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INTRODUCTION
 9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
INTRODUCTION INTRODUCTION
The condensed quarterly financial statements of each Registrant included herein have been prepared by such Registrant, without audit, pursuant to the rules and regulations of the SEC. The Condensed Balance Sheets as of December 31, 2019 have been derived from the audited financial statements of each Registrant. In the opinion of each Registrant's management, the information regarding such Registrant furnished herein reflects all adjustments, which, except as otherwise disclosed, are of a normal recurring nature, necessary to present fairly the results of operations for the periods ended September 30, 2020 and 2019. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although each Registrant believes that the disclosures regarding such Registrant are adequate to make the information presented not misleading. Disclosures which would substantially duplicate the disclosures in the Form 10-K and details which have not changed significantly in amount or composition since the filing of the Form 10-K are generally omitted from this Quarterly Report on Form 10-Q unless specifically required by GAAP. Therefore, these Condensed Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K. Due to the seasonal variations in the demand for energy and other factors, including the impacts of the COVID-19 pandemic, operating results for the periods presented are not necessarily indicative of the operating results to be expected for the full year.
Certain prior year data presented in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no impact on the overall results of operations, financial position, or cash flows of any Registrant.
Goodwill and Other Intangible Assets
Goodwill at September 30, 2020 and December 31, 2019 was as follows:
Goodwill
(in millions)
Southern Company$5,280 
Southern Company Gas:
Gas distribution operations$4,034 
Gas marketing services981 
Southern Company Gas total$5,015 
Goodwill is not amortized but is subject to an annual impairment test in the fourth quarter of the year and on an interim basis as events and changes in circumstances occur, including, but not limited to, a significant change in operating performance, the business climate, legal or regulatory factors, or a planned sale or disposition of a significant portion of the business. The continued COVID-19 pandemic and related responses continue to disrupt supply chains, reduce labor availability and productivity, and reduce economic activity. These effects could have a variety of adverse impacts on Southern Company and its subsidiaries, including the $263 million of goodwill recorded at PowerSecure. If the impact of the COVID-19 pandemic becomes significant to the operating results of PowerSecure and its businesses, a portion of the associated goodwill may become impaired. The ultimate outcome of this matter cannot be determined at this time.
Other intangible assets were as follows:
At September 30, 2020At December 31, 2019
Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net		Gross Carrying AmountAccumulated AmortizationOther
Intangible Assets, Net
(in millions)(in millions)
Southern Company
Other intangible assets subject to amortization:
Customer relationships$212 $(130)$82 $212 $(116)$96 
Trade names64 (30)34 64 (25)39 
Storage and transportation contracts64 (64)— 64 (62)2 
PPA fair value adjustments390 (84)306 390 (69)321 
Other10 (8)2 11 (8)3 
Total other intangible assets subject to amortization$740 $(316)$424 $741 $(280)$461 
Other intangible assets not subject to amortization:
Federal Communications Commission licenses75 — 75 75 — 75 
Total other intangible assets$815 $(316)$499 $816 $(280)$536 
Southern Power
Other intangible assets subject to amortization:
PPA fair value adjustments$390 $(84)$306 $390 $(69)$321 
Southern Company Gas
Other intangible assets subject to amortization:
Gas marketing services
Customer relationships$156 $(115)$41 $156 $(104)$52 
Trade names26 (12)14 26 (10)16 
Wholesale gas services
Storage and transportation contracts64 (64)— 64 (62)2 
Total other intangible assets subject to amortization$246 $(191)$55 $246 $(176)$70 
Amortization associated with other intangible assets was as follows:
Three Months EndedNine Months Ended
September 30, 2020
(in millions)
Southern Company(a)
$12 $37 
Southern Power(b)
$5 $15 
Southern Company Gas
Gas marketing services$4 $13 
Wholesale gas services(b)
1 2 
Southern Company Gas total$5 $15 
(a)Includes $6 million and $17 million for the three and nine months ended September 30, 2020, respectively, recorded as a reduction to operating revenues.
(b)Recorded as a reduction to operating revenues.
