Retirement Benefits

12 Months Ended

Dec. 31, 2017

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Southern Company has a defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at Southern Company Gas and PowerSecure. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. Southern Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, Southern Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund related other postretirement trusts to the extent required by their respective regulatory commissions. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

In addition, Southern Company Gas has a qualified defined benefit, trusteed, pension plan covering certain eligible employees, which was closed in 2012 to new employees and reopened to all non-union employees on January 1, 2018. This qualified pension plan is funded in accordance with requirements of ERISA. No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the Southern Company Gas qualified pension plan are anticipated for the year ending December 31, 2018. Southern Company Gas also provides certain non-qualified defined benefit and defined contribution pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, Southern Company Gas provides certain medical care and life insurance benefits for eligible retired employees through a postretirement benefit plan. Southern Company Gas also has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the net periodic costs for the pension and other postretirement benefit plans for the following year and the benefit obligations as of the measurement date are presented below.



Assumptions used to determine net periodic costs:	2017		2016		2015
Pension plans
Discount rate – benefit obligations	4.40	%	4.58	%	4.17	%
Discount rate – interest costs	3.77		3.88		4.17
Discount rate – service costs	4.81		4.98		4.48
Expected long-term return on plan assets	7.92		8.16		8.20
Annual salary increase	4.37		4.37		3.59
Other postretirement benefit plans
Discount rate – benefit obligations	4.23	%	4.38	%	4.04	%
Discount rate – interest costs	3.54		3.66		4.04
Discount rate – service costs	4.64		4.85		4.39
Expected long-term return on plan assets	6.84		6.66		6.97
Annual salary increase	4.37		4.37		3.59



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.80	%	4.40	%
Annual salary increase	4.32		4.37
Other postretirement benefit plans
Discount rate	3.68	%	4.23	%
Annual salary increase	4.32		4.37

The Company estimates the expected rate of return on pension plan and other postretirement benefit plan assets using a financial model to project the expected return on each current investment portfolio. The analysis projects an expected rate of return on each of eight different asset classes in order to arrive at the expected return on the entire portfolio relying on each trust's target asset allocation and reasonable capital market assumptions. The financial model is based on four key inputs: anticipated returns by asset class (based in part on historical returns), each trust's target asset allocation, an anticipated inflation rate, and the projected impact of a periodic rebalancing of each trust's portfolio.

An additional assumption used in measuring the accumulated other postretirement benefit obligations (APBO) was a weighted average medical care cost trend rate. The weighted average medical care cost trend rates used in measuring the APBO as of December 31, 2017 were as follows:



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	132	$	113
Service and interest costs	4		3

Pension Plans

The total accumulated benefit obligation for the pension plans was $12.6 billion at December 31, 2017 and $11.3 billion at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	12,385		$	10,542
Acquisitions	—			1,244
Service cost	293			262
Interest cost	455			422
Benefits paid	(596		)	(466		)
Plan amendments	(26		)	39
Actuarial (gain) loss	1,297			342
Balance at end of year	13,808			12,385
Change in plan assets
Fair value of plan assets at beginning of year	11,583			9,234
Acquisitions	—			837
Actual return (loss) on plan assets	1,953			902
Employer contributions	52			1,076
Benefits paid	(596		)	(466		)
Fair value of plan assets at end of year	12,992			11,583
Accrued liability	$	(816	)	$	(802	)

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $13.2 billion and $652 million, respectively. All pension plan assets are related to the qualified pension plans.

Amounts presented in the following tables exclude regulatory assets of $334 million associated with unamortized amounts in Southern Company Gas' pension plans prior to its acquisition by Southern Company on July 1, 2016.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	3,273		$	3,207
Other current liabilities	(53		)	(53		)
Employee benefit obligations	(763		)	(749		)
Other regulatory liabilities, deferred	(118		)	(87		)
Accumulated OCI	107			100

Presented below are the amounts included in accumulated OCI and regulatory assets at December 31, 2017 and 2016 related to the defined benefit pension plans that had not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for 2018.



	Prior Service Cost		Net (Gain) Loss
	(in millions)
Balance at December 31, 2017:
Accumulated OCI	$	3	$	104
Regulatory assets	14		3,140
Total	$	17	$	3,244
Balance at December 31, 2016:
Accumulated OCI	$	4	$	96
Regulatory assets	51		3,069
Total	$	55	$	3,165
Estimated amortization in net periodic pension cost in 2018:
Accumulated OCI	$	1	$	9
Regulatory assets	4		204
Total	$	5	$	213

The components of OCI and the changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2017 and 2016 are presented in the following table:



	Accumulated OCI			Regulatory Assets
	(in millions)
Balance at December 31, 2015	$	125		$	2,998
Net (gain) loss	(20		)	243
Change in prior service costs	2			37
Reclassification adjustments:
Amortization of prior service costs	(1		)	(13		)
Amortization of net gain (loss)	(6		)	(145		)
Total reclassification adjustments	(7		)	(158		)
Total change	(25		)	122
Balance at December 31, 2016	$	100		$	3,120
Net (gain) loss	15			227
Change in prior service costs	—			(26		)
Reclassification adjustments:
Amortization of prior service costs	(1		)	(11		)
Amortization of net gain (loss)	(7		)	(155		)
Total reclassification adjustments	(8		)	(166		)
Total change	7			35
Balance at December 31, 2017	$	107		$	3,155

Components of net periodic pension cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	293		$	262		$	257
Interest cost	455			422			445
Expected return on plan assets	(897		)	(782		)	(724		)
Recognized net (gain) loss	162			150			215
Net amortization	12			14			25
Net periodic pension cost	$	25		$	66		$	218

Net periodic pension cost is the sum of service cost, interest cost, and other costs netted against the expected return on plan assets. The expected return on plan assets is determined by multiplying the expected rate of return on plan assets and the market-related value of plan assets. In determining the market-related value of plan assets, the Company has elected to amortize changes in the market value of all plan assets over five years rather than recognize the changes immediately. As a result, the accounting value of plan assets that is used to calculate the expected return on plan assets differs from the current fair value of the plan assets.

Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plans. At December 31, 2017, estimated benefit payments were as follows:



	Benefit Payments
	(in millions)
2018	$	634
2019	637
2020	663
2021	681
2022	704
2023 to 2027	3,836

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	2,297		$	1,989
Acquisitions	—			338
Service cost	24			22
Interest cost	79			76
Benefits paid	(136		)	(119		)
Actuarial (gain) loss	65			(16		)
Plan amendments	3			—
Retiree drug subsidy	7			7
Balance at end of year	2,339			2,297
Change in plan assets
Fair value of plan assets at beginning of year	944			833
Acquisitions	—			100
Actual return (loss) on plan assets	154			58
Employer contributions	84			65
Benefits paid	(129		)	(112		)
Fair value of plan assets at end of year	1,053			944
Accrued liability	$	(1,286	)	$	(1,353	)

Amounts presented in the following tables exclude regulatory assets of $77 million associated with unamortized amounts in Southern Company Gas' other postretirement benefit plans prior to its acquisition by Southern Company on July 1, 2016.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	382		$	419
Other current liabilities	(5		)	(4		)
Employee benefit obligations	(1,281		)	(1,349		)
Other regulatory liabilities, deferred	(41		)	(41		)
Accumulated OCI	4			7

Presented below are the amounts included in accumulated OCI and net regulatory assets (liabilities) at December 31, 2017 and 2016 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2018.



	Prior Service Cost		Net (Gain) Loss
	(in millions)
Balance at December 31, 2017:
Accumulated OCI	$	—	$	4
Net regulatory assets	21		320
Total	$	21	$	324
Balance at December 31, 2016:
Accumulated OCI	$	—	$	7
Net regulatory assets	25		353
Total	$	25	$	360
Estimated amortization as net periodic postretirement benefit cost in 2018:
Net regulatory assets	$	7	$	14

The components of OCI, along with the changes in the balance of net regulatory assets (liabilities), related to the other postretirement benefit plans for the plan years ended December 31, 2017 and 2016 are presented in the following table:



	Accumulated OCI			Net Regulatory Assets (Liabilities)
	(in millions)
Balance at December 31, 2015	$	8		$	411
Net (gain) loss	(1		)	(13		)
Reclassification adjustments:
Amortization of prior service costs	—			(6		)
Amortization of net gain (loss)	—			(14		)
Total reclassification adjustments	—			(20		)
Total change	(1		)	(33		)
Balance at December 31, 2016	$	7		$	378
Net (gain) loss	(3		)	(21		)
Change in prior service costs	—			3
Reclassification adjustments:
Amortization of prior service costs	—			(6		)
Amortization of net gain (loss)	—			(13		)
Total reclassification adjustments	—			(19		)
Total change	(3		)	(37		)
Balance at December 31, 2017	$	4		$	341

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	24		$	22		$	23
Interest cost	79			76			78
Expected return on plan assets	(66		)	(60		)	(58		)
Net amortization	20			21			21
Net periodic postretirement benefit cost	$	57		$	59		$	64

Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the other postretirement benefit plans. Estimated benefit payments are reduced by drug subsidy receipts expected as a result of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as follows:



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2018	$	144	$	(7	)	$	137
2019	148		(8		)	140
2020	151		(8		)	143
2021	154		(9		)	145
2022	156		(9		)	147
2023 to 2027	780		(48		)	732

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policies for both the pension plans and the other postretirement benefit plans cover a diversified mix of assets as described below. Derivative instruments may be used to gain efficient exposure to the various asset classes and as hedging tools. Additionally, the Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The investment strategy for plan assets related to the Company's qualified pension plans is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns and interest rates, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plans is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual asset class exposures relative to the target asset allocation, the Southern Company plan employs a formal rebalancing program. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices. Management believes the portfolio is well-diversified with no significant concentrations of risk.

