Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2018

Regulatory assets and (liabilities) reflected in the consolidated balance sheets of Southern Company at December 31, 2018 and 2017 relate to:



	2018			2017			Note
	(in millions)
Retiree benefit plans	$	3,658		$	3,931		(a,p)
Asset retirement obligations-asset	2,933			1,133			(b,p)
Deferred income tax charges	799			814			(b,o)
Property damage reserves-asset	416			333			(c)
Under recovered regulatory clause revenues	407			317			(d)
Environmental remediation-asset	366			511			(e,p)
Loss on reacquired debt	346			223			(f)
Remaining net book value of retired assets	211			306			(g)
Vacation pay	182			183			(h,p)
Long-term debt fair value adjustment	121			138			(i)
Deferred PPA charges	—			119			(j,p)
Other regulatory assets	581			625			(k)
Deferred income tax credits	(6,455		)	(7,261		)	(b,o)
Other cost of removal obligations	(2,297		)	(2,684		)	(b)
Customer refunds	(293		)	(188		)	(n)
Property damage reserves-liability	(76		)	(135		)	(l)
Over recovered regulatory clause revenues	(47		)	(155		)	(d)
Other regulatory liabilities	(132		)	(104		)	(m)
Total regulatory assets (liabilities), net	$	720		$	(1,894	)

Note: Unless otherwise noted, the recovery and amortization periods for these regulatory assets and (liabilities) are approved by the respective PSC or regulatory agency and are as follows:


(a)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 11 for additional information.

(b)

Asset retirement and other cost of removal obligations are recorded, deferred income tax assets are recovered, and deferred income tax liabilities are amortized over the related property lives, which may range up to 80 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities. Included in the deferred income tax assets is $28 million for the retiree Medicare drug subsidy, which is being recovered and amortized through 2027.


(c)	Through 2019, Georgia Power is recovering approximately $30 million annually for storm damage, which is expected to be adjusted in the Georgia Power 2019 Base Rate Case. See "Georgia Power – Storm Damage Recovery" herein for additional information.


(d)	Recorded and recovered or amortized over periods generally not exceeding 10 years.


(e)	Recovered through environmental cost recovery mechanisms when the remediation is performed or the work is performed.


(f)	Recovered over either the remaining life of the original issue or, if refinanced, over the remaining life of the new issue, which may range up to 50 years.


(g)	Amortized over periods not exceeding eight years.


(h)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.


(i)	Recovered over the remaining life of the original debt issuances, which range up to 20 years. For additional information see Note 15 under "Southern Company Merger with Southern Company Gas."


(j)	Related to Gulf Power and reclassified as assets held for sale at December 31, 2018. See Note 15 under "Southern Company's Sale of Gulf Power" for information regarding the sale of Gulf Power.


(k)	Comprised of numerous immaterial components including nuclear outage, fuel-hedging losses, cancelled construction projects, building and generating plant leases, property tax, and other miscellaneous assets. These costs are recorded and recovered or amortized over periods generally not exceeding 50 years.


(l)	Amortized as storm restoration and potential reliability-related expenses are incurred.


(m)	Comprised of numerous components including retiree benefit plans, fuel-hedging gains, AROs, and other liabilities that are recorded and recovered or amortized over periods not exceeding 20 years.

(n)

At December 31, 2018, represents amounts accrued and outstanding for refund, including approximately $109 million as a result of Alabama Power's 2018 retail return exceeding the allowed range, approximately $55 million pursuant to the Georgia Power Tax Reform Settlement Agreement, and approximately $100 million, subject to review and approval by the Georgia PSC, as a result of Georgia Power's 2018 retail ROE exceeding the allowed retail ROE range. See "Alabama Power – Rate RSE" and "Georgia Power – Rate Plans" herein for additional information.


(o)	As a result of the Tax Reform Legislation, these accounts include certain deferred income tax assets and liabilities not subject to normalization. The recovery and amortization of these amounts will be determined in future rate proceedings. See "Georgia Power," "Mississippi Power," and "Southern Company Gas" herein and Note 10 for additional information.


