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Lease Commitments | 6 Months Ended
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Jun. 30, 2023
Leases [Abstract] |
Lease Commitments | Lease Commitments The Company leases office buildings, vehicles, and other equipment. In addition, PNM leases interests in PVNGS Unit 2 and certain rights-of-way agreements are classified as leases. All of the Company's leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings. See additional discussion of the Company's leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2022 Annual Reports on Form 10-K. PVNGS In 1985 and 1986, PNM entered into leases for its interest in PVNGS Unit 1 and 2. The leases initially were scheduled to expire in January 2015 for four Unit 1 leases and January 2016 for four Unit 2 leases. Following procedures set forth in the PVNGS leases, PNM notified four of the lessors under the Unit 1 leases and one lessor under the Unit 2 lease that it would elect to renew those leases on the expiration date of the original leases. The four Unit 1 leases expired in January 2023 and the one Unit 2 lease expires in January 2024. The annual lease payments during the renewal periods aggregate $1.6 million on the remaining PVNGS Unit 2 lease. The terms of each of the extended leases did not provide for additional renewal options beyond their scheduled expiration dates. PNM had the option to purchase the assets underlying each of the extended leases at their fair market value or to return the lease interests to the lessors on the expiration dates. On June 11, 2020, PNM provided notice to the lessors and the NMPRC of its intent to return the assets underlying both the PVNGS Unit 1 and Unit 2 leases upon their expiration in January 2023 and 2024. Although PNM elected to return the assets underlying the extended leases, PNM retains certain obligations related to PVNGS, including costs to decommission the facility. PNM depreciates its capital improvements related to the extended leases using NMPRC approved rates through the end of the NRC license period for each unit, which expire in June 2045 for Unit 1 and in June 2046 for Unit 2. Upon expiration of the leases PNM will cease depreciation and, as authorized by the NMPRC, create a regulatory asset for the associated remaining undepreciated investments. On April 5, 2021, PNM and SRP entered into an Asset Purchase and Sale Agreement, pursuant to which PNM agreed to sell to SRP certain PNM-owned assets and nuclear fuel necessary to the ongoing operation and maintenance of leased capacity in PVNGS Unit 1 and Unit 2, which SRP has agreed to acquire from the lessors upon termination of the existing leases. The proposed transaction between PNM and SRP received all necessary approvals, including NRC approval for the transfer of the associated possessory licenses to SRP at the end of the term of each of the respective leases. In January 2023, the Unit 1 leases expired, and PNM closed on the associated sale to SRP, receiving payments of $33.7 million, of which $28.4 million was recorded as a reduction to Net utility plant on the Condensed Consolidated Balance Sheets and is presented as cash flows from investing activities on the Condensed Consolidated Statement of Cash Flows. In addition, $5.3 million was recorded as a reduction to Materials, supplies, and fuel stock on the Condensed Consolidated Balance Sheets and is presented as cash flows from operating activities on the Condensed Consolidated Statement of Cash Flows. See Note 12 for information on other PVNGS matters including the PVNGS Leased Interest Abandonment Application which included PNM's request to create regulatory assets for the associated remaining undepreciated investments. PNM is exposed to loss under the PVNGS lease arrangements upon the occurrence of certain events that PNM does not consider reasonably likely to occur. Under certain circumstances (for example, the NRC issuing specified violation orders with respect to PVNGS or the occurrence of