 3 (614 MWs based on 75% ownership) by December 31, 2028 and reclassification to regulatory asset accounts of the remaining net book value (approximately $608 million at September 30, 2022) and any remaining unusable materials and supplies inventory to regulatory asset accounts upon retirement. The timing of recovery for these regulatory assets is expected to be determined in a future base rate case.
Decertification and retirement of Plant Gaston Units 1 through 4 (500 MWs based on 50% ownership through SEGCO) by December 31, 2028. See Note 7 to the financial statements under "SEGCO" in Item 8 of the Form 10-K for additional information.
Georgia Power's environmental compliance strategy, including approval of Georgia Power's plans to address CCR at its ash ponds and landfills. Recovery of the related costs is expected to be determined in future base rate cases. The Georgia PSC's approval included a change in the method of closure for one ash

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(UNAUDITED)

pond. Georgia Power is currently evaluating the related impact on its cost estimates and AROs; however, it is not expected to be material.

Installation of environmental controls at Plants Bowen and Scherer for compliance with rules related to effluent limitations guidelines.
Initiation of a license renewal application with the NRC for Plant Hatch.
Investments related to the continued hydro operations of Plants Sinclair and Burton.
Provisional authorization for development of a 265-MW battery energy storage facility with expected commercial operation in 2026.
Issuance of requests for proposals (RFP) for 2,300 MWs of renewable resources, an additional 500 MWs of energy storage, and up to 140 MWs of biomass generation.
Related transmission projects necessary to support the generation facilities plan.
Certification of six PPAs (including five affiliate PPAs with Southern Power that are subject to approval by the FERC) with capacities of 1,567 MWs beginning in 2024, 380 MWs beginning in 2025, and 228 MWs beginning in 2028, procured through RFPs authorized in the 2019 IRP. See Note (F) under "Georgia Power Lease Modification" for additional information.

The Georgia PSC deferred a decision on the requested decertification and retirement of Plant Bowen Units 1 and 2 (1,400 MWs) to the 2025 IRP and rejected Georgia Power's request to certify approximately 88 MWs of wholesale capacity to be placed in retail rate base between January 1, 2024 and January 1, 2025. Georgia Power may offer such capacity in the wholesale market or to the retail jurisdiction in a future regulatory proceeding.

On August 26, 2022, Restore Chattooga Gorge Coalition (RCG) filed a petition in the Superior Court of Fulton County, Georgia against Georgia Power and the Georgia PSC. The petition challenges Georgia Power's plan to expend $115 million to modernize Plant Tugalo, as approved in the 2019 IRP, and seeks judicial review of the Georgia PSC's order in the 2022 IRP proceeding with respect to the denial of RCG's challenge to the modernization plan.

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

Nuclear Construction

In 2009, the Georgia PSC certified construction of Plant Vogtle Units 3 and 4, in which Georgia Power holds a 45.7% ownership interest. In 2012, the NRC issued the related combined construction and operating licenses, which allowed full construction of the 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, under which Bechtel is reimbursed for actual costs plus a base fee and an at-risk fee, 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

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(UNAUDITED)

work, the applicable portion of the at-risk fee. Bechtel may terminate the Bechtel Agreement under certain circumstances, including certain Vogtle Owner suspensions of work, certain breaches of the Bechtel Agreement by the Vogtle Owners, Vogtle Owner insolvency, and certain other events.

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

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 the end of the first quarter 2023 and the fourth quarter 2023, respectively, is as follows:


	(in millions)
Base project capital cost forecast(a)(b)	$	10,334
Construction contingency estimate	49

Total project capital cost forecast(a)(b)	10,383
Net investment at September 30, 2022(b)	(9,280)
Remaining estimate to complete	$	1,103

(a)Includes approximately $590 million of costs that are not shared with the other Vogtle Owners and approximately $353 million of incremental costs under the cost-sharing and tender provisions of the joint ownership agreements described below. Excludes financing costs expected to be capitalized through AFUDC of approximately $385 million, of which $275 million had been accrued through September 30, 2022.

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

Georgia Power estimates that its financing costs for construction of Plant Vogtle Units 3 and 4 will total approximately $3.4 billion, of which $3.1 billion had been incurred through September 30, 2022.

As part of its ongoing processes, Southern Nuclear continues to evaluate cost and schedule forecasts on a regular basis to incorporate current information available, particularly in the areas of engineering support, commodity installation, system turnovers and related test results, and workforce statistics. Southern Nuclear establishes aggressive target values for monthly construction production and system turnover activities, which are reflected in the site work plans.

Since March 2020, the number of active COVID-19 cases at the site has fluctuated consistent with the surrounding area and impacted productivity levels and pace of activity completion, with the site experiencing peaks in the number of active cases in January 2021, August 2021, and January 2022. Georgia Power estimates the productivity impacts of the COVID-19 pandemic have consumed approximately three to four months of schedule margin previously embedded in the site work plan for Unit 3 and Unit 4. As of September 30, 2022, Georgia Power's proportionate share of the estimated incremental cost associated with COVID-19 mitigation actions and impacts on construction productivity is estimated to be between $160 million and $200 million and is included in the total project capital cost forecast. The continuing effects of the COVID-19 pandemic could further disrupt or delay construction and testing activities at Plant Vogtle Units 3 and 4.

On July 29, 2022, Southern Nuclear announced that all Unit 3 ITAACs had been submitted to the NRC. On August 3, 2022, the NRC published its 103(g) finding that the acceptance criteria in the combined license for Unit 3 had been met, which allowed nuclear fuel to be loaded and allows start-up testing to begin. Fuel load for Unit 3 was completed on October 17, 2022, and the unit is projected to be placed in service by the end of the first quarter 2023. Unit 4 is projected to be placed in service by the end of the fourth quarter 2023.

During the first nine months of 2022, established construction contingency totaling $170 million was assigned to the base capital cost forecast for costs primarily associated with construction productivity, the pace of system turnovers, additional craft and support resources, and procurement for Units 3 and 4. Georgia Power also increased its total

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(UNAUDITED)

project capital cost forecast by adding $36 million and $32 million to replenish construction contingency in the second quarter 2022 and the third quarter 2022, respectively.

After considering the significant level of uncertainty that exists regarding the future recoverability of these costs since the ultimate outcome of these matters is subject to the outcome of future assessments by management, as well as Georgia PSC decisions in future regulatory proceedings, Georgia Power recorded pre-tax charges to income in the second quarter 2022 and the third quarter 2022 of $36 million ($27 million after tax) and $32 million ($24 million after tax), respectively, for the increases in the total project capital cost forecast. Georgia Power may request the Georgia PSC to evaluate those expenditures for rate recovery during the prudence review following the Unit 4 fuel load pursuant to the twenty-fourth VCM stipulation described below.

The projected schedule for Unit 3 primarily depends on the pace of system and area transitions to operations, including the completion of closure documentation necessary to support start-up testing, and the progression of start-up, final component, and pre-operational testing, which may be impacted by equipment or other operational failures. The projected schedule for Unit 4 primarily depends on Unit 3 progress through start-up and testing; overall construction productivity and production levels improving, particularly in electrical installation, including terminations; and appropriate levels of craft laborers, particularly electricians, being added and maintained. As Unit 4 progresses through construction and continues to transition into testing, ongoing and potential future challenges include the pace and quality of electrical, mechanical, and instrumentation and controls commodities installation; availability of craft and supervisory resources, including the temporary diversion of such resources to support Unit 3; the pace of work package closures and system turnovers; and the timeframe and duration of hot functional and other testing. Ongoing or future challenges for both units also include management of contractors and vendors; subcontractor performance; supervision of craft labor and related productivity; ability to attract and retain craft labor; and/or related cost escalation. New challenges also may arise, particularly as Units 3 and 4 move into initial testing and start-up, which may result in required engineering changes or remediation related to 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). These challenges may result in further schedule delays and/or cost increases.

There have been technical and procedural challenges to the construction and licensing of Plant Vogtle Units 3 and 4 at the federal and state level and additional challenges may arise. Processes are in place that are designed to ensure compliance with the requirements specified in the Westinghouse Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the NRC that occur throughout construction. On March 25, 2022, the NRC completed a follow-up inspection related to the November 2021 final significance report on its special inspection to review the root cause of additional construction remediation work identified in 2021 and Southern Nuclear's corresponding corrective action plans. The NRC closed the two white findings identified in November 2021 and returned Vogtle Unit 3 to the NRC's baseline inspection program.

With the receipt of the NRC's 103(g) finding, Unit 3 is now under the NRC's operating reactor oversight process and must meet applicable technical and operational requirements contained within Unit 3's operating license. Various design and other licensing-based compliance matters, including the timely submittal by Southern Nuclear of the ITAAC documentation and the related reviews and approvals by the NRC necessary to support NRC authorization to load fuel for Unit 4, may arise, which may result in additional license amendment requests or require other resolution. If any license amendment requests or other licensing-based compliance issues, including inspections and ITAACs for Unit 4, are not resolved in a timely manner, there may be delays in the project schedule that could result in increased costs.

The ultimate outcome of these matters cannot be determined at this time. However, any extension of the in-service date beyond the first quarter 2023 for Unit 3 or the fourth quarter 2023 for Unit 4, including the current level of cost sharing described below, is estimated to result in additional base capital costs for Georgia Power of up to $15 million per month for Unit 3 and $35 million per month for Unit 4, as well as the related AFUDC and any additional related construction, support resources, or testing costs. While Georgia Power is not precluded from seeking retail recovery of any future capital cost forecast increase other than the amounts related to the cost-sharing

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and tender provisions of the joint ownership agreements described below, management will ultimately determine whether or not to seek recovery. Any further changes to the capital cost forecast that are not expected to be recoverable through regulated rates will be required to be charged to income and such charges could be material.

