Commitments

12 Months Ended

Dec. 31, 2017

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 2017, 2016, and 2015, the traditional electric operating companies and Southern Power incurred fuel expense of $4.4 billion, $4.4 billion, and $4.8 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 $235 million, $232 million, and $227 million for 2017, 2016, and 2015, respectively.

Estimated total obligations under these commitments at December 31, 2017 were as follows:



	Operating Leases		Other
	(in millions)
2018	$	247	$	7
2019	250		6
2020	247		4
2021	249		5
2022	252		4
2023 and thereafter	806		38
Total	$	2,051	$	64

Pipeline Charges, Storage Capacity, and Gas Supply

Pipeline charges, storage capacity, and gas supply include charges recoverable through a natural gas cost recovery mechanism, or alternatively, billed to marketers selling retail natural gas, as well as demand charges associated with Southern Company Gas' wholesale gas services. The gas supply balance includes amounts for gas commodity purchase commitments associated with Southern Company Gas' gas marketing services of 35 million mmBtu at floating gas prices calculated using forward natural gas prices at December 31, 2017 and valued at $101 million. Southern Company Gas provides guarantees to certain gas suppliers for certain of its subsidiaries in support of payment obligations.

Expected future contractual obligations for pipeline charges, storage capacity, and gas supply that are not recognized on the balance sheets as of December 31, 2017 were as follows:



	Pipeline Charges, Storage Capacity, and Gas Supply
	(in millions)
2018	$	813
2019	552
2020	416
2021	375
2022	339
2023 and thereafter	2,294
Total	$	4,789

Operating Leases

The Southern Company system has operating lease agreements with various terms and expiration dates. Total rent expense was $176 million, $169 million, and $130 million for 2017, 2016, and 2015, respectively. Southern Company includes any step rents, fixed escalations, and lease concessions in its computation of minimum lease payments.

As of December 31, 2017, estimated minimum lease payments under operating leases were as follows:



	Minimum Lease Payments
	Barges & Railcars		Other^(*)		Total
	(in millions)
2018	$	21	$	128	$	149
2019	11		113		124
2020	9		99		108
2021	8		87		95
2022	6		77		83
2023 and thereafter	5		963		968
Total	$	60	$	1,467	$	1,527


(*)	Includes operating leases for cellular tower space, facilities, vehicles, and other equipment.

For the traditional electric 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 railcar leases with respect to the residual value of the leased property. These leases have terms expiring through 2024 with maximum obligations under these leases of $44 million. At the termination of the leases, the lessee may renew the lease, 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

In 2013, Georgia Power entered into an agreement that requires Georgia Power 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 2018. In the event the gas supplier defaults on payments, the maximum potential exposure under the guarantee is approximately $43 million.

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

ALABAMA POWER CO

Commitments [Line Items]

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 2017, 2016, and 2015, the Company incurred fuel expense of $1.2 billion, $1.3 billion, and $1.3 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 $41 million, $42 million, and $38 million for 2017, 2016, and 2015, respectively. Total estimated minimum long-term obligations at December 31, 2017 were as follows:



	Operating Lease PPAs
	(in millions)
2018	$	41
2019	43
2020	44
2021	46
2022	47
2023 and thereafter	—
Total commitments	$	221

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 traditional electric operating companies and Southern Power. Under these agreements, each of the traditional electric 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 electric 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 operating leases with Southern Linc and third parties for the use of cellular tower space. Substantially all of these agreements have initial terms ranging from five to 10 years and renewal options of up to 20 years. The Company has entered into rental agreements for towers, coal railcars, vehicles, and other equipment with various terms and expiration dates. Total rent expense under these agreements was $25 million in 2017, $18 million in 2016, and $19 million in 2015. Of these amounts, $11 million, $14 million, and $13 million for 2017, 2016, and 2015, respectively, relate to the railcar leases and was recovered through the Company's Rate ECR. The Company includes any step rents, fixed escalations, and lease concessions in its computation of minimum lease payments.

As of December 31, 2017, estimated minimum lease payments under operating leases were as follows:



	Minimum Lease Payments^(a)
	Affiliate Operating Leases^(b)		Railcars		Vehicles & Other		Total
			(in millions)
2018	$	8	$	7	$	6	$	21
2019	10		7		5		22
2020	8		7		3		18
2021	7		6		1		14
2022	5		5		—		10
2023 and thereafter	16		4		—		20
Total	$	54	$	36	$	15	$	105


(a)	Minimum lease payments have not been reduced by minimum sublease rentals of $3 million in the future.


(b)	Includes operating leases for cellular tower space.