(p)	Not earning a return as offset in rate base by a corresponding asset or liability.

Regulatory assets and (liabilities) reflected in the balance sheets of Alabama Power at December 31, 2018 and 2017 relate to:



	2018			2017			Note
	(in millions)
Retiree benefit plans	$	947		$	946		(a,p)
Deferred income tax charges	241			240			(b,c,d,)
Under recovered regulatory clause revenues	176			53			(e)
Asset retirement obligations	147			(33		)	(b)
Regulatory clauses	142			142			(f)
Vacation pay	71			70			(g,p)
Loss on reacquired debt	56			62			(h)
Nuclear outage	49			56			(i)
Remaining net book value of retired assets	43			54			(j)
Other regulatory assets	57			58			(k,l)
Deferred income tax credits	(2,027		)	(2,082		)	(b,d)
Other cost of removal obligations	(497		)	(609		)	(b)
Rate RSE refund	(109		)	—			(m)
Natural disaster reserve	(20		)	(38		)	(n)
Other regulatory liabilities	(45		)	(7		)	(l,o)
Total regulatory assets (liabilities), net	$	(769	)	$	(1,088	)

Note: Unless otherwise noted, the recovery and amortization periods for these regulatory assets and (liabilities) have been accepted or approved by the Alabama PSC and are as follows:


(a)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 11 for additional information.


(b)	Asset retirement and removal assets and liabilities are recorded, deferred income tax assets are recovered, and deferred income tax credits are amortized over the related property lives, which may range up to 50 years. Asset retirement and other cost of removal assets and liabilities will be settled and trued up following completion of the related activities.


(c)	Included in the deferred income tax charges are $10 million for 2018 and $13 million for 2017 for the retiree Medicare drug subsidy, which is being recovered and amortized through 2027.


(d)	As a result of the Tax Reform Legislation, these accounts include certain deferred income tax assets and liabilities not subject to normalization. The recovery and amortization of these amounts will occur ratably over the related property lives, which may range up to 50 years. See Note 10 for additional information.


(e)	Recorded and recovered or amortized over periods not exceeding 10 years. See "Rate CNP PPA," "Rate CNP Compliance," and" Rate ECR" herein for additional information.


(f)	Will be amortized concurrently with the effective date of Alabama Power's next depreciation study. See "Rate RSE" herein for additional information.


(g)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.


(h)	Recovered over the remaining life of the original issue, which may range up to 50 years.


(i)	Nuclear outage costs are deferred to a regulatory asset when incurred and amortized over a subsequent 18-month period.


(j)	Recorded and amortized over remaining periods up to 8 years.


(k)	Comprised of components including generation site selection/evaluation costs, PPA capacity (to be recovered over the next 12 months), and other miscellaneous assets. Capitalized upon initialization of related construction projects, if applicable.


(l)	Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed three and a half years. Upon final settlement, actual costs incurred are recovered through the energy cost recovery clause.


(m)	Refund accrued as a result of the 2018 retail return exceeding the allowed range. See "Rate RSE" herein for additional information.


(n)	Amortized as storm restoration and potential reliability-related expenses are incurred.


(o)	Comprised of several components, primarily $33 million deferred as a result of the Alabama PSC accounting order regarding the Tax Reform Legislation. See "Tax Reform Accounting Order" herein for additional information.


(p)	Not earning a return as offset in rate base by a corresponding asset or liability.

