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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of Southern Company and its subsidiaries;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate;

•

variations in demand for electricity and natural gas, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of natural gas and other fuels;

•	limits on pipeline capacity;

•	transmission constraints;

•	effects of inflation;

•

the ability to control costs and avoid cost overruns during the development, construction, and operation of facilities, which include the development and construction of generating facilities with designs that have not been previously constructed, including changes in labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under construction, operating, or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities (including major equipment failure and system integration), and/or operational performance;

•	the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;

•	investment performance of the Southern Company system's employee and retiree benefit plans and nuclear decommissioning trust funds;

•	advances in technology;

•	ongoing renewable energy partnerships and development agreements;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

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•	the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;

•	legal proceedings and regulatory approvals and actions related to Plant Vogtle Units 3 and 4, including Georgia PSC approvals and NRC actions;

•	litigation related to the Kemper County energy facility;

•	the inherent risks involved in operating and constructing nuclear generating facilities, including environmental, health, regulatory, natural disaster, terrorism, and financial risks;

•	the inherent risks involved in transporting and storing natural gas;

•	the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;

•	internal restructuring or other restructuring options that may be pursued;

•

potential business strategies, including acquisitions or dispositions of assets or businesses, including the proposed disposition by a wholly-owned subsidiary of Southern Company Gas of Elizabethtown Gas and Elkton Gas and the potential sale of a 33% equity interest in substantially all of Southern Power's solar assets, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;

•	the possibility that the anticipated benefits from the Merger cannot be fully realized or may take longer to realize than expected and the possibility that costs related to the integration of Southern Company and Southern Company Gas will be greater than expected;

•	the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in Southern Company's and any of its subsidiaries' credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the benefits of the DOE loan guarantees;

•	the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;

•	impairments of goodwill or long-lived assets;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the registrants from time to time with the SEC.

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Item 1.	BUSINESS

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(1)	The MWs and related facility units may change due to unit rating changes or assignment of units to contracts.

(2)	Amount sold into PJM capacity market.

(3)	Alabama Municipal Electric Authority will also be served by Plant Franklin Unit 1 through December 2019.

(4)	Subject to commercial operation of the 345-MW expansion project.

(5)	Represents sale of power purchased from NCEMC under a PPA.

(6)	Century Aluminum PPA is partially served by Plant Franklin Unit 3.

(1)	Represents forecasted incremental capacity needs over the contract term.

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(a)	Totals may not add due to rounding.

(b)	Includes the traditional electric operating companies, Southern Power, and Southern Company Gas, as well as the other subsidiaries. See "Other Businesses" herein for additional information.

(c)

Reflects cost estimates for environmental regulations. These estimated expenditures do not include any potential compliance costs associated with the regulation of CO2 emissions from fossil-fuel-fired electric generating units or costs associated with closure and groundwater monitoring under the CCR Rule. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations" and FINANCIAL CONDITION AND LIQUIDITY – "Capital Requirements and Contractual Obligations" of Southern Company and each traditional electric operating company in Item 7 herein for additional information.

(d)	Includes approximately $0.9 billion for planned expenditures for plant acquisitions and placeholder growth, which may vary materially due to market opportunities and Southern Power's ability to execute its growth strategy.

(e)

Includes costs for ongoing capital projects associated with infrastructure improvement programs for certain natural gas distribution utilities that have been previously approved by their applicable state regulatory agencies. See MANAGEMENT'S DISCUSSION AND ANALYSIS – FUTURE EARNINGS POTENTIAL – "Infrastructure Replacement Programs and Capital Projects" of Southern Company Gas in Item 7 herein for additional information. See

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(*)	For information relating to the pending asset sales of Elizabethtown Gas and Elkton Gas, see MANAGEMENT'S DISCUSSION AND ANALYSIS – OVERVIEW – "Merger, Acquisition, and Disposition Activities" of Southern Company Gas in Item 7 herein and Note 11 to the financial statements of Southern Company Gas under "Proposed Sale of Elizabethtown Gas and Elkton Gas" in Item 8 herein.

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•	changes in the availability or price of natural gas and other forms of energy;

•	general economic conditions;

•	energy conservation, including state-supported energy efficiency programs;

•	legislation and regulations;

•	the cost and capability to convert from natural gas to alternative energy products; and

•	technological changes resulting in displacement or replacement of natural gas appliances.

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•	possible disruption of the integrated resource planning processes within the states in the Southern Company system's service territory;

•	delays and additional processes for developing transmission plans; and

•	possible impacts on state jurisdiction of approving, certifying, and pricing new transmission facilities.

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•	operator error or failure of equipment or processes;

•	accidents or explosions;

•	operating limitations that may be imposed by environmental or other regulatory requirements;

•	labor disputes;

•	terrorist attacks (physical and/or cyber);

•	fuel or material supply interruptions;

•	transmission disruption or capacity constraints, including with respect to the Southern Company system's and third parties' transmission, storage, and transportation facilities;

•	compliance with mandatory reliability standards, including mandatory cyber security standards;

•	implementation of new technologies;

•	information technology system failure;

•	cyber intrusion;

•	an environmental event, such as a spill or release; and

•	catastrophic events such as fires, earthquakes, floods, droughts, hurricanes, tornadoes, and storms, pandemic health events such as influenzas, or other similar occurrences.

•	the potential harmful effects on the environment and human health and safety resulting from a release of radioactive materials in connection with the operation of nuclear facilities and the storage, handling, and disposal of radioactive material, including spent nuclear fuel;

•	uncertainties with respect to the ability to dispose of spent nuclear fuel and the need for longer term on-site storage;

•	uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of licensed lives and the ability to maintain and anticipate adequate capital reserves for decommissioning;

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•	limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with the nuclear operations of Alabama Power and Georgia Power or those of other commercial nuclear facility owners in the U.S.;

•	potential liabilities arising out of the operation of these facilities;

•	significant capital expenditures relating to maintenance, operation, security, and repair of these facilities, including repairs and upgrades required by the NRC;

•	the threat of a possible terrorist attack, including a potential cyber security attack; and

•	the potential impact of an accident or natural disaster.

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•	shortages and inconsistent quality of equipment, materials, and labor;

•	changes in labor costs and productivity;

•	work stoppages;

•	contractor or supplier delay or non-performance under construction, operating, or other agreements or non-performance by other major participants in construction projects;

•	delays in or failure to receive necessary permits, approvals, tax credits, and other regulatory authorizations;

•	delays associated with start-up activities, including major equipment failure and system integration, and/or operational performance (including additional costs to satisfy any operational parameters ultimately adopted by any PSC or other applicable state regulatory agency);

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•	operational readiness, including specialized operator training and required site safety programs;

•	impacts of new and existing laws and regulations, including environmental laws and regulations;

•	the outcome of legal challenges to projects, including legal challenges to regulatory approvals;

•	failure to construct in accordance with permitting and licensing requirements;

•	failure to satisfy any environmental performance standards and the requirements of tax credits and other incentives;

•	continued public and policymaker support for such projects;

•	adverse weather conditions or natural disasters;

•	other unforeseen engineering or design problems;

•	changes in project design or scope;

•	environmental and geological conditions;

•	delays or increased costs to interconnect facilities to transmission grids; and

•	unanticipated cost increases, including materials and labor, and increased financing costs as a result of changes in market interest rates or as a result of construction schedule delays.

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•	prevailing market prices for coal, natural gas, uranium, fuel oil, biomass, and other fuels, as applicable, used in the generation facilities of the traditional electric operating companies and Southern Power and, in the case of natural gas, distributed by Southern Company Gas, including associated transportation costs, and supplies of such commodities;

•	demand for energy and the extent of additional supplies of energy available from current or new competitors;

•	liquidity in the general wholesale electricity and natural gas markets;

•	weather conditions impacting demand for electricity and natural gas;

•	seasonality;

•	transmission or transportation constraints, disruptions, or inefficiencies;

•	availability of competitively priced alternative energy sources;

•	forced or unscheduled plant outages for the Southern Company system, its competitors, or third party providers;

•	the financial condition of market participants;

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•	the economy in the Southern Company system's service territory, the nation, and worldwide, including the impact of economic conditions on demand for electricity and the demand for fuels, including natural gas;

•	natural disasters, wars, embargos, acts of terrorism, and other catastrophic events; and

•	federal, state, and foreign energy and environmental regulation and legislation.

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•	they may not result in an increase in income or provide an adequate return on capital or other anticipated benefits;

•	they may result in Southern Company or its subsidiaries entering into new or additional lines of business, which may have new or different business or operational risks;

•	they may not be successfully integrated into the acquiring company's operations and/or internal control processes;

•	the due diligence conducted prior to a transaction may not uncover situations that could result in financial or legal exposure or the acquiring company may not appropriately evaluate the likelihood or quantify the exposure from identified risks;

•	they may result in decreased earnings, revenues, or cash flow;

•	expected benefits of a transaction may be dependent on the cooperation or performance of a counterparty; or

•	for the traditional electric operating companies and Southern Company Gas, costs associated with such investments that were expected to be recovered through rates may not be recoverable.

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•	an economic downturn or uncertainty;

•	bankruptcy or financial distress at an unrelated energy company, financial institution, or sovereign entity;

•	capital markets volatility and disruption, either nationally or internationally;

•	changes in tax policy;

•	volatility in market prices for electricity and natural gas;

•	terrorist attacks or threatened attacks on the Southern Company system's facilities or unrelated energy companies' facilities;

•	war or threat of war; or

•	the overall health of the utility and financial institution industries.