In addition to the above rental commitments payments, the Company has potential obligations upon expiration of certain railcar 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 $12 million in 2023. There are no obligations under these leases through 2022. 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 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 CO

Commitments [Line Items]

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 2017, 2016, and 2015, the Company incurred fuel expense of $1.7 billion, $1.8 billion, and $2.0 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 Units 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 $9 million, $11 million, and $10 million in 2017, 2016, and 2015, 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 $199 million, $217 million, and $203 million for 2017, 2016, and 2015, respectively. Contingent rent expense under energy-only solar PPAs of $73 million, $39 million, and $8 million for 2017, 2016, and 2015, respectively, was recognized as services were performed. Estimated total long-term obligations at December 31, 2017 were as follows:



	Affiliate Capital Leases		Affiliate Operating Leases		Non-Affiliate Operating Leases		Vogtle Units 1 and 2 Capacity Payments		Total
	(in millions)
2018	$	23	$	62	$	127	$	7	$	219
2019	23		63		128		6		220
2020	23		65		124		4		216
2021	24		66		125		5		220
2022	24		67		126		4		221
2023 and thereafter	182		412		773		38		1,405
Total	$	299	$	735	$	1,403	$	64	$	2,501
Less: amounts representing executory costs^(a)	45
Net minimum lease payments	254
Less: amounts representing interest^(b)	120
Present value of net minimum lease payments	$	134


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


(b)	Calculated using an adjusted incremental borrowing rate to reduce the present value of the net minimum lease payments to fair value.

Operating Leases

The Company has entered into operating leases with Southern Linc and third parties for the use of cellular tower space. Substantially all of these agreements have initial terms ranging from five to 10 years and renewal options of up to 20 years. The Company has also entered into rental agreements for facilities, railcars, and other equipment with various terms and expiration dates. Total rent expense was $31 million, $28 million, and $29 million for 2017, 2016, and 2015, respectively. The Company includes any step rents, fixed escalations, and lease concessions in its computation of minimum lease payments.

As of December 31, 2017, estimated minimum lease payments under operating leases were as follows:



	Minimum Lease Payments
	Affiliate Operating Leases^(a)		Non-Affiliate Operating Leases ^(b)		Total
	(in millions)
2018	$	10	$	14	$	24
2019	11		11		22
2020	11		9		20
2021	9		8		17
2022	8		6		14
2023 and thereafter	33		11		44
Total	$	82	$	59	$	141


(a)	Includes operating leases for cellular tower space.


(b)	Includes operating leases for cellular tower space, facilities, railcars, and other equipment.

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 2024 with maximum obligations under these leases of $32 million. At the termination of the leases, the Company may either renew the lease, 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 reduce 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 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, in 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 2018. 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 CO

Commitments [Line Items]

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 2017, 2016, and 2015, the Company incurred fuel expense of $427 million, $432 million, and $445 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 a PPA accounted for as an operating lease was $75 million each year for 2017, 2016, and 2015.

Estimated total minimum long-term commitments at December 31, 2017 were as follows:



	Operating Lease PPA
	(in millions)
2018	$	79
2019	79
2020	79
2021	79
2022	79
2023 and thereafter	33
Total	$	428

Operating Leases

In addition to the operating lease PPA discussed above, the Company has entered into operating leases with Southern Linc and other third parties for the use of cellular tower space. These agreements have initial terms ranging from five to 10 years and renewal options of up to five years. The Company also has other operating lease agreements with various terms and expiration dates. Total lease payments were $10 million, $9 million, and $14 million for 2017, 2016, and 2015, respectively. The Company includes any step rents, fixed escalations, and reasonably assured renewal periods in its computation of minimum lease payments.

Estimated total minimum lease payments under these operating leases at December 31, 2017 were as follows:



	Minimum Lease Payments
	Affiliate Operating Leases^(a)		Non-Affiliate Operating Leases^(b)		Total
	(in millions)
2018	$	2	$	7	$	9
2019	1		1		2
2020	1		1		2
2021	1		—		1
2022	1		—		1
2023 and thereafter	4		1		5
Total	$	10	$	10	$	20


(a)	Includes operating leases for cellular tower space.


(b)	Includes operating leases for barges, facilities, and other equipment.

The Company also has operating lease agreements for railcars, barges, and towboats for the transport of coal. The Company has the option to renew the leases at the end of the lease term. The Company's lease costs, charged to fuel inventory and recovered through the retail fuel cost recovery clause, were $7 million in 2017, $5 million in 2016, and $10 million in 2015. The Company's annual barge and towboat payments for 2018 are expected to be approximately $6 million.

MISSISSIPPI POWER CO

Commitments [Line Items]

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 2017, 2016, and 2015, the Company incurred fuel expense of $395 million, $343 million, and $443 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 energy through PPAs associated with solar facilities. The energy related costs associated with PPAs are recovered through the fuel cost recovery clause.

Operating Leases

The Company has entered into operating leases with Southern Linc and third parties for the use of cellular tower space. These agreements have initial terms ranging from five to 10 years and renewal options of up to 20 years. The Company has other operating lease agreements with various terms and expiration dates. Total rent expense was $3 million, $3 million, and $5 million for 2017, 2016, and 2015, respectively. The Company includes any step rents, fixed escalations, lease concessions, and reasonably assured renewal periods in its computation of minimum lease payments.

