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LEASES | 12 Months Ended
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Dec. 31, 2023
Leases [Abstract] |
LEASES | LEASES Lessee The Registrants recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease. As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Electric generating units(*) | $ | 670 |  | $ | 58 |  | $ | 1,028 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 871 |  | 4 |  | 54 |  | 2 |  | 546 |  | 28 |
Communication towers | 123 |  | 1 |  | 4 |  | — |  | — |  | 23 |
Railcars | 64 |  | 32 |  | 27 |  | 5 |  | — |  | — |
Other | 60 |  | 3 |  | 2 |  | 18 |  | — |  | — |
Total | $ | 1,788 |  | $ | 98 |  | $ | 1,115 |  | $ | 25 |  | $ | 546 |  | $ | 51 |
At December 31, 2022 |  |  |  |  |  |
Electric generating units(*) | $ | 760 |  | $ | 59 |  | $ | 1,163 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 885 |  | 4 |  | 54 |  | 2 |  | 542 |  | 36 |
Communication towers | 141 |  | 2 |  | 4 |  | — |  | — |  | 23 |
Railcars | 34 |  | 12 |  | 18 |  | 3 |  | — |  | — |
Other | 79 |  | 4 |  | 1 |  | 21 |  | — |  | 1 |
Total | $ | 1,899 |  | $ | 81 |  | $ | 1,240 |  | $ | 26 |  | $ | 542 |  | $ | 60 |
(*)Amounts related to affiliate leases are eliminated in consolidation for Southern Company. See "Contracts that Contain a Lease" herein for additional information. Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 27 years while the land leases have remaining terms of up to 44 years, including renewal periods. Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have remaining terms of up to 17 years. Renewal options exist in many of the leases. The expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease unless it is considered reasonably certain that the lease will be extended. Land leases associated with renewable energy facilities at Southern Power and communication tower leases for automated meter infrastructure at Nicor Gas include renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities and the automated meter infrastructure, respectively. Contracts that Contain a Lease While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between one and 16 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $416 million and $461 million at December 31, 2023 and 2022, respectively. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as reviewed and approved by the Georgia PSC. Amounts related to the affiliate PPAs are eliminated in consolidation for Southern Company. Short-term Leases Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term. Residual Value Guarantees Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial at December 31, 2023 and 2022. Lease and Nonlease Components For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset. Balance sheet amounts recorded for operating and finance leases are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,432 |  | $ | 87 |  | $ | 884 |  | $ | 9 |  | $ | 488 |  | $ | 47 |
Operating lease obligations - current | $ | 183 |  | $ | 12 |  | $ | 135 |  | $ | 3 |  | $ | 29 |  | $ | 11 |
Operating lease obligations - non-current | 1,307 |  | 81 |  | 740 |  | 6 |  | 517 |  | 40 |
Total operating lease obligations(*) | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 272 |  | $ | 5 |  | $ | 203 |  | $ | 15 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 11 |  | $ | 2 |  | $ | 18 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 287 |  | 3 |  | 222 |  | 15 |  | — |  | — |
Total finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
At December 31, 2022 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,531 |  | $ | 71 |  | $ | 1,007 |  | $ | 9 |  | $ | 489 |  | $ | 57 |
Operating lease obligations - current | $ | 197 |  | $ | 9 |  | $ | 151 |  | $ | 4 |  | $ | 28 |  | $ | 9 |
Operating lease obligations - non-current | 1,388 |  | 67 |  | 851 |  | 5 |  | 514 |  | 51 |
Total operating lease obligations(*) | $ | 1,585 |  | $ | 76 |  | $ | 1,002 |  | $ | 9 |  | $ | 542 |  | $ | 60 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 292 |  | $ | 5 |  | $ | 205 |  | $ | 16 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 18 |  | $ | 2 |  | $ | 16 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 296 |  | 3 |  | 222 |  | 16 |  | — |  | — |
Total finance lease obligations | $ | 314 |  | $ | 5 |  | $ | 238 |  | $ | 17 |  | $ | — |  | $ | — |
(*)Includes operating lease obligations related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $566 million, $58 million, and $813 million, respectively, at December 31, 2023 and $652 million, $59 million, and $952 million, respectively, at December 31, 2022. If not presented separately on the Registrants' balance sheets, amounts related to leases are presented as follows: operating lease ROU assets, net are included in "other deferred charges and assets"; operating lease obligations are included in "other current liabilities" and "other deferred credits and liabilities," as applicable; finance lease ROU assets, net are included in "plant in service"; and finance lease obligations are included in "securities due within one year" and "long-term debt," as applicable. Lease costs for 2023, 2022, and 2021, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 252 |  | $ | 16 |  | $ | 192 |  | $ | 5 |  | $ | 34 |  | $ | 12 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 24 |  | 2 |  | 19 |  | 1 |  | — |  | — |
Interest on lease obligations | 14 |  | — |  | 17 |  | — |  | — |  | — |
Total finance lease cost | 38 |  | 2 |  | 36 |  | 1 |  | — |  | — |
Short-term lease costs | 40 |  | 16 |  | 16 |  | — |  | — |  | — |
Variable lease cost | 47 |  | — |  | 74 |  | — |  | 4 |  | — |
Sublease income | — |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 377 |  | $ | 34 |  | $ | 318 |  | $ | 6 |  | $ | 38 |  | $ | 12 |
2022 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 297 |  | $ | 59 |  | $ | 198 |  | $ | 5 |  | $ | 32 |  | $ | 15 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 23 |  | 1 |  | 15 |  | 1 |  | — |  | — |
Interest on lease obligations | 13 |  | — |  | 17 |  | 1 |  | — |  | — |
Total finance lease cost | 36 |  | 1 |  | 32 |  | 2 |  | — |  | — |
Short-term lease costs | 64 |  | 44 |  | 13 |  | — |  | — |  | — |
Variable lease cost | 125 |  | 13 |  | 105 |  | — |  | 5 |  | — |
Sublease income | (1) |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 521 |  | $ | 117 |  | $ | 348 |  | $ | 7 |  | $ | 37 |  | $ | 15 |
2021 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 313 |  | $ | 58 |  | $ | 208 |  | $ | 2 |  | $ | 33 |  | $ | 19 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 21 |  | 1 |  | 11 |  | 1 |  | — |  | — |
Interest on lease obligations | 11 |  | — |  | 16 |  | 1 |  | — |  | — |
Total finance lease cost | 32 |  | 1 |  | 27 |  | 2 |  | — |  | — |
Short-term lease costs | 48 |  | 15 |  | 24 |  | — |  | — |  | — |
Variable lease cost | 96 |  | 4 |  | 83 |  | — |  | 5 |  | — |
Sublease income | 1 |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 490 |  | $ | 78 |  | $ | 342 |  | $ | 4 |  | $ | 38 |  | $ | 19 |
(*)Includes operating lease costs related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $112 million, $4 million, and $174 million, respectively, in 2023, $162 million, $48 million, and $180 million, respectively, in 2022, and $165 million, $47 million, and $184 million, respectively, in 2021. Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs, including $42 million, $45 million, and $41 million in 2023, 2022, and 2021, respectively, from finance leases which are included in purchased power on Georgia Power's statements of income, of which $21 million, $21 million, and $20 million was included in purchased power, affiliates in 2023, 2022, and 2021, respectively. Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 253 |  | $ | 17 |  | $ | 199 |  | $ | 5 |  | $ | 33 |  | $ | 12 |
Operating cash flows from finance leases | 15 |  | — |  | 22 |  | — |  | — |  | — |
Financing cash flows from finance leases | 18 |  | 2 |  | 16 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 100 |  | 30 |  | 26 |  | 1 |  | 7 |  | 7 |
ROU assets obtained under finance leases | 3 |  | 3 |  | 18 |  | — |  | — |  | — |
2022 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 303 |  | $ | 58 |  | $ | 206 |  | $ | 5 |  | $ | 30 |  | $ | 14 |
Operating cash flows from finance leases | 11 |  | — |  | 20 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 16 |  | 1 |  | 10 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 56 |  | 10 |  | 17 |  | 9 |  | — |  | 3 |
Reassessment of ROU assets under operating leases | 16 |  | — |  | — |  | — |  | 16 |  | — |
ROU assets obtained under finance leases | 118 |  | 2 |  | 116 |  | — |  | — |  | — |
2021 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 308 |  | $ | 58 |  | $ | 211 |  | $ | 2 |  | $ | 28 |  | $ | 19 |
Operating cash flows from finance leases | 9 |  | — |  | 17 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 17 |  | 1 |  | 9 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 64 |  | 3 |  | 9 |  | — |  | 72 |  | 7 |
ROU assets obtained under finance leases | 3 |  | — |  | — |  | — |  | — |  | — |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
