REVENUE FROM CONTRACTS WITH CUSTOMERS

The registrants generate revenues from a variety of sources, some of which are excluded from the scope of ASC 606, such as leases, derivatives, and certain cost recovery mechanisms. See Note (A) under "Recently Adopted Accounting Standards – Revenue" for additional information on the adoption of ASC 606 for revenue from contracts with customers.

The majority of the revenues of the traditional electric operating companies and Southern Company Gas are generated from contracts with retail electric and natural gas distribution customers. Revenues from this integrated service to deliver electricity or gas when and if called upon by the customer is recognized as a single performance obligation satisfied over time and is recognized at a tariff rate as electricity or gas is delivered to the customer during the month. The traditional electric operating companies and Southern Company Gas exclude taxes imposed on the customer and collected on behalf of governmental agencies to be remitted to these agencies from the transaction price in determining the revenue related to contracts with a customer.

The traditional electric operating companies and Southern Power also have contracts with multiple performance obligations, such as capacity and energy in a wholesale PPA, where the contract's total transaction price is allocated to each performance obligation based on the standalone selling price. The standalone selling price is primarily determined by the price charged to customers for the specific goods or services transferred with the performance obligations. Generally, the registrants recognize revenue as the performance obligations are satisfied over time as electricity or natural gas is delivered to the customer or as generation capacity is available to the customer. At Southern Company Gas, the performance obligations related to wholesale gas services are satisfied, and revenue is recognized, at a point in time when natural gas is delivered to the customer.

The registrants generally have a right to consideration in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and may recognize revenue in the amount to which the entity has a right to invoice and has elected to recognize revenue for its sales of electricity, capacity, and natural gas using the invoice practical expedient. In addition, payment for goods and services rendered is typically due in the subsequent month following satisfaction of the registrants' performance obligation.

The following tables disaggregate revenue sources for the three and nine months ended September 30, 2018:



	For the Three Months Ended September 30, 2018		For the Nine Months Ended September 30, 2018
	(in millions)
Southern Company
Operating revenues
Retail electric revenues^(a)
Residential	$	2,148	$	5,266
Commercial	1,527		4,084
Industrial	901		2,471
Other	29		92
Natural gas distribution revenues	433		2,299
Alternative revenue programs^(b)	5		(23		)
Total retail electric and gas distribution revenues	$	5,043	$	14,189
Wholesale energy revenues^(c)(d)	516		1,444
Wholesale capacity revenues^(d)	177		479
Other natural gas revenues^(e)	54		530
Other revenues^(f)	369		1,516
Total operating revenues	$	6,159	$	18,158

(a)

Retail electric revenues include $17 million and $54 million of leases for the three and nine months ended September 30, 2018, respectively, and a (net reduction) or net increase of $(98) million and $4 million for the three and nine months ended September 30, 2018, respectively, from certain cost recovery mechanisms that are not accounted for as revenue under ASC 606. See Note 3 to the financial statements of Southern Company under "Regulatory Matters" in Item 8 of the Form 10-K for additional information on cost recovery mechanisms.


(b)	See Note 1 to the financial statements of Southern Company under "Revenues" in Item 8 of the Form 10-K for additional information on alternative revenue programs at the natural gas distribution utilities. Alternative revenue program revenues are presented net of any previously recognized program amounts billed to customers during the same accounting period.


(c)	Wholesale energy revenues include $63 million and $217 million for the three and nine months ended September 30, 2018, respectively, of revenues accounted for as derivatives, primarily related to physical energy sales in the wholesale electricity market. See Note (I) for additional information on energy-related derivative contracts.


(d)	Wholesale energy and wholesale capacity revenues include $130 million and $31 million, respectively, for the three months ended September 30, 2018 and $318 million and $92 million, respectively, for the nine months ended September 30, 2018 of PPA contracts accounted for as leases.

