Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Leases.    As a lessee, we have a relatively small portfolio of leases with the most significant being our 60% undivided interest in Scherer Unit No. 2 and railcar leases for the transportation of coal. We also have various other leases of minimal value.

We classify our four Scherer Unit No. 2 leases as finance leases and our railcar leases as operating leases. We have made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases, leases having an initial term of 12 months or less, for any class of underlying asset. We recognize lease expense for short-term leases on a straight-line basis over the lease term. Lease expense recognized for our short-term leases during the three months ended March 31, 2024 and 2023 was insignificant.

Finance Leases

Three of our Scherer Unit No. 2 finance leases have lease terms through December 31, 2027, and one lease extends through June 30, 2031. At the end of the leases, we can elect at our sole discretion to:

•Renew the leases for a period of not less than one year and not more than five years at fair market value,

•Purchase the undivided interest at fair market value, or

•Redeliver the undivided interest to the lessors.

For rate-making purposes, we include the actual lease payments for our finance leases in our cost of service. The difference between lease payments and the aggregate of the amortization on the right-of-use asset and the interest on the finance lease obligation is recognized as a regulatory asset. Finance lease amortization is recorded in depreciation and amortization expense.

Operating Leases

Our railcar operating leases have terms that extend through November 30, 2028. At the end of the railcar operating leases, we can renew at terms mutually agreeable by us and the lessors, purchase the assets or return the assets to the lessors. We have additional operating leases including one for office equipment that has a term extending through October 31, 2028 and one for real property at one of our electric generating facilities that has a term extending through February 2042 with one renewal option for a 20 year term.

The exercise of renewal options for our finance and operating leases is at our sole discretion.

As all of our operating leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the time new lease agreements are entered into or reassessed to determine the present value of lease payments.

We combine lease and nonlease components for all lease agreements.

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Finance leases
Right-of-use assets	$	302,732	$	302,732
Less: Accumulated provision for depreciation	(279,465)		(278,586)
Total finance lease assets	$	23,267	$	24,146
Lease liabilities—Finance leases
Obligations under finance leases	$	43,586	$	43,586
Long-term debt and finance leases due within one year	9,351		9,351
Total finance lease liabilities	$	52,937	$	52,937

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Operating leases
Electric plant in service, net	$	6,181	$	6,587
Total operating lease assets	$	6,181	$	6,587
Lease liabilities—Operating leases
Capitalization—Other	$	4,786	$	5,152
Other current liabilities	1,395		1,529
Total operating lease liabilities	$	6,181	$	6,681

		Three months ended
Lease Cost	Classification	March 31, 2024		March 31, 2023
		(dollars in thousands)
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	$	2,338	$	2,099
Interest on lease liabilities	Interest expense	1,400		1,638
Operating lease cost:	Inventory(1) & production expense	538		329
Total leased cost		$	4,276	$	4,066

(1) The majority of our operating lease costs relate to our railcar leases and such costs are added to the cost of our fossil-fuel inventories and are recognized in fuel expense as the inventories are consumed.

	March 31, 2024		December 31, 2023
Lease Term and Discount Rate:
Weighted-average remaining lease term (in years)
Finance leases	5.01		5.26
Operating leases	5.70		5.77
Weighted-average discount rate:
Finance leases	11.05	%	11.05	%
Operating leases	6.45	%	6.37	%

	Three months ended March 31,
	2024		2023
	(dollars in thousands)
Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	632	$	409
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17	$	—

Maturity analysis of our finance and operating lease liabilities as of March 31, 2024 is as follows:

	(dollars in thousands)
Year Ending December 31,	Finance Leases		Operating Leases		Total
2024	$	14,949	$	1,334	$	16,283
2025	14,949		1,708		16,657
2026	14,949		1,416		16,365
2027	14,949		1,139		16,088
2028	3,052		1,029		4,081
Thereafter	7,633		723		8,356
Total lease payments	$	70,481	$	7,349	$	77,830
Less: imputed interest	(17,544)		(1,168)		(18,712)
Present value of lease liabilities	$	52,937	$	6,181	$	59,118

As a lessor, we primarily lease office space to several tenants within our headquarters building. Several of these tenants are related parties. We account for all of these lease agreements as operating leases.

Lease income recognized during the three months ended March 31, 2024 and 2023 was as follows:

	Three Months Ended March 31,
	2024		2023
	(dollars in thousands)
Lease income	$	1,387	$	1,685

Leases

Leases.    As a lessee, we have a relatively small portfolio of leases with the most significant being our 60% undivided interest in Scherer Unit No. 2 and railcar leases for the transportation of coal. We also have various other leases of minimal value.

