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Derivatives (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

At September 30, 2021, the net volume of energy-related derivative contracts for natural gas positions, together with the longest hedge date over which the respective entity is hedging its exposure to the variability in future cash flows for forecasted transactions and the longest non-hedge date for derivatives not designated as hedges, were as follows:


	Net Purchased mmBtu	Longest Hedge Date	Longest Non-Hedge Date
	(in millions)
Southern Company(*)	336	2030	2024
Alabama Power	75	2024	—
Georgia Power	99	2024	—
Mississippi Power	79	2025	—
Southern Power	6	2030	2022
Southern Company Gas(*)	77	2024	2024

(*)Southern Company Gas' derivative instruments include both long and short natural gas positions. A long position is a contract to purchase natural gas and a short position is a contract to sell natural gas. Southern Company Gas' volume represents the net of long natural gas positions of 91.4 million mmBtu and short natural gas positions of 14.3 million mmBtu at September 30, 2021, which is also included in Southern Company's total volume. See Note (K) under "Southern Company Gas" for information regarding Southern Company Gas' sale of Sequent.

Schedule of Interest Rate Derivatives

At September 30, 2021, the following interest rate derivatives were outstanding:


	Notional Amount		Interest Rate Received	Weighted Average Interest Rate Paid	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2021
	(in millions)					(in millions)
Cash Flow Hedges of Forecasted Debt
Alabama Power	$	150	—	1.91%	August 2051	$	5





Fair Value Hedges of Existing Debt
Southern Company parent	400		1.75%	1-month LIBOR + 0.68%	March 2028	(2)
Southern Company parent	1,000		3.70%	1-month LIBOR + 2.36%	April 2030	3
Southern Company Gas	500		1.75%	1-month LIBOR + 0.38%	January 2031	2
Southern Company	$	2,050				$	8

Schedule of Foreign Currency Derivatives

At September 30, 2021, the following foreign currency derivatives were outstanding:


	Pay Notional		Pay Rate	Receive Notional		Receive Rate	Hedge Maturity Date	Fair Value Gain (Loss) at September 30, 2021
	(in millions)			(in millions)				(in millions)
Fair Value Hedges of Existing Debt
Southern Company parent	$	1,476	3.39%	€	1,250	1.88%	September 2027	$	(32)

Cash Flow Hedges of Existing Debt
Southern Power	$	677	2.95%	€	600	1.00%	June 2022	$	9
Southern Power	564		3.78%	500		1.85%	June 2026	—
Southern Power total	$	1,241		€	1,100			$	9

Southern Company	$	2,717		€	2,350			$	(23)

Schedule of Derivative Category and Balance Sheet Location

The fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Company
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	308	$	9	$	24	$	11
Other deferred charges and assets/Other deferred credits and liabilities	118		6		18		19


Total derivatives designated as hedging instruments for regulatory purposes	$	426	$	15	$	42	$	30
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	41	$	—	$	3	$	5
Other deferred charges and assets/Other deferred credits and liabilities	4		—		—		—
Interest rate derivatives:
Assets from risk management activities/Other current liabilities	25		—		20		—
Other deferred charges and assets/Other deferred credits and liabilities	—		16		—		—
Foreign currency derivatives:
Assets from risk management activities/Other current liabilities	9		33		—		23
Other deferred charges and assets/Other deferred credits and liabilities	11		10		87		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	90	$	59	$	110	$	28
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	29	$	29	$	388	$	331
Other deferred charges and assets/Other deferred credits and liabilities	1		—		270		232

Total derivatives not designated as hedging instruments	$	30	$	29	$	658	$	563
Gross amounts recognized	$	546	$	103	$	810	$	621
Gross amounts offset(a)	(57)		(37)		(529)		(557)
Net amounts recognized in the Balance Sheets(b)	$	489	$	66	$	281	$	64


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Alabama Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	67	$	2	$	7	$	2
Other deferred charges and assets/Other deferred credits and liabilities	37		2		5		5
Total derivatives designated as hedging instruments for regulatory purposes	$	104	$	4	$	12	$	7
Derivatives designated as hedging instruments in cash flow and fair value hedges
Interest rate derivatives:
Other current assets/Other current liabilities	$	5	$	—	$	—	$	—