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Item 1B.	UNRESOLVED STAFF COMMENTS.

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Item 3.	LEGAL PROCEEDINGS

Item 4.	MINE SAFETY DISCLOSURES

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Item 5.	MARKET FOR REGISTRANTS' COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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Item 6.	SELECTED FINANCIAL DATA

Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9A.	CONTROLS AND PROCEDURES

Item 9B.	OTHER INFORMATION

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(*)	Average cost of purchased power includes fuel purchased by the Southern Company system for tolling agreements where power is generated by the provider.

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•	the creditworthiness of the counterparties involved and the impact of credit enhancements (such as cash deposits and letters of credit);

•	events specific to a given counterparty; and

•	the impact of Southern Company's nonperformance risk on its liabilities.

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(a)	Represents the Southern Company parent entity.

(b)	Does not include Southern Power's $120 million continuing letter of credit facility for standby letters of credit expiring in 2019, of which $19 million remains unused at December 31, 2017.

(c)	Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.4 billion of these arrangements. Southern Company Gas' committed credit arrangements also include $500 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas.

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(*)	Average and maximum amounts are based upon daily balances during the 12-month periods ended December 31, 2017, 2016, and 2015.

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(a)	Includes reductions in capital lease obligations resulting from cash payments under capital leases.

(b)	Represents the Southern Company parent entity.

(c)	The senior notes were issued by Southern Company Gas Capital and guaranteed by the Southern Company Gas parent entity. Other long-term debt issued represents first mortgage bonds issued by Nicor Gas.

(d)	Includes intercompany loans from Southern Company to Mississippi Power and reductions in affiliate capital lease obligations at Georgia Power. These transactions are eliminated in Southern Company's Consolidated Financial Statements.

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(*)	Any additional credit rating downgrades at or below BB- and/or Ba3 could increase collateral requirements up to an additional $38 million.

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(a)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

(b)	Excludes premium and intrinsic value associated with weather derivatives of $11 million at December 31, 2017 and includes premium and intrinsic value associated with weather derivatives of $4 million at December 31, 2016.

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(a)

All amounts are reflected based on final maturity dates except for amounts related to FFB borrowings and certain revenue bonds. As it relates to the FFB borrowings, the final maturity date is February 20, 2044; however, principal amortization is reflected beginning in 2020. See Note 6 to the financial statements under "DOE Loan Guarantee Borrowings" and "Securities Due Within One Year" for additional information. Southern Company and its subsidiaries plan to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of December 31, 2017, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. Long-term debt excludes capital lease amounts (shown separately).

(b)	Represents preferred stock of subsidiaries. Preferred stock does not mature; therefore, amounts are provided for the next five years only.

(c)	See Notes 1 and 11 to the financial statements.

(d)	Excludes PPAs that are accounted for as leases and included in "Purchased power."

(e)	See Note 5 to the financial statements under "Unrecognized Tax Benefits" for additional information.

(f)

Includes charges recoverable through a natural gas cost recovery mechanism, or alternatively billed to marketers selling retail natural gas, and demand charges associated with Southern Company Gas' wholesale gas services. The gas supply balance includes amounts for gas commodity purchase commitments associated with Southern Company Gas' gas marketing services of 35 million mmBtu at floating gas prices calculated using forward natural gas prices at December 31, 2017 and valued at $101 million. Southern Company Gas provides guarantees to certain gas suppliers for certain of its subsidiaries in support of payment obligations.

(g)	Represents fixed-fee minimum payments for asset management agreements associated with wholesale gas services.

(h)

The Southern Company system provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. These amounts exclude contractual purchase commitments for nuclear fuel and capital expenditures covered under LTSAs which are reflected in "Fuel" and "Other," respectively. At December 31, 2017, significant purchase commitments were outstanding in connection with the construction program. See FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations" herein for additional information.

(i)

Primarily includes commitments to purchase coal, nuclear fuel, and natural gas, as well as the related transportation and storage. In most cases, these contracts contain provisions for price escalation, minimum purchase levels, and other financial commitments. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected for natural gas purchase commitments have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(j)	Estimated minimum long-term obligations for various PPA purchases from gas-fired, biomass, and wind-powered facilities.

(k)	Includes LTSAs, contracts for the procurement of limestone, contractual environmental remediation liabilities, and operation and maintenance agreements. LTSAs include price escalation based on inflation indices.

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(l)

Projections of nuclear decommissioning trust fund contributions for Plant Hatch and Plant Vogtle Units 1 and 2 are based on the 2013 ARP for Georgia Power. Alabama Power also has external trust funds for nuclear decommissioning costs; however, Alabama Power currently has no additional funding requirements. See Note 1 to the financial statements under "Nuclear Decommissioning" for additional information.

(m)

The Southern Company system forecasts contributions to the pension and other postretirement benefit plans over a three-year period. Southern Company anticipates no mandatory contributions to the qualified pension plans during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from corporate assets of Southern Company's subsidiaries. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from corporate assets of Southern Company's subsidiaries.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of Southern Company and its subsidiaries;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which Southern Company's subsidiaries operate;

•

variations in demand for electricity and natural gas, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of natural gas and other fuels;

•	limits on pipeline capacity;

•	transmission constraints;

•	effects of inflation;

•

the ability to control costs and avoid cost overruns during the development, construction, and operation of facilities, which include the development and construction of generating facilities with designs that have not been previously constructed, including changes in labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under construction, operating, or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities (including major equipment failure and system integration), and/or operational performance;

•	the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;

•	investment performance of the Southern Company system's employee and retiree benefit plans and nuclear decommissioning trust funds;

•	advances in technology;

•	ongoing renewable energy partnerships and development agreements;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

•	the ability to successfully operate the electric utilities' generating, transmission, and distribution facilities and Southern Company Gas' natural gas distribution and storage facilities and the successful performance of necessary corporate functions;

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•	legal proceedings and regulatory approvals and actions related to Plant Vogtle Units 3 and 4, including Georgia PSC approvals and NRC actions;

•	litigation related to the Kemper County energy facility;

•	the inherent risks involved in operating and constructing nuclear generating facilities, including environmental, health, regulatory, natural disaster, terrorism, and financial risks;

•	the inherent risks involved in transporting and storing natural gas;

•	the performance of projects undertaken by the non-utility businesses and the success of efforts to invest in and develop new opportunities;

•	internal restructuring or other restructuring options that may be pursued;

•

potential business strategies, including acquisitions or dispositions of assets or businesses, including the proposed disposition by a wholly-owned subsidiary of Southern Company Gas of Elizabethtown Gas and Elkton Gas and the potential sale of a 33% equity interest in substantially all of Southern Power's solar assets, which cannot be assured to be completed or beneficial to Southern Company or its subsidiaries;

•	the possibility that the anticipated benefits from the Merger cannot be fully realized or may take longer to realize than expected and the possibility that costs related to the integration of Southern Company and Southern Company Gas will be greater than expected;

•	the ability of counterparties of Southern Company and its subsidiaries to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Southern Company system's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in Southern Company's and any of its subsidiaries' credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the benefits of the DOE loan guarantees;

•	the ability of Southern Company's electric utilities to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Southern Company system's business resulting from incidents affecting the U.S. electric grid, natural gas pipeline infrastructure, or operation of generating or storage resources;

•	impairments of goodwill or long-lived assets;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by Southern Company from time to time with the SEC.

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(a)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 2 for additional information.

(b)	Asset retirement and other cost of removal obligations are recorded, deferred income tax assets are recovered, and deferred income tax liabilities are amortized over the related property lives, which may range up to 80 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities.

(c)	Recovered over either the remaining life of the original issue or, if refinanced, over the remaining life of the new issue, which may range up to 50 years.

(d)	Recovered over the remaining life of the original debt issuances, which range up to 21 years. For additional information see Note 12 under "Southern Company – Merger with Southern Company Gas."

(e)	Recovered over the life of the PPA for periods up to six years.

(f)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.

(g)	Recorded and recovered or amortized as approved or accepted by the appropriate state PSCs or other applicable regulatory agencies over periods generally not exceeding 10 years.

(h)	Includes $114 million of regulatory assets and $26 million of regulatory liabilities to be recovered over periods of eight and six years, respectively. For additional information, see Note 3 under "Kemper County Energy Facility – Rate Recovery – Kemper Settlement Agreement."

(i)

Previous under-recovery as of December 2013 is recorded and recovered or amortized as approved by the Georgia PSC through 2019. Amortization of $319 million related to the under-recovery from January 2014 through December 2017 is expected to be determined by the Georgia PSC in the 2019 base rate case. See Note 3 under "Regulatory Matters – Georgia Power – Storm Damage Recovery" for additional information.

(j)	Recovered through environmental cost recovery mechanisms when the remediation is performed or the work is performed.

(k)	Comprised of numerous immaterial components including nuclear outage, fuel-hedging losses, deferred income tax charges - Medicare subsidy, cancelled construction projects, building and generating plant leases, property tax, and other miscellaneous assets. These costs are recorded and recovered or amortized as approved by the appropriate state PSCs over periods generally not exceeding 50 years.

(l)	Recovered as storm restoration and potential reliability-related expenses are incurred as approved by the appropriate state PSCs.

(m)	Comprised of numerous immaterial components including retiree benefit plans, fuel-hedging gains, AROs, and other liabilities that are recorded and recovered or amortized as approved by the appropriate state PSCs or other applicable regulatory agencies generally over periods not exceeding 20 years.

