Derivatives (Tables)

At December 31, 2018, 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^(*)	431	2022	2029
Alabama Power	74	2022	—
Georgia Power	153	2022	—
Mississippi Power	63	2022	—
Southern Power	15	2020	—
Southern Company Gas^(*)	120	2021	2029

(*)

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 4,159 million mmBtu and short natural gas positions of 4,039 million mmBtu at December 31, 2018, which is also included in Southern Company's total volume.

At December 31, 2018, the following interest rate derivatives were outstanding:



	Notional Amount		Interest Rate Received	Weighted Average Interest Rate Paid	Hedge Maturity Date	Fair Value Gain (Loss) December 31, 2018
	(in millions)					(in millions)
Fair Value Hedges of Existing Debt
Southern Company^(*)	$	300	2.75%	3-month LIBOR + 0.92%	June 2020	$	(4	)
Southern Company^(*)	1,500		2.35%	1-month LIBOR + 0.87%	July 2021	(43		)
Georgia Power	200		4.25%	3-month LIBOR + 2.46%	December 2019	(2		)
Southern Company Consolidated	$	2,000				$	(49	)


(*)	Represents the Southern Company parent entity.

At December 31, 2018, the following foreign currency derivatives were outstanding:



	Pay Notional		Pay Rate	Receive Notional		Receive Rate	Hedge Maturity Date	Fair Value Gain (Loss) at December 31, 2018
	(in millions)			(in millions)				(in millions)
Cash Flow Hedges of Existing Debt
Southern Power	$	677	2.95%	€	600	1.00%	June 2022	$	25
Southern Power	564		3.78%	500		1.85%	June 2026	27
Total	$	1,241		€	1,100			$	52

At December 31, 2018 and 2017, the fair value of energy-related derivatives, interest rate derivatives, and foreign currency derivatives was reflected in the balance sheets as follows:



	2018						2017
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)
Southern Company
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	8		$	23		$	10		$	43
Other deferred charges and assets/Other deferred credits and liabilities	9			26			7			24
Assets held for sale, current/Liabilities held for sale, current	—			6			—			—
Total derivatives designated as hedging instruments for regulatory purposes	$	17		$	55		$	17		$	67
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	3		$	7		$	3		$	14
Other deferred charges and assets/Other deferred credits and liabilities	1			2			—			—
Interest rate derivatives:
Other current assets/Other current liabilities	—			19			1			4
Other deferred charges and assets/Other deferred credits and liabilities	—			30			—			34
Foreign currency derivatives:
Other current assets/Other current liabilities	—			23			—			23
Other deferred charges and assets/Other deferred credits and liabilities	75			—			129			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	79		$	81		$	133		$	75
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities	$	561		$	575		$	380		$	437
Other deferred charges and assets/Other deferred credits and liabilities	180			325			170			215
Total derivatives not designated as hedging instruments	$	741		$	900		$	550		$	652
Gross amounts recognized	$	837		$	1,036		$	700		$	794
Gross amounts offset^(a)	$	(524	)	$	(801	)	$	(405	)	$	(598	)
Net amounts recognized in the Balance Sheets^(b)	$	313		$	235		$	295		$	196



	2018						2017
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)
Alabama Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	3		$	4		$	2		$	6
Other deferred charges and assets/Other deferred credits and liabilities	3			6			2			4
Total derivatives designated as hedging instruments for regulatory purposes	$	6		$	10		$	4		$	10
Gross amounts recognized	$	6		$	10		$	4		$	10
Gross amounts offset	$	(4	)	$	(4	)	$	(4	)	$	(4	)
Net amounts recognized in the Balance Sheets	$	2		$	6		$	—		$	6

Georgia Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	2		$	8		$	2		$	9
Other deferred charges and assets/Other deferred credits and liabilities	4			13			4			10
Total derivatives designated as hedging instruments for regulatory purposes	$	6		$	21		$	6		$	19
Derivatives designated as hedging instruments in cash flow and fair value hedges
Interest rate derivatives:
Other current assets/Other current liabilities	$	—		$	2		$	—		$	4
Other deferred charges and assets/Other deferred credits and liabilities	—			—			—			1
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	—		$	2		$	—		$	5
Gross amounts recognized	$	6		$	23		$	6		$	24
Gross amounts offset	$	(6	)	$	(6	)	$	(6	)	$	(6	)
Net amounts recognized in the Balance Sheets	$	—		$	17		$	—		$	18



	2018						2017
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)
Mississippi Power
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Other current assets/Other current liabilities	$	1		$	3		$	1		$	6
Other deferred charges and assets/Other deferred credits and liabilities	2			6			1			3
Total derivatives designated as hedging instruments for regulatory purposes	$	3		$	9		$	2		$	9
Gross amounts recognized	$	3		$	9		$	3		$	9
Gross amounts offset	$	(2	)	$	(2	)	$	(2	)	$	(2	)
Net amounts recognized in the Balance Sheets	$	1		$	7		$	1		$	7