Investment Strategies and Benefit Plan Asset Fair Values

A description of the major asset classes that the pension and other postretirement benefit plans are comprised of, along with the valuation methods used for fair value measurement, is provided below:



Description	Valuation Methodology
● Domestic equity: A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches. ● International equity: A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.	Domestic and International equities such as common stocks, American depositary receipts, and real estate investment trusts that trade on public exchanges are classified as Level 1 investments and are valued at the closing price in the active market. Equity funds with unpublished prices are valued as Level 2 when the underlying holdings are comprised of Level 1 or Level 2 equity securities.
● Fixed income: A mix of domestic and international bonds.	Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.
● Trust-owned life insurance (TOLI): Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.	Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate accounts. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.
● Special situations: Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies, as well as investments in promising new strategies of a longer-term nature. ● Real estate: Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities. ● Private equity: Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.	Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

The fair values, and actual allocations relative to the target allocations, of Southern Company's pension plan (excluding Southern Company Gas) as of December 31, 2017 and 2016 are presented below. The fair values presented are prepared in accordance with GAAP. For purposes of determining the fair value of the pension plan and other postretirement benefit plan assets and the appropriate level designation, management relies on information provided by the plan's trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate.

These fair values exclude cash, receivables related to investment income and pending investment sales, and payables related to pending investment purchases.



	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				Target Allocation		Actual Allocation
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Domestic equity^(*)	$	2,405	$	1,159	$	—	$	—	$	3,564	26	%	31	%
International equity^(*)	1,555		1,403		—		—		2,958		25		25
Fixed income:											23		24
U.S. Treasury, government, and agency bonds	—		841		—		—		841
Mortgage- and asset-backed securities	—		8		—		—		8
Corporate bonds	—		1,201		—		—		1,201
Pooled funds	—		650		—		—		650
Cash equivalents and other	217		11		—		—		228
Real estate investments	469		—		—		1,188		1,657		14		13
Special situations	—		—		—		180		180		3		1
Private equity	—		—		—		669		669		9		6
Total	$	4,646	$	5,273	$	—	$	2,037	$	11,956	100	%	100	%


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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				Target Allocation		Actual Allocation
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Domestic equity^(*)	$	2,010	$	927	$	—	$	—	$	2,937	26	%	29	%
International equity^(*)	1,231		1,110		—		—		2,341		25		22
Fixed income:											23		29
U.S. Treasury, government, and agency bonds	—		588		—		—		588
Mortgage- and asset-backed securities	—		13		—		—		13
Corporate bonds	—		991		—		—		991
Pooled funds	—		524		—		—		524
Cash equivalents and other	996		2		—		—		998
Real estate investments	310		—		—		1,152		1,462		14		13
Special situations	—		—				180		180		3		2
Private equity	—		—		—		549		549		9		5
Total	$	4,547	$	4,155	$	—	$	1,881	$	10,583	100	%	100	%


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

The fair values of Southern Company Gas' pension plan assets for the period ended December 31, 2017 and 2016 are presented below. The fair value measurements exclude cash, receivables related to investment income, pending investment sales, and payables related to pending investment purchases. Special situations (absolute return and hedge funds) investment assets are presented in the tables below based on the nature of the investment.



	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:
Domestic equity^(*)	$	155	$	323	$	—	$	—	$	478
International equity^(*)	—		166		—		—		166
Fixed income:
U.S. Treasury, government, and agency bonds	—		85		—		—		85
Corporate bonds	—		39		—		—		39
Cash equivalents and other	84		25		—		48		157
Real estate investments	3		—		—		16		19
Private equity	—		—		—		1		1
Total	$	242	$	638	$	—	$	65	$	945


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	142	$	343	$	—	$	—	$	485
International equity^(*)	—		185		—		—		185
Fixed income:
U.S. Treasury, government, and agency bonds	—		85		—		—		85
Corporate bonds	—		41		—		—		41
Pooled funds	—		66		—		—		66
Cash equivalents and other	12		5		—		83		100
Real estate investments	4		—		—		15		19
Private equity	—		—		—		2		2
Total	$	158	$	725	$	—	$	100	$	983


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

The composition of Southern Company Gas' pension plan assets as of December 31, 2017 and 2016, along with the targets, is presented below:



	Target		2017		2016
Pension plan assets:
Equity	53	%	65	%	69	%
Fixed Income	15		19		20
Cash	2		6		1
Other	30		10		10
Balance at end of period	100	%	100	%	100	%

The fair values of Southern Company's (excluding Southern Company Gas) other postretirement benefit plan assets as of December 31, 2017 and 2016 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investment sales, and payables related to pending investment purchases.



	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		Total		Target Allocation		Actual Allocation
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		(NAV)
	(in millions)
Assets:
Domestic equity^(*)	$	132	$	35	$	—	$	—	$	167	37	%	40	%
International equity^(*)	47		76		—		—		123		23		23
Fixed income:											30		29
U.S. Treasury, government, and agency bonds	—		32		—		—		32
Corporate bonds	—		37		—		—		37
Pooled funds	—		55		—		—		55
Cash equivalents and other	10		—		—		—		10
Trust-owned life insurance	—		426		—		—		426
Real estate investments	16		—		—		36		52		5		5
Special situations	—		—		—		5		5		1		1
Private equity	—		—		—		20		20		4		2
Total	$	205	$	661	$	—	$	61	$	927	100	%	100	%


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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				Target Allocation		Actual Allocation
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Assets:
Domestic equity^(*)	$	118	$	28	$	—	$	—	$	146	39	%	40	%
International equity^(*)	37		61		—		—		98		23		21
Fixed income:											29		31
U.S. Treasury, government, and agency bonds	—		24		—		—		24
Corporate bonds	—		30		—		—		30
Pooled funds	—		49		—		—		49
Cash equivalents and other	41		—		—		—		41
Trust-owned life insurance	—		382		—		—		382
Real estate investments	11		—		—		35		46		5		5
Special situations	—		—		—		5		5		1		1
Private equity	—		—		—		17		17		3		2
Total	$	207	$	574	$	—	$	57	$	838	100	%	100	%


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

The fair values of Southern Company Gas' other postretirement benefit plan assets for the period ended December 31, 2017 and 2016 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investment sales, and payables related to pending investment purchases. Special situations (absolute return and hedge funds) investment assets are presented in the tables below based on the nature of the investment.



	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		Total
As of December 31, 2017:	(Level 1)		(Level 2)		(Level 3)		(NAV)
	(in millions)
Assets:
Domestic equity^(*)	$	3	$	69	$	—	$	—	$	72
International equity^(*)	—		22		—		—		22
Fixed income:
Pooled funds	—		24		—		—		24
Cash equivalents and other	2		—		—		1		3
Total	$	5	$	115	$	—	$	1	$	121


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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		Total
As of December 31, 2016:	(Level 1)		(Level 2)		(Level 3)		(NAV)
	(in millions)
Assets:
Domestic equity^(*)	$	3	$	58	$	—	$	—	$	61
International equity^(*)	—		18		—		—		18
Fixed income:
Pooled funds	—		23		—		—		23
Cash equivalents and other	1		—		—		2		3
Total	$	4	$	99	$	—	$	2	$	105


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

The composition of Southern Company Gas' other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targets, is presented below:



	Target		2017		2016
Other postretirement benefit plan assets:
Equity	72	%	76	%	74	%
Fixed Income	24		20		23
Cash	1		2		1
Other	3		2		2
Total	100	%	100	%	100	%

Employee Savings Plan

Southern Company and its subsidiaries also sponsor 401(k) defined contribution plans covering substantially all employees and provide matching contributions up to specified percentages of an employee's eligible pay. Total matching contributions made to the plans for 2017, 2016, and 2015 were $118 million, $105 million, and $92 million, respectively.

ALABAMA POWER CO

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the Alabama PSC and the FERC. For the year ending December 31, 2018, no other postretirement trusts contributions are expected.