Rate RSE

Regulatory assets and (liabilities) reflected in the balance sheets of Georgia Power at December 31, 2018 and 2017 relate to:



	2018			2017			Note
	(in millions)
Retiree benefit plans	$	1,295		$	1,313		(a, l)
Asset retirement obligations	2,644			945			(b, l)
Deferred income tax charges	522			521			(b, c, l)
Storm damage reserves	416			333			(d)
Remaining net book value of retired assets	127			146			(e)
Loss on reacquired debt	277			127			(f, l)
Vacation pay	91			91			(g, l)
Other cost of removal obligations	68			40			(b)
Environmental remediation	55			49			(h)
Other regulatory assets	135			106			(i)
Deferred income tax credits	(3,080		)	(3,248		)	(b, c)
Customer refunds	(165		)	(188		)	(j)
Other regulatory liabilities	(7		)	(3		)	(k, l)
Total regulatory assets (liabilities), net	$	2,378		$	232

Note: Unless otherwise noted, the recovery and amortization periods for these regulatory assets and (liabilities) are approved by the Georgia PSC and are as follows:


(a)	Recovered and amortized over the average remaining service period which may range up to 14 years. See Note 11 for additional information.

(b)

Through 2019, Georgia Power is recovering approximately $60 million annually for AROs, which is expected to be adjusted in the Georgia Power 2019 Base Rate Case. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities. See Note 6 for additional information on AROs. Other cost of removal obligations and deferred income tax assets are recovered and deferred income tax liabilities are amortized over the related property lives, which may range up to 65 years. Included in the deferred income tax assets is $17 million for the retiree Medicare drug subsidy, which is being recovered and amortized through 2022.

(c)

As a result of the Tax Reform Legislation, these balances include $145 million of deferred income tax assets related to CWIP for Plant Vogtle Units 3 and 4 and approximately $610 million of deferred income tax liabilities, neither of which are subject to normalization. The recovery and amortization of these amounts is expected to be determined in the Georgia Power 2019 Base Rate Case. See "Rate Plans" herein and Note 10 for additional information.


(d)	Through 2019, Georgia Power is recovering approximately $30 million annually for storm damage, which is expected to be adjusted in the Georgia Power 2019 Base Rate Case. See "Storm Damage Recovery" herein and Note 1 under "Storm Damage Reserves" for additional information.

(e)

The net book value of Plant Branch Units 1 through 4 at December 31, 2018 was $87 million, which is being amortized over the units' remaining useful lives through 2024. The net book value of Plant Mitchell Unit 3 at December 31, 2018 was $9 million, which will continue to be amortized through December 31, 2019 as provided in the 2013 ARP. Amortization of the remaining approximately $4 million net book value of Plant Mitchell Unit 3 at December 31, 2019 and a total of approximately $31 million related to obsolete inventories of certain retired units is expected to be determined in the Georgia Power 2019 Base Rate Case. See "Integrated Resource Plan" herein for additional information.


(f)	Recovered over either the remaining life of the original issue or, if refinanced, over the remaining life of the new issue, which currently does not exceed 34 years.


(g)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.


(h)	Through 2019, Georgia Power is recovering approximately $2 million annually for environmental remediation, which is expected to be adjusted in the Georgia Power 2019 Base Rate Case. See Note 3 under Environmental Remediation for additional information.

(i)

Comprised of several components including future generation costs, deferred nuclear outage costs, cancelled construction projects, building lease, and fuel-hedging losses. The timing of recovery of approximately $50 million for a future generation site is expected to be determined in the Georgia Power 2019 Base Rate Case. Nuclear outage costs are recorded and recovered or amortized over the outage cycles of each nuclear unit, which do not exceed 24 months. Approximately $30 million of costs associated with construction of environmental controls that will not be completed as a result of unit retirements are being amortized through 2022. The building lease is recorded and recovered or amortized through 2020. Fuel-hedging losses are recovered through Georgia Power's fuel cost recovery mechanism upon final settlement. See "Integrated Resource Plan" herein for additional information on future generation costs.


(j)	At December 31, 2018, approximately $55 million was accrued and outstanding for refund pursuant to the Georgia Power Tax Reform Settlement Agreement and approximately $100 million was accrued for refund, subject to review and approval by the Georgia PSC, as a result of the 2018 retail ROE exceeding the allowed retail ROE range. See "Rate Plans" herein for additional information.

