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Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Lessee, Operating Leases

Lease Descriptions. We are the lessee for substantially all of our leasing activity, which includes operating and finance leases for corporate and field offices, railcars, fleet vehicles and certain IT assets. Our corporate and field office leases have remaining lease terms between 1 and 21 years with options to renew the leases for up to 25 years. We lease railcars to transport coal to and from our electric generation facilities in Indiana. Our railcars are specifically identified in the lease agreements which have remaining lease terms between 1 and 5 years with options to renew for 1 year. Our fleet vehicles include trucks, trailers and equipment that have been customized specifically for use in the utility industry. We lease fleet vehicles for 1 year terms, after which we have the option to extend on a month-to-month basis or terminate with written notice. We elected the short-term lease practical expedient, allowing us to not recognize ROU assets or lease liabilities for all leases with a term of 12 months or less. ROU assets and liabilities on our Consolidated Balance Sheets do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so. We lease the majority of our IT assets under 4 year lease terms. Ownership of leased IT assets is transferred to us at the end of the lease term.

We have not provided material residual value guarantees for our leases, nor do our leases contain material restrictions or covenants. Lease contracts containing renewal and termination options are mostly exercisable at our sole discretion. Certain of our real estate and railcar leases include renewal periods in the measurement of the lease obligation if we have deemed the renewals reasonably certain to be exercised.

With respect to service contracts involving the use of assets, if we have the right to direct the use of the asset and obtain substantially all economic benefits from the use of an asset, we account for the service contract as a lease. Unless specifically provided to us by the lessor, we utilize NiSource's collateralized incremental borrowing rate commensurate to the lease term as the discount rate for all of our leases. ASC 842 permits a lessee, by class of underlying asset, not to separate nonlease components from lease components. Our policy is to apply this expedient for our leases of fleet vehicles, IT assets and railcars when calculating their respective lease liabilities.

Lease costs for the years ended December 31, 2022 and December 31, 2021 are presented in the table below. These costs include both amounts recognized in expense and amounts capitalized as part of the cost of another asset. Income statement presentation for these costs (when ultimately recognized on the income statement) is also included:

Year Ended December 31, (in millions)			Income Statement Classification			2022						2021
Finance lease cost
Amortization of right-of-use assets			Depreciation and amortization			$	31.9					$	28.8
Interest on lease liabilities			Interest expense, net			8.5						9.4
Total finance lease cost						40.4						38.2
Operating lease cost			Operation and maintenance			10.4						15.6
Total lease cost						$	50.8					$	53.8

Our right-of-use assets and liabilities are presented in the following lines on the Consolidated Balance Sheets:

At December 31, (in millions)			Balance Sheet Classification			2022						2021
Assets
Finance leases			Net Property, Plant and Equipment			$	153.4					$	165.7
Operating leases			Deferred charges and other			35.7						33.8
Total leased assets						$	189.1					199.5
Liabilities
Current
Finance leases			Current portion of long-term debt			$	30.0					28.1
Operating leases			Other accruals			4.8						6.7
Noncurrent
Finance leases			Long-term debt, excluding amounts due within one year			144.7						157.5
Operating leases			Other noncurrent liabilities			31.9						27.9
Total lease liabilities						$	211.4					$	220.2

Other pertinent information related to leases was as follows:

Year Ended December 31, (in millions)			2022						2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases			$	8.6					$	9.4
Operating cash flows used for operating leases			10.3						15.4
Financing cash flows used for finance leases			30.3						25.7
Right-of-use assets obtained in exchange for lease obligations
Finance leases			19.3						22.4
Operating leases			$	8.8					$	6.0

			December 31, 2022						December 31, 2021
Weighted-average remaining lease term (years)
Finance leases			9.9						10.6
Operating leases			7.7						8.5
Weighted-average discount rate
Finance leases			5.1		%				5.0		%
Operating leases			4.0		%				3.7		%

Maturities of our lease liabilities as of December 31, 2022 were as follows:

As of December 31, 2022, (in millions)			Total			Finance Leases			Operating Leases
2023			$	46.8		$	38.9		$	7.9
2024			37.3			30.9			6.4
2025			30.3			24.5			5.8
2026			24.7			19.4			5.3
2027			19.9			15.4			4.5
Thereafter			110.8			97.4			13.4
Total lease payments			269.8			226.5			43.3
Less: Imputed interest			(58.4)			(51.8)			(6.6)
Total			$	211.4		$	174.7		$	36.7
Reported as of December 31, 2022
Short-term lease liabilities			34.8			30.0			4.8
Long-term lease liabilities			176.6			144.7			31.9
Total lease liabilities			$	211.4		$	174.7		$	36.7

