Commitments

12 Months Ended

Dec. 31, 2013

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel and Purchased Power Agreements

To supply a portion of the fuel requirements of the generating plants, the Southern Company system has entered into various long-term commitments for the procurement and delivery of fossil and nuclear fuel which are not recognized on the balance sheets. In 2013, 2012, and 2011, the traditional operating companies and Southern Power incurred fuel expense of $5.5 billion, $5.1 billion, and $6.3 billion, respectively, the majority of which was purchased under long-term commitments. Southern Company expects that a substantial amount of the Southern Company system's future fuel needs will continue to be purchased under long-term commitments. In addition, the Southern Company system has entered into various long-term commitments for the purchase of capacity and electricity, some of which are accounted for as operating leases or have been used by a third party to secure financing. Total capacity expense under PPAs accounted for as operating leases was $157 million, $171 million, and $199 million for 2013, 2012, and 2011, respectively.

Estimated total obligations under these commitments at December 31, 2013 were as follows:

	Capital Leases (4)		Operating Leases		Other
			(in millions)
2014	$	—	$	201	$	21
2015	20		244		13
2016	26		260		11
2017	27		263		8
2018	27		266		7
2019 and thereafter	541		2,104		58
Total	$	641	$	3,338	$	118
Less: amounts representing executory costs (1)	142
Net minimum lease payments	499
Less: amounts representing interest (2)	166
Present value of net minimum lease payments (3)	$	333

(1) Executory costs such as taxes, maintenance, and insurance (including the estimated profit thereon) are estimated and included in total minimum lease payments.

(2) Calculated Georgia Power's incremental borrowing rate at the inception of the leases.

(3) When the PPAs with non-affiliates begin in 2015, Georgia Power will recognize capital lease assets and capital lease obligations totaling $333 million, equal to the lesser of the present value of the net minimum lease payments or the estimated fair value of the leased property.

(4) A total of $1.3 billion of biomass PPAs included under the non-affiliate capital and operating leases is contingent upon the counterparty meeting specified contract dates for posting collateral and commercial operation.

Operating Leases

The Southern Company system has operating lease agreements with various terms and expiration dates. Total rent expense was $123 million, $155 million, and $176 million for 2013, 2012, and 2011, respectively. Southern Company includes any step rents, escalations, and lease concessions in its computation of minimum lease payments, which are recognized on a straight-line basis over the minimum lease term.

As of December 31, 2013, estimated minimum lease payments under operating leases were as follows:

	Minimum Lease Payments
	Barges & Railcars		Other		Total
	(in millions)
2014	$	56	$	45	$	101
2015	35		40		75
2016	30		35		65
2017	12		32		44
2018	6		25		31
2019 and thereafter	15		120		135
Total	$	154	$	297	$	451

For the traditional operating companies, a majority of the barge and railcar lease expenses are recoverable through fuel cost recovery provisions. In addition to the above rental commitments, Alabama Power and Georgia Power have obligations upon expiration of certain leases with respect to the residual value of the leased property. These leases have terms expiring through 2023 with maximum obligations under these leases of $59 million. At the termination of the leases, the lessee may either exercise its purchase option, or the property can be sold to a third party. Alabama Power and Georgia Power expect that the fair market value of the leased property would substantially reduce or eliminate the payments under the residual value obligations.

Guarantees

As discussed above under "Operating Leases," Alabama Power and Georgia Power have entered into certain residual value guarantees.

Alabama Power [Member]

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel and Purchased Power Agreements

To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement and delivery of fossil and nuclear fuel which are not recognized on the balance sheets. In 2013, 2012, and 2011, the Company incurred fuel expense of $1.6 billion, $1.5 billion, and $1.7 billion, respectively, the majority of which was purchased under long-term commitments. The Company expects that a substantial amount of its future fuel needs will continue to be purchased under long-term commitments.

In addition, the Company has entered into various long-term commitments for the purchase of capacity and electricity, some of which are accounted for as operating leases. Total capacity expense under PPAs accounted for as operating leases was $30 million, $33 million, and $33 million for 2013, 2012, and 2011, respectively. Total estimated minimum long-term obligations at December 31, 2013 were as follows:

	Operating Lease PPAs
	(in millions)
2014	$	36
2015	38
2016	39
2017	40
2018	42
2019 and thereafter	182
Total commitments	$	377

SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements.