(k)

Comprised of Demand-Side Management (DSM) tariff over recovery and fuel-hedging gains. The amortization of DSM tariff over recovery of $3 million at December 31, 2018 is expected to be determined in the Georgia Power 2019 Base Rate Case. Fuel-hedging gains are refunded through Georgia Power's fuel cost recovery mechanism upon final settlement. See "Rate Plans" herein for additional information on customer refunds and DSM tariffs.


(l)	Generally not earning a return as they are excluded from rate base or are offset in rate base by a corresponding asset or liability.

Regulatory assets and (liabilities) reflected in the balance sheets of Mississippi Power at December 31, 2018 and 2017 relate to:



	2018			2017			Note
	(in millions)
Retiree benefit plans – regulatory assets	$	171		$	174		(a)
Asset retirement obligations	143			95			(b)
Kemper County energy facility assets, net	69			88			(c)
Remaining net book value of retired assets	41			44			(d)
Property tax	44			43			(e)
Deferred charges related to income taxes	34			36			(b)
Plant Daniel Units 3 and 4	36			36			(f)
ECO carryforward	26			26			(g)
Other regulatory assets	28			28			(h)
Deferred credits related to income taxes	(377		)	(377		)	(i)
Other cost of removal obligations	(185		)	(178		)	(b)
Property damage	(56		)	(57		)	(j)
Other regulatory liabilities	(9		)	—			(k)
Total regulatory assets (liabilities), net	$	(35	)	$	(42	)

Note: Unless otherwise noted, the recovery and amortization periods for these regulatory assets and (liabilities) are approved by the Mississippi PSC and are as follows:


(a)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 11 for additional information.


(b)	Asset retirement and other cost of removal obligations and deferred charges related to income taxes are generally recovered over the related property lives, which may range up to 48 years. Asset retirement and other cost of removal obligations will be settled and trued up upon completion of removal activities over a period to be determined by the Mississippi PSC.

(c)

Includes $91 million of regulatory assets and $22 million of regulatory liabilities. The retail portion includes $75 million of regulatory assets and $22 million of regulatory liabilities that are being recovered in rates over an eight-year period through 2025 and a six-year period through 2023, respectively. Recovery of the wholesale portion of the regulatory assets in the amount of $16 million is expected to be determined in a settlement agreement with wholesale customers in 2019. For additional information, see "Kemper County Energy Facility – Rate Recovery – Kemper Settlement Agreement" herein.


(d)	Retail portion includes approximately $26 million being recovered over a five-year period through 2021 and 2022 for Plant Watson and Plant Greene County, respectively. Recovery of the wholesale portion of approximately $15 million is expected to be determined in a settlement agreement with wholesale customers in 2019.


(e)	Recovered through the ad valorem tax adjustment clause over a 12-month period beginning in April of the following year. See "Ad Valorem Tax Adjustment" herein for additional information.


(f)	Represents the difference between the revenue requirement under the purchase option and the revenue requirement assuming operating lease accounting treatment for the extended term, which will be amortized over a 10-year period beginning October 2021.


(g)	Generally recovered through the ECO Plan clause in the year following the deferral. See "Environmental Compliance Plan" herein.

(h)

Comprised of $9 million related to vacation pay, $8 million related to loss on reacquired debt, and other miscellaneous assets. These costs are recorded and recovered or amortized over periods which may range up to 50 years. This amount also includes fuel-hedging assets which are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed three years. Upon final settlement, actual costs incurred are recovered through the ECM.

(i)

Includes excess deferred income taxes primarily associated with Tax Reform Legislation of $377 million, of which $266 million is related to protected deferred income taxes to be recovered over the related property lives utilizing the average rate assumption method in accordance with IRS normalization principles and $111 million related to unprotected (not subject to normalization). The unprotected portion associated with the Kemper County energy facility is $46 million, of which $33 million is being amortized over eight years through 2025 for retail and the amortization of $15 million is expected to be determined in a settlement agreement with wholesale customers in 2019. Mississippi Power also has $9 million of excess deferred income tax benefits associated with the System Restoration Rider being amortized over an eight-year period through 2025. Amortization of the remaining portions of the unprotected deferred income taxes associated with the Tax Reform Legislation are expected to be determined in Mississippi Power's next base rate proceeding, which is scheduled to be filed in the fourth quarter 2019 (Mississippi Power 2019 Base Rate Case). See "Kemper County Energy Facility" and "FERC Matters – Mississippi Power – Municipal and Rural Associations Tariff" herein and Note 10 for additional information.


