Fair Value Measurements

12 Months Ended

Dec. 31, 2017

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, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Energy-related derivatives^(a)(b)	$	331	$	239	$	—	$	—	$	570
Interest rate derivatives	—		1		—		—		1
Foreign currency derivatives	—		129		—		—		129
Nuclear decommissioning trusts:^(c)
Domestic equity	690		82		—		—		772
Foreign equity	62		224		—		—		286
U.S. Treasury and government agency securities	—		251		—		—		251
Municipal bonds	—		68		—		—		68
Corporate bonds	21		315		—		—		336
Mortgage and asset backed securities	—		57		—		—		57
Private equity	—		—		—		29		29
Other	19		12		—		—		31
Cash equivalents	1,455		—		—		—		1,455
Other investments	9		—		1		—		10
Total	$	2,587	$	1,378	$	1	$	29	$	3,995
Liabilities:
Energy-related derivatives^(a)(b)	$	480	$	253	$	—	$	—	$	733
Interest rate derivatives	—		38		—		—		38
Foreign currency derivatives	—		23		—		—		23
Contingent consideration	—		—		22		—		22
Total	$	480	$	314	$	22	$	—	$	816


(a)	Energy-related derivatives exclude $11 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.


(b)	Energy-related derivatives exclude cash collateral of $193 million.


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

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Energy-related derivatives^(a)(b)	$	338	$	333	$	—	$	—	$	671
Interest rate derivatives	—		14		—		—		14
Nuclear decommissioning trusts:^(c)
Domestic equity	589		73		—		—		662
Foreign equity	48		168		—		—		216
U.S. Treasury and government agency securities	—		92		—		—		92
Municipal bonds	—		73		—		—		73
Corporate bonds	22		310		—		—		332
Mortgage and asset backed securities	—		183		—		—		183
Private equity	—		—		—		20		20
Other	11		15		—		—		26
Cash equivalents	1,172		—		—		—		1,172
Other investments	9		—		1		—		10
Total	$	2,189	$	1,261	$	1	$	20	$	3,471
Liabilities:
Energy-related derivatives^(a)(b)	$	345	$	285	$	—	$	—	$	630
Interest rate derivatives	—		29		—		—		29
Foreign currency derivatives	—		58		—		—		58
Contingent consideration	—		—		18		—		18
Total	$	345	$	372	$	18	$	—	$	735


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


(b)	Energy-related derivatives exclude cash collateral of $62 million.


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

Valuation Methodologies

The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note 11 for additional information on how these derivatives are used.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. For fair value measurements of the investments within the nuclear decommissioning trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available. See Note 1 under "Nuclear Decommissioning" for additional information.

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

"Other investments" include investments that are not traded in the open market. The fair value of these investments has been determined based on market factors including comparable multiples and the expectations regarding cash flows and business plan executions.

As of December 31, 2017 and 2016, the fair value measurements of private equity investments held in the nuclear decommissioning trust that are calculated at net asset value per share (or its equivalent) as a practical expedient, as well as the nature and risks of those investments, were as follows:



	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
	(in millions)
As of December 31, 2017	$	29	$	21	Not Applicable	Not Applicable
As of December 31, 2016	$	20	$	25	Not Applicable	Not Applicable

Private equity funds include a fund-of-funds that invests in high-quality private equity funds across several market sectors, funds that invest in real estate assets, and a fund that acquires companies to create resale value. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated. Liquidations are expected to occur at various times over the next 10 years.

As of December 31, 2017 and 2016, 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, including securities due within one year:
2017	$	48,151	$	51,348
2016	$	45,080	$	46,286

The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to Southern Company, Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Southern Power, and Southern Company Gas.

ALABAMA POWER CO

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS


•	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.

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4
Nuclear decommissioning trusts:^(*)
Domestic equity	442		81		—		—		523
Foreign equity	62		59		—		—		121
U.S. Treasury and government agency securities	—		24		—		—		24
Corporate bonds	21		160		—		—		181
Mortgage and asset backed securities	—		18		—		—		18
Private equity	—		—		—		29		29
Other	6		—		—		—		6
Cash equivalents	349		—		—		—		349
Total	$	880	$	346	$	—	$	29	$	1,255
Liabilities:
Energy-related derivatives	$	—	$	10	$	—	$	—	$	10


(*)	Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. See Note 1 under "Nuclear Decommissioning" for additional information.

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	20	$	—	$	—	$	20
Nuclear decommissioning trusts:^(*)
Domestic equity	385		72		—		—		457
Foreign equity	48		47		—		—		95
U.S. Treasury and government agency securities	—		21		—		—		21
Corporate bonds	22		146		—		—		168
Mortgage and asset backed securities	—		19		—		—		19
Private equity	—		—		—		20		20
Other	—		10		—		—		10
Cash equivalents	262		—		—		—		262
Total	$	717	$	335	$	—	$	20	$	1,072
Liabilities:
Energy-related derivatives	$	—	$	9	$	—	$	—	$	9


(*)	Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. 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 overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The interest rate derivatives are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note 11 for additional information on how these derivatives are used.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. For fair value measurements of the investments within the nuclear decommissioning trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. See Note 1 under "Nuclear Decommissioning" for additional information. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.

As of December 31, 2017 and 2016, the fair value measurements of private equity investments held in the nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient, as well as the nature and risks of those investments, were as follows:



	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
	(in millions)
As of December 31, 2017	$	29	$	21	Not Applicable	Not Applicable
As of December 31, 2016	$	20	$	25	Not Applicable	Not Applicable

Private equity funds include a fund-of-funds that invests in high quality private equity funds across several market sectors, funds that invest in real estate assets, and a fund that acquires companies to create resale value. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated. Liquidations of these investments are expected to occur at various times over the next 10 years.