(n)	Not earning a return as offset in rate base by a corresponding asset or liability.

(o)	Amortized as approved by the appropriate state PSCs over periods generally up to 48 years.

(p)	As a result of the Tax Reform Legislation, these accounts include certain deferred income tax assets and liabilities not subject to normalization. The recovery and amortization of these amounts will be determined by the appropriate state PSCs or other applicable regulatory agencies. See Note 3 under "Regulatory Matters" and Note 5 for additional information.

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(*)	Represents a nitrogen supply agreement for the air separation unit of the Kemper County energy facility, which was terminated following the suspension of the gasifier portion of the project. See Note 6 under "Capital Leases" for additional information.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Includes $50 million in revenue bonds classified as short term at December 31, 2017 that were remarketed in an index rate mode subsequent to December 31, 2017. Also includes $40 million in pollution control revenue bonds classified as short term since they are variable rate demand obligations supported by short-term credit facilities; however, the final maturity dates range from 2020 to 2028.

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(a)	Represents the Southern Company parent entity.

(b)	Does not include Southern Power's $120 million continuing letter of credit facility for standby letters of credit expiring in 2019, of which $19 million remains unused at December 31, 2017.

(c)	Southern Company Gas, as the parent entity, guarantees the obligations of Southern Company Gas Capital, which is the borrower of $1.4 billion of these arrangements. Southern Company Gas' committed credit arrangements also include $500 million for which Nicor Gas is the borrower and which is restricted for working capital needs of Nicor Gas.

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(*)	Includes operating leases for cellular tower space, facilities, vehicles, and other equipment.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

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(a)	Energy-related derivatives exclude $11 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.

(b)	Energy-related derivatives exclude cash collateral of $193 million.

(c)	Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, currencies, and payables related to pending investment purchases and the securities lending program. See Note 1 under "Nuclear Decommissioning" for additional information.

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(a)	Energy-related derivatives exclude $4 million associated with certain weather derivatives accounted for based on intrinsic value rather than fair value.

(b)	Energy-related derivatives exclude cash collateral of $62 million.

(c)	Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, currencies, and payables related to pending investment purchases and the securities lending program. See Note 1 under "Nuclear Decommissioning" for additional information.

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Regulatory Hedges – Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the traditional electric operating companies' and natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses.

•	Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in OCI before being recognized in the statements of income in the same period as the hedged transactions are reflected in earnings.

•	Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

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(a)	Gross amounts offset include cash collateral held on deposit in broker margin accounts of $193 million and $62 million as of December 31, 2017 and 2016, respectively.

(b)	Net amounts of derivative instruments outstanding exclude premiums and intrinsic value associated with weather derivatives of $11 million as of December 31, 2017.

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(*)	Fair value gains and losses recorded in regulatory assets and liabilities include cash collateral held on deposit in broker margin accounts of $6 million and $8 million as of December 31, 2017 and 2016, respectively.

(*)	The reclassification from accumulated OCI into other income (expense), net completely offsets currency gains and losses arising from changes in the U.S. currency exchange rates used to record euro-denominated notes.

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(*)	Excludes gains (losses) recorded in natural gas revenues associated with weather derivatives of $23 million and $6 million for the years ended December 31, 2017 and 2016, respectively.

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(a)	On July 31, 2017, Southern Power purchased 100% of the Cactus Flats facility and commenced construction. Upon placing the facility in service, Southern Power expects to close on a tax equity partnership agreement that has already been executed, subject to various customary conditions at closing, and will then own 100% of the class B membership interests.

(b)	Southern Power owns 100% of the class B membership interest under a tax equity partnership agreement.

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(a)	Southern Power owns 100% of the class A membership interests and a wholly-owned subsidiary of the seller owns 100% of the class B membership interests. Southern Power and the class B member are entitled to 51% and 49%, respectively, of all cash distributions from the project. In addition, Southern Power is entitled to substantially all of the federal tax benefits with respect to the transaction.

(b)	Southern Power originally purchased 90%, with a minority owner owning 10%. During 2017, Southern Power acquired the remaining 10% ownership interest.

(c)	In addition to the 20-year and 12-year PPAs, the facility has a 10-year contract with Allianz Risk Transfer (Bermuda) Ltd.

(d)	Under the terms of the PPA and the expansion PPA, approximately $442 million of assets, primarily related to property, plant, and equipment, are subject to lien at December 31, 2017.

(e)	The acquisition included a fully operational 375-MW natural gas-fired combined-cycle facility.

(f)	Southern Power owns 90.1%, with the minority owner, Invenergy Wind Global LLC, owning 9.9%.

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(a)	Intangible assets consist of acquired PPAs that will be amortized over 10- and 20-year terms. The estimated amortization for future periods is approximately $9 million per year. See Note 1 for additional information.

(b)	At December 31, 2016, $461 million is included in acquisitions payable on the balance sheets.

(c)	Includes approximately $281 million of contingent consideration, of which $29 million was payable at December 31, 2017.

(d)	Includes approximately $51 million of non-cash contributions recorded as capital contributions from noncontrolling interests in the statements of stockholders' equity.

(e)	Includes approximately $142 million of contingent consideration, all of which had been paid at December 31, 2016 by the noncontrolling interests.

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(a)	Attributable to Southern Company.

(b)

Segment net income (loss) for the traditional electric operating companies includes pre-tax charges for estimated probable losses on the Kemper IGCC of $3.4 billion ($2.4 billion after tax) in 2017, $428 million ($264 million after tax) in 2016, and $365 million ($226 million after tax) in 2015. See Note 3 under "Kemper County Energy Facility – Schedule and Cost Estimate" for additional information.

(c)	Segment net income (loss) for the traditional electric operating companies also includes a pre-tax charge for the write-down of Gulf Power's ownership of Plant Scherer Unit 3 of $33 million ($20 million after tax) in 2017. See Note 3 under "Regulatory Matters – Gulf Power – Retail Base Rate Cases" for additional information.

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(*)	Average and maximum amounts are based upon daily balances during the 12-month periods ended December 31, 2017, 2016, and 2015.

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(*)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

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(a)

All amounts are reflected based on final maturity dates. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of December 31, 2017, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. Long-term debt excludes capital lease amounts (shown separately).

(b)	Preferred stock does not mature; therefore, amounts are provided for the next five years only.

(c)	Includes derivative liabilities related to cash flow hedges of forecasted debt, as well as energy-related derivatives. For additional information, see Notes 1 and 11 to the financial statements.

(d)	Excludes PPAs that are accounted for as leases and are included in purchased power.

(e)

The Company provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. These amounts exclude contractual purchase commitments for nuclear fuel and capital expenditures covered under long-term service agreements which are reflected in "Fuel" and "Other," respectively. At December 31, 2017, purchase commitments were outstanding in connection with the construction program. See FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations" herein for additional information.

(f)

Includes commitments to purchase coal, nuclear fuel, and natural gas, as well as the related transportation and storage. In most cases, these contracts contain provisions for price escalation, minimum purchase levels, and other financial commitments. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected for natural gas purchase commitments have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(g)	Estimated minimum long-term obligations for various long-term commitments for the purchase of capacity and energy.

(h)	Includes long-term service agreements and contracts for the procurement of limestone. Long-term service agreements include price escalation based on inflation indices.

(i)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•

variations in demand for electricity, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of fuels;

•	effects of inflation;

•	the ability to control costs and avoid cost overruns during the development and construction of facilities, to construct facilities in accordance with the requirements of permits and licenses, and to satisfy any environmental performance standards;

•	investment performance of the Company's employee and retiree benefit plans and nuclear decommissioning trust funds;

•	advances in technology;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

•	the inherent risks involved in operating nuclear generating facilities, including environmental, health, regulatory, natural disaster, terrorism, and financial risks;

•	the ability to successfully operate generating, transmission, and distribution facilities and the successful performance of necessary corporate functions;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general;

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•	the ability of the Company to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(a)	Asset retirement and removal assets and liabilities are recorded, deferred income tax assets are recovered, and deferred income tax credits are amortized over the related property lives, which may range up to 50 years. Asset retirement and other cost of removal assets and liabilities will be settled and trued up following completion of the related activities.

(b)	Recovered over the remaining life of the original issue, which may range up to 50 years.

(c)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.

(d)	Recorded and recovered or amortized as approved or accepted by the Alabama PSC over periods not exceeding 10 years. See Note 3 under "Retail Regulatory Matters" for additional information.

(e)	Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed three and a half years. Upon final settlement, actual costs incurred are recovered through the energy cost recovery clause.

(f)	Comprised of components including generation site selection/evaluation costs, PPA capacity (to be recovered over the next 12 months), and other miscellaneous assets. Recorded as accepted by the Alabama PSC. Capitalized upon initialization of related construction projects, if applicable.

(g)	Comprised of components including mine reclamation and remediation liabilities and fuel-hedging gains. Recorded as accepted by the Alabama PSC. Mine reclamation and remediation liabilities will be settled following completion of the related activities.

(h)	Utilized as storm restoration and potential reliability-related expenses are incurred, as approved by the Alabama PSC.

(i)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 2 for additional information.

(j)	Not earning a return as offset in rate base by a corresponding asset or liability.

(k)	Included in the deferred income tax charges are $13 million for 2017 and $16 million for 2016 for the retiree Medicare drug subsidy, which is recovered and amortized, as approved by the Alabama PSC, over the average remaining service period which may range up to 15 years.

(l)	Recorded and amortized as approved by the Alabama PSC for a period up to 11 years.