Operating Leases

The Company has entered into rental agreements for coal railcars, vehicles, and other equipment with various terms and expiration dates. Total rent expense was $21 million in 2013, $24 million in 2012, and $23 million in 2011. Of these amounts, $18 million, $19 million, and $18 million for 2013, 2012, and 2011, respectively, relate to the railcar leases and are recoverable through the Company's Rate ECR. As of December 31, 2013, estimated minimum lease payments under operating leases were as follows:

	Minimum Lease Payments
	Railcars		Vehicles & Other		Total
	(in millions)
2014	$	12	$	3	$	15
2015	10		2		12
2016	11		1		12
2017	6		—		6
2018	4		—		4
2019 and thereafter	15		—		15
Total	$	58	$	6	$	64

In addition to the above rental commitments payments, the Company has potential obligations upon expiration of certain leases with respect to the residual value of the leased property. These leases have terms expiring through 2023 with maximum obligations under these leases of $8 million in 2014, $5 million in 2015, $4 million in 2016, and $12 million in 2019 and thereafter. There are no maximum obligations under these leases in 2017 and 2018. At the termination of the leases, the lessee may either exercise its purchase option, or the property can be sold to a third party. The Company expects that the fair market value of the leased property would substantially reduce or eliminate the Company's payments under the residual value obligations.

Guarantees

The Company has guaranteed the obligation of SEGCO for $25 million of pollution control revenue bonds issued in 2001, which mature in June 2019, and also $100 million of senior notes issued in November 2013, which mature in December 2018. Georgia Power has agreed to reimburse the Company for the pro rata portion of such obligations corresponding to Georgia Power's then proportionate ownership of SEGCO's stock if the Company is called upon to make such payment under its guarantee. See Note 4 for additional information.

Georgia Power [Member]

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel and Purchased Power Agreements

To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement and delivery of fossil and nuclear fuel which are not recognized on the balance sheets. In 2013, 2012, and 2011, the Company incurred fuel expense of $2.3 billion, $2.1 billion, and $2.8 billion, respectively, the majority of which was purchased under long-term commitments. The Company expects that a substantial amount of its future fuel needs will continue to be purchased under long-term commitments.

The Company has commitments regarding a portion of a 5% interest in the original cost of Plant Vogtle Units 1 and 2 owned by MEAG Power that are in effect until the latter of the retirement of the plant or the latest stated maturity date of MEAG Power's bonds issued to finance such ownership interest. The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Portions of the capacity payments relate to costs in excess of MEAG Power's Plant Vogtle Unit 1 and 2 allowed investment for ratemaking purposes. The present value of these portions at the time of the disallowance was written off. Generally, the cost of such capacity and energy is included in purchased power, non-affiliates in the statements of income. Capacity payments totaled $27 million, $50 million, and $52 million in 2013, 2012, and 2011, respectively.

The Company has also entered into various long-term PPAs, some of which are accounted for as capital or operating leases. Total capacity expense under PPAs accounted for as operating leases was $162 million, $169 million, and $216 million for 2013, 2012, and 2011, respectively. Estimated total long-term obligations at December 31, 2013 were as follows:

	Affiliate Capital Leases		Non-Affiliate Capital Leases (4)		Affiliate Operating Leases		Non-Affiliate Operating Leases (4)		Vogtle Units 1 and 2 Capacity Payments		Total ($)
	(in millions)
2014	$	—	$	—	$	55	$	112	$	21	$	188
2015	22		20		89		127		13		271
2016	22		26		99		142		11		300
2017	23		27		71		144		8		273
2018	23		27		62		145		7		264
2019 and thereafter	278		541		669		1,573		58		3,119
Total	$	368	$	641	$	1,045	$	2,243	$	118	$	4,415
Less: amounts representing executory costs(1)	55		142
Net minimum lease payments	313		499
Less: amounts representing interest(2)	85		166
Present value of net minimum lease payments(3)	$	228	$	333

(1) Executory costs such as taxes, maintenance, and insurance (including the estimated profit thereon) are estimated and included in total minimum lease payments.

(2) Calculated at the Company's incremental borrowing rate at the inception of the leases.

(3) When the PPAs begin in 2015, the Company will recognize capital lease assets and capital lease obligations totaling $482 million, equal to the lesser of the present value of the net minimum lease payments or the estimated fair value of the leased property.

(4) A total of $1.3 billion of biomass PPAs included under the non-affiliate capital and operating leases is contingent upon the counterparty meeting specified contract dates for posting collateral and commercial operation.

SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements.

Operating Leases

In addition to the PPA operating leases discussed above, the Company has other operating lease agreements with various terms and expiration dates. Total rent expense was $32 million for 2013, $34 million for 2012, and $33 million for 2011. The Company includes any step rents, fixed escalations, and lease concessions in its computation of minimum lease payments.