Joint Owner Contracts

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

Amendments to the Vogtle Joint Ownership Agreements

In connection with a September 2018 vote by the Vogtle Owners to continue construction, Georgia Power entered into (i) a binding term sheet (Vogtle Owner Term Sheet) with the other Vogtle Owners and MEAG Power's wholly-owned subsidiaries MEAG Power SPVJ, LLC (MEAG SPVJ), MEAG Power SPVM, LLC (MEAG SPVM), and MEAG Power SPVP, LLC (MEAG SPVP) to take certain actions which partially mitigate potential financial exposure for the other Vogtle Owners, including additional amendments to the Vogtle Joint Ownership Agreements and the purchase of PTCs from the other Vogtle Owners at pre-established prices, and (ii) a term sheet (MEAG Term Sheet) with MEAG Power and MEAG SPVJ to provide up to $300 million of funding with respect to MEAG SPVJ's ownership interest in Plant Vogtle Units 3 and 4 under certain circumstances. In January 2019, Georgia Power, MEAG Power, and MEAG SPVJ entered into an agreement to implement the provisions of the MEAG Term Sheet. In February 2019, Georgia Power, the other Vogtle Owners, and MEAG Power's wholly-owned subsidiaries MEAG SPVJ, MEAG SPVM, and MEAG SPVP entered into certain amendments to the Vogtle Joint Ownership Agreements to implement the provisions of the Vogtle Owner Term Sheet (Global Amendments).

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. The Global Amendments provide that if the EAC is revised and exceeds the EAC in the nineteenth VCM by more than $2.1 billion, each of the other Vogtle Owners will have a one-time option at the time the project budget cost forecast is so revised to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power's agreement to pay 100% of such Vogtle Owner's remaining share of total construction costs in excess of the EAC in the nineteenth VCM plus $2.1 billion.

For purposes of the foregoing provisions, qualifying construction costs will not include costs (i) resulting from force majeure events, including epidemics and quarantines, governmental actions or inactions (or significant delays associated with issuance of such actions) that affect the licensing, completion, start-up, operations, or financing of Plant Vogtle Units 3 and 4, administrative proceedings or litigation regarding ITAAC or other regulatory challenges to commencement of operation of Plant Vogtle Units 3 and 4, and changes in laws or regulations governing Plant Vogtle Units 3 and 4, (ii) legal fees and legal expenses incurred due to litigation with contractors or subcontractors

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that are not subsidiaries or affiliates of Southern Company, and (iii) additional costs caused by requests from the Vogtle Owners other than Georgia Power, except for the exercise of a right to vote granted under the Vogtle Joint Ownership Agreements, that increase costs by $100,000 or more.

In addition, pursuant to the Global Amendments, the holders of at least 90% of the ownership interests in Plant Vogtle Units 3 and 4 must vote to continue construction if certain adverse events (Project Adverse Events) occur, including, among other events: (i) the bankruptcy of Toshiba; (ii) the termination or rejection in bankruptcy of certain agreements, including the Vogtle Services Agreement, the Bechtel Agreement, or the agency agreement with Southern Nuclear; (iii) Georgia Power's public announcement of its intention not to submit for rate recovery any portion of its investment in Plant Vogtle Units 3 and 4 or the Georgia PSC determines that any of Georgia Power's costs relating to the construction of Plant Vogtle Units 3 and 4 will not be recovered in retail rates, excluding any additional amounts paid by Georgia Power on behalf of the other Vogtle Owners pursuant to the Global Amendments described above and the first 6% of costs during any six-month VCM reporting period that are disallowed by the Georgia PSC for recovery, or for which Georgia Power elects not to seek cost recovery, through retail rates; and (iv) an incremental extension of one year or more from the seventeenth VCM report estimated in-service dates of November 2021 and November 2022 for Units 3 and 4, respectively. The schedule extension announced in February 2022 triggered the requirement for a vote to continue construction. Effective February 25, 2022, all of the Vogtle Owners had voted to continue construction.

Georgia Power and the other Vogtle Owners do not agree on either the starting dollar amount for the determination of cost increases subject to the cost-sharing and tender provisions of the Global Amendments or the extent to which COVID-19-related costs impact those provisions. Based on the definition in the Global Amendments, Georgia Power believes the starting dollar amount is $18.38 billion and the current project capital cost forecast exceeds the cost-sharing provision threshold, but not the tender provision threshold. The other Vogtle Owners have notified Georgia Power that they believe the current capital cost expenditures have already exceeded the cost-sharing thresholds and the current project capital cost forecast triggers the tender provisions under the Global Amendments. In October 2021, Georgia Power and the other Vogtle Owners entered into an agreement, which was modified on June 3, 2022, to clarify the process for the tender provisions of the Global Amendments to provide for a decision between 120 and 194 days after the tender option is triggered, which the other Vogtle Owners assert occurred on February 14, 2022. On June 17, 2022 and July 26, 2022, OPC and Dalton, respectively, notified Georgia Power of their purported exercises of their tender options.

On June 18, 2022, OPC and MEAG Power each filed a separate lawsuit against Georgia Power in the Superior Court of Fulton County, Georgia seeking a declaratory judgment that the starting dollar amount is $17.1 billion and that the cost-sharing and tender provisions have been triggered. The lawsuits also assert other claims, including breach of contract allegations, and seek, among other remedies, damages and injunctive relief requiring Georgia Power to track and allocate construction costs consistent with MEAG Power's and OPC's interpretations of the Global Amendments. On July 25, 2022 and July 28, 2022, Georgia Power filed its answers in the lawsuits filed by MEAG Power and OPC, respectively, and included counterclaims seeking a declaratory judgment that the starting dollar amount is $18.38 billion and that costs related to force majeure events are excluded prior to calculating the cost-sharing and tender provisions and when calculating Georgia Power's related financial obligations. On September 26, 2022, Dalton filed complaints in each of these lawsuits. On September 29, 2022, Georgia Power and MEAG Power reached an agreement to resolve their dispute regarding the proper interpretation of the cost-sharing and tender provisions of the Global Amendments. Under the terms of the agreement, among other items, (i) MEAG Power will not exercise its tender option and will retain its full ownership interest in Plant Vogtle Units 3 and 4; (ii) Georgia Power will pay a portion of MEAG Power's costs of construction for Plant Vogtle Units 3 and 4 as such costs are incurred and with no further adjustment for force majeure costs, which payments will total approximately $79 million based on the current project capital cost forecast; and (iii) Georgia Power will pay 20% of MEAG Power's costs of construction with respect to any amounts over the current project capital cost forecast, with no further adjustment for force majeure costs. In addition, MEAG Power agreed to vote to continue construction upon occurrence of a Project Adverse Event unless the commercial operation date of either of Plant Vogtle Unit 3 or Unit 4 is not projected to occur by December 31, 2025. On October 4, 2022, MEAG Power and Georgia Power filed a

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notice of settlement and voluntary dismissal of their pending litigation, including Georgia Power's counterclaim, and, on October 6, 2022, Dalton dismissed its related complaint.

Georgia Power recorded pre-tax charges (credits) to income in the fourth quarter 2021, the second quarter 2022, and the third quarter 2022 of approximately $440 million ($328 million after tax), $16 million ($12 million after tax), and $(102) million ($(76) million after tax), respectively, associated with the cost-sharing and tender provisions of the Global Amendments, including the settlement with MEAG Power, which are included in the total project capital cost forecast and will not be recovered from retail customers. The settlement with MEAG Power does not resolve the separate pending litigation with OPC, including Dalton's associated complaint, described above. Georgia Power may be required to record further pre-tax charges to income of up to approximately $300 million associated with the cost-sharing and tender provisions of the Global Amendments for OPC and Dalton based on the current project capital cost forecast.

Georgia Power's ownership interest in Plant Vogtle Units 3 and 4 continues to be 45.7%; however, it could increase if OPC or Dalton effectively exercises the option to tender a portion of their ownership interest to Georgia Power and require Georgia Power to pay 100% of the remaining share of the costs necessary to complete Plant Vogtle Units 3 and 4. Georgia Power's incremental ownership interest would be calculated and conveyed to Georgia Power after Plant Vogtle Units 3 and 4 are placed in service.

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

Regulatory Matters

In 2009, the Georgia PSC voted to certify construction of Plant Vogtle Units 3 and 4 with a certified capital cost of $4.418 billion. In addition, in 2009 the Georgia PSC approved inclusion of the Plant Vogtle Units 3 and 4 related CWIP accounts in rate base, and the State of Georgia enacted the Georgia Nuclear Energy Financing Act, which allows Georgia Power to recover financing costs for Plant Vogtle Units 3 and 4. Financing costs are recovered on all applicable certified costs through annual adjustments to the NCCR tariff up to the certified capital cost of $4.418 billion. At September 30, 2022, Georgia Power had recovered approximately $2.8 billion of financing costs. Financing costs related to capital costs above $4.418 billion are being recognized through AFUDC and are expected to be recovered through retail rates over the life of Plant Vogtle Units 3 and 4; however, Georgia Power is not recording AFUDC related to any capital costs in excess of the total deemed reasonable by the Georgia PSC (currently $7.3 billion) and not requested for rate recovery. In November 2021, the Georgia PSC approved Georgia Power's request to decrease the NCCR tariff by $78 million annually, effective January 1, 2022.

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

In 2016, the Georgia PSC voted to approve a settlement agreement (Vogtle Cost Settlement Agreement) resolving certain prudency matters in connection with the fifteenth VCM report. In December 2017, the Georgia PSC voted to approve (and issued its related order on January 11, 2018) Georgia Power's seventeenth VCM report and modified the Vogtle Cost Settlement Agreement. The Vogtle Cost Settlement Agreement, as modified by the January 11, 2018 order, resolved the following regulatory matters related to Plant Vogtle Units 3 and 4: (i) none of the $3.3 billion of costs incurred through December 31, 2015 and reflected in the fourteenth VCM report should be disallowed from rate base on the basis of imprudence; (ii) the Contractor Settlement Agreement was reasonable and prudent and none of the $0.3 billion paid pursuant to the Contractor Settlement Agreement should be disallowed from rate base on the basis of imprudence; (iii) (a) capital costs incurred up to $5.68 billion would be presumed to be reasonable and prudent with the burden of proof on any party challenging such costs, (b) Georgia Power would have the burden to show that any capital costs above $5.68 billion were prudent, and (c) a revised capital cost forecast of $7.3 billion (after reflecting the impact of payments received under the Guarantee Settlement Agreement and related customer refunds) was found reasonable; (iv) construction of Plant Vogtle Units 3 and 4 should be

