Fair Value Measurements

12 Months Ended

Dec. 31, 2011

FAIR VALUE MEASUREMENTS

10. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2011:	Quoted Prices     in Active     Markets for     Identical     Assets     (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$    —	$  14	$—	$	14
Interest rate derivatives	—	13	—		13
Foreign currency derivatives	—	2	—		2
Nuclear decommissioning trusts: (a)
Domestic equity	396	58	—		454
Foreign equity	124	48	—		172
U.S. Treasury and government agency securities	17	33	—		50
Municipal bonds	—	82	—		82
Corporate bonds	—	260	—		260
Mortgage and asset backed securities	—	151	—		151
Other investments	—	36	—		36
Cash equivalents and restricted cash	1,024	—	—		1,024
Other investments	3	50	14		67
Total	$1,564	$747	$14	$	2,325
Liabilities:
Energy-related derivatives	$    —	$245	$—	$	245
Interest rate derivatives	—	33	—		33
Foreign currency derivatives	—	3	—		3
Total	$    —	$281	$—	$	281

(a) Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases and the lending pool. See Note 1 under “Nuclear Decommissioning” for additional information.

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2010:	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$ —	$  10	$—	$	10
Interest rate derivatives	—	10	—		10
Foreign currency derivatives	—	3	—		3
Nuclear decommissioning trusts: (a)
Domestic equity	604	60	—		664
U.S. Treasury and government agency securities	20	220	—		240
Municipal bonds	—	53	—		53
Corporate bonds	—	220	—		220
Mortgage and asset backed securities	—	119	—		119
Other investments	—	74	—		74
Cash equivalents and restricted cash	351	—	—		351
Other investments	9	51	19		79
Total	$984	$820	$ 19	$	1,823
Liabilities:
Energy-related derivatives	$ —	$206	$—	$	206
Interest rate derivatives	—	1	—		1
Total	$ —	$207	$—	$	207

(a) Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases and the lending pool. See Note 1 under “Nuclear Decommissioning” for additional information.

Valuation Methodologies

The energy-related derivatives primarily consist of 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 LIBOR interest rates. Interest rate and foreign currency derivatives are also standard over-the-counter financial products valued using the market approach. Inputs for interest rate derivatives include LIBOR interest rates, interest rate futures contracts, and occasionally implied volatility of interest rate options. Inputs for foreign currency derivatives are from observable market sources. See Note 11 for additional information on how these derivatives are used.

“Other investments” include investments in funds that are valued using the market approach and income approach. Securities that are traded in the open market are valued at the closing price on their principal exchange as of the measurement date. Discounts are applied in accordance with GAAP when certain trading restrictions exist. For investments that are not traded in the open market, the price paid will have been determined based on market factors including comparable multiples and the expectations regarding cash flows and business plan execution. As the investments mature or if market conditions change materially, further analysis of the fair market value of the investment is performed. This analysis is typically based on a metric, such as multiple of earnings, revenues, earnings before interest and income taxes, or earnings adjusted for certain cash changes. These multiples are based on comparable multiples for publicly traded companies or other relevant prior transactions.

For fair value measurements of investments within the nuclear decommissioning trusts and rabbi trust funds, specifically the fixed income assets using significant other observable inputs and unobservable inputs, the primary valuation technique used is the market approach. External pricing vendors are designated for each of the asset classes in the nuclear decommissioning trusts and rabbi trust funds with each security discriminately assigned a primary pricing source, based on similar characteristics.

