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LEASES (Tables)

12 Months Ended

Dec. 31, 2019

The major categories of lease obligations are as follows:



	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric generating units	$	990	$	125	$	1,487	$	—	$	—	$	—
Real estate/land	782		4		54		2		398		74
Communication towers	154		2		3		—		—		18
Railcars	51		21		26		3		—		—
Other	93		8		12		1		—		—
Total	$	2,070	$	160	$	1,582	$	6	$	398	$	92

Balance sheet amounts recorded for operating and financing leases

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



	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Operating Leases
Operating lease ROU assets, net	$	1,800	$	132	$	1,428	$	6	$	369	$	93

Operating lease obligations - current	$	229	$	49	$	144	$	2	$	22	$	14
Operating lease obligations - non-current	1,615		107		1,282		4		376		78
Total operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92

Finance Leases
Finance lease ROU assets, net	$	216	$	4	$	130	$	—	$	—	$	—

Finance lease obligations - current	$	21	$	1	$	11	$	—	$	—	$	—
Finance lease obligations - non-current	205		3		145		—		—		—
Total finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Lease costs and other information

Lease costs for the year ended December 31, 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)
2019
Lease cost
Operating lease cost	$	310	$	54		$	206	$	3	$	28	$	18
Finance lease cost:
Amortization of ROU assets	28		1			15		—		—		—
Interest on lease obligations	12		—			18		—		—		—
Total finance lease cost	40		1			33		—		—		—
Short-term lease costs	48		19			22		—		—		—
Variable lease cost	105		6			85		—		7		—
Sublease income	—		(1		)	—		—		—		—
Total lease cost	$	503	$	79		$	346	$	3	$	35	$	18

Rent expense and PPA capacity expense related to leases for 2018 and 2017, prior to the adoption of ASC 842, were as follows:



	Southern Company^(a)(b)(c)		Alabama Power		Georgia Power^(a)		Mississippi Power^(b)		Southern Power^(c)		Southern Company Gas
	(in millions)
2018:
Rent expense	$	192	$	23	$	34	$	4	$	31	$	15
PPA capacity expense	231		44		206		—		—		—
2017:
Rent expense	$	176	$	25	$	31	$	3	$	29	$	15
PPA capacity expense	235		41		225		—		—		—


(a)	Georgia Power's energy-only solar PPAs accounted for as leases contained contingent rent expense of $72 million and $73 million for 2018 and 2017, respectively, of which $29 million in each of 2018 and 2017 related to solar PPAs with Southern Power.


(b)	Mississippi Power's energy-only solar PPAs accounted for as operating leases contained contingent rent expense of $10 million and $5 million in 2018 and 2017, respectively.


(c)	Rent expense includes contingent rent expense related to Southern Power's land leases based on wind production and escalation in the Consumer Price Index for All Urban Consumers.

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:



	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	$	323	$	54	$	210	$	3	$	27	$	18
Operating cash flows from finance leases	10		—		19		—		—		—
Financing cash flows from finance leases	32		1		13		—		—		—
ROU assets obtained in exchange for new operating lease obligations	118		7		21		—		2		19
ROU assets obtained in exchange for new finance lease obligations	35		2		24		—		—		—



	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
Weighted-average remaining lease term in years:
Operating leases	14.2		3.1		10.2		7.0		32.8		9.9
Finance leases	18.8		12.1		10.5		N/A		N/A		N/A
Weighted-average discount rate:
Operating leases	4.53	%	3.33	%	4.46	%	4.02	%	5.66	%	3.70	%
Finance leases	5.04	%	3.60	%	10.76	%	N/A		N/A		N/A

Maturities of operating lease liabilities

Maturities of lease liabilities are as follows:



	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Maturities of finance lease liabilities

Maturities of lease liabilities are as follows:



	As of December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Maturity Analysis
Operating leases:
2020	$	289	$	54	$	205	$	2	$	26	$	18
2021	268		52		198		1		23		17
2022	260		53		197		1		23		14
2023	208		4		198		1		24		11
2024	163		1		161		—		24		10
Thereafter	1,514		1		831		2		812		44
Total	2,702		165		1,790		7		932		114
Less: Present value discount	858		9		364		1		534		22
Operating lease obligations	$	1,844	$	156	$	1,426	$	6	$	398	$	92
Finance leases:
2020	$	31	$	1	$	28	$	—	$	—	$	—
2021	25		1		24		—		—		—
2022	22		1		25		—		—		—
2023	18		1		25		—		—		—
2024	15		—		25		—		—		—
Thereafter	246		—		134		—		—		—
Total	357		4		261		—		—		—
Less: Present value discount	131		—		105						—
Finance lease obligations	$	226	$	4	$	156	$	—	$	—	$	—

Leases not yet commenced

As of December 31, 2019, Southern Company, Alabama Power, Mississippi Power, and Southern Power have additional leases that have not yet commenced, as detailed in the following table:



	Southern Company	Alabama Power^(a)	Mississippi Power^(b)	Southern Power
Lease category	PPAs, land, pipelines, and aircraft	PPAs	Pipelines	Land
Expected commencement date	2020-2024	2020-2024	2020	2020
Longest lease term expiration	40 years	28 years	15 years	40 years
Estimated total obligations (in millions)	$248	$95	$23	$87


(a)	See Note 2 under "Alabama Power – Petition for Certificate of Convenience and Necessity" for additional information. Alabama Power will have variable operating lease payments and variable finance lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs.

(b)

See Note 2 under "Mississippi Power – Kemper County Energy Facility – Lignite Mine and CO₂ Pipeline Facilities" for additional information. Estimated total obligations include non-lease components.

Lease income, operating leases

Lease income for the year ended December 31, 2019 is as follows:



	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Lease income, sales-type leases

Lease income for the year ended December 31, 2019 is as follows:



	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
2019
Lease income - interest income on sales-type leases	$	9	$	—	$	—	$	9	$	—	$	—
Lease income - operating leases	273		24		71		—		160		35
Variable lease income	403		—		—		—		434		—
Total lease income	$	685	$	24	$	71	$	9	$	594	$	35

Undiscounted cash flows to be received under tolling arrangements accounted for as sales-type leases

The undiscounted cash flows to be received under the lease are as follows:



	At December 31, 2019
	Southern Company		Mississippi Power
	(in millions)
2020	$	17	$	17
2021	15		15
2022	15		15
2023	14		14
2024	14		14
Thereafter	138		138
Total undiscounted cash flows	$	213	$	213
Lease receivable^(*)	118		118
Difference between undiscounted cash flows and discounted cash flows	$	95	$	95

(*)

Included in other current assets and other property and investments on the balance sheets.

Undiscounted cash flows to be received under PPAs accounted for as operating leases

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



	At December 31, 2019
	Southern Company		Alabama Power		Georgia Power		Southern Power		Southern Company Gas
	(in millions)
2020	$	155	$	26	$	26	$	84	$	35
2021	141		23		19		86		35
2022	125		16		8		87		35
2023	110		7		2		88		34
2024	103		3		—		90		33
Thereafter	1,063		20		—		387		463
Total	$	1,697	$	95	$	55	$	822	$	635