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completed, with Southern Nuclear serving as project manager and Bechtel as primary contractor; (v) approved and deemed reasonable Georgia Power's revised schedule placing Plant Vogtle Units 3 and 4 in service in November 2021 and November 2022, respectively; (vi) confirmed that the revised cost forecast does not represent a cost cap and that a prudence proceeding on cost recovery will occur following Unit 4 fuel load, consistent with applicable Georgia law; (vii) reduced the ROE used to calculate the NCCR tariff (a) from 10.95% (the ROE rate setting point authorized by the Georgia PSC in the 2013 alternate rate plan) to 10.00% effective January 1, 2016, (b) from 10.00% to 8.30%, effective January 1, 2020, and (c) from 8.30% to 5.30%, effective January 1, 2021 (provided that the ROE in no case will be less than Georgia Power's average cost of long-term debt); (viii) reduced the ROE used for AFUDC equity for Plant Vogtle Units 3 and 4 from 10.00% to Georgia Power's average cost of long-term debt, effective January 1, 2018; and (ix) agreed that effective the first month after Unit 3 reaches commercial operation, retail base rates would be adjusted to include the costs related to Unit 3 and common facilities deemed prudent in the Vogtle Cost Settlement Agreement (see Note 2 to the financial statements under "Georgia Power – Plant Vogtle Unit 3 and Common Facilities Rate Proceeding" in Item 8 of the Form 10-K for additional information). The January 11, 2018 order also stated that if Plant Vogtle Units 3 and 4 are not commercially operational by June 1, 2021 and June 1, 2022, respectively, the ROE used to calculate the NCCR tariff will be further reduced by 10 basis points each month (but not lower than Georgia Power's average cost of long-term debt) until the respective Unit is commercially operational. The ROE reductions negatively impacted earnings by approximately $270 million in 2021 and are estimated to have negative earnings impacts of approximately $300 million and $250 million in 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.

In the August 2021 order approving the twenty-fourth VCM report, the Georgia PSC 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 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.

The Georgia PSC has approved 25 VCM reports covering periods through June 30, 2021. These reports reflect total construction capital costs incurred of $7.9 billion (net of $1.7 billion of payments received under the Guarantee Settlement Agreement and approximately $188 million in related customer refunds), of which the Georgia PSC has verified and approved $7.3 billion as described above. The Georgia PSC also has reviewed the twenty-sixth VCM report, which reflects $584 million of additional construction capital costs incurred through December 31, 2021. Georgia Power filed its twenty-seventh VCM report with the Georgia PSC on August 31, 2022, which reflects the revised capital cost forecast as of June 30, 2022 of $10.5 billion and $522 million of construction capital costs incurred from January 1, 2022 through June 30, 2022.

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

Mississippi Power

Performance Evaluation Plan

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual retail PEP filing for 2022, resulting in an annual increase in revenues of approximately $18 million, or 1.9%, primarily due to increases in rate base, operations and maintenance expenses, and depreciation and amortization. The rate increase became effective with the first billing cycle of April 2022 in accordance with the PEP rate schedule.

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Ad Valorem Tax Adjustment

On June 7, 2022, the Mississippi PSC approved Mississippi Power's annual ad valorem tax adjustment filing for 2022, resulting in an annual increase in revenues of $5 million, effective with the first billing cycle of July 2022.

Municipal and Rural Associations Tariff

On August 26, 2022, the FERC accepted an amended shared service agreement (SSA) between Mississippi Power and Cooperative Energy, effective July 1, 2022, under which Cooperative Energy will continue to decrease its use of Mississippi Power's generation services under the MRA tariff up to 2.5% annually through 2035. At September 30, 2022, Mississippi Power is serving approximately 400 MWs of Cooperative Energy's annual demand. Beginning in 2036, Cooperative Energy will provide 100% of its electricity requirements at the MRA delivery points under the tariff. Neither party has the option to cancel the amended SSA.

On July 15, 2022, Mississippi Power filed a request with the FERC for a $23 million increase in annual wholesale base revenues under the MRA tariff and requested an effective date of July 15, 2022. Cooperative Energy has filed a complaint with the FERC challenging the new rates. On September 13, 2022, the FERC issued an order accepting Mississippi Power's request effective September 14, 2022, subject to refund, and establishing hearing and settlement judge procedures. The ultimate outcome of this matter cannot be determined at this time.

Southern Company Gas

Infrastructure Replacement Programs and Capital Projects

Capital expenditures incurred under specific infrastructure replacement programs and capital projects during the first nine months of 2022 were as follows:


Utility	Program	Nine Months Ended September 30, 2022
		(in millions)
Nicor Gas	Investing in Illinois	$	311
Virginia Natural Gas	SAVE	52
Atlanta Gas Light	System Reinforcement Rider	51
Chattanooga Gas	Pipeline Replacement Program	2
Total		$	416

Rate Proceedings

Atlanta Gas Light

On July 1, 2022, Atlanta Gas Light filed its annual GRAM update with the Georgia PSC. The filing requests an annual base rate increase of $53 million based on the projected 12-month period beginning January 1, 2023. Resolution of the GRAM filing is expected by December 28, 2022, with the new rates effective January 1, 2023. The ultimate outcome of this matter cannot be determined at this time.

Virginia Natural Gas

On August 1, 2022, Virginia Natural Gas filed a general base rate case with the Virginia Commission seeking an increase in annual base rate revenues of $69 million, including $15 million related to the recovery of investments under the SAVE program, primarily to recover investments and increased costs associated with infrastructure, technology, and workforce development. The requested increase is based on a projected 12-month period beginning January 1, 2023, a ROE of 10.35%, and an equity ratio of 53.2%. Rate adjustments are expected to be effective January 1, 2023, subject to refund. The Virginia Commission is expected to rule on the requested increase in the third quarter 2023. The ultimate outcome of this matter cannot be determined at this time.

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

General Litigation Matters

The Registrants are involved in various 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 named 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 Georgia. The complaints alleged that the defendants caused Southern Company to make false or misleading statements regarding the Kemper County energy facility cost and schedule. Further, the complaints alleged that the defendants were unjustly enriched and caused the waste of corporate assets and also alleged 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 named as defendants Southern Company, certain of its directors, certain of its current and former officers, and certain former Mississippi Power officers. The complaint alleged 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 alleged 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 sought 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 sought certain changes to Southern Company's corporate governance and internal processes. On January 21, 2022, the plaintiffs in the federal court action filed a motion for preliminary approval of settlement, together with an executed stipulation of settlement, which applied to both actions. On June 9, 2022, the U.S. District Court for the Northern District of Georgia granted final approval of the settlement and, on June 16, 2022, the Superior Court of Gwinnett County, Georgia entered an order awarding attorneys' fees and expenses related to the Martin J. Kobuck lawsuit. The settlement consisted of an aggregate payment by Southern Company's insurers of approximately $4.5 million for attorneys' fees and expenses, as well as adoption of various corporate governance reforms by Southern Company. These matters are now concluded.

Alabama Power

On September 26, 2022, Mobile Baykeeper, through its counsel Southern Environmental Law Center, filed a citizen suit in the U.S. District Court for the Southern District of Alabama alleging that Alabama Power's plan to close the Plant Barry ash pond utilizing a closure-in-place methodology violates the Resource Conservation and Recovery Act (RCRA) and regulations governing CCR. Among other relief requested, Mobile Baykeeper seeks a declaratory judgment that the RCRA and regulations governing CCR are being violated, preliminary and injunctive relief to

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prevent implementation of Alabama Power's closure plan and the development of a closure plan that satisfies regulations governing CCR requirements. See Note 6 to the financial statements in Item 8 of the Form 10-K for a discussion of Alabama Power's ARO liabilities related to facilities that are subject to the CCR Rule and the related state rule. The ultimate outcome of this matter cannot be determined at this time.

Georgia Power

In 2011, plaintiffs filed a putative class action against Georgia Power in the Superior Court of Fulton County, Georgia alleging that Georgia Power's collection in rates of amounts for municipal franchise fees (which fees are paid to municipalities) exceeded the amounts allowed in orders of the Georgia PSC and alleging certain state law claims. This case has been ruled upon and appealed numerous times over the last several years. In 2019, the Georgia PSC issued an order that found Georgia Power has appropriately implemented the municipal franchise fee schedule. In March 2021, the Superior Court of Fulton County granted class certification and Georgia Power's motion for summary judgment and the plaintiffs filed a notice of appeal. In April 2021, Georgia Power filed a notice of cross appeal on the issue of class certification. In December 2021, the Georgia Court of Appeals affirmed the Superior Court's ruling that granted summary judgment to Georgia Power and dismissed Georgia Power's cross appeal on the issue of class certification as moot. Also in December 2021, the plaintiffs filed a petition for writ of certiorari to the Georgia Supreme Court. The amount of any possible losses cannot be estimated at this time because, among other factors, it is unknown whether any losses would be subject to recovery from any municipalities.

In July 2020, a group of individual plaintiffs filed a complaint in the Superior Court of Fulton County, Georgia against Georgia Power alleging that releases from Plant Scherer have impacted groundwater, surface water, and air, resulting in alleged personal injuries and property damage. The plaintiffs seek an unspecified amount of monetary damages including punitive damages, a medical monitoring fund, and injunctive relief. Georgia Power has filed multiple motions to dismiss the complaint. In October 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. In November 2021, Georgia Power filed a notice to remove the three cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. On February 7, 2022, four additional complaints were filed in the Superior Court of Monroe County, Georgia against Georgia Power seeking damages for alleged personal injuries or property damage. On March 9, 2022, Georgia Power filed a notice to remove the four cases pending in the Superior Court of Monroe County, Georgia to the U.S. District Court for the Middle District of Georgia. The amount of any possible losses from these matters cannot be estimated at this time.