At December 31, 2023 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.2 | 11.1 | 7.5 | 4.6 | 33.1 | 7.0
Finance leases | 16.7 | 4.3 | 10.6 | 11.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.68 | % | 5.02 | % | 4.58 | % | 3.67 | % | 4.89 | % | 3.80 | %
Finance leases | 4.85 | % | 3.93 | % | 5.95 | % | 2.74 | % | N/A | N/A
At December 31, 2022 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.3 | 13.0 | 8.1 | 4.7 | 34.0 | 11.0
Finance leases | 17.4 | 6.4 | 11.8 | 12.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.51 | % | 4.87 | % | 4.52 | % | 3.49 | % | 4.86 | % | 3.79 | %
Finance leases | 4.87 | % | 3.00 | % | 8.06 | % | 2.74 | % | N/A | N/A
Maturities of lease liabilities are as follows:
| At December 31, 2023
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
Maturity Analysis |  |  |  |  |  |
Operating leases: |  |  |  |  |  |
2024 | $ | 230 |  | $ | 16 |  | $ | 172 |  | $ | 4 |  | $ | 36 |  | $ | 12 |
2025 | 203 |  | 14 |  | 147 |  | 3 |  | 29 |  | 12 |
2026 | 180 |  | 12 |  | 142 |  | 2 |  | 29 |  | 9 |
2027 | 159 |  | 10 |  | 141 |  | — |  | 29 |  | 4 |
2028 | 143 |  | 7 |  | 135 |  | — |  | 30 |  | 3 |
Thereafter | 1,378 |  | 64 |  | 303 |  | 1 |  | 1,000 |  | 18 |
Total | 2,293 |  | 123 |  | 1,040 |  | 10 |  | 1,153 |  | 58 |
Less: Present value discount | 803 |  | 30 |  | 165 |  | 1 |  | 607 |  | 7 |
Operating lease obligations | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance leases: |  |  |  |  |  |
2024 | $ | 22 |  | $ | 2 |  | $ | 27 |  | $ | 2 |  | $ | — |  | $ | — |
2025 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2026 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2027 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2028 | 26 |  | 1 |  | 37 |  | 1 |  | — |  | — |
Thereafter | 320 |  | — |  | 153 |  | 10 |  | — |  | — |
Total | 449 |  | 6 |  | 325 |  | 19 |  | — |  | — |
Less: Present value discount | 151 |  | 1 |  | 85 |  | 3 |  | — |  | — |
Finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis. Lessor The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to 10 years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a remaining term of 15 years. For Southern Power, these arrangements consist of PPAs related to electric generating units accounted for as operating leases with remaining terms of up to 23 years and PPAs related to battery energy storage facilities accounted for as sales-type leases with remaining terms of up to 18 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 19 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with remaining terms of up to 10 years. Lease income for 2023, 2022, and 2021, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 24 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 164 |  | 35 |  | 29 |  | 2 |  | 85 |  | 37 |
Variable lease income | 406 |  | 1 |  | — |  | — |  | 437 |  | — |
Total lease income | $ | 594 |  | $ | 36 |  | $ | 29 |  | $ | 16 |  | $ | 532 |  | $ | 37 |
2022 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 25 |  | $ | — |  | $ | — |  | $ | 15 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 208 |  | 77 |  | 32 |  | 2 |  | 85 |  | 36 |
Variable lease income | 417 |  | 1 |  | — |  | — |  | 448 |  | — |
Total lease income | $ | 650 |  | $ | 78 |  | $ | 32 |  | $ | 17 |  | $ | 543 |  | $ | 36 |
2021 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 15 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 1 |  | $ | — |
Lease income - operating leases | 223 |  | 82 |  | 42 |  | 2 |  | 85 |  | 35 |
Variable lease income | 429 |  | — |  | — |  | — |  | 456 |  | — |
Total lease income | $ | 667 |  | $ | 82 |  | $ | 42 |  | $ | 16 |  | $ | 542 |  | $ | 35 |
Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income related to PPAs for Alabama Power and Southern Power is included in wholesale revenues. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses. Mississippi Power has a tolling arrangement accounted for as a sales-type lease. During 2021, Mississippi Power completed construction of additional leased assets under the lease and, upon completion, the book value of $39 million was transferred from CWIP to lease receivables. The transfer represented a non-cash investing transaction for purposes of the statements of cash flows. During 2021, Southern Power completed construction of a portion of the Garland and Tranquillity battery energy storage facilities' assets and recorded losses totaling $40 million upon commencement of the related PPAs, which Southern Power accounts for as sales-type leases. The losses were due to ITCs retained and expected to be realized by Southern Power and its partners in these projects, and no estimated residual asset value was assumed in calculating the losses. Each lease had an initial term of 20 years. Upon commencement of the leases, the book values of the related assets totaling $210 million were derecognized from CWIP and lease receivables were recorded. The transfers represented noncash investing transactions for purposes of the statement of cash flows. See Note 15 under "Southern Power" for additional information. The undiscounted cash flows expected to be received for in-service leased assets under the leases are as follows:
| At December 31, 2023
| Southern Company | Mississippi Power | Southern Power
| (in millions)
2024 | $ | 38 |  | $ | 23 |  | $ | 15 |
2025 | 37 |  | 22 |  | 15 |
2026 | 36 |  | 21 |  | 15 |
2027 | 35 |  | 20 |  | 15 |
2028 | 34 |  | 19 |  | 15 |
Thereafter | 330 |  | 145 |  | 185 |
Total undiscounted cash flows | $ | 510 |  | $ | 250 |  | $ | 260 |
Net investment in sales-type lease(*) | 311 |  | 148 |  | 163 |
Difference between undiscounted cash flows and discounted cash flows | $ | 199 |  | $ | 102 |  | $ | 97 |
(*)For Mississippi Power, included in other current assets and other property and investments on the balance sheets. For Southern Power, included in other current assets ($15 million and $15 million at December 31, 2023 and 2022, respectively) and net investment in sales-type leases ($148 million and $154 million at December 31, 2023 and 2022, respectively) on the balance sheet. The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases are as follows:
| At December 31, 2023
| Southern Company | Alabama Power |  | Southern Power | Southern Company Gas
| (in millions)
2024 | $ | 116 |  | $ | 7 |  |  | $ | 90 |  | $ | 35 |
2025 | 107 |  | 5 |  |  | 75 |  | 29 |
2026 | 108 |  | 5 |  |  | 73 |  | 29 |
2027 | 105 |  | 4 |  |  | 75 |  | 28 |
2028 | 104 |  | 3 |  |  | 76 |  | 28 |
Thereafter | 706 |  | 26 |  |  | 91 |  | 354 |
Total | $ | 1,246 |  | $ | 50 |  |  | $ | 480 |  | $ | 503 |
Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Alabama Power and Southern Power allocate revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Georgia Power and Mississippi Power are immaterial. Southern Company Leveraged Lease At December 31, 2020, a subsidiary of Southern Holdings had four leveraged lease agreements related to energy generation, distribution, and transportation assets, including two domestic and two international projects. During 2021, one of the domestic projects was sold and the agreements for both international projects were terminated. At December 31, 2023, the one remaining leveraged lease agreement, which relates to energy generation, had an expected remaining term of eight years. Southern Company continues to receive federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to this investment. Southern Company wrote off the related investment balance in 2020 following an evaluation of the recoverability of the lease receivable and the expected residual value of the generation assets at the end of the lease. The following table provides a summary of the components of income related to leveraged lease investments. Income was impacted in 2021 by the impairment charges discussed below and in Note 15 under "Southern Company." Income in 2021 does not include the impacts of the sale and terminations of leveraged lease projects discussed in Note 15 under "Southern Company."
|  |  |  |  | 2021
|  |  |  |  | (in millions)
Pretax leveraged lease income |  |  |  |  | $ | 17 |
Income tax expense |  |  |  |  | (5) |
Net leveraged lease income |  |  |  |  | $ | 12 |
In June 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. Subsequently, the lessee failed to make the semi-annual lease payment due in December 2022. As a result, the Southern Holdings subsidiary was unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. The parties to the lease entered into forbearance agreements which suspended the related contractual rights of the parties while they continued restructuring negotiations, during which the termination date for the operating and maintenance agreement was delayed until July 31, 2023. The negotiations were completed on July 14, 2023, resulting in the Southern Holdings subsidiary agreeing to continue operating the plant for the lessee until the lessee's associated power off-take agreement ends in 2032, subject to certain terms and conditions. The restructuring had no material impact on Southern Company's financial statements. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to meet its obligations, including those associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.