Estimated minimum lease payments under operating leases at December 31, 2017 were as follows:



	Affiliate Operating Leases^(a)		Non-Affiliate Operating Lease^(b)		Total
	(in millions)
2018	$	2	$	1	$	3
2019	2		1		3
2020	2		1		3
2021	2		—		2
2022	2		—		2
2023 and thereafter	7		—		7
Total	$	17	$	3	$	20


(a)	Includes operating leases with affiliates primarily related to cellular towers.


(b)	Primarily includes railcar and fuel handling equipment leases for Plant Daniel.

In addition to the above rental commitments, the Company entered into operating lease agreements for aluminum railcars for the transportation of coal at Plant Daniel, which is jointly owned with Gulf Power. 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. The Company also has separate lease agreements for other railcars that do not contain a purchase option.

The Company's 50% share of the lease costs, charged to fuel stock and recovered through the fuel cost recovery clause, was $1 million in 2017, $2 million in 2016, and $2 million in 2015.

In addition to railcar leases, the Company has other operating leases for fuel handling equipment at Plant Daniel. The Company's 50% share of the leases for fuel handling was charged to fuel handling expense annually from 2015 through 2017; however, those amounts were immaterial for the reporting period.

SOUTHERN POWER CO

Commitments [Line Items]

COMMITMENTS

Fuel Agreements

SCS, as agent for the Company and the traditional electric operating companies, has entered into various fuel transportation and procurement agreements to supply a portion of the fuel (primarily natural gas) requirements for the Company's generating facilities. These purchase obligations are not recognized on the Company's consolidated balance sheets. The Company incurred fuel expense of $621 million, $456 million, and $441 million for the years ended December 31, 2017, 2016, and 2015, 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 electric operating companies. Under these agreements, each of the traditional electric operating companies and the Company may be jointly and severally liable. Southern Company has entered into keep-well agreements with each of the traditional electric 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 $29 million, $22 million, and $7 million for the years ended December 31, 2017, 2016, and 2015, respectively. These amounts include contingent rent expense related to land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers. The Company excludes contingent rent but includes step rents, fixed escalations, lease concessions, and lease extensions in its computation of minimum lease payments, which are recognized on a straight-line basis over the minimum lease term. As of December 31, 2017, estimated minimum lease payments under operating leases were $22 million in each of 2018, 2019, and 2020, $23 million in each of 2021 and 2022, and $815 million in 2023 and thereafter. The majority of the committed future expenditures are related to land leases for solar and wind facilities.

Redeemable Noncontrolling Interests

See Note 10.

SOUTHERN Co GAS

Commitments [Line Items]

COMMITMENTS

Pipeline Charges, Storage Capacity, and Gas Supply

Pipeline charges, storage capacity, and gas supply include charges recoverable through a natural gas cost recovery mechanism, or alternatively, billed to Marketers and demand charges associated with Sequent. The gas supply balance includes amounts for Nicor Gas' and SouthStar's gas commodity purchase commitments of 35 million mmBtu at floating gas prices calculated using forward natural gas prices at December 31, 2017 and valued at $101 million. The Company provides guarantees to certain gas suppliers for certain of its subsidiaries in support of payment obligations.

Expected future contractual obligations for pipeline charges, storage capacity, and gas supply that are not recognized on the balance sheets as of December 31, 2017 were as follows:



	Pipeline Charges, Storage Capacity, and Gas Supply
	(in millions)
2018	$	813
2019	552
2020	416
2021	375
2022	339
2023 and thereafter	2,294
Total	$	4,789

Operating Leases

The Company has operating lease agreements with various terms and expiration dates. Total rent expense was $15 million, $8 million, $6 million, and $12 million for the successor periods of the year ended December 31, 2017 and July 1, 2016 through December 31, 2016 and the predecessor periods of January 1, 2016 through June 30, 2016 and the year ended December 31, 2015, respectively. The 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 terms.

As of December 31, 2017, the Company's estimated minimum lease payments under operating leases were as follows:



	Minimum Lease Payments
	(in millions)
2018	$	17
2019	16
2020	16
2021	15
2022	13
2023 and thereafter	26
Total	$	103

Financial Guarantees

AGL Equipment Leasing Inc. (AEL), a wholly-owned subsidiary of the Company, holds the Company's interest in Triton and has an obligation to restore to zero any deficit in its equity account for income tax purposes in the unlikely event that Triton is liquidated and a deficit balance remains. This obligation continues for the life of the Triton partnerships. Any payment is effectively limited to the net assets of AEL, which were less than $1 million at December 31, 2017. The Company believes the likelihood of any such payment by AEL is remote and, as such, no liability has been recorded for this obligation at December 31, 2017.