Segment and Related Information

12 Months Ended

Dec. 31, 2017

Segment Reporting Information [Line Items]

The primary businesses of the Southern Company system are electricity sales by the traditional electric operating companies and Southern Power and the distribution of natural gas by Southern Company Gas. The four traditional electric operating companies – Alabama Power, Georgia Power, Gulf Power, and Mississippi Power – are vertically integrated utilities providing electric service in four Southeastern states. Southern Power develops, constructs, acquires, owns, and manages power generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. Southern Company Gas distributes natural gas through the natural gas distribution utilities in seven states and is involved in several other complementary businesses including gas marketing services, wholesale gas services, and gas midstream operations.

Southern Company's reportable business segments are the sale of electricity by the four traditional electric operating companies, the sale of electricity in the competitive wholesale market by Southern Power, and the sale of natural gas and other complementary products and services by Southern Company Gas. Revenues from sales by Southern Power to the traditional electric operating companies were $392 million, $419 million, and $417 million in 2017, 2016, and 2015, respectively. Revenues from sales of natural gas from Southern Company Gas to the traditional electric operating companies and Southern Power were $23 million and $119 million, respectively, in 2017 and $11 million and $17 million, respectively, in 2016. The "All Other" column includes the Southern Company parent entity, which does not allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include providing energy technologies and services to electric utilities and large industrial, commercial, institutional, and municipal customers; as well as investments in telecommunications and leveraged lease projects. All other inter-segment revenues are not material. Financial data for business segments and products and services for the years ended December 31, 2017, 2016, and 2015 was as follows:



	Electric Utilities
	Traditional Electric Operating Companies			Southern Power			Eliminations			Total		Southern Company Gas		All Other			Eliminations			Consolidated
	(in millions)
2017
Operating revenues	$	16,884		$	2,075		$	(419	)	$	18,540	$	3,920	$	741		$	(170	)	$	23,031
Depreciation and amortization	1,954			503			—			2,457		501		52			—			3,010
Interest income	14			7			—			21		3		11			(9		)	26
Earnings from equity method investments	1			—			—			1		106		(1		)	—			106
Interest expense	820			191			—			1,011		200		490			(7		)	1,694
Income taxes	1,021			(939		)	—			82		367		(307		)	—			142
Segment net income (loss)^(a)(b)(c)	(193		)	1,071			—			878		243		(279		)	—			842
Total assets	72,204			15,206			(325		)	87,085		22,987		2,552			(1,619		)	111,005
Gross property additions	3,836			268			—			4,104		1,525		355			—			5,984
2016
Operating revenues	$	16,803		$	1,577		$	(439	)	$	17,941	$	1,652	$	463		$	(160	)	$	19,896
Depreciation and amortization	1,881			352			—			2,233		238		31			—			2,502
Interest income	6			7			—			13		2		20			(15		)	20
Earnings from equity method investments	2			—			—			2		60		(3		)	—			59
Interest expense	814			117			—			931		81		317			(12		)	1,317
Income taxes	1,286			(195		)	—			1,091		76		(216		)	—			951
Segment net income (loss)^{(a) (b)}	2,233			338			—			2,571		114		(230		)	(7		)	2,448
Total assets	72,141			15,169			(316		)	86,994		21,853		2,474			(1,624		)	109,697
Gross property additions	4,852			2,114			—			6,966		618		41			(1		)	7,624
2015
Operating revenues	$	16,491		$	1,390		$	(439	)	$	17,442	$	—	$	152		$	(105	)	$	17,489
Depreciation and amortization	1,772			248			—			2,020		—		14			—			2,034
Interest income	19			2			1			22		—		6			(5		)	23
Earnings from equity method investments	1			—			—			1		—		(1		)	—			—
Interest expense	697			77			—			774		—		69			(3		)	840
Income taxes	1,305			21			—			1,326		—		(132		)	—			1,194
Segment net income (loss)^{(a) (b)}	2,186			215			—			2,401		—		(32		)	(2		)	2,367
Total assets	69,052			8,905			(397		)	77,560		—		1,819			(1,061		)	78,318
Gross property additions	5,124			1,005			—			6,129		—		40			—			6,169


(a)	Attributable to Southern Company.

(b)

Segment net income (loss) for the traditional electric operating companies includes pre-tax charges for estimated probable losses on the Kemper IGCC of $3.4 billion ($2.4 billion after tax) in 2017, $428 million ($264 million after tax) in 2016, and $365 million ($226 million after tax) in 2015. See Note 3 under "Kemper County Energy Facility – Schedule and Cost Estimate" for additional information.


(c)	Segment net income (loss) for the traditional electric operating companies also includes a pre-tax charge for the write-down of Gulf Power's ownership of Plant Scherer Unit 3 of $33 million ($20 million after tax) in 2017. See Note 3 under "Regulatory Matters – Gulf Power – Retail Base Rate Cases" for additional information.

Products and Services



Electric Utilities' Revenues
Year	Retail		Wholesale		Other		Total
	(in millions)
2017	$	15,330	$	2,426	$	784	$	18,540
2016	15,234		1,926		781		17,941
2015	14,987		1,798		657		17,442



Southern Company Gas' Revenues
Year	Gas Distribution Operations		Gas Marketing Services		All Other		Total
	(in millions)
2017	$	3,024	$	860	$	36	$	3,920
2016	1,266		354		32		1,652

SOUTHERN Co GAS

Segment Reporting Information [Line Items]

SEGMENT AND RELATED INFORMATION

The Company manages its business through four reportable segments - gas distribution operations, gas marketing services, wholesale gas services, and gas midstream operations. The non-reportable segments are combined and presented as all other. In conjunction with the Merger, the Company changed the names of certain reportable segments to better align with its new parent company.

