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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

Fair value measurements are based on inputs of observable and unobservable market data that a market participant would use in pricing the asset or liability. The use of observable inputs is maximized where available and the use of unobservable inputs is minimized for fair value measurement and reflects a three-tier fair value hierarchy that prioritizes inputs to valuation techniques used for fair value measurement.


•	Level 1 consists of observable market data in an active market for identical assets or liabilities.


•	Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable.


•	Level 3 consists of unobservable market data. The input may reflect the assumptions of each Registrant of what a market participant would use in pricing an asset or liability. If there is little available market data, then each Registrant's own assumptions are the best available information.

In the case of multiple inputs being used in a fair value measurement, the lowest level input that is significant to the fair value measurement represents the level in the fair value hierarchy in which the fair value measurement is reported.

Net asset value as a practical expedient is the classification used for assets that do not have readily determinative fair values. Fund managers value the assets using various inputs and techniques depending on the nature of the underlying investments.

At December 31, 2019, 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
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2019:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives^(a)(b)	$	388	$	267	$	22	$	—	$	677
Interest rate derivatives	—		2		—		—		2
Foreign currency derivatives	—		16		—		—		16
Investments in trusts:^(c)(d)
Domestic equity	751		135		—		—		886
Foreign equity	68		220		—		—		288
U.S. Treasury and government agency securities	—		307		—		—		307
Municipal bonds	—		85		—		—		85
Pooled funds – fixed income	—		17		—		—		17
Corporate bonds	23		297		—		—		320
Mortgage and asset backed securities	—		87		—		—		87
Private equity	—		—		—		56		56
Cash and cash equivalents	1		—		—		—		1
Other	17		5		—		—		22
Cash equivalents	1,393		2		—		—		1,395
Other investments	9		21		—		—		30
Total	$	2,650	$	1,461	$	22	$	56	$	4,189
Liabilities:
Energy-related derivatives^(a)(b)	$	442	$	254	$	7	$	—	$	703
Interest rate derivatives	—		24		—		—		24
Foreign currency derivatives	—		24		—		—		24
Contingent consideration	—		—		19		—		19
Total	$	442	$	302	$	26	$	—	$	770



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2019:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4
Nuclear decommissioning trusts:^(c)
Domestic equity	488		123		—		—		611
Foreign equity	68		64		—		—		132
U.S. Treasury and government agency securities	—		21		—		—		21
Municipal bonds	—		1		—		—		1
Corporate bonds	23		144		—		—		167
Mortgage and asset backed securities	—		29		—		—		29
Private equity	—		—		—		56		56
Other	3		1		—		—		4
Cash equivalents	691		2		—		—		693
Other investments	—		21		—		—		21
Total	$	1,273	$	410	$	—	$	56	$	1,739
Liabilities:
Energy-related derivatives	$	—	$	24	$	—	$	—	$	24

Georgia Power
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4
Nuclear decommissioning trusts:^(c)(d)
Domestic equity	263		1		—		—		264
Foreign equity	—		152		—		—		152
U.S. Treasury and government agency securities	—		286		—		—		286
Municipal bonds	—		84		—		—		84
Corporate bonds	—		153		—		—		153
Mortgage and asset backed securities	—		57		—		—		57
Other	13		4		—		—		17
Total	$	276	$	741	$	—	$	—	$	1,017
Liabilities:
Energy-related derivatives	$	—	$	53	$	—	$	—	$	53
Interest rate derivatives	—		17		—		—		17
Total	$	—	$	70	$	—	$	—	$	70



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2019:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	1	$	—	$	—	$	1
Cash equivalents	281		—		—		—		281
Total	$	281	$	1	$	—	$	—	$	282
Liabilities:
Energy-related derivatives	$	—	$	27	$	—	$	—	$	27

Southern Power
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Foreign currency derivatives	—		16		—		—		16
Cash equivalents	113		—		—		—		113
Total	$	113	$	19	$	—	$	—	$	132
Liabilities:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Foreign currency derivatives	—		24		—		—		24
Contingent consideration	—		—		19		—		19
Total	$	—	$	27	$	19	$	—	$	46

Southern Company Gas
Assets:
Energy-related derivatives^(a)(b)	$	388	$	255	$	22	$	—	$	665
Interest rate derivatives	—		2		—		—		2
Non-qualified deferred compensation trusts:
Domestic equity	—		11		—		—		11
Foreign equity	—		4		—		—		4
Pooled funds - fixed income	—		17		—		—		17
Cash equivalents	1		—		—		—		1
Cash equivalents	8		—		—		—		8
Total	$	397	$	289	$	22	$	—	$	708
Liabilities:
Energy-related derivatives^(a)(b)	$	442	$	147	$	7	$	—	$	596


(a)	Energy-related derivatives exclude $4 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.


(b)	Energy-related derivatives exclude cash collateral of $99 million.


(c)	Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 under "Nuclear Decommissioning" for additional information.


(d)	Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. See Note 6 under "Nuclear Decommissioning" for additional information.