Mississippi Power

In 2018, Ray C. Turnage and 10 other individual plaintiffs filed a putative class action complaint against Mississippi Power and the three then-serving members of the Mississippi PSC in the U.S. District Court for the Southern District of Mississippi, which was amended in March 2019 to include four additional plaintiffs. Mississippi Power received Mississippi PSC approval in 2013 to charge a mirror CWIP rate premised upon including in its rate base pre-construction and construction costs for the Kemper IGCC prior to placing the Kemper IGCC into service. The Mississippi Supreme Court reversed that approval and ordered Mississippi Power to refund the amounts paid by customers under the previously-approved mirror CWIP rate. The plaintiffs allege that the initial approval process, and the amount approved, were improper and make claims for gross negligence, reckless conduct, and intentional wrongdoing. They also allege that Mississippi Power underpaid customers by up to $23.5 million in the refund process by applying an incorrect interest rate. The plaintiffs seek to recover, on behalf of themselves and their putative class, actual damages, punitive damages, pre-judgment interest, post-judgment interest, attorney's fees, and costs. The district court dismissed the amended complaint; however, in March 2020, the plaintiffs filed a motion seeking to name the new members of the Mississippi PSC, the Mississippi Development Authority, and Southern Company as additional defendants and add a cause of action against all defendants based on a dormant commerce clause theory under the U.S. Constitution. In July 2020, the plaintiffs filed a motion for leave to file a third amended complaint, which included the same federal claims as the proposed second amended complaint, as well as several

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additional state law claims based on the allegation that Mississippi Power failed to disclose the annual percentage rate of interest applicable to refunds. In November 2020, the district court denied each of the plaintiffs' pending motions and entered final judgment in favor of Mississippi Power. In January 2021, the district court denied further motions by the plaintiffs to vacate the judgment and to file a revised second amended complaint. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit. On March 21, 2022, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the dismissal of the claims against the Mississippi PSC defendants but reversing the dismissal of the claims against Mississippi Power. On May 31, 2022, the U.S. Court of Appeals for the Fifth Circuit denied a petition by Mississippi Power for a rehearing en banc and remanded the case to the U.S. District Court for the Southern District of Mississippi for further proceedings. On June 17, 2022, Mississippi Power filed with the trial court a motion to dismiss the complaint. An adverse outcome in this proceeding could have a material impact on Mississippi Power's financial statements.

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 $16 million and $17 million at September 30, 2022 and December 31, 2021, respectively. Georgia Power has been designated or identified as a potentially responsible party at sites governed by the Georgia Hazardous Site Response Act and/or by the federal Comprehensive Environmental Response, Compensation, and Liability Act, and assessment and potential cleanup of such sites is expected.

Southern Company Gas' environmental remediation liability was $270 million and $249 million at September 30, 2022 and December 31, 2021, respectively, based on the estimated cost of environmental investigation and remediation associated with known former manufactured gas plant operating sites.

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

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Other Matters

Mississippi Power

In conjunction with Southern Company's 2019 sale of Gulf Power, NextEra Energy, Inc. held back $75 million of the purchase price pending Mississippi Power and Gulf Power negotiating a mutually acceptable revised operating agreement for Plant Daniel. On July 12, 2022, the co-owners executed a revised operating agreement and Southern Company subsequently received the remaining $75 million of the purchase price. The revised operating agreement contains dispatch procedures for the two jointly-owned coal units at Plant Daniel such that Mississippi Power will designate one of the two units as primary and the other as secondary in lieu of each company separately owning 100% of a single generating unit. Mississippi Power has the option to purchase its co-owner's ownership interest for $1 on January 15, 2024, provided that Mississippi Power exercises the option no later than 120 days prior to that date. The revised operating agreement is not expected to have a material impact on Mississippi Power's financial statements. See Note 15 to the financial statements under "Southern Company" in Item 8 of the Form 10-K for additional information regarding the sale of Gulf Power.

On August 31, 2022, the Mississippi Department of Revenue (Mississippi DOR) completed an audit of sales and use taxes paid by Mississippi Power from 2016 to 2019 and entered a final assessment, indicating a total amount due of $28 million, including associated penalties and interest. Mississippi Power does not agree with the audit findings and expects to exercise its rights to an administrative appeal with the Mississippi DOR by October 30, 2022. Excluding amounts associated with the gasifier and other abandoned Kemper IGCC assets, Mississippi Power's sales and use taxes are generally authorized for rate recovery; however, the ultimate outcome of this matter cannot be determined at this time.

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(UNAUDITED)

(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.

The following table disaggregates revenue from contracts with customers for the three and nine months ended September 30, 2022 and 2021:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Three Months Ended September 30, 2022
Operating revenues
Retail electric revenues
Residential	$	2,104	$	799	$	1,212	$	93	$	—	$	—
Commercial	1,637		499		1,051		87		—		—
Industrial	1,183		452		642		89		—		—
Other	27		3		22		2		—		—
Total retail electric revenues	4,951		1,753		2,927		271		—		—
Natural gas distribution revenues
Residential	331		—		—		—		—		331
Commercial	93		—		—		—		—		93
Transportation	259		—		—		—		—		259
Industrial	12		—		—		—		—		12
Other	49		—		—		—		—		49
Total natural gas distribution revenues	744		—		—		—		—		744
Wholesale electric revenues
PPA energy revenues	812		187		40		4		591		—
PPA capacity revenues	175		56		12		1		107		—
Non-PPA revenues	58		67		4		242		303		—
Total wholesale electric revenues	1,045		310		56		247		1,001		—
Other natural gas revenues


Gas marketing services	84		—		—		—		—		84
Other natural gas revenues	15		—		—		—		—		15
Total natural gas revenues	99		—		—		—		—		99
Other revenues	277		65		110		13		9		—
Total revenue from contracts with customers	7,116		2,128		3,093		531		1,010		843
Other revenue sources(a)	1,262		316		796		(21)		170		14

Total operating revenues	$	8,378	$	2,444	$	3,889	$	510	$	1,180	$	857

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	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Nine Months Ended September 30, 2022
Operating revenues
Retail electric revenues
Residential	$	5,282	$	2,049	$	2,995	$	238	$	—	$	—
Commercial	4,202		1,285		2,688		229		—		—
Industrial	2,914		1,143		1,529		242		—		—
Other	79		10		62		7		—		—
Total retail electric revenues	12,477		4,487		7,274		716		—		—
Natural gas distribution revenues
Residential	1,821		—		—		—		—		1,821
Commercial	493		—		—		—		—		493
Transportation	872		—		—		—		—		872
Industrial	60		—		—		—		—		60
Other	244		—		—		—		—		244
Total natural gas distribution revenues	3,490		—		—		—		—		3,490
Wholesale electric revenues
PPA energy revenues	1,739		354		112		11		1,285		—
PPA capacity revenues	443		135		35		4		273		—
Non-PPA revenues	182		166		19		511		572		—
Total wholesale electric revenues	2,364		655		166		526		2,130		—
Other natural gas revenues


Gas marketing services	417		—		—		—		—		417
Other natural gas revenues	41		—		—		—		—		41
Total natural gas revenues	458		—		—		—		—		458
Other revenues	810		173		327		34		27		—
Total revenue from contracts with customers	19,599		5,315		7,767		1,276		2,157		3,948
Other revenue sources(a)	2,633		708		1,451		3		461		50

Total operating revenues	$	22,232	$	6,023	$	9,218	$	1,279	$	2,618	$	3,998

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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
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

(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 Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K and Note (L) under "Southern Company Gas" for information on the sale of Sequent and components of wholesale gas services' operating revenues, respectively.

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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, 2022 and December 31, 2021:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Accounts Receivable
At September 30, 2022	$	2,760	$	800	$	1,035	$	98	$	264	$	433
At December 31, 2021	2,504		589		736		73		149		753
Contract Assets
At September 30, 2022	$	178	$	5	$	114	$	—	$	—	$	—
At December 31, 2021	117		2		63		—		1		—
Contract Liabilities
At September 30, 2022	$	56	$	5	$	6	$	7	$	2	$	—
At December 31, 2021	57		4		14		—		1		—

At September 30, 2022 and December 31, 2021, Georgia Power had contract assets primarily related to retail customer fixed bill programs, where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over a one-year contract term, and unregulated service agreements, where payment is contingent on project completion. Contract liabilities for Georgia Power relate to cash collections recognized in advance of revenue for unregulated service agreements. Southern Company's unregulated distributed generation business had $59 million and $50 million of contract assets and $37 million and $39 million of contract liabilities at September 30, 2022 and December 31, 2021, respectively, for outstanding performance obligations.

Revenues recognized in the three and nine months ended September 30, 2022, which were included in contract liabilities at December 31, 2021, were $13 million and $32 million, respectively, for Southern Company and immaterial for the other Registrants.

Remaining Performance Obligations

The Subsidiary Registrants have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. For the traditional electric operating companies and Southern Power, these contracts primarily relate to PPAs whereby electricity and generation capacity are provided to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. For Southern Company Gas, these contracts involve energy infrastructure enhancement and upgrade projects for certain governmental customers. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenues from contracts with customers related to these performance obligations remaining at September 30, 2022 are expected to be recognized as follows:


	2022 (remaining)		2023		2024		2025		2026		Thereafter
	(in millions)
Southern Company	$	243	$	619	$	434	$	322	$	307	$	2,340
Alabama Power	8		24		7		5		—		—
Georgia Power	20		70		34		22		11		21

Southern Power	80		341		344		294		299		2,334
Southern Company Gas	12		29		29		—		—		—

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(UNAUDITED)

Revenue expected to be recognized for performance obligations remaining at September 30, 2022 was immaterial for Mississippi Power.

Lease Income

Lease income for the three and nine months ended September 30, 2022 and 2021 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, 2022
Lease income - interest income on sales-type leases	$	7	$	—	$	—	$	4	$	3	$	—
Lease income - operating leases	50		19		8		1		21		9
Variable lease income	139		—		—		—		145		—
Total lease income	$	196	$	19	$	8	$	5	$	169	$	9

For the Nine Months Ended September 30, 2022
Lease income - interest income on sales-type leases	$	19	$	—	$	—	$	11	$	8	$	—
Lease income - operating leases	149		58		24		1		64		27
Variable lease income	355		1		—		—		372		—
Total lease income	$	523	$	59	$	24	$	12	$	444	$	27

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

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.

(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.

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(UNAUDITED)

SP Solar and SP Wind

At September 30, 2022 and December 31, 2021, SP Solar had total assets of $6.0 billion and $6.1 billion, respectively, total liabilities of $0.4 billion, and noncontrolling interests of $1.1 billion. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

At September 30, 2022 and December 31, 2021, SP Wind had total assets of $2.3 billion, total liabilities of $191 million and $130 million, respectively, and noncontrolling interests of $40 million and $41 million, respectively. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the three financial investors in accordance with the limited liability agreement.