(j)	For additional information, see "

The following table illustrates Southern Company Gas' authorized ratemaking amounts that are not recognized on its balance sheets. These amounts are primarily composed of an allowed equity rate of return on assets associated with certain regulatory infrastructure programs. These amounts will be recognized as revenues in Southern Company Gas' financial statements in the periods they are billable to customers, the majority of which will be recovered by 2025.



	December 31, 2018		December 31, 2017
	(in millions)
Atlanta Gas Light	$	95	$	104
Virginia Natural Gas	11		11
Nicor Gas	4		2
Total	$	110	$	117

Regulatory assets and (liabilities) reflected in the balance sheets of Southern Company Gas at December 31, 2018 and 2017 relate to:



	2018			2017			Note
	(in millions)
Environmental remediation	$	311		$	410		(a,b)
Retiree benefit plans	161			270			(a,c)
Long-term debt fair value adjustment	121			138			(d)
Under recovered regulatory clause revenues	90			98			(e)
Other regulatory assets	59			79			(f)
Other cost of removal obligations	(1,585		)	(1,646		)	(g)
Deferred income tax credits	(940		)	(1,063		)	(g,i)
Over recovered regulatory clause revenues	(43		)	(144		)	(e)
Other regulatory liabilities	(46		)	(21		)	(h)
Total regulatory assets (liabilities), net	$	(1,872	)	$	(1,879	)

Note: Unless otherwise noted, the recovery and amortization periods for these regulatory assets and (liabilities) have been approved or accepted by the relevant state PSC or other regulatory body and are as follows:


(a)	Not earning a return as offset in rate base by a corresponding asset or liability.


(b)	Recovered through environmental cost recovery mechanisms when the remediation is performed or the work is performed.


(c)	Recovered and amortized over the average remaining service period which range up to 15 years. See Note 11 for additional information.


(d)	Recovered over the remaining life of the original debt issuances, which range up to 20 years.

(e)

Recorded and recovered or amortized over periods generally not exceeding seven years. In addition to natural gas cost recovery mechanisms, the natural gas distribution utilities are authorized to utilize other cost recovery mechanisms, such as regulatory riders, which vary by utility but allow recovery of certain costs, such as those related to infrastructure replacement programs, as well as environmental remediation and energy efficiency plans.

(f)

Comprised of several components including unamortized loss on reacquired debt, weather normalization, franchise gas, deferred depreciation, and financial instrument-hedging assets, which are recovered or amortized over periods generally not exceeding 10 years, except for financial hedging-instruments. Financial instrument-hedging assets are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed two years. Upon final settlement, actual costs incurred are recovered, and actual income earned is refunded through the energy cost recovery clause.


(g)	Other cost of removal obligations are recorded and deferred income tax liabilities are amortized over the related property lives, which may range up to 80 years. Cost of removal liabilities will be settled and trued up following completion of the related activities.

(h)

Comprised of several components including amounts to be refunded to customers as a result of the Tax Reform Legislation, energy efficiency programs, and unamortized bond issuance costs and financial instrument-hedging liabilities which are recovered or amortized over periods generally not exceeding 20 years, except for financial hedging-instruments. Financial instrument-hedging liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed two years. Upon final settlement, actual costs incurred are recovered, and actual income earned is refunded through the energy cost recovery clause. See "Rate Proceedings" herein for additional information regarding customer refunds resulting from the Tax Reform Legislation.


(i)	Includes excess deferred income tax liabilities not subject to normalization as a result of the Tax Reform Legislation, the recovery and amortization of which is expected to be determined by the applicable state regulatory agencies in future rate proceedings. See "Rate Proceedings" herein and Note 10 for additional details.

Schedule of Regulatory Liabilities