We classify our four Scherer Unit No. 2 leases as finance leases and our railcar leases as operating leases. We have made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases, leases having an initial term of 12 months or less, for any class of underlying asset. We recognize lease expense for short-term leases on a straight-line basis over the lease term. Lease expense recognized for our short-term leases during the three months ended March 31, 2024 and 2023 was insignificant.

Finance Leases

Three of our Scherer Unit No. 2 finance leases have lease terms through December 31, 2027, and one lease extends through June 30, 2031. At the end of the leases, we can elect at our sole discretion to:

•Renew the leases for a period of not less than one year and not more than five years at fair market value,

•Purchase the undivided interest at fair market value, or

•Redeliver the undivided interest to the lessors.

For rate-making purposes, we include the actual lease payments for our finance leases in our cost of service. The difference between lease payments and the aggregate of the amortization on the right-of-use asset and the interest on the finance lease obligation is recognized as a regulatory asset. Finance lease amortization is recorded in depreciation and amortization expense.

Operating Leases

Our railcar operating leases have terms that extend through November 30, 2028. At the end of the railcar operating leases, we can renew at terms mutually agreeable by us and the lessors, purchase the assets or return the assets to the lessors. We have additional operating leases including one for office equipment that has a term extending through October 31, 2028 and one for real property at one of our electric generating facilities that has a term extending through February 2042 with one renewal option for a 20 year term.

The exercise of renewal options for our finance and operating leases is at our sole discretion.

As all of our operating leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the time new lease agreements are entered into or reassessed to determine the present value of lease payments.

We combine lease and nonlease components for all lease agreements.

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Finance leases
Right-of-use assets	$	302,732	$	302,732
Less: Accumulated provision for depreciation	(279,465)		(278,586)
Total finance lease assets	$	23,267	$	24,146
Lease liabilities—Finance leases
Obligations under finance leases	$	43,586	$	43,586
Long-term debt and finance leases due within one year	9,351		9,351
Total finance lease liabilities	$	52,937	$	52,937

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Operating leases
Electric plant in service, net	$	6,181	$	6,587
Total operating lease assets	$	6,181	$	6,587
Lease liabilities—Operating leases
Capitalization—Other	$	4,786	$	5,152
Other current liabilities	1,395		1,529
Total operating lease liabilities	$	6,181	$	6,681

		Three months ended
Lease Cost	Classification	March 31, 2024		March 31, 2023
		(dollars in thousands)
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	$	2,338	$	2,099
Interest on lease liabilities	Interest expense	1,400		1,638
Operating lease cost:	Inventory(1) & production expense	538		329
Total leased cost		$	4,276	$	4,066

(1) The majority of our operating lease costs relate to our railcar leases and such costs are added to the cost of our fossil-fuel inventories and are recognized in fuel expense as the inventories are consumed.

	March 31, 2024		December 31, 2023
Lease Term and Discount Rate:
Weighted-average remaining lease term (in years)
Finance leases	5.01		5.26
Operating leases	5.70		5.77
Weighted-average discount rate:
Finance leases	11.05	%	11.05	%
Operating leases	6.45	%	6.37	%

	Three months ended March 31,
	2024		2023
	(dollars in thousands)
Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	632	$	409
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17	$	—

Maturity analysis of our finance and operating lease liabilities as of March 31, 2024 is as follows:

	(dollars in thousands)
Year Ending December 31,	Finance Leases		Operating Leases		Total
2024	$	14,949	$	1,334	$	16,283
2025	14,949		1,708		16,657
2026	14,949		1,416		16,365
2027	14,949		1,139		16,088
2028	3,052		1,029		4,081
Thereafter	7,633		723		8,356
Total lease payments	$	70,481	$	7,349	$	77,830
Less: imputed interest	(17,544)		(1,168)		(18,712)
Present value of lease liabilities	$	52,937	$	6,181	$	59,118

As a lessor, we primarily lease office space to several tenants within our headquarters building. Several of these tenants are related parties. We account for all of these lease agreements as operating leases.

Lease income recognized during the three months ended March 31, 2024 and 2023 was as follows:

	Three Months Ended March 31,
	2024		2023
	(dollars in thousands)
Lease income	$	1,387	$	1,685

Leases

Leases.    As a lessee, we have a relatively small portfolio of leases with the most significant being our 60% undivided interest in Scherer Unit No. 2 and railcar leases for the transportation of coal. We also have various other leases of minimal value.

