Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

LEASES

LEASES

On January 1, 2019, the registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with right-of-use (ROU) assets that will be amortized over the term of each lease.

The registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements are applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	988	$	125	$	1,488	$	—	$	—	$	—
Real estate/land	785		4		57		2		395		77
Communication towers	150		2		3		—		—		13
Railcars	51		23		25		3		—		—
Other	89		9		14		2		—		1
Total	$	2,063	$	163	$	1,587	$	7	$	395	$	91

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern

Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies. Communication tower leases have terms of up to 10 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the affiliate PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of approximately $625 million at September 30, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During the third quarter 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the battery storage system portion of the solar generation PPAs are deemed operating leases. The estimated minimum lease payments for these agreements total $95 million. See Note (B) under "Alabama Power" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of September 30, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of September 30, 2019
	Southern  Company(*)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,823	$	143	$	1,461	$	7	$	368	$	92
Operating lease obligations - current	$	229	$	49	$	143	$	2	$	22	$	14
Operating lease obligations - non current	1,606		109		1,287		5		373		77
Total operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance Leases
Finance lease ROU assets, net	$	220	$	4	$	134	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	12	$	—	$	—	$	—
Finance lease obligations - noncurrent	207		4		145		—		—		—
Total finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

(*) Includes operating lease ROU assets, net and operating lease obligations classified as held for sale.

Lease costs for the three and nine months ended September 30, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company			Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease cost
Operating lease cost	$	94		$	29		$	53	$	1	$	7	$	5
Finance lease cost:
Amortization of ROU assets	7			—			4		—		—		—
Interest on lease obligations	3			—			4		—		—		—
Total finance lease cost	10			—			8		—		—		—
Short-term lease costs	9			4			5		—		—		—
Variable lease cost	33			4			26		—		1		—
Total lease cost	$	146		$	37		$	92	$	1	$	8	$	5
For the Nine Months Ended September 30, 2019
Lease cost
Operating lease cost	$	243		$	49		$	154	$	2	$	21	$	14
Finance lease cost:
Amortization of ROU assets	21			1			11		—		—		—
Interest on lease obligations	9			—			14		—		—		—
Total finance lease cost	30			1			25		—		—		—
Short-term lease costs	39			15			17		—		—		—
Variable lease cost	81			6			67		—		3		—
Sublease income	(1		)	(1		)	—		—		—		—
Total lease cost	$	392		$	70		$	263	$	2	$	24	$	14

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	For the Nine Months Ended September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	211	$	50	$	130	$	2	$	18	$	13
Operating cash flows from finance leases	3		1		17		—		—		—
Financing cash flows from finance leases	24		—		4		—		—		—
ROU assets obtained in exchange for new operating lease obligations	76		7		18		—		—		14
ROU assets obtained in exchange for new finance lease obligations	31		1		24		—		—		—

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.4		3.4		10.4		6.8		33.2		9.6
Finance leases	18.9		12.4		10.8		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.56	%	3.33	%	4.46	%	3.98	%	5.68	%	3.73	%
Finance leases	5.07	%	3.65	%	10.74	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2019 (remaining)	$	45	$	4	$	23	$	1	$	8	$	4
2020	284		54		205		2		22		17
2021	269		53		198		1		23		17
2022	259		52		196		1		23		13
2023	202		4		197		1		24		11
Thereafter	1,662		2		991		2		847		49
Total	2,721		169		1,810		8		947		111
Less: Present value discount	886		11		380		1		552		20
Operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance leases:
2019 (remaining)	$	9	$	—	$	4	$	—	$	—	$	—
2020	31		1		28		—		—		—
2021	24		1		24		—		—		—
2022	21		1		24		—		—		—
2023	17		1		25		—		—		—
Thereafter	259		1		161		—		—		—
Total	361		5		266		—		—		—
Less: Present value discount	133		—		109						—
Finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of September 30, 2019, Alabama Power and Southern Power have additional operating leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power	Southern Power
Operating lease type	PPAs and land	PPAs	Land
Expected commencement date	2019-2024	2020-2024	2019-2022
Longest lease term expiration	28-31 years	28 years	31 years
Estimated total obligations (in millions)	$159	$95	$64

For additional information on each registrant's operating lease obligations at December 31, 2018, see Note 9 to the financial statements in Item 8 of the Form 10-K.