(e)

Other natural gas revenues related to Southern Company Gas' energy and risk management activities are presented net of the related costs of those activities and include gross third-party revenues of $1.6 billion and $4.8 billion for the three and nine months ended September 30, 2018, respectively, of which $0.9 billion and $2.7 billion, respectively, relates to contracts that are accounted for as derivatives. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services operating revenues.


(f)	Other revenues include $92 million and $274 million for the three and nine months ended September 30, 2018, respectively, of revenues not accounted for under ASC 606.



	Alabama Power		Georgia Power		Gulf Power		Mississippi Power
	(in millions)
For the Three Months Ended September 30, 2018
Operating revenues
Retail revenues^(a)(b)
Residential	$	721	$	1,142	$	200	$	85
Commercial	464		877		103		82
Industrial	392		385		37		86
Other	7		21		1		1
Total retail electric revenues	$	1,584	$	2,425	$	341	$	254
Wholesale energy revenues^(c)	62		33		48		92
Wholesale capacity revenues	26		14		7		1
Other revenues^(b)(d)	68		121		18		11
Total operating revenues	$	1,740	$	2,593	$	414	$	358

For the Nine Months Ended September 30, 2018
Operating revenues
Retail revenues^(a)(b)
Residential	$	1,848	$	2,671	$	537	$	209
Commercial	1,238		2,343		291		212
Industrial	1,103		1,036		100		233
Other	19		62		4		6
Total retail electric revenues	$	4,208	$	6,112	$	932	$	660
Wholesale energy revenues^(c)	234		99		104		259
Wholesale capacity revenues	75		41		20		6
Other revenues^(b)(d)	199		349		50		31
Total operating revenues	$	4,716	$	6,601	$	1,106	$	956

(a)

Retail revenues at Alabama Power, Georgia Power, Gulf Power, and Mississippi Power include a net increase or (net reduction) of $(12) million, $(47) million, $(36) million, and $(3) million, respectively, for the three months ended September 30, 2018 and $113 million, $(35) million, $(63) million, and $(11) million, respectively, for the nine months ended September 30, 2018 related to certain cost recovery mechanisms that are not accounted for as revenue under ASC 606. See Note 3 to the financial statements of Alabama Power, Georgia Power, Gulf Power, and Mississippi Power under "Retail Regulatory Matters" in Item 8 of the Form 10-K for additional information on cost recovery mechanisms.


(b)	Retail revenues and other revenues at Georgia Power include $17 million and $34 million, respectively, for the three months ended September 30, 2018 and $54 million and $100 million, respectively, for the nine months ended September 30, 2018 of revenues accounted for as leases.

(c)

Wholesale energy revenues at Alabama Power and Georgia Power include $6 million and $8 million, respectively, for the three months ended September 30, 2018 and $14 million and $21 million, respectively, for the nine months ended September 30, 2018 accounted for as derivatives primarily related to physical energy sales in the wholesale electricity market. See Note (I) for additional information on energy-related derivative contracts.


(d)	Other revenues at Alabama Power, Georgia Power, and Gulf Power include $27 million, $28 million, and $2 million, respectively, for the three months ended September 30, 2018 and $79 million, $80 million, and $5 million, respectively, for the nine months ended September 30, 2018 of revenues not accounted for under ASC 606.



	For the Three Months Ended September 30, 2018		For the Nine Months Ended September 30, 2018
	(in millions)
Southern Power
PPA capacity revenues^(a)	$	168	$	450
PPA energy revenues^(a)	336		892
Non-PPA revenues^(b)	126		347
Other revenues	5		10
Total operating revenues	$	635	$	1,699

(a)

PPA capacity revenues and PPA energy revenues include $47 million and $139 million, respectively, for the three months ended September 30, 2018 and $141 million and $342 million, respectively, for the nine months ended September 30, 2018 related to PPAs accounted for as leases. See Note 1 to the financial statements of Southern Power under "Revenues" in Item 8 of the Form 10-K for additional information on capacity revenues accounted for as leases.