LEASES | LEASES Lessee The Registrants recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease. As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Electric generating units(*) | $ | 670 |  | $ | 58 |  | $ | 1,028 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 871 |  | 4 |  | 54 |  | 2 |  | 546 |  | 28 |
Communication towers | 123 |  | 1 |  | 4 |  | — |  | — |  | 23 |
Railcars | 64 |  | 32 |  | 27 |  | 5 |  | — |  | — |
Other | 60 |  | 3 |  | 2 |  | 18 |  | — |  | — |
Total | $ | 1,788 |  | $ | 98 |  | $ | 1,115 |  | $ | 25 |  | $ | 546 |  | $ | 51 |
At December 31, 2022 |  |  |  |  |  |
Electric generating units(*) | $ | 760 |  | $ | 59 |  | $ | 1,163 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 885 |  | 4 |  | 54 |  | 2 |  | 542 |  | 36 |
Communication towers | 141 |  | 2 |  | 4 |  | — |  | — |  | 23 |
Railcars | 34 |  | 12 |  | 18 |  | 3 |  | — |  | — |
Other | 79 |  | 4 |  | 1 |  | 21 |  | — |  | 1 |
Total | $ | 1,899 |  | $ | 81 |  | $ | 1,240 |  | $ | 26 |  | $ | 542 |  | $ | 60 |
(*)Amounts related to affiliate leases are eliminated in consolidation for Southern Company. See "Contracts that Contain a Lease" herein for additional information. Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 27 years while the land leases have remaining terms of up to 44 years, including renewal periods. Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have remaining terms of up to 17 years. Renewal options exist in many of the leases. The expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease unless it is considered reasonably certain that the lease will be extended. Land leases associated with renewable energy facilities at Southern Power and communication tower leases for automated meter infrastructure at Nicor Gas include renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities and the automated meter infrastructure, respectively. Contracts that Contain a Lease While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between one and 16 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $416 million and $461 million at December 31, 2023 and 2022, respectively. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as reviewed and approved by the Georgia PSC. Amounts related to the affiliate PPAs are eliminated in consolidation for Southern Company. Short-term Leases Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term. Residual Value Guarantees Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial at December 31, 2023 and 2022. Lease and Nonlease Components For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset. Balance sheet amounts recorded for operating and finance leases are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,432 |  | $ | 87 |  | $ | 884 |  | $ | 9 |  | $ | 488 |  | $ | 47 |
Operating lease obligations - current | $ | 183 |  | $ | 12 |  | $ | 135 |  | $ | 3 |  | $ | 29 |  | $ | 11 |
Operating lease obligations - non-current | 1,307 |  | 81 |  | 740 |  | 6 |  | 517 |  | 40 |
Total operating lease obligations(*) | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 272 |  | $ | 5 |  | $ | 203 |  | $ | 15 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 11 |  | $ | 2 |  | $ | 18 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 287 |  | 3 |  | 222 |  | 15 |  | — |  | — |
Total finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
At December 31, 2022 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,531 |  | $ | 71 |  | $ | 1,007 |  | $ | 9 |  | $ | 489 |  | $ | 57 |
Operating lease obligations - current | $ | 197 |  | $ | 9 |  | $ | 151 |  | $ | 4 |  | $ | 28 |  | $ | 9 |
Operating lease obligations - non-current | 1,388 |  | 67 |  | 851 |  | 5 |  | 514 |  | 51 |
Total operating lease obligations(*) | $ | 1,585 |  | $ | 76 |  | $ | 1,002 |  | $ | 9 |  | $ | 542 |  | $ | 60 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 292 |  | $ | 5 |  | $ | 205 |  | $ | 16 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 18 |  | $ | 2 |  | $ | 16 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 296 |  | 3 |  | 222 |  | 16 |  | — |  | — |
Total finance lease obligations | $ | 314 |  | $ | 5 |  | $ | 238 |  | $ | 17 |  | $ | — |  | $ | — |
(*)Includes operating lease obligations related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $566 million, $58 million, and $813 million, respectively, at December 31, 2023 and $652 million, $59 million, and $952 million, respectively, at December 31, 2022. If not presented separately on the Registrants' balance sheets, amounts related to leases are presented as follows: operating lease ROU assets, net are included in "other deferred charges and assets"; operating lease obligations are included in "other current liabilities" and "other deferred credits and liabilities," as applicable; finance lease ROU assets, net are included in "plant in service"; and finance lease obligations are included in "securities due within one year" and "long-term debt," as applicable. Lease costs for 2023, 2022, and 2021, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 252 |  | $ | 16 |  | $ | 192 |  | $ | 5 |  | $ | 34 |  | $ | 12 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 24 |  | 2 |  | 19 |  | 1 |  | — |  | — |
Interest on lease obligations | 14 |  | — |  | 17 |  | — |  | — |  | — |
Total finance lease cost | 38 |  | 2 |  | 36 |  | 1 |  | — |  | — |
Short-term lease costs | 40 |  | 16 |  | 16 |  | — |  | — |  | — |
Variable lease cost | 47 |  | — |  | 74 |  | — |  | 4 |  | — |
Sublease income | — |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 377 |  | $ | 34 |  | $ | 318 |  | $ | 6 |  | $ | 38 |  | $ | 12 |
2022 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 297 |  | $ | 59 |  | $ | 198 |  | $ | 5 |  | $ | 32 |  | $ | 15 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 23 |  | 1 |  | 15 |  | 1 |  | — |  | — |
Interest on lease obligations | 13 |  | — |  | 17 |  | 1 |  | — |  | — |
Total finance lease cost | 36 |  | 1 |  | 32 |  | 2 |  | — |  | — |
Short-term lease costs | 64 |  | 44 |  | 13 |  | — |  | — |  | — |
Variable lease cost | 125 |  | 13 |  | 105 |  | — |  | 5 |  | — |
Sublease income | (1) |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 521 |  | $ | 117 |  | $ | 348 |  | $ | 7 |  | $ | 37 |  | $ | 15 |
2021 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 313 |  | $ | 58 |  | $ | 208 |  | $ | 2 |  | $ | 33 |  | $ | 19 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 21 |  | 1 |  | 11 |  | 1 |  | — |  | — |
Interest on lease obligations | 11 |  | — |  | 16 |  | 1 |  | — |  | — |
Total finance lease cost | 32 |  | 1 |  | 27 |  | 2 |  | — |  | — |
Short-term lease costs | 48 |  | 15 |  | 24 |  | — |  | — |  | — |
Variable lease cost | 96 |  | 4 |  | 83 |  | — |  | 5 |  | — |
Sublease income | 1 |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 490 |  | $ | 78 |  | $ | 342 |  | $ | 4 |  | $ | 38 |  | $ | 19 |
(*)Includes operating lease costs related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $112 million, $4 million, and $174 million, respectively, in 2023, $162 million, $48 million, and $180 million, respectively, in 2022, and $165 million, $47 million, and $184 million, respectively, in 2021. Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs, including $42 million, $45 million, and $41 million in 2023, 2022, and 2021, respectively, from finance leases which are included in purchased power on Georgia Power's statements of income, of which $21 million, $21 million, and $20 million was included in purchased power, affiliates in 2023, 2022, and 2021, respectively. Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 253 |  | $ | 17 |  | $ | 199 |  | $ | 5 |  | $ | 33 |  | $ | 12 |
Operating cash flows from finance leases | 15 |  | — |  | 22 |  | — |  | — |  | — |
Financing cash flows from finance leases | 18 |  | 2 |  | 16 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 100 |  | 30 |  | 26 |  | 1 |  | 7 |  | 7 |
ROU assets obtained under finance leases | 3 |  | 3 |  | 18 |  | — |  | — |  | — |
2022 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 303 |  | $ | 58 |  | $ | 206 |  | $ | 5 |  | $ | 30 |  | $ | 14 |
Operating cash flows from finance leases | 11 |  | — |  | 20 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 16 |  | 1 |  | 10 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 56 |  | 10 |  | 17 |  | 9 |  | — |  | 3 |
Reassessment of ROU assets under operating leases | 16 |  | — |  | — |  | — |  | 16 |  | — |
ROU assets obtained under finance leases | 118 |  | 2 |  | 116 |  | — |  | — |  | — |
2021 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 308 |  | $ | 58 |  | $ | 211 |  | $ | 2 |  | $ | 28 |  | $ | 19 |
Operating cash flows from finance leases | 9 |  | — |  | 17 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 17 |  | 1 |  | 9 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 64 |  | 3 |  | 9 |  | — |  | 72 |  | 7 |
ROU assets obtained under finance leases | 3 |  | — |  | — |  | — |  | — |  | — |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
At December 31, 2023 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.2 | 11.1 | 7.5 | 4.6 | 33.1 | 7.0
Finance leases | 16.7 | 4.3 | 10.6 | 11.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.68 | % | 5.02 | % | 4.58 | % | 3.67 | % | 4.89 | % | 3.80 | %
Finance leases | 4.85 | % | 3.93 | % | 5.95 | % | 2.74 | % | N/A | N/A
At December 31, 2022 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.3 | 13.0 | 8.1 | 4.7 | 34.0 | 11.0
Finance leases | 17.4 | 6.4 | 11.8 | 12.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.51 | % | 4.87 | % | 4.52 | % | 3.49 | % | 4.86 | % | 3.79 | %
Finance leases | 4.87 | % | 3.00 | % | 8.06 | % | 2.74 | % | N/A | N/A
Maturities of lease liabilities are as follows:
| At December 31, 2023
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
Maturity Analysis |  |  |  |  |  |
Operating leases: |  |  |  |  |  |
2024 | $ | 230 |  | $ | 16 |  | $ | 172 |  | $ | 4 |  | $ | 36 |  | $ | 12 |
