PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment is stated at original cost or fair value at acquisition, as appropriate, less any regulatory disallowances and impairments. Original cost may include: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the interest capitalized and/or cost of equity funds used during construction.

The registrants' property, plant, and equipment in service consisted of the following at December 31, 2018 and 2017:



At December 31, 2018:	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric utilities:
Generation	$	52,324	$	16,533	$	19,145	$	2,849	$	13,246	$	—
Transmission	11,344		4,380		6,156		769		—		—
Distribution	18,746		7,389		10,389		968		—		—
General/other	4,446		2,100		1,985		314		25		—
Electric utilities' plant in service	86,860		30,402		37,675		4,900		13,271		—
Southern Company Gas:
Natural gas distribution utilities transportation and distribution	12,409		—		—		—		—		12,409
Storage facilities	1,640		—		—		—		—		1,640
Other	1,128		—		—		—		—		1,128
Southern Company Gas plant in service	15,177		—		—		—		—		15,177
Other plant in service	1,669		—		—		—		—		—
Total plant in service	$	103,706	$	30,402	$	37,675	$	4,900	$	13,271	$	15,177



At December 31, 2017:	Southern Company		Alabama Power		Georgia Power		Mississippi Power		Southern Power		Southern Company Gas
	(in millions)
Electric utilities:
Generation	$	51,279	$	14,213	$	17,038	$	2,801	$	13,737	$	—
Transmission	11,562		4,119		5,947		737		—		—
Distribution	19,239		7,034		9,978		946		—		—
General/other	4,402		1,960		1,898		289		18		—
Electric utilities' plant in service	86,482		27,326		34,861		4,773		13,755		—
Southern Company Gas:
Natural gas distribution utilities transportation and distribution	13,079		—		—		—		—		13,079
Storage facilities	1,599		—		—		—		—		1,599
Other	1,155		—		—		—		—		1,155
Southern Company Gas plant in service	15,833		—		—		—		—		15,833
Other plant in service	1,227		—		—		—		—		—
Total plant in service	$	103,542	$	27,326	$	34,861	$	4,773	$	13,755	$	15,833

The cost of replacements of property, exclusive of minor items of property, is capitalized. The cost of maintenance, repairs, and replacement of minor items of property is charged to other operations and maintenance expenses as incurred or performed with the exception of nuclear refueling costs and certain maintenance costs including those described below.

In accordance with orders from their respective state PSCs, Alabama Power and Georgia Power defer nuclear outage operations and maintenance expenses to a regulatory asset when the charges are incurred. Alabama Power amortizes the costs over a subsequent 18-month period with Plant Farley's fall outage cost amortization beginning in January of the following year and spring outage cost amortization beginning in July of the same year. Georgia Power amortizes its costs over each unit's operating cycle, or 18 months for Plant Vogtle Units 1 and 2 and 24 months for Plant Hatch Units 1 and 2.

A portion of Mississippi Power's railway track maintenance costs is charged to fuel stock and recovered through Mississippi Power's fuel clause.

The portion of Southern Company Gas' non-working gas used to maintain the structural integrity of natural gas storage facilities that is considered to be non-recoverable is recorded as depreciable property, plant, and equipment, while the recoverable or retained portion is recorded as non-depreciable property, plant, and equipment.

Capital Leases

Assets acquired under a capital lease are included in property, plant, and equipment and are further detailed in the table below for the applicable registrants:



	Southern Company			Georgia Power
	(in millions)
At December 31, 2018:
Office buildings	$	216		$	61
PPAs^(*)	—			144
Computer-related equipment	43			—
Gas pipeline	7			—
Less: Accumulated amortization	(75		)	(84		)
Balance, net of amortization	$	191		$	121

At December 31, 2017:
Office buildings	$	216		$	61
PPAs^(*)	—			144
Computer-related equipment	51			—
Gas pipeline	6			—
Less: Accumulated amortization	(72		)	(68		)
Balance, net of amortization	$	201		$	137


(*)	Represents Georgia Power's affiliate PPAs with Southern Power. See Note 1 under "Affiliate Transactions" and Note 9 under "Fuel and Power Purchase Agreements – Affiliate" for additional information.

See Note 8 under "Long-term Debt – Capital Leases" for additional information.

