REVENUE FROM CONTRACTS WITH CUSTOMERS

The registrants generate revenues from a variety of sources, some of which are excluded from the scope of ASC 606, Revenue from Contracts with Customers (ASC 606), such as leases, derivatives, and certain cost recovery mechanisms. See Note 1 to the financial statements under "Recently Adopted Accounting Standards – Revenue" in Item 8 of the Form 10-K for additional information on the adoption of ASC 606 for revenue from contracts with customers and Note 1 to the financial statements under "Revenues" and "Other Taxes" in Item 8 of the Form 10-K for additional information on the revenue policies of the registrants. For additional information on revenues accounted for under other accounting guidance, see Notes (J) and (L) for energy-related derivative contracts and lessor revenues, respectively, Note 1 to the financial statements under "Revenues – Southern Company Gas" in Item 8 of the Form 10-K for alternative revenue programs at the natural gas distribution utilities, and Note 2 to the financial statements in Item 8 of the Form 10-K for cost recovery mechanisms.

The following tables disaggregate revenue sources for the three months ended March 31, 2019 and 2018:



	For the Three Months Ended March 31, 2019			For the Three Months Ended March 31, 2018
	(in millions)
Southern Company
Operating revenues
Retail electric revenues^(a)
Residential	$	1,288		$	1,539
Commercial	1,093			1,243
Industrial	677			756
Other	26			30
Natural gas distribution revenues	1,163			1,224
Alternative revenue programs^(b)	(2		)	(24		)
Total retail electric and gas distribution revenues	$	4,245		$	4,768
Wholesale energy revenues^(c)(d)	367			472
Wholesale capacity revenues^(d)	132			151
Other natural gas revenues^(e)(f)	313			407
Other revenues^(g)	355			574
Total operating revenues	$	5,412		$	6,372


(a)	Retail electric revenues include $8 million and $18 million of revenues accounted for as leases for the three months ended March 31, 2019 and 2018, respectively, and a (net reduction) or net increase of $(103) million and $117 million for the three months ended March 31, 2019 and 2018, respectively, from certain cost recovery mechanisms that are not accounted for as revenue under ASC 606.


(b)	Alternative revenue program revenues are presented net of any previously recognized program amounts billed to customers during the same accounting period.


(c)	Wholesale energy revenues include $53 million and $93 million for the three months ended March 31, 2019 and 2018, respectively, of revenues accounted for as derivatives, primarily related to physical energy sales in the wholesale electricity market.


(d)	Wholesale energy and wholesale capacity revenues include $66 million and $25 million, respectively, for the three months ended March 31, 2019 and $69 million and $30 million, respectively, for the three months ended March 31, 2018 related to PPAs accounted for as leases.

(e)

Other natural gas revenues related to Southern Company Gas' energy and risk management activities are presented net of the related costs of those activities and include gross third-party revenues of $1.9 billion for each of the three months ended March 31, 2019 and 2018, of which $1.2 billion and $1.1 billion, respectively, relates to contracts that are accounted for as derivatives. See Note (M) under "Southern Company Gas" for additional information on the components of wholesale gas services operating revenues.


(f)	Other natural gas revenues for the three months ended March 31, 2019 include $9 million of revenues accounted for as leases.


(g)	Other revenues include $96 million and $90 million for the three months ended March 31, 2019 and 2018, respectively, of revenues not accounted for under ASC 606, including $31 million and $33 million in 2019 and 2018, respectively, accounted for as leases.



	Alabama Power		Georgia Power		Mississippi Power
	(in millions)
For the Three Months Ended March 31, 2019
Operating revenues
Retail revenues^(a)(b)
Residential	$	540	$	688	$	60
Commercial	354		674		65
Industrial	313		289		74
Other	6		17		4
Total retail electric revenues	$	1,213	$	1,668	$	203
Wholesale energy revenues^(c)	94		18		78
Wholesale capacity revenues	27		14		1
Other revenues^(b)(d)	74		133		5
Total operating revenues	$	1,408	$	1,833	$	287

For the Three Months Ended March 31, 2018
Operating revenues
Retail revenues^(a)(b)
Residential	$	570	$	744	$	60
Commercial	371		717		62
Industrial	338		316		70
Other	6		21		2
Total retail electric revenues	$	1,285	$	1,798	$	194
Wholesale energy revenues^(c)	101		40		98
Wholesale capacity revenues	24		14		4
Other revenues^(b)(d)	63		109		6
Total operating revenues	$	1,473	$	1,961	$	302

(a)

Retail revenues at Alabama Power, Georgia Power, and Mississippi Power include a net increase or (net reduction) of $(57) million, $(47) million, and $1 million, respectively, for the three months ended March 31, 2019 and $47 million, $10 million, and $76 million, respectively, for the three months ended March 31, 2018 related to certain cost recovery mechanisms that are not accounted for as revenue under ASC 606.


(b)	Retail revenues and other revenues at Georgia Power include $8 million and $11 million, respectively, for the three months ended March 31, 2019 and $18 million and $33 million, respectively, for the three months ended March 31, 2018 of revenues accounted for as leases.


(c)	Wholesale energy revenues at Alabama Power, Georgia Power, and Mississippi Power include $3 million, $4 million, and $1 million, respectively, for the three months ended March 31, 2019 and $5 million, $7 million, and $1 million, respectively, for the three months ended March 31, 2018 accounted for as derivatives primarily related to physical energy sales in the wholesale electricity market.