Lessor

With the exception of Southern Company Gas, the registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset

owned by the applicable registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include tolling arrangements related to electric generating units accounted for as sales-type leases with terms of up to 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 28 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 24 years.

Lease income for the three and nine months ended September 30, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	2	$	—	$	—	$	2	$	—	$	—
Lease income - operating leases	64		6		18		—		31		9
Variable lease income	141		—		—		—		151		—
Total lease income	$	207	$	6	$	18	$	2	$	182	$	9
For the Nine Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	7	$	—	$	—	$	7	$	—	$	—
Lease income - operating leases	216		19		57		—		111		26
Variable lease income	324		—		—		—		349		—
Total lease income	$	547	$	19	$	57	$	7	$	460	$	26

No profit or loss was recognized by Mississippi Power upon commencement of a sales-type lease during the first quarter 2019.

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

The undiscounted cash flows to be received under tolling arrangements accounted for as sales-type leases are as follows:

	As of September 30, 2019
	Southern Company		Mississippi Power
	(in millions)
2019 (remaining)	$	4	$	4
2020	17		17
2021	15		15
2022	15		15
2023	14		14
Thereafter	152		152
Total undiscounted cash flows	$	217	$	217
Lease receivable	119		119
Difference between undiscounted cash flows and discounted cash flows	$	98	$	98

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2019 (remaining)	$	39	$	6	$	7	$	8	$	9
2020	155		26		26		65		35
2021	140		22		18		66		35
2022	121		13		8		68		34
2023	109		5		2		69		34
Thereafter	1,166		22		—		350		497
Total	$	1,730	$	94	$	61	$	626	$	644

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with right-of-use (ROU) assets that will be amortized over the term of each lease.

The registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements are applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	988	$	125	$	1,488	$	—	$	—	$	—
Real estate/land	785		4		57		2		395		77
Communication towers	150		2		3		—		—		13
Railcars	51		23		25		3		—		—
Other	89		9		14		2		—		1
Total	$	2,063	$	163	$	1,587	$	7	$	395	$	91

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern

Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies. Communication tower leases have terms of up to 10 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the affiliate PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of approximately $625 million at September 30, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During the third quarter 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the battery storage system portion of the solar generation PPAs are deemed operating leases. The estimated minimum lease payments for these agreements total $95 million. See Note (B) under "Alabama Power" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of September 30, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of September 30, 2019
	Southern  Company(*)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,823	$	143	$	1,461	$	7	$	368	$	92
Operating lease obligations - current	$	229	$	49	$	143	$	2	$	22	$	14
Operating lease obligations - non current	1,606		109		1,287		5		373		77
Total operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance Leases
Finance lease ROU assets, net	$	220	$	4	$	134	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	12	$	—	$	—	$	—
Finance lease obligations - noncurrent	207		4		145		—		—		—
Total finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

(*) Includes operating lease ROU assets, net and operating lease obligations classified as held for sale.

Lease costs for the three and nine months ended September 30, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company			Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease cost
Operating lease cost	$	94		$	29		$	53	$	1	$	7	$	5
Finance lease cost:
Amortization of ROU assets	7			—			4		—		—		—
Interest on lease obligations	3			—			4		—		—		—
Total finance lease cost	10			—			8		—		—		—
Short-term lease costs	9			4			5		—		—		—
Variable lease cost	33			4			26		—		1		—
Total lease cost	$	146		$	37		$	92	$	1	$	8	$	5
For the Nine Months Ended September 30, 2019
Lease cost
Operating lease cost	$	243		$	49		$	154	$	2	$	21	$	14
Finance lease cost:
Amortization of ROU assets	21			1			11		—		—		—
Interest on lease obligations	9			—			14		—		—		—
Total finance lease cost	30			1			25		—		—		—
Short-term lease costs	39			15			17		—		—		—
Variable lease cost	81			6			67		—		3		—
Sublease income	(1		)	(1		)	—		—		—		—
Total lease cost	$	392		$	70		$	263	$	2	$	24	$	14

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	For the Nine Months Ended September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	211	$	50	$	130	$	2	$	18	$	13
Operating cash flows from finance leases	3		1		17		—		—		—
Financing cash flows from finance leases	24		—		4		—		—		—
ROU assets obtained in exchange for new operating lease obligations	76		7		18		—		—		14
ROU assets obtained in exchange for new finance lease obligations	31		1		24		—		—		—

