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ASSET RETIREMENT OBLIGATIONS | 12 Months Ended
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Dec. 31, 2021
Asset Retirement Obligation Disclosure [Abstract] |
ASSET RETIREMENT OBLIGATIONS | ASSET RETIREMENT OBLIGATIONS AROs are computed as the present value of the estimated costs for an asset's future retirement and are recorded in the period in which the liability is incurred. The estimated costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. In the absence of quoted market prices, AROs are estimated using present value techniques in which estimates of future cash outlays associated with the asset retirements are discounted using a credit-adjusted risk-free rate. Estimates of the timing and amounts of future cash outlays are based on projections of when and how the assets will be retired and the cost of future removal activities. Each traditional electric operating company and natural gas distribution utility has received accounting guidance from its state PSC or applicable state regulatory agency allowing the continued accrual or recovery of other retirement costs for long-lived assets that it does not have a legal obligation to retire. Accordingly, the accumulated removal costs for these obligations are reflected in the balance sheets as regulatory liabilities and amounts to be recovered are reflected in the balance sheets as regulatory assets. The ARO liabilities for the traditional electric operating companies primarily relate to facilities that are subject to the CCR Rule and the related state rules, principally ash ponds. In addition, Alabama Power and Georgia Power have retirement obligations related to the decommissioning of nuclear facilities (Alabama Power's Plant Farley and Georgia Power's ownership interests in Plant Hatch and Plant Vogtle Units 1 and 2). See "Nuclear Decommissioning" herein for additional information. Other significant AROs include various landfill sites and asbestos removal for Alabama Power, Georgia Power, and Mississippi Power and gypsum cells and mine reclamation for Mississippi Power. The ARO liability for Southern Power primarily relates to its solar and wind facilities, which are located on long-term land leases requiring the restoration of land at the end of the lease. The traditional electric operating companies and Southern Company Gas also have identified other retirement obligations, such as obligations related to certain electric transmission and distribution facilities, certain asbestos-containing material within long-term assets not subject to ongoing repair and maintenance activities, certain wireless communication towers, the disposal of polychlorinated biphenyls in certain transformers, leasehold improvements, equipment on customer property, and property associated with the Southern Company system's rail lines and natural gas pipelines. However, liabilities for the removal of these assets have not been recorded because the settlement timing for certain retirement obligations related to these assets is indeterminable and, therefore, the fair value of the retirement obligations cannot be reasonably estimated. A liability for these retirement obligations will be recognized when sufficient information becomes available to support a reasonable estimation of the ARO. Southern Company and the traditional electric operating companies will continue to recognize in their respective statements of income allowed removal costs in accordance with regulatory treatment. Any differences between costs recognized in accordance with accounting standards related to asset retirement and environmental obligations and those reflected in rates are recognized as either a regulatory asset or liability in the balance sheets as ordered by the various state PSCs. Details of the AROs included in the balance sheets are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power(*)
| (in millions)
Balance at December 31, 2019 | $ | 9,786 |  | $ | 3,540 |  | $ | 5,784 |  | $ | 190 |  | $ | 89 |
Liabilities incurred | 19 |  | — |  | 10 |  | — |  | 9 |
Liabilities settled | (442) |  | (219) |  | (185) |  | (22) |  | — |
Accretion | 409 |  | 152 |  | 238 |  | 8 |  | 4 |
Cash flow revisions | 912 |  | 501 |  | 418 |  | — |  | (7) |
Balance at December 31, 2020 | $ | 10,684 |  | $ | 3,974 |  | $ | 6,265 |  | $ | 176 |  | $ | 95 |
Liabilities incurred | 26 |  | — |  | 3 |  | — |  | 23 |
Liabilities settled | (456) |  | (202) |  | (210) |  | (24) |  | — |
Accretion | 407 |  | 156 |  | 236 |  | 7 |  | 5 |
Cash flow revisions | 1,026 |  | 406 |  | 530 |  | 31 |  | 8 |
Balance at December 31, 2021 | $ | 11,687 |  | $ | 4,334 |  | $ | 6,824 |  | $ | 190 |  | $ | 131 |
(*)Included in other deferred credits and liabilities on Southern Power's consolidated balance sheets. During 2020, Alabama Power recorded increases totaling approximately $501 million to its AROs related to the CCR Rule and the related state rule primarily as a result of management's completion of the closure design for the remaining ash pond and the addition of a water treatment system to the design of another ash pond. The additional estimated costs to close these ash ponds under the planned closure-in-place methodology primarily relate to inputs from contractor bids, design revisions, and changes in the expected volume of ash handling. During 2021, Alabama Power recorded increases totaling approximately $406 million to its AROs primarily related to the CCR Rule and the related state rule based on updated estimates for post-closure costs at its ash ponds and inflation rates. During the third quarter 2020, Georgia Power refined the cost estimates related to its plans to close the ash ponds at all of its generating plants in compliance with the CCR Rule and