LEASES (Notes)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

LEASES

LEASES

On January 1, 2019, the Registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease.

The Registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements were applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The Registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the Registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	990	$	125	$	1,487	$	—	$	—	$	—
Real estate/land	782		4		54		2		398		74
Communication towers	154		2		3		—		—		18
Railcars	51		21		26		3		—		—
Other	93		8		12		1		—		—
Total	$	2,070	$	160	$	1,582	$	6	$	398	$	92

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have terms of up to 15 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities at Southern Power and for communication tower leases at Southern Company Gas, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $624 million at December 31, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence later in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the 20-year term battery energy storage systems of the solar generation PPAs are deemed operating leases. The 28-year term battery energy storage systems of the solar generation PPAs are deemed finance leases. The estimated minimum lease payments for these agreements, which are contingent upon approval by the Alabama PSC, total $95 million. See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of December 31, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,800	$	132	$	1,428	$	6	$	369	$	93
Operating lease obligations - current	$	229	$	49	$	144	$	2	$	22	$	14
Operating lease obligations - non-current	1,615		107		1,282		4		376		78
Total operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance Leases
Finance lease ROU assets, net	$	216	$	4	$	130	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	11	$	—	$	—	$	—
Finance lease obligations - non-current	205		3		145		—		—		—
Total finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Lease costs for the year ended December 31, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company		Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease cost
Operating lease cost	$	310	$	54		$	206	$	3	$	28	$	18
Finance lease cost:
Amortization of ROU assets	28		1			15		—		—		—
Interest on lease obligations	12		—			18		—		—		—
Total finance lease cost	40		1			33		—		—		—
Short-term lease costs	48		19			22		—		—		—
Variable lease cost	105		6			85		—		7		—
Sublease income	—		(1		)	—		—		—		—
Total lease cost	$	503	$	79		$	346	$	3	$	35	$	18

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Rent expense and PPA capacity expense related to leases for 2018 and 2017, prior to the adoption of ASC 842, were as follows:

	Southern Company(a)(b)(c)		Alabama Power		Georgia Power(a)		Mississippi Power(b)		Southern Power(c)		Southern Company Gas
	(in millions)
2018:
Rent expense	$	192	$	23	$	34	$	4	$	31	$	15
PPA capacity expense	231		44		206		—		—		—
2017:
Rent expense	$	176	$	25	$	31	$	3	$	29	$	15
PPA capacity expense	235		41		225		—		—		—

(a) Georgia Power's energy-only solar PPAs accounted for as leases contained contingent rent expense of $72 million and $73 million for 2018 and 2017, respectively, of which $29 million in each of 2018 and 2017 related to solar PPAs with Southern Power.

(b) Mississippi Power's energy-only solar PPAs accounted for as operating leases contained contingent rent expense of $10 million and $5 million in 2018 and 2017, respectively.

(c) Rent expense includes contingent rent expense related to Southern Power's land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	323	$	54	$	210	$	3	$	27	$	18
Operating cash flows from finance leases	10		—		19		—		—		—
Financing cash flows from finance leases	32		1		13		—		—		—
ROU assets obtained in exchange for new operating lease obligations	118		7		21		—		2		19
ROU assets obtained in exchange for new finance lease obligations	35		2		24		—		—		—

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.2		3.1		10.2		7.0		32.8		9.9
Finance leases	18.8		12.1		10.5		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.53	%	3.33	%	4.46	%	4.02	%	5.66	%	3.70	%
Finance leases	5.04	%	3.60	%	10.76	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of December 31, 2019, Southern Company, Alabama Power, Mississippi Power, and Southern Power have additional leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power(a)	Mississippi Power(b)	Southern Power
Lease category	PPAs, land, pipelines,  and aircraft	PPAs	Pipelines	Land
Expected commencement date	2020-2024	2020-2024	2020	2020
Longest lease term expiration	40 years	28 years	15 years	40 years
Estimated total obligations (in millions)	$248	$95	$23	$87

(a) See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information. Alabama Power will have variable operating lease payments and variable finance lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

(b) See Note 2 under "Mississippi Power – Kemper County Energy Facility – Lignite Mine and CO₂ Pipeline Facilities" for additional information. Estimated total obligations include non-lease components.