2025 | 203 |  | 14 |  | 147 |  | 3 |  | 29 |  | 12 |
2026 | 180 |  | 12 |  | 142 |  | 2 |  | 29 |  | 9 |
2027 | 159 |  | 10 |  | 141 |  | — |  | 29 |  | 4 |
2028 | 143 |  | 7 |  | 135 |  | — |  | 30 |  | 3 |
Thereafter | 1,378 |  | 64 |  | 303 |  | 1 |  | 1,000 |  | 18 |
Total | 2,293 |  | 123 |  | 1,040 |  | 10 |  | 1,153 |  | 58 |
Less: Present value discount | 803 |  | 30 |  | 165 |  | 1 |  | 607 |  | 7 |
Operating lease obligations | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance leases: |  |  |  |  |  |
2024 | $ | 22 |  | $ | 2 |  | $ | 27 |  | $ | 2 |  | $ | — |  | $ | — |
2025 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2026 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2027 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2028 | 26 |  | 1 |  | 37 |  | 1 |  | — |  | — |
Thereafter | 320 |  | — |  | 153 |  | 10 |  | — |  | — |
Total | 449 |  | 6 |  | 325 |  | 19 |  | — |  | — |
Less: Present value discount | 151 |  | 1 |  | 85 |  | 3 |  | — |  | — |
Finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis. Lessor The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to 10 years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a remaining term of 15 years. For Southern Power, these arrangements consist of PPAs related to electric generating units accounted for as operating leases with remaining terms of up to 23 years and PPAs related to battery energy storage facilities accounted for as sales-type leases with remaining terms of up to 18 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 19 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with remaining terms of up to 10 years. Lease income for 2023, 2022, and 2021, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 24 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 164 |  | 35 |  | 29 |  | 2 |  | 85 |  | 37 |
Variable lease income | 406 |  | 1 |  | — |  | — |  | 437 |  | — |
Total lease income | $ | 594 |  | $ | 36 |  | $ | 29 |  | $ | 16 |  | $ | 532 |  | $ | 37 |
2022 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 25 |  | $ | — |  | $ | — |  | $ | 15 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 208 |  | 77 |  | 32 |  | 2 |  | 85 |  | 36 |
Variable lease income | 417 |  | 1 |  | — |  | — |  | 448 |  | — |
Total lease income | $ | 650 |  | $ | 78 |  | $ | 32 |  | $ | 17 |  | $ | 543 |  | $ | 36 |
2021 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 15 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 1 |  | $ | — |
Lease income - operating leases | 223 |  | 82 |  | 42 |  | 2 |  | 85 |  | 35 |
Variable lease income | 429 |  | — |  | — |  | — |  | 456 |  | — |
Total lease income | $ | 667 |  | $ | 82 |  | $ | 42 |  | $ | 16 |  | $ | 542 |  | $ | 35 |
Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income related to PPAs for Alabama Power and Southern Power is included in wholesale revenues. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses. Mississippi Power has a tolling arrangement accounted for as a sales-type lease. During 2021, Mississippi Power completed construction of additional leased assets under the lease and, upon completion, the book value of $39 million was transferred from CWIP to lease receivables. The transfer represented a non-cash investing transaction for purposes of the statements of cash flows. During 2021, Southern Power completed construction of a portion of the Garland and Tranquillity battery energy storage facilities' assets and recorded losses totaling $40 million upon commencement of the related PPAs, which Southern Power accounts for as sales-type leases. The losses were due to ITCs retained and expected to be realized by Southern Power and its partners in these projects, and no estimated residual asset value was assumed in calculating the losses. Each lease had an initial term of 20 years. Upon commencement of the leases, the book values of the related assets totaling $210 million were derecognized from CWIP and lease receivables were recorded. The transfers represented noncash investing transactions for purposes of the statement of cash flows. See Note 15 under "Southern Power" for additional information. The undiscounted cash flows expected to be received for in-service leased assets under the leases are as follows:
| At December 31, 2023
| Southern Company | Mississippi Power | Southern Power
| (in millions)
2024 | $ | 38 |  | $ | 23 |  | $ | 15 |
2025 | 37 |  | 22 |  | 15 |
2026 | 36 |  | 21 |  | 15 |
2027 | 35 |  | 20 |  | 15 |
2028 | 34 |  | 19 |  | 15 |
Thereafter | 330 |  | 145 |  | 185 |
Total undiscounted cash flows | $ | 510 |  | $ | 250 |  | $ | 260 |
Net investment in sales-type lease(*) | 311 |  | 148 |  | 163 |
Difference between undiscounted cash flows and discounted cash flows | $ | 199 |  | $ | 102 |  | $ | 97 |
(*)For Mississippi Power, included in other current assets and other property and investments on the balance sheets. For Southern Power, included in other current assets ($15 million and $15 million at December 31, 2023 and 2022, respectively) and net investment in sales-type leases ($148 million and $154 million at December 31, 2023 and 2022, respectively) on the balance sheet. The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases are as follows:
| At December 31, 2023
| Southern Company | Alabama Power |  | Southern Power | Southern Company Gas
| (in millions)
2024 | $ | 116 |  | $ | 7 |  |  | $ | 90 |  | $ | 35 |
2025 | 107 |  | 5 |  |  | 75 |  | 29 |
2026 | 108 |  | 5 |  |  | 73 |  | 29 |
2027 | 105 |  | 4 |  |  | 75 |  | 28 |
2028 | 104 |  | 3 |  |  | 76 |  | 28 |
Thereafter | 706 |  | 26 |  |  | 91 |  | 354 |
Total | $ | 1,246 |  | $ | 50 |  |  | $ | 480 |  | $ | 503 |
Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Alabama Power and Southern Power allocate revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Georgia Power and Mississippi Power are immaterial. Southern Company Leveraged Lease At December 31, 2020, a subsidiary of Southern Holdings had four leveraged lease agreements related to energy generation, distribution, and transportation assets, including two domestic and two international projects. During 2021, one of the domestic projects was sold and the agreements for both international projects were terminated. At December 31, 2023, the one remaining leveraged lease agreement, which relates to energy generation, had an expected remaining term of eight years. Southern Company continues to receive federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to this investment. Southern Company wrote off the related investment balance in 2020 following an evaluation of the recoverability of the lease receivable and the expected residual value of the generation assets at the end of the lease. The following table provides a summary of the components of income related to leveraged lease investments. Income was impacted in 2021 by the impairment charges discussed below and in Note 15 under "Southern Company." Income in 2021 does not include the impacts of the sale and terminations of leveraged lease projects discussed in Note 15 under "Southern Company."
|  |  |  |  | 2021
|  |  |  |  | (in millions)
Pretax leveraged lease income |  |  |  |  | $ | 17 |
Income tax expense |  |  |  |  | (5) |
Net leveraged lease income |  |  |  |  | $ | 12 |
In June 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. Subsequently, the lessee failed to make the semi-annual lease payment due in December 2022. As a result, the Southern Holdings subsidiary was unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. The parties to the lease entered into forbearance agreements which suspended the related contractual rights of the parties while they continued restructuring negotiations, during which the termination date for the operating and maintenance agreement was delayed until July 31, 2023. The negotiations were completed on July 14, 2023, resulting in the Southern Holdings subsidiary agreeing to continue operating the plant for the lessee until the lessee's associated power off-take agreement ends in 2032, subject to certain terms and conditions. The restructuring had no material impact on Southern Company's financial statements. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to meet its obligations, including those associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.
LEASES | LEASES Lessee The Registrants recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease. As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Electric generating units(*) | $ | 670 |  | $ | 58 |  | $ | 1,028 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 871 |  | 4 |  | 54 |  | 2 |  | 546 |  | 28 |
Communication towers | 123 |  | 1 |  | 4 |  | — |  | — |  | 23 |
Railcars | 64 |  | 32 |  | 27 |  | 5 |  | — |  | — |
Other | 60 |  | 3 |  | 2 |  | 18 |  | — |  | — |
Total | $ | 1,788 |  | $ | 98 |  | $ | 1,115 |  | $ | 25 |  | $ | 546 |  | $ | 51 |
At December 31, 2022 |  |  |  |  |  |
Electric generating units(*) | $ | 760 |  | $ | 59 |  | $ | 1,163 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 885 |  | 4 |  | 54 |  | 2 |  | 542 |  | 36 |
Communication towers | 141 |  | 2 |  | 4 |  | — |  | — |  | 23 |
Railcars | 34 |  | 12 |  | 18 |  | 3 |  | — |  | — |
Other | 79 |  | 4 |  | 1 |  | 21 |  | — |  | 1 |
Total | $ | 1,899 |  | $ | 81 |  | $ | 1,240 |  | $ | 26 |  | $ | 542 |  | $ | 60 |