Gross amounts recognized	$	109	$	4	$	12	$	7
Gross amounts offset	(3)		(3)		(7)		(7)
Net amounts recognized in the Balance Sheets	$	106	$	1	$	5	$	—

Georgia Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	124	$	2	$	7	$	5
Other deferred charges and assets/Other deferred credits and liabilities	42		2		8		8
Total derivatives designated as hedging instruments for regulatory purposes	$	166	$	4	$	15	$	13





Gross amounts recognized	$	166	$	4	$	15	$	13
Gross amounts offset	(3)		(3)		(12)		(12)
Net amounts recognized in the Balance Sheets	$	163	$	1	$	3	$	1

Mississippi Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	66	$	1	$	4	$	3
Other deferred charges and assets/Other deferred credits and liabilities	39		2		5		6
Total derivatives designated as hedging instruments for regulatory purposes	$	105	$	3	$	9	$	9





Gross amounts recognized	$	105	$	3	$	9	$	9
Gross amounts offset	(2)		(2)		(7)		(7)
Net amounts recognized in the Balance Sheets	$	103	$	1	$	2	$	2


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	8	$	—	$	2	$	2
Other deferred charges and assets/Other deferred credits and liabilities	1		—		—		—
Foreign currency derivatives:
Other current assets/Other current liabilities	9		11		—		23
Other deferred charges and assets/Other deferred credits and liabilities	11		—		87		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	29	$	11	$	89	$	25
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities	$	1	$	2	$	—	$	1



Total derivatives not designated as hedging instruments	$	1	$	2	$	—	$	1
Gross amounts recognized	$	30	$	13	$	89	$	26
Gross amounts offset	(1)		(1)		—		—
Net amounts recognized in the Balance Sheets	$	29	$	12	$	89	$	26


	At September 30, 2021				At December 31, 2020
Derivative Category and Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
	(in millions)				(in millions)
Southern Company Gas
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	51	$	4	$	6	$	1

Total derivatives designated as hedging instruments for regulatory purposes	$	51	$	4	$	6	$	1
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	33	$	—	$	1	$	3
Other deferred charges and assets/Other deferred credits and liabilities	3		—		—		—
Interest rate derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	6		—		—		—
Other deferred charges and assets/Other deferred credits and liabilities	—		4		—		—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	42	$	4	$	1	$	3
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Other current liabilities	$	28	$	27	$	388	$	330
Other deferred charges and assets/Other deferred credits and liabilities	1		—		270		232

Total derivatives not designated as hedging instruments	$	29	$	27	$	658	$	562
Gross amounts recognized	$	122	$	35	$	665	$	566
Gross amounts offset(a)	(48)		(28)		(503)		(531)
Net amounts recognized in the Balance Sheets(b)	$	74	$	7	$	162	$	35

(a)Gross amounts offset include cash collateral held on deposit in broker margin accounts of $(20) million and $28 million at September 30, 2021 and December 31, 2020, respectively.

(b)Net amounts of derivative instruments outstanding exclude immaterial premium and intrinsic value associated with weather derivatives for both periods presented.

Schedule of Pre-tax Effects of Unrealized Derivative Gains (Losses)

At September 30, 2021 and December 31, 2020, the pre-tax effects of unrealized derivative gains (losses) arising from energy-related derivative instruments designated as regulatory hedging instruments and deferred were as follows:


Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet
Derivative Category and Balance Sheet Location	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Company Gas
	(in millions)
At September 30, 2021:
Energy-related derivatives:
Other regulatory assets, current	$	(5)	$	(1)	$	(1)	$	—	$	(3)



Other regulatory liabilities, current	297		66		123		66		42
Other regulatory liabilities, deferred	112		35		40		37		—
Total energy-related derivative gains (losses)	$	404	$	100	$	162	$	103	$	39

At December 31, 2020:
Energy-related derivatives:

Other regulatory assets, deferred	$	(2)	$	—	$	(1)	$	(1)	$	—
Other regulatory liabilities, current	12		5		2		1		4
Other regulatory liabilities, deferred	2		1		1		—		—
Total energy-related derivative gains (losses)	$	12	$	6	$	2	$	—	$	4

Schedule of Pre-Tax Effects of Hedging on AOCI

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of cash flow and fair value hedge accounting on accumulated OCI were as follows:


Gain (Loss) Recognized in OCI on Derivative	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions)				(in millions)
Southern Company
Cash flow hedges:
Energy-related derivatives	$	38	$	9	$	59	$	2
Interest rate derivatives	5		1		7		(27)
Foreign currency derivatives	(36)		54		(79)		(10)
Fair value hedges(*):
Foreign currency derivatives	(4)		—		(4)		—
Total	$	3	$	64	$	(17)	$	(35)







Southern Power
Cash flow hedges:
Energy-related derivatives	$	8	$	5	$	16	$	2

Foreign currency derivatives	(36)		54		(79)		(10)
Total	$	(28)	$	59	$	(63)	$	(8)
Southern Company Gas
Cash flow hedges:
Energy-related derivatives	$	30	$	4	$	43	$	—
Interest rate derivatives	—		1		—		(24)
Total	$	30	$	5	$	43	$	(24)

(*)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in OCI.

Schedule of Pre-Tax Effects of Cash Flow and Fair Value Hedging on Income

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of cash flow and fair value hedge accounting on income were as follows:


Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships	For the Three Months Ended September 30,				For the Nine Months Ended September 30,

	2021		2020		2021		2020
	(in millions)				(in millions)
Southern Company
Total cost of natural gas	$	129	$	71	$	943	$	654
Gain (loss) on energy-related cash flow hedges(a)	2		—		—		(8)
Total depreciation and amortization	896		889		2,658		2,619
Gain (loss) on energy-related cash flow hedges(a)	3		(1)		6		(3)
Total interest expense, net of amounts capitalized	(451)		(443)		(1,352)		(1,343)
Gain (loss) on interest rate cash flow hedges(a)	(7)		(6)		(20)		(19)
Gain (loss) on foreign currency cash flow hedges(a)	(6)		(6)		(18)		(18)
Gain (loss) on interest rate fair value hedges(b)	(4)		(3)		(16)		27
Total other income (expense), net	131		113		297		319
Gain (loss) on foreign currency cash flow hedges(a)(c)	(34)		56		(76)		52
Gain (loss) on foreign currency fair value hedges	(32)		—		(32)		—
Amount excluded from effectiveness testing recognized in earnings	4		—		4		—










Southern Power
Total depreciation and amortization	$	132	$	129	$	383	$	367
Gain (loss) on energy-related cash flow hedges(a)	3		(1)		6		(3)
Total interest expense, net of amounts capitalized	(36)		(36)		(111)		(114)
Gain (loss) on foreign currency cash flow hedges(a)	(6)		(6)		(18)		(18)
Total other income (expense), net	2		13		10		19
Gain (loss) on foreign currency cash flow hedges(a)(c)	(34)		56		(76)		52

(a)Reclassified from accumulated OCI into earnings.

(b)For fair value hedges, changes in the fair value of the derivative contracts are generally equal to changes in the fair value of the underlying debt and have no material impact on income.

(c)The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record the euro-denominated notes.

Schedule of Cumulative Basis Adjustments for Fair Value Hedges

At September 30, 2021 and December 31, 2020, the following amounts were recorded on the balance sheets related to cumulative basis adjustments for fair value hedges:


	Carrying Amount of the Hedged Item				Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Amount of the Hedged Item
Balance Sheet Location of Hedged Items	At September 30, 2021		At December 31, 2020		At September 30, 2021		At December 31, 2020
	(in millions)				(in millions)
Southern Company
Securities due within one year	$	—	$	(1,509)	$	—	$	(10)
Long-term debt	(3,320)		—		—		—

Southern Company Gas

Long-term debt	$	(497)	$	—	$	(1)	$	—

Schedule of Pre-tax Effect of Interest Rate and Energy Related Derivatives on Income

For the three and nine months ended September 30, 2021 and 2020, the pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income of Southern Company and Southern Company Gas were as follows:


		Gain (Loss)
		Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	2021		2020		2021		2020
		(in millions)				(in millions)

Energy-related derivatives:	Natural gas revenues(*)	$	(2)	$	(30)	$	(122)	$	54

	Cost of natural gas	20		5		36		18
Total derivatives in non-designated hedging relationships		$	18	$	(25)	$	(86)	$	72

(*)Excludes immaterial gains (losses) recorded in natural gas revenues associated with weather derivatives for all periods presented.