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that total to the amounts shown in the condensed statements of cash flows for the Registrants that had restricted cash at September 30, 2020 and/or December 31, 2019:
Southern
Company		Southern PowerSouthern
Company Gas
At September
30, 2020		At December 31, 2019At September 30, 2020At September
30, 2020		At December 31, 2019
(in millions)(in millions)(in millions)
Cash and cash equivalents$3,379 $1,975 $416 $157 $46 
Restricted cash(a):
Other accounts and notes receivable— 3 — — 3 
Other current assets4 — — 4 — 
Other deferred charges and assets1 — 1 — — 
Total cash, cash equivalents, and restricted cash$3,383 
(b)
$1,978 $417 $161 $49 
(a)For Southern Company Gas, reflects restricted cash held as collateral for workers' compensation, life insurance, and long-term disability insurance. For Southern Power, reflects restricted cash held for construction payables.
(b)Total does not add due to rounding.
Natural Gas for Sale
Southern Company Gas, with the exception of Nicor Gas, carries natural gas inventory on a WACOG basis. For any declines in market prices below the WACOG considered to be other than temporary, an adjustment is recorded to reduce the value of natural gas inventories to market value. Nicor Gas' natural gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during the year that are restored prior to year end are charged to cost of natural gas at the estimated annual replacement cost. Inventory decrements that are not restored prior to year end are charged to cost of natural gas at the actual LIFO cost of the inventory layers liquidated.
Southern Company Gas recorded no material adjustments to natural gas inventories for the three and nine months ended September 30, 2020 or the three months ended September 30, 2019 and recorded an adjustment of $10
million for the nine months ended September 30, 2019. Nicor Gas' inventory decrement at September 30, 2020 is expected to be restored prior to year end.
Asset Retirement Obligations
See Note 6 to the financial statements in Item 8 of the Form 10-K for additional information.
Details of changes in AROs for Southern Company, Alabama Power, and Georgia Power during the first nine months of 2020 are shown in the following table. There were no material changes in AROs for the other Registrants during the first nine months of 2020.
Southern CompanyAlabama PowerGeorgia Power
(in millions)
Balance at December 31, 2019$9,786 $3,540 $5,784 
Liabilities incurred15 — 10 
Liabilities settled(315)(157)(130)
Accretion308 113 177 
Cash flow revisions866 462 411 
Balance at September 30, 2020$10,660 $3,958 $6,252 
In June 2020, Alabama Power recorded an increase of approximately $462 million to its AROs related to the CCR Rule and the related state rule primarily due to management's completion of a feasibility study and the related cost estimates during the second quarter 2020 for one of its ash ponds. Alabama Power's increase also reflects costs associated with the addition of a water treatment system to the design of another ash pond. The additional estimated costs to close these ash ponds under the planned closure-in-place methodology primarily relate to inputs from contractor bids, design revisions, and changes in the expected volume of ash handling.
During the third quarter 2020, Georgia Power completed an assessment of its plans to close the ash ponds at all of its generating plants in compliance with the CCR Rule and the related state rule. The related cost estimates were further refined, including updates to long-term post-closure care requirements, market pricing, and timing of future cash outlays. As a result, in September 2020, Georgia Power recorded an increase of approximately $411 million to its AROs related to the CCR Rule and the related state rule.
The traditional electric operating companies expect to continue updating their cost estimates and ARO liabilities periodically as additional information related to ash pond closure methodologies, schedules, and/or costs becomes available, and the changes could be material. Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costs through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted. See Note (B) and Note 2 to the financial statements in Item 8 of the Form 10-K under "Georgia Power – Integrated Resource Plan" for additional information. The ultimate outcome of these matters cannot be determined at this time.
Depreciation and Amortization
See Note 5 to the financial statements under "Depreciation and Amortization – Southern Power" in Item 8 of the Form 10-K for additional information.
Effective January 1, 2020, Southern Power revised the depreciable lives of its natural gas generating facilities from up to 45 years to up to 50 years. This revision resulted in an immaterial decrease in depreciation for the three and nine months ended September 30, 2020 and is expected to result in an immaterial decrease in annual depreciation for 2020.