(m)	Established per an order from the Alabama PSC issued on February 17, 2017 and will be amortized concurrently with the effective date of the Company's next depreciation study. See Note 3 under "Retail Regulatory Matters – Rate RSE" for additional information.

(n)	As a result of the Tax Reform Legislation, these accounts include certain deferred income tax assets and liabilities not subject to normalization. The recovery and amortization of these amounts will be established consistent with guidance provided by the Alabama PSC. See Note 5 for additional information.

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

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•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•	TOLI. Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

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Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(1)	Jointly owned with an affiliate, Mississippi Power.

(2)	Jointly owned with PowerSouth Energy Cooperative, Inc.

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(*)	Prior to October 1, 2022: $25.50; on or after October 1, 2022: Stated Capital

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(a)	Minimum lease payments have not been reduced by minimum sublease rentals of $3 million in the future.

(b)	Includes operating leases for cellular tower space.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

(*)	Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. See Note 1 under "Nuclear Decommissioning" for additional information.

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(*)	Excludes receivables related to investment income, pending investment sales, and payables related to pending investment purchases. See Note 1 under "Nuclear Decommissioning" for additional information.

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Regulatory Hedges – Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company's fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the energy cost recovery clause.

•	Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

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(*)	Average and maximum amounts are based upon daily balances during the 12-month periods ended December 31, 2017, 2016, and 2015.

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(*)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

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(a)

All amounts are reflected based on final maturity dates except for amounts related to FFB borrowings. As it relates to the FFB borrowings, the final maturity date is February 20, 2044; however, principal amortization is reflected beginning in 2020. See Note 6 to the financial statements under "DOE Loan Guarantee Borrowings" for additional information. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of December 31, 2017, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. Long-term debt excludes capital lease amounts (shown separately).

(b)	See Notes 1 and 11 to the financial statements.

(c)	Excludes PPAs that are accounted for as leases and included in "Purchased power." See Note 7 to the financial statements under "Operating Leases" for additional information.

(d)

The Company provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. These amounts exclude contractual purchase commitments for nuclear fuel and capital expenditures covered under LTSAs which are reflected in "Fuel" and "Other," respectively. At December 31, 2017, significant purchase commitments were outstanding in connection with the construction program. See FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations" and "Retail Regulatory Matters – Nuclear Construction" herein for additional information.

(e)

Includes commitments to purchase coal, nuclear fuel, and natural gas, as well as the related transportation and storage. In most cases, these contracts contain provisions for price escalation, minimum purchase levels, and other financial commitments. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected for natural gas purchase commitments have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(f)	Estimated minimum long-term obligations for various PPA purchases from gas-fired, biomass, and wind-powered facilities.

(g)	Includes LTSAs and contracts for the procurement of limestone. LTSAs include price escalation based on inflation indices.

(h)	Projections of nuclear decommissioning trust fund contributions for Plant Hatch and Plant Vogtle Units 1 and 2 are based on the 2013 ARP. See Note 1 to the financial statements under "Nuclear Decommissioning" for additional information.

(i)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•

variations in demand for electricity, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of fuels;

•	effects of inflation;

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the ability to control costs and avoid cost overruns during the development, construction, and operation of facilities, which include the development and construction of generating facilities with designs that have not been previously constructed, including changes in labor costs and productivity, adverse weather conditions, shortages and inconsistent quality of equipment, materials, and labor, contractor or supplier delay, non-performance under construction, operating, or other agreements, operational readiness, including specialized operator training and required site safety programs, unforeseen engineering or design problems, start-up activities (including major equipment failure and system integration), and/or operational performance;

•	the ability to construct facilities in accordance with the requirements of permits and licenses (including satisfaction of NRC requirements), to satisfy any environmental performance standards and the requirements of tax credits and other incentives, and to integrate facilities into the Southern Company system upon completion of construction;

•	investment performance of the Company's employee and retiree benefit plans and nuclear decommissioning trust funds;

•	advances in technology;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate cases related to fuel and other cost recovery mechanisms;

•	the ability to successfully operate generating, transmission, and distribution facilities and the successful performance of necessary corporate functions;

•	legal proceedings and regulatory approvals and actions related to Plant Vogtle Units 3 and 4, including Georgia PSC approvals and NRC actions;

•	the inherent risks involved in operating and constructing nuclear generating facilities, including environmental, health, regulatory, natural disaster, terrorism, and financial risks;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

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•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general, as well as potential impacts on the benefits of the DOE loan guarantees;

•	the ability of the Company to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(a)	Recovered and amortized over the average remaining service period which may range up to 14 years. See Note 2 for additional information.

(b)

Asset retirement and other cost of removal obligations and deferred income tax assets are recovered and deferred income tax liabilities are amortized over the related property lives, which may range up to 65 years. Asset retirement and removal liabilities will be settled and trued up following completion of the related activities. Included in the deferred income tax assets is $21 million for the retiree Medicare drug subsidy, which is recovered and amortized, as approved by the Georgia PSC, through 2022.

(c)

As a result of Tax Reform Legislation, these balances include $145 million of deferred income tax assets related to CWIP for Plant Vogtle Units 3 and 4 and $626 million of deferred income tax liabilities, neither of which are subject to normalization. The recovery and amortization of these amounts will be determined by the Georgia PSC. See Note 3 under "Retail Regulatory Matters – Rate Plans" and Note 5 for additional information.

(d)	Previous under-recovery as of December 2013 is recorded and recovered or amortized as approved by the Georgia PSC through 2019. Amortization of $319 million related to the under-recovery from January 2014 through December 2017 is expected to be determined by the Georgia PSC in the 2019 base rate case. See Note 3 under "Retail Regulatory Matters – Storm Damage Recovery" for additional information.

(e)

Amortized as approved by the Georgia PSC over periods not exceeding 10 years or through 2024. The net book value of Plant Mitchell Unit 3 at December 31, 2017 was $10 million, which will continue to be amortized through December 31, 2019 as provided in the 2013 ARP. Amortization of the remaining net book value of Plant Mitchell Unit 3 at December 31, 2019, which is expected to be approximately $4 million, and $31 million related to obsolete inventories of certain retired units is expected to be determined by the Georgia PSC in the 2019 base rate case. See Note 3 under "Retail Regulatory Matters – Integrated Resource Plan" for additional information.

(f)	Recovered over either the remaining life of the original issue or, if refinanced, over the remaining life of the new issue, which currently does not exceed 35 years.

(g)

Comprised of several components including deferred nuclear outages, environmental remediation, building lease, demand-side management tariff under-recovery, and fuel-hedging losses. Deferred nuclear outages are recorded and recovered or amortized over the outage cycles of each nuclear unit, which does not exceed 24 months. The building lease is recorded and recovered or amortized as approved by the Georgia PSC through 2020. The amortization of environmental remediation and demand-side management tariff under-recovery of $54 million at December 31, 2017 is expected to be determined by the Georgia PSC in the 2019 base rate case. Fuel-hedging losses are recovered through the Company's fuel cost recovery mechanism upon final settlement.

(h)	Recorded as earned by employees and recovered as paid, generally within one year. This includes both vacation and banked holiday pay.

(i)	Costs associated with construction of environmental controls that will not be completed as a result of unit retirements are being amortized as approved by the Georgia PSC over periods not exceeding nine years or through 2022.

(j)

Comprised of certain customer refunds and fuel-hedging gains. As ordered by the Georgia PSC on January 11, 2018, approximately $188 million of the proceeds pursuant to the Toshiba Guarantee will be refunded to customers in 2018. Fuel-hedging gains are refunded through the Company's fuel cost recovery mechanism upon final settlement. See Note 3 under "Nuclear Construction" for additional information on the customer refunds related to the Toshiba Guarantee.

(k)	Generally not earning a return as they are excluded from rate base or are offset in rate base by a corresponding asset or liability.

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Trust-owned life insurance (TOLI). Investments of the Company's taxable trusts aimed at minimizing the impact of taxes on the portfolio.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

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•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•	TOLI. Investments in TOLI policies are classified as Level 2 investments and are valued based on the underlying investments held in the policy's separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(a)	Executory costs such as taxes, maintenance, and insurance (including the estimated profit thereon) are estimated and included in total minimum lease payments.

(b)	Calculated using an adjusted incremental borrowing rate to reduce the present value of the net minimum lease payments to fair value.

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(a)	Includes operating leases for cellular tower space.

(b)	Includes operating leases for cellular tower space, facilities, railcars, and other equipment.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

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(*)	Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, currencies, and payables related to pending investment purchases and the securities lending program. See Note 1 under "Nuclear Decommissioning" for additional information.

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(*)	Includes the investment securities pledged to creditors and collateral received, and excludes receivables related to investment income, pending investment sales, currencies, and payables related to pending investment purchases and the securities lending program. See Note 1 under "Nuclear Decommissioning" for additional information.

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•

Regulatory Hedges – Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company's fuel-hedging program, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the fuel cost recovery mechanism.

•	Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

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(*)	Average and maximum amounts are based upon daily balances during the year.

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(*)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

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(a)

All amounts are reflected based on final maturity dates. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of December 31, 2017, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk.

(b)	See Notes 1 and 10 to the financial statements for additional information.

(c)	Excludes a PPA accounted for as a lease, which is included in "Purchased power."

(d)

The Company provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. These amounts exclude capital expenditures covered under long-term service agreements, which are reflected in "Other." At December 31, 2017, significant purchase commitments were outstanding in connection with the construction program. See FUTURE EARNINGS POTENTIAL – "Environmental Matters – Environmental Laws and Regulations" for additional information.