Actuarial Assumptions



Assumptions used to determine net periodic costs:	2017		2016		2015
Pension plans
Discount rate – benefit obligations	4.44	%	4.67	%	4.18	%
Discount rate – interest costs	3.76		3.90		4.18
Discount rate – service costs	4.85		5.07		4.49
Expected long-term return on plan assets	7.95		8.20		8.20
Annual salary increase	4.46		4.46		3.59
Other postretirement benefit plans
Discount rate – benefit obligations	4.27	%	4.51	%	4.04	%
Discount rate – interest costs	3.58		3.69		4.04
Discount rate – service costs	4.70		4.96		4.40
Expected long-term return on plan assets	6.83		6.83		7.17
Annual salary increase	4.46		4.46		3.59



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.81	%	4.44	%
Annual salary increase	4.46		4.46
Other postretirement benefit plans
Discount rate	3.71	%	4.27	%
Annual salary increase	4.46		4.46



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	30	$	26
Service and interest costs	1		1

Pension Plans

The total accumulated benefit obligation for the pension plans was $2.7 billion at December 31, 2017 and $2.4 billion at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	2,663		$	2,506
Service cost	63			57
Interest cost	98			95
Benefits paid	(120		)	(109		)
Actuarial (gain) loss	294			114
Balance at end of year	2,998			2,663
Change in plan assets
Fair value of plan assets at beginning of year	2,517			2,279
Actual return (loss) on plan assets	427			206
Employer contributions	12			141
Benefits paid	(120		)	(109		)
Fair value of plan assets at end of year	2,836			2,517
Accrued liability	$	(162	)	$	(146	)

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $2.9 billion and $126 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	890		$	870
Other current liabilities	(12		)	(12		)
Employee benefit obligations	(150		)	(134		)

Presented below are the amounts included in regulatory assets at December 31, 2017 and 2016 related to the defined benefit pension plans that had not yet been recognized in net periodic pension cost along with the estimated amortization of such amounts for 2018.



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	8	$	10	$	1
Net (gain) loss	882		860		54
Regulatory assets	$	890	$	870

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Regulatory assets:
Beginning balance	$	870		$	822
Net (gain) loss	64			84
Change in prior service costs	—			7
Reclassification adjustments:
Amortization of prior service costs	(2		)	(3		)
Amortization of net gain (loss)	(42		)	(40		)
Total reclassification adjustments	(44		)	(43		)
Total change	20			48
Ending balance	$	890		$	870

Components of net periodic pension cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	63		$	57		$	59
Interest cost	98			95			106
Expected return on plan assets	(196		)	(184		)	(178		)
Recognized net (gain) loss	42			40			55
Net amortization	2			3			6
Net periodic pension cost	$	9		$	11		$	48



	Benefit Payments
	(in millions)
2018	$	129
2019	134
2020	139
2021	143
2022	148
2023 to 2027	807

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	501		$	505
Service cost	6			5
Interest cost	17			18
Benefits paid	(29		)	(28		)
Actuarial (gain) loss	20			(1		)
Retiree drug subsidy	2			2
Balance at end of year	517			501
Change in plan assets
Fair value of plan assets at beginning of year	367			363
Actual return (loss) on plan assets	60			23
Employer contributions	6			7
Benefits paid	(27		)	(26		)
Fair value of plan assets at end of year	406			367
Accrued liability	$	(111	)	$	(134	)

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	63		$	86
Other regulatory liabilities, deferred	(7		)	(10		)
Employee benefit obligations	(111		)	(134		)

Presented below are the amounts included in net regulatory assets (liabilities) at December 31, 2017 and 2016 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2018.



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	11	$	15	$	4
Net (gain) loss	45		61		1
Net regulatory assets	$	56	$	76

The changes in the balance of net regulatory assets (liabilities) related to the other postretirement benefit plans for the plan years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Net regulatory assets (liabilities):
Beginning balance	$	76		$	82
Net (gain) loss	(15		)	—
Reclassification adjustments:
Amortization of prior service costs	(4		)	(4		)
Amortization of net gain (loss)	(1		)	(2		)
Total reclassification adjustments	(5		)	(6		)
Total change	(20		)	(6		)
Ending balance	$	56		$	76

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	6		$	5		$	6
Interest cost	17			18			20
Expected return on plan assets	(25		)	(25		)	(26		)
Net amortization	5			6			5
Net periodic postretirement benefit cost	$	3		$	4		$	5



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2018	$	31	$	(2	)	$	29
2019	32		(2		)	30
2020	33		(3		)	30
2021	34		(3		)	31
2022	35		(3		)	32
2023 to 2027	173		(14		)	159

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended. The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targeted mix of assets for each plan, is presented below:



	Target		2017		2016
Pension plan assets:
Domestic equity	26	%	31	%	29	%
International equity	25		25		22
Fixed income	23		24		29
Special situations	3		1		2
Real estate investments	14		13		13
Private equity	9		6		5
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	42	%	44	%	44	%
International equity	22		22		20
Domestic fixed income	28		28		29
Special situations	1		—		1
Real estate investments	4		4		4
Private equity	3		2		2
Total	100	%	100	%	100	%

The investment strategy for plan assets related to the Company's qualified pension plan is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns and interest rates, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plan is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual asset class exposures relative to the target asset allocation, the Company employs a formal rebalancing program. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices. Management believes the portfolio is well-diversified with no significant concentrations of risk.

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Following are the fair value measurements for the pension plan and the other postretirement benefit plan assets as of December 31, 2017 and 2016. The fair values presented are prepared in accordance with GAAP. For purposes of determining the fair value of the pension plan and other postretirement benefit plan assets and the appropriate level designation, management relies on information provided by the plan's trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate.

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.


•	TOLI. Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.



	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:
Domestic equity^(*)	$	572	$	276	$	—	$	—	$	848
International equity^(*)	370		333		—		—		703
Fixed income:
U.S. Treasury, government, and agency bonds	—		200		—		—		200
Mortgage- and asset-backed securities	—		2		—		—		2
Corporate bonds	—		286		—		—		286
Pooled funds	—		155		—		—		155
Cash equivalents and other	51		3		—		—		54
Real estate investments	111		—		—		283		394
Special situations	—		—		—		43		43
Private equity	—		—		—		159		159
Total	$	1,104	$	1,255	$	—	$	485	$	2,844


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	477	$	220	$	—	$	—	$	697
International equity^(*)	292		264		—		—		556
Fixed income:
U.S. Treasury, government, and agency bonds	—		140		—		—		140
Mortgage- and asset-backed securities	—		3		—		—		3
Corporate bonds	—		235		—		—		235
Pooled funds	—		124		—		—		124
Cash equivalents and other	236		1		—		—		237
Real estate investments	74		—		—		274		348
Special situations	—		—		—		43		43
Private equity	—		—		—		130		130
Total	$	1,079	$	987	$	—	$	447	$	2,513


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	52	$	12	$	—	$	—	$	64
International equity^(*)	16		14		—		—		30
Fixed income:
U.S. Treasury, government, and agency bonds	—		11		—		—		11
Corporate bonds	—		12		—		—		12
Pooled funds	—		7		—		—		7
Cash equivalents and other	2		—		—		—		2
Trust-owned life insurance	—		253		—		—		253
Real estate investments	5		—		—		12		17
Special situations	—		—		—		2		2
Private equity	—		—		—		7		7
Total	$	75	$	309	$	—	$	21	$	405


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	51	$	10	$	—	$	—	$	61
International equity^(*)	13		12		—		—		25
Fixed income:
U.S. Treasury, government, and agency bonds	—		7		—		—		7
Corporate bonds	—		10		—		—		10
Pooled funds	—		5		—		—		5
Cash equivalents and other	14		—		—		—		14
Trust-owned life insurance	—		220		—		—		220
Real estate investments	4		—		—		12		16
Special situations	—		—		—		2		2
Private equity	—		—		—		6		6
Total	$	82	$	264	$	—	$	20	$	366


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company matches a portion of the first 6% of employee base salary contributions. The maximum Company match is 5.1% of an employee's base salary. Total matching contributions made to the plan for 2017, 2016, and 2015 were $23 million, $23 million, and $22 million, respectively.