specified nuclear events), PNM would be required to make specified payments to the lessors and take title to the leased interests. If such an event had occurred as of June 30, 2023, amounts due to the lessors under the circumstances described above would have been up to $13.8 million, payable on July 15, 2023 in addition to the scheduled lease payments due on that date. Land Easements and Rights-of-Ways Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2023 payment for the amount due under the Navajo Nation right-of-way lease was $8.3 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019 are considered variable lease payments. PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed Consolidated Statement of Earnings over their term. As of June 30, 2023 and December 31, 2022, the unamortized balance of these rights-of-ways was $57.5 million and $54.6 million. PNM recognized amortization expense associated with these agreements of $0.9 million and $1.8 million in the three and six months ended June 30, 2023 and $0.9 million and $2.0 million in the three and six months ended June 30, 2022. Fleet Vehicles and Equipment Fleet vehicle and equipment leases commencing on or after January 1, 2019 are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018 are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At June 30, 2023, residual value guarantees on fleet vehicle and equipment leases are $0.9 million, $1.1 million, and $2.0 million for PNM, TNMP, and PNMR Consolidated. Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:
| June 30, 2023 |  | December 31, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating leases: |  |  |  |  |  |  |  |  |  |  |
Operating lease assets, net of amortization | $ | 47,648 |  |  | $ | 2,456 |  |  | $ | 50,104 |  |  | $ | 52,556 |  |  | $ | 3,426 |  |  | $ | 55,982 |
Current portion of operating lease liabilities | 7,795 |  |  | 1,030 |  |  | 8,825 |  |  | 17,239 |  |  | 1,543 |  |  | 18,781 |
Long-term portion of operating lease liabilities | 33,422 |  |  | 1,237 |  |  | 34,658 |  |  | 39,633 |  |  | 1,703 |  |  | 41,336 |
As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases. Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:
| June 30, 2023 |  | December 31, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Financing leases: |  |  |  |  |  |  |  |  |  |  |
Non-utility property | $ | 24,105 |  |  | $ | 21,855 |  |  | $ | 46,290 |  |  | $ | 19,324 |  |  | $ | 20,084 |  |  | $ | 39,738 |
Accumulated depreciation | (9,857) |  |  | (10,364) |  |  | (20,518) |  |  | (7,726) |  |  | (8,202) |  |  | (16,189) |
Non-utility property, net | 14,248 |  |  | 11,491 |  |  | 25,772 |  |  | 11,598 |  |  | 11,882 |  |  | 23,549 |
Other current liabilities | $ | 4,355 |  |  | $ | 4,184 |  |  | $ | 8,565 |  |  | $ | 3,441 |  |  | $ | 3,867 |  |  | $ | 7,363 |
Other deferred credits | 9,859 |  |  | 7,323 |  |  | 17,190 |  |  | 8,079 |  |  | 8,028 |  |  | 16,123 |
Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2023 is presented below:
| PNM |  | TNMP |  | PNMR Consolidated
Weighted average remaining lease term (years): |  |  |  |  |
Operating leases | 7.75 |  | 1.99 |  | 7.43
Financing leases | 3.99 |  | 3.09 |  | 3.58
Weighted average discount rate: |  |  |  |  |
Operating leases | 4.07 | % |  | 4.13 | % |  | 4.08 | %
Financing leases | 4.24 | % |  | 3.90 | % |  | 4.08 | %
Information for the components of lease expense is as follows:
| Three Months Ended June 30, 2023 |  | Six Months Ended June 30, 2023
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating lease cost: | $ | 2,468 |  |  | $ | 401 |  |  | $ | 2,869 |  |  | $ | 6,376 |  |  | $ | 830 |  |  | $ | 7,206 |
Amounts capitalized | (103) |  |  | (331) |  |  | (434) |  |  | (263) |  |  | (684) |  |  | (947) |
Total operating lease expense | 2,365 |  |  | 70 |  |  | 2,435 |  |  | 6,113 |  |  | 146 |  |  | 6,259 |
Financing lease cost: |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets | 1,123 |  |  | 1,098 |  |  | 2,235 |  |  | 2,132 |  |  | 2,162 |  |  | 4,329 |