Gas distribution operations is the largest component of the Company's business and includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in seven states. Gas marketing services includes natural gas marketing to end-use customers primarily in Georgia and Illinois. Additionally, gas marketing services provides home equipment protection products and services. Wholesale gas services provides natural gas asset management and/or related logistics services for each of the Company's utilities except Nicor Gas as well as for non-affiliated companies. Additionally, wholesale gas services segment engages in natural gas storage and gas pipeline arbitrage and related activities. Since the acquisition of the Company's 50% interest in SNG, gas midstream operations primarily consists of the Company's gas pipeline investments, with storage and fuel operations also aggregated into this segment. The all other column includes segments below the quantitative threshold for separate disclosure, including the subsidiaries that fall below the quantitative threshold for separate disclosure.

After the Merger, the Company changed the segment performance measure to net income, which is utilized by its parent company. In order to properly assess net income by segment, the Company executed various intercompany note agreements to revise interest charges to its segments. Since such agreements did not exist in the predecessor periods, the Company is unable to provide the comparable net income for those periods.

Financial data for business segments for the successor year ended December 31, 2017, the successor period of 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 were as follows:



	Gas Distribution Operations			Gas Marketing Services			Wholesale Gas Services^(a)			Gas Midstream Operations			Total			All Other			Eliminations			Consolidated
	(in millions)
Successor – Year ended December 31, 2017
Operating revenues	$	3,207		$	860		$	6		$	71		$	4,144		$	10		$	(234	)	$	3,920
Depreciation and amortization	391			62			2			18			473			28			—			501
Operating income (loss)	650			113			(51		)	(10		)	702			(37		)	—			665
Earnings from equity method investments	—			—			—			103			103			3			—			106
Interest expense	(153		)	(5		)	(7		)	(33		)	(198		)	(2		)	—			(200		)
Income taxes^(b)	178			24			—			61			263			104			—			367
Segment net income (loss)^(b)	353			84			(57		)	3			383			(140		)	—			243
Gross property additions	1,330			9			1			134			1,474			34			—			1,508
Successor – Total assets at December 31, 2017	19,358			2,147			1,096			2,241			24,842			12,184			(14,039		)	22,987
Successor – July 1, 2016 through December 31, 2016
Operating revenues	$	1,342		$	354		$	24		$	31		$	1,751		$	3		$	(102	)	$	1,652
Depreciation and amortization	185			35			1			9			230			8			—			238
Operating income (loss)	222			27			(2		)	(7		)	240			(43		)	—			197
Earnings from equity method investments	—			—			—			58			58			2			—			60
Interest expense	(105		)	(1		)	(3		)	(16		)	(125		)	44			—			(81		)
Income taxes	51			7			(3		)	16			71			5			—			76
Segment net income (loss)	77			19			—			20			116			(2		)	—			114
Gross property additions	561			5			1			54			621			11			—			632
Successor – Total assets at December 31, 2016	19,453			2,084			1,127			2,211			24,875			11,145			(14,167		)	21,853



	Gas Distribution Operations		Gas Marketing Services		Wholesale Gas Services^(a)			Gas Midstream Operations			Total		All Other			Eliminations			Consolidated
	(in millions)
Predecessor – January 1, 2016 through June 30, 2016
Operating revenues	$	1,575	$	435	$	(32	)	$	25		$	2,003	$	4		$	(102	)	$	1,905
Depreciation and amortization	178		11		1			9			199		7			—			206
Operating income (loss)	351		109		(69		)	(9		)	382		(61		)	—			321
EBIT	353		109		(68		)	(6		)	388		(60		)	—			328
Gross property additions	484		4		1			43			532		16			—			548
Predecessor – Year Ended December 31, 2015
Operating revenues	$	3,049	$	835	$	202		$	55		$	4,141	$	11		$	(211	)	$	3,941
Depreciation and amortization	336		25		1			18			380		17			—			397
Operating income (loss)	571		152		112			(26		)	809		(63		)	—			746
EBIT	581		152		110			(23		)	820		(59		)	—			761
Gross property additions	957		7		2			27			993		34			—			1,027
Predecessor – Total assets at December 31, 2015	12,519		686		935			692			14,832		9,662			(9,740		)	14,754

(a)The revenues for wholesale gas services are netted with costs associated with its energy and risk management activities. A reconciliation of operating revenues and intercompany revenues is shown in the following table.



	Third Party Gross Revenues		Intercompany Revenues		Total Gross Revenues		Less Gross Gas Costs		Operating Revenues
	(in millions)
Successor – Year Ended December 31, 2017	$	6,152	$	481	$	6,633	$	6,627	$	6
Successor – July 1, 2016 through December 31, 2016	5,807		333		6,140		6,116		24
	(in millions)
Predecessor – January 1, 2016 through June 30, 2016	$	2,500	$	143	$	2,643	$	2,675	$	(32	)
Predecessor – Year Ended December 31, 2015	6,286		408		6,694		6,492		202


(b)	Includes the impact of the Tax Reform Legislation and new income tax apportionment factors in several states resulting from the Company's inclusion in the consolidated Southern Company state tax filings.