(b)

Non-PPA revenues include $47 million and $176 million for the three and nine months ended September 30, 2018, respectively, of revenues from short-term sales related to physical energy sales from uncovered capacity in the wholesale electricity market. See Note 1 to the financial statements of Southern Power under "Revenues" in Item 8 of the Form 10-K and Note (I) for additional information on energy-related derivative contracts.



	For the Three Months Ended September 30, 2018			For the Nine Months Ended September 30, 2018
	(in millions)
Southern Company Gas
Operating revenues
Natural gas distribution revenues
Residential	$	149		$	1,082
Commercial	45			313
Transportation	203			708
Industrial	4			28
Other	32			168
Alternative revenue programs^(a)	5			(23		)
Total natural gas distribution revenues	$	438		$	2,276
Gas marketing services^(b)	44			403
Wholesale gas services^(c)	(10		)	121
Gas midstream operations	20			60
Other revenues	—			1
Total operating revenues	$	492		$	2,861


(a)	See Note 1 to the financial statements of Southern Company Gas under "Revenues" in Item 8 of the Form 10-K for additional information on alternative revenue programs at the natural gas distribution utilities. Alternative revenue program revenues are presented net of any previously recognized program amounts billed to customers during the same accounting period.


(b)	Gas marketing services includes $4 million for the nine months ended September 30, 2018 of revenues not accounted for under ASC 606.

(c)

Wholesale gas services revenues are presented net of the related costs associated with its energy trading and risk management activities. Operating revenues, as presented, include gross third-party revenues of $1.6 billion and $4.8 billion for the three and nine months ended September 30, 2018, respectively, of which $0.9 billion and $2.7 billion, respectively, relates to contracts that are accounted for as derivatives. See Note (L) under "Southern Company Gas" for additional information on the components of wholesale gas services operating revenues and Note (I) for additional information on energy-related derivative contracts.

Contract Balances

The following table reflects the closing balances of receivables, contract assets, and contract liabilities related to revenues from contracts with customers as of September 30, 2018:



	Receivables		Contract Assets		Contract Liabilities
	(in millions)
Southern Company	$	2,778	$	99	$	34
Alabama Power	649		1		14
Georgia Power	924		70		3
Gulf Power	186		—		—
Mississippi Power	96		—		—
Southern Power	142		—		17
Southern Company Gas	523		—		1

As of September 30, 2018, Alabama Power had contract liabilities for outstanding performance obligations primarily related to extended service agreements. Georgia Power had contract assets primarily related to fixed retail customer bill programs where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over the one-year contract term. Southern Power's contract liabilities relate to collections recognized in advance of revenue for certain levelized PPAs with Georgia Power. Southern Company's unregulated distributed generation business had $27 million and $17 million of contract assets and contract liabilities, respectively, remaining for outstanding performance obligations.

Remaining Performance Obligations

The traditional electric operating companies and Southern Power have long-term contracts with customers in which revenues are recognized as performance obligations are satisfied over the contract term. These contracts primarily relate to PPAs whereby the traditional electric operating companies and Southern Power provide electricity and generation capacity to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Revenues from contracts with customers related to these performance obligations remaining at September 30, 2018 are expected to be recognized as follows:



	2018		2019		2020		2021		2022		2023 and Thereafter
	(in millions)
Southern Company^(*)	$	168	$	406	$	322	$	322	$	310	$	2,112
Alabama Power	6		22		22		26		23		161
Georgia Power	10		41		38		40		30		113
Gulf Power	5		22		—		—		—		—
Mississippi Power	1		3		3		1		—		—
Southern Power^(*)	75		310		283		277		276		2,005


(*)	Excludes amounts related to held for sale assets. See Note (J) under "Southern Company's Sale of Gulf Power" and "Southern Power – Sale of Florida Plants" for additional information.