the related state rule, including updates to long-term post-closure care requirements, market pricing, and timing of future cash outlays and recorded an increase of approximately $411 million to its AROs related to the CCR Rule and the related state rule. In September 2021, Georgia Power recorded a further increase of approximately $435 million to these AROs based on updated estimates for inflation rates and the timing of closure activities. In September 2021, Mississippi Power recorded an increase of approximately $31 million to its AROs related to the CCR Rule based on updated estimates for the timing of closure activities, post-closure costs at one of its ash ponds, and inflation rates. The cost estimates for AROs related to the disposal of CCR are based on information at December 31, 2021 using various assumptions related to closure and post-closure costs, timing of future cash outlays, inflation and discount rates, and the potential methods for complying with the CCR Rule and the related state rules. The traditional electric operating companies have periodically updated, and expect to continue periodically updating, their related cost estimates and ARO liabilities for each CCR unit as additional information related to these assumptions becomes available. Some of these updates have been, and future updates may be, material. Additionally, the closure designs and plans in the States of Alabama and Georgia are subject to approval by environmental regulatory agencies. Absent continued recovery of ARO costs through regulated rates, results of operations, cash flows, and financial condition for Southern Company and the traditional electric operating companies could be materially impacted. See Note 2 under "Georgia Power – Rate Plans" for additional information. The ultimate outcome of these matters cannot be determined at this time. Nuclear Decommissioning The NRC requires licensees of commercial nuclear power reactors to establish a plan for providing reasonable assurance of funds for future decommissioning. Alabama Power and Georgia Power have external trust funds (Funds) to comply with the NRC's regulations. Use of the Funds is restricted to nuclear decommissioning activities. The Funds are managed and invested in accordance with applicable requirements of various regulatory bodies, including the NRC, the FERC, and state PSCs, as well as the IRS. While Alabama Power and Georgia Power are allowed to prescribe an overall investment policy to the Funds' managers, neither Southern Company nor its subsidiaries or affiliates are allowed to engage in the day-to-day management of the Funds or to mandate individual investment decisions. Day-to-day management of the investments in the Funds is delegated to unrelated third-party managers with oversight by the management of Alabama Power and Georgia Power. The Funds' managers are authorized, within certain investment guidelines, to actively buy and sell securities at their own discretion in order to maximize the return on the Funds' investments. The Funds are invested in a tax-efficient manner in a diversified mix of equity and fixed income securities and are reported as trading securities. Alabama Power and Georgia Power record the investment securities held in the Funds at fair value, as disclosed in Note 13, as management believes that fair value best represents the nature of the Funds. Gains and losses, whether realized or unrealized, are recorded in the regulatory liability for AROs in the balance sheets and are not included in net income or OCI. Fair value adjustments and realized gains and losses are determined on a specific identification basis. The Funds at Georgia Power participate in a securities lending program through the managers of the Funds. Under this program, Georgia Power's Funds' investment securities are loaned to institutional investors for a fee. Securities loaned are fully collateralized by cash, letters of credit, and/or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. At December 31, 2021 and 2020, approximately $42 million and $44 million, respectively, of the fair market value of Georgia Power's Funds' securities were on loan and pledged to creditors under the Funds' managers' securities lending program. The fair value of the collateral received was approximately $43 million and $45 million at December 31, 2021 and 2020, respectively, and can only be sold by the borrower upon the return of the loaned securities. The collateral received is treated as a non-cash item in the statements of cash flows. Investment securities in the Funds for December 31, 2021 and 2020 were as follows:
| Southern Company | Alabama Power | Georgia Power
| (in millions)
At December 31, 2021: |  |  |
Equity securities | $ | 1,358 |  | $ | 849 |  | $ | 509 |
Debt securities | 986 |  | 316 |  | 670 |
Other securities | 197 |  | 159 |  | 38 |
Total investment securities in the Funds | $ | 2,541 |  | $ | 1,324 |  | $ | 1,217 |
At December 31, 2020: |  |  |
Equity securities | $ | 1,339 |  | $ | 842 |  | $ | 497 |
Debt securities | 851 |  | 231 |  | 620 |
Other securities | 111 |  | 83 |  | 28 |
Total investment securities in the Funds | $ | 2,301 |  | $ | 1,156 |  | $ | 1,145 |
These amounts exclude receivables related to investment income and pending investment sales and payables related to pending investment purchases. For Southern Company and Georgia Power, these amounts include Georgia Power's investment securities pledged to creditors and collateral received and excludes payables related to Georgia Power's securities lending program. The fair value increases (decreases) of the Funds, including unrealized gains (losses) and reinvested interest and dividends and excluding the Funds' expenses, for 2021, 2020, and 2019 are shown in the table below.
