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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2021

Fair value measurements are based on inputs of observable and unobservable market data that a market participant would use in pricing the asset or liability. The use of observable inputs is maximized where available and the use of unobservable inputs is minimized for fair value measurement and reflects a three-tier fair value hierarchy that prioritizes inputs to valuation techniques used for fair value measurement.

•Level 1 consists of observable market data in an active market for identical assets or liabilities.

•Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable.

•Level 3 consists of unobservable market data. The input may reflect the assumptions of each Registrant of what a market participant would use in pricing an asset or liability. If there is little available market data, then each Registrant's own assumptions are the best available information.

In the case of multiple inputs being used in a fair value measurement, the lowest level input that is significant to the fair value measurement represents the level in the fair value hierarchy in which the fair value measurement is reported.

Net asset value as a practical expedient is the classification used for assets that do not have readily determined fair values. Fund managers value the assets using various inputs and techniques depending on the nature of the underlying investments.

At December 31, 2021, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2021:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$	24	$	195	$	—	$	—	$	219
Interest rate derivatives	—		19		—		—		19

Investments in trusts:(b)(c)
Domestic equity	791		225		—		—		1,016
Foreign equity	165		188		—		—		353
U.S. Treasury and government agency securities	—		314		—		—		314
Municipal bonds	—		56		—		—		56
Pooled funds – fixed income	—		13		—		—		13
Corporate bonds	1		522		—		—		523
Mortgage and asset backed securities	—		93		—		—		93
Private equity	—		—		—		150		150
Cash and cash equivalents	2		—		—		—		2
Other	22		25		—		—		47
Cash equivalents	1,160		14		—		—		1,174
Other investments	9		35		—		—		44
Total	$	2,174	$	1,699	$	—	$	150	$	4,023
Liabilities:
Energy-related derivatives(a)	$	10	$	36	$	—	$	—	$	46
Interest rate derivatives	—		29		—		—		29
Foreign currency derivatives	—		79		—		—		79
Contingent consideration	—		—		14		—		14
Other	—		13		—		—		13
Total	$	10	$	157	$	14	$	—	$	181


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2021:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	55	$	—	$	—	$	55
Nuclear decommissioning trusts:(b)
Domestic equity	468		216		—		—		684
Foreign equity	165		—		—		—		165
U.S. Treasury and government agency securities	—		21		—		—		21
Municipal bonds	—		1		—		—		1
Corporate bonds	1		271		—		—		272
Mortgage and asset backed securities	—		22		—		—		22
Private equity	—		—		—		150		150
Other	9		—		—		—		9
Cash equivalents	839		14		—		—		853
Other investments	—		35		—		—		35
Total	$	1,482	$	635	$	—	$	150	$	2,267
Liabilities:
Energy-related derivatives	$	—	$	11	$	—	$	—	$	11

Georgia Power
Assets:
Energy-related derivatives	$	—	$	75	$	—	$	—	$	75

Nuclear decommissioning trusts:(b)(c)
Domestic equity	323		1		—		—		324
Foreign equity	—		185		—		—		185
U.S. Treasury and government agency securities	—		293		—		—		293
Municipal bonds	—		55		—		—		55
Corporate bonds	—		251		—		—		251
Mortgage and asset backed securities	—		71		—		—		71
Other	13		25		—		—		38

Total	$	336	$	956	$	—	$	—	$	1,292
Liabilities:
Energy-related derivatives	$	—	$	8	$	—	$	—	$	8


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2021:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	56	$	—	$	—	$	56

Cash equivalents	40		—		—		—		40
Total	$	40	$	56	$	—	$	—	$	96
Liabilities:
Energy-related derivatives	$	—	$	5	$	—	$	—	$	5

Southern Power
Assets:
Energy-related derivatives	$	—	$	4	$	—	$	—	$	4




Liabilities:

Foreign currency derivatives	$	—	$	16	$	—	$	—	$	16
Contingent consideration	—		—		14		—		14
Other	—		13		—		—		13
Total	$	—	$	29	$	14	$	—	$	43

Southern Company Gas
Assets:
Energy-related derivatives(a)	$	24	$	5	$	—	$	—	$	29
Interest rate derivatives	—		6		—		—		6
Non-qualified deferred compensation trusts:
Domestic equity	—		8		—		—		8
Foreign equity	—		3		—		—		3
Pooled funds - fixed income	—		13		—		—		13
Cash equivalents	2		—		—		—		2

Total	$	26	$	35	$	—	$	—	$	61
Liabilities:
Energy-related derivatives(a)(b)	$	10	$	12	$	—	$	—	$	22
Interest rate derivatives	—		5		—		—		5
Total	$	10	$	17	$	—	$	—	$	27

(a)Excludes immaterial cash collateral.

