RETIREMENT BENEFITS

9 Months Ended

Sep. 30, 2020

Retirement Benefits [Abstract]

RETIREMENT BENEFITS

RETIREMENT BENEFITS

The Southern Company system has a qualified defined benefit, trusteed, pension plan covering substantially all employees, with the exception of employees at PowerSecure. The qualified pension plan is funded in accordance with requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA). No mandatory contributions to the qualified pension plan are anticipated for the year ending December 31, 2020. The Southern Company system also provides certain non-qualified defined benefits for a select group of management and highly compensated employees, which are funded on a cash basis. In addition, the Southern Company system provides certain medical care and life insurance benefits for retired employees through other postretirement benefit plans. The traditional electric operating companies fund other postretirement trusts to the extent required by their respective regulatory commissions. Southern Company Gas has a separate unfunded supplemental retirement health care plan that provides medical care and life insurance benefits to employees of discontinued businesses.

See Note 11 to the financial statements in Item 8 of the Form 10-K for additional information.

Effective January 1, 2020, Southern Company adopted a change in method of calculating the market-related value of the liability-hedging securities included in its pension plan assets. The market-related value is used to determine the expected return on plan assets component of net periodic pension cost. Southern Company previously used the

calculated value approach for all plan assets, which smoothed asset returns and deferred gains and losses by amortizing them into the calculation of the market-related value over five years. Southern Company changed to the fair value approach for liability-hedging securities, which includes measuring the market-related value of that portion of the plan assets at fair value for purposes of determining the expected return on plan assets. The remaining asset classes of plan assets will continue to use the calculated value approach in determining the market-related value. Southern Company considers the fair value approach to be preferable because it results in a current reflection of changes in the value of plan assets in the measurement of net periodic pension cost. Southern Company evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements of all Registrants and therefore did not account for the change retrospectively. The change in accounting principle was recorded through earnings as a prior period adjustment for the amounts related to the unregulated businesses of Southern Company and Southern Power. Amounts related to the traditional electric operating companies and the natural gas distribution utilities have been reflected as adjustments to regulatory assets as appropriate, consistent with the expected regulatory treatment.

On each Registrant's condensed statements of income, the service cost component of net periodic benefit costs is included in other operations and maintenance expenses and all other components of net periodic benefit costs are included in other income (expense), net. Components of the net periodic benefit costs for the three and nine months ended September 30, 2020 and 2019 are presented in the following tables.

Three Months Ended September 30, 2020	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	94	$	23	$	24	$	3	$	2	$	8
Interest cost	108		25		33		5		1		8
Expected return on plan assets	(274)		(66)		(87)		(13)		(4)		(20)
Amortization:
Prior service costs	—		1		—		—		—		(1)
Regulatory asset	—		—		—		—		—		4
Net (gain)/loss	67		17		22		4		1		2
Net periodic pension cost (income)	$	(5)	$	—	$	(8)	$	(1)	$	—	$	1
Postretirement Benefits
Service cost	$	6	$	1	$	2	$	(1)	$	1	$	—
Interest cost	13		4		5		1		—		2
Expected return on plan assets	(18)		(7)		(7)		—		—		(2)
Amortization:
Prior service costs	—		—		(1)		—		—		—
Regulatory asset	—		—		—		—		—		2
Net (gain)/loss	1		—		1		—		—		(1)
Net periodic postretirement benefit cost	$	2	$	(2)	$	—	$	—	$	1	$	1

Nine Months Ended September 30, 2020	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	282	$	67	$	72	$	11	$	6	$	24
Interest cost	324		75		100		15		4		23
Expected return on plan assets	(824)		(198)		(261)		(38)		(10)		(59)
Amortization:
Prior service costs	1		1		1		—		—		(2)
Regulatory asset	—		—		—		—		—		12
Net (gain)/loss	201		53		65		10		2		7
Net periodic pension cost (income)	$	(16)	$	(2)	$	(23)	$	(2)	$	2	$	5
Postretirement Benefits
Service cost	$	17	$	4	$	5	$	—	$	1	$	1
Interest cost	40		10		15		2		—		5
Expected return on plan assets	(54)		(21)		(20)		(1)		—		(5)
Amortization:
Prior service costs	(1)		—		(1)		—		—		—
Regulatory asset	—		—		—		—		—		5
Net (gain)/loss	2		—		2		—		—		(2)
Net periodic postretirement benefit cost	$	4	$	(7)	$	1	$	1	$	1	$	4

Three Months Ended September 30, 2019	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	73	$	17	$	19	$	3	$	2	$	7
Interest cost	123		28		38		6		1		9
Expected return on plan assets	(222)		(51)		(73)		(10)		(2)		(15)
Amortization:
Prior service costs	1		—		—		—		—		(1)
Regulatory asset	—		—		—		—		—		3
Net (gain)/loss	30		9		11		1		—		1
Net periodic pension cost (income)	$	5	$	3	$	(5)	$	—	$	1	$	4
Postretirement Benefits
Service cost	$	5	$	1	$	2	$	1	$	—	$	—
Interest cost	18		4		6		—		—		2
Expected return on plan assets	(16)		(6)		(7)		—		—		(1)
Amortization:
Prior service costs	—		1		—		—		—		—
Regulatory asset	—		—		—		—		—		1
Net (gain)/loss	(1)		—		1		—		—		—
Net periodic postretirement benefit cost	$	6	$	—	$	2	$	1	$	—	$	2

Nine Months Ended September 30, 2019	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Pension Plans
Service cost	$	219	$	51	$	56	$	9	$	5	$	19
Interest cost	369		85		116		17		4		27
Expected return on plan assets	(664)		(154)		(219)		(30)		(7)		(45)
Amortization:
Prior service costs	2		1		1		—		—		(2)
Regulatory asset	—		—		—		—		—		10
Net (gain)/loss	90		27		33		4		—		2
Net periodic pension cost (income)	$	16	$	10	$	(13)	$	—	$	2	$	11
Postretirement Benefits
Service cost	$	14	$	3	$	4	$	1	$	—	$	1
Interest cost	52		12		19		2		—		7
Expected return on plan assets	(49)		(19)		(19)		(1)		—		(4)
Amortization:
Prior service costs	2		3		—		—		—		—
Regulatory asset	—		—		—		—		—		4
Net (gain)/loss	(2)		—		1		—		—		(2)
Net periodic postretirement benefit cost	$	17	$	(1)	$	5	$	2	$	—	$	6