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.4		3.4		10.4		6.8		33.2		9.6
Finance leases	18.9		12.4		10.8		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.56	%	3.33	%	4.46	%	3.98	%	5.68	%	3.73	%
Finance leases	5.07	%	3.65	%	10.74	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2019 (remaining)	$	45	$	4	$	23	$	1	$	8	$	4
2020	284		54		205		2		22		17
2021	269		53		198		1		23		17
2022	259		52		196		1		23		13
2023	202		4		197		1		24		11
Thereafter	1,662		2		991		2		847		49
Total	2,721		169		1,810		8		947		111
Less: Present value discount	886		11		380		1		552		20
Operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance leases:
2019 (remaining)	$	9	$	—	$	4	$	—	$	—	$	—
2020	31		1		28		—		—		—
2021	24		1		24		—		—		—
2022	21		1		24		—		—		—
2023	17		1		25		—		—		—
Thereafter	259		1		161		—		—		—
Total	361		5		266		—		—		—
Less: Present value discount	133		—		109						—
Finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of September 30, 2019, Alabama Power and Southern Power have additional operating leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power	Southern Power
Operating lease type	PPAs and land	PPAs	Land
Expected commencement date	2019-2024	2020-2024	2019-2022
Longest lease term expiration	28-31 years	28 years	31 years
Estimated total obligations (in millions)	$159	$95	$64

For additional information on each registrant's operating lease obligations at December 31, 2018, see Note 9 to the financial statements in Item 8 of the Form 10-K.

Lessor

With the exception of Southern Company Gas, the registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset

owned by the applicable registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include tolling arrangements related to electric generating units accounted for as sales-type leases with terms of up to 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 28 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 24 years.

Lease income for the three and nine months ended September 30, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	2	$	—	$	—	$	2	$	—	$	—
Lease income - operating leases	64		6		18		—		31		9
Variable lease income	141		—		—		—		151		—
Total lease income	$	207	$	6	$	18	$	2	$	182	$	9
For the Nine Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	7	$	—	$	—	$	7	$	—	$	—
Lease income - operating leases	216		19		57		—		111		26
Variable lease income	324		—		—		—		349		—
Total lease income	$	547	$	19	$	57	$	7	$	460	$	26

No profit or loss was recognized by Mississippi Power upon commencement of a sales-type lease during the first quarter 2019.

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

The undiscounted cash flows to be received under tolling arrangements accounted for as sales-type leases are as follows:

	As of September 30, 2019
	Southern Company		Mississippi Power
	(in millions)
2019 (remaining)	$	4	$	4
2020	17		17
2021	15		15
2022	15		15
2023	14		14
Thereafter	152		152
Total undiscounted cash flows	$	217	$	217
Lease receivable	119		119
Difference between undiscounted cash flows and discounted cash flows	$	98	$	98

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2019 (remaining)	$	39	$	6	$	7	$	8	$	9
2020	155		26		26		65		35
2021	140		22		18		66		35
2022	121		13		8		68		34
2023	109		5		2		69		34
Thereafter	1,166		22		—		350		497
Total	$	1,730	$	94	$	61	$	626	$	644

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with right-of-use (ROU) assets that will be amortized over the term of each lease.

The registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements are applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	988	$	125	$	1,488	$	—	$	—	$	—
Real estate/land	785		4		57		2		395		77
Communication towers	150		2		3		—		—		13
Railcars	51		23		25		3		—		—
Other	89		9		14		2		—		1
Total	$	2,063	$	163	$	1,587	$	7	$	395	$	91

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern

Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies. Communication tower leases have terms of up to 10 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the affiliate PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of approximately $625 million at September 30, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During the third quarter 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the battery storage system portion of the solar generation PPAs are deemed operating leases. The estimated minimum lease payments for these agreements total $95 million. See Note (B) under "Alabama Power" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of September 30, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of September 30, 2019
	Southern  Company(*)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,823	$	143	$	1,461	$	7	$	368	$	92
Operating lease obligations - current	$	229	$	49	$	143	$	2	$	22	$	14
Operating lease obligations - non current	1,606		109		1,287		5		373		77
Total operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance Leases
Finance lease ROU assets, net	$	220	$	4	$	134	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	12	$	—	$	—	$	—
Finance lease obligations - noncurrent	207		4		145		—		—		—
Total finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

(*) Includes operating lease ROU assets, net and operating lease obligations classified as held for sale.

