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10-Q
ALABAMA POWER CO filed this Form 10-Q on 11/01/2017
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NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(UNAUDITED)

Mississippi Power
Mississippi Power's effective tax (benefit) rate was (30.3)% for the nine months ended September 30, 2017 compared to (282.8)% for the corresponding period in 2016. The effective tax rate increase was primarily due to the estimated probable losses on the Kemper IGCC, net of the non-deductible AFUDC equity portion and the related state valuation allowances.
Southern Power
Southern Power's effective tax (benefit) rate was (66.5)% for the nine months ended September 30, 2017 compared to (88.9)% for the corresponding period in 2016. The effective tax rate increase was primarily due to a decrease in tax benefits from solar ITCs, partially offset by additional wind PTCs and state apportionment rate changes.
Southern Power recognizes PTCs when wind energy is generated and sold (using the prescribed KWH rate in applicable federal and state statutes), which may differ significantly from amounts computed on a quarterly basis using an overall estimated annual effective income tax rate. Southern Power uses this method of recognition since the amount of PTCs can be significantly impacted by wind generation. This method can significantly affect the effective income tax rate for the period depending on the amount of pretax income.
During the third quarter 2017, Southern Power began a legal entity reorganization of various direct and indirect subsidiaries that own and operate solar facilities, including certain subsidiaries owned in partnership with various third parties. Southern Power's ownership interests in the various solar entities and facilities will not be affected by the reorganization. The reorganization is expected to result in estimated tax benefits totaling approximately $40 million that will be recorded in the fourth quarter 2017 related to certain changes in state apportionment rates and net operating loss carryforward utilization. The ultimate outcome of this matter cannot be determined at this time.
Southern Company Gas
Southern Company Gas' effective tax rate was 43.4% for the successor nine months ended September 30, 2017 compared to 60.3% for the successor period of July 1, 2016 through September 30, 2016 and 37.6% for the predecessor period of January 1, 2016 through June 30, 2016. The effective tax rate for the successor year-to-date 2017 was impacted by State of Illinois tax legislation enacted during July 2017, the allocation of new tax apportionment factors in several states for the inclusion of Southern Company Gas into the consolidated Southern Company state tax filings, and higher pre-tax earnings. The effective tax rates for the periods in 2016 were impacted by the non-deductibility of certain Merger-related expenses. The effective tax rate for the successor period of July 1, 2016 through September 30, 2016 was also impacted by nondeductible expenses associated with certain compensation costs.
Unrecognized Tax Benefits
See Note 5 to the financial statements of each registrant under "Unrecognized Tax Benefits" in Item 8 of the Form 10-K for additional information.
Changes during the nine months ended September 30, 2017 for unrecognized tax benefits were as follows:
 
Mississippi Power
 
Southern Power
 
Southern Company
 
(in millions)
Unrecognized tax benefits as of December 31, 2016
$
465

 
$
17

 
$
484

Tax positions from current periods
2

 

 
9

Tax positions from prior periods
(175
)
 
(17
)
 
(186
)
Reductions due to settlements
(290
)
 

 
(290
)
Balance as of September 30, 2017
$
2

 
$

 
$
17


254

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