(b)Excludes receivables related to investment income, pending investment sales, payables related to pending investment purchases, and currencies. See Note 6 under "Nuclear Decommissioning" for additional information.

(c)Includes investment securities pledged to creditors and collateral received and excludes payables related to the securities lending program. See Note 6 under "Nuclear Decommissioning" for additional information.

At December 31, 2020, assets and liabilities measured at fair value on a recurring basis during the period, together with their associated level of the fair value hierarchy, were as follows:


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2020:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$	401	$	271	$	32	$	—	$	704
Interest rate derivatives	—		20		—		—		20
Foreign currency derivatives	—		87		—		—		87
Investments in trusts:(b)(c)
Domestic equity	862		151		—		—		1,013
Foreign equity	85		253		—		—		338
U.S. Treasury and government agency securities	—		284		—		—		284
Municipal bonds	—		85		—		—		85
Pooled funds – fixed income	—		17		—		—		17
Corporate bonds	13		386		—		—		399
Mortgage and asset backed securities	—		83		—		—		83
Private equity	—		—		—		76		76
Cash and cash equivalents	1		—		—		—		1
Other	28		7		—		—		35
Cash equivalents	575		9		—		—		584
Other investments	9		24		—		—		33
Total	$	1,974	$	1,677	$	32	$	76	$	3,759
Liabilities:
Energy-related derivatives(a)	$	389	$	204	$	4	$	—	$	597

Foreign currency derivatives	—		23		—		—		23
Contingent consideration	—		—		17		—		17
Total	$	389	$	227	$	21	$	—	$	637


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2020:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Alabama Power
Assets:
Energy-related derivatives	$	—	$	12	$	—	$	—	$	12
Nuclear decommissioning trusts:(b)
Domestic equity	543		141		—		—		684
Foreign equity	85		73		—		—		158
U.S. Treasury and government agency securities	—		21		—		—		21
Municipal bonds	—		1		—		—		1
Corporate bonds	13		167		—		—		180
Mortgage and asset backed securities	—		29		—		—		29
Private equity	—		—		—		76		76
Other	7		—		—		—		7
Cash equivalents	311		9		—		—		320
Other investments	—		24		—		—		24
Total	$	959	$	477	$	—	$	76	$	1,512
Liabilities:

Energy-related derivatives	$	—	$	7	$	—	$	—	$	7

Georgia Power
Assets:
Energy-related derivatives	$	—	$	15	$	—	$	—	$	15

Nuclear decommissioning trusts:(b)(c)
Domestic equity	319		1		—		—		320
Foreign equity	—		177		—		—		177
U.S. Treasury and government agency securities	—		263		—		—		263
Municipal bonds	—		84		—		—		84
Corporate bonds	—		219		—		—		219
Mortgage and asset backed securities	—		54		—		—		54
Other	21		7		—		—		28

Total	$	340	$	820	$	—	$	—	$	1,160
Liabilities:
Energy-related derivatives	$	—	$	13	$	—	$	—	$	13


	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Asset Value as a Practical Expedient
At December 31, 2020:	(Level 1)		(Level 2)		(Level 3)		(NAV)		Total
	(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$	—	$	9	$	—	$	—	$	9

Cash equivalents	21		—		—		—		21
Total	$	21	$	9	$	—	$	—	$	30
Liabilities:
Energy-related derivatives	$	—	$	9	$	—	$	—	$	9



Southern Power
Assets:
Energy-related derivatives	$	—	$	2	$	—	$	—	$	2
Foreign currency derivatives	—		87		—		—		87

Total	$	—	$	89	$	—	$	—	$	89
Liabilities:
Energy-related derivatives	$	—	$	3	$	—	$	—	$	3
Foreign currency derivatives	—		23		—		—		23
Contingent consideration	—		—		17		—		17
Total	$	—	$	26	$	17	$	—	$	43

Southern Company Gas
Assets:
Energy-related derivatives(a)	$	401	$	233	$	32	$	—	$	666

Non-qualified deferred compensation trusts:
Domestic equity	—		9		—		—		9
Foreign equity	—		3		—		—		3
Pooled funds - fixed income	—		17		—		—		17

Cash equivalents	1		—		—		—		1
Total	$	402	$	262	$	32	$	—	$	696
Liabilities:
Energy-related derivatives(a)(b)	$	389	$	172	$	4	$	—	$	565

(a)Excludes $6 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value and cash collateral of $28 million.