A market price secured from the primary source vendor is then used in the valuation of the assets within the trusts. As a general approach, 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’ judgment are also obtained when available.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value	Unfunded Commitments	Redemption Frequency	Redemption  Notice Period
As of December 31, 2011:	(in millions)
Nuclear decommissioning trusts:
Corporate bonds – commingled funds	$    32	None	Daily	1 to 3 days
Equity – commingled funds	48	None	Daily/Monthly	Daily/7 days
Other – commingled funds	25	None	Daily	Not applicable
Trust-owned life insurance	87	None	Daily	15 days
Cash equivalents and restricted cash:
Money market funds	1,024	None	Daily	Not applicable
As of December 31, 2010:
Nuclear decommissioning trusts:
Corporate bonds – commingled funds	$    65	None	Daily	1 to 3 days
Other – commingled funds	67	None	Daily	Not applicable
Trust-owned life insurance	86	None	Daily	15 days
Cash equivalents and restricted cash:
Money market funds	351	None	Daily	Not applicable
Other:
Money market funds	2	None	Daily	Not applicable

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. Alabama Power and Georgia Power have external trust funds to comply with the NRC’s regulations. The commingled funds in the nuclear decommissioning trusts are invested primarily in a diversified portfolio of high grade money market instruments, including, but not limited to, commercial paper, notes, repurchase agreements, and other evidences of indebtedness with a maturity not exceeding 13 months from the date of purchase. The commingled funds will, however, maintain a dollar-weighted average portfolio maturity of 90 days or less. The assets may be longer term investment grade fixed income obligations having a maximum five-year final maturity with put features or floating rates with a reset date of 13 months or less. The primary objective for the commingled funds is a high level of current income consistent with stability of principal and liquidity. The corporate bonds – commingled funds represent the investment of cash collateral received under the Funds’ managers’ securities lending program that can only be sold upon the return of the loaned securities. See Note 1 under “Nuclear Decommissioning” for additional information.

Alabama Power’s nuclear decommissioning trust includes investments in Trust-Owned Life Insurance (TOLI). The taxable nuclear decommissioning trust invests in the TOLI in order to minimize the impact of taxes on the portfolio and can draw on the value of the TOLI through death proceeds, loans against the cash surrender value, and/or the cash surrender value, subject to legal restrictions. The amounts reported in the table above reflect the fair value of investments the insurer has made in relation to the TOLI agreements. The nuclear decommissioning trust does not own the underlying investments, but the fair value of the investments approximates the cash surrender value of the TOLI policies. The investments made by the insurer are in commingled funds. The commingled funds primarily include investments in domestic and international equity securities and predominantly high-quality fixed income securities. These fixed income securities may include U.S. Treasury and government agency fixed income securities, non-U.S. government and agency fixed income securities, domestic and foreign corporate fixed income securities, and, to some degree, mortgage and asset backed securities. The passively managed funds seek to replicate the performance of a related index. The actively managed funds seek to exceed the performance of a related index through security analysis and selection.

The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the Securities and Exchange Commission and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis up to the full amount of the Company’s investment in the money market funds.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount	Fair Value
	(in millions)
Long-term debt:
2011	$20,272	$22,144
2010	$19,356	$20,073

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).

Alabama Power [Member]

FAIR VALUE MEASUREMENTS

10. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2011:	Quoted Prices  in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Nuclear decommissioning trusts: (a)
Domestic equity	$253	$  57	$—	$310
Foreign equity	24	48	—	72
U.S. Treasury and government agency securities	17	8	—	25
Corporate bonds	—	93	—	93
Mortgage and asset backed securities	—	28	—	28
Other investments	—	11	—	11
Cash equivalents and restricted cash	209	—	—	209
Total	$503	$245	$—	$748
Liabilities:
Energy-related derivatives	$  —	$  48	$—	$  48
Interest rate derivatives	—	18	—	18
Total	$  —	$  66	$—	$  66

(a) Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases.

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2010:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives		$  —		$    2	$—		$    2
Nuclear decommissioning trusts: (a)
Domestic equity		347		59	—		406
U.S. Treasury and government agency securities		20		7	—		27
Corporate bonds		—		82	—		82
Mortgage and asset backed securities		—		30	—		30
Other investments		—		7	—		7
Cash equivalents and restricted cash		109		—	—		109
Total		$476		$187	$—		$663
Liabilities:
Energy-related derivatives		$  —		$  40	$—		$  40

(a) Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases.