As of December 31, 2013, estimated minimum lease payments under operating leases were as follows:

	Minimum Lease Payments
	Railcars		Other		Total
	(in millions)
2014	$	20	$	6	$	26
2015	14		6		20
2016	8		5		13
2017	5		4		9
2018	2		4		6
2019 and thereafter	—		11		11
Total	$	49	$	36	$	85

Railcar minimum lease payments are disclosed at 100% of railcar lease obligations; however, a portion of these obligations is shared with the joint owners of Plants Scherer and Wansley. A majority of the rental expenses related to the railcar leases are recoverable through the fuel cost recovery clause as ordered by the Georgia PSC and the remaining portion is recovered through base rates.

In addition to the above rental commitments, the Company has obligations upon expiration of certain railcar leases with respect to the residual value of the leased property. These leases have terms expiring through 2018 with maximum obligations under these leases of $30 million. At the termination of the leases, the lessee may either exercise its purchase option or the property can be sold to a third party. The Company expects that the fair market value of the leased property would substantially reduce or eliminate the Company's payments under the residual value obligations.

Guarantees

Alabama Power has guaranteed the obligations of SEGCO for $25 million of pollution control revenue bonds issued in 2001, which mature in June 2019 and also $100 million of senior notes issued in November 2013, which mature in December 2018. The Company has agreed to reimburse Alabama Power for the pro rata portion of such obligations corresponding to the Company's then proportionate ownership of SEGCO's stock if Alabama Power is called upon to make such payment under its guarantee. See Note 4 for additional information.

In addition, subsequent to December 31, 2013, the Company entered into an agreement that requires the Company to guarantee certain payments of a gas supplier for Plant McIntosh for a period up to 15 years. The guarantee is expected to be terminated if certain events occur within one year of the initial gas deliveries in 2017. In the event the gas supplier defaults on payments, the maximum potential exposure under the guarantee is approximately $43 million.

As discussed earlier in this Note under "Operating Leases," the Company has entered into certain residual value guarantees related to railcar leases.

Gulf Power [Member]

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel and Purchased Power Agreements

To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement and delivery of fossil fuel which are not recognized on the balance sheets. In 2013, 2012, and 2011, the Company incurred fuel expense of $532.8 million, $544.9 million, and $662.3 million, respectively, the majority of which was purchased under long-term commitments. The Company expects that a substantial amount of its future fuel needs will continue to be purchased under long-term commitments.

In addition, the Company has entered into various long-term commitments for the purchase of capacity, energy, and transmission, some of which are accounted for as operating leases. The energy-related costs associated with PPAs are recovered through the fuel cost recovery clause. The capacity and transmission-related costs associated with PPAs are recovered through the purchased power capacity cost recovery clause. Capacity expense under purchased power agreements accounted for as operating leases was $21.3 million, $24.6 million, and $25.1 million for 2013, 2012, and 2011, respectively.

Estimated total minimum long-term commitments at December 31, 2013 were as follows:

	Operating Lease PPAs
	(in millions)
2014	$	52.9
2015		78.6
2016		78.7
2017		78.8
2018		78.9
2019 and thereafter		349.2
Total	$	717.1

SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements.

Operating Leases

The Company has operating lease agreements with various terms and expiration dates. Total rent expense was $18.0 million, $20.1 million, and $21.9 million for 2013, 2012, and 2011, respectively.

Estimated total minimum lease payments under operating leases at December 31, 2013 were as follows:

	Minimum Lease Payments
	Barges & Railcars		Other		Total
	(in millions)
2014	$	13.3	$	0.2	$	13.5
2015	9.9		0.1		10.0
2016	9.9		0.1		10.0
2017	0.5		0.1		0.6
Total	$	33.6	$	0.5	$	34.1

The Company and Mississippi Power jointly entered into operating lease agreements for aluminum railcars for the transportation of coal to Plant Daniel. The Company has the option to purchase the railcars at the greater of lease termination value or fair market value or to renew the leases at the end of each lease term. In early 2011, one operating lease expired and the Company elected not to exercise the option to purchase. The remaining operating lease has 229 aluminum railcars. The Company and Mississippi Power also have separate lease agreements for other railcars that do not include purchase options. The Company's share of the lease costs, charged to fuel inventory and recovered through the fuel cost recovery clause, was $3.1 million in 2013, $3.6 million in 2012, and $2.6 million in 2011. The Company's annual railcar lease payments for 2014 through 2017 will average approximately $1.4 million. The Company has no lease payment obligations for the period 2018 and thereafter.

Mississippi Power [Member]

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel and Purchased Power Agreements

To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement and delivery of fossil fuel which are not recognized on the balance sheets. In 2013, 2012, and 2011, the Company incurred fuel expense of $491.3 million, $411.2 million, and $490.4 million, respectively, the majority of which was purchased under long-term commitments. The Company expects that a substantial amount of its future fuel needs will continue to be purchased under long-term commitments.

