FAIR VALUE MEASUREMENTS

As of March 31, 2018, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:



	Fair Value Measurements Using:
As of March 31, 2018:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives^(a)(b)	$	360	$	172	$	—	$	—	$	532
Foreign currency derivatives	—		182		—		—		182
Nuclear decommissioning trusts^(c)	776		1,019		—		32		1,827
Cash equivalents	1,664		—		—		—		1,664
Other investments	9		—		1		—		10
Total	$	2,809	$	1,373	$	1	$	32	$	4,215
Liabilities:
Energy-related derivatives^(a)(b)	$	506	$	136	$	—	$	—	$	642
Interest rate derivatives	—		61		—		—		61
Foreign currency derivatives	—		22		—		—		22
Contingent consideration	—		—		22		—		22
Total	$	506	$	219	$	22	$	—	$	747

Alabama Power
Assets:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Nuclear decommissioning trusts:^(d)
Domestic equity	437		83		—		—		520
Foreign equity	63		58		—		—		121
U.S. Treasury and government agency securities	—		19		—		—		19
Corporate bonds	21		162		—		—		183
Mortgage and asset backed securities	—		17		—		—		17
Private Equity	—		—		—		32		32
Other	6		—		—		—		6
Cash equivalents	459		—		—		—		459
Total	$	986	$	342	$	—	$	32	$	1,360
Liabilities:
Energy-related derivatives	$	—	$	8	$	—	$	—	$	8



	Fair Value Measurements Using:
As of March 31, 2018:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Georgia Power
Assets:
Energy-related derivatives	$	—	$	5	$	—	$	—	$	5
Nuclear decommissioning trusts:^{(d) (e)}
Domestic equity	238		1		—		—		239
Foreign equity	—		141		—		—		141
U.S. Treasury and government agency securities	—		241		—		—		241
Municipal bonds	—		76		—		—		76
Corporate bonds	—		168		—		—		168
Mortgage and asset backed securities	—		40		—		—		40
Other	11		14		—		—		25
Cash equivalents	1,055		—		—		—		1,055
Total	$	1,304	$	686	$	—	$	—	$	1,990
Liabilities:
Energy-related derivatives	$	—	$	18	$	—	$	—	$	18
Interest rate derivatives	—		8		—		—		8
Total	$	—	$	26	$	—	$	—	$	26

Gulf Power
Assets:
Cash equivalents	$	27	$	—	$	—	$	—	$	27
Liabilities:
Energy-related derivatives	$	—	$	17	$	—	$	—	$	17

Mississippi Power
Assets:
Energy-related derivatives	$	—	$	2	$	—	$	—	$	2
Cash equivalents	103		—		—		—		103
Total	$	103	$	2	$	—	$	—	$	105
Liabilities:
Energy-related derivatives	$	—	$	8	$	—	$	—	$	8



	Fair Value Measurements Using:
As of March 31, 2018:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value as a Practical Expedient (NAV)		Total
	(in millions)
Southern Power
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4
Foreign currency derivatives	—		182		—		—		182
Total	$	—	$	186	$	—	$	—	$	186
Liabilities:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Foreign currency derivatives	—		22		—		—		22
Contingent consideration	—		—		22		—		22
Total	$	—	$	25	$	22	$	—	$	47

Southern Company Gas
Assets:
Energy-related derivatives^(a)(b)	$	360	$	158	$	—	$	—	$	518
Liabilities:
Energy-related derivatives^(a)(b)	$	506	$	82	$	—	$	—	$	588


(a)	Excludes $4 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.


(b)	Excludes cash collateral of $223 million.


(c)	For additional detail, see the nuclear decommissioning trusts sections for Alabama Power and Georgia Power in this table.


(d)	Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies.


(e)	Includes the investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. As of March 31, 2018, approximately $76 million of the fair market value of Georgia Power's nuclear decommissioning trust funds' securities were on loan to creditors under the funds' managers' securities lending program.

Southern Company, Alabama Power, and Georgia Power continue to elect the option to fair value investment securities held in the nuclear decommissioning trust funds. The fair value of the funds at Southern Company, including reinvested interest and dividends and excluding the funds' expenses, decreased by $11 million and increased by $63 million for the three months ended March 31, 2018 and 2017, respectively. Alabama Power recorded a decrease in fair value of $5 million and an increase of $34 million for the three months ended March 31, 2018 and 2017, respectively, as a change in regulatory liabilities related to its AROs. Georgia Power recorded a decrease in fair value of $6 million and an increase of $29 million for the three months ended March 31, 2018 and 2017, respectively, as a change in its regulatory asset related to its AROs.

Valuation Methodologies

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

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. For fair value measurements of the investments within the nuclear decommissioning trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available. See Note 1 to the financial statements of Southern Company, Alabama Power, and Georgia Power under "Nuclear Decommissioning" in Item 8 of the Form 10-K for additional information.

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

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

As of March 31, 2018, the fair value measurements of private equity investments held in the nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient, as well as the nature and risks of those investments, were as follows:



As of March 31, 2018:	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
	(in millions)
Southern Company	$	32	$	19	Not Applicable	Not Applicable
Alabama Power	$	32	$	19	Not Applicable	Not Applicable

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

As of March 31, 2018, other financial instruments for which the carrying amount did not equal fair value were as follows:



	Carrying Amount		Fair Value
	(in millions)
Long-term debt, including securities due within one year:
Southern Company	$	47,479	$	48,836
Alabama Power	7,626		8,093
Georgia Power	11,402		11,851
Gulf Power	1,285		1,317
Mississippi Power	1,781		1,790
Southern Power	5,878		6,006
Southern Company Gas	6,036		6,276

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