Southern Power
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Other current assets/Other current liabilities	$	3		$	6		$	3		$	11
Other deferred charges and assets/Other deferred credits and liabilities	1			2			—			—
Foreign currency derivatives:
Other current assets/Other current liabilities	—			23			—			23
Other deferred charges and assets/Other deferred credits and liabilities	75			—			129			—
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	79		$	31		$	132		$	34
Derivatives not designated as hedging instruments
Energy-related derivatives:
Other current assets/Other current liabilities	$	—		$	—		$	—		$	2
Total derivatives not designated as hedging instruments	$	—		$	—		$	—		$	2
Gross amounts recognized	$	79		$	31		$	132		$	36
Gross amounts offset	$	(3	)	$	(3	)	$	(3	)	$	(3	)
Net amounts recognized in the Balance Sheets	$	76		$	28		$	129		$	33



	2018						2017
Derivative Category and Balance Sheet Location	Assets			Liabilities			Assets			Liabilities
	(in millions)
Southern Company Gas
Derivatives designated as hedging instruments for regulatory purposes
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	2		$	8		$	5		$	8
Other deferred charges and assets/Other deferred credits and liabilities	—			1			—			—
Total derivatives designated as hedging instruments for regulatory purposes	$	2		$	9		$	5		$	8
Derivatives designated as hedging instruments in cash flow and fair value hedges
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	—		$	1		$	—		$	3
Total derivatives designated as hedging instruments in cash flow and fair value hedges	$	—		$	1		$	—		$	3
Derivatives not designated as hedging instruments
Energy-related derivatives:
Assets from risk management activities/Liabilities from risk management activities-current	$	559		$	574		$	379		$	434
Other deferred charges and assets/Other deferred credits and liabilities	180			325			170			215
Total derivatives not designated as hedging instruments	$	739		$	899		$	549		$	649
Gross amounts recognized	$	741		$	909		$	554		$	660
Gross amounts offset^(a)	$	(508	)	$	(785	)	$	(390	)	$	(583	)
Net amounts recognized in the Balance Sheets ^(b)	$	233		$	124		$	164		$	77


(a)	Gross amounts offset include cash collateral held on deposit in broker margin accounts of $277 million and $193 million at December 31, 2018 and 2017, respectively.


(b)	Net amounts of derivative instruments outstanding exclude premium and intrinsic value associated with weather derivatives of $8 million and $11 million at December 31, 2018 and 2017, respectively.

At December 31, 2018 and 2017, 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 at December 31, 2018
Derivative Category and Balance Sheet Location	Southern Company			Alabama Power			Georgia Power			Mississippi Power			Southern Company Gas
	(in millions)
Energy-related derivatives:
Other regulatory assets, current	$	(19	)	$	(3	)	$	(6	)	$	(2	)	$	(8	)
Other regulatory assets, deferred	(16		)	(3		)	(9		)	(4		)	—
Assets held for sale, current	(6		)	—			—			—			—
Other regulatory liabilities, current	1			—			—			—			1
Total energy-related derivative gains (losses)	$	(40	)	$	(6	)	$	(15	)	$	(6	)	$	(7	)



Regulatory Hedge Unrealized Gain (Loss) Recognized in the Balance Sheet at December 31, 2017
Derivative Category and Balance Sheet Location	Southern Company^(*)			Alabama Power			Georgia Power			Mississippi Power			Southern Company Gas^(*)
	(in millions)
Energy-related derivatives:
Other regulatory assets, current	$	(34	)	$	(4	)	$	(7	)	$	(5	)	$	(4	)
Other regulatory assets, deferred	(18		)	(3		)	(6		)	(2		)	—
Other regulatory liabilities, current	7			1			—			—			7
Other regulatory liabilities, deferred	1			—			—			—			—
Total energy-related derivative gains (losses)	$	(44	)	$	(6	)	$	(13	)	$	(7	)	$	3


(*)	Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $6 million at December 31, 2017.

For the years ended December 31, 2018, 2017, and 2016, the pre-tax effects of cash flow hedge accounting on AOCI for the applicable registrants were as follows:



Gain (Loss) Recognized in OCI on Derivative	2018			2017			2016
	(in millions)
Southern Company
Energy-related derivatives	$	17		$	(47	)	$	18
Interest rate derivatives	(1		)	(2		)	(180		)
Foreign currency derivatives	(78		)	140			(58		)
Total	$	(62	)	$	91		$	(220	)
Southern Power
Energy-related derivatives	$	10		$	(38	)	$	14
Foreign currency derivatives	(78		)	140			(58		)
Total	$	(68	)	$	102		$	(44	)



	Successor								Predecessor
Gain (Loss) Recognized in OCI on Derivative	Year Ended December 31, 2018		Year Ended December 31, 2017			July 1, 2016 through December 31, 2016			January 1, 2016 through June 30, 2016
	(in millions)								(in millions)
Southern Company Gas
Energy-related derivatives	$	7	$	(9	)	$	2		$	—
Interest rate derivatives	—		—			(5		)	(64		)
Total	$	7	$	(9	)	$	(3	)	$	(64	)