Lessee, Finance Leases

Lease Descriptions. We are the lessee for substantially all of our leasing activity, which includes operating and finance leases for corporate and field offices, railcars, fleet vehicles and certain IT assets. Our corporate and field office leases have remaining lease terms between 1 and 21 years with options to renew the leases for up to 25 years. We lease railcars to transport coal to and from our electric generation facilities in Indiana. Our railcars are specifically identified in the lease agreements which have remaining lease terms between 1 and 5 years with options to renew for 1 year. Our fleet vehicles include trucks, trailers and equipment that have been customized specifically for use in the utility industry. We lease fleet vehicles for 1 year terms, after which we have the option to extend on a month-to-month basis or terminate with written notice. We elected the short-term lease practical expedient, allowing us to not recognize ROU assets or lease liabilities for all leases with a term of 12 months or less. ROU assets and liabilities on our Consolidated Balance Sheets do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so. We lease the majority of our IT assets under 4 year lease terms. Ownership of leased IT assets is transferred to us at the end of the lease term.

We have not provided material residual value guarantees for our leases, nor do our leases contain material restrictions or covenants. Lease contracts containing renewal and termination options are mostly exercisable at our sole discretion. Certain of our real estate and railcar leases include renewal periods in the measurement of the lease obligation if we have deemed the renewals reasonably certain to be exercised.

With respect to service contracts involving the use of assets, if we have the right to direct the use of the asset and obtain substantially all economic benefits from the use of an asset, we account for the service contract as a lease. Unless specifically provided to us by the lessor, we utilize NiSource's collateralized incremental borrowing rate commensurate to the lease term as the discount rate for all of our leases. ASC 842 permits a lessee, by class of underlying asset, not to separate nonlease components from lease components. Our policy is to apply this expedient for our leases of fleet vehicles, IT assets and railcars when calculating their respective lease liabilities.

Lease costs for the years ended December 31, 2022 and December 31, 2021 are presented in the table below. These costs include both amounts recognized in expense and amounts capitalized as part of the cost of another asset. Income statement presentation for these costs (when ultimately recognized on the income statement) is also included:

Year Ended December 31, (in millions)			Income Statement Classification			2022						2021
Finance lease cost
Amortization of right-of-use assets			Depreciation and amortization			$	31.9					$	28.8
Interest on lease liabilities			Interest expense, net			8.5						9.4
Total finance lease cost						40.4						38.2
Operating lease cost			Operation and maintenance			10.4						15.6
Total lease cost						$	50.8					$	53.8

Our right-of-use assets and liabilities are presented in the following lines on the Consolidated Balance Sheets:

At December 31, (in millions)			Balance Sheet Classification			2022						2021
Assets
Finance leases			Net Property, Plant and Equipment			$	153.4					$	165.7
Operating leases			Deferred charges and other			35.7						33.8
Total leased assets						$	189.1					199.5
Liabilities
Current
Finance leases			Current portion of long-term debt			$	30.0					28.1
Operating leases			Other accruals			4.8						6.7
Noncurrent
Finance leases			Long-term debt, excluding amounts due within one year			144.7						157.5
Operating leases			Other noncurrent liabilities			31.9						27.9
Total lease liabilities						$	211.4					$	220.2

Other pertinent information related to leases was as follows:

Year Ended December 31, (in millions)			2022						2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases			$	8.6					$	9.4
Operating cash flows used for operating leases			10.3						15.4
Financing cash flows used for finance leases			30.3						25.7
Right-of-use assets obtained in exchange for lease obligations
Finance leases			19.3						22.4
Operating leases			$	8.8					$	6.0

			December 31, 2022						December 31, 2021
Weighted-average remaining lease term (years)
Finance leases			9.9						10.6
Operating leases			7.7						8.5
Weighted-average discount rate
Finance leases			5.1		%				5.0		%
Operating leases			4.0		%				3.7		%

Maturities of our lease liabilities as of December 31, 2022 were as follows:

As of December 31, 2022, (in millions)			Total			Finance Leases			Operating Leases
2023			$	46.8		$	38.9		$	7.9
2024			37.3			30.9			6.4
2025			30.3			24.5			5.8
2026			24.7			19.4			5.3
2027			19.9			15.4			4.5
Thereafter			110.8			97.4			13.4
Total lease payments			269.8			226.5			43.3
Less: Imputed interest			(58.4)			(51.8)			(6.6)
Total			$	211.4		$	174.7		$	36.7
Reported as of December 31, 2022
Short-term lease liabilities			34.8			30.0			4.8
Long-term lease liabilities			176.6			144.7			31.9
Total lease liabilities			$	211.4		$	174.7		$	36.7

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- References

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI https://asc.fasb.org/subtopic&trid=77888251

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI https://asc.fasb.org/subtopic&trid=77888251

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