(*)Amounts related to affiliate leases are eliminated in consolidation for Southern Company. See "Contracts that Contain a Lease" herein for additional information. Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 27 years while the land leases have remaining terms of up to 44 years, including renewal periods. Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have remaining terms of up to 17 years. Renewal options exist in many of the leases. The expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease unless it is considered reasonably certain that the lease will be extended. Land leases associated with renewable energy facilities at Southern Power and communication tower leases for automated meter infrastructure at Nicor Gas include renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities and the automated meter infrastructure, respectively. Contracts that Contain a Lease While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between one and 16 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $416 million and $461 million at December 31, 2023 and 2022, respectively. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as reviewed and approved by the Georgia PSC. Amounts related to the affiliate PPAs are eliminated in consolidation for Southern Company. Short-term Leases Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term. Residual Value Guarantees Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial at December 31, 2023 and 2022. Lease and Nonlease Components For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset. Balance sheet amounts recorded for operating and finance leases are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,432 |  | $ | 87 |  | $ | 884 |  | $ | 9 |  | $ | 488 |  | $ | 47 |
Operating lease obligations - current | $ | 183 |  | $ | 12 |  | $ | 135 |  | $ | 3 |  | $ | 29 |  | $ | 11 |
Operating lease obligations - non-current | 1,307 |  | 81 |  | 740 |  | 6 |  | 517 |  | 40 |
Total operating lease obligations(*) | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 272 |  | $ | 5 |  | $ | 203 |  | $ | 15 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 11 |  | $ | 2 |  | $ | 18 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 287 |  | 3 |  | 222 |  | 15 |  | — |  | — |
Total finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
At December 31, 2022 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,531 |  | $ | 71 |  | $ | 1,007 |  | $ | 9 |  | $ | 489 |  | $ | 57 |
Operating lease obligations - current | $ | 197 |  | $ | 9 |  | $ | 151 |  | $ | 4 |  | $ | 28 |  | $ | 9 |
Operating lease obligations - non-current | 1,388 |  | 67 |  | 851 |  | 5 |  | 514 |  | 51 |
Total operating lease obligations(*) | $ | 1,585 |  | $ | 76 |  | $ | 1,002 |  | $ | 9 |  | $ | 542 |  | $ | 60 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 292 |  | $ | 5 |  | $ | 205 |  | $ | 16 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 18 |  | $ | 2 |  | $ | 16 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 296 |  | 3 |  | 222 |  | 16 |  | — |  | — |
Total finance lease obligations | $ | 314 |  | $ | 5 |  | $ | 238 |  | $ | 17 |  | $ | — |  | $ | — |
(*)Includes operating lease obligations related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $566 million, $58 million, and $813 million, respectively, at December 31, 2023 and $652 million, $59 million, and $952 million, respectively, at December 31, 2022. If not presented separately on the Registrants' balance sheets, amounts related to leases are presented as follows: operating lease ROU assets, net are included in "other deferred charges and assets"; operating lease obligations are included in "other current liabilities" and "other deferred credits and liabilities," as applicable; finance lease ROU assets, net are included in "plant in service"; and finance lease obligations are included in "securities due within one year" and "long-term debt," as applicable. Lease costs for 2023, 2022, and 2021, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 252 |  | $ | 16 |  | $ | 192 |  | $ | 5 |  | $ | 34 |  | $ | 12 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 24 |  | 2 |  | 19 |  | 1 |  | — |  | — |
Interest on lease obligations | 14 |  | — |  | 17 |  | — |  | — |  | — |
Total finance lease cost | 38 |  | 2 |  | 36 |  | 1 |  | — |  | — |
Short-term lease costs | 40 |  | 16 |  | 16 |  | — |  | — |  | — |
Variable lease cost | 47 |  | — |  | 74 |  | — |  | 4 |  | — |
Sublease income | — |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 377 |  | $ | 34 |  | $ | 318 |  | $ | 6 |  | $ | 38 |  | $ | 12 |
2022 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 297 |  | $ | 59 |  | $ | 198 |  | $ | 5 |  | $ | 32 |  | $ | 15 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 23 |  | 1 |  | 15 |  | 1 |  | — |  | — |
Interest on lease obligations | 13 |  | — |  | 17 |  | 1 |  | — |  | — |
Total finance lease cost | 36 |  | 1 |  | 32 |  | 2 |  | — |  | — |
Short-term lease costs | 64 |  | 44 |  | 13 |  | — |  | — |  | — |
Variable lease cost | 125 |  | 13 |  | 105 |  | — |  | 5 |  | — |
Sublease income | (1) |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 521 |  | $ | 117 |  | $ | 348 |  | $ | 7 |  | $ | 37 |  | $ | 15 |
2021 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 313 |  | $ | 58 |  | $ | 208 |  | $ | 2 |  | $ | 33 |  | $ | 19 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 21 |  | 1 |  | 11 |  | 1 |  | — |  | — |
Interest on lease obligations | 11 |  | — |  | 16 |  | 1 |  | — |  | — |
Total finance lease cost | 32 |  | 1 |  | 27 |  | 2 |  | — |  | — |
Short-term lease costs | 48 |  | 15 |  | 24 |  | — |  | — |  | — |
Variable lease cost | 96 |  | 4 |  | 83 |  | — |  | 5 |  | — |
Sublease income | 1 |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 490 |  | $ | 78 |  | $ | 342 |  | $ | 4 |  | $ | 38 |  | $ | 19 |
(*)Includes operating lease costs related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $112 million, $4 million, and $174 million, respectively, in 2023, $162 million, $48 million, and $180 million, respectively, in 2022, and $165 million, $47 million, and $184 million, respectively, in 2021. Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs, including $42 million, $45 million, and $41 million in 2023, 2022, and 2021, respectively, from finance leases which are included in purchased power on Georgia Power's statements of income, of which $21 million, $21 million, and $20 million was included in purchased power, affiliates in 2023, 2022, and 2021, respectively. Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 253 |  | $ | 17 |  | $ | 199 |  | $ | 5 |  | $ | 33 |  | $ | 12 |
Operating cash flows from finance leases | 15 |  | — |  | 22 |  | — |  | — |  | — |
Financing cash flows from finance leases | 18 |  | 2 |  | 16 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 100 |  | 30 |  | 26 |  | 1 |  | 7 |  | 7 |
ROU assets obtained under finance leases | 3 |  | 3 |  | 18 |  | — |  | — |  | — |
2022 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 303 |  | $ | 58 |  | $ | 206 |  | $ | 5 |  | $ | 30 |  | $ | 14 |
Operating cash flows from finance leases | 11 |  | — |  | 20 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 16 |  | 1 |  | 10 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 56 |  | 10 |  | 17 |  | 9 |  | — |  | 3 |
Reassessment of ROU assets under operating leases | 16 |  | — |  | — |  | — |  | 16 |  | — |
ROU assets obtained under finance leases | 118 |  | 2 |  | 116 |  | — |  | — |  | — |
2021 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 308 |  | $ | 58 |  | $ | 211 |  | $ | 2 |  | $ | 28 |  | $ | 19 |
Operating cash flows from finance leases | 9 |  | — |  | 17 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 17 |  | 1 |  | 9 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 64 |  | 3 |  | 9 |  | — |  | 72 |  | 7 |
ROU assets obtained under finance leases | 3 |  | — |  | — |  | — |  | — |  | — |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
At December 31, 2023 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.2 | 11.1 | 7.5 | 4.6 | 33.1 | 7.0
Finance leases | 16.7 | 4.3 | 10.6 | 11.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.68 | % | 5.02 | % | 4.58 | % | 3.67 | % | 4.89 | % | 3.80 | %
Finance leases | 4.85 | % | 3.93 | % | 5.95 | % | 2.74 | % | N/A | N/A
At December 31, 2022 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.3 | 13.0 | 8.1 | 4.7 | 34.0 | 11.0
Finance leases | 17.4 | 6.4 | 11.8 | 12.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.51 | % | 4.87 | % | 4.52 | % | 3.49 | % | 4.86 | % | 3.79 | %
Finance leases | 4.87 | % | 3.00 | % | 8.06 | % | 2.74 | % | N/A | N/A
Maturities of lease liabilities are as follows:
| At December 31, 2023
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
Maturity Analysis |  |  |  |  |  |
Operating leases: |  |  |  |  |  |
2024 | $ | 230 |  | $ | 16 |  | $ | 172 |  | $ | 4 |  | $ | 36 |  | $ | 12 |
2025 | 203 |  | 14 |  | 147 |  | 3 |  | 29 |  | 12 |
2026 | 180 |  | 12 |  | 142 |  | 2 |  | 29 |  | 9 |
2027 | 159 |  | 10 |  | 141 |  | — |  | 29 |  | 4 |
2028 | 143 |  | 7 |  | 135 |  | — |  | 30 |  | 3 |
Thereafter | 1,378 |  | 64 |  | 303 |  | 1 |  | 1,000 |  | 18 |
Total | 2,293 |  | 123 |  | 1,040 |  | 10 |  | 1,153 |  | 58 |
Less: Present value discount | 803 |  | 30 |  | 165 |  | 1 |  | 607 |  | 7 |
Operating lease obligations | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance leases: |  |  |  |  |  |
2024 | $ | 22 |  | $ | 2 |  | $ | 27 |  | $ | 2 |  | $ | — |  | $ | — |
2025 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2026 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2027 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2028 | 26 |  | 1 |  | 37 |  | 1 |  | — |  | — |
Thereafter | 320 |  | — |  | 153 |  | 10 |  | — |  | — |
Total | 449 |  | 6 |  | 325 |  | 19 |  | — |  | — |
Less: Present value discount | 151 |  | 1 |  | 85 |  | 3 |  | — |  | — |
Finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis. Lessor The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to 10 years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a remaining term of 15 years. For Southern Power, these arrangements consist of PPAs related to electric generating units accounted for as operating leases with remaining terms of up to 23 years and PPAs related to battery energy storage facilities accounted for as sales-type leases with remaining terms of up to 18 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 19 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with remaining terms of up to 10 years. Lease income for 2023, 2022, and 2021, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 24 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 164 |  | 35 |  | 29 |  | 2 |  | 85 |  | 37 |