| Southern Company | Alabama Power | Georgia Power
| (in millions)
Fair value increases |  |  |
2021 | $ | 274 |  | $ | 200 |  | $ | 74 |
2020 | 280 |  | 142 |  | 138 |
2019 | 344 |  | 194 |  | 150 |
Unrealized gains (losses) |  |  |
At December 31, 2021 | $ | (27) |  | $ | (30) |  | $ | 3 |
At December 31, 2020 | 220 |  | 121 |  | 99 |
At December 31, 2019 | 259 |  | 149 |  | 110 |
The investment securities held in the Funds continue to be managed with a long-term focus. Accordingly, all purchases and sales within the Funds are presented separately in the statements of cash flows as investing cash flows, consistent with the nature of the securities and purpose for which the securities were acquired. For Alabama Power, approximately $15 million at each of December 31, 2021 and 2020 previously recorded in internal reserves is being transferred into the Funds through 2040 as approved by the Alabama PSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission only the radioactive portions of a nuclear unit based on the size and type of reactor. Alabama Power and Georgia Power have filed plans with the NRC designed to ensure that, over time, the deposits and earnings of the Funds will provide the minimum funding amounts prescribed by the NRC. At December 31, 2021 and 2020, the accumulated provisions for the external decommissioning trust funds were as follows:
| 2021 |  | 2020
| (in millions)
Alabama Power |  |  |
Plant Farley | $ | 1,324 |  |  | $ | 1,156 |
Georgia Power |  |  |
Plant Hatch | $ | 757 |  |  | $ | 716 |
Plant Vogtle Units 1 and 2 | 460 |  |  | 429 |
Total | $ | 1,217 |  |  | $ | 1,145 |
Site study cost is the estimate to decommission a specific facility as of the site study year. The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from these estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. The estimated costs of decommissioning at December 31, 2021 based on the most current studies, which were performed in 2018 for Alabama Power and in 2021 for Georgia Power, were as follows:
| Plant Farley |  | Plant Hatch(*) |  | Plant Vogtle Units 1 and 2(*)
Decommissioning periods: |  |  |  |  |
Beginning year | 2037 |  | 2034 |  | 2047
Completion year | 2076 |  | 2075 |  | 2079
| (in millions)
Site study costs: |  |  |  |  |
Radiated structures | $ | 1,234 |  |  | $ | 771 |  |  | $ | 628 |
Spent fuel management | 387 |  |  | 186 |  |  | 170 |
Non-radiated structures | 99 |  |  | 61 |  |  | 85 |
Total site study costs | $ | 1,720 |  |  | $ | 1,018 |  |  | $ | 883 |
(*)Based on Georgia Power's ownership interests. For ratemaking purposes, Alabama Power's decommissioning costs are based on the site study and Georgia Power's decommissioning costs are based on the NRC generic estimate to decommission the radioactive portion of the facilities and the site study estimate for spent fuel management as of 2021. Significant assumptions used to determine these costs for ratemaking were an estimated inflation rate of 4.5% and 2.5% for Alabama Power and Georgia Power, respectively, and an estimated trust earnings rate of 7.0% and 4.5% for Alabama Power and Georgia Power, respectively. Amounts previously contributed to the Funds for Plant Farley are currently projected to be adequate to meet the decommissioning obligations. Alabama Power will continue to provide site-specific estimates of the decommissioning costs and related projections of funds in the external trust to the Alabama PSC and, if necessary, would seek the Alabama PSC's approval to address any changes in a manner consistent with NRC and other applicable requirements. Effective January 1, 2020, in connection with the 2019 ARP, Georgia Power's annual decommissioning cost for ratemaking is a total of $4 million for Plant Hatch and Plant Vogtle Units 1 and 2. Georgia Power's annual decommissioning cost for ratemaking in 2019 totaled $5 million.

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- Definition The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 410 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2175671 + Details
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