Valuation Methodologies

The energy-related derivatives primarily consist of exchange-traded and over-the-counter financial products for natural gas and physical power products, including, from time to time, basis swaps. These are standard products used within the energy industry and are valued using the market approach. The inputs used are mainly from observable market sources, such as forward natural gas prices, power prices, implied volatility, and overnight index swap interest rates. Interest rate derivatives are also standard over-the-counter products that are valued using observable market data and assumptions commonly used by market participants. The fair value of interest rate derivatives reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and occasionally, implied volatility of interest rate options. The fair value of cross-currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates. The interest rate derivatives and cross-currency swaps are categorized as Level 2 under Fair Value Measurements as these inputs are based on observable data and valuations of similar instruments. See Note 14 for additional information on how these derivatives are used.

For fair value measurements of the investments within the nuclear decommissioning trusts and the non-qualified deferred compensation trusts, external pricing vendors are designated for each asset class with each security specifically assigned a primary pricing source. For investments held within commingled funds, fair value is determined at the end of each business day through the net asset value, which is established by obtaining the underlying securities' individual prices from the primary pricing source. A market price secured from the primary source vendor is then evaluated by management in its valuation of the assets within the trusts. As a general approach, fixed income market pricing vendors gather market data (including indices and market research reports) and integrate relative credit information, observed market movements, and sector news into proprietary pricing models, pricing systems, and mathematical tools. Dealer quotes and other market information, including live trading levels and pricing analysts' judgments, are also obtained when available.

The NRC requires licensees of commissioned nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. See Note 6 under "Nuclear Decommissioning" for additional information.

Southern Power has contingent payment obligations related to certain acquisitions whereby it is primarily obligated to make generation-based payments to the seller, which commenced at the commercial operation of the respective facility and continue through 2026. The obligations are categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility generation in MW-hours, as well as other inputs such as a fixed dollar amount per MW-hour, and a discount rate. The fair value of contingent consideration reflects the net present value of expected payments and any periodic change arising from forecasted generation is expected to be immaterial.

Southern Power also has payment obligations through 2040 whereby it must reimburse the transmission owners for interconnection facilities and network upgrades constructed to support connection of a Southern Power generating facility to the transmission system. The obligations are categorized as Level 2 under Fair Value Measurements as the fair value is determined using observable inputs for the contracted amounts and reimbursement period, as well as a discount rate. The fair value of the obligations reflects the net present value of expected payments.

"Other investments" include investments traded in the open market that have maturities greater than 90 days, which are categorized as Level 2 under Fair Value Measurements and are comprised of corporate bonds, bank certificates of deposit, treasury bonds, and/or agency bonds.

The fair value measurements of private equity investments held in Alabama Power's nuclear decommissioning trusts that are calculated at net asset value per share (or its equivalent) as a practical expedient totaled $150 million and $76 million at December 31, 2021 and 2020, respectively. Unfunded commitments related to the private equity investments totaled $69 million and $73 million at December 31, 2021 and 2020, respectively. Private equity investments include high-quality private equity funds across several market sectors and funds that invest in real estate assets. Private equity funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

At December 31, 2021 and 2020, other financial instruments for which the carrying amount did not equal fair value were as follows:


	Southern Company(*)		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas(*)
	(in billions)
At December 31, 2021:
Long-term debt, including securities due within one year:
Carrying amount	$	52.1	$	9.7	$	13.6	$	1.5	$	3.7	$	6.9
Fair value	57.1		10.9		15.1		1.6		4.1		7.8
At December 31, 2020:
Long-term debt, including securities due within one year:
Carrying amount	$	48.3	$	8.9	$	12.8	$	1.4	$	3.7	$	6.6
Fair value	56.3		10.7		15.2		1.6		4.2		8.0

(*)The long-term debt of Southern Company Gas is recorded at amortized cost, including the fair value adjustments at the effective date of the 2016 merger with Southern Company. Southern Company Gas amortizes the fair value adjustments over the remaining lives of the respective bonds, the latest being through 2043.

The fair values are determined using Level 2 measurements and are based on quoted market prices for the same or similar issues or on the current rates available to the Registrants.

Commodity Contracts with Level 3 Valuation Inputs

Prior to July 1, 2021, Southern Company Gas had Level 3 physical natural gas forward contracts related to Sequent. See Note 15 under "Southern Company Gas" for information regarding the sale of Sequent. The following table provides a reconciliation of Southern Company Gas' Level 3 contracts during 2021.


	2021
	(in millions)
Beginning balance	$	28
Instruments realized or otherwise settled during period	(6)
Changes in fair value	(4)
Sale of Sequent	(18)
Ending balance	$	—

Changes in fair value of Level 3 instruments represent changes in gains and losses reported on Southern Company Gas' statements of income in natural gas revenues prior to the sale of Sequent.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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