NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued) (UNAUDITED)
      Postretirement Benefits      (in millions)  Successor – July 1, 2016 through September 30, 2016    Service cost ^{(a)}   $  1 
 Interest cost ^{(a)}   2 
 Expected return on plan assets   (2  )  Amortization of regulatory asset   1 
 Net periodic postretirement benefit cost   $  2 
 Predecessor – January 1, 2016 through June 30, 2016    Service cost ^{(a)}   $  1 
 Interest cost ^{(a)}   5 
 Expected return on plan assets   (3  )  Amortization:    Prior service costs   (1  )  Net (gain)/loss   2 
 Net periodic postretirement benefit cost   $  4 
 Predecessor – Three Months Ended September 30, 2015    Service cost   $  — 
 Interest cost   4 
 Expected return on plan assets   (1  )  Amortization:    Prior service costs   (1  )  Net (gain)/loss   1 
 Net periodic postretirement benefit cost   $  3 
 Predecessor – Nine Months Ended September 30, 2015    Service cost   $  1 
 Interest cost   10 
 Expected return on plan assets   (5  )  Amortization:    Prior service costs   (2  )  Net (gain)/loss   4 
 Net periodic postretirement benefit cost   $  8 

  (a)  Effective January 1, 2016, Southern Company Gas uses a spot rate approach to estimate the service cost and interest cost components. Historically, Southern Company Gas estimated these components using a single weightedaverage discount rate. 
(G) INCOME TAXES See Note 13 to the consolidated financial statements of Southern Company Gas in Item 8 of the Form 10K for additional tax information. Effective Tax Rate Southern Company Gas' effective tax rate was 59.6% for the successor period July 1, 2016 through September 30, 2016 and 37.6% for the predecessor period January 1, 2016 through June 30, 2016, compared to 37.9% for the predecessor period nine months ended September 30, 2015. The effective tax rates for the periods in 2016 were impacted by the nondeductibility of certain Mergerrelated expenses, which were reassessed in the second and third quarters 2016. The effective tax rate for the successor period July 1, 2016 through September 30, 2016 was also impacted by nondeductible expenses associated with change in control compensation charges. Removing the impact of the Mergerrelated expenses, the effective tax rate for the predecessor period was 37.5% and for the successor period was 39.1%.