As of December 31, 2017 and 2016, 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, including securities due within one year:
2017	$	7,625	$	8,305
2016	$	7,092	$	7,544

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

GEORGIA POWER CO

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS


•	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.

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	6	$	—	$	6
Nuclear decommissioning trusts:^(*)
Domestic equity	248		1		—		249
Foreign equity	—		166		—		166
U.S. Treasury and government agency securities	—		227		—		227
Municipal bonds	—		68		—		68
Corporate bonds	—		155		—		155
Mortgage and asset backed securities	—		40		—		40
Other	12		12		—		24
Cash equivalents	690		—		—		690
Total	$	950	$	675	$	—	$	1,625
Liabilities:
Energy-related derivatives	$	—	$	19	$	—	$	19
Interest rate derivatives	—		5		—		5
Total	$	—	$	24	$	—	$	24


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

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	44	$	—	$	44
Interest rate derivatives	—		2		—		2
Nuclear decommissioning trusts:^(*)
Domestic equity	204		1		—		205
Foreign equity	—		121		—		121
U.S. Treasury and government agency securities	—		71		—		71
Municipal bonds	—		73		—		73
Corporate bonds	—		164		—		164
Mortgage and asset backed securities	—		164		—		164
Other	11		5		—		16
Total	$	215	$	645	$	—	$	860
Liabilities:
Energy-related derivatives	$	—	$	8	$	—	$	8
Interest rate derivatives	—		3		—		3
Total	$	—	$	11	$	—	$	11


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

Valuation Methodologies

As of December 31, 2017 and 2016, 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, including securities due within one year:
2017	$	11,777	$	12,531
2016	$	10,516	$	11,034

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

GULF POWER CO

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS


•	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.

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Cash equivalents	$	21	$	—	$	—	$	21
Liabilities:
Energy-related derivatives	$	—	$	21	$	—	$	21

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	5	$	—	$	5
Cash equivalents	20		—		—		20
Total	$	20	$	5	$	—	$	25
Liabilities:
Energy-related derivatives	$	—	$	29	$	—	$	29

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 overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflect the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The interest rate derivatives are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note 10 for additional information on how these derivatives are used.

As of December 31, 2017 and 2016, 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:
2017	$	1,285	$	1,334
2016	$	1,074	$	1,097

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

MISSISSIPPI POWER CO

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS


•	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.

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	2	$	—	$	2
Interest rate derivatives	—		1		—		1
Cash equivalents	224		—		—		224
Total	$	224	$	3	$	—	$	227
Liabilities:
Energy-related derivatives	$	—	$	9	$	—	$	9

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	3
Interest rate derivatives	—		3		—		3
Cash equivalents	206		—		—		206
Total	$	206	$	6	$	—	$	212
Liabilities:
Energy-related derivatives	$	—	$	10	$	—	$	10

Valuation Methodologies

As of December 31, 2017 and 2016, 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:
2017	$	2,086	$	2,076
2016	$	2,979	$	2,922

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

SOUTHERN POWER CO

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS


•	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.

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	3
Foreign currency derivatives	—		129		—		129
Cash equivalents	21		—		—		21
Total	$	21	$	132	$	—	$	153
Liabilities:
Energy-related derivatives	$	—	$	13	$	—	$	13
Foreign currency derivatives	—		23		—		23
Contingent consideration	—		—		22		22
Total	$	—	$	36	$	22	$	58

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
Assets:
Energy-related derivatives	$	—	$	21	$	—	$	21
Interest rate derivatives	—		1		—		1
Cash equivalents	628		—		—		628
Total	$	628	$	22	$	—	$	650
Liabilities:
Energy-related derivatives	$	—	$	5	$	—	$	5
Foreign currency derivatives	—		58		—		58
Contingent consideration	—		—		18		18
Total	$	—	$	63	$	18	$	81

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 overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note 9 for additional information on how these derivatives are used.

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

As of December 31, 2017 and 2016, 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, including securities due within one year:
2017	$	5,841	$	6,079
2016	$	5,628	$	5,691

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

SOUTHERN Co GAS

Fair Value Disclosures [Line Items]

FAIR VALUE MEASUREMENTS

As of December 31, 2017, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
As of December 31, 2017:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Assets:
Energy-related derivatives^(a)(b)	$	331	$	223	$	—	$	—	$	554
Liabilities:
Energy-related derivatives^(a)(b)	$	479	$	181	$	—	$	—	$	660


(a)	Energy-related derivatives excludes $11 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.


(b)	Energy-related derivatives excludes cash collateral of $193 million.

As of December 31, 2016, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using
As of December 31, 2016:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Assets:
Energy-related derivatives^(a)(b)	$	338	$	239	$	—	$	—	$	577
Liabilities:
Energy-related derivatives^(a)(b)	$	345	$	224	$	—	$	—	$	569


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


(b)	Energy-related derivatives excludes cash collateral of $62 million.

Valuation Methodologies

The energy-related derivatives primarily consist of exchange-traded 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 overnight index swap interest rates. Interest rate derivatives are also standard OTC products that are valued using observable market data and assumptions commonly used by market participants. See Note 10 for additional information on how these derivatives are used.

Debt

The Company's long-term debt is recorded at amortized cost, including the fair value adjustments at the effective date of the Merger. The Company amortizes the fair value adjustments over the lives of the respective bonds. The following table presents the carrying amount and fair value of the Company's long-term debt as of December 31:



	Carrying Amount		Fair Value
	(in millions)
Long-term debt, including securities due within one year:
2017	$	6,048	$	6,471
2016	$	5,281	$	5,491

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

- Definition

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

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