Coal commitments include a management fee associated with a 40-year management contract with Liberty Fuels related to the Kemper IGCC with the remaining amount due at December 31, 2013 of $38.7 million. Additional commitments for fuel will be required to supply the Company's future needs.

SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and all of the other Southern Company traditional operating companies and Southern Power. Under these agreements, each of the traditional operating companies and Southern Power may be jointly and severally liable. Accordingly, Southern Company has entered into keep-well agreements with the Company and each of the other traditional operating companies to ensure the Company will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of Southern Power as a contracting party under these agreements.

Operating Leases

The Company has operating lease agreements with various terms and expiration dates. Total rent expense was $10.1 million, $11.1 million, and $32.6 million for 2013, 2012, and 2011 respectively, which includes the Plant Daniel Units 3 and 4 operating lease that ended October 20, 2011.

The Company and Gulf Power have jointly entered into operating lease agreements for aluminum railcars for the transportation of coal at Plant Daniel. The Company has the option to purchase the railcars at the greater of lease termination value or fair market value, or to renew the leases at the end of the lease term. In early 2011, one operating lease expired and the Company elected not to exercise the option to purchase. The remaining operating lease has 229 aluminum railcars. The Company and Gulf Power also have separate lease agreements for other railcars that do not contain a purchase option.

The Company's share (50%) of the leases, charged to fuel stock and recovered through the fuel cost recovery clause, was $3.1 million in 2013, $3.6 million in 2012, and $2.6 million in 2011. The Company's annual railcar lease payments for 2014 through 2017 will average approximately $1.4 million. The Company has no lease obligation for the period 2018 and thereafter.

In addition to railcar leases, the Company has other operating leases for fuel handling equipment at Plants Daniel and Watson and operating leases for barges and tow/shift boats for the transport of coal at Plant Watson. The Company's share (50% at Plant Daniel and 100% at Plant Watson) of the leases for fuel handling was charged to fuel handling expense in the amount of $0.2 million in 2013, $0.2 million in 2012, and $0.4 million in 2011. The Company's annual lease payment for 2014 is expected to be $0.2 million for fuel handling equipment. The Company charged to fuel stock and recovered through fuel cost recovery the barge transportation leases in the amount of $6.7 million in 2013, $7.3 million in 2012, and $7.5 million in 2011 related to barges and tow/shift boats. The Company's annual lease payment for 2014 with respect to these barge transportation leases is expected to be $7.6 million.

Southern Power [Member]

Commitments [Line Items]

COMMITMENTS

COMMITMENTS

Fuel Agreements

SCS, as agent for the Company and the traditional operating companies, has entered into various fuel transportation and procurement agreements to supply a portion of the fuel (primarily natural gas) requirements for the operating facilities which are not recognized on the Company's balance sheets. In 2013, 2012, and 2011, the Company incurred fuel expense of $473.8 million, $426.3 million, and $454.8 million, respectively, the majority of which was purchased under long-term commitments. The Company expects that a substantial amount of its future fuel needs will continue to be purchased under long-term commitments.

SCS may enter into various types of wholesale energy and natural gas contracts acting as an agent for the Company and Southern Company's traditional operating companies. Under these agreements, each of the traditional operating companies and the Company may be jointly and severally liable. Southern Company has entered into keep-well agreements with each of the traditional operating companies to ensure they will not subsidize or be responsible for any costs, losses, liabilities, or damages resulting from the inclusion of the Company as a contracting party under these agreements.

Operating Leases

The Company has operating lease agreements with various terms and expiration dates. Total rent expense was $1.9 million, $0.8 million, and $0.6 million for 2013, 2012, and 2011, respectively. These amounts include contingent rent expense related to the Plant Stanton Unit A land lease based on escalation in the Consumer Price Index for All Urban Consumers. The Company includes step rents, escalations, and lease concessions in its computation of minimum lease payments, which are recognized on a straight-line basis over the minimum lease term. As of December 31, 2013, estimated minimum lease payments under operating leases were $2.7 million in 2014, $2.5 million in 2015, $2.5 million in 2016, $2.5 million in 2017, $2.6 million in 2018, and $83.9 million in 2019 and thereafter. The majority of the committed future expenditures are land leases at solar facilities.

Redeemable Noncontrolling Interest

Pursuant to an agreement with TRE, on or after November 25, 2015, or earlier in the event of the death of the controlling member of TRE, TRE may require the Company to purchase its noncontrolling interest in STR at fair market value.