We classify our four Scherer Unit No. 2 leases as finance leases and our railcar leases as operating leases. We have made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases, leases having an initial term of 12 months or less, for any class of underlying asset. We recognize lease expense for short-term leases on a straight-line basis over the lease term. Lease expense recognized for our short-term leases during the three months ended March 31, 2024 and 2023 was insignificant.

Finance Leases

Three of our Scherer Unit No. 2 finance leases have lease terms through December 31, 2027, and one lease extends through June 30, 2031. At the end of the leases, we can elect at our sole discretion to:

•Renew the leases for a period of not less than one year and not more than five years at fair market value,

•Purchase the undivided interest at fair market value, or

•Redeliver the undivided interest to the lessors.

For rate-making purposes, we include the actual lease payments for our finance leases in our cost of service. The difference between lease payments and the aggregate of the amortization on the right-of-use asset and the interest on the finance lease obligation is recognized as a regulatory asset. Finance lease amortization is recorded in depreciation and amortization expense.

Operating Leases

Our railcar operating leases have terms that extend through November 30, 2028. At the end of the railcar operating leases, we can renew at terms mutually agreeable by us and the lessors, purchase the assets or return the assets to the lessors. We have additional operating leases including one for office equipment that has a term extending through October 31, 2028 and one for real property at one of our electric generating facilities that has a term extending through February 2042 with one renewal option for a 20 year term.

The exercise of renewal options for our finance and operating leases is at our sole discretion.

As all of our operating leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the time new lease agreements are entered into or reassessed to determine the present value of lease payments.

We combine lease and nonlease components for all lease agreements.

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Finance leases
Right-of-use assets	$	302,732	$	302,732
Less: Accumulated provision for depreciation	(279,465)		(278,586)
Total finance lease assets	$	23,267	$	24,146
Lease liabilities—Finance leases
Obligations under finance leases	$	43,586	$	43,586
Long-term debt and finance leases due within one year	9,351		9,351
Total finance lease liabilities	$	52,937	$	52,937

Classification	March 31, 2024		December 31, 2023
	(dollars in thousands)
Right-of-use assets—Operating leases
Electric plant in service, net	$	6,181	$	6,587
Total operating lease assets	$	6,181	$	6,587
Lease liabilities—Operating leases
Capitalization—Other	$	4,786	$	5,152
Other current liabilities	1,395		1,529
Total operating lease liabilities	$	6,181	$	6,681

		Three months ended
Lease Cost	Classification	March 31, 2024		March 31, 2023
		(dollars in thousands)
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	$	2,338	$	2,099
Interest on lease liabilities	Interest expense	1,400		1,638
Operating lease cost:	Inventory(1) & production expense	538		329
Total leased cost		$	4,276	$	4,066

(1) The majority of our operating lease costs relate to our railcar leases and such costs are added to the cost of our fossil-fuel inventories and are recognized in fuel expense as the inventories are consumed.

	March 31, 2024		December 31, 2023
Lease Term and Discount Rate:
Weighted-average remaining lease term (in years)
Finance leases	5.01		5.26
Operating leases	5.70		5.77
Weighted-average discount rate:
Finance leases	11.05	%	11.05	%
Operating leases	6.45	%	6.37	%

	Three months ended March 31,
	2024		2023
	(dollars in thousands)
Other Information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	632	$	409
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17	$	—

Maturity analysis of our finance and operating lease liabilities as of March 31, 2024 is as follows:

	(dollars in thousands)
Year Ending December 31,	Finance Leases		Operating Leases		Total
2024	$	14,949	$	1,334	$	16,283
2025	14,949		1,708		16,657
2026	14,949		1,416		16,365
2027	14,949		1,139		16,088
2028	3,052		1,029		4,081
Thereafter	7,633		723		8,356
Total lease payments	$	70,481	$	7,349	$	77,830
Less: imputed interest	(17,544)		(1,168)		(18,712)
Present value of lease liabilities	$	52,937	$	6,181	$	59,118

As a lessor, we primarily lease office space to several tenants within our headquarters building. Several of these tenants are related parties. We account for all of these lease agreements as operating leases.

Lease income recognized during the three months ended March 31, 2024 and 2023 was as follows:

	Three Months Ended March 31,
	2024		2023
	(dollars in thousands)
Lease income	$	1,387	$	1,685