GEORGIA POWER CO

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the Georgia PSC and the FERC. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

Actuarial Assumptions



Assumptions used to determine net periodic costs:	2017		2016		2015
Pension plans
Discount rate – benefit obligations	4.40	%	4.65	%	4.18	%
Discount rate – interest costs	3.72		3.86		4.18
Discount rate – service costs	4.83		5.03		4.49
Expected long-term return on plan assets	7.95		8.20		8.20
Annual salary increase	4.46		4.46		3.59
Other postretirement benefit plans
Discount rate – benefit obligations	4.23	%	4.49	%	4.03	%
Discount rate – interest costs	3.55		3.67		4.03
Discount rate – service costs	4.63		4.88		4.39
Expected long-term return on plan assets	6.79		6.27		6.48
Annual salary increase	4.46		4.46		3.59



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.79	%	4.40	%
Annual salary increase	4.46		4.46
Other postretirement benefit plans
Discount rate	3.68	%	4.23	%
Annual salary increase	4.46		4.46



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	59	$	50
Service and interest costs	2		2

Pension Plans

The total accumulated benefit obligation for the pension plans was $3.8 billion at December 31, 2017 and $3.5 billion at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	3,800		$	3,615
Service cost	74			70
Interest cost	138			136
Benefits paid	(187		)	(164		)
Actuarial (gain) loss	363			143
Balance at end of year	4,188			3,800
Change in plan assets
Fair value of plan assets at beginning of year	3,621			3,196
Actual return (loss) on plan assets	610			288
Employer contributions	14			301
Benefits paid	(187		)	(164		)
Fair value of plan assets at end of year	4,058			3,621
Accrued liability	$	(130	)	$	(179	)

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $4.0 billion and $153 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Prepaid pension costs	$	23		$	—
Other regulatory assets, deferred	1,105			1,129
Other current liabilities	(15		)	(14		)
Employee benefit obligations	(138		)	(165		)



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	14	$	17	$	2
Net (gain) loss	1,091		1,112		69
Regulatory assets	$	1,105	$	1,129

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Regulatory assets:
Beginning balance	$	1,129		$	1,076
Net (gain) loss	36			99
Change in prior service costs	—			14
Reclassification adjustments:
Amortization of prior service costs	(3		)	(5		)
Amortization of net gain (loss)	(57		)	(55		)
Total reclassification adjustments	(60		)	(60		)
Total change	(24		)	53
Ending balance	$	1,105		$	1,129

Components of net periodic pension cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	74		$	70		$	73
Interest cost	138			136			154
Expected return on plan assets	(283		)	(258		)	(251		)
Recognized net (gain) loss	57			55			76
Net amortization	3			5			9
Net periodic pension cost	$	(11	)	$	8		$	61



	Benefit Payments
	(in millions)
2018	$	196
2019	201
2020	207
2021	210
2022	216
2023 to 2027	1,156

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	847		$	854
Service cost	7			6
Interest cost	29			30
Benefits paid	(51		)	(45		)
Actuarial (gain) loss	28			(1		)
Retiree drug subsidy	3			3
Balance at end of year	863			847
Change in plan assets
Fair value of plan assets at beginning of year	354			358
Actual return (loss) on plan assets	54			21
Employer contributions	26			17
Benefits paid	(48		)	(42		)
Fair value of plan assets at end of year	386			354
Accrued liability	$	(477	)	$	(493	)

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	202		$	213
Employee benefit obligations	(477		)	(493		)

Presented below are the amounts included in regulatory assets at December 31, 2017 and 2016 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2018.



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	5	$	6	$	1
Net (gain) loss	197		207		9
Regulatory assets	$	202	$	213

The changes in the balance of regulatory assets related to the other postretirement benefit plans for the plan years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Regulatory assets:
Beginning balance	$	213		$	223
Net (gain) loss	(2		)	—
Reclassification adjustments:
Amortization of prior service costs	(1		)	(1		)
Amortization of net gain (loss)	(8		)	(9		)
Total reclassification adjustments	(9		)	(10		)
Total change	(11		)	(10		)
Ending balance	$	202		$	213

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	7		$	6		$	7
Interest cost	29			30			34
Expected return on plan assets	(25		)	(22		)	(24		)
Net amortization	9			10			11
Net periodic postretirement benefit cost	$	20		$	24		$	28



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2018	$	55	$	(3	)	$	52
2019	55		(3		)	52
2020	56		(3		)	53
2021	57		(4		)	53
2022	58		(4		)	54
2023 to 2027	288		(21		)	267

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended. The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targeted mix of assets for each plan, is presented below:



	Target		2017		2016
Pension plan assets:
Domestic equity	26	%	31	%	29	%
International equity	25		25		22
Fixed income	23		24		29
Special situations	3		1		2
Real estate investments	14		13		13
Private equity	9		6		5
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	36	%	38	%	35	%
International equity	24		24		24
Domestic fixed income	33		31		35
Special situations	1		1		1
Real estate investments	4		4		4
Private equity	2		2		1
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.


•	TOLI. Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•



	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:
Domestic equity^(*)	$	819	$	394	$	—	$	—	$	1,213
International equity^(*)	529		477		—		—		1,006
Fixed income:
U.S. Treasury, government, and agency bonds	—		286		—		—		286
Mortgage- and asset-backed securities	—		3		—		—		3
Corporate bonds	—		409		—		—		409
Pooled funds	—		221		—		—		221
Cash equivalents and other	74		4		—		—		78
Real estate investments	160		—		—		404		564
Special situations	—		—		—		61		61
Private equity	—		—		—		228		228
Total	$	1,582	$	1,794	$	—	$	693	$	4,069


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	686	$	317	$	—	$	—	$	1,003
International equity^(*)	420		380		—		—		800
Fixed income:
U.S. Treasury, government, and agency bonds	—		201		—		—		201
Mortgage- and asset-backed securities	—		4		—		—		4
Corporate bonds	—		338		—		—		338
Pooled funds	—		179		—		—		179
Cash equivalents and other	340		1		—		—		341
Real estate investments	106		—		—		394		500
Special situations	—		—		—		61		61
Private equity	—		—		—		188		188
Total	$	1,552	$	1,420	$	—	$	643	$	3,615


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	53	$	11	$	—	$	—	$	64
International equity^(*)	14		46		—		—		60
Fixed income:
U.S. Treasury, government, and agency bonds	—		6		—		—		6
Corporate bonds	—		11		—		—		11
Pooled funds	—		41		—		—		41
Cash equivalents and other	4		—		—		—		4
Trust-owned life insurance	—		173		—		—		173
Real estate investments	6		—		—		11		17
Special situations	—		—		—		2		2
Private equity	—		—		—		6		6
Total	$	77	$	288	$	—	$	19	$	384


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	45	$	9	$	—	$	—	$	54
International equity^(*)	11		37		—		—		48
Fixed income:
U.S. Treasury, government, and agency bonds	—		5		—		—		5
Corporate bonds	—		9		—		—		9
Pooled funds	—		38		—		—		38
Cash equivalents and other	15		—		—		—		15
Trust-owned life insurance	—		162		—		—		162
Real estate investments	3		—		—		11		14
Special situations	—		—		—		2		2
Private equity	—		—		—		5		5
Total	$	74	$	260	$	—	$	18	$	352


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company matches a portion of the first 6% of employee base salary contributions. The maximum Company match is 5.1% of an employee's base salary. Total matching contributions made to the plan for 2017, 2016, and 2015 were $26 million, $27 million, and $26 million, respectively.

GULF POWER CO

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the FERC. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

Actuarial Assumptions



Assumptions used to determine net periodic costs:	2017		2016		2015
Pension plans
Discount rate – benefit obligations	4.46	%	4.71	%	4.18	%
Discount rate – interest costs	3.82		3.97		4.18
Discount rate – service costs	4.81		5.04		4.48
Expected long-term return on plan assets	7.95		8.20		8.20
Annual salary increase	4.46		4.46		3.59
Other postretirement benefit plans
Discount rate – benefit obligations	4.25	%	4.51	%	4.04	%
Discount rate – interest costs	3.56		3.68		4.04
Discount rate – service costs	4.62		4.88		4.38
Expected long-term return on plan assets	7.81		8.05		8.07
Annual salary increase	4.46		4.46		3.59



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.82	%	4.46	%
Annual salary increase	4.46		4.46
Other postretirement benefit plans
Discount rate	3.69	%	4.25	%
Annual salary increase	4.46		4.46



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	4	$	3
Service and interest costs	—		—

Pension Plans

The total accumulated benefit obligation for the pension plans was $524 million at December 31, 2017 and $460 million at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	517		$	480
Service cost	13			12
Interest cost	19			19
Benefits paid	(20		)	(17		)
Actuarial (gain) loss	58			23
Balance at end of year	587			517
Change in plan assets
Fair value of plan assets at beginning of year	491			420
Actual return (loss) on plan assets	81			39
Employer contributions	1			49
Benefits paid	(20		)	(17		)
Fair value of plan assets at end of year	553			491
Accrued liability	$	(34	)	$	(26	)

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $563 million and $25 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized on the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	160		$	153
Other current liabilities	(1		)	(1		)
Employee benefit obligations	(33		)	(25		)



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	2	$	3	$	—
Net (gain) loss	158		150		10
Regulatory assets	$	160	$	153

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Regulatory assets:
Beginning balance	$	153		$	142
Net (gain) loss	15			16
Change in prior service costs	—			2
Reclassification adjustments:
Amortization of prior service costs	(1		)	(1		)
Amortization of net gain (loss)	(7		)	(6		)
Total reclassification adjustments	(8		)	(7		)
Total change	7			11
Ending balance	$	160		$	153

Components of net periodic pension cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	13		$	12		$	12
Interest cost	19			19			20
Expected return on plan assets	(38		)	(34		)	(32		)
Recognized net (gain) loss	7			6			9
Net amortization	1			1			1
Net periodic pension cost	$	2		$	4		$	10



	Benefit Payments
	(in millions)
2018	$	22
2019	23
2020	25
2021	26
2022	28
2023 to 2027	155

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	83		$	81
Service cost	1			1
Interest cost	3			3
Benefits paid	(5		)	(4		)
Actuarial (gain) loss	1			2
Balance at end of year	83			83
Change in plan assets
Fair value of plan assets at beginning of year	18			17
Actual return (loss) on plan assets	3			2
Employer contributions	4			3
Benefits paid	(5		)	(4		)
Fair value of plan assets at end of year	20			18
Accrued liability	$	(63	)	$	(65	)

Amounts recognized on the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	8		$	11
Other current liabilities	(1		)	(1		)
Other regulatory liabilities, deferred	(2		)	(4		)
Employee benefit obligations	(62		)	(64		)

Approximately $6 million and $7 million was included in net regulatory assets at December 31, 2017 and 2016, respectively, related to the net loss for the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost. The estimated amortization of such amounts for 2018 is immaterial.