Interest on lease liabilities | 140 |  |  | 112 |  |  | 252 |  |  | 262 |  |  | 223 |  |  | 486 |
Amounts capitalized | (778) |  |  | (699) |  |  | (1,477) |  |  | (1,469) |  |  | (1,699) |  |  | (3,167) |
Total financing lease expense | 485 |  |  | 511 |  |  | 1,010 |  |  | 925 |  |  | 686 |  |  | 1,648 |
Variable lease expense | 360 |  |  | — |  |  | 360 |  |  | 622 |  |  | — |  |  | 622 |
Short-term lease expense | 145 |  |  | 1 |  |  | 149 |  |  | 292 |  |  | 1 |  |  | 299 |
Total lease expense for the period | $ | 3,355 |  |  | $ | 582 |  |  | $ | 3,954 |  |  | $ | 7,952 |  |  | $ | 833 |  |  | $ | 8,828 |
| Three Months Ended June 30, 2022 |  | Six Months Ended June 30, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating lease cost: | $ | 6,665 |  |  | $ | 495 |  |  | $ | 7,181 |  |  | $ | 13,349 |  |  | $ | 1,023 |  |  | $ | 14,418 |
Amounts capitalized | (173) |  |  | (457) |  |  | (630) |  |  | (358) |  |  | (926) |  |  | (1,283) |
Total operating lease expense | 6,492 |  |  | 38 |  |  | 6,551 |  |  | 12,991 |  |  | 97 |  |  | 13,135 |
Financing lease cost: |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets | 769 |  |  | 799 |  |  | 1,583 |  |  | 1,501 |  |  | 1,555 |  |  | 3,095 |
Interest on lease liabilities | 79 |  |  | 80 |  |  | 160 |  |  | 147 |  |  | 153 |  |  | 301 |
Amounts capitalized | (563) |  |  | (764) |  |  | (1,327) |  |  | (1,060) |  |  | (1,480) |  |  | (2,540) |
Total financing lease expense | 285 |  |  | 115 |  |  | 416 |  |  | 588 |  |  | 228 |  |  | 856 |
Variable lease expense | 262 |  |  | — |  |  | 262 |  |  | 367 |  |  | — |  |  | 367 |
Short-term lease expense (1) | 1,137 |  |  | 3 |  |  | 1,147 |  |  | 2,269 |  |  | 3 |  |  | 2,317 |
Total lease expense for the period | $ | 8,176 |  |  | $ | 156 |  |  | $ | 8,376 |  |  | $ | 16,215 |  |  | $ | 328 |  |  | $ | 16,675 |
(1) Includes expense of $1.1 million and $2.3 million for the three and six months ended June 30, 2022 for rental of temporary cooling towers associated with the SJGS Unit 1 outage. These amounts are offset with insurance reimbursements of $1.1 million and $2.3 million for the three and six months ended June 30, 2022. Supplemental cash flow information related to the Company’s leases is as follows:
| Six Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases | $ | 16,208 |  |  | $ | 155 |  |  | $ | 16,363 |  |  | $ | 16,260 |  |  | $ | 75 |  |  | $ | 16,381 |
Operating cash flows from financing leases | 88 |  |  | 38 |  |  | 127 |  |  | 45 |  |  | 21 |  |  | 68 |
Finance cash flows from financing leases | 792 |  |  | 646 |  |  | 1,474 |  |  | 528 |  |  | 236 |  |  | 809 |
Non-cash information related to right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |  |  |  |  |  |
Operating leases | $ | 94 |  |  | $ | 6 |  |  | $ | 100 |  |  | $ | 1,079 |  |  | $ | — |  |  | $ | 1,079 |
Financing leases | 4,793 |  |  | 1,783 |  |  | 6,576 |  |  | 2,151 |  |  | 1,625 |  |  | 3,776 |
Capitalized lease costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022. Future expected lease payments are shown below:
| As of June 30, 2023
| PNM |  | TNMP |  | PNMR Consolidated
| Financing |  | Operating |  | Financing |  | Operating |  | Financing |  | Operating
| (In thousands)
Remainder of 2023 | $ | 2,539 |  |  | $ | 1,148 |  |  | $ | 2,343 |  |  | $ | 602 |  |  | $ | 4,900 |  |  | $ | 1,750 |
2024 | 4,204 |  |  | 8,149 |  |  | 4,068 |  |  | 945 |  |  | 8,286 |  |  | 9,094 |
2025 | 3,232 |  |  | 7,428 |  |  | 3,070 |  |  | 770 |  |  | 6,304 |  |  | 8,198 |
2026 | 2,735 |  |  | 7,019 |  |  | 1,912 |  |  | 76 |  |  | 4,647 |  |  | 7,094 |
2027 | 1,577 |  |  | 7,023 |  |  | 748 |  |  | — |  |  | 2,325 |  |  | 7,023 |
Later years | 1,229 |  |  | 17,510 |  |  | 81 |  |  | — |  |  | 1,310 |  |  | 17,510 |
Total minimum lease payments | 15,516 |  |  | 48,277 |  |  | 12,222 |  |  | 2,393 |  |  | 27,772 |  |  | 50,669 |
Less: Imputed interest | 1,302 |  |  | 7,060 |  |  | 715 |  |  | 126 |  |  | 2,017 |  |  | 7,186 |