Lessor

The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric

operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a term of 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 27 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 23 years.

Lease income for the year ended December 31, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

No profit or loss was recognized by Mississippi Power upon commencement of a tolling arrangement accounted for as a sales-type lease during the first quarter 2019. The undiscounted cash flows to be received under the lease are as follows:

	At December 31, 2019
	Southern Company		Mississippi Power
	(in millions)
2020	$	17	$	17
2021	15		15
2022	15		15
2023	14		14
2024	14		14
Thereafter	138		138
Total undiscounted cash flows	$	213	$	213
Lease receivable(*)	118		118
Difference between undiscounted cash flows and discounted cash flows	$	95	$	95

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

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	At December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2020	$	155	$	26	$	26	$	84	$	35
2021	141		23		19		86		35
2022	125		16		8		87		35
2023	110		7		2		88		34
2024	103		3		—		90		33
Thereafter	1,063		20		—		387		463
Total	$	1,697	$	95	$	55	$	822	$	635

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the Registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease.

The Registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements were applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The Registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the Registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	990	$	125	$	1,487	$	—	$	—	$	—
Real estate/land	782		4		54		2		398		74
Communication towers	154		2		3		—		—		18
Railcars	51		21		26		3		—		—
Other	93		8		12		1		—		—
Total	$	2,070	$	160	$	1,582	$	6	$	398	$	92

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have terms of up to 15 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities at Southern Power and for communication tower leases at Southern Company Gas, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $624 million at December 31, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence later in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the 20-year term battery energy storage systems of the solar generation PPAs are deemed operating leases. The 28-year term battery energy storage systems of the solar generation PPAs are deemed finance leases. The estimated minimum lease payments for these agreements, which are contingent upon approval by the Alabama PSC, total $95 million. See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of December 31, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,800	$	132	$	1,428	$	6	$	369	$	93
Operating lease obligations - current	$	229	$	49	$	144	$	2	$	22	$	14
Operating lease obligations - non-current	1,615		107		1,282		4		376		78
Total operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance Leases
Finance lease ROU assets, net	$	216	$	4	$	130	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	11	$	—	$	—	$	—
Finance lease obligations - non-current	205		3		145		—		—		—
Total finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Lease costs for the year ended December 31, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company		Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease cost
Operating lease cost	$	310	$	54		$	206	$	3	$	28	$	18
Finance lease cost:
Amortization of ROU assets	28		1			15		—		—		—
Interest on lease obligations	12		—			18		—		—		—
Total finance lease cost	40		1			33		—		—		—
Short-term lease costs	48		19			22		—		—		—
Variable lease cost	105		6			85		—		7		—
Sublease income	—		(1		)	—		—		—		—
Total lease cost	$	503	$	79		$	346	$	3	$	35	$	18

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Rent expense and PPA capacity expense related to leases for 2018 and 2017, prior to the adoption of ASC 842, were as follows:

	Southern Company(a)(b)(c)		Alabama Power		Georgia Power(a)		Mississippi Power(b)		Southern Power(c)		Southern Company Gas
	(in millions)
2018:
Rent expense	$	192	$	23	$	34	$	4	$	31	$	15
PPA capacity expense	231		44		206		—		—		—
2017:
Rent expense	$	176	$	25	$	31	$	3	$	29	$	15
PPA capacity expense	235		41		225		—		—		—

(a) Georgia Power's energy-only solar PPAs accounted for as leases contained contingent rent expense of $72 million and $73 million for 2018 and 2017, respectively, of which $29 million in each of 2018 and 2017 related to solar PPAs with Southern Power.

(b) Mississippi Power's energy-only solar PPAs accounted for as operating leases contained contingent rent expense of $10 million and $5 million in 2018 and 2017, respectively.