	2017			2016
	(in millions)
Net regulatory assets (liabilities):
Beginning balance	$	7		$	5
Net (gain) loss	(1		)	2
Ending balance	$	6		$	7

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	1		$	1		$	1
Interest cost	3			3			3
Expected return on plan assets	(1		)	(1		)	(1		)
Net periodic postretirement benefit cost	$	3		$	3		$	3



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2018	$	5	$	—		$	5
2019	5		—			5
2020	5		—			5
2021	6		(1		)	5
2022	6		(1		)	5
2023 to 2027	28		(2		)	26

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended. The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targeted mix of assets for each plan, is presented below:



	Target		2017		2016
Pension plan assets:
Domestic equity	26	%	31	%	29	%
International equity	25		25		22
Fixed income	23		24		29
Special situations	3		1		2
Real estate investments	14		13		13
Private equity	9		6		5
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	25	%	30	%	28	%
International equity	24		24		21
Domestic fixed income	25		26		31
Special situations	3		1		2
Real estate investments	14		13		13
Private equity	9		6		5
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•



	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:
Domestic equity^(*)	$	112	$	54	$	—	$	—	$	166
International equity^(*)	72		65		—		—		137
Fixed income:
U.S. Treasury, government, and agency bonds	—		39		—		—		39
Corporate bonds	—		57		—		—		57
Pooled funds	—		30		—		—		30
Cash equivalents and other	10		—		—		—		10
Real estate investments	22		—		—		55		77
Special situations	—		—		—		8		8
Private equity	—		—		—		31		31
Total	$	216	$	245	$	—	$	94	$	555


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	93	$	43	$	—	$	—	$	136
International equity^(*)	57		52		—		—		109
Fixed income:
U.S. Treasury, government, and agency bonds	—		27		—		—		27
Mortgage- and asset-backed securities	—		1		—		—		1
Corporate bonds	—		47		—		—		47
Pooled funds	—		24		—		—		24
Cash equivalents and other	46		—		—		—		46
Real estate investments	14		—		—		53		67
Special situations	—		—		—		8		8
Private equity	—		—		—		25		25
Total	$	210	$	194	$	—	$	86	$	490


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	4	$	2	$	—	$	—	$	6
International equity^(*)	2		2		—		—		4
Fixed income:
U.S. Treasury, government, and agency bonds	—		1		—		—		1
Corporate bonds	—		2		—		—		2
Pooled funds	—		1		—		—		1
Cash equivalents and other	1		—		—		—		1
Real estate investments	1		—		—		2		3
Private equity	—		—		—		1		1
Total	$	8	$	8	$	—	$	3	$	19


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	3	$	2	$	—	$	—	$	5
International equity^(*)	2		2		—		—		4
Fixed income:
U.S. Treasury, government, and agency bonds	—		1		—		—		1
Corporate bonds	—		2		—		—		2
Pooled funds	—		1		—		—		1
Cash equivalents and other	2		—		—		—		2
Real estate investments	1		—		—		2		3
Private equity	—		—		—		1		1
Total	$	8	$	8	$	—	$	3	$	19


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

Employee Savings Plan

The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company matches a portion of the first 6% of employee base salary contributions. The maximum Company match is 5.1% of an employee's base salary. Total matching contributions made to the plan for 2017, 2016, and 2015 were $5 million, $5 million, and $4 million, respectively.

MISSISSIPPI POWER CO

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

The Company has a defined benefit, trusteed, pension plan covering substantially all employees. This qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. The Company also provides certain defined benefit pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The Company funds its other postretirement trusts to the extent required by the FERC. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

Actuarial Assumptions



Assumptions used to determine net periodic costs:	2017		2016		2015
Pension plans
Discount rate – benefit obligations	4.44	%	4.69	%	4.17	%
Discount rate – interest costs	3.81		3.97		4.17
Discount rate – service costs	4.83		5.04		4.49
Expected long-term return on plan assets	7.95		8.20		8.20
Annual salary increase	4.46		4.46		3.59
Other postretirement benefit plans
Discount rate – benefit obligations	4.22	%	4.47	%	4.03	%
Discount rate – interest costs	3.55		3.66		4.03
Discount rate – service costs	4.65		4.88		4.38
Expected long-term return on plan assets	6.88		7.07		7.23
Annual salary increase	4.46		4.46		3.59



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.80	%	4.44	%
Annual salary increase	4.46		4.46
Other postretirement benefit plans
Discount rate	3.68	%	4.22	%
Annual salary increase	4.46		4.46



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	5	$	5
Service and interest costs	—		—

Pension Plans

The total accumulated benefit obligation for the pension plans was $541 million at December 31, 2017 and $479 million at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	534		$	500
Service cost	15			13
Interest cost	20			19
Benefits paid	(22		)	(20		)
Actuarial (gain) loss	55			22
Balance at end of year	602			534
Change in plan assets
Fair value of plan assets at beginning of year	499			430
Actual return (loss) on plan assets	84			39
Employer contributions	2			50
Benefits paid	(22		)	(20		)
Fair value of plan assets at end of year	563			499
Accrued liability	$	(39	)	$	(35	)

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $571 million and $31 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	158		$	154
Other current liabilities	(3		)	(3		)
Employee benefit obligations	(36		)	(32		)



	2017		2016		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	3	$	3	$	—
Net (gain) loss	155		151		10
Regulatory assets	$	158	$	154

The changes in the balance of regulatory assets related to the defined benefit pension plans for the years ended December 31, 2017 and 2016 are presented in the following table:



	2017			2016
	(in millions)
Regulatory assets:
Beginning balance	$	154		$	144
Net (gain) loss	12			16
Change in prior service costs	—			2
Reclassification adjustments:
Amortization of prior service costs	(1		)	(1		)
Amortization of net gain (loss)	(7		)	(7		)
Total reclassification adjustments	(8		)	(8		)
Total change	4			10
Ending balance	$	158		$	154

Components of net periodic pension cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	15		$	13		$	13
Interest cost	20			19			21
Expected return on plan assets	(40		)	(35		)	(33		)
Recognized net (gain) loss	7			7			10
Net amortization	1			1			1
Net periodic pension cost	$	3		$	5		$	12



	Benefit Payments
	(in millions)
2018	$	23
2019	24
2020	26
2021	27
2022	28
2023 to 2027	164

Other Postretirement Benefits

Changes in the APBO and in the fair value of plan assets during the plan years ended December 31, 2017 and 2016 were as follows:



	2017			2016
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	97		$	97
Service cost	1			1
Interest cost	3			3
Benefits paid	(6		)	(6		)
Actuarial (gain) loss	1			1
Retiree drug subsidy	1			1
Balance at end of year	97			97
Change in plan assets
Fair value of plan assets at beginning of year	23			23
Actual return (loss) on plan assets	3			1
Employer contributions	4			4
Benefits paid	(5		)	(5		)
Fair value of plan assets at end of year	25			23
Accrued liability	$	(72	)	$	(74	)

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	18		$	21
Other regulatory liabilities, deferred	(1		)	(2		)
Employee benefit obligations	(72		)	(74		)

Approximately $17 million and $19 million was included in net regulatory assets at December 31, 2017 and 2016, respectively, related to the net loss for the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost. The estimated amortization of such amounts for 2018 is $1 million.