(e)

Includes commitments to purchase coal and natural gas, as well as the related transportation and storage. In most cases, these contracts contain provisions for price escalation, minimum purchase levels, and other financial commitments. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected for natural gas purchase commitments have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(f)	The capacity and transmission related costs associated with PPAs are recovered through the purchased power capacity cost recovery clause. Energy costs associated with PPAs are recovered through the fuel cost recovery clause. See Notes 3 and 7 to the financial statements for additional information.

(g)	Includes long-term service agreements and contracts for the procurement of limestone. Long-term service agreements include price escalation based on inflation indices. Limestone costs are recovered through the environmental cost recovery clause. See Note 3 to the financial statements for additional information.

(h)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•

variations in demand for electricity, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of fuels;

•	effects of inflation;

•	the ability to control costs and avoid cost overruns during the development and construction of facilities, to construct facilities in accordance with the requirements of permits and licenses, and to satisfy any environmental performance standards;

•	investment performance of the Company's employee and retiree benefit plans;

•	advances in technology;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

•	the ability to successfully operate generating, transmission, and distribution facilities and the successful performance of necessary corporate functions;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general;

•	the ability of the Company to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

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•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(a)	Recovered and amortized over the average remaining service period, which may range up to 14 years. See Note 2 for additional information.

(b)	Not earning a return as offset in rate base by a corresponding asset or liability.

(c)	Recovered over the life of the PPA for periods up to six years.

(d)	Recovered through the environmental cost recovery clause when the remediation or the work is performed.

(e)	Recorded and recovered or amortized as approved by the Florida PSC.

(f)	Asset retirement and removal assets and liabilities are recorded, and deferred income tax assets are recorded, recovered, and amortized, over the related property lives, which may range up to 65 years. Asset retirement and removal assets and liabilities will be settled and trued up following completion of the related activities.

(g)	Deferred income tax liabilities are amortized over the related property lives, which may range up to 65 years. Includes the deferred tax liabilities as a result of the Tax Reform Legislation. Amortization of $71 million of the deferred tax liabilities at December 31, 2017 is expected to be determined by the Florida PSC at a later date. See Notes 3 and 5 for additional information.

(h)	Fuel-hedging assets and liabilities are recorded over the life of the underlying hedged purchase contracts, which currently do not exceed four years. Upon final settlement, actual costs incurred are recovered through the fuel cost recovery clause.

(i)

Comprised primarily of under recovered regulatory clause revenues. Other regulatory assets costs, with the exception of vacation pay, are recorded and recovered or amortized as approved by the Florida PSC. Vacation pay, including banked holiday pay, does not earn a return as offset in rate base by a corresponding liability; it is recorded as earned by employees and recovered as paid, generally within one year.

(j)	Recovered over either the remaining life of the original issue or, if refinanced, over the life of the new issue, which may range up to 40 years.

(k)	Recorded and recovered or amortized as approved by the Florida PSC, generally within one year.

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

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•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(a)	Includes operating leases for cellular tower space.

(b)	Includes operating leases for barges, facilities, and other equipment.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

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•	Regulatory Hedges — Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company's fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the fuel cost recovery clause.

•	Cash Flow Hedges — Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in OCI before being recognized in the statements of income in the same period as the hedged transactions are reflected in earnings.

•	Not Designated — Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income as incurred.

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(*)	The unrealized gains and losses for derivative contracts subject to netting arrangements were presented net on the balance sheets.

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(*)	Average and maximum amounts are based upon daily balances during the 12-month periods ended December 31.

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(*)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

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(a)

All amounts are reflected based on final maturity dates except for amounts related to certain revenue bonds. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates as of December 31, 2017, as reflected in the statements of capitalization. Fixed rates include, where applicable, the effects of interest rate derivatives employed to manage interest rate risk. Long-term debt excludes capital lease amounts (shown separately). For additional information, see Note 6 to the financial statements.

(b)	Preferred stock does not mature; therefore, amounts are provided for the next five years only.

(c)	Derivative obligations are for energy-related derivatives. For additional information, see Notes 1 and 10 to the financial statements.

(d)	See Note 7 to the financial statements for additional information.

(e)

The Company provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. At December 31, 2017, significant purchase commitments were outstanding in connection with the construction program. These amounts exclude capital expenditures covered under long-term service agreements, which are reflected separately. See FUTURE EARNINGS POTENTIAL – "Environmental Matters" for additional information.

(f)

Fuel commitments include coal and natural gas purchases, as well as the related transportation and storage. In most cases, these contracts contain provisions for price escalation, minimum purchase levels, and other financial commitments. Natural gas purchase commitments are based on various indices at the time of delivery. Amounts reflected for natural gas purchase commitments have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(g)	Long-term service agreements include price escalation based on inflation indices.

(h)	Purchased power represents estimated minimum long-term commitments for the purchase of solar energy. Energy costs associated with solar PPAs are recovered through the fuel clause. See Notes 3 and 7 to the financial statements for additional information.

(i)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•

variations in demand for electricity, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of fuels;

•	effects of inflation;

•	the ability to control costs and avoid cost overruns during the development and construction of facilities, to construct facilities in accordance with the requirements of permits and licenses, and to satisfy any environmental performance standards, including the requirements of any tax incentives;

•	investment performance of the Company's employee and retiree benefit plans;

•	advances in technology;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to fuel and other cost recovery mechanisms;

•	the ability to successfully operate generating, transmission, and distribution facilities and the successful performance of necessary corporate functions;

•	litigation related to the Kemper County energy facility;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial to the Company;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general;

•	the ability of the Company to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

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•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(a)	Recovered and amortized over the average remaining service period which may range up to 15 years. See Note 2 for additional information.

(b)	To be recovered upon completion of removal activities over a period approved by the Mississippi PSC.

(c)	Includes $114 million of regulatory assets and $26 million of regulatory liabilities to be recovered in rates over periods of eight and six years, respectively. For additional information, see Note 3 under "Kemper County Energy Facility – Rate Recovery – Kemper Settlement Agreement."

(d)	Recovered over the related property lives up to 48 years.

(e)	Recovered through the ad valorem tax adjustment clause over a 12-month period beginning in April of the following year. See Note 3 under "Retail Regulatory Matters – Ad Valorem Tax Adjustment" for additional information.

(f)	Represents the difference between the revenue requirement under the purchase option and the revenue requirement assuming operating lease accounting treatment for the extended term, which will be amortized over a 10-year period beginning October 2021.

(g)

Comprised of vacation pay, loss on reacquired debt, and other miscellaneous assets. These costs are recorded and recovered or amortized as approved by the Mississippi PSC over periods which may range up to 50 years. This amount also includes fuel-hedging assets and liabilities which are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed three years. Upon final settlement, actual costs incurred are recovered through the ECM.

(h)	Recovered through the ECO clause in the year following the deferral.

(i)	Comprised of numerous immaterial components including deferred income tax credits and other miscellaneous liabilities that are recorded and refunded or amortized as approved by the Mississippi PSC generally over periods not exceeding one year.

(j)

This amount includes excess deferred income taxes primarily associated with Tax Reform Legislation of $375 million, of which $273 million is related to protected deferred income taxes to be recovered over the related property lives utilizing the average rate assumption method in accordance with IRS normalization principles and $102 million related to unprotected (not subject to normalization) deferred income taxes to be amortized over a period approved by the Mississippi PSC or the FERC, as appropriate. Of the total excess deferred income taxes associated with Tax Reform Legislation, $129 million is associated with the Kemper County energy facility. The unprotected portion associated with the Kemper County energy facility is $54 million, of which $38 million is being amortized over eight years for retail as approved by the Mississippi PSC on February 6, 2018 and $16 million is wholesale-related. Currently, the Company is requesting eight-year amortization for the remaining portions of the unprotected deferred income taxes associated with Tax Reform Legislation in all of its retail and wholesale rate filings. See Note 3 under "Retail Regulatory Matters" and "Kemper County Energy Facility" and Note 5 for additional information.

(k)	Collected in advance from customers to remove assets upon their retirement.

(l)	For additional information, see Note 1 under "Provision for Property Damage."

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

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Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Includes $50 million in revenue bonds classified as short term at December 31, 2017 that were remarketed in an index rate mode subsequent to December 31, 2017. Also includes $40 million in pollution control revenue bonds classified as short term since they are variable rate demand obligations supported by short-term credit facilities; however, the final maturity dates range from 2020 to 2028.

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(*)	There are 1,200,000 outstanding depositary shares, each representing one-fourth of a share of the 5.25% preferred stock.

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(a)	Includes operating leases with affiliates primarily related to cellular towers.

(b)	Primarily includes railcar and fuel handling equipment leases for Plant Daniel.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

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Regulatory Hedges – Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company's fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in fuel expense as the underlying fuel is used in operations and ultimately recovered through the respective fuel cost recovery clauses.

•	Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of operations as incurred.

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•	PPA capacity revenues increased $58 million, or 11%, primarily due to additional customer capacity requirements, and a new PPA related to the Mankato natural gas facility acquired in late 2016.

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PPA energy revenues increased $276 million, or 40%, primarily due to a $213 million increase in renewable energy sales arising from new solar and wind facilities and a $50 million increase in sales from existing natural gas PPAs primarily due to an $85 million increase in the average cost of fuel, partially offset by a $35 million decrease in the volume of KWHs sold primarily due to reduced customer load.