(c) Rent expense includes contingent rent expense related to Southern Power's land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	323	$	54	$	210	$	3	$	27	$	18
Operating cash flows from finance leases	10		—		19		—		—		—
Financing cash flows from finance leases	32		1		13		—		—		—
ROU assets obtained in exchange for new operating lease obligations	118		7		21		—		2		19
ROU assets obtained in exchange for new finance lease obligations	35		2		24		—		—		—

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.2		3.1		10.2		7.0		32.8		9.9
Finance leases	18.8		12.1		10.5		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.53	%	3.33	%	4.46	%	4.02	%	5.66	%	3.70	%
Finance leases	5.04	%	3.60	%	10.76	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of December 31, 2019, Southern Company, Alabama Power, Mississippi Power, and Southern Power have additional leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power(a)	Mississippi Power(b)	Southern Power
Lease category	PPAs, land, pipelines,  and aircraft	PPAs	Pipelines	Land
Expected commencement date	2020-2024	2020-2024	2020	2020
Longest lease term expiration	40 years	28 years	15 years	40 years
Estimated total obligations (in millions)	$248	$95	$23	$87

(a) See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information. Alabama Power will have variable operating lease payments and variable finance lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

(b) See Note 2 under "Mississippi Power – Kemper County Energy Facility – Lignite Mine and CO₂ Pipeline Facilities" for additional information. Estimated total obligations include non-lease components.

Lessor

The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric

operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a term of 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 27 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 23 years.

Lease income for the year ended December 31, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

No profit or loss was recognized by Mississippi Power upon commencement of a tolling arrangement accounted for as a sales-type lease during the first quarter 2019. The undiscounted cash flows to be received under the lease are as follows:

	At December 31, 2019
	Southern Company		Mississippi Power
	(in millions)
2020	$	17	$	17
2021	15		15
2022	15		15
2023	14		14
2024	14		14
Thereafter	138		138
Total undiscounted cash flows	$	213	$	213
Lease receivable(*)	118		118
Difference between undiscounted cash flows and discounted cash flows	$	95	$	95

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

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	At December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2020	$	155	$	26	$	26	$	84	$	35
2021	141		23		19		86		35
2022	125		16		8		87		35
2023	110		7		2		88		34
2024	103		3		—		90		33
Thereafter	1,063		20		—		387		463
Total	$	1,697	$	95	$	55	$	822	$	635

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the Registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease.

The Registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements were applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The Registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the Registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	990	$	125	$	1,487	$	—	$	—	$	—
Real estate/land	782		4		54		2		398		74
Communication towers	154		2		3		—		—		18
Railcars	51		21		26		3		—		—
Other	93		8		12		1		—		—
Total	$	2,070	$	160	$	1,582	$	6	$	398	$	92

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have terms of up to 15 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities at Southern Power and for communication tower leases at Southern Company Gas, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $624 million at December 31, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence later in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the 20-year term battery energy storage systems of the solar generation PPAs are deemed operating leases. The 28-year term battery energy storage systems of the solar generation PPAs are deemed finance leases. The estimated minimum lease payments for these agreements, which are contingent upon approval by the Alabama PSC, total $95 million. See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of December 31, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,800	$	132	$	1,428	$	6	$	369	$	93
Operating lease obligations - current	$	229	$	49	$	144	$	2	$	22	$	14
Operating lease obligations - non-current	1,615		107		1,282		4		376		78
Total operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance Leases
Finance lease ROU assets, net	$	216	$	4	$	130	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	11	$	—	$	—	$	—
Finance lease obligations - non-current	205		3		145		—		—		—
Total finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Lease costs for the year ended December 31, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company		Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease cost
Operating lease cost	$	310	$	54		$	206	$	3	$	28	$	18
Finance lease cost:
Amortization of ROU assets	28		1			15		—		—		—
Interest on lease obligations	12		—			18		—		—		—
Total finance lease cost	40		1			33		—		—		—
Short-term lease costs	48		19			22		—		—		—
Variable lease cost	105		6			85		—		7		—
Sublease income	—		(1		)	—		—		—		—
Total lease cost	$	503	$	79		$	346	$	3	$	35	$	18

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Rent expense and PPA capacity expense related to leases for 2018 and 2017, prior to the adoption of ASC 842, were as follows:

	Southern Company(a)(b)(c)		Alabama Power		Georgia Power(a)		Mississippi Power(b)		Southern Power(c)		Southern Company Gas
	(in millions)
2018:
Rent expense	$	192	$	23	$	34	$	4	$	31	$	15
PPA capacity expense	231		44		206		—		—		—
2017:
Rent expense	$	176	$	25	$	31	$	3	$	29	$	15
PPA capacity expense	235		41		225		—		—		—

(a) Georgia Power's energy-only solar PPAs accounted for as leases contained contingent rent expense of $72 million and $73 million for 2018 and 2017, respectively, of which $29 million in each of 2018 and 2017 related to solar PPAs with Southern Power.