	2017			2016
	(in millions)
Net regulatory assets (liabilities):
Beginning balance	$	19		$	18
Net (gain) loss	(1		)	2
Reclassification adjustments:
Amortization of net gain (loss)	(1		)	(1		)
Total reclassification adjustments	(1		)	(1		)
Total change	(2		)	1
Ending balance	$	17		$	19

Components of the other postretirement benefit plans' net periodic cost were as follows:



	2017			2016			2015
	(in millions)
Service cost	$	1		$	1		$	1
Interest cost	3			3			4
Expected return on plan assets	(1		)	(1		)	(2		)
Net amortization	1			1			1
Net periodic postretirement benefit cost	$	4		$	4		$	4



	Benefit Payments		Subsidy Receipts			Total
	(in millions)
2018	$	6	$	—		$	6
2019	6		—			6
2020	6		(1		)	5
2021	7		(1		)	6
2022	7		(1		)	6
2023 to 2027	34		(2		)	32

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended (Internal Revenue Code). The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targeted mix of assets for each plan, is presented below:



	Target		2017		2016
Pension plan assets:
Domestic equity	26	%	31	%	29	%
International equity	25		25		22
Fixed income	23		24		29
Special situations	3		1		2
Real estate investments	14		13		13
Private equity	9		6		5
Total	100	%	100	%	100	%
Other postretirement benefit plan assets:
Domestic equity	21	%	25	%	23	%
International equity	21		20		18
Domestic fixed income	37		38		43
Special situations	2		1		2
Real estate investments	12		11		10
Private equity	7		5		4
Total	100	%	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•



	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:
Domestic equity^(*)	$	113	$	55	$	—	$	—	$	168
International equity^(*)	73		66		—		—		139
Fixed income:
U.S. Treasury, government, and agency bonds	—		40		—		—		40
Corporate bonds	—		56		—		—		56
Pooled funds	—		31		—		—		31
Cash equivalents and other	10		1		—		—		11
Real estate investments	22		—		—		56		78
Special situations	—		—		—		9		9
Private equity	—		—		—		32		32
Total	$	218	$	249	$	—	$	97	$	564


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	95	$	44	$	—	$	—	$	139
International equity^(*)	58		51		—		—		109
Fixed income:
U.S. Treasury, government, and agency bonds	—		28		—		—		28
Mortgage- and asset-backed securities	—		1		—		—		1
Corporate bonds	—		46		—		—		46
Pooled funds	—		25		—		—		25
Cash equivalents and other	47		—		—		—		47
Real estate investments	15		—		—		54		69
Special situations	—		—		—		8		8
Private equity	—		—		—		26		26
Total	$	215	$	195	$	—	$	88	$	498


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	4	$	2	$	—	$	—	$	6
International equity^(*)	3		2		—		—		5
Fixed income:
U.S. Treasury, government, and agency bonds	—		5		—		—		5
Corporate bonds	—		2		—		—		2
Pooled funds	—		1		—		—		1
Cash equivalents and other	1		—		—		—		1
Real estate investments	1		—		—		2		3
Private equity	—		—		—		1		1
Total	$	9	$	12	$	—	$	3	$	24


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	4	$	2	$	—	$	—	$	6
International equity^(*)	2		2		—		—		4
Fixed income:
U.S. Treasury, government, and agency bonds	—		5		—		—		5
Corporate bonds	—		2		—		—		2
Pooled funds	—		1		—		—		1
Cash equivalents and other	2		—		—		—		2
Real estate investments	1		—		—		2		3
Private equity	—		—		—		1		1
Total	$	9	$	12	$	—	$	3	$	24


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

Employee Savings Plan

SOUTHERN POWER CO

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

Effective in December 2017, 538 employees transferred from SCS to the Company. Accordingly, the Company assumed various compensation and benefit plans including a defined benefit, trusteed, pension plan covering substantially all employees. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). With the transfer of employees, the Company assumed the related benefit obligations from SCS of $139 million for the qualified pension plan (along with trust assets of $138 million) and $11 million for other postretirement benefit plans, together with $36 million in prior service costs and net gains/losses that are in OCI. In 2018, the Company will also begin providing certain defined benefits under a non-qualified pension plan for a select group of management and highly compensated employees. No obligation related to these benefits was assumed in the employee transfer; however, obligations under the non-qualified pension plan for future services rendered by employees will be recognized beginning in 2018 and ultimately funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans that are to be funded on a cash basis.

Prior to the transfer of employees in December 2017, substantially all expenses charged by SCS, including pension and other postretirement benefit costs, were recorded in other operations and maintenance expense. Beginning in 2018, in connection with the adoption of ASU 2017-07, the service cost component of pension and postretirement benefit costs will be recorded in other operations and maintenance expense while the non-service cost components of pension and postretirement benefit costs will be recorded in other income (expense). See Note 1 under "General" for additional information.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine the benefit obligations for the pension and other postretirement plans as of the December 31, 2017 measurement date are presented below.



Assumptions used to determine benefit obligations:	2017
Pension plans
Discount rate	3.94	%
Annual salary increase	4.46
Other postretirement benefit plans
Discount rate	3.81	%
Annual salary increase	4.46

In determining the amount of pension cost to be recognized in 2018, the Company estimates the expected rate of return on pension plan assets using a financial model to project the expected return on the current investment portfolio. The analysis projects an expected rate of return on each of the different asset classes in order to arrive at the expected return on the entire portfolio relying on the trust's target asset allocation and reasonable capital market assumptions. The financial model is based on four key inputs: anticipated returns by asset class (based in part on historical returns), the trust's target asset allocation, an anticipated inflation rate, and the projected impact of a periodic rebalancing of the trust's portfolio.

An additional assumption used in measuring the accumulated other postretirement benefit obligations (APBO) is a weighted average medical care cost trend rate. The weighted average medical care cost trend rates used in measuring the APBO as of December 31, 2017 were as follows:



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.50	%	4.50	%	2026
Post-65 medical	5.00		4.50		2026
Post-65 prescription	10.00		4.50		2026

An annual increase or decrease in the assumed medical care cost trend rate of 1% would have an immaterial effect on the APBO at December 31, 2017.

Pension Plan

The total accumulated benefit obligation for the pension plan was $111 million at December 31, 2017. The projected benefit obligation for the pension plan was $139 million and the fair value of plan assets was $138 million at December 31, 2017.

Presented below are the amounts included in AOCI at December 31, 2017 related to the Company's pension plan that had not yet been recognized in net periodic pension cost, along with the estimated amortization of such amounts for 2018.



	2017		Estimated Amortization in 2018
	(in millions)
Prior service cost	$	1	$	—
Net (gain) loss	32		2
AOCI	$	33

Future benefit payments reflect expected future service and are estimated based on assumptions used to measure the projected benefit obligation for the pension plan. At December 31, 2017, estimated benefit payments average approximately $4 million each year for the next five years, and for the five-year period from 2023 to 2027 estimated benefit payments are $27 million.

Other Postretirement Benefits

The APBO for the other postretirement benefit plan at December 31, 2017 is $11 million. Amounts recognized in the balance sheet at December 31, 2017 related to the Company's other postretirement benefit plan consist of the following:



	2017
	(in millions)
Employee benefit obligations (included in other deferred credits and liabilities)	$	(11	)
AOCI	3

Presented below are the amounts included in AOCI at December 31, 2017 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost along with the estimated amortization of such amounts for 2018.



	2017		Estimated Amortization in 2018
	(in millions)
Net (gain) loss	$	3	$	—
AOCI	$	3

Future benefit payments, which include any prescription drug benefits, and any offset from drug subsidiary receipts, are immaterial for each of the years 2018-2027.

Benefit Plan Assets

Pension plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended. The Company's investment policies for the pension plan cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. Derivative instruments are used primarily to gain efficient exposure to the various asset classes and as hedging tools. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan assets as of December 31, 2017, along with the targeted mix of assets for the plan, is presented below:



	Target		2017
Pension plan assets:
Domestic equity	26	%	31	%
International equity	25		25
Fixed income	23		24
Special situations	3		1
Real estate investments	14		13
Private equity	9		6
Total	100	%	100	%

Investment Strategies

Detailed below is a description of the investment strategies for each major asset category for the pension benefit plan disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

Benefit Plan Asset Fair Values

Following are the fair value measurements for the pension plan assets as of December 31, 2017. The fair values presented are prepared in accordance with GAAP. For purposes of determining the fair value of the pension plan assets and the appropriate level designation, management relies on information provided by the plan's trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate.

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

The fair values of pension plan assets as of December 31, 2017 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases.



	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:
Domestic equity^(*)	$	28	$	13	$	—	$	—	$	41
International equity^(*)	18		16		—		—		34
Fixed income:
U.S. Treasury, government, and agency bonds	—		10		—		—		10
Corporate bonds	—		14		—		—		14
Pooled funds	—		8		—		—		8
Cash equivalents and other	2		—		—		—		2
Real estate investments	5		—		—		14		19
Special situations	—		—		—		2		2
Private equity	—		—		—		8		8
Total	$	53	$	61	$	—	$	24	$	138


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

SOUTHERN Co GAS

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

RETIREMENT BENEFITS

The Company has a qualified defined benefit, trusteed, pension plan covering most eligible employees, which was closed in 2012 to new employees and reopened to all non-union employees on January 1, 2018. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No contributions to the qualified pension plan were made for the year ended December 31, 2017 and no mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2018. The Company also provides certain non-qualified defined benefit and defined contribution pension plans for a selected group of management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the Company provides certain medical care and life insurance benefits for eligible retired employees through a postretirement benefit plan. The Company also has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses. For the year ending December 31, 2018, no other postretirement trust contributions are expected.

In connection with the Merger, the Company performed updated valuations of its pension and other postretirement benefit plan assets and obligations to reflect actual census data at the new measurement date of July 1, 2016. This valuation resulted in increases to the projected benefit obligations for the pension and other postretirement benefit plans of approximately $177 million and $20 million, respectively, a decrease in the fair value of pension plan assets of $10 million, and an increase in the fair value of other postretirement benefit plan assets of $1 million. The Company also recorded a related regulatory asset of $437 million related to unrecognized prior service cost and actuarial gain/loss, as it is probable that this amount will be recovered through future rates for the natural gas distribution utilities. The previously unrecognized prior service cost and actuarial gain/loss related to non-utility subsidiaries were eliminated through purchase accounting adjustments.