Variable lease income | 406 |  | 1 |  | — |  | — |  | 437 |  | — |
Total lease income | $ | 594 |  | $ | 36 |  | $ | 29 |  | $ | 16 |  | $ | 532 |  | $ | 37 |
2022 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 25 |  | $ | — |  | $ | — |  | $ | 15 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 208 |  | 77 |  | 32 |  | 2 |  | 85 |  | 36 |
Variable lease income | 417 |  | 1 |  | — |  | — |  | 448 |  | — |
Total lease income | $ | 650 |  | $ | 78 |  | $ | 32 |  | $ | 17 |  | $ | 543 |  | $ | 36 |
2021 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 15 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 1 |  | $ | — |
Lease income - operating leases | 223 |  | 82 |  | 42 |  | 2 |  | 85 |  | 35 |
Variable lease income | 429 |  | — |  | — |  | — |  | 456 |  | — |
Total lease income | $ | 667 |  | $ | 82 |  | $ | 42 |  | $ | 16 |  | $ | 542 |  | $ | 35 |
Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income related to PPAs for Alabama Power and Southern Power is included in wholesale revenues. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses. Mississippi Power has a tolling arrangement accounted for as a sales-type lease. During 2021, Mississippi Power completed construction of additional leased assets under the lease and, upon completion, the book value of $39 million was transferred from CWIP to lease receivables. The transfer represented a non-cash investing transaction for purposes of the statements of cash flows. During 2021, Southern Power completed construction of a portion of the Garland and Tranquillity battery energy storage facilities' assets and recorded losses totaling $40 million upon commencement of the related PPAs, which Southern Power accounts for as sales-type leases. The losses were due to ITCs retained and expected to be realized by Southern Power and its partners in these projects, and no estimated residual asset value was assumed in calculating the losses. Each lease had an initial term of 20 years. Upon commencement of the leases, the book values of the related assets totaling $210 million were derecognized from CWIP and lease receivables were recorded. The transfers represented noncash investing transactions for purposes of the statement of cash flows. See Note 15 under "Southern Power" for additional information. The undiscounted cash flows expected to be received for in-service leased assets under the leases are as follows:
| At December 31, 2023
| Southern Company | Mississippi Power | Southern Power
| (in millions)
2024 | $ | 38 |  | $ | 23 |  | $ | 15 |
2025 | 37 |  | 22 |  | 15 |
2026 | 36 |  | 21 |  | 15 |
2027 | 35 |  | 20 |  | 15 |
2028 | 34 |  | 19 |  | 15 |
Thereafter | 330 |  | 145 |  | 185 |
Total undiscounted cash flows | $ | 510 |  | $ | 250 |  | $ | 260 |
Net investment in sales-type lease(*) | 311 |  | 148 |  | 163 |
Difference between undiscounted cash flows and discounted cash flows | $ | 199 |  | $ | 102 |  | $ | 97 |
(*)For Mississippi Power, included in other current assets and other property and investments on the balance sheets. For Southern Power, included in other current assets ($15 million and $15 million at December 31, 2023 and 2022, respectively) and net investment in sales-type leases ($148 million and $154 million at December 31, 2023 and 2022, respectively) on the balance sheet. The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases are as follows:
| At December 31, 2023
| Southern Company | Alabama Power |  | Southern Power | Southern Company Gas
| (in millions)
2024 | $ | 116 |  | $ | 7 |  |  | $ | 90 |  | $ | 35 |
2025 | 107 |  | 5 |  |  | 75 |  | 29 |
2026 | 108 |  | 5 |  |  | 73 |  | 29 |
2027 | 105 |  | 4 |  |  | 75 |  | 28 |
2028 | 104 |  | 3 |  |  | 76 |  | 28 |
Thereafter | 706 |  | 26 |  |  | 91 |  | 354 |
Total | $ | 1,246 |  | $ | 50 |  |  | $ | 480 |  | $ | 503 |
Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Alabama Power and Southern Power allocate revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Georgia Power and Mississippi Power are immaterial. Southern Company Leveraged Lease At December 31, 2020, a subsidiary of Southern Holdings had four leveraged lease agreements related to energy generation, distribution, and transportation assets, including two domestic and two international projects. During 2021, one of the domestic projects was sold and the agreements for both international projects were terminated. At December 31, 2023, the one remaining leveraged lease agreement, which relates to energy generation, had an expected remaining term of eight years. Southern Company continues to receive federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to this investment. Southern Company wrote off the related investment balance in 2020 following an evaluation of the recoverability of the lease receivable and the expected residual value of the generation assets at the end of the lease. The following table provides a summary of the components of income related to leveraged lease investments. Income was impacted in 2021 by the impairment charges discussed below and in Note 15 under "Southern Company." Income in 2021 does not include the impacts of the sale and terminations of leveraged lease projects discussed in Note 15 under "Southern Company."
|  |  |  |  | 2021
|  |  |  |  | (in millions)
Pretax leveraged lease income |  |  |  |  | $ | 17 |
Income tax expense |  |  |  |  | (5) |
Net leveraged lease income |  |  |  |  | $ | 12 |
In June 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. Subsequently, the lessee failed to make the semi-annual lease payment due in December 2022. As a result, the Southern Holdings subsidiary was unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. The parties to the lease entered into forbearance agreements which suspended the related contractual rights of the parties while they continued restructuring negotiations, during which the termination date for the operating and maintenance agreement was delayed until July 31, 2023. The negotiations were completed on July 14, 2023, resulting in the Southern Holdings subsidiary agreeing to continue operating the plant for the lessee until the lessee's associated power off-take agreement ends in 2032, subject to certain terms and conditions. The restructuring had no material impact on Southern Company's financial statements. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to meet its obligations, including those associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.
LEASES | LEASES Lessee The Registrants recognize leases with a term of greater than 12 months on the balance sheet as lease obligations, representing the discounted future fixed payments due, along with ROU assets that will be amortized over the term of each lease. As lessee, the Registrants lease certain electric generating units (including renewable energy facilities), real estate/land, communication towers, railcars, and other equipment and vehicles. The major categories of lease obligations are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Electric generating units(*) | $ | 670 |  | $ | 58 |  | $ | 1,028 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 871 |  | 4 |  | 54 |  | 2 |  | 546 |  | 28 |
Communication towers | 123 |  | 1 |  | 4 |  | — |  | — |  | 23 |
Railcars | 64 |  | 32 |  | 27 |  | 5 |  | — |  | — |
Other | 60 |  | 3 |  | 2 |  | 18 |  | — |  | — |
Total | $ | 1,788 |  | $ | 98 |  | $ | 1,115 |  | $ | 25 |  | $ | 546 |  | $ | 51 |
At December 31, 2022 |  |  |  |  |  |
Electric generating units(*) | $ | 760 |  | $ | 59 |  | $ | 1,163 |  | $ | — |  | $ | — |  | $ | — |
Real estate/land | 885 |  | 4 |  | 54 |  | 2 |  | 542 |  | 36 |
Communication towers | 141 |  | 2 |  | 4 |  | — |  | — |  | 23 |
Railcars | 34 |  | 12 |  | 18 |  | 3 |  | — |  | — |
Other | 79 |  | 4 |  | 1 |  | 21 |  | — |  | 1 |
Total | $ | 1,899 |  | $ | 81 |  | $ | 1,240 |  | $ | 26 |  | $ | 542 |  | $ | 60 |
(*)Amounts related to affiliate leases are eliminated in consolidation for Southern Company. See "Contracts that Contain a Lease" herein for additional information. Real estate/land leases primarily consist of commercial real estate leases at Southern Company, Georgia Power, and Southern Company Gas and various land leases primarily associated with renewable energy facilities at Southern Power. The commercial real estate leases have remaining terms of up to 27 years while the land leases have remaining terms of up to 44 years, including renewal periods. Communication towers are leased for the installation of equipment to provide cellular phone service to customers and to support the automated meter infrastructure programs at the traditional electric operating companies and Nicor Gas. Communication tower leases have remaining terms of up to 17 years. Renewal options exist in many of the leases. The expected term used in calculating the lease obligation generally reflects only the noncancelable period of the lease unless it is considered reasonably certain that the lease will be extended. Land leases associated with renewable energy facilities at Southern Power and communication tower leases for automated meter infrastructure at Nicor Gas include renewal periods reasonably certain of exercise resulting in an expected lease term at least equal to the expected life of the renewable energy facilities and the automated meter infrastructure, respectively. Contracts that Contain a Lease While not specifically structured as a lease, some of the PPAs at Alabama Power and Georgia Power are deemed to represent a lease of the underlying electric generating units when the terms of the PPA convey the right to control the use of the underlying assets. Amounts recorded for leases of electric generating units are generally based on the amount of scheduled capacity payments due over the remaining term of the PPA, which varies between one and 16 years. Georgia Power has several PPAs with Southern Power that Georgia Power accounts for as leases with a lease obligation of $416 million and $461 million at December 31, 2023 and 2022, respectively. The amount paid for energy under these affiliate PPAs reflects a price that would be paid in an arm's-length transaction as reviewed and approved by the Georgia PSC. Amounts related to the affiliate PPAs are eliminated in consolidation for Southern Company. Short-term Leases Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Registrants generally recognize lease expense for these leases on a straight-line basis over the lease term. Residual Value Guarantees Residual value guarantees exist primarily in railcar leases at Alabama Power and Georgia Power and the amounts probable of being paid under those guarantees are included in the lease payments. All such amounts are immaterial at December 31, 2023 and 2022. Lease and Nonlease Components For all asset categories, with the exception of electric generating units, gas pipelines, and real estate leases, the Registrants combine lease payments and any nonlease components, such as asset maintenance, for purposes of calculating the lease obligation and the right-of-use asset. Balance sheet amounts recorded for operating and finance leases are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
