LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for as leases under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard in January 2019, Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of December 31, 2019, Entergy and the Registrant Subsidiaries held operating and finance leases for fleet vehicles used in operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting standards.

Leases have remaining terms of one year to 60 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the year ended December 31, 2019:



	(In Thousands)
Operating lease cost		$63,566
Finance lease cost:
Amortization of right-of-use assets		$16,048
Interest on lease liabilities		$3,667

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the year ended December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating lease cost		$13,213		$11,975		$6,927		$1,406		$4,259
Finance lease cost:
Amortization of right-of-use assets		$3,643		$5,940		$2,097		$1,042		$1,568
Interest on lease liabilities		$594		$895		$353		$168		$241

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the finance lease costs which are included in financing activities.

Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31, 2019 are $234 million related to operating leases and $61 million related to finance leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019 are the following amounts:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Operating leases		$52,317		$36,034		$16,900		$3,878		$14,020
Finance leases		$11,216		$17,209		$6,869		$3,291		$5,273

The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of December 31, 2019:



	(In Thousands)
Current liabilities:
Operating leases		$52,678
Finance leases		$11,413
Non-current liabilities:
Operating leases		$181,339
Finance leases		$53,396

The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
Current liabilities:
Operating leases		$11,443		$10,331		$5,633		$1,134		$3,698
Finance leases		$2,442		$3,919		$1,487		$647		$1,222
Non-current liabilities:
Operating leases		$40,880		$25,743		$11,232		$2,746		$10,364
Finance leases		$8,768		$13,376		$5,382		$2,644		$4,009

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of Entergy at December 31, 2019:



Weighted average remaining lease terms:
Operating leases	5.14
Finance leases	6.69
Weighted average discount rate:
Operating leases	3.86	%
Finance leases	4.60	%

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and finance leases of the Registrant Subsidiaries at December 31, 2019:



	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas

Weighted average remaining lease terms:
Operating leases	5.84		4.33		5.04		5.62		4.54
Finance leases	5.43		5.24		5.32		5.93		5.12
Weighted average discount rate:
Operating leases	3.67	%	3.65	%	3.75	%	3.88	%	3.73	%
Finance leases	3.68	%	3.65	%	3.67	%	3.74	%	3.82	%

Maturity of the lease liabilities for Entergy as of December 31, 2019 are as follows:



Year	Operating Leases		Finance Leases
	(In Thousands)

2020		$62,124		$14,014
2021	56,386		12,457
2022	47,919		11,253
2023	37,228		10,121
2024	30,376		8,454
Years thereafter	29,138		20,010
Minimum lease payments	263,171		76,309
Less: amount representing interest	29,153		11,500
Present value of net minimum lease payments		$234,018		$64,809

Maturity of the lease liabilities for the Registrant Subsidiaries as of December 31, 2019 are as follows:

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$13,010		$11,376		$6,112		$1,248		$4,339
2021	11,165		9,645		4,983		991		3,611
2022	8,788		6,935		3,566		711		2,689
2023	7,193		4,916		1,454		549		2,336
2024	5,866		3,089		731		310		1,684
Years thereafter	12,021		2,972		1,972		522		1,119
Minimum lease payments	58,043		38,933		18,818		4,331		15,778
Less: amount representing interest	5,720		2,860		1,953		452		1,716
Present value of net minimum lease payments		$52,323		$36,073		$16,865		$3,879		$14,062

Finance Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)

2020		$2,772		$4,422		$1,692		$744		$1,382
2021	2,369		3,766		1,527		634		1,188
2022	2,079		3,325		1,334		581		981
2023	1,833		2,856		1,111		532		839
2024	1,489		2,092		838		449		648
Years thereafter	1,787		2,476		1,038		713		706
Minimum lease payments	12,329		18,937		7,540		3,653		5,744
Less: amount representing interest	1,119		1,641		670		362		512
Present value of net minimum lease payments		$11,210		$17,296		$6,870		$3,291		$5,232

In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K for the year ended December 31, 2018.

General

As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2019		$94,043		$2,887
2020	82,191		2,887
2021	75,147		2,887
2022	60,808		2,887
2023	47,391		2,887
Years thereafter	88,004		16,117
Minimum lease payments	447,584		30,552
Less: Amount representing interest	—		8,555
Present value of net minimum lease payments		$447,584		$21,997

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.

As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2019		$20,421		$25,970		$9,344		$2,493		$5,744
2020	13,918		21,681		8,763		2,349		4,431
2021	11,931		19,514		7,186		1,901		3,625
2022	9,458		15,756		5,675		1,314		2,218
2023	7,782		12,092		2,946		1,043		1,561
Years thereafter	23,297		22,003		4,417		2,323		2,726
Minimum lease payments		$86,807		$117,016		$38,331		$11,423		$20,305

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2018		$6.2		$20.2		$4.6		$2.5		$3.1		$1.9
2017		$7.5		$23.0		$5.6		$2.5		$3.4		$2.2
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.

Power Purchase Agreements

As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2019		$31,159		$31,159
2020	31,876		31,876
2021	32,609		32,609
2022	10,180		10,180
Minimum lease payments		$105,824		$105,824


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and that matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:



	Amount
	(In Thousands)

2019		$17,188
2020	17,188
2021	17,188
2022	17,188
2023	17,188
Years thereafter	223,437
Total	309,377
Less: Amount representing interest	275,025
Present value of net minimum lease payments		$34,352