Actuarial Assumptions

The weighted average rates assumed in the actuarial calculations used to determine both the net periodic costs for the pension and other postretirement benefit plans for all periods presented and the benefit obligations as of the measurement date are presented below.



	Successor				Predecessor
Assumptions used to determine net periodic costs:	Year ended December 31, 2017		July 1, 2016 through December 31, 2016		January 1, 2016 through June 30, 2016		Year ended December 31, 2015
Pension plans
Discount rate – interest costs^(a)	3.76	%	3.21	%	4.00	%	4.20	%
Discount rate – service costs^(a)	4.64		4.07		4.80		4.20
Expected long-term return on plan assets	7.60		7.75		7.80		7.80
Annual salary increase	3.50		3.50		3.70		3.70
Pension band increase^(b)	N/A		2.00		2.00		2.00
Other postretirement benefit plans
Discount rate – interest costs^(a)	3.40	%	2.84	%	3.60	%	4.00	%
Discount rate – service costs^(a)	4.55		3.96		4.70		4.00
Expected long-term return on plan assets	6.03		5.93		6.60		7.80
Annual salary increase	3.50		3.50		3.70		3.70


(a)	Effective January 1, 2016, the Company uses a spot rate approach to estimate the service cost and interest cost components. Previously, the Company estimated these components using a single weighted average discount rate.


(b)	Only applicable to Nicor Gas union employees. The pension bands for the former Nicor plan reflect the negotiated rates in accordance with the union agreements.



Assumptions used to determine benefit obligations:	2017		2016
Pension plans
Discount rate	3.74	%	4.39	%
Annual salary increase	2.88		3.50
Pension band increase^(*)	N/A		2.00
Other postretirement benefit plans
Discount rate	3.62	%	4.15	%
Annual salary increase	2.56		3.50


(*)	Only applicable to Nicor Gas union employees. The pension bands for the former Nicor plan reflect the negotiated rates in accordance with the union agreements.

The Company estimates the expected return on pension plan and other postretirement benefit plan assets by evaluating expected bond returns, equity risk premiums, asset allocations, the effects of active plan management, the impact of periodic plan asset rebalancing, and historical performance. The Company also considers guidance from its investment advisors in making a final determination of its expected rate of return on assets. To the extent the actual rate of return on assets realized over the course of a year is greater or less than the assumed rate, it does not affect that year's annual pension or other postretirement benefit plan cost; rather, this gain or loss reduces or increases future pension or other postretirement benefit plan costs.



	Initial Cost Trend Rate		Ultimate Cost Trend Rate		Year That Ultimate Rate is Reached
Pre-65	6.40	%	4.50	%	2038
Post-65 medical	7.80		4.50		2038
Post-65 prescription	7.80		4.50		2038

An annual increase or decrease in the assumed medical care cost trend rate of 1% would affect the APBO and the service and interest cost components at December 31, 2017 as follows:



	1 Percent Increase		1 Percent Decrease
	(in millions)
Benefit obligation	$	11	$	(10	)
Service and interest costs	—		—

Pension Plans

The total accumulated benefit obligation for the pension plans was $1.1 billion at December 31, 2017 and $1.1 billion at December 31, 2016. Changes in the projected benefit obligations and the fair value of plan assets for all periods presented were as follows:



	Successor							Predecessor
	Year ended December 31, 2017			July 1, 2016 through December 31, 2016				January 1, 2016 through June 30, 2016
	(in millions)							(in millions)
Change in benefit obligation
Benefit obligation at beginning of period	$	1,133		$	1,244		`	$	1,067
Service cost	23			15				13
Interest cost	42			20				21
Plan amendments	(26		)	—				—
Benefits paid	(91		)	(31		)		(26		)
Actuarial (gain) loss	103			(115		)		169
Balance at end of period	1,184			1,133				1,244
Change in plan assets
Fair value of plan assets at beginning of period	983			837			`	847
Actual return (loss) on plan assets	175			48				15
Employer contributions	1			129				1
Benefits paid	(91		)	(31		)		(26		)
Fair value of plan assets at end of period	1,068			983				837
Accrued liability	$	116		$	150			$	407

At December 31, 2017, the projected benefit obligations for the qualified and non-qualified pension plans were $1.1 billion and $44 million, respectively. All pension plan assets are related to the qualified pension plan.

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's pension plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	217		$	267
Other deferred charges and assets	85			58
Other current liabilities	(3		)	(2		)
Employee benefit obligations	(198		)	(206		)



	Regulatory Amortization		Prior Service Cost			Net (Gain) Loss
	(in millions)
Balance at December 31, 2017:
Accumulated OCI	$	—	$	—		$	(42	)
Regulatory assets (liabilities)	40		(20		)	197
Total	$	40	$	(20	)	$	155
Balance at December 31, 2016:
Accumulated OCI	$	—	$	—		$	(43	)
Regulatory assets (liabilities)	—		(2		)	269
Total	$	—	$	(2	)	$	226
Estimated amortization in net periodic cost in 2018:
Regulatory assets (liabilities)	$	3	$	(2	)	$	16

The components of OCI and the changes in the balance of regulatory assets related to the defined benefit pension plans for all periods presented were as follows:



	Accumulated OCI			Regulatory Assets
	(in millions)
Predecessor – Balance at December 31, 2015:	$	282		$	88
Reclassification adjustments:
Amortization of prior service costs	1			—
Amortization of net loss	(9		)	(4		)
Total reclassification adjustments	(8		)	(4		)
Total change	(8		)	(4		)
Predecessor – Balance at June 30, 2016:	$	274		$	84


Successor – Balance at July 1, 2016:	$	—		$	368
Net (gain) loss	(43		)	(87		)
Reclassification adjustments:
Amortization of prior service costs	—			1
Amortization of net loss	—			(15		)
Total reclassification adjustments	—			(14		)
Total change	(43		)	(101		)
Successor – Balance at December 31, 2016:	$	(43	)	$	267
Net (gain) loss	1			(31		)
Reclassification adjustments:
Amortization of regulatory assets	—			(1		)
Amortization of net loss	—			(18		)
Total reclassification adjustments	—			(19		)
Total change	1			(50		)
Successor – Balance at December 31, 2017:	$	(42	)	$	217

Components of net periodic pension costs for all periods presented were as follows:



	Successor						Predecessor
	Year ended December 31, 2017			July 1, 2016 through December 31, 2016			January 1, 2016 through June 30, 2016			Year ended December 31, 2015
	(in millions)						(in millions)
Service cost	$	23		$	15		$	13		$	28
Interest cost	42			20			21			45
Expected return on plan assets	(70		)	(35		)	(33		)	(65		)
Amortization of regulatory assets	1			—			—			—
Amortization:
Prior service costs	—			(1		)	(1		)	(2		)
Net (gain)/loss	18			14			13			31
Net periodic pension cost	$	14		$	13		$	13		$	37



	Benefit Payments
	(in millions)
2018	$	100
2019	77
2020	79
2021	79
2022	80
2023 to 2027	392

Other Postretirement Benefits

Changes in the APBO and the fair value of plan assets for all periods presented were as follows:



	Successor						Predecessor
	Year ended December 31, 2017			July 1, 2016 through December 31, 2016			January 1, 2016 through June 30, 2016
	(in millions)						(in millions)
Change in benefit obligation
Benefit obligation at beginning of period	$	308		$	338		$	318
Service cost	2			1			1
Interest cost	10			5			5
Benefits paid	(19		)	(11		)	(11		)
Actuarial (gain) loss	3			(26		)	24
Plan amendments	3			—			—
Employee contributions	3			1			1
Balance at end of period	310			308			338
Change in plan assets
Fair value of plan assets at beginning of period	105			100			99
Actual return (loss) on plan assets	20			4			1
Employee contributions	3			1			1
Employer contributions	17			11			10
Benefits paid	(20		)	(11		)	(11		)
Fair value of plan assets at end of year	125			105			100
Accrued liability	$	185		$	203		$	238

Amounts recognized in the balance sheets at December 31, 2017 and 2016 related to the Company's other postretirement benefit plans consist of the following:



	2017			2016
	(in millions)
Other regulatory assets, deferred	$	46		$	52
Employee benefit obligations	(185		)	(203		)

Presented below are the amounts included in accumulated OCI and regulatory assets at December 31, 2017 and 2016 related to the other postretirement benefit plans that had not yet been recognized in net periodic other postretirement benefit cost. The estimated amortization of such amounts for 2018 is immaterial.