(b) Mississippi Power's energy-only solar PPAs accounted for as operating leases contained contingent rent expense of $10 million and $5 million in 2018 and 2017, respectively.

(c) Rent expense includes contingent rent expense related to Southern Power's land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	323	$	54	$	210	$	3	$	27	$	18
Operating cash flows from finance leases	10		—		19		—		—		—
Financing cash flows from finance leases	32		1		13		—		—		—
ROU assets obtained in exchange for new operating lease obligations	118		7		21		—		2		19
ROU assets obtained in exchange for new finance lease obligations	35		2		24		—		—		—

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.2		3.1		10.2		7.0		32.8		9.9
Finance leases	18.8		12.1		10.5		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.53	%	3.33	%	4.46	%	4.02	%	5.66	%	3.70	%
Finance leases	5.04	%	3.60	%	10.76	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of December 31, 2019, Southern Company, Alabama Power, Mississippi Power, and Southern Power have additional leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power(a)	Mississippi Power(b)	Southern Power
Lease category	PPAs, land, pipelines,  and aircraft	PPAs	Pipelines	Land
Expected commencement date	2020-2024	2020-2024	2020	2020
Longest lease term expiration	40 years	28 years	15 years	40 years
Estimated total obligations (in millions)	$248	$95	$23	$87

(a) See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information. Alabama Power will have variable operating lease payments and variable finance lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

(b) See Note 2 under "Mississippi Power – Kemper County Energy Facility – Lignite Mine and CO₂ Pipeline Facilities" for additional information. Estimated total obligations include non-lease components.

Lessor

The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric

operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a term of 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 27 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 23 years.

Lease income for the year ended December 31, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

No profit or loss was recognized by Mississippi Power upon commencement of a tolling arrangement accounted for as a sales-type lease during the first quarter 2019. The undiscounted cash flows to be received under the lease are as follows:

	At December 31, 2019
	Southern Company		Mississippi Power
	(in millions)
2020	$	17	$	17
2021	15		15
2022	15		15
2023	14		14
2024	14		14
Thereafter	138		138
Total undiscounted cash flows	$	213	$	213
Lease receivable(*)	118		118
Difference between undiscounted cash flows and discounted cash flows	$	95	$	95

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

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	At December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2020	$	155	$	26	$	26	$	84	$	35
2021	141		23		19		86		35
2022	125		16		8		87		35
2023	110		7		2		88		34
2024	103		3		—		90		33
Thereafter	1,063		20		—		387		463
Total	$	1,697	$	95	$	55	$	822	$	635

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the Registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease.

The Registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements were applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The Registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the Registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	990	$	125	$	1,487	$	—	$	—	$	—
Real estate/land	782		4		54		2		398		74
Communication towers	154		2		3		—		—		18
Railcars	51		21		26		3		—		—
Other	93		8		12		1		—		—
Total	$	2,070	$	160	$	1,582	$	6	$	398	$	92