At December 31, 2018, 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
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2018:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives^(a)(b)	$	469	$	292	$	—	$	—	$	761
Foreign currency derivatives	—		75		—		—		75
Investments in trusts:^(c)(d)
Domestic equity	601		107		—		—		708
Foreign equity	53		173		—		—		226
U.S. Treasury and government agency securities	—		261		—		—		261
Municipal bonds	—		83		—		—		83
Pooled funds – fixed income	—		14		—		—		14
Corporate bonds	24		290		—		—		314
Mortgage and asset backed securities	—		68		—		—		68
Private equity	—		—		—		45		45
Cash and cash equivalents	16		—		—		—		16
Other	34		4		—		—		38
Cash equivalents	765		1		—		—		766
Other investments	—		12		—		—		12
Total	$	1,962	$	1,380	$	—	$	45	$	3,387
Liabilities:
Energy-related derivatives^(a)(b)	$	648	$	316	$	—	$	—	$	964
Interest rate derivatives	—		49		—		—		49
Foreign currency derivatives	—		23		—		—		23
Contingent consideration	—		—		21		—		21
Total	$	648	$	388	$	21	$	—	$	1,057



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2018:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	6	$	—	$	—	$	6
Nuclear decommissioning trusts:^(c)
Domestic equity	396		95		—		—		491
Foreign equity	53		50		—		—		103
U.S. Treasury and government agency securities	—		18		—		—		18
Municipal bonds	—		1		—		—		1
Corporate bonds	24		135		—		—		159
Mortgage and asset backed securities	—		23		—		—		23
Private equity	—		—		—		45		45
Other	6		—		—		—		6
Cash equivalents	116		1		—		—		117
Other investments	—		12		—		—		12
Total	$	595	$	341	$	—	$	45	$	981
Liabilities:
Energy-related derivatives	$	—	$	10	$	—	$	—	$	10

Georgia Power
Assets:
Energy-related derivatives	$	—	$	6	$	—	$	—	$	6
Nuclear decommissioning trusts:^(c)(d)
Domestic equity	205		1		—		—		206
Foreign equity	—		119		—		—		119
U.S. Treasury and government agency securities	—		243		—		—		243
Municipal bonds	—		82		—		—		82
Corporate bonds	—		155		—		—		155
Mortgage and asset backed securities	—		45		—		—		45
Other	19		4		—		—		23
Total	$	224	$	655	$	—	$	—	$	879
Liabilities:
Energy-related derivatives	$	—	$	21	$	—	$	—	$	21
Interest rate derivatives	—		2		—		—		2
Total	$	—	$	23	$	—	$	—	$	23



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2018:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Cash equivalents	255		—		—		—		255
Total	$	255	$	3	$	—	$	—	$	258
Liabilities:
Energy-related derivatives	$	—	$	9	$	—	$	—	$	9

Southern Power
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4
Foreign currency derivatives	—		75		—		—		75
Cash equivalents	46		—		—		—		46
Total	$	46	$	79	$	—	$	—	$	125
Liabilities:
Energy-related derivatives	$	—	$	8	$	—	$	—	$	8
Foreign currency derivatives	—		23		—		—		23
Contingent consideration	—		—		21		—		21
Total	$	—	$	31	$	21	$	—	$	52

Southern Company Gas
Assets:
Energy-related derivatives^(a)(b)	$	469	$	272	$	—	$	—	$	741
Non-qualified deferred compensation trusts:
Domestic equity	—		11		—		—		11
Foreign equity	—		4		—		—		4
Pooled funds - fixed income	—		14		—		—		14
Cash equivalents	4		—		—		—		4
Cash equivalents	40		—		—		—		40
Total	$	513	$	301	$	—	$	—	$	814
Liabilities:
Energy-related derivatives^(a)(b)	$	648	$	261	$	—	$	—	$	909


(a)	Energy-related derivatives exclude $8 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.


(b)	Energy-related derivatives exclude cash collateral of $277 million.


(c)	Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 under "Nuclear Decommissioning" for additional information.


(d)	Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. See Note 6 under "Nuclear Decommissioning" for additional information.

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 14 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 under "Nuclear Decommissioning" for additional information.

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

"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, treasury bonds, and/or agency bonds.

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 $56 million and $45 million at December 31, 2019 and 2018, respectively. Unfunded commitments related to the private equity investments totaled $70 million and $50 million at December 31, 2019 and 2018, respectively. 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 December 31, 2019 and 2018, other financial instruments for which the carrying amount did not equal fair value were as follows:



	Southern Company^(a)(b)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas^(b)
	(in millions)
At December 31, 2019:
Long-term debt, including securities due within one year:
Carrying amount	$	44,561	$	8,517	$	11,660	$	1,589	$	4,398	$	5,845
Fair value	48,339		9,525		12,680		1,671		4,708		6,509
At December 31, 2018:
Long-term debt, including securities due within one year:
Carrying amount	$	45,023	$	8,120	$	9,838	$	1,579	$	5,017	$	5,940
Fair value	44,824		8,370		9,800		1,546		4,980		5,965


(a)	Amounts at December 31, 2018 include long-term debt of Gulf Power, which was classified as liabilities held for sale on Southern Company's balance sheet at December 31, 2018. See Note 15 under "Southern Company" and "Assets Held for Sale" for additional information.


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

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

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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