NOTE 11 – LEASES

Leasing Arrangements As Lessee

We have lease agreements as lessee for the right to use various facilities and operational assets and had a lease agreement for the right to use power generating equipment at Brush Generating Station. Under the power purchase arrangement at the Brush Generating Station that expired on December 31, 2019, we were required to account for the arrangement as an operating lease since it conveyed to us the right to direct the use of 70 megawatts at the Brush Generating Station and whereby we provided our own natural gas for generation of electricity. We did not renew this power purchase arrangement.

Rent expense for all short-term and long-term operating leases was $7.4 million in 2019 and $7.9 million in 2018. Rent expense is included in operating expenses on our consolidated statements of operations. As of December 31, 2019, there were no arrangements accounted for as finance leases.

Our consolidated statements of financial position include the following lease components (dollars in thousands):


	December 31,
	2019
Operating leases
Operating lease right-of-use assets	$	8,376
Less: Accumulated amortization		(754)
Net operating lease right-of-use assets	$	7,622

Operating lease liabilities – current	$	(5,533)
Operating lease liabilities – noncurrent		(1,846)
Total operating lease liabilities	$	(7,379)

Operating leases
Weighted average remaining lease term (years)		9.5
Weighted average discount rate		3.80%

Future expected minimum lease commitments under operating leases are as follows (dollars in thousands):


Year 1	$	5,660
Year 2		517
Year 3		319
Year 4		275
Year 5		240
Thereafter		856
Total lease payments	$	7,867
Less imputed interest		(488)
Total	$	7,379

Leasing Arrangements As Lessor

We have lease agreements as lessor for certain operational assets and had a lease agreement as lessor for power generating equipment at the J.M. Shafer Generating Station. Under the power sales arrangement at the J.M. Shafer Generating Station that expired on June 30, 2019, we were required to account for the arrangement as an operating lease since it conveyed to a third party the right to direct the use of 122 megawatts of the 272 megawatt generating capability of the J.M. Shafer Generating Station whereby the third party provided its own natural gas for generation of electricity. The revenue from these lease agreements of $12.1 million in 2019 and $17.6 million in 2018 are included in other operating revenue on our consolidated statements of operations.

The lease arrangement with the Springerville Partnership is not reflected in our lease right right-of-use asset or liability balances as the associated revenues and expenses are eliminated in consolidation. See Note 14- Variable Interest Entities. However, as the noncontrolling interest associated with this lease arrangement generates book-tax differences, a deferred tax asset and liability have been recorded. See Note 9 – Income Taxes.