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have terms of up to 15 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities at Southern Power and for communication tower leases at Southern Company Gas, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $624 million at December 31, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence later in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the 20-year term battery energy storage systems of the solar generation PPAs are deemed operating leases. The 28-year term battery energy storage systems of the solar generation PPAs are deemed finance leases. The estimated minimum lease payments for these agreements, which are contingent upon approval by the Alabama PSC, total $95 million. See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of December 31, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,800	$	132	$	1,428	$	6	$	369	$	93
Operating lease obligations - current	$	229	$	49	$	144	$	2	$	22	$	14
Operating lease obligations - non-current	1,615		107		1,282		4		376		78
Total operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance Leases
Finance lease ROU assets, net	$	216	$	4	$	130	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	11	$	—	$	—	$	—
Finance lease obligations - non-current	205		3		145		—		—		—
Total finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Lease costs for the year ended December 31, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company		Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease cost
Operating lease cost	$	310	$	54		$	206	$	3	$	28	$	18
Finance lease cost:
Amortization of ROU assets	28		1			15		—		—		—
Interest on lease obligations	12		—			18		—		—		—
Total finance lease cost	40		1			33		—		—		—
Short-term lease costs	48		19			22		—		—		—
Variable lease cost	105		6			85		—		7		—
Sublease income	—		(1		)	—		—		—		—
Total lease cost	$	503	$	79		$	346	$	3	$	35	$	18

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Rent expense and PPA capacity expense related to leases for 2018 and 2017, prior to the adoption of ASC 842, were as follows:

	Southern Company(a)(b)(c)		Alabama Power		Georgia Power(a)		Mississippi Power(b)		Southern Power(c)		Southern Company Gas
	(in millions)
2018:
Rent expense	$	192	$	23	$	34	$	4	$	31	$	15
PPA capacity expense	231		44		206		—		—		—
2017:
Rent expense	$	176	$	25	$	31	$	3	$	29	$	15
PPA capacity expense	235		41		225		—		—		—

(a) Georgia Power's energy-only solar PPAs accounted for as leases contained contingent rent expense of $72 million and $73 million for 2018 and 2017, respectively, of which $29 million in each of 2018 and 2017 related to solar PPAs with Southern Power.

(b) Mississippi Power's energy-only solar PPAs accounted for as operating leases contained contingent rent expense of $10 million and $5 million in 2018 and 2017, respectively.

(c) Rent expense includes contingent rent expense related to Southern Power's land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	323	$	54	$	210	$	3	$	27	$	18
Operating cash flows from finance leases	10		—		19		—		—		—
Financing cash flows from finance leases	32		1		13		—		—		—
ROU assets obtained in exchange for new operating lease obligations	118		7		21		—		2		19
ROU assets obtained in exchange for new finance lease obligations	35		2		24		—		—		—

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.2		3.1		10.2		7.0		32.8		9.9
Finance leases	18.8		12.1		10.5		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.53	%	3.33	%	4.46	%	4.02	%	5.66	%	3.70	%
Finance leases	5.04	%	3.60	%	10.76	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of December 31, 2019, Southern Company, Alabama Power, Mississippi Power, and Southern Power have additional leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power(a)	Mississippi Power(b)	Southern Power
Lease category	PPAs, land, pipelines,  and aircraft	PPAs	Pipelines	Land
Expected commencement date	2020-2024	2020-2024	2020	2020
Longest lease term expiration	40 years	28 years	15 years	40 years
Estimated total obligations (in millions)	$248	$95	$23	$87

(a) See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information. Alabama Power will have variable operating lease payments and variable finance lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

(b) See Note 2 under "Mississippi Power – Kemper County Energy Facility – Lignite Mine and CO₂ Pipeline Facilities" for additional information. Estimated total obligations include non-lease components.

Lessor

The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric

operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a term of 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 27 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 23 years.

Lease income for the year ended December 31, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

No profit or loss was recognized by Mississippi Power upon commencement of a tolling arrangement accounted for as a sales-type lease during the first quarter 2019. The undiscounted cash flows to be received under the lease are as follows:

	At December 31, 2019
	Southern Company		Mississippi Power
	(in millions)
2020	$	17	$	17
2021	15		15
2022	15		15
2023	14		14
2024	14		14
Thereafter	138		138
Total undiscounted cash flows	$	213	$	213
Lease receivable(*)	118		118
Difference between undiscounted cash flows and discounted cash flows	$	95	$	95

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

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	At December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2020	$	155	$	26	$	26	$	84	$	35
2021	141		23		19		86		35
2022	125		16		8		87		35
2023	110		7		2		88		34
2024	103		3		—		90		33
Thereafter	1,063		20		—		387		463
Total	$	1,697	$	95	$	55	$	822	$	635

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.