Stock-based compensation primarily in the form of Southern Company performance share units (PSU) and restricted stock units (RSU) may be granted through the Equity and Incentive Compensation Plan to Southern Company system employees ranging from line management to executives.

At December 31, 2021, the number of current and former employees participating in stock-based compensation programs for the Registrants was as follows:


	Southern Company	Alabama Power	Georgia Power	Mississippi Power	Southern Power	Southern Company Gas
Number of employees	1,728	241	271	70	45	173

The majority of PSUs and RSUs awarded contain terms where employees become immediately vested in PSUs and RSUs upon retirement. As a result, compensation expense for employees that are retirement eligible at the grant date is recognized

immediately, while compensation expense for employees that become retirement eligible during the vesting period is recognized over the period from grant date to the date of retirement eligibility. In addition, the Registrants recognize forfeitures as they occur.

PSUs granted to employees vest at the end of a three-year performance period. Shares of Southern Company common stock are delivered to employees at the end of the performance period with the number of shares issued ranging from 0% to 200% of the target number of PSUs granted, based on achievement of the performance goals established by the Compensation Committee of the Southern Company Board of Directors.

Southern Company has issued three types of PSUs, each with a unique performance goal. These types of PSUs include total shareholder return (TSR) awards based on the TSR for Southern Company common stock during the three-year performance period as compared to a group of industry peers; ROE awards based on Southern Company's equity-weighted return over the performance period; and EPS awards based on Southern Company's cumulative EPS over the performance period. EPS awards were last granted in 2017.

The fair value of TSR awards is determined as of the grant date using a Monte Carlo simulation model. In determining the fair value of the TSR awards issued to employees, the expected volatility is based on the historical volatility of Southern Company's stock over a period equal to the performance period. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the awards. The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of TSR awards granted:


Year Ended December 31	2021	2020	2019
Expected volatility	30.0%	15.4%	15.6%
Expected term (in years)	3	3	3
Interest rate	0.2%	1.4%	2.4%
Weighted average grant-date fair value	$69.06	$77.65	$62.71

The Registrants recognize TSR award compensation expense on a straight-line basis over the three-year performance period without remeasurement.

The fair values of EPS awards and ROE awards are based on the closing stock price of Southern Company common stock on the date of the grant. The weighted average grant-date fair value of the ROE awards granted during 2021, 2020, and 2019 was $59.49, $68.42, and $49.38, respectively. Compensation expense for EPS and ROE awards is generally recognized ratably over the three-year performance period adjusted for expected changes in EPS and ROE performance. Total compensation cost recognized for vested EPS awards and ROE awards reflects final performance metrics.

Southern Company had 2.2 million unvested PSUs outstanding at December 31, 2020. In February 2021, the PSUs that vested for the three-year performance period ended December 31, 2020 were converted into 2.5 million shares outstanding at a share price of $60.10. During 2021, Southern Company granted 1.3 million PSUs and 1.3 million PSUs were vested or forfeited, resulting in 2.2 million unvested PSUs outstanding at December 31, 2021. In February 2022, the PSUs that vested for the three-year performance period ended December 31, 2021 were converted into 2.5 million shares outstanding at a weighted average share price of $66.57.

Total PSU compensation cost, and the related tax benefit recognized in income, for the years ended December 31, 2021, 2020, and 2019 are as follows:


	2021		2020		2019
	(in millions)
Southern Company
Compensation cost recognized in income	$	112	$	84	$	77
Tax benefit of compensation cost recognized in income	29		22		20












Southern Company Gas
Compensation cost recognized in income	$	17	$	13	$	14
Tax benefit of compensation cost recognized in income	4		4		4

Total PSU compensation cost and the related tax benefit recognized in income were immaterial for all periods presented for all other Registrants. The compensation cost related to the grant of Southern Company PSUs to the employees of each Subsidiary Registrant is recognized in each Subsidiary Registrant's financial statements with a corresponding credit to equity representing a capital contribution from Southern Company.