•	Non-PPA revenues increased $164 million, or 50%, primarily due to a $156 million increase in the volume of KWHs sold primarily from uncovered natural gas capacity through short-term opportunity sales, as well as an $8 million increase in the price of energy in the wholesale markets.

•	PPA capacity revenues decreased $28 million as a result of a $44 million decrease in non-affiliate capacity revenues primarily as a result of PPA expirations and subsequent generation capacity remarketing into the short-term markets, partially offset by a $16 million increase in affiliate capacity revenues due to new PPAs.

•	PPA energy revenues increased $134 million primarily due to a $170 million increase in renewable energy sales arising from new solar and wind facilities, partially offset by a decrease of $36 million in fuel revenues related to natural gas PPAs. Overall, total KWH sales under PPAs increased 7% in 2016 when compared to 2015.

•	Non-PPA revenues increased $78 million primarily due to a 23% increase in KWH sales. Underlying this increase was a $113 million increase in short-term sales to non-affiliates as a result of remarketing generation capacity from expired PPAs, partially offset by a $35 million decrease in power pool sales primarily associated with a reduction in capacity available for sale.

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(*)	The Company owns 100% of the class B membership interest under a tax equity partnership agreement.

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•	Assessing whether specific property is explicitly or implicitly identified in the agreement;

•	Determining whether the fulfillment of the arrangement is dependent on the use of the identified property; and

•	Assessing whether the arrangement conveys to the purchaser the right to use the identified property.

•	Assessing whether the contract meets the definition of a derivative;

•	Assessing whether the contract meets the definition of a capacity contract;

•	Assessing the probability at inception and throughout the term of the individual contract that the contract will result in physical delivery; and

•	Ensuring that the contract quantities do not exceed available generating capacity (including purchased capacity).

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•	Identifying the hedging instrument, the forecasted hedged transaction, and the nature of the risk being hedged; and

•	Assessing hedge effectiveness at inception and throughout the contract term.

•	Future demand for electricity based on projections of economic growth and estimates of available generating capacity;

•	Future power and natural gas prices, which have been quite volatile in recent years; and

•	Future operating costs.

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(*)	Average and maximum amounts are based upon daily balances during the twelve-month periods ended December 31, 2017, 2016, and 2015.

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(*)	Any additional credit rating downgrades at or below BB- and/or Ba3 could increase collateral requirements up to an additional $38 million.

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(*)	Current period changes also include changes in the fair value of new contracts entered into during the period, if any.

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(a)

All amounts are reflected based on final maturity dates and include the effects of interest rate derivatives employed to manage interest rate risk and effects of foreign currency swaps employed to manage foreign currency exchange rate risk. Included in debt principal is a $77 million gain related to the foreign currency hedge of €1.1 billion. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit.

(b)	For additional information, see Notes 1 and 9 to the financial statements.

(c)	Operating lease commitments include certain land leases for solar and wind facilities that are subject to annual price escalation based on indices. See Note 7 to the financial statements under "Commitments" for additional information.

(d)

The Company provides estimated capital expenditures for a five-year period, including capital expenditures associated with environmental regulations. Included in these amounts are planned expenditures for plant acquisitions and placeholder growth, which averages approximately $1.3 billion per year, and may vary materially each year due to market opportunities and the Company's ability to execute its growth strategy. Amounts represent current estimates of total expenditures, excluding capital expenditures covered under LTSAs which are reflected in "Other." See Note (g) below. At December 31, 2017, significant purchase commitments were outstanding in connection with the construction program.

(e)	Primarily includes commitments to purchase, transport, and store natural gas. Amounts reflected are based on contracted cost and may contain provisions for price escalation. Amounts reflected for natural gas purchase commitments are based on various indices at the time of delivery and have been estimated based on the New York Mercantile Exchange future prices at December 31, 2017.

(f)	Purchased power commitments will be resold under a third party agreement at cost.

(g)	Includes commitments related to LTSAs, operation and maintenance agreements, and transmission. LTSAs include price escalation based on inflation indices. Transmission commitments are based on the Southern Company system's current tariff rate for point-to-point transmission.

(h)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•

variations in demand for electricity, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources such as self-generation and distributed generation technologies, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of fuels;

•	effects of inflation;

•	the ability to control costs and avoid cost overruns during the development and construction of generating facilities, to construct facilities in accordance with the requirements of permits and licenses, and to satisfy any environmental performance standards, including the requirements of tax credits and other incentives;

•	investment performance of the Company's employee and retiree benefit plans;

•	advances in technology;

•	ongoing renewable energy partnerships and development agreements;

•	state and federal rate regulations;

•	the ability to successfully operate generating facilities and the successful performance of necessary corporate functions;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, including the potential sale of a 33% equity interest in substantially all of the Company's solar assets, which cannot be assured to be completed or beneficial to the Company;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

•	the ability to obtain new short- and long-term contracts with wholesale customers;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general;

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•	the ability of the Company to obtain additional generating capacity (or sell excess generating capacity) at competitive prices;

•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. electric grid or operation of generating resources;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(*)	In connection with the Company becoming a participant to the Southern Company qualified pension plan and other postretirement benefit plan, $27 million of OCI, net of tax of $9 million, was transferred from SCS.

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)

ITCs and PTCs generated in the current tax year and carried forward from prior tax years that cannot be utilized in the current tax year are reclassified from current to deferred taxes in federal income tax expense above. ITCs and PTCs reclassified in this manner include $316 million for 2017, $1.13 billion for 2016, and $246 million for 2015. These ITCs and PTCs are included in the following table of temporary differences as unrealized tax credits.

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(*)	Represents euro-denominated debt at the U.S. dollar denominated hedge settlement amount.

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•	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 the Company of what a market participant would use in pricing an asset or liability. If there is little available market data, then the Company's own assumptions are the best available information.

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•	Cash Flow Hedges – Gains and losses on energy-related derivatives designated as cash flow hedges which are used to hedge anticipated purchases and sales and are initially deferred in OCI before being recognized in the consolidated statements of income in the same period as the hedged transactions are reflected in earnings.

•	Not Designated – Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the consolidated statements of income as incurred.

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(a)	On July 31, 2017, the Company purchased 100% of the Cactus Flats facility and commenced construction. Upon placing the facility in service, the Company expects to close on a tax equity partnership agreement that has already been executed, subject to various customary conditions at closing, and will then own 100% of the class B membership interests.

(b)	The Company owns 100% of the class B membership interest under a tax equity partnership agreement.

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(a)	The Company owns 100% of the class A membership interests and a wholly-owned subsidiary of the seller owns 100% of the class B membership interests. The Company and the class B member are entitled to 51% and 49%, respectively, of all cash distributions from the project. In addition, the Company is entitled to substantially all of the federal tax benefits with respect to the transaction.

(b)	The Company originally purchased 90%, with a minority owner owning 10%. During 2017, the Company acquired the remaining 10% ownership interest. See Note 10 for additional information.

(c)	In addition to the 20-year and 12-year PPAs, the facility has a 10-year contract with Allianz Risk Transfer (Bermuda) Ltd.

(d)	Under the terms of the PPA and the expansion PPA, approximately $442 million of assets, primarily related to property, plant, and equipment, are subject to lien at December 31, 2017.

(e)	The acquisition included a fully operational 375-MW natural gas-fired combined-cycle facility.

(f)	The Company owns 90.1%, with the minority owner, Invenergy Wind Global LLC, owning 9.9%.

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(a)	Intangible assets consist of acquired PPAs that will be amortized over 10- and 20-year terms. The estimated amortization for future periods is approximately $9 million per year. See Note 1 for additional information.

(b)	At December 31, 2016, $461 million is included in acquisitions payable on the consolidated balance sheets.

(c)	Includes approximately $281 million of contingent consideration, of which $29 million was payable at December 31, 2017.

(d)	Includes approximately $51 million of non-cash contributions recorded as capital contributions from noncontrolling interests in the consolidated statements of stockholders' equity.

(e)	Includes approximately $142 million of contingent consideration, all of which had been paid at December 31, 2016 by the noncontrolling interests.

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(*)	As a result of the Tax Reform Legislation, the Company recorded an income tax benefit of $743 million in the fourth quarter 2017. See Note 5 for additional information.

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(a)	Normal represents the 10-year average from January 1, 2007 through December 31, 2016 for Illinois at Chicago Midway International Airport and for Georgia at Atlanta Hartsfield-Jackson International Airport, based on information obtained from the National Oceanic and Atmospheric Administration, National Climatic Data Center.

(b)	The 10-year average Heating Degree Days established by the Illinois Commission in Nicor Gas' 2009 rate case is 5,600 annually from 1998 through 2007.

(a)	Includes customer and contract counts at December 31, 2017 and 2016.

(b)	Includes average customer and contract counts for the year ended December 31, 2015.

(c)	Includes approximately 140,000 customers at December 31, 2017 that were contracted to serve beginning April 1, 2017.

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(a)	Includes other operations and maintenance, depreciation and amortization, taxes other than income taxes, and Merger-related expenses.

(b)	Nicor Gas' revenue tax expenses, which are passed through directly to customers.

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(*)	Adjusted operating margin and operating expenses are adjusted for Nicor Gas revenue tax expenses, which are passed through directly to customers.

(*)	Adjusted operating margin and operating expenses are adjusted for Nicor Gas revenue tax expenses, which are passed through directly to customers.