Lease costs for the three and nine months ended September 30, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company			Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease cost
Operating lease cost	$	94		$	29		$	53	$	1	$	7	$	5
Finance lease cost:
Amortization of ROU assets	7			—			4		—		—		—
Interest on lease obligations	3			—			4		—		—		—
Total finance lease cost	10			—			8		—		—		—
Short-term lease costs	9			4			5		—		—		—
Variable lease cost	33			4			26		—		1		—
Total lease cost	$	146		$	37		$	92	$	1	$	8	$	5
For the Nine Months Ended September 30, 2019
Lease cost
Operating lease cost	$	243		$	49		$	154	$	2	$	21	$	14
Finance lease cost:
Amortization of ROU assets	21			1			11		—		—		—
Interest on lease obligations	9			—			14		—		—		—
Total finance lease cost	30			1			25		—		—		—
Short-term lease costs	39			15			17		—		—		—
Variable lease cost	81			6			67		—		3		—
Sublease income	(1		)	(1		)	—		—		—		—
Total lease cost	$	392		$	70		$	263	$	2	$	24	$	14

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	For the Nine Months Ended September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	211	$	50	$	130	$	2	$	18	$	13
Operating cash flows from finance leases	3		1		17		—		—		—
Financing cash flows from finance leases	24		—		4		—		—		—
ROU assets obtained in exchange for new operating lease obligations	76		7		18		—		—		14
ROU assets obtained in exchange for new finance lease obligations	31		1		24		—		—		—

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.4		3.4		10.4		6.8		33.2		9.6
Finance leases	18.9		12.4		10.8		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.56	%	3.33	%	4.46	%	3.98	%	5.68	%	3.73	%
Finance leases	5.07	%	3.65	%	10.74	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2019 (remaining)	$	45	$	4	$	23	$	1	$	8	$	4
2020	284		54		205		2		22		17
2021	269		53		198		1		23		17
2022	259		52		196		1		23		13
2023	202		4		197		1		24		11
Thereafter	1,662		2		991		2		847		49
Total	2,721		169		1,810		8		947		111
Less: Present value discount	886		11		380		1		552		20
Operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance leases:
2019 (remaining)	$	9	$	—	$	4	$	—	$	—	$	—
2020	31		1		28		—		—		—
2021	24		1		24		—		—		—
2022	21		1		24		—		—		—
2023	17		1		25		—		—		—
Thereafter	259		1		161		—		—		—
Total	361		5		266		—		—		—
Less: Present value discount	133		—		109						—
Finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of September 30, 2019, Alabama Power and Southern Power have additional operating leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power	Southern Power
Operating lease type	PPAs and land	PPAs	Land
Expected commencement date	2019-2024	2020-2024	2019-2022
Longest lease term expiration	28-31 years	28 years	31 years
Estimated total obligations (in millions)	$159	$95	$64

For additional information on each registrant's operating lease obligations at December 31, 2018, see Note 9 to the financial statements in Item 8 of the Form 10-K.

Lessor

With the exception of Southern Company Gas, the registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset

owned by the applicable registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include tolling arrangements related to electric generating units accounted for as sales-type leases with terms of up to 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 28 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 24 years.

Lease income for the three and nine months ended September 30, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	2	$	—	$	—	$	2	$	—	$	—
Lease income - operating leases	64		6		18		—		31		9
Variable lease income	141		—		—		—		151		—
Total lease income	$	207	$	6	$	18	$	2	$	182	$	9
For the Nine Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	7	$	—	$	—	$	7	$	—	$	—
Lease income - operating leases	216		19		57		—		111		26
Variable lease income	324		—		—		—		349		—
Total lease income	$	547	$	19	$	57	$	7	$	460	$	26

No profit or loss was recognized by Mississippi Power upon commencement of a sales-type lease during the first quarter 2019.

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

The undiscounted cash flows to be received under tolling arrangements accounted for as sales-type leases are as follows:

	As of September 30, 2019
	Southern Company		Mississippi Power
	(in millions)
2019 (remaining)	$	4	$	4
2020	17		17
2021	15		15
2022	15		15
2023	14		14
Thereafter	152		152
Total undiscounted cash flows	$	217	$	217
Lease receivable	119		119
Difference between undiscounted cash flows and discounted cash flows	$	98	$	98

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2019 (remaining)	$	39	$	6	$	7	$	8	$	9
2020	155		26		26		65		35
2021	140		22		18		66		35
2022	121		13		8		68		34
2023	109		5		2		69		34
Thereafter	1,166		22		—		350		497
Total	$	1,730	$	94	$	61	$	626	$	644

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.