Lease liabilities as of June 30, 2023 | $ | 14,214 |  |  | $ | 41,217 |  |  | $ | 11,507 |  |  | $ | 2,267 |  |  | $ | 25,755 |  |  | $ | 43,483 |
The above table includes $13.1 million, $12.0 million, and $25.1 million for PNM, TNMP, and PNMR at June 30, 2023 for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties. At June 30, 2023, the Company has various lease arrangements that have been executed but have not yet commenced, which are primarily related to battery storage agreements. The Company currently expects lease commencement dates in 2023 and 2024, with lease terms expiring in 2044, and will recognize lease assets and liabilities upon lease commencement. The expected total fixed consideration to be paid for these arrangements, which includes non-lease payments, is approximately $1.3 billion over the 20-year terms of the agreements.
Lease Commitments | Lease Commitments The Company leases office buildings, vehicles, and other equipment. In addition, PNM leases interests in PVNGS Unit 2 and certain rights-of-way agreements are classified as leases. All of the Company's leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings. See additional discussion of the Company's leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2022 Annual Reports on Form 10-K. PVNGS In 1985 and 1986, PNM entered into leases for its interest in PVNGS Unit 1 and 2. The leases initially were scheduled to expire in January 2015 for four Unit 1 leases and January 2016 for four Unit 2 leases. Following procedures set forth in the PVNGS leases, PNM notified four of the lessors under the Unit 1 leases and one lessor under the Unit 2 lease that it would elect to renew those leases on the expiration date of the original leases. The four Unit 1 leases expired in January 2023 and the one Unit 2 lease expires in January 2024. The annual lease payments during the renewal periods aggregate $1.6 million on the remaining PVNGS Unit 2 lease. The terms of each of the extended leases did not provide for additional renewal options beyond their scheduled expiration dates. PNM had the option to purchase the assets underlying each of the extended leases at their fair market value or to return the lease interests to the lessors on the expiration dates. On June 11, 2020, PNM provided notice to the lessors and the NMPRC of its intent to return the assets underlying both the PVNGS Unit 1 and Unit 2 leases upon their expiration in January 2023 and 2024. Although PNM elected to return the assets underlying the extended leases, PNM retains certain obligations related to PVNGS, including costs to decommission the facility. PNM depreciates its capital improvements related to the extended leases using NMPRC approved rates through the end of the NRC license period for each unit, which expire in June 2045 for Unit 1 and in June 2046 for Unit 2. Upon expiration of the leases PNM will cease depreciation and, as authorized by the NMPRC, create a regulatory asset for the associated remaining undepreciated investments. On April 5, 2021, PNM and SRP entered into an Asset Purchase and Sale Agreement, pursuant to which PNM agreed to sell to SRP certain PNM-owned assets and nuclear fuel necessary to the ongoing operation and maintenance of leased capacity in PVNGS Unit 1 and Unit 2, which SRP has agreed to acquire from the lessors upon termination of the existing leases. The proposed transaction between PNM and SRP received all necessary approvals, including NRC approval for the transfer of the associated possessory licenses to SRP at the end of the term of each of the respective leases. In January 2023, the Unit 1 leases expired, and PNM closed on the associated sale to SRP, receiving payments of $33.7 million, of which $28.4 million was recorded as a reduction to Net utility plant on the Condensed Consolidated Balance Sheets and is presented as cash flows from investing activities on the Condensed Consolidated Statement of Cash Flows. In addition, $5.3 million was recorded as a reduction to Materials, supplies, and fuel stock on the Condensed