At December 31, 2021, Southern Company's total unrecognized compensation cost related to PSUs was $32 million and is expected to be recognized over a weighted-average period of approximately 19 months. The total unrecognized compensation cost related to PSUs at December 31, 2021 was immaterial for all other Registrants.

The fair value of RSUs is based on the closing stock price of Southern Company common stock on the date of the grant. The weighted average grant-date fair values of RSUs granted during 2021, 2020, and 2019 were $59.56, $67.60, and $50.44, respectively. For most RSU awards, one-third of the RSUs vest each year throughout a three-year service period and compensation cost for RSUs is generally recognized over the corresponding one-, two-, or three-year vesting period. Shares of Southern Company common stock are delivered to employees at the end of each vesting period.

Southern Company had 1.2 million RSUs outstanding at December 31, 2020. During 2021, Southern Company granted 0.5 million RSUs and 0.6 million RSUs were vested or forfeited, resulting in 1.1 million unvested RSUs outstanding at December 31, 2021, including RSUs related to employee retention agreements.

For the years ended December 31, 2021, 2020, and 2019, Southern Company's total compensation cost for RSUs recognized in income was $32 million, $29 million, and $28 million, respectively. The related tax benefit also recognized in income was $8 million, $8 million, and $7 million for the years ended December 31, 2021, 2020, and 2019, respectively. Total unrecognized compensation cost related to RSUs at December 31, 2021, which is being recognized over a weighted-average period of approximately 16 months, is immaterial for Southern Company.

Total RSUs outstanding and total compensation cost and related tax benefit for the RSUs recognized in income for the years ended December 31, 2021, 2020, and 2019, as well as the total unrecognized compensation cost at December 31, 2021, were immaterial for all other Registrants. The compensation cost related to the grant of Southern Company RSUs to the employees of each Subsidiary Registrant is recognized in such Subsidiary Registrant's financial statements with a corresponding credit to equity representing a capital contribution from Southern Company.

In 2015, Southern Company discontinued granting stock options. As of December 31, 2017, all stock option awards were vested and compensation cost fully recognized. Stock options expire no later than 10 years after the grant date and the latest possible exercise will occur by November 2024. At December 31, 2021, the weighted average remaining contractual term for the options outstanding and exercisable was approximately 19 months.


	Shares Subject to Option	Weighted Average Exercise Price
	(in millions)
Outstanding at December 31, 2020	4.3	$	43.04
Exercised	1.5	43.21

Outstanding and Exercisable at December 31, 2021	2.8	$	42.95

Southern Company's cash receipts from issuances related to stock options exercised under the share-based payment arrangements for the years ended December 31, 2021, 2020, and 2019 were $66 million, $66 million, and $482 million, respectively.


	Southern Company		Georgia Power		Southern Company Gas
	(in millions)
Total intrinsic value for outstanding and exercisable options	$	71	$	17	$	8

The aggregate intrinsic value for the options outstanding and exercisable was immaterial for Alabama Power, Mississippi Power, and Southern Power at December 31, 2021.

Total intrinsic value of options exercised, and the related tax benefit, for the years ended December 31, 2021, 2020, and 2019 are presented below:


Year Ended December 31	2021		2020		2019
	(in millions)
Southern Company
Intrinsic value of options exercised	$	34	$	38	$	167
Tax benefit of options exercised	7		9		35
Alabama Power
Intrinsic value of options exercised	$	3	$	5	$	21
Tax benefit of options exercised	1		1		4
Georgia Power
Intrinsic value of options exercised	$	14	$	9	$	30
Tax benefit of options exercised	3		2		6

Total intrinsic value of options exercised, and the related tax benefit recognized in income, for the years ended December 31, 2021, 2020, and 2019 were immaterial for Mississippi Power, Southern Power, and Southern Company Gas.