LEASES

LEASES

On January 1, 2019, the registrants adopted the provisions of FASB ASC Topic 842 (as amended), Leases (ASC 842), which require lessees to recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with right-of-use (ROU) assets that will be amortized over the term of each lease.

The registrants elected the transition methodology provided by ASC 842, whereby the applicable requirements are applied on a prospective basis as of the adoption date of January 1, 2019, without restating prior periods. The registrants also elected the package of practical expedients provided by ASC 842 that allows prior determinations of whether existing contracts are, or contain, leases and the classification of existing leases to continue without reassessment. Additionally, the registrants applied the use-of-hindsight practical expedient in determining lease terms as of the date of adoption and elected the practical expedient that allows existing land easements not previously accounted for as leases not to be reassessed.

Lessee

As lessee, the registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	988	$	125	$	1,488	$	—	$	—	$	—
Real estate/land	785		4		57		2		395		77
Communication towers	150		2		3		—		—		13
Railcars	51		23		25		3		—		—
Other	89		9		14		2		—		1
Total	$	2,063	$	163	$	1,587	$	7	$	395	$	91

Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern

Power. The commercial real estate leases have remaining terms of up to 25 years while the land leases have remaining terms of up to 47 years, including renewal periods.

Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies. Communication tower leases have terms of up to 10 years with options to renew for periods up to 20 years.

While renewal options exist in many of the leases, other than for land leases associated with renewable energy facilities, the expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease as it is not considered reasonably certain that the lease will be extended. The expected term of land leases associated with renewable energy facilities includes renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities.

Contracts that Contain a Lease

While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the affiliate PPA, which varies between three and 18 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of approximately $625 million at September 30, 2019. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as those amounts have been reviewed and approved by the Georgia PSC.

During the third quarter 2019, Alabama Power entered into additional long-term PPAs totaling approximately 640 MWs of additional generating capacity consisting of combined cycle generation expected to commence in 2020 and solar generation coupled with battery energy storage systems expected to commence in 2022 through 2024. Both the combined cycle PPA and the battery storage system portion of the solar generation PPAs are deemed operating leases. The estimated minimum lease payments for these agreements total $95 million. See Note (B) under "Alabama Power" for additional information.

Short-term Leases

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the registrants generally recognize lease expense for these leases on a straight-line basis over the lease term.

Residual Value Guarantees

Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial as of September 30, 2019.

Lease and Nonlease Components

For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset.

Balance sheet amounts recorded for operating and finance leases are as follows:

	As of September 30, 2019
	Southern  Company(*)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,823	$	143	$	1,461	$	7	$	368	$	92
Operating lease obligations - current	$	229	$	49	$	143	$	2	$	22	$	14
Operating lease obligations - non current	1,606		109		1,287		5		373		77
Total operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance Leases
Finance lease ROU assets, net	$	220	$	4	$	134	$	—	$	—	$	—
Finance lease obligations - current	$	21	$	1	$	12	$	—	$	—	$	—
Finance lease obligations - noncurrent	207		4		145		—		—		—
Total finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

(*) Includes operating lease ROU assets, net and operating lease obligations classified as held for sale.

Lease costs for the three and nine months ended September 30, 2019, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:

	Southern Company			Alabama Power			Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease cost
Operating lease cost	$	94		$	29		$	53	$	1	$	7	$	5
Finance lease cost:
Amortization of ROU assets	7			—			4		—		—		—
Interest on lease obligations	3			—			4		—		—		—
Total finance lease cost	10			—			8		—		—		—
Short-term lease costs	9			4			5		—		—		—
Variable lease cost	33			4			26		—		1		—
Total lease cost	$	146		$	37		$	92	$	1	$	8	$	5
For the Nine Months Ended September 30, 2019
Lease cost
Operating lease cost	$	243		$	49		$	154	$	2	$	21	$	14
Finance lease cost:
Amortization of ROU assets	21			1			11		—		—		—
Interest on lease obligations	9			—			14		—		—		—
Total finance lease cost	30			1			25		—		—		—
Short-term lease costs	39			15			17		—		—		—
Variable lease cost	81			6			67		—		3		—
Sublease income	(1		)	(1		)	—		—		—		—
Total lease cost	$	392		$	70		$	263	$	2	$	24	$	14

Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:

	For the Nine Months Ended September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Other information
Cash paid for amounts included in the measurements of lease obligations:
Operating cash flows from operating leases	$	211	$	50	$	130	$	2	$	18	$	13
Operating cash flows from finance leases	3		1		17		—		—		—
Financing cash flows from finance leases	24		—		4		—		—		—
ROU assets obtained in exchange for new operating lease obligations	76		7		18		—		—		14
ROU assets obtained in exchange for new finance lease obligations	31		1		24		—		—		—

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.4		3.4		10.4		6.8		33.2		9.6
Finance leases	18.9		12.4		10.8		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.56	%	3.33	%	4.46	%	3.98	%	5.68	%	3.73	%
Finance leases	5.07	%	3.65	%	10.74	%	N/A		N/A		N/A

Maturities of lease liabilities are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2019 (remaining)	$	45	$	4	$	23	$	1	$	8	$	4
2020	284		54		205		2		22		17
2021	269		53		198		1		23		17
2022	259		52		196		1		23		13
2023	202		4		197		1		24		11
Thereafter	1,662		2		991		2		847		49
Total	2,721		169		1,810		8		947		111
Less: Present value discount	886		11		380		1		552		20
Operating lease obligations	$	1,835	$	158	$	1,430	$	7	$	395	$	91
Finance leases:
2019 (remaining)	$	9	$	—	$	4	$	—	$	—	$	—
2020	31		1		28		—		—		—
2021	24		1		24		—		—		—
2022	21		1		24		—		—		—
2023	17		1		25		—		—		—
Thereafter	259		1		161		—		—		—
Total	361		5		266		—		—		—
Less: Present value discount	133		—		109						—
Finance lease obligations	$	228	$	5	$	157	$	—	$	—	$	—

Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis.

As of September 30, 2019, Alabama Power and Southern Power have additional operating leases that have not yet commenced, as detailed in the following table:

	Southern Company	Alabama Power	Southern Power
Operating lease type	PPAs and land	PPAs	Land
Expected commencement date	2019-2024	2020-2024	2019-2022
Longest lease term expiration	28-31 years	28 years	31 years
Estimated total obligations (in millions)	$159	$95	$64

For additional information on each registrant's operating lease obligations at December 31, 2018, see Note 9 to the financial statements in Item 8 of the Form 10-K.

Lessor

With the exception of Southern Company Gas, the registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset

owned by the applicable registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to seven years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include tolling arrangements related to electric generating units accounted for as sales-type leases with terms of up to 20 years. For Southern Power, these arrangements consist of PPAs related to electric generating units, including renewable energy facilities, accounted for as operating leases with terms of up to 28 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with terms of up to 15 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 24 years.

Lease income for the three and nine months ended September 30, 2019 is as follows:

	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
For the Three Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	2	$	—	$	—	$	2	$	—	$	—
Lease income - operating leases	64		6		18		—		31		9
Variable lease income	141		—		—		—		151		—
Total lease income	$	207	$	6	$	18	$	2	$	182	$	9
For the Nine Months Ended September 30, 2019
Lease income - interest income on sales-type leases	$	7	$	—	$	—	$	7	$	—	$	—
Lease income - operating leases	216		19		57		—		111		26
Variable lease income	324		—		—		—		349		—
Total lease income	$	547	$	19	$	57	$	7	$	460	$	26

No profit or loss was recognized by Mississippi Power upon commencement of a sales-type lease during the first quarter 2019.

Lease income for Southern Power is included in wholesale revenues. Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses.

The undiscounted cash flows to be received under tolling arrangements accounted for as sales-type leases are as follows:

	As of September 30, 2019
	Southern Company		Mississippi Power
	(in millions)
2019 (remaining)	$	4	$	4
2020	17		17
2021	15		15
2022	15		15
2023	14		14
Thereafter	152		152
Total undiscounted cash flows	$	217	$	217
Lease receivable	119		119
Difference between undiscounted cash flows and discounted cash flows	$	98	$	98

The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases (adjusted for intercompany eliminations) are as follows:

	As of September 30, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2019 (remaining)	$	39	$	6	$	7	$	8	$	9
2020	155		26		26		65		35
2021	140		22		18		66		35
2022	121		13		8		68		34
2023	109		5		2		69		34
Thereafter	1,166		22		—		350		497
Total	$	1,730	$	94	$	61	$	626	$	644

Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Southern Power allocates revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Mississippi Power are immaterial.