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(a)

Represents expected operating gains from planned storage withdrawals associated with existing inventory positions and could change as wholesale gas services adjusts its daily injection and withdrawal plans in response to changes in future market conditions and forward NYMEX price fluctuations. Also includes the impact of purchase accounting adjustments to reflect natural gas storage inventory at market value. Excluding the impact of these adjustments, the expected net operating gains at December 31, 2017 would have been $22 million.

(b)	Represents the periods associated with the transportation derivative (gains) and losses during which the derivatives will be settled and the physical transportation transactions will occur that offset the derivative losses that were previously recognized.

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(a)	Includes other operations and maintenance, depreciation and amortization, taxes other than income taxes, goodwill impairment in 2015, and Merger-related expenses.

(b)	Nicor Gas' revenue tax expenses, which are passed through directly to customers.

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(a)	Represents the Company's expected capital expenditures and ownership interest, which may change.

(b)

In 2014, the Company entered into a joint venture to construct and operate a natural gas pipeline that will run from West Virginia through Virginia and into eastern North Carolina to meet the region's growing demand for natural gas. The proposed pipeline project is expected to transport natural gas to customers in Virginia. On October 13, 2017, the Atlantic Coast Pipeline project received FERC approval. The joint venture continues to work with state and other federal agencies to obtain the required environmental permits to begin construction.

(c)

In 2014, the Company entered into a joint venture to construct and operate a natural gas pipeline that will transport low-cost natural gas from the Marcellus Shale area to customers in New Jersey. The Company believes this will alleviate takeaway constraints in the Marcellus region and help mitigate some of the price volatility experienced during recent winters. On January 19, 2018, the PennEast Pipeline project received FERC approval. The joint venture continues to work with state and other federal agencies to obtain the required environmental permits to begin construction.

•	distributing natural gas for Marketers;

•	constructing, operating, and maintaining the gas system infrastructure, including responding to customer service calls and leaks;

•	reading meters and maintaining underlying customer premise information for Marketers; and

•	planning and contracting for capacity on interstate transportation and storage systems.

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(a)

Represents the authorized ROE, or the midpoint of the authorized ROE range, at December 31, 2017, except Nicor Gas which represents the authorized ROE established in the January 31, 2018 order issued by the Illinois Commission. The authorized ROE of Nicor Gas at December 31, 2017 was 10.17%. See "Base Rate Cases" herein and Note 3 to the financial statements under "Regulatory Matters – Base Rate Cases" for additional information.

(b)	The authorized ROE range for Atlanta Gas Light, Virginia Natural Gas, and Florida City Gas was 10.55% - 10.95%, 9.00% - 10.00%, and 10.25% - 12.25%, respectively, at December 31, 2017.

(c)

Regulatory mechanisms that allow recovery of costs in the event of unseasonal weather, but are not direct offsets to the potential impacts on earnings of weather and customer consumption. These mechanisms are designed to help stabilize operating results by increasing base rate amounts charged to customers when weather is warmer than normal and decreasing amounts charged when weather is colder than normal.

(d)	Recovery of fixed customer service costs separately from assumed natural gas volumes used by customers.

(e)	Programs that update or expand distribution systems and LNG facilities.

(f)	The recovery (refund) of bad debt expense over (under) an established benchmark expense. Virginia Natural Gas and Chattanooga Gas recover the gas portion of bad debt expense through their purchased gas adjustment mechanisms.

(g)	Recovery of costs associated with plans to achieve specified energy savings goals.

(h)	See "Base Rate Cases" herein and Note 3 to the financial statements under "Regulatory Matters – Base Rate Cases" for additional information.

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(a)	Replacement of cast iron, bare steel, mid-vintage plastic, and risk-based materials.

(b)	Represents expenditures on qualifying infrastructure placed into service after December 9, 2014.

(c)	Replacement of early vintage plastic, risk-based mid-vintage plastic, and mid-vintage neighborhood convenience.

(d)	Replacement of four-inch and smaller mains, associated service lines, and in some instances above-ground facilities associated with rear-lot easements.

(e)	Replacement of cast iron and bare steel pipes.

(f)	Replacement of galvanized and X-Tube steel pipes. Reflects expenditures and miles of pipe installed since the Company acquired Florida City Gas in 2004.

(g)	Installation of large diameter pressure improvement and system reinforcement projects.

(h)	Installation of new business construction and strategic line extension.

(i)	Recovery of the related program costs was incorporated in Atlanta Gas Light's petition for GRAM, which the Georgia PSC approved on February 21, 2017. See "Base Rate Cases" herein and Note 3 to the financial statements under "Regulatory Matters – Base Rate Cases" for additional information.

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(a)	The agreement renews automatically each year unless terminated by either party.

(b)	Payments made to Elkton Gas were less than $1 million for each of the periods presented.

(*)	See Note 11 to the financial statements under "Proposed Sale of Elizabethtown Gas and Elkton Gas" for information on the pending asset sale.

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•	the creditworthiness of the counterparties involved and the impact of credit enhancements (such as cash deposits and letters of credit);

•	events specific to a given counterparty; and

•	the impact of the Company's nonperformance risk on its liabilities.

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(*)	Average and maximum amounts are based upon daily balances during the 12-month periods.

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(a)	Current period changes also include the changes in fair value of new contracts entered into during the period, if any.

(b)	Net fair value of derivative contracts outstanding excludes premium and intrinsic value associated with weather derivatives of $11 million at December 31, 2017 and includes premium and intrinsic value associated with weather derivatives of $4 million at December 31, 2016, $5 million at June 30, 2016, and $10 million at December 31, 2015.

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(a)	Valued using NYMEX futures prices.

(b)	Valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers.

(c)	Excludes cash collateral of $193 million as well as premium and associated intrinsic value associated with weather derivatives of $11 million at December 31, 2017.

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(*)	Increase in VaR at December 31, 2017 was driven by significant natural gas price increases in Sequent's key markets due to colder-than-normal weather. As weather moderated during January 2018, VaR reduced to a level consistent with prior periods.

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(a)	Amounts are reflected based on final maturity dates. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates at December 31, 2017, as reflected in the statements of capitalization.

(b)

Includes charges recoverable through a natural gas cost recovery mechanism, or alternatively billed to Marketers, and demand charges associated with Sequent. The gas supply balance includes amounts for Nicor Gas and SouthStar gas commodity purchase commitments of 35 million mmBtu at floating gas prices calculated using forward natural gas prices at December 31, 2017 and valued at $101 million. The Company provides guarantees to certain gas suppliers for certain of its subsidiaries, including SouthStar, in support of payment obligations.

(c)

Certain operating leases have provisions for step rent or escalation payments and certain lease concessions are accounted for by recognizing the future minimum lease payments on a straight-line basis over the respective minimum lease terms. However, this accounting treatment does not affect the future annual operating lease cash obligations as shown herein. In terms of rental charges and duration of contracts, the Company's most significant operating leases relate to real estate.

(d)	Represent fixed-fee minimum payments for Sequent's affiliated asset management agreements.

(e)	See Notes 1 and 10 to the financial statements for additional information.

(f)

The Company forecasts contributions to the pension and other postretirement benefit plans over a three-year period. The Company anticipates no mandatory contributions to the qualified pension plan during the next three years. Amounts presented represent estimated benefit payments for the nonqualified pension plans, estimated non-trust benefit payments for the other postretirement benefit plans, and estimated contributions to the other postretirement benefit plan trusts, all of which will be made from the Company's corporate assets. See Note 2 to the financial statements for additional information related to the pension and other postretirement benefit plans, including estimated benefit payments. Certain benefit payments will be made through the related benefit plans. Other benefit payments will be made from the Company's corporate assets.

(g)

Estimated capital expenditures are provided through 2022. Capital includes amounts related to Elizabethtown Gas and Elkton Gas, which represent $123 million in 2018, $249 million in 2019-2020, and $255 million in 2021-2022. See Note 11 to the financial statements under "Proposed Sale of Elizabethtown Gas and Elkton Gas" for additional information. Capital also includes amounts related to the Company's pipeline investments that will be recorded at the joint venture level, which represent $64 million in 2018, $195 million in 2019-2020, and less than $1 million in capital expenditures in 2021-2022.

(h)	Includes contractual environmental remediation liabilities that are generally recoverable through base rates or rate rider mechanisms and long-term service agreements.