	Regulatory Amortization		Prior Service Cost			Net (Gain) Loss
	(in millions)
Balance at December 31, 2017:
Accumulated OCI	$	—	$	—		$	(3	)
Regulatory assets (liabilities)	6		(7		)	47
Total	$	6	$	(7	)	$	44
Balance at December 31, 2016:
Accumulated OCI	$	—	$	—		$	(3	)
Regulatory assets (liabilities)	—		(12		)	64
Total	$	—	$	(12	)	$	61

The components of OCI, along with the changes in the balance of regulatory assets (liabilities), related to the other postretirement benefit plans for all periods presented were as follows:



	Accumulated OCI			Regulatory Assets
	(in millions)
Predecessor – Balance at December 31, 2015:	$	36		$	30
Net (gain) loss	—			—
Reclassification adjustments:
Amortization of prior service costs	—			1
Amortization of net loss	(1		)	(1		)
Total reclassification adjustments	(1		)	—
Total change	(1		)	—
Predecessor – Balance at June 30, 2016:	$	35		$	30


Successor – Balance at July 1, 2016:	$	—		$	77
Net (gain) loss	(3		)	(23		)
Reclassification adjustments:
Amortization of prior service costs	—			1
Amortization of net loss	—			(3		)
Total reclassification adjustments	—			(2		)
Total change	(3		)	(25		)
Successor – Balance at December 31, 2016:	$	(3	)	$	52
Net (gain) loss	—			(5		)
Reclassification adjustments:
Amortization of prior service costs	—			3
Amortization of net loss	—			(4		)
Total reclassification adjustments	—			(1		)
Total change	—			(6		)
Successor – Balance at December 31, 2017:	$	(3	)	$	46

Components of the other postretirement benefit plans' net periodic cost for all periods presented were as follows:



	Successor						Predecessor
	Year ended December 31, 2017			July 1, 2016 through December 31, 2016			January 1, 2016 through June 30, 2016			Year ended December 31, 2015
	(in millions)						(in millions)
Service cost	$	2		$	1		$	1		$	2
Interest cost	10			5			5			13
Expected return on plan assets	(7		)	(3		)	(3		)	(7		)
Amortization of regulatory assets	—			2			—			—
Amortization:
Prior service costs	(3		)	—			(1		)	(3		)
Net (gain)/loss	4			—			2			6
Net periodic postretirement benefit cost	$	6		$	5		$	4		$	11

Future benefit payments, including prescription drug benefits, reflect expected future service and are estimated based on assumptions used to measure the APBO for the other postretirement benefit plans. At December 31, 2017, estimated benefit payments were as follows:



	Benefit Payments
	(in millions)
2018	$	20
2019	20
2020	21
2021	21
2022	22
2023 to 2027	105

Benefit Plan Assets

Pension plan and other postretirement benefit plan assets are managed and invested in accordance with all applicable requirements, including ERISA and the Internal Revenue Code of 1986, as amended. The Company's investment policies for both the pension plan and the other postretirement benefit plans cover a diversified mix of assets, including equity and fixed income securities, real estate, and private equity. The Company minimizes the risk of large losses primarily through diversification but also monitors and manages other aspects of risk.

The composition of the Company's pension plan and other postretirement benefit plan assets as of December 31, 2017 and 2016, along with the targets for each plan, is presented below:



	Target		2017		2016
Pension plan assets:
Equity	53	%	65	%	69	%
Fixed Income	15		19		20
Cash	2		6		1
Other	30		10		10
Balance at end of period	100	%	100	%	100	%
Other postretirement benefit plan assets:
Equity	72	%	76	%	74	%
Fixed Income	24		20		23
Cash	1		2		1
Other	3		2		2
Total	100	%	100	%	100	%

The investment strategy for plan assets related to the Company's qualified pension plan is to be broadly diversified across major asset classes. The asset allocation is established after consideration of various factors that affect the assets and liabilities of the pension plan including, but not limited to, historical and expected returns and interest rates, volatility, correlations of asset classes, the current level of assets and liabilities, and the assumed growth in assets and liabilities. Because a significant portion of the liability of the pension plan is long-term in nature, the assets are invested consistent with long-term investment expectations for return and risk. To manage the actual asset class exposures relative to the target asset allocation, the Company employs a formal rebalancing program for its pension plan assets. As additional risk management, external investment managers and service providers are subject to written guidelines to ensure appropriate and prudent investment practices. Management believes the portfolio is well-diversified with no significant concentrations of risk.

Investment Strategies

Detailed below is a description of the investment strategies for the successor period for each major asset category for the pension and other postretirement benefit plans disclosed above:


•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.


•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.


•	Fixed income. A mix of domestic and international bonds.


•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.


•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.


•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

The investment strategies for the predecessor periods followed a policy to preserve the plans' capital and maximize investment earnings in excess of inflation within acceptable levels of capital market volatility. To accomplish this goal, the plans' assets were managed to optimize long-term return while maintaining a high standard of portfolio quality and diversification. In developing the allocation policy for the assets of the pension and other postretirement benefit plans, the Company examined projections of asset returns and volatility over a long-term horizon. In connection with this analysis, the risk and return trade-offs of alternative asset classes and asset mixes were evaluated given long-term historical relationships as well as prospective capital market returns. The Company also conducted asset-liability studies to match projected asset growth with projected liability growth to determine whether there is sufficient liquidity for projected benefit payments. Asset mix guidelines were developed by incorporating the results of these analyses with an assessment of the Company's risk posture, and taking into account industry practices. The Company periodically evaluated its investment strategy to ensure that plan assets were sufficient to meet the benefit obligations of the plans. As part of the ongoing evaluation, the Company made changes to its targeted asset allocations and investment strategy.

Benefit Plan Asset Fair Values

Following are the fair value measurements for the pension plan and the other postretirement benefit plan assets as of December 31, 2017 and 2016. The fair values presented are prepared in accordance with GAAP. For purposes of determining the fair value of the pension plan and other postretirement benefit plan assets and the appropriate level designation for the successor period, management relies on information provided by the plan's trustee. This information is reviewed and evaluated by management with changes made to the trustee information as appropriate. Management believes the portfolio is well-diversified with no significant concentrations of risk.

Valuation methods of the primary fair value measurements disclosed in the following tables are as follows:

•


•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

The fair values of pension plan assets as of December 31, 2017 and 2016 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases. For 2017 and 2016, special situations (absolute return and hedge funds) investment assets are presented in the table below based on the nature of the investment.



	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:
Domestic equity^(*)	$	155	$	323	$	—	$	—	$	478
International equity^(*)	—		166		—		—		166
Fixed income:
U.S. Treasury, government, and agency bonds	—		85		—		—		85
Corporate bonds	—		39		—		—		39
Cash equivalents and other	84		25		—		48		157
Real estate investments	3		—		—		16		19
Private equity	—		—		—		1		1
Total	$	242	$	638	$	—	$	65	$	945


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	142	$	343	$	—	$	—	$	485
International equity^(*)	—		185		—		—		185
Fixed income:
U.S. Treasury, government, and agency bonds	—		85		—		—		85
Corporate bonds	—		41		—		—		41
Pooled funds	—		66		—		—		66
Cash equivalents and other	12		5		—		83		100
Real estate investments	4		—		—		15		19
Private equity	—		—		—		2		2
Total	$	158	$	725	$	—	$	100	$	983


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

The fair values of other postretirement benefit plan assets as of December 31, 2017 and 2016 are presented below. These fair value measurements exclude cash, receivables related to investment income, pending investments sales, and payables related to pending investment purchases. For 2017 and 2016, special situations (absolute return and hedge funds) investment assets are presented in the table below based on the nature of the investment.



	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:
Domestic equity^(*)	$	3	$	69	$	—	$	—	$	72
International equity^(*)	—		22		—		—		22
Fixed income:
Pooled funds	—		24		—		—		24
Cash equivalents and other	2		—		—		1		3
Total	$	5	$	115	$	—	$	1	$	121


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.



	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:
Domestic equity^(*)	$	3	$	58	$	—	$	—	$	61
International equity^(*)	—		18		—		—		18
Fixed income:
Pooled funds	—		23		—		—		23
Cash equivalents and other	1		—		—		2		3
Total	$	4	$	99	$	—	$	2	$	105


(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

Employee Savings Plan

SCS sponsors 401(k) defined contribution plans covering certain eligible Southern Company Gas employees. Through December 31, 2017, the 401(k) plans provided matching contributions of either 65% on up to 8% of an employee's eligible compensation, or a 100% matching contribution on up to 3% of an employee's eligible compensation, followed by a 75% matching contribution on up to the next 3% of an employee's eligible compensation. Total matching contributions made to the 401(k) plans for the successor periods ended December 31, 2017 and 2016 were $17 million and $8 million, respectively, and for the predecessor periods ended June 30, 2016 and December 31, 2015 were $10 million and $16 million, respectively.

For employees not accruing a benefit under the pension plan, additional contributions made to the 401(k) plans for the successor period ended December 31, 2017 were $2 million, for the successor period ended December 31, 2016 were not material, and for the predecessor periods ended June 30, 2016 and December 31, 2015 were $2 million for each period.

Effective January 1, 2018, the 401(k) plans were merged into the Southern Company Employee Savings Plan, which is a defined contribution plan covering substantially all employees of the Company. Under this plan, the Company matches a portion of the first 6% of employee base salary contributions. The maximum Company match is 5.1% of an employee's base salary.