At December 31, 2023 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,432 |  | $ | 87 |  | $ | 884 |  | $ | 9 |  | $ | 488 |  | $ | 47 |
Operating lease obligations - current | $ | 183 |  | $ | 12 |  | $ | 135 |  | $ | 3 |  | $ | 29 |  | $ | 11 |
Operating lease obligations - non-current | 1,307 |  | 81 |  | 740 |  | 6 |  | 517 |  | 40 |
Total operating lease obligations(*) | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 272 |  | $ | 5 |  | $ | 203 |  | $ | 15 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 11 |  | $ | 2 |  | $ | 18 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 287 |  | 3 |  | 222 |  | 15 |  | — |  | — |
Total finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
At December 31, 2022 |  |  |  |  |  |
Operating Leases |  |  |  |  |  |
Operating lease ROU assets, net | $ | 1,531 |  | $ | 71 |  | $ | 1,007 |  | $ | 9 |  | $ | 489 |  | $ | 57 |
Operating lease obligations - current | $ | 197 |  | $ | 9 |  | $ | 151 |  | $ | 4 |  | $ | 28 |  | $ | 9 |
Operating lease obligations - non-current | 1,388 |  | 67 |  | 851 |  | 5 |  | 514 |  | 51 |
Total operating lease obligations(*) | $ | 1,585 |  | $ | 76 |  | $ | 1,002 |  | $ | 9 |  | $ | 542 |  | $ | 60 |
Finance Leases |  |  |  |  |  |
Finance lease ROU assets, net | $ | 292 |  | $ | 5 |  | $ | 205 |  | $ | 16 |  | $ | — |  | $ | — |
Finance lease obligations - current | $ | 18 |  | $ | 2 |  | $ | 16 |  | $ | 1 |  | $ | — |  | $ | — |
Finance lease obligations - non-current | 296 |  | 3 |  | 222 |  | 16 |  | — |  | — |
Total finance lease obligations | $ | 314 |  | $ | 5 |  | $ | 238 |  | $ | 17 |  | $ | — |  | $ | — |
(*)Includes operating lease obligations related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $566 million, $58 million, and $813 million, respectively, at December 31, 2023 and $652 million, $59 million, and $952 million, respectively, at December 31, 2022. If not presented separately on the Registrants' balance sheets, amounts related to leases are presented as follows: operating lease ROU assets, net are included in "other deferred charges and assets"; operating lease obligations are included in "other current liabilities" and "other deferred credits and liabilities," as applicable; finance lease ROU assets, net are included in "plant in service"; and finance lease obligations are included in "securities due within one year" and "long-term debt," as applicable. Lease costs for 2023, 2022, and 2021, which includes both amounts recognized as operations and maintenance expense and amounts capitalized as part of the cost of another asset, are as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 252 |  | $ | 16 |  | $ | 192 |  | $ | 5 |  | $ | 34 |  | $ | 12 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 24 |  | 2 |  | 19 |  | 1 |  | — |  | — |
Interest on lease obligations | 14 |  | — |  | 17 |  | — |  | — |  | — |
Total finance lease cost | 38 |  | 2 |  | 36 |  | 1 |  | — |  | — |
Short-term lease costs | 40 |  | 16 |  | 16 |  | — |  | — |  | — |
Variable lease cost | 47 |  | — |  | 74 |  | — |  | 4 |  | — |
Sublease income | — |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 377 |  | $ | 34 |  | $ | 318 |  | $ | 6 |  | $ | 38 |  | $ | 12 |
2022 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 297 |  | $ | 59 |  | $ | 198 |  | $ | 5 |  | $ | 32 |  | $ | 15 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 23 |  | 1 |  | 15 |  | 1 |  | — |  | — |
Interest on lease obligations | 13 |  | — |  | 17 |  | 1 |  | — |  | — |
Total finance lease cost | 36 |  | 1 |  | 32 |  | 2 |  | — |  | — |
Short-term lease costs | 64 |  | 44 |  | 13 |  | — |  | — |  | — |
Variable lease cost | 125 |  | 13 |  | 105 |  | — |  | 5 |  | — |
Sublease income | (1) |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 521 |  | $ | 117 |  | $ | 348 |  | $ | 7 |  | $ | 37 |  | $ | 15 |
2021 |  |  |  |  |  |
Lease cost |  |  |  |  |  |
Operating lease cost(*) | $ | 313 |  | $ | 58 |  | $ | 208 |  | $ | 2 |  | $ | 33 |  | $ | 19 |
Finance lease cost: |  |  |  |  |  |
Amortization of ROU assets | 21 |  | 1 |  | 11 |  | 1 |  | — |  | — |
Interest on lease obligations | 11 |  | — |  | 16 |  | 1 |  | — |  | — |
Total finance lease cost | 32 |  | 1 |  | 27 |  | 2 |  | — |  | — |
Short-term lease costs | 48 |  | 15 |  | 24 |  | — |  | — |  | — |
Variable lease cost | 96 |  | 4 |  | 83 |  | — |  | 5 |  | — |
Sublease income | 1 |  | — |  | — |  | — |  | — |  | — |
Total lease cost | $ | 490 |  | $ | 78 |  | $ | 342 |  | $ | 4 |  | $ | 38 |  | $ | 19 |
(*)Includes operating lease costs related to PPAs at Southern Company, Alabama Power, and Georgia Power totaling $112 million, $4 million, and $174 million, respectively, in 2023, $162 million, $48 million, and $180 million, respectively, in 2022, and $165 million, $47 million, and $184 million, respectively, in 2021. Georgia Power has variable lease payments that are based on the amount of energy produced by certain renewable generating facilities subject to PPAs, including $42 million, $45 million, and $41 million in 2023, 2022, and 2021, respectively, from finance leases which are included in purchased power on Georgia Power's statements of income, of which $21 million, $21 million, and $20 million was included in purchased power, affiliates in 2023, 2022, and 2021, respectively. Other information with respect to cash and noncash activities related to leases, as well as weighted-average lease terms and discount rates, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 253 |  | $ | 17 |  | $ | 199 |  | $ | 5 |  | $ | 33 |  | $ | 12 |
Operating cash flows from finance leases | 15 |  | — |  | 22 |  | — |  | — |  | — |
Financing cash flows from finance leases | 18 |  | 2 |  | 16 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 100 |  | 30 |  | 26 |  | 1 |  | 7 |  | 7 |
ROU assets obtained under finance leases | 3 |  | 3 |  | 18 |  | — |  | — |  | — |
2022 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 303 |  | $ | 58 |  | $ | 206 |  | $ | 5 |  | $ | 30 |  | $ | 14 |
Operating cash flows from finance leases | 11 |  | — |  | 20 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 16 |  | 1 |  | 10 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 56 |  | 10 |  | 17 |  | 9 |  | — |  | 3 |
Reassessment of ROU assets under operating leases | 16 |  | — |  | — |  | — |  | 16 |  | — |
ROU assets obtained under finance leases | 118 |  | 2 |  | 116 |  | — |  | — |  | — |
2021 |  |  |  |  |  |
Other information |  |  |  |  |  |
Cash paid for amounts included in the measurements of lease obligations: |  |  |  |  |  |
Operating cash flows from operating leases | $ | 308 |  | $ | 58 |  | $ | 211 |  | $ | 2 |  | $ | 28 |  | $ | 19 |
Operating cash flows from finance leases | 9 |  | — |  | 17 |  | 1 |  | — |  | — |
Financing cash flows from finance leases | 17 |  | 1 |  | 9 |  | 1 |  | — |  | — |
ROU assets obtained under operating leases | 64 |  | 3 |  | 9 |  | — |  | 72 |  | 7 |
ROU assets obtained under finance leases | 3 |  | — |  | — |  | — |  | — |  | — |
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
At December 31, 2023 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.2 | 11.1 | 7.5 | 4.6 | 33.1 | 7.0
Finance leases | 16.7 | 4.3 | 10.6 | 11.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.68 | % | 5.02 | % | 4.58 | % | 3.67 | % | 4.89 | % | 3.80 | %
Finance leases | 4.85 | % | 3.93 | % | 5.95 | % | 2.74 | % | N/A | N/A
At December 31, 2022 |  |  |  |  |  |
Weighted-average remaining lease term in years: |  |  |  |  |  |
Operating leases | 17.3 | 13.0 | 8.1 | 4.7 | 34.0 | 11.0
Finance leases | 17.4 | 6.4 | 11.8 | 12.9 | N/A | N/A
Weighted-average discount rate: |  |  |  |  |  |
Operating leases | 4.51 | % | 4.87 | % | 4.52 | % | 3.49 | % | 4.86 | % | 3.79 | %
Finance leases | 4.87 | % | 3.00 | % | 8.06 | % | 2.74 | % | N/A | N/A
Maturities of lease liabilities are as follows:
| At December 31, 2023
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
Maturity Analysis |  |  |  |  |  |
Operating leases: |  |  |  |  |  |
2024 | $ | 230 |  | $ | 16 |  | $ | 172 |  | $ | 4 |  | $ | 36 |  | $ | 12 |
2025 | 203 |  | 14 |  | 147 |  | 3 |  | 29 |  | 12 |
2026 | 180 |  | 12 |  | 142 |  | 2 |  | 29 |  | 9 |
2027 | 159 |  | 10 |  | 141 |  | — |  | 29 |  | 4 |
2028 | 143 |  | 7 |  | 135 |  | — |  | 30 |  | 3 |
Thereafter | 1,378 |  | 64 |  | 303 |  | 1 |  | 1,000 |  | 18 |
Total | 2,293 |  | 123 |  | 1,040 |  | 10 |  | 1,153 |  | 58 |
Less: Present value discount | 803 |  | 30 |  | 165 |  | 1 |  | 607 |  | 7 |
Operating lease obligations | $ | 1,490 |  | $ | 93 |  | $ | 875 |  | $ | 9 |  | $ | 546 |  | $ | 51 |
Finance leases: |  |  |  |  |  |
2024 | $ | 22 |  | $ | 2 |  | $ | 27 |  | $ | 2 |  | $ | — |  | $ | — |
2025 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2026 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2027 | 27 |  | 1 |  | 36 |  | 2 |  | — |  | — |
2028 | 26 |  | 1 |  | 37 |  | 1 |  | — |  | — |
Thereafter | 320 |  | — |  | 153 |  | 10 |  | — |  | — |
Total | 449 |  | 6 |  | 325 |  | 19 |  | — |  | — |
Less: Present value discount | 151 |  | 1 |  | 85 |  | 3 |  | — |  | — |
Finance lease obligations | $ | 298 |  | $ | 5 |  | $ | 240 |  | $ | 16 |  | $ | — |  | $ | — |
Payments made under PPAs at Georgia Power for energy generated from certain renewable energy facilities accounted for as operating and finance leases are considered variable lease costs and are therefore not reflected in the above maturity analysis. Lessor The Registrants are each considered lessors in various arrangements that have been determined to contain a lease due to the customer's ability to control the use of the underlying asset owned by the applicable Registrant. For the traditional electric operating companies, these arrangements consist of outdoor lighting contracts accounted for as operating leases with initial terms of up to 10 years, after which the contracts renew on a month-to-month basis at the customer's option. For Mississippi Power, these arrangements also include a tolling arrangement related to an electric generating unit accounted for as a sales-type lease with a remaining term of 15 years. For Southern Power, these arrangements consist of PPAs related to electric generating units accounted for as operating leases with remaining terms of up to 23 years and PPAs related to battery energy storage facilities accounted for as sales-type leases with remaining terms of up to 18 years. Southern Company Gas is the lessor in operating leases related to gas pipelines with remaining terms of up to 19 years. For Southern Company, these arrangements also include PPAs related to fuel cells accounted for as operating leases with remaining terms of up to 10 years. Lease income for 2023, 2022, and 2021, is as follows:
| Southern Company | Alabama Power | Georgia Power | Mississippi Power | Southern Power | Southern Company Gas
| (in millions)
2023 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 24 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 164 |  | 35 |  | 29 |  | 2 |  | 85 |  | 37 |
Variable lease income | 406 |  | 1 |  | — |  | — |  | 437 |  | — |
Total lease income | $ | 594 |  | $ | 36 |  | $ | 29 |  | $ | 16 |  | $ | 532 |  | $ | 37 |
2022 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 25 |  | $ | — |  | $ | — |  | $ | 15 |  | $ | 10 |  | $ | — |
Lease income - operating leases | 208 |  | 77 |  | 32 |  | 2 |  | 85 |  | 36 |
Variable lease income | 417 |  | 1 |  | — |  | — |  | 448 |  | — |
Total lease income | $ | 650 |  | $ | 78 |  | $ | 32 |  | $ | 17 |  | $ | 543 |  | $ | 36 |
2021 |  |  |  |  |  |
Lease income - interest income on sales-type leases | $ | 15 |  | $ | — |  | $ | — |  | $ | 14 |  | $ | 1 |  | $ | — |
Lease income - operating leases | 223 |  | 82 |  | 42 |  | 2 |  | 85 |  | 35 |
Variable lease income | 429 |  | — |  | — |  | — |  | 456 |  | — |
Total lease income | $ | 667 |  | $ | 82 |  | $ | 42 |  | $ | 16 |  | $ | 542 |  | $ | 35 |
Lease payments received under tolling arrangements and PPAs consist of either scheduled payments or variable payments based on the amount of energy produced by the underlying electric generating units. Lease income related to PPAs for Alabama Power and Southern Power is included in wholesale revenues. Scheduled payments to be received under outdoor lighting contracts, tolling arrangements, and PPAs accounted for as leases are presented in the following maturity analyses. Mississippi Power has a tolling arrangement accounted for as a sales-type lease. During 2021, Mississippi Power completed construction of additional leased assets under the lease and, upon completion, the book value of $39 million was transferred from CWIP to lease receivables. The transfer represented a non-cash investing transaction for purposes of the statements of cash flows. During 2021, Southern Power completed construction of a portion of the Garland and Tranquillity battery energy storage facilities' assets and recorded losses totaling $40 million upon commencement of the related PPAs, which Southern Power accounts for as sales-type leases. The losses were due to ITCs retained and expected to be realized by Southern Power and its partners in these projects, and no estimated residual asset value was assumed in calculating the losses. Each lease had an initial term of 20 years. Upon commencement of the leases, the book values of the related assets totaling $210 million were derecognized from CWIP and lease receivables were recorded. The transfers represented noncash investing transactions for purposes of the statement of cash flows. See Note 15 under "Southern Power" for additional information. The undiscounted cash flows expected to be received for in-service leased assets under the leases are as follows:
| At December 31, 2023
| Southern Company | Mississippi Power | Southern Power
| (in millions)
2024 | $ | 38 |  | $ | 23 |  | $ | 15 |
2025 | 37 |  | 22 |  | 15 |
2026 | 36 |  | 21 |  | 15 |
2027 | 35 |  | 20 |  | 15 |
2028 | 34 |  | 19 |  | 15 |
Thereafter | 330 |  | 145 |  | 185 |
Total undiscounted cash flows | $ | 510 |  | $ | 250 |  | $ | 260 |
Net investment in sales-type lease(*) | 311 |  | 148 |  | 163 |
Difference between undiscounted cash flows and discounted cash flows | $ | 199 |  | $ | 102 |  | $ | 97 |
(*)For Mississippi Power, included in other current assets and other property and investments on the balance sheets. For Southern Power, included in other current assets ($15 million and $15 million at December 31, 2023 and 2022, respectively) and net investment in sales-type leases ($148 million and $154 million at December 31, 2023 and 2022, respectively) on the balance sheet. The undiscounted cash flows to be received under operating leases and contracts accounted for as operating leases are as follows:
| At December 31, 2023
| Southern Company | Alabama Power |  | Southern Power | Southern Company Gas
| (in millions)
2024 | $ | 116 |  | $ | 7 |  |  | $ | 90 |  | $ | 35 |
2025 | 107 |  | 5 |  |  | 75 |  | 29 |
2026 | 108 |  | 5 |  |  | 73 |  | 29 |
2027 | 105 |  | 4 |  |  | 75 |  | 28 |
2028 | 104 |  | 3 |  |  | 76 |  | 28 |
Thereafter | 706 |  | 26 |  |  | 91 |  | 354 |
Total | $ | 1,246 |  | $ | 50 |  |  | $ | 480 |  | $ | 503 |
Southern Power receives payments for renewable energy under PPAs accounted for as operating leases that are considered contingent rents and are therefore not reflected in the table above. Alabama Power and Southern Power allocate revenue to the nonlease components of PPAs based on the stand-alone selling price of capacity and energy. The undiscounted cash flows to be received under outdoor lighting contracts accounted for as operating leases at Georgia Power and Mississippi Power are immaterial. Southern Company Leveraged Lease At December 31, 2020, a subsidiary of Southern Holdings had four leveraged lease agreements related to energy generation, distribution, and transportation assets, including two domestic and two international projects. During 2021, one of the domestic projects was sold and the agreements for both international projects were terminated. At December 31, 2023, the one remaining leveraged lease agreement, which relates to energy generation, had an expected remaining term of eight years. Southern Company continues to receive federal income tax deductions for depreciation and amortization, as well as interest on long-term debt related to this investment. Southern Company wrote off the related investment balance in 2020 following an evaluation of the recoverability of the lease receivable and the expected residual value of the generation assets at the end of the lease. The following table provides a summary of the components of income related to leveraged lease investments. Income was impacted in 2021 by the impairment charges discussed below and in Note 15 under "Southern Company." Income in 2021 does not include the impacts of the sale and terminations of leveraged lease projects discussed in Note 15 under "Southern Company."
|  |  |  |  | 2021
|  |  |  |  | (in millions)
Pretax leveraged lease income |  |  |  |  | $ | 17 |
Income tax expense |  |  |  |  | (5) |
Net leveraged lease income |  |  |  |  | $ | 12 |
In June 2022, the Southern Holdings subsidiary operating the generating plant for the lessee provided notice to the lessee to terminate the related operating and maintenance agreement effective June 30, 2023. Subsequently, the lessee failed to make the semi-annual lease payment due in December 2022. As a result, the Southern Holdings subsidiary was unable to make its corresponding payment to the holders of the underlying non-recourse debt related to the generation assets. The parties to the lease entered into forbearance agreements which suspended the related contractual rights of the parties while they continued restructuring negotiations, during which the termination date for the operating and maintenance agreement was delayed until July 31, 2023. The negotiations were completed on July 14, 2023, resulting in the Southern Holdings subsidiary agreeing to continue operating the plant for the lessee until the lessee's associated power off-take agreement ends in 2032, subject to certain terms and conditions. The restructuring had no material impact on Southern Company's financial statements. Southern Company will continue to monitor the operational performance of the underlying assets and evaluate the ability of the lessee to continue to meet its obligations, including those associated with a future closure or retirement of the generation assets and associated properties, including the dry ash landfill.

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