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•	the impact of recent and future federal and state regulatory changes, including environmental laws and regulations governing air, water, land, and protection of other natural resources, and also changes in tax and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations;

•	the uncertainty surrounding the recently enacted Tax Reform Legislation, including implementing regulations and IRS interpretations, actions that may be taken in response by regulatory authorities, and its impact, if any, on the credit ratings of the Company, Southern Company Gas Capital, and Nicor Gas;

•	current and future litigation or regulatory investigations, proceedings, or inquiries;

•	the effects, extent, and timing of the entry of additional competition in the markets in which the Company operates;

•	variations in demand for natural gas, including those relating to weather, the general economy, population and business growth (and declines), the effects of energy conservation and efficiency measures, including from the development and deployment of alternative energy sources, and any potential economic impacts resulting from federal fiscal decisions;

•	available sources and costs of natural gas;

•	limits on pipeline capacity;

•	effects of inflation;

•	the ability to control costs and avoid cost overruns during the development and construction of facilities;

•	investment performance of the Company's employee and retiree benefit plans;

•	advances in technology;

•	state and federal rate regulations and the impact of pending and future rate cases and negotiations, including rate actions relating to natural gas and other cost recovery mechanisms;

•	the inherent risks involved in transporting and storing natural gas;

•	the ability to successfully operate the natural gas distribution and storage facilities and the successful performance of necessary corporate functions;

•	internal restructuring or other restructuring options that may be pursued;

•	potential business strategies, including acquisitions or dispositions of assets or businesses, including the proposed disposition of Elizabethtown Gas and Elkton Gas, which cannot be assured to be completed or beneficial to the Company;

•	the possibility that the anticipated benefits from the Merger cannot be fully realized or may take longer to realize than expected and the possibility that costs related to integration with Southern Company will be greater than expected;

•	the ability of counterparties of the Company to make payments as and when due and to perform as required;

•	the direct or indirect effect on the Company's business resulting from cyber intrusion or physical attack and the threat of physical attacks;

•	interest rate fluctuations and financial market conditions and the results of financing efforts;

•	changes in the Company's, Southern Company Gas Capital's, and Nicor Gas' credit ratings, including impacts on interest rates, access to capital markets, and collateral requirements;

•	the impacts of any sovereign financial issues, including impacts on interest rates, access to capital markets, impacts on foreign currency exchange rates, counterparty performance, and the economy in general;

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•	catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes and other storms, droughts, pandemic health events such as influenzas, or other similar occurrences;

•	the direct or indirect effects on the Company's business resulting from incidents affecting the U.S. natural gas pipeline infrastructure or operation of storage resources;

•	impairments of goodwill or long-lived assets;

•	the effect of accounting pronouncements issued periodically by standard-setting bodies; and

•	other factors discussed elsewhere herein and in other reports filed by the Company from time to time with the SEC.

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(a)	Not earning a return as offset in rate base by a corresponding asset or liability.

(b)	Recovered through environmental cost recovery mechanisms when the remediation is performed or the work is performed.

(c)	Recovered and amortized over the average remaining service period which range up to 15 years. See Note 2 for additional information.

(d)	Recovered over the remaining life of the original debt issuances, which range up to 21 years.

(e)	Recorded and recovered or amortized as approved or accepted by the appropriate state regulatory agencies over periods generally not exceeding eight years.

(f)

Comprised of several components including unamortized loss on reacquired debt, weather normalization, franchise gas, deferred depreciation expense, and financial instrument-hedging assets, which are recovered or amortized as approved by the applicable state regulatory agencies over periods generally not exceeding 10 years, except for financial hedging-instruments. Financial instrument-hedging assets are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed two years. Upon final settlement, actual costs incurred are recovered, and actual income earned is refunded through the energy cost recovery clause.

(g)	Other cost of removal obligations are recorded and deferred income tax liabilities are amortized over the related property lives, which may range up to 80 years. Cost of removal liabilities will be settled and trued up following completion of the related activities.

(h)

Comprised of several components including energy efficiency programs, unamortized bond issuance costs and financial instrument-hedging liabilities which are recovered or amortized as approved by the applicable state regulatory agencies over periods generally not exceeding a range of four years to 20 years, except for financial hedging-instruments. Financial instrument-hedging liabilities are recorded over the life of the underlying hedged purchase contracts, which generally do not exceed two years. Upon final settlement, actual costs incurred are recovered, and actual income earned is refunded through the energy cost recovery clause.

(i)	Includes excess deferred income tax liabilities not subject to normalization as a result of the Tax Reform Legislation, the recovery and amortization of which will be determined by the applicable state regulatory agencies. See Note 3 under "Regulatory Matters" and Note 5 for additional details.

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•	Weather normalization adjustments – reduce customer bills when winter weather is colder than normal and increase customer bills when weather is warmer than normal and are included in the tariffs for Virginia Natural Gas, Elizabethtown Gas, and Chattanooga Gas;

•	Revenue normalization mechanisms – mitigate the impact of conservation and declining customer usage and are contained in the tariffs for Virginia Natural Gas, Chattanooga Gas, and Elkton Gas; and

•

Revenue true-up adjustment – included within the provisions of the Georgia Rate Adjustment Mechanism (GRAM) program in which Atlanta Gas Light participates as a short-term alternative to formal rate case filings, the revenue true-up feature provides for a monthly positive (or negative) adjustment to record revenue in the amount of any variance to budgeted revenues, which are submitted and approved annually as a requirement of GRAM. Such adjustments are reflected in customer billings in a subsequent program year.

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(*)	Variable rate is determined by the FERC method of AFUDC accounting.

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(a)	Effective January 1, 2016, the Company uses a spot rate approach to estimate the service cost and interest cost components. Previously, the Company estimated these components using a single weighted average discount rate.

(b)	Only applicable to Nicor Gas union employees. The pension bands for the former Nicor plan reflect the negotiated rates in accordance with the union agreements.

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(*)	Only applicable to Nicor Gas union employees. The pension bands for the former Nicor plan reflect the negotiated rates in accordance with the union agreements.

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•	Domestic equity. A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.

•	International equity. A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.

•	Fixed income. A mix of domestic and international bonds.

•	Special situations. Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.

•	Real estate investments. Investments in traditional private market, equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.

•	Private equity. Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.

•

Domestic and international equity. Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.

•	Fixed income. Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.

•

Real estate investments, private equity, and special situations investments. Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

(*)	Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.

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(*)	Includes a $104 million decrease at December 31, 2017 related to the impact of the Tax Reform Legislation and new income tax apportionment factors in several states resulting from the Company's inclusion in the consolidated Southern Company state tax filings.

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•	Southern Company Gas' outstanding restricted stock units, restricted stock awards, and non-employee director stock awards were deemed fully vested and were canceled and converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Southern Company Gas' common stock subject to such award and (ii) the Merger consideration of $66 per share;

•

Southern Company Gas' outstanding stock options, all of which were fully vested, were canceled and converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Southern Company Gas' common stock subject to such options and (ii) the excess of the Merger consideration of $66 per share over the applicable exercise price per share of such options; and

•	each outstanding award of a performance share unit was converted into an award of Southern Company's restricted stock units (restricted stock awards).

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(a)	Energy-related derivatives excludes $11 million associated with premiums and certain weather derivatives accounted for based on intrinsic value rather than fair value.

(b)	Energy-related derivatives excludes cash collateral of $193 million.

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(a)	Energy-related derivatives excludes $4 million associated with certain weather derivatives accounted for based on intrinsic value rather than fair value.

(b)	Energy-related derivatives excludes cash collateral of $62 million.

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Regulatory Hedges — Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the natural gas distribution utilities' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in the cost of natural gas as the underlying natural gas is used in operations and ultimately recovered through the respective cost recovery clauses.

•	Cash Flow Hedges — Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in other OCI before being recognized in the statements of income in the same period as the hedged transactions are reflected in earnings.

•	Not Designated — Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income in the period of change.

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(a)	Gross amounts offset include cash collateral held on deposit in broker margin accounts of $193 million and $62 million as of December 31, 2017 and 2016, respectively.

(b)	Net amount of derivative instruments outstanding excludes premiums and intrinsic value associated with weather derivatives of $11 million as of December 31, 2017.

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(*)	Excludes the impact of weather derivatives recorded in natural gas revenues of $23 million for the successor year ended December 31, 2017, $6 million for the successor period of July 1, 2016 through December 31, 2016, $3 million for the predecessor period of January 1, 2016 through June 30, 2016, and $12 million for the predecessor year ended December 31, 2015.

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•	rate credits of $18 million to be paid to customers in New Jersey and Maryland;

•	sharing of Merger savings with customers in Georgia starting in 2020;

•	phasing-out the use of the Nicor name or logo by certain of the Company's gas marketing services subsidiaries in conducting non-utility business in Illinois;

•	reaffirming that Elizabethtown Gas would file a base rate case no later than September 1, 2016, with another base rate case no later than three years after the 2016 rate case; and

•	requiring Elkton Gas to file a base rate case within two years of closing the Merger.

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(b)	Includes the impact of the Tax Reform Legislation and new income tax apportionment factors in several states resulting from the Company's inclusion in the consolidated Southern Company state tax filings.

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(a)	Net income (loss) attributable to Southern Company Gas includes the impact of new income tax apportionment factors in several states resulting from the Company's inclusion in the consolidated Southern Company state tax filings.

(b)	Net loss attributable to Southern Company Gas includes the impact of the Tax Reform Legislation.

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(1)	Includes Deloitte & Touche LLP fees in connection with financing transactions and PricewaterhouseCoopers LLP and Deloitte & Touche LLP fees in connection with audits of several subsidiaries in addition to the consolidated audit.

(2)	Represents fees for non-statutory audit services in 2017 and a review report on internal controls provided to third parties billed by Deloitte & Touche LLP in 2017 and 2016.

(3)	Represents fees billed by Deloitte & Touche LLP for tax compliance services.

(4)	Represents registration fees for attendance at Deloitte & Touche LLP-sponsored education seminars and subscription fees for Deloitte & Touche LLP's technical accounting research tool.

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Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following documents are filed as a part of this report on Form 10-K:

(1)	Financial Statements and Financial Statement Schedules:

(2)	Exhibits:

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(*)

The refund ordered by the Mississippi PSC pursuant to the 2015 Mississippi Supreme Court decision relative to a regulatory liability used by Mississippi Power to record financing costs associated with construction of the Kemper County energy facility involved refunding all billed amounts to all historical customers and included an interest component. The refund of approximately $371 million in 2015 was of sufficient magnitude to resolve most past due amounts beyond 30 days aged receivables, accounting for the negative provision of $(2.0) million where risk of collectibility was offset by applying the refund to past due amounts. It was also of sufficient size to offset amounts previously written off in the 2012-2015 time frame, accounting for the net recoveries of $1.5 million.

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