Depreciation and Amortization

The traditional electric operating companies' and Southern Company Gas' depreciation of the original cost of utility plant in service is provided primarily by using composite straight-line rates. The approximate rates for 2018, 2017, and 2016 are as follows:



	2018		2017		2016
	(percent)
Alabama Power	3.0	%	2.9	%	3.0	%
Georgia Power	2.6	%	2.7	%	2.8	%
Mississippi Power^(*)	4.1	%	3.7	%	4.2	%
Southern Company Gas	2.9	%	2.9	%	2.8	%


(*)	Mississippi Power's decrease in 2017 is primarily the result of recording a loss on its lignite mine in June 2017.

Depreciation studies are conducted periodically to update the composite rates. These studies are filed with the respective state PSC and/or other applicable state and federal regulatory agencies for the traditional electric operating companies and natural gas distribution utilities. In 2016, Alabama Power submitted an updated depreciation study to the FERC and received authorization to use the recommended rates beginning January 2017. The study was also provided to the Alabama PSC.

Under the terms of the 2013 ARP, Georgia Power amortized approximately $14 million annually from 2014 through 2016 of its remaining regulatory liability related to other cost of removal obligations.

Southern Company's 2017 depreciation includes $34 million of reductions in depreciation recognized by Gulf Power under the terms of its 2013 rate case settlement agreement with the Florida PSC.

When property, plant, and equipment subject to composite depreciation is retired or otherwise disposed of in the normal course of business, its original cost, together with the cost of removal, less salvage, is charged to accumulated depreciation. For other property dispositions, the applicable cost and accumulated depreciation are removed from the balance sheet accounts, and a gain or loss is recognized. Minor items of property included in the original cost of the asset are retired when the related property unit is retired.

At December 31, 2018 and 2017, accumulated depreciation for utility plant in service totaled $30.3 billion and $30.8 billion, respectively, for Southern Company and $4.3 billion and $4.5 billion, respectively, for Southern Company Gas.

Depreciation of the original cost of other plant in service is provided primarily on a straight-line basis over estimated useful lives, which for Southern Company range up to 65 years and for Southern Company Gas range from five to 15 years for transportation equipment, 40 to 60 years for storage facilities, and up to 65 years for other assets. At December 31, 2018 and 2017, accumulated depreciation for other plant in service totaled $766 million and $673 million, respectively, for Southern Company and $129 million and $75 million, respectively, for Southern Company Gas.

Southern Power

Southern Power applies component depreciation, where depreciation is computed principally by the straight-line method over the estimated useful life of the asset. Certain of Southern Power's generation assets related to natural gas-fired facilities are depreciated on a units-of-production basis, using hours or starts, to better match outage and maintenance costs to the usage of, and revenues from, these assets. The primary assets in Southern Power's property, plant, and equipment are generating facilities, which generally have estimated useful lives as follows:



Southern Power Generating Facility	Useful life
Natural gas	Up to 45 years
Biomass	Up to 40 years
Solar	Up to 35 years
Wind	Up to 30 years

Southern Power reviews its estimated useful lives and salvage values on an ongoing basis. The results of these reviews could result in changes which could have a material impact on Southern Power's net income in the near term.

When Southern Power's depreciable property, plant, and equipment is retired, or otherwise disposed of in the normal course of business, the applicable cost and accumulated depreciation is removed and a gain or loss is recognized in the statements of income.

Joint Ownership Agreements

At December 31, 2018, the registrants' percentage ownership and investment (exclusive of nuclear fuel) in jointly-owned facilities in commercial operation were as follows:



Facility (Type)	Percent Ownership			Plant in Service		Accumulated Depreciation		CWIP
				(in millions)
Alabama Power
Greene County (natural gas) Units 1 and 2	60.0	%	^(a)	$	274	$	71	$	1
Plant Miller (coal) Units 1 and 2	91.8		^(b)	2,056		619		138

Georgia Power
Plant Hatch (nuclear)	50.1	%	^(c)	$	1,569	$	615	$	54
Plant Vogtle (nuclear) Units 1 and 2	45.7		^(c)	3,804		2,150		84
Plant Scherer (coal) Units 1 and 2	8.4		^(c)	266		96		14
Plant Scherer (coal) Unit 3	75.0		^(c)	1,238		493		66
Plant Wansley (coal)	53.5		^(c)	1,179		362		160
Rocky Mountain (pumped storage)	25.4		^(d)	184		135		—

Mississippi Power
Greene County (natural gas) Units 1 and 2	40.0	%	^(a)	$	180	$	93	$	1
Plant Daniel (coal) Units 1 and 2	50.0		^(e)	723		201		7

Southern Company Gas
Dalton Pipeline (natural gas pipeline)	50.0	%	^(f)	$	270	$	6	$	—


(a)	Jointly owned by Alabama Power and Mississippi Power and operated and maintained by Alabama Power.


