SOUTHERN CO

For the period ended Dec 31, 2023. Filed Feb 15, 2024.

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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.

FY2023 · Filed Feb 15, 2024

SO$92.34-1.1%Stored close · as of Nov 6, 2026

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Contents

Fair Value Measurements

FAIR VALUE MEASUREMENTS

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.

II-231

At December 31, 2023, 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, 2023:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$6	$49	$—	$—	$55
Investments in trusts:(b)
Domestic equity	764	216	—	—	980
Foreign equity	145	171	—	—	316
U.S. Treasury and government agency securities	—	369	—	—	369
Municipal bonds	—	48	—	—	48
Pooled funds – fixed income	—	6	—	—	6
Corporate bonds	—	389	—	—	389
Mortgage and asset backed securities	—	89	—	—	89
Private equity	—	—	—	169	169
Cash and cash equivalents	3	—	—	—	3
Other	58	3	—	9	70
Cash equivalents and restricted cash	253	15	—	—	268
Other investments	9	27	8	—	44
Total	$1,238	$1,382	$8	$178	$2,806
Liabilities:
Energy-related derivatives(a)	$46	$312	$—	$—	$358
Interest rate derivatives	—	264	—	—	264
Foreign currency derivatives	—	122	—	—	122
Contingent consideration	3	—	16	—	19
Other	—	13	—	—	13
Total	$49	$711	$16	$—	$776

II-232

	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, 2023:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Alabama Power
Assets:
Energy-related derivatives	$—	$15	$—	$—	$15
Nuclear decommissioning trusts:(b)
Domestic equity	443	208	—	—	651
Foreign equity	145	—	—	—	145
U.S. Treasury and government agency securities	—	20	—	—	20
Municipal bonds	—	1	—	—	1
Corporate bonds	—	231	—	—	231
Mortgage and asset backed securities	—	25	—	—	25
Private equity	—	—	—	169	169
Other	8	—	—	9	17
Cash equivalents and restricted cash	119	15	—	—	134
Other investments	—	27	—	—	27
Total	$715	$542	$—	$178	$1,435
Liabilities:
Energy-related derivatives	$—	$110	$—	$—	$110
Georgia Power
Assets:
Energy-related derivatives	$—	$13	$—	$—	$13
Nuclear decommissioning trusts:(b)
Domestic equity	321	1	—	—	322
Foreign equity	—	170	—	—	170
U.S. Treasury and government agency securities	—	349	—	—	349
Municipal bonds	—	47	—	—	47
Corporate bonds	—	158	—	—	158
Mortgage and asset backed securities	—	64	—	—	64
Other	50	3	—	—	53
Total	$371	$805	$—	$—	$1,176
Liabilities:
Energy-related derivatives	$—	$124	$—	$—	$124

II-233

	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, 2023:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$—	$15	$—	$—	$15
Cash equivalents	17	—	—	—	17
Total	$17	$15	$—	$—	$32
Liabilities:
Energy-related derivatives	$—	$61	$—	$—	$61
Southern Power
Assets:
Energy-related derivatives	$—	$3	$—	$—	$3
Liabilities:
Energy-related derivatives	$—	$5	$—	$—	$5
Foreign currency derivatives	—	22	—	—	22
Contingent consideration	3	—	16	—	19
Other	—	13	—	—	13
Total	$3	$40	$16	$—	$59
Southern Company Gas
Assets:
Energy-related derivatives(a)	$6	$3	$—	$—	$9
Non-qualified deferred compensation trusts:
Domestic equity	—	7	—	—	7
Foreign equity	—	1	—	—	1
Pooled funds - fixed income	—	6	—	—	6
Cash and cash equivalents	3	—	—	—	3
Total	$9	$17	$—	$—	$26
Liabilities:
Energy-related derivatives(a)(b)	$46	$12	$—	$—	$58
Interest rate derivatives	—	79	—	—	79
Total	$46	$91	$—	$—	$137

(a)Excludes cash collateral of $62 million.

(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.