Valuation Methodologies

The energy-related derivatives primarily consist of 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 London Interbank Offered Rate (LIBOR) interest rates. Interest rate derivatives are also standard over-the-counter financial products valued using the market approach. Inputs for interest rate derivatives include LIBOR interest rates, interest rate futures contracts, and occasionally implied volatility of interest rate options. See Note 11 for additional information on how these derivatives are used.

For fair value measurements of investments within the nuclear decommissioning trusts, specifically the fixed income assets using significant other observable inputs and unobservable inputs, the primary valuation technique used is the market approach. External pricing vendors are designated for each of the asset classes in the nuclear decommissioning trusts with each security discriminately assigned a primary pricing source, based on similar characteristics.

A market price secured from the primary source vendor is then used in the valuation of the assets within the trusts. As a general approach, 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’ judgment are also obtained when available.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value	Unfunded Commitments	Redemption Frequency	Redemption Notice Period
As of December 31, 2011:	(in millions)
Nuclear decommissioning trusts:
Equity-commingled funds	$  48	None	Daily/Monthly	Daily/7 days
Trust-owned life insurance	87	None	Daily	15 days
Cash equivalents and restricted cash:
Money market funds	209	None	Daily	Not applicable
As of December 31, 2010:
Nuclear decommissioning trusts:
Trust-owned life insurance	$  86	None	Daily	15 days
Cash equivalents and restricted cash:
Money market funds	109	None	Daily	Not applicable

The nuclear decommissioning trust includes investments in Trust-Owned Life Insurance (TOLI). The taxable nuclear decommissioning trust invests in the TOLI in order to minimize the impact of taxes on the portfolio and can draw on the value of the TOLI through death proceeds, loans against the cash surrender value, and/or the cash surrender value, subject to legal restrictions. The amounts reported in the table above reflect the fair value of investments the insurer has made in relation to the TOLI agreements. The nuclear decommissioning trust does not own the underlying investments, but the fair value of the investments approximates the cash surrender value of the TOLI policies. The investments made by the insurer are in commingled funds. The commingled funds primarily include investments in domestic and international equity securities and predominantly high-quality fixed income securities. These fixed income securities may include U.S. Treasury and government agency fixed income securities, non-U.S. government and agency fixed income securities, domestic and foreign corporate fixed income securities, and, to some degree, mortgage and asset backed securities. The passively managed funds seek to replicate the performance of a related index. The actively managed funds seek to exceed the performance of a related index through security analysis and selection.

The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the SEC and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis, up to the full amount of the Company’s investment in the money market funds.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount	Fair Value
	(in millions)
Long-term debt:
2011	$6,132	$6,874
2010	$6,187	$6,463

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).

Georgia Power [Member]

FAIR VALUE MEASUREMENTS

10. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2011:	Quoted Prices     in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	13	$—	$	13
Nuclear decommissioning trusts: (a)
Domestic equity		143		1	—		144
Foreign equity		100		—			100
U.S. Treasury and government agency securities		—		25	—		25
Municipal bonds		—		82	—		82
Corporate bonds		—		167	—		167
Mortgage and asset backed securities		—		123	—		123
Other investments		—		25	—		25
Cash equivalents		13		—	—		13
Total	$	256	$	436	$—	$	692
Liabilities:
Energy-related derivatives	$	—	$	95	$—	$	95

(a) Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases and the lending pool. See Note 1 under “Nuclear Decommissioning” for additional information.

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
As of December 31, 2010:	Quoted Prices     in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	1	$—	$	1
Nuclear decommissioning trusts: (a)
Domestic equity		257		1	—		258
U.S. Treasury and government agency securities		—		213	—		213
Municipal bonds		—		53	—		53
Corporate bonds		—		138	—		138
Mortgage and asset backed securities		—		89	—		89
Other investments		—		67	—		67
Total	$	257	$	562	$—	$	819
Liabilities:
Energy-related derivatives	$	—	$	101	$—	$	101

(a) Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases and the lending pool. See Note 1 under “Nuclear Decommissioning” for additional information.