Consolidated Balance Sheets and is presented as cash flows from operating activities on the Condensed Consolidated Statement of Cash Flows. See Note 12 for information on other PVNGS matters including the PVNGS Leased Interest Abandonment Application which included PNM's request to create regulatory assets for the associated remaining undepreciated investments. PNM is exposed to loss under the PVNGS lease arrangements upon the occurrence of certain events that PNM does not consider reasonably likely to occur. Under certain circumstances (for example, the NRC issuing specified violation orders with respect to PVNGS or the occurrence of specified nuclear events), PNM would be required to make specified payments to the lessors and take title to the leased interests. If such an event had occurred as of June 30, 2023, amounts due to the lessors under the circumstances described above would have been up to $13.8 million, payable on July 15, 2023 in addition to the scheduled lease payments due on that date. Land Easements and Rights-of-Ways Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2023 payment for the amount due under the Navajo Nation right-of-way lease was $8.3 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019 are considered variable lease payments. PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed Consolidated Statement of Earnings over their term. As of June 30, 2023 and December 31, 2022, the unamortized balance of these rights-of-ways was $57.5 million and $54.6 million. PNM recognized amortization expense associated with these agreements of $0.9 million and $1.8 million in the three and six months ended June 30, 2023 and $0.9 million and $2.0 million in the three and six months ended June 30, 2022. Fleet Vehicles and Equipment Fleet vehicle and equipment leases commencing on or after January 1, 2019 are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018 are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At June 30, 2023, residual value guarantees on fleet vehicle and equipment leases are $0.9 million, $1.1 million, and $2.0 million for PNM, TNMP, and PNMR Consolidated. Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:
| June 30, 2023 |  | December 31, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating leases: |  |  |  |  |  |  |  |  |  |  |
Operating lease assets, net of amortization | $ | 47,648 |  |  | $ | 2,456 |  |  | $ | 50,104 |  |  | $ | 52,556 |  |  | $ | 3,426 |  |  | $ | 55,982 |
Current portion of operating lease liabilities | 7,795 |  |  | 1,030 |  |  | 8,825 |  |  | 17,239 |  |  | 1,543 |  |  | 18,781 |
Long-term portion of operating lease liabilities | 33,422 |  |  | 1,237 |  |  | 34,658 |  |  | 39,633 |  |  | 1,703 |  |  | 41,336 |
As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases. Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:
| June 30, 2023 |  | December 31, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Financing leases: |  |  |  |  |  |  |  |  |  |  |
Non-utility property | $ | 24,105 |  |  | $ | 21,855 |  |  | $ | 46,290 |  |  | $ | 19,324 |  |  | $ | 20,084 |  |  | $ | 39,738 |
Accumulated depreciation | (9,857) |  |  | (10,364) |  |  | (20,518) |  |  | (7,726) |  |  | (8,202) |  |  | (16,189) |
Non-utility property, net | 14,248 |  |  | 11,491 |  |  | 25,772 |  |  | 11,598 |  |  | 11,882 |  |  | 23,549 |
Other current liabilities | $ | 4,355 |  |  | $ | 4,184 |  |  | $ | 8,565 |  |  | $ | 3,441 |  |  | $ | 3,867 |  |  | $ | 7,363 |
Other deferred credits | 9,859 |  |  | 7,323 |  |  | 17,190 |  |  | 8,079 |  |  | 8,028 |  |  | 16,123 |
Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities as of June 30, 2023 is presented below:
| PNM |  | TNMP |  | PNMR Consolidated
Weighted average remaining lease term (years): |  |  |  |  |
Operating leases | 7.75 |  | 1.99 |  | 7.43
Financing leases | 3.99 |  | 3.09 |  | 3.58
Weighted average discount rate: |  |  |  |  |
Operating leases | 4.07 | % |  | 4.13 | % |  | 4.08 | %
Financing leases | 4.24 | % |  | 3.90 | % |  | 4.08 | %