II-234

At December 31, 2022, 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, 2022:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Southern Company
Assets:
Energy-related derivatives(a)	$18	$181	$—	$—	$199
Interest rate derivatives	—	12	—	—	12
Investments in trusts:(b)(c)
Domestic equity	651	178	—	—	829
Foreign equity	125	150	—	—	275
U.S. Treasury and government agency securities	—	285	—	—	285
Municipal bonds	—	51	—	—	51
Pooled funds – fixed income	—	7	—	—	7
Corporate bonds	—	412	—	—	412
Mortgage and asset backed securities	—	90	—	—	90
Private equity	—	—	—	161	161
Cash and cash equivalents	4	—	—	—	4
Other	37	12	—	—	49
Cash equivalents	1,427	20	—	—	1,447
Other investments	9	26	—	—	35
Total	$2,271	$1,424	$—	$161	$3,856
Liabilities:
Energy-related derivatives(a)	$32	$178	$—	$—	$210
Interest rate derivatives	—	302	—	—	302
Foreign currency derivatives	—	216	—	—	216
Contingent consideration	—	—	12	—	12
Other	—	13	—	—	13
Total	$32	$709	$12	$—	$753

II-235

	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, 2022:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Alabama Power
Assets:
Energy-related derivatives	$—	$62	$—	$—	$62
Nuclear decommissioning trusts:(b)
Domestic equity	396	169	—	—	565
Foreign equity	125	—	—	—	125
U.S. Treasury and government agency securities	—	19	—	—	19
Municipal bonds	—	1	—	—	1
Corporate bonds	—	225	—	—	225
Mortgage and asset backed securities	—	22	—	—	22
Private equity	—	—	—	161	161
Other	7	—	—	—	7
Cash equivalents	438	20	—	—	458
Other investments	—	26	—	—	26
Total	$966	$544	$—	$161	$1,671
Liabilities:
Energy-related derivatives	$—	$39	$—	$—	$39
Georgia Power
Assets:
Energy-related derivatives	$—	$42	$—	$—	$42
Nuclear decommissioning trusts:(b)(c)
Domestic equity	255	1	—	—	256
Foreign equity	—	149	—	—	149
U.S. Treasury and government agency securities	—	266	—	—	266
Municipal bonds	—	50	—	—	50
Corporate bonds	—	187	—	—	187
Mortgage and asset backed securities	—	68	—	—	68
Other	30	12	—	—	42
Cash equivalents	355	—	—	—	355
Total	$640	$775	$—	$—	$1,415
Liabilities:
Energy-related derivatives	$—	$62	$—	$—	$62

II-236

	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, 2022:	(Level 1)	(Level 2)	(Level 3)	(NAV)	Total
(in millions)
Mississippi Power
Assets:
Energy-related derivatives	$—	$59	$—	$—	$59
Cash equivalents	47	—	—	—	47
Total	$47	$59	$—	$—	$106
Liabilities:
Energy-related derivatives	$—	$32	$—	$—	$32
Southern Power
Assets:
Energy-related derivatives	$—	$8	$—	$—	$8
Liabilities:
Energy-related derivatives	$—	$12	$—	$—	$12
Foreign currency derivatives	—	47	—	—	47
Contingent consideration	—	—	12	—	12
Other	—	13	—	—	13
Total	$—	$72	$12	$—	$84
Southern Company Gas
Assets:
Energy-related derivatives(a)	$18	$10	$—	$—	$28
Non-qualified deferred compensation trusts:
Domestic equity	—	8	—	—	8
Foreign equity	—	1	—	—	1
Pooled funds - fixed income	—	7	—	—	7
Cash equivalents	4	—	—	—	4
Cash equivalents	50	—	—	—	50
Total	$72	$26	$—	$—	$98
Liabilities:
Energy-related derivatives(a)(b)	$32	$33	$—	$—	$65
Interest rate derivatives	—	86	—	—	86
Total	$32	$119	$—	$—	$151

(a)Excludes cash collateral of $41 million.

(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.

II-237

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 two of its acquisitions whereby it is primarily obligated to make generation-based payments to the seller, commencing at the commercial operation of each facility and continuing through 2026 and 2035, respectively. The obligations are primarily categorized as Level 3 under Fair Value Measurements as the fair value is determined using significant unobservable inputs for the forecasted facility's 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" primarily includes 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 market 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 $178 million and $161 million at December 31, 2023 and 2022, respectively. Unfunded commitments related to the private market investments totaled $87 million and $78 million at December 31, 2023 and 2022, respectively. Private market investments include high-quality private equity funds across several market sectors, funds that invest in real estate assets, and a private credit fund. Private market funds do not have redemption rights. Distributions from these funds will be received as the underlying investments in the funds are liquidated.

II-238

At December 31, 2023 and 2022, 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, 2023:
Long-term debt, including securities due within one year:
Carrying amount	$59.4	$11.2	$16.5	$1.6	$2.7	$7.8
Fair value	55.0	10.1	15.1	1.4	2.6	6.8
At December 31, 2022:
Long-term debt, including securities due within one year:
Carrying amount	$54.6	$10.6	$14.7	$1.5	$3.0	$7.4
Fair value	48.6	9.2	13.0	1.3	2.8	6.5

(*)The carrying amount of Southern Company Gas' long-term debt includes fair value adjustments from 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.

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The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.