(d)	Other revenues at Alabama Power and Georgia Power include $28 million and $31 million, respectively, for the three months ended March 31, 2019 and $25 million and $26 million, respectively, for the three months ended March 31, 2018 of revenues not accounted for under ASC 606.



	For the Three Months Ended March 31, 2019		For the Three Months Ended March 31, 2018
	(in millions)
Southern Power
PPA capacity revenues^(a)	$	127	$	138
PPA energy revenues^(a)	227		254
Non-PPA revenues^(b)	85		115
Other revenues	4		2
Total operating revenues	$	443	$	509


(a)	PPA capacity revenues and PPA energy revenues include $41 million and $72 million, respectively, for the three months ended March 31, 2019 and $47 million and $76 million, respectively, for the three months ended March 31, 2018 related to PPAs accounted for as leases.


(b)	Non-PPA revenues include $45 million and $79 million for the three months ended March 31, 2019 and 2018, respectively, of revenues from short-term sales related to physical energy sales from uncovered capacity in the wholesale electricity market.



	For the Three Months Ended March 31, 2019			For the Three Months Ended March 31, 2018
	(in millions)
Southern Company Gas
Operating revenues
Natural gas distribution revenues
Residential	$	601		$	660
Commercial	170			192
Transportation	256			277
Industrial	17			17
Other	119			78
Alternative revenue programs^(a)	(2		)	(24		)
Total natural gas distribution revenues	$	1,161		$	1,200
Gas pipeline investments^(b)	8			8
Wholesale gas services^(c)	66			146
Gas marketing services^(d)	229			271
Other revenues	10			14
Total operating revenues	$	1,474		$	1,639


(a)	Alternative revenue program revenues are presented net of any previously recognized program amounts billed to customers during the same accounting period.


(b)	Revenues from gas pipeline investments include $8 million for the three months ended March 31, 2019 accounted for as leases.

(c)

Wholesale gas services revenues are presented net of the related costs associated with its energy trading and risk management activities. Operating revenues, as presented, include gross third-party revenues of $1.9 billion for each of the three months ended March 31, 2019 and 2018, of which $1.2 billion and $1.1 billion, respectively, relates to contracts accounted for as derivatives. See Note (M) under "Southern Company Gas" for additional information on the components of wholesale gas services operating revenues.


(d)	Gas marketing services includes $6 million and $4 million for the three months ended March 31, 2019 and 2018, respectively, of revenues not accounted for under ASC 606.

Contract Balances

The following table reflects the closing balances of receivables, contract assets, and contract liabilities related to revenues from contracts with customers as of March 31, 2019 and December 31, 2018:



	Receivables				Contract Assets				Contract Liabilities
	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
	(in millions)
Southern Company^(*)	$	2,522	$	2,630	$	84	$	102	$	62	$	32
Alabama Power	514		520		1		—		10		12
Georgia Power	668		721		41		58		25		7
Mississippi Power	85		100		—		—		—		—
Southern Power	99		118		—		—		4		11
Southern Company Gas	948		952		—		—		1		2


(*)	Includes amounts related to held for sale investments.

As of March 31, 2019 and December 31, 2018, Georgia Power had contract assets primarily related to unregulated service agreements where payment is contingent on project completion and fixed retail customer bill programs where the payment is contingent upon Georgia Power's continued performance and the customer's continued participation in the program over the one-year contract term. Alabama Power had contract liabilities for outstanding performance obligations primarily related to extended service agreements. Contract liabilities for Georgia Power and Southern Power relate to cash collections recognized in advance of revenue for certain unregulated service agreements and certain levelized PPAs, respectively. Southern Company's unregulated distributed generation business had $34 million and $39 million of contract assets and $25 million and $11 million of contract liabilities at March 31, 2019 and December 31, 2018, respectively, remaining for outstanding performance obligations.

The following table reflects revenue from contracts with customers recognized in the three-month period ended March 31, 2019 included in the contract liability at December 31, 2018:



	Three Months Ended March 31, 2019
	(in millions)
Southern Company	$	17
Southern Power	10

Revenues recognized in the three-month period ended March 31, 2019, which were included in contract liabilities at December 31, 2018, were immaterial for Alabama Power, Georgia Power, and Southern Company Gas.

Remaining Performance Obligations

The traditional electric operating companies and Southern Power have long-term contracts with customers in which revenues are recognized when the performance obligations are satisfied during the contract term. These contracts primarily relate to PPAs whereby the traditional electric operating companies and Southern Power provide electricity and generation capacity to a customer. The revenue recognized for the delivery of electricity is variable; however, certain PPAs include a fixed payment for fixed generation capacity over the term of the contract. Southern Company's unregulated distributed generation business also has partially satisfied performance obligations related to certain fixed price contracts. Registrants with revenues from contracts with customers related to these performance obligations remaining at March 31, 2019 expect the revenues to be recognized as follows:



	2019 (remaining)		2020		2021		2022		2023		Thereafter
	(in millions)
Southern Company^(*)	$	451	$	349	$	315	$	310	$	301	$	2,219
Alabama Power	16		22		27		23		22		140
Georgia Power	30		38		40		30		31		82
Mississippi Power	2		3		1		—		—		—
Southern Power	248		295		270		276		269		2,143


(*)	Includes amounts related to held for sale investments.