(b)	Jointly owned with PowerSouth and operated and maintained by Alabama Power.

(c)

Georgia Power owns undivided interests in Plants Hatch, Vogtle Units 1 and 2, Scherer, and Wansley in varying amounts jointly with one or more of the following entities: OPC, MEAG Power, Dalton, Florida Power & Light Company, JEA, and Gulf Power. Georgia Power has been contracted to operate and maintain the plants as agent for the co-owners and is jointly and severally liable for third party claims related to these plants.


(d)	Jointly owned with OPC, which is the operator of the plant.


(e)	Jointly owned by Gulf Power and Mississippi Power. In accordance with the operating agreement, Mississippi Power acts as Gulf Power's agent with respect to the operation and maintenance of these units.

(f)

Jointly owned with The Williams Companies, Inc. The Dalton Pipeline is a 115-mile natural gas pipeline that serves as an extension of the Transco natural gas pipeline system into northwest Georgia. Southern Company Gas also entered into an agreement to lease its 50% undivided ownership in the Dalton Pipeline that became effective when it was placed in service in August 2017. Under the lease, Southern Company Gas will receive approximately $26 million annually for an initial term of 25 years. The lessee is responsible for maintaining the pipeline during the lease term and for providing service to transportation customers under its FERC-regulated tariff.

Georgia Power also owns 45.7% of Plant Vogtle Units 3 and 4, which are currently under construction and had a CWIP balance of $4.5 billion at December 31, 2018. See Note 2 under "Georgia Power – Nuclear Construction" for additional information.

On December 4, 2018, Southern Power completed the sale of its 65% ownership interest in Plant Stanton Unit A, which Southern Power previously jointly-owned with OUC, the FMPA, and the KUA, to NextEra Energy. See Note 15 under "Southern Power – Sales of Natural Gas Plants" for additional information.

In conjunction with Southern Company's sale of Gulf Power, Mississippi Power and Gulf Power have committed to seek a restructuring of their 50% undivided ownership interests in Plant Daniel such that each of them would, after the restructuring, own 100% of a generating unit. On January 15, 2019, Gulf Power provided notice to Mississippi Power that Gulf Power will retire its share of the generating capacity of Plant Daniel on January 15, 2024. Mississippi Power has the option to purchase Gulf Power's ownership interest for $1 on January 15, 2024, provided that Mississippi Power exercises the option no later than 120 days prior to that date. Mississippi Power is assessing the potential operational and economic effects of Gulf Power's notice. The ultimate outcome of these matters remains subject to completion of Mississippi Power's evaluations and applicable regulatory approvals, including the FERC and the Mississippi PSC, and cannot now be determined. See Note 15 under "Southern Company's Sale of Gulf Power" for information regarding the sale of Gulf Power.

The registrants' proportionate share of their jointly-owned facility operating expenses is included in the corresponding operating expenses in the statements of income and each registrant is responsible for providing its own financing.

Assets Subject to Lien

On October 2, 2018, the Mississippi PSC approved executed agreements between Mississippi Power and its largest retail customer, Chevron Products Company (Chevron), for Mississippi Power to continue providing retail service to the Chevron refinery in Pascagoula, Mississippi through 2038. The agreements grant Chevron a security interest in the co-generation assets, with a net book value of approximately $101 million at December 31, 2018, located at the refinery that is exercisable upon the occurrence of (i) certain bankruptcy events or (ii) other events of default coupled with specific reductions in steam output at the facility and a downgrade of Mississippi Power's credit rating to below investment grade by two of the three rating agencies.

Under the terms of the PPA and the expansion PPA for Southern Power's Plant Mankato, which was acquired in 2016, approximately $563 million of assets, primarily related to property, plant, and equipment, are subject to lien at December 31, 2018. See Note 15 under "Southern Power – Sales of Natural Gas Plants" for additional information regarding the proposed sale of Plant Mankato.

See Note 3 under "General Litigation Matters – Southern Power" for information regarding liens on Southern Power's Roserock facility.

See Note 8 under "Secured Debt" for information regarding debt secured by certain assets of Georgia Power, Mississippi Power, and Southern Company Gas.