Valuation Methodologies

The energy-related derivatives primarily consist of over-the-counter financial products for natural gas, 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, implied volatility, and LIBOR interest rates. See Note 11 for additional information on how these derivatives are used.

For fair value measurements of investments within the nuclear decommissioning trusts, specifically the fixed income assets using significant other observable inputs and unobservable inputs, the primary valuation technique used is the market approach. External pricing vendors are designated for each of the asset classes in the nuclear decommissioning trusts with each security discriminately assigned a primary pricing source, based on similar characteristics.

A market price secured from the primary source vendor is then used in the valuation of the assets within the trusts. As a general approach, 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’ judgment are also obtained when available.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
As of December 31, 2011:	(in millions)
Nuclear decommissioning trusts:
Corporate bonds — commingled funds		$32	None	Daily	1 to 3 days
Other — commingled funds		25	None	Daily	Not applicable
As of December 31, 2010:
Nuclear decommissioning trusts:
Corporate bonds — commingled funds		$65	None	Daily	1 to 3 days
Other — commingled funds		67	None	Daily	Not applicable

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. The commingled funds in the nuclear decommissioning trusts are invested primarily in a diversified portfolio of high grade money market instruments, including, but not limited to, commercial paper, notes, repurchase agreements, and other evidences of indebtedness with a maturity not exceeding 13 months from the date of purchase. The commingled funds will, however, maintain a dollar-weighted average portfolio maturity of 90 days or less. The assets may be longer term investment grade fixed income obligations having a maximum five-year final maturity with put features or floating rates with a reset date of 13 months or less. The primary objective for the commingled funds is a high level of current income consistent with stability of principal and liquidity. The corporate bonds – commingled funds represent the investment of cash collateral received under the Funds’ managers’ securities lending program that can only be sold upon the return of the loaned securities. See Note 1 under “Nuclear Decommissioning” for additional information.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount		Fair Value
	(in millions)
Long-term debt:
2011		$8,418		$9,209
2010		$8,285		$8,548

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).

Gulf Power [Member]

FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
	Quoted Prices   in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Energy-related derivatives		$       —	$	198		$—	$	198
Cash equivalents		13,949		—		—		13,949
Total		$13,949	$	198		$—	$	14,147
Liabilities:
Energy-related derivatives		$       —	$	40,983		$—	$	40,983

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
	Quoted Prices   in Active   Markets for   Identical   Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2010:	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets:
Energy-related derivatives	$	—	$	2,380		$  —	$	2,380
Cash equivalents		11,770		—		—		11,770
Total	$	11,770	$	2,380		$  —	$	14,150
Liabilities:
Energy-related derivatives	$	—	$	13,608		$  —	$	13,608

Valuation Methodologies

The energy-related derivatives primarily consist of 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 London Interbank Offered Rate interest rates. See Note 10 for additional information on how these derivatives are used.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value	Unfunded Commitments	Redemption Frequency	Redemption     Notice Period
As of December 31, 2011:	(in thousands)
Cash equivalents:
Money market funds	$13,949	None	Daily	Not applicable
As of December 31, 2010:
Cash equivalents:
Money market funds	$11,770	None	Daily	Not applicable

The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the SEC and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis, up to the full amount of the Company’s investment in the money market funds.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount		Fair Value
	(in thousands)
Long-term debt:
2011		$1,235,447		$1,350,237
2010		$1,224,398		$1,258,428

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).