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

Other Variable Interest Entities

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

At September 30, 2022 and December 31, 2021, the other VIEs had total assets of $1.9 billion, total liabilities of $0.2 billion and $0.3 billion, respectively, and noncontrolling interests of $0.8 billion and $0.9 billion, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

At September 30, 2022 and December 31, 2021, Southern Power had equity method investments in wind and battery energy storage projects totaling $49 million and $86 million, respectively. Earnings (loss) from these investments were immaterial for all periods presented. During the nine months ended September 30, 2022, Southern Power sold equity method investments in wind projects and received proceeds totaling $38 million. The gains associated with the sales were immaterial.

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(UNAUDITED)

Southern Company Gas

Equity Method Investments

The carrying amounts of Southern Company Gas' equity method investments at September 30, 2022 and December 31, 2021 and related earnings (loss) from those investments for the three and nine months ended September 30, 2022 and 2021 were as follows:


Investment Balance	September 30, 2022		December 31, 2021
	(in millions)
SNG	$	1,091	$	1,129
Other(*)	34		44
Total	$	1,125	$	1,173

(*)Balance at September 30, 2022 reflects an $11 million distribution received in 2022 from PennEast Pipeline.


	Three Months Ended September 30,				Nine Months Ended September 30,
Earnings (Loss) from Equity Method Investments	2022		2021		2022		2021
	(in millions)
SNG	$	34	$	27	$	104	$	93
PennEast Pipeline(*)	—		(2)		—		(81)
Other	—		—		1		2
Total	$	34	$	25	$	105	$	14

(*)Primarily reflects pre-tax impairment charges. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

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(UNAUDITED)

(F) FINANCING AND LEASES

Bank Credit Arrangements

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

At September 30, 2022, committed credit arrangements with banks were as follows:


	Expires
Company	2023		2024		2025		2026		Total		Unused		Expires within One Year
	(in millions)
Southern Company parent	$	—	$	—	$	—	$	2,000	$	2,000	$	1,998	$	—
Alabama Power	—		550		—		700		1,250		1,250		—
Georgia Power	—		—		—		1,750		1,750		1,726		—
Mississippi Power	—		150		125		—		275		275		—
Southern Power(a)	—		—		—		600		600		569		—
Southern Company Gas(b)	250		—		—		1,500		1,750		1,748		250
SEGCO	30		—		—		—		30		30		30
Southern Company	$	280	$	700	$	125	$	6,550	$	7,655	$	7,596	$	280

(a)Does not include Southern Power Company's two $75 million continuing letter of credit facilities for standby letters of credit, expiring in 2023 and 2025, respectively, of which $11 million and $5 million, respectively, was unused at September 30, 2022. Southern Power's subsidiaries are not parties to its bank credit arrangements or letter of credit facilities.

(b)Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $800 million of the credit arrangement expiring in 2026. Southern Company Gas' committed credit arrangement expiring in 2026 also includes $700 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas. Pursuant to the multi-year credit arrangement expiring in 2026, the allocations between Southern Company Gas Capital and Nicor Gas may be adjusted. Nicor Gas is also the borrower of a new $250 million credit arrangement expiring in 2023.

As reflected in the table above, in March 2022, Mississippi Power amended and restated its $125 million revolving credit arrangement, which among other things, extended the maturity date from 2023 to 2025 and allows for borrowing based on term SOFR.

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

These bank credit arrangements, as well as the term loan arrangements of the Registrants, Nicor Gas, and SEGCO, contain covenants that limit debt levels and contain cross-acceleration or, in the case of Southern Power, cross-default provisions to other indebtedness (including guarantee obligations) that are restricted only to the indebtedness of the individual company. Such cross-default provisions to other indebtedness would trigger an event of default if Southern Power defaulted on indebtedness or guarantee obligations over a specified threshold. Such cross-acceleration provisions to other indebtedness would trigger an event of default if the applicable borrower defaulted on indebtedness, the payment of which was then accelerated. At September 30, 2022, the Registrants, Nicor Gas, and SEGCO were in compliance with all such covenants. None of the bank credit arrangements contain material adverse change clauses at the time of borrowings.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

A portion of the unused credit with banks is allocated to provide liquidity support to the revenue bonds of the traditional electric operating companies and the commercial paper programs of the Registrants, Nicor Gas, and SEGCO. The amount of variable rate revenue bonds of the traditional electric operating companies outstanding requiring liquidity support at September 30, 2022 was approximately $1.4 billion (comprised of approximately $789 million at Alabama Power, $619 million at Georgia Power, and $34 million at Mississippi Power). In addition, at September 30, 2022, Georgia Power had approximately $288 million of fixed rate revenue bonds outstanding that are required to be remarketed within the next 12 months.

Equity Units

In May 2022, Southern Company remarketed $862.5 million aggregate principal amount of its Series 2019A Remarketable Junior Subordinated Notes due August 1, 2024 (2019A RSNs) and $862.5 million aggregate principal amount of its Series 2019B Remarketable Junior Subordinated Notes due August 1, 2027 (2019B RSNs), pursuant to the terms of its 2019 Series A Equity Units (Equity Units). In connection with the remarketing, the interest rates on the 2019A RSNs and the 2019B RSNs were reset to 4.475% and 5.113%, respectively, payable on a semi-annual basis, and Southern Company ceased to have the ability to redeem these securities prior to maturity or to defer interest payments. Southern Company did not receive any proceeds from the remarketing, which were used to purchase a portfolio of treasury securities maturing on July 28, 2022. On August 1, 2022, the proceeds from this portfolio were used to settle the purchase contracts entered into as part of the Equity Units and Southern Company issued approximately 25.2 million shares of common stock and received proceeds of $1.725 billion. At September 30, 2022 and December 31, 2021, the 2019A RSNs and the 2019B RSNs are included in long-term debt on Southern Company's consolidated balance sheets.

Earnings per Share

For Southern Company, the only differences in computing basic and diluted earnings per share are attributable to awards outstanding under stock-based compensation plans and the Equity Units until they were settled in August 2022. 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 and "Equity Units" herein 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,
	2022	2021	2022	2021
	(in millions)
As reported shares	1,082	1,061	1,070	1,060
Effect of stock-based compensation	6	7	6	7

Diluted shares	1,088	1,068	1,076	1,067

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

Southern Company Leveraged Lease

See Note 9 to the financial statements in Item 8 of the Form 10-K for information on a leveraged lease agreement related to energy generation. On June 30, 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. The parties to the lease agreement are currently negotiating a potential restructuring, which could result in rescission of the termination notice. The ultimate outcome of this matter cannot be determined at this time but is not expected to have a material impact on Southern Company's financial statements.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Georgia Power Lease Modification

See Note 9 to the financial statements in Item 8 of the Form 10-K for information on Georgia Power's leases. In July 2022, Georgia Power recognized a lease modification related to an existing non-affiliate PPA which converted from an operating lease to a finance lease upon its approval in the 2022 IRP. As a result, Georgia Power removed from its balance sheet operating lease right-of-use assets, net of amortization of $17 million and lease obligations of $18 million maturing through 2024 and recorded finance lease right-of-use assets of $112 million and lease obligations of $113 million maturing through 2039.

(G) INCOME TAXES

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

Current and Deferred Income Taxes

Tax Credit and Net Operating Loss Carryforwards

Southern Company had federal ITC and PTC carryforwards (primarily related to Southern Power) totaling $1.0 billion at September 30, 2022 compared to $1.2 billion at December 31, 2021.

The federal PTC and ITC carryforwards begin expiring in 2032, but are expected to be fully utilized by 2025. The utilization of each Registrant's estimated tax credit and state net operating loss carryforwards and related valuation allowances could be impacted by numerous factors, including the acquisition of additional renewable projects, the purchase of rights to additional PTCs of Plant Vogtle Units 3 and 4 pursuant to certain joint ownership agreements, an increase in Georgia Power's ownership interest percentage in Plant Vogtle Units 3 and 4, changes in taxable income projections, and potential income tax rate changes. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information on Plant Vogtle Units 3 and 4.

Effective Tax Rate

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

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

Southern Company

Southern Company's effective tax rate was 20.0% for the nine months ended September 30, 2022 compared to 17.5% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to a prior year state tax credit carryforward at Georgia Power in 2022, partially offset by additional tax expense in 2021 as a result of the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Georgia Power

Georgia Power's effective tax rate was 18.5% for the nine months ended September 30, 2022 compared to 7.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings and an adjustment related to a prior year state tax credit carryforward in 2022.

Mississippi Power

Mississippi Power's effective tax rate was 20.1% for the nine months ended September 30, 2022 compared to 14.3% for the corresponding period in 2021. The effective tax rate increase was primarily due to a decrease in the flowback of excess deferred income taxes in 2022.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Southern Power

Southern Power's effective tax rate was 18.8% for the nine months ended September 30, 2022 compared to a tax benefit rate of (1.6)% for the corresponding period in 2021. The effective tax rate increase was primarily due to higher pre-tax earnings in 2022 and a change in state apportionment methodology resulting from tax legislation enacted by the State of Alabama in the first quarter 2021, partially offset by higher wind PTCs in 2022.

Southern Company Gas

Southern Company Gas' effective tax rate was 23.7% for the nine months ended September 30, 2022 compared to 36.6% for the corresponding period in 2021. The effective tax rate decrease was primarily due to additional tax expense in 2021 as a result of the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Unrecognized Tax Benefits

Southern Company's and Southern Company Gas' unrecognized tax positions balances at September 30, 2022 were $79 million and $32 million, respectively, compared to $47 million for Southern Company at December 31, 2021. The increases from prior periods are related to the amendment of certain 2018 state tax filing positions related to Southern Company Gas dispositions. If accepted by the states, these positions would decrease Southern Company's and Southern Company Gas' annual effective tax rates. The ultimate outcome of these unrecognized tax benefits is dependent on acceptance by each state and is not expected to be resolved in the next 12 months.

(H) RETIREMENT BENEFITS

The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2022. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

During 2022, the qualified pension plan achieved the predetermined funding threshold whereby the asset allocation was adjusted to invest a larger portion of the portfolio in fixed rate debt securities.

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

On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three and nine months ended September 30, 2022 and 2021 are presented in the following tables.