The pre-tax effects of cash flow and fair value hedge accounting on income for the years ended December 31, 2018, 2017, and 2016 were as follows:



Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships	2018			2017			2016
	(in millions)
Southern Company
Total cost of natural gas	$	1,539		$	1,601		$	613
Gain (loss) on energy-related cash flow hedges^(a)	2			(2		)	(1		)
Total depreciation and amortization	3,131			3,010			2,502
Gain (loss) on energy-related cash flow hedges^(a)	7			(16		)	2
Total interest expense, net of amounts capitalized	(1,842		)	(1,694		)	(1,317		)
Gain (loss) on interest rate cash flow hedges^(a)	(21		)	(21		)	(18		)
Gain (loss) on foreign currency cash flow hedges^(a)	(24		)	(23		)	(13		)
Gain (loss) on interest rate fair value hedges^(b)	(12		)	(22		)	(21		)
Total other income (expense), net	114			163			50
Gain (loss) on foreign currency cash flow hedges^(a)(c)	(60		)	160			(82		)
Alabama Power
Total interest expense, net of amounts capitalized	$	(323	)	$	(305	)	$	(302	)
Gain (loss) on interest rate cash flow hedges^(a)	(6		)	(6		)	(6		)
Georgia Power
Total interest expense, net of amounts capitalized	$	(397	)	$	(419	)	$	(388	)
Gain (loss) on interest rate cash flow hedges^(a)	(4		)	(4		)	(4		)
Gain (loss) on interest rate fair value hedges^(b)	2			(3		)	(1		)
Mississippi Power
Total interest expense, net of amounts capitalized	$	(76	)	$	(42	)	$	(74	)
Gain (loss) on interest rate cash flow hedges^(a)	(2		)	(2		)	3
Southern Power
Total depreciation and amortization	$	493		$	503		$	352
Gain (loss) on energy-related cash flow hedges^(a)	7			(17		)	2
Total interest expense, net of amounts capitalized	(183		)	(191		)	(117		)
Gain (loss) on foreign currency cash flow hedges^(a)	(24		)	(23		)	(13		)
Total other income (expense), net	23			1			6
Gain (loss) on foreign currency cash flow hedges^(a)(c)	(60		)	159			(82		)


(a)	Reclassified from AOCI 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 AOCI 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.



	Successor								Predecessor
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships	Year Ended December 31, 2018		Year Ended December 31, 2017			July 1, 2016 through December 31, 2016			January 1, 2016 through June 30, 2016
	(in millions)								(in millions)
Southern Company Gas
Total cost of natural gas	$	1,539	$	1,601		$	613		$	755
Gain (loss) on energy-related cash flow hedges^(*)	2		(2		)	(1		)	(1		)


(*)	Amounts reflect gains or losses on cash flow hedges that were reclassified from AOCI into earnings.

At December 31, 2018 and 2017, 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 December 31, 2018			At December 31, 2017			At December 31, 2018		At December 31, 2017
	(in millions)						(in millions)
Southern Company
Securities due within one year	$	(498	)	$	(746	)	$	2	$	3
Long-term debt	(2,052		)	(2,553		)	41		35

Georgia Power
Securities due within one year	$	(498	)	$	(746	)	$	2	$	3
Long-term debt	—			(498		)	—		1

The pre-tax effects of energy-related derivatives not designated as hedging instruments on the statements of income for the years ended December 31, 2018, 2017, and 2016 for the applicable registrants were as follows:



		Gain (Loss)
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	2018			2017			2016
		(in millions)
Southern Company
Energy-related derivatives	Natural gas revenues^(*)	$	(122	)	$	(80	)	$	33
	Cost of natural gas	(6		)	(2		)	3
	Wholesale electric revenues	2			(4		)	2
Total derivatives in non-designated hedging relationships		$	(126	)	$	(86	)	$	38


(*)	Excludes the impact of weather derivatives recorded in natural gas revenues of $5 million, $23 million, and $6 million for the years ended December 31, 2018, 2017, and 2016, respectively, as they are accounted for based on intrinsic value rather than fair value.



		Gain (Loss)
		Successor								Predecessor
Derivatives in Non-Designated Hedging Relationships	Statements of Income Location	For the Year Ended December 31, 2018			For the Year Ended December 31, 2017			July 1, 2016 through December 31, 2016		January 1, 2016 through June 30, 2016
					(in millions)					(in millions)
Southern Company Gas
Energy-related derivatives	Natural gas revenues^(*)	$	(122	)	$	(80	)	$	33	$	(1	)
	Cost of natural gas	(6		)	(2		)	3		(62		)
Total derivatives in non-designated hedging relationships		$	(128	)	$	(82	)	$	36	$	(63	)

(*)

Excludes the impact of weather derivatives recorded in natural gas revenues of $5 million and $23 million for the successor years ended December 31, 2018 and 2017, respectively, $6 million for the successor period of July 1, 2016 through December 31, 2016, and $3 million for the predecessor period of January 1, 2016 through June 30, 2016, as they are accounted for based on intrinsic value rather than fair value.