Mississippi Power [Member]

FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
At December 31, 2011:	Quoted Prices     in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant   Unobservable   Inputs (Level 3)	Total
	(in thousands)
Assets:
Energy-related derivatives		$	—		$	162	$—		$	162
Foreign currency derivatives			—			1,526	—			1,526
Cash equivalents			133,900			—	—			133,900
Total		$	133,900		$	1,688	$—		$	135,588
Liabilities:
Energy-related derivatives		$	—		$	51,152	$—		$	51,152
Interest rate derivatives			—			15,208	—			15,208
Foreign currency derivatives			—			2,510	—			2,510
Total		$	—		$	68,870	$—		$	68,870

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
At December 31, 2010:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
	(in thousands)
Assets:
Energy-related derivatives		$         —		$  2,075	$—		$    2,075
Foreign currency derivatives		—		3,419	—		3,419
Cash equivalents		160,200		—	—		160,200
Total		$160,200		$  5,494	$—		$165,694
Liabilities:
Energy-related derivatives		$         —		$45,845	$—		$  45,845
Foreign currency derivatives		—		95	—		95
Total		$         —		$45,940	$—		$  45,940

Valuation Methodologies

The energy-related derivatives primarily consist of 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 LIBOR interest rates. Interest rate and foreign currency derivatives are also standard over-the-counter financial products valued using the market approach. Inputs for interest rate derivatives include LIBOR interest rates, interest rate futures contracts and occasionally implied volatility of interest rate options. Inputs for foreign currency derivatives are from observable market sources. See Note 10 for additional information on how these derivatives are used.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
As of December 31, 2011	(in  thousands)
Cash equivalents:
Money market funds		$   133,900	None	Daily	Not applicable
As of December 31, 2010
Cash equivalents:
Money market funds		$   160,200	None	Daily	Not applicable

The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the Securities and Exchange Commission and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis, up to the full amount of the Company’s investment in the money market funds.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount		Fair Value
	(in thousands)
Long-term debt:
2011		$1,343,596		$1,426,808
2010		$   716,399		$   738,211

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).

Southern Power [Member]

FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS

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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company’s own assumptions are the best available information. The need to use unobservable inputs would typically apply to long-term energy-related derivative contracts and generally results from the nature of the energy industry, as each participant forecasts its own power supply and demand and those of other participants, which directly impact the valuation of each unique contract.

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.

As of December 31, 2011, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
As of December 31, 2011:	(Level 1)	(Level 2)	(Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$  —	$0.6	$—	$  0.6
Cash equivalents	14.2	—	—	14.2
Total	$14.2	$0.6	$—	$14.8
Liabilities:
Energy-related derivatives	$  —	$9.8	$—	$  9.8

As of December 31, 2010, assets and liabilities measured at fair value on a recurring basis during the period, together with the level of the fair value hierarchy in which they fall, were as follows:

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
As of December 31, 2010:	(Level 1)	(Level 2)	(Level 3)	Total
	(in millions)
Assets:
Energy-related derivatives	$ —	$2.8	$—	$  2.8
Cash equivalents	7.2	—	—	7.2
Total	$ 7.2	$2.8	$—	$10.0
Liabilities:
Energy-related derivatives	$ —	$6.2	$—	$  6.2

Valuation Methodologies

The energy-related derivatives primarily consist of 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 London Interbank Offered Rate interest rates. See Note 9 for additional information on how these derivatives are used.

As of December 31, 2011 and 2010, the fair value measurements of investments calculated at net asset value per share (or its equivalent), as well as the nature and risks of those investments, were as follows:

	Fair Value	Unfunded Commitments	Redemption Frequency	Redemption   Notice Period
As of December 31, 2011:	(in millions)
Cash equivalents:
Money market funds	$14.2	None	Daily	Not applicable
As of December 31, 2010:
Cash equivalents:
Money market funds	$  7.2	None	Daily	Not applicable

The money market funds are short-term investments of excess funds in various money market mutual funds, which are portfolios of short-term debt securities. The money market funds are regulated by the SEC and typically receive the highest rating from credit rating agencies. Regulatory and rating agency requirements for money market funds include minimum credit ratings and maximum maturities for individual securities and a maximum weighted average portfolio maturity. Redemptions are available on a same day basis up to the full amount of the Company’s investment in the money market funds.

As of December 31, 2011 and 2010, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Carrying Amount	Fair Value
	(in millions)
Long-term debt:
2011	$1,303	$1,397
2010	$1,303	$1,382

The fair values were based on either closing market prices (Level 1) or closing prices of comparable instruments (Level 2).