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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, 2022
Pension Plans
Service cost	$	103	$	25	$	26	$	5	$	2	$	9
Interest cost	102		24		31		5		2		7
Expected return on plan assets	(316)		(77)		(99)		(15)		(4)		(22)
Amortization:
Prior service costs	—		—		—		—		—		(1)
Regulatory asset	—		—		—		—		—		3
Net loss	60		16		18		2		1		2
Net periodic pension cost (income)	$	(51)	$	(12)	$	(24)	$	(3)	$	1	$	(2)

Postretirement Benefits
Service cost	$	6	$	2	$	2	$	1	$	1	$	—
Interest cost	10		3		4		—		—		1
Expected return on plan assets	(20)		(9)		(8)		—		—		(2)
Amortization:
Prior service costs	(1)		—		—		—		—		—
Regulatory asset	—		—		—		—		—		2
Net (gain)/loss	1		—		—		—		—		(1)
Net periodic postretirement benefit cost (income)	$	(4)	$	(4)	$	(2)	$	1	$	1	$	—

Nine Months Ended September 30, 2022
Pension Plans
Service cost	$	309	$	74	$	78	$	13	$	7	$	26
Interest cost	306		72		92		14		5		21
Expected return on plan assets	(949)		(229)		(298)		(44)		(12)		(68)
Amortization:
Prior service costs	—		—		1		—		—		(2)
Regulatory asset	—		—		—		—		—		11
Net loss	180		47		55		9		2		5
Net periodic pension cost (income)	$	(154)	$	(36)	$	(72)	$	(8)	$	2	$	(7)

Postretirement Benefits
Service cost	$	17	$	5	$	5	$	1	$	1	$	1
Interest cost	31		8		11		1		—		4
Expected return on plan assets	(60)		(25)		(21)		(1)		—		(6)
Amortization:
Prior service costs	(1)		—		—		—		—		—
Regulatory asset	—		—		—		—		—		5
Net (gain)/loss	1		—		1		—		—		(2)
Net periodic postretirement benefit cost (income)	$	(12)	$	(12)	$	(4)	$	1	$	1	$	2

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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, 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 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 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)

(I) FAIR VALUE MEASUREMENTS

At September 30, 2022, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:


	Fair Value Measurements Using:
At September 30, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$	49	$	454	$	—	$	—	$	503


Investments in trusts:(b)(c)
Domestic equity	610		161		—		—		771
Foreign equity	111		129		—		—		240
U.S. Treasury and government agency securities	—		265		—		—		265
Municipal bonds	—		52		—		—		52
Pooled funds – fixed income	—		7		—		—		7
Corporate bonds	—		438		—		—		438
Mortgage and asset backed securities	—		87		—		—		87
Private equity	—		—		—		156		156
Cash and cash equivalents	4		—		—		—		4
Other	17		13		—		—		30
Cash equivalents	1,402		18		—		—		1,420
Other investments	9		26		—		—		35
Total	$	2,202	$	1,650	$	—	$	156	$	4,008
Liabilities:
Energy-related derivatives(a)	$	20	$	141	$	—	$	—	$	161
Interest rate derivatives	—		311		—		—		311
Foreign currency derivatives	—		323		—		—		323
Contingent consideration	—		—		14		—		14
Other	—		13		—		—		13
Total	$	20	$	788	$	14	$	—	$	822

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Fair Value Measurements Using:
At September 30, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	147	$	—	$	—	$	147

Nuclear decommissioning trusts:(b)
Domestic equity	370		152		—		—		522
Foreign equity	111		—		—		—		111
U.S. Treasury and government agency securities	—		15		—		—		15
Municipal bonds	—		2		—		—		2
Corporate bonds	—		230		—		—		230
Mortgage and asset backed securities	—		20		—		—		20
Private equity	—		—		—		156		156
Other	10		—		—		—		10
Cash equivalents	1,225		18		—		—		1,243
Other investments	—		26		—		—		26
Total	$	1,716	$	610	$	—	$	156	$	2,482
Liabilities:
Energy-related derivatives	$	—	$	35	$	—	$	—	$	35



Georgia Power
Assets:
Energy-related derivatives	$	—	$	145	$	—	$	—	$	145

Nuclear decommissioning trusts:(b)(c)
Domestic equity	240		1		—		—		241
Foreign equity	—		128		—		—		128
U.S. Treasury and government agency securities	—		250		—		—		250
Municipal bonds	—		50		—		—		50
Corporate bonds	—		208		—		—		208
Mortgage and asset backed securities	—		67		—		—		67
Other	7		13		—		—		20

Total	$	247	$	862	$	—	$	—	$	1,109
Liabilities:
Energy-related derivatives	$	—	$	51	$	—	$	—	$	51

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Fair Value Measurements Using:
At September 30, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	133	$	—	$	—	$	133

Cash equivalents	30		—		—		—		30
Total	$	30	$	133	$	—	$	—	$	163
Liabilities:
Energy-related derivatives	$	—	$	24	$	—	$	—	$	24



Southern Power
Assets:
Energy-related derivatives	$	—	$	7	$	—	$	—	$	7



Liabilities:
Energy-related derivatives	$	—	$	13	$	—	$	—	$	13
Foreign currency derivatives	—		80		—		—		80
Contingent consideration	—		—		14		—		14
Other	—		13		—		—		13
Total	$	—	$	106	$	14	$	—	$	120

Southern Company Gas
Assets:
Energy-related derivatives(a)	$	49	$	22	$	—	$	—	$	71

Non-qualified deferred compensation trusts:
Domestic equity	—		8		—		—		8
Foreign equity	—		1		—		—		1
Pooled funds – fixed income	—		7		—		—		7
Cash equivalents	4		—		—		—		4


Total	$	53	$	38	$	—	$	—	$	91
Liabilities:
Energy-related derivatives(a)	$	20	$	17	$	—	$	—	$	37
Interest rate derivatives	—		87		—		—		87

Total	$	20	$	104	$	—	$	—	$	124

(a)Excludes cash collateral of $15 million.

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

(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. At September 30, 2022, approximately $46 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program. See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds, including reinvested interest and dividends and excluding the funds' expenses, increased (decreased) by the amounts shown in the table below for the three and nine months ended September 30, 2022 and 2021. The changes were recorded as a change to the regulatory assets and liabilities related to AROs for Georgia Power and Alabama Power, respectively.


Fair value increases (decreases)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
	(in millions)
Southern Company	$	(106)	$	9	$	(486)	$	173
Alabama Power	(53)		15		(245)		133
Georgia Power	(53)		(6)		(241)		40

Valuation Methodologies

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

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

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

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Southern Power has contingent payment obligations related to certain acquisitions whereby it is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligations are categorized as Level 3 under Fair Value Measurements as 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, 2022, the fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $156 million and unfunded commitments related to the private equity investments totaled $84 million. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

At September 30, 2022, other financial instruments for which the carrying amount did not equal fair value were as follows:


	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas*()**
	(in billions)
Long-term debt, including securities due within one year:
Carrying amount	$	53.4	$	10.8	$	14.5	$	1.5	$	2.9	$	7.4
Fair value	46.4		9.3		12.6		1.2		2.7		6.3

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

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

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

(J) DERIVATIVES

The Registrants are exposed to market risks, including commodity price risk, interest rate risk, weather risk, and occasionally foreign currency exchange rate risk. To manage the volatility attributable to these exposures, each company nets its exposures, where possible, to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to each company's policies in areas such as counterparty exposure and risk management practices. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' wholesale gas operations used various contracts in its commercial activities that generally met the definition of derivatives. For the traditional electric operating companies, Southern Power, and Southern Company Gas' other businesses, each company's policy is that derivatives are to be used primarily for hedging purposes and mandates strict adherence to all applicable risk management policies. Derivative positions are monitored using techniques including, but not limited to, market valuation, value at risk, stress testing, and sensitivity analysis. Derivative instruments are recognized at fair value in the balance sheets as either assets or liabilities and are presented on a net basis. See Note (I) for additional fair value information. In the statements of cash flows, any cash impacts of settled energy-related and interest rate derivatives are recorded as operating activities. Any cash impacts of settled foreign currency derivatives are classified as operating or financing activities to correspond with the classification of the hedged interest or principal, respectively. See Note 1 to the financial statements under "Financial Instruments" in Item 8 of the Form 10-K for additional information. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information regarding the sale of Sequent.

Energy-Related Derivatives

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

Southern Company Gas also enters into weather derivative contracts as economic hedges 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.

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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

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

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

At September 30, 2022, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:


	Net Purchased mmBtu	Longest Hedge Date	Longest Non-Hedge Date
	(in millions)
Southern Company(*)	399	2030	2025
Alabama Power	105	2026	—
Georgia Power	116	2025	—
Mississippi Power	82	2027	—
Southern Power	11	2030	2023
Southern Company Gas(*)	85	2025	2025

(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 95.7 million mmBtu and short natural gas positions of 10.6 million mmBtu at September 30, 2022, which is also included in Southern Company's total volume.

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 15 million mmBtu for Southern Company, which includes 4 million mmBtu for Alabama Power, 5 million mmBtu for Georgia Power, 2 million mmBtu for Mississippi Power, and 4 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, 2023 are $17 million for Southern Company, $26 million for Southern Company Gas, and immaterial for the other Registrants.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Interest Rate Derivatives

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

At September 30, 2022, the following interest rate derivatives were outstanding:


	Notional Amount		Interest Rate Received	Weighted Average Interest Rate Paid	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2022
	(in millions)					(in millions)
Cash Flow Hedges of Existing Debt
Southern Company parent	$	175	—	4.25%	September 2025	$	—
Southern Company parent	175		—	3.83%	August 2032	—
Fair Value Hedges of Existing Debt
Southern Company parent	400		1.75%	1-month LIBOR + 0.68%	March 2028	(57)
Southern Company parent	1,000		3.70%	1-month LIBOR + 2.36%	April 2030	(167)
Southern Company Gas	500		1.75%	1-month LIBOR + 0.38%	January 2031	(87)
Southern Company	$	2,250				$	(311)

For cash flow hedges of interest rate derivatives, the estimated pre-tax gains (losses) expected to be reclassified from accumulated OCI to interest expense for the 12-month period ending September 30, 2023 are $(17) million for Southern Company and immaterial for the other Registrants. Deferred gains and losses related to interest rate derivatives are expected to be amortized into earnings through 2052 for Southern Company, Alabama Power, and Georgia Power, 2028 for Mississippi Power, and 2046 for Southern Company Gas.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Foreign Currency Derivatives

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

At September 30, 2022, the following foreign currency derivatives were outstanding:


	Pay Notional		Pay Rate	Receive Notional		Receive Rate	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2022
	(in millions)			(in millions)				(in millions)
Cash Flow Hedges of Existing Debt
Southern Power	$	564	3.78%	€	500	1.85%	June 2026	$	(80)

Fair Value Hedges of Existing Debt

Southern Company parent	1,476		3.39%	1,250		1.88%	September 2027	(243)


Southern Company	$	2,040		€	1,750			$	(323)

For cash flow hedges of foreign currency derivatives, the estimated pre-tax losses expected to be reclassified from accumulated OCI to earnings for the 12-month period ending September 30, 2023 are $12 million for Southern Power.

Derivative Financial Statement Presentation and Amounts

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

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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


	At September 30, 2022				At December 31, 2021
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Company
Energy-related derivatives designated as hedging instruments for regulatory purposes

Assets from risk management activities/Other current liabilities	$	299	$	70	$	129	$	30
Other deferred charges and assets/Other deferred credits and liabilities	150		59		72		6


Total derivatives designated as hedging instruments for regulatory purposes	449		129		201		36
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	27		13		7		5
Other deferred charges and assets/Other deferred credits and liabilities	7		1		1		—
Interest rate derivatives:
Assets from risk management activities/Other current liabilities	—		44		19		—
Other deferred charges and assets/Other deferred credits and liabilities	—		266		—		29
Foreign currency derivatives:
Assets from risk management activities/Other current liabilities	—		37		—		39
Other deferred charges and assets/Other deferred credits and liabilities	—		285		—		40
Total derivatives designated as hedging instruments in cash flow and fair value hedges	34		646		27		113
Energy-related derivatives not designated as hedging instruments

Assets from risk management activities/Other current liabilities	19		18		9		4
Other deferred charges and assets/Other deferred credits and liabilities	2		1		1		—

Total derivatives not designated as hedging instruments	21		19		10		4
Gross amounts recognized	504		794		238		153
Gross amounts offset(a)	(113)		(128)		(25)		(28)
Net amounts recognized in the Balance Sheets(b)	$	391	$	666	$	213	$	125

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	At September 30, 2022				At December 31, 2021
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Alabama Power
Energy-related derivatives designated as hedging instruments for regulatory purposes

Other current assets/Other current liabilities	$	90	$	12	$	30	$	9
Other deferred charges and assets/Other deferred credits and liabilities	57		23		25		2
Total derivatives designated as hedging instruments for regulatory purposes	147		35		55		11






Gross amounts offset	(31)		(31)		(5)		(5)
Net amounts recognized in the Balance Sheets	$	116	$	4	$	50	$	6

Georgia Power
Energy-related derivatives designated as hedging instruments for regulatory purposes

Assets from risk management activities/Other current liabilities	$	107	$	28	$	54	$	6
Other deferred charges and assets/Other deferred credits and liabilities	38		23		21		2
Total derivatives designated as hedging instruments for regulatory purposes	145		51		75		8





Energy-related derivatives not designated as hedging instruments

Other current assets/Other current liabilities	1		—		—		—

Gross amounts recognized	146		51		75		8
Gross amounts offset	(41)		(41)		(8)		(8)
Net amounts recognized in the Balance Sheets	$	105	$	10	$	67	$	—

Mississippi Power
Energy-related derivatives designated as hedging instruments for regulatory purposes

Assets from risk management activities/Other current liabilities	$	78	$	12	$	30	$	3
Other deferred charges and assets/Other deferred credits and liabilities	55		12		26		2
Total derivatives designated as hedging instruments for regulatory purposes	133		24		56		5






Gross amounts offset	(20)		(20)		(4)		(4)
Net amounts recognized in the Balance Sheets	$	113	$	4	$	52	$	1

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	At September 30, 2022				At December 31, 2021
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	$	—	$	10	$	2	$	—
Other deferred charges and assets/Other deferred credits and liabilities	5		1		1		—
Foreign currency derivatives:
Other current assets/Other current liabilities	—		12		—		16
Other deferred charges and assets/Other deferred credits and liabilities	—		68		—		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	5		91		3		16
Energy-related derivatives not designated as hedging instruments

Other current assets/Other current liabilities	2		2		1		—




Gross amounts recognized	7		93		4		16
Gross amounts offset	(3)		(3)		—		—
Net amounts recognized in the Balance Sheets	$	4	$	90	$	4	$	16

Southern Company Gas
Energy-related derivatives designated as hedging instruments for regulatory purposes

Other current assets/Other current liabilities	$	24	$	17	$	15	$	12


Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	26		3		5		5
Other deferred charges and assets/Other deferred credits and liabilities	3		—		—		—
Interest rate derivatives:
Other current assets/Other current liabilities	—		13		6		—
Other deferred charges and assets/Other deferred credits and liabilities	—		74		—		6
Total derivatives designated as hedging instruments in cash flow and fair value hedges	29		90		11		11
Energy-related derivatives not designated as hedging instruments

Other current assets/Other current liabilities	16		16		8		4
Other deferred charges and assets/Other deferred credits and liabilities	2		1		1		—

Total derivatives not designated as hedging instruments	18		17		9		4
Gross amounts recognized	71		124		35		27
Gross amounts offset(a)	(18)		(33)		(8)		(11)
Net amounts recognized in the Balance Sheets(b)	$	53	$	91	$	27	$	16

(a)Gross amounts offset includes cash collateral held on deposit in broker margin accounts of $15 million and $3 million at September 30, 2022 and December 31, 2021, respectively.

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

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Energy-related derivatives not designated as hedging instruments were immaterial for Alabama Power and Mississippi Power at September 30, 2022. There were no such instruments for the traditional electric operating companies at December 31, 2021.

At September 30, 2022 and December 31, 2021, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:


Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet Location	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Company Gas
	(in millions)
At September 30, 2022:
Energy-related derivatives:
Other regulatory assets, current	$	(17)	$	(2)	$	(8)	$	(3)	$	(4)
Other regulatory assets, deferred	(6)		(2)		(3)		(1)		—


Other regulatory liabilities, current	246		80		87		69		10
Other regulatory liabilities, deferred	98		36		18		44		—
Total energy-related derivative gains (losses)	$	321	$	112	$	94	$	109	$	6

At December 31, 2021:
Energy-related derivatives:
Other regulatory assets, current	$	(17)	$	(6)	$	—	$	—	$	(11)

Other regulatory liabilities, current	107		28		48		27		4
Other regulatory liabilities, deferred	65		22		19		24		—
Total energy-related derivative gains (losses)	$	155	$	44	$	67	$	51	$	(7)

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

For the three and nine months ended September 30, 2022 and 2021, 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,
2022	2021		2022		2021
	(in millions)				(in millions)
Southern Company
Cash flow hedges:
Energy-related derivatives	$	11	$	38	$	51	$	59
Interest rate derivatives	6		5		36		7
Foreign currency derivatives	(35)		(36)		(137)		(79)
Fair value hedges(*):
Foreign currency derivatives	20		(4)		18		(4)
Total	$	2	$	3	$	(32)	$	(17)


Georgia Power

Interest rate derivatives	$	—	$	—	$	31	$	—



Southern Power
Cash flow hedges:
Energy-related derivatives	$	(11)	$	8	$	(4)	$	16

Foreign currency derivatives	(35)		(36)		(137)		(79)
Total	$	(46)	$	(28)	$	(141)	$	(63)
Southern Company Gas
Cash flow hedges:
Energy-related derivatives	$	22	$	30	$	55	$	43
Interest rate derivatives	5		—		—		—
Total	$	27	$	30	$	55	$	43

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

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of interest rate derivatives designated as cash flow hedging instruments on accumulated OCI were immaterial for the other Registrants.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

For the three and nine months ended September 30, 2022 and 2021, 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,

2022	2021		2022		2021
	(in millions)				(in millions)
Southern Company
Total cost of natural gas	$	294	$	129	$	1,840	$	943
Gain (loss) on energy-related cash flow hedges(a)	9		2		28		—
Total depreciation and amortization	922		896		2,728		2,658
Gain (loss) on energy-related cash flow hedges(a)	(1)		3		5		6
Total interest expense, net of amounts capitalized	(511)		(451)		(1,461)		(1,352)
Gain (loss) on interest rate cash flow hedges(a)	(7)		(7)		(19)		(20)
Gain (loss) on foreign currency cash flow hedges(a)	(3)		(6)		(16)		(18)
Gain (loss) on interest rate fair value hedges(b)	(102)		(4)		(300)		(16)
Total other income (expense), net	132		131		414		290
Gain (loss) on foreign currency cash flow hedges(a)(c)	(32)		(34)		(129)		(76)
Gain (loss) on foreign currency fair value hedges	(59)		(32)		(180)		(32)
Amount excluded from effectiveness testing recognized in earnings	(21)		4		(17)		4










Southern Power
Total depreciation and amortization	$	133	$	132	$	384	$	383
Gain (loss) on energy-related cash flow hedges(a)	(1)		3		5		6
Total interest expense, net of amounts capitalized	(32)		(36)		(105)		(111)
Gain (loss) on foreign currency cash flow hedges(a)	(3)		(6)		(16)		(18)
Total other income (expense), net	3		2		5		10
Gain (loss) on foreign currency cash flow hedges(a)(c)	(32)		(34)		(129)		(76)
Southern Company Gas
Total cost of natural gas	$	294	$	129	$	1,840	$	943
Gain (loss) on energy-related cash flow hedges(a)	9		2		28		—
Total interest expense, net of amounts capitalized	(65)		(57)		(187)		(175)
Gain (loss) on interest rate cash flow hedges(a)	(2)		(1)		(3)		(2)
Gain (loss) on interest rate fair value hedges(b)	(30)		—		(87)		2

(a)Reclassified from accumulated OCI into earnings.

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

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

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of cash flow hedge accounting on income for interest rate derivatives were immaterial for Alabama Power, Georgia Power, and Mississippi Power.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

At September 30, 2022 and December 31, 2021, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:


	Carrying Amount of the Hedged Item				Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged Items	At September 30, 2022		At December 31, 2021		At September 30, 2022		At December 31, 2021
	(in millions)				(in millions)
Southern Company

Long-term debt	$	(2,788)	$	(3,280)	$	306	$	9

Southern Company Gas

Long-term debt	$	(411)	$	(493)	$	86	$	2

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:


		Gain (Loss)
		Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	2022		2021		2022		2021
		(in millions)				(in millions)

Energy-related derivatives:	Natural gas revenues(*)	$	3	$	(2)	$	(10)	$	(122)
	Cost of natural gas	(2)		20		(7)		36

Total derivatives in non-designated hedging relationships		$	1	$	18	$	(17)	$	(86)

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

For the three and nine months ended September 30, 2022 and 2021, the pre-tax effects of energy-related derivatives not designated as hedging instruments were immaterial for the other Registrants.

Contingent Features

The Registrants do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain derivatives that could require collateral, but not accelerated payment, in the event of various credit rating changes of certain Southern Company subsidiaries. Generally, collateral may be provided by a Southern Company guaranty, letter of credit, or cash. At September 30, 2022, the Registrants had no collateral posted with derivative counterparties to satisfy these arrangements.

For Southern Company and Southern Power, the fair value of interest rate derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were $156 million and $38 million, respectively at September 30, 2022. For the traditional electric operating companies and Southern Power, energy-related derivative liabilities with contingent features and the maximum potential collateral requirements arising from the credit-risk-related contingent features, at a rating below BBB- and/or Baa3, were immaterial at September 30, 2022. The maximum potential collateral requirements arising from the credit-risk-related contingent features for the traditional electric operating companies and Southern Power include certain agreements that could require collateral in the event that one or more Southern Company power pool participants has a credit rating change to below investment grade. Following the sale of Gulf Power to NextEra Energy, Inc., Gulf Power continued participating in the Southern Company power pool through July 13, 2022.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

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, 2022, cash collateral posted in these accounts was immaterial. Southern Company Gas maintains accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, Southern Company Gas may be required to deposit cash into these accounts. At September 30, 2022, cash collateral held on deposit in broker margin accounts was $15 million.

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

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

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

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

(K) ACQUISITIONS AND DISPOSITIONS

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

Alabama Power

On September 30, 2022, Alabama Power completed its acquisition of the Calhoun Generating Station, which was accounted for as an asset acquisition. The total purchase price was $179 million, of which $171 million was related to net assets recorded within property, plant, and equipment on the balance sheet and the remainder primarily related to fossil fuel stock and materials and supplies. See Note (B) and Note 15 to the financial statements in Item 8 of the Form 10-K under "Alabama Power" for additional information.

Southern Power

Construction Projects

During the nine months ended September 30, 2022, Southern Power completed construction of and placed in service the remaining 40 MWs of the Tranquillity battery energy storage facility and the remaining 15 MWs of the Garland battery energy storage facility.

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Project Facility	Resource	Approximate Nameplate Capacity (MW)	Location	COD	PPA Contract Period
Projects Completed During the Nine Months Ended September 30, 2022
Garland Solar Storage(a)	Battery energy storage system	88	Kern County, CA	September 2021 through February 2022(b)	20 years
Tranquillity Solar Storage(a)	Battery energy storage system	72	Fresno County, CA	November 2021 through March 2022(c)	20 years

(a)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 73 MWs were placed in service in 2021 and 15 MWs were placed in service in February 2022.

(c)The facility has a total capacity of 72 MWs, of which 32 MWs were placed in service in 2021 and 40 MWs were placed in service in March 2022.

Southern Company Gas

Sale of Natural Gas Storage Facilities

On September 7, 2022, certain affiliates of Southern Company Gas entered into agreements to sell two natural gas storage facilities located in California and Texas for an aggregate purchase price of $186 million, plus working capital and certain other adjustments. Completion of the sales is subject to material closing conditions, including, among others, release of a Southern Company Gas parent guarantee, approval from the California Public Utility Commission without a material burdensome condition, and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The parent guarantee release was executed on October 20, 2022, which resolved a material closing condition. As a result, Southern Company Gas expects to record pre-tax impairment charges totaling approximately $125 million ($95 million after tax) in the fourth quarter 2022. The sale of the Texas facility is expected to be completed later in the fourth quarter 2022, and the sale of the California facility is expected to be completed during 2023; however, the ultimate outcome of these matters cannot be determined at this time.

Sale of Pivotal LNG

On May 20, 2022, Southern Company Gas received the final $5 million contingent payment from Dominion Modular LNG Holdings, Inc. in connection with its 2020 sale of Pivotal LNG, Inc.

(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 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 and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' other businesses also included wholesale gas services.

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Southern Company's reportable business segments are the sale of electricity by the traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $336 million and $673 million for the three and nine months ended September 30, 2022, respectively, and $167 million and $361 million for the three and nine months ended September 30, 2021, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies were immaterial for all periods presented. Revenues from sales of natural gas from Southern Company Gas (prior to its sale of Sequent) to Southern Power were $18 million for the nine months ended September 30, 2021. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing distributed energy and resilience solutions and deploying microgrids for commercial, industrial, governmental, and utility customers, as well as investments in telecommunications and, for the three and nine months ended September 30, 2021, leveraged lease projects. All other inter-segment revenues are not material.

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Financial data for business segments and products and services for the three and nine months ended September 30, 2022 and 2021 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, 2022
Operating revenues	$	6,938	$	1,180	$	(691)	$	7,427	$	857	$	135	$	(41)	$	8,378
Segment net income (loss)(a)(b)	1,445		95		—		1,540		83		(152)		1		1,472
Nine Months Ended September 30, 2022
Operating revenues	$	16,716	$	2,618	$	(1,391)	$	17,943	$	3,998	$	418	$	(127)	$	22,232
Segment net income (loss)(a)(b)	3,256		265		—		3,521		516		(415)		(11)		3,611
At September 30, 2022
Goodwill	$	—	$	2	$	—	$	2	$	5,015	$	263	$	—	$	5,280
Total assets	95,659		13,283		(748)		108,194		24,097		2,372		(658)		134,005
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)	2,352		211		—		2,563		389		(338)		(6)		2,608
At December 31, 2021
Goodwill	$	—	$	2	$	—	$	2	$	5,015	$	263	$	—	$	5,280
Total assets	89,051		13,390		(667)		101,774		23,560		2,975		(775)		127,534

(a)Attributable to Southern Company.

(b)For the traditional electric operating companies, includes pre-tax charges (credits) to income at Georgia Power for the estimated probable loss associated with the construction of Plant Vogtle Units 3 and 4 of $(70) million ($(52) million after tax) and $(18) million ($(13) million after tax) for the three and nine months ended September 30, 2022, respectively, and $264 million ($197 million after tax) and $772 million ($576 million after tax) for the three and nine months ended September 30, 2021, respectively. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Nuclear Construction" for additional information.

(c)For Southern Company Gas, includes a 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 as a result of the sale. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K 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 Note 15 to the financial statements under "Southern Power – Development Projects" in Item 8 of the Form 10-K for additional information.

(e)For Southern Company Gas, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to its equity method investment in the PennEast Pipeline project. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Products and Services


	Electric Utilities' Revenues
	Retail		Wholesale		Other		Total
	(in millions)
Three Months Ended September 30, 2022	$	5,961	$	1,197	$	269	$	7,427
Three Months Ended September 30, 2021	4,551		731		245		5,527
Nine Months Ended September 30, 2022	$	14,363	$	2,798	$	782	$	17,943
Nine Months Ended September 30, 2021	11,492		1,822		737		14,051


	Southern Company Gas' Revenues
	Gas Distribution Operations		Wholesale Gas Services*()**		Gas Marketing Services		Other		Total
	(in millions)
Three Months Ended September 30, 2022	$	748	$	—	$	85	$	24	$	857
Three Months Ended September 30, 2021	553		—		52		18		623
Nine Months Ended September 30, 2022	$	3,513	$	—	$	420	$	65	$	3,998
Nine Months Ended September 30, 2021	2,451		188		311		44		2,994

(*)Prior to the sale of Sequent, the revenues for wholesale gas services were netted with costs associated with its energy and risk management activities. See "Southern Company Gas" herein and Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Southern Company Gas

Southern Company Gas manages its business through three reportable segments – gas distribution operations, gas pipeline investments, and gas marketing services. Prior to the sale of Sequent on July 1, 2021, Southern Company Gas' reportable segments also included wholesale gas services. The non-reportable segments are combined and presented as all other. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information on the sale of Sequent.

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

Gas pipeline investments consists of joint ventures in natural gas pipeline investments including a 50% interest in SNG 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 includes a 20% ownership interest in the PennEast Pipeline project, which was cancelled in September 2021. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Through July 1, 2021, wholesale gas services 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. Additionally, wholesale gas services engaged in natural gas storage and gas pipeline arbitrage and related activities.

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

The all other column includes segments and subsidiaries that fall below the quantitative threshold for separate disclosure, including storage and fuels operations. See Note (K) under "Southern Company Gas" for information regarding agreements by certain affiliates of Southern Company Gas to sell two natural gas storage facilities.

Table of Contents Index to Financial Statements

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Business segment financial data for the three and nine months ended September 30, 2022 and 2021 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, 2022
Operating revenues	$	751	$	8	$	—	$	85	$	844	$	16	$	(3)	$	857
Segment net income (loss)	59		24		—		(2)		81		2		—		83
Nine Months Ended September 30, 2022
Operating revenues	$	3,533	$	24	$	—	$	420	$	3,977	$	43	$	(22)	$	3,998
Segment net income (loss)	365		76		—		65		506		10		—		516
Total assets at September 30, 2022	21,605		1,425		—		1,595		24,625		9,100		(9,628)		24,097
Three Months Ended September 30, 2021
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 December 31, 2021	20,917		1,467		31		1,556		23,971		12,114		(12,525)		23,560

(a)As a result of the sale of Sequent, wholesale gas services is no longer a reportable segment for the three and nine months ended September 30, 2022. Prior to the sale of Sequent, the revenues for wholesale gas services were 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)



Nine Months Ended September 30, 2021	$	3,881	$	90	$	3,971	$	3,783	$	188

(b)For wholesale gas services, includes a pre-tax gain of $121 million ($93 million after tax) related to the sale of Sequent. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(c)For the "All Other" column, includes $85 million of additional tax expense as a result of the sale. See Note 15 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

(d)For gas pipeline investments, includes pre-tax impairment charges totaling $84 million ($67 million after tax) related to the equity method investment in the PennEast Pipeline project. See Note 7 to the financial statements under "Southern Company Gas" in Item 8 of the Form 10-K for additional information.

Table of Contents Index to Financial Statements

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