Leases

12 Months Ended

Dec. 31, 2022

Leases

PSE has operating leases for buildings for corporate offices and operations, real estate for operating facilities and the PSE and PLNG LNG facility, land for our wind farms, and vehicles for PSE’s fleet. Finance leases represent office printers and office buildings. The leases have remaining lease terms of less than a year to 47 years. PSE's right-of-use (ROU) assets and lease liabilities include options to extend leases when it is reasonably certain that PSE will exercise that option.

During 2021, mechanical completion was achieved for the Puget LNG facility which triggered an increase in the lease payments for the Port of Tacoma lease. This remeasurement resulted in an increase of the operating lease ROU asset and operating lease liabilities of $26.3 million, of which $0.4 million was recorded in current operating lease liabilities and $25.9 million was recorded in operating lease liabilities. Additionally, two finance leases commenced for service center facilities in Kent and Puyallup, Washington. The Kent lease has a term of 20 years and resulted in an increase of electric utility plant and finance lease liabilities of $45.1 million, of which $1.0 million was recorded in other current liabilities and $44.1 million was recorded in finance lease liabilities, respectively. The Puyallup lease has a term of 20 years and resulted in an increase in common utility plant and finance lease liabilities of $61.3 million, of which $0.4 million was recorded in other current liabilities and $59.9 million was recorded in finance lease liabilities.

During 2022, there were no material changes regarding the Company's leases.

The components of lease cost were as follows:


Puget Energy and Puget Sound Energy	Year Ended December 31,		Year Ended December 31,
(Dollars in Thousands)	2022		2021
Finance lease cost:
Amortization of right-of-use asset	$	2,465	$	1,291
Interest on lease liabilities	2,482		358
Total finance lease cost	$	4,947	$	1,649

Operating lease cost1	$	23,984	$	23,983

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1.Includes $1.5 million and $1.4 million allocated to PLNG at Puget Energy related to the Port of Tacoma lease or both of the years ended December 31, 2022 and December 31, 2021, respectively.

Supplemental cash flow information related to leases was as follows:


Puget Energy and Puget Sound Energy	Year Ended December 31,		Year Ended December 31,
(Dollars in Thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow for operating leases	$	16,574	$	16,440
Investing cash flow for operating leases1	7,410		7,543
Operating cash flow for finance leases	2,482		358
Financing cash flow for finance leases	2,465		1,291
Non-cash disclosure upon commencement of new lease
Right-of-use assets obtained in exchange for new operating lease liabilities	$	5,338	$	4,820
Right-of-use assets obtained in exchange for new finance lease liabilities	—		105,176
Non-cash disclosure upon modification of existing lease
Modification of operating lease right-of-use assets	$	21,068	$	26,287

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1 Includes $1.5 million and $1.4 million allocated to PLNG at Puget Energy related to the Port of Tacoma lease for both of the years ended December 31, 2022 and December 31, 2021, respectively.

Supplemental balance sheet information related to leases was as follows:


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	At December 31,			At December 31,
Operating Leases	2022			2021
Operating lease right-of-use asset	$	193,509		$	184,957

Operating leases liabilities current	$	20,342		$	20,398
Operating lease liabilities long-term	181,265			172,510
Total operating lease liabilities:	$	201,607		$	192,908

Finance Leases
Common plant	$	58,391		$	61,227
Electric plant	41,576			43,793
Total finance lease assets	$	99,967		$	105,020

Other current liabilities	$	3,167		$	1,742
Finance lease liabilities	102,518			105,303
Total finance lease liabilities	$	105,685		$	107,045

Weighted Average Remaining Lease Term
Operating leases	22.00 Years			22.80 Years
Finance leases	19.10 Years			20.15 Years

Weighted Average Discount Rate
Operating leases	3.62		%	3.27		%
Finance leases	3.07		%	3.07		%

The following table summarizes the Company’s estimated future minimum lease payments as of December 31, 2022:


Puget Energy and Puget Sound Energy	Future Minimum Lease Payments
(Dollars in Thousands)
At December 31,	Operating Leases		Finance Leases
2023	$	23,676	$	6,383
2024	23,232		6,408
2025	21,887		6,534
2026	21,472		6,591
2027	21,047		6,670
Thereafter	172,969		109,882
Total lease payments	$	284,283	$	142,468
Less imputed interest	(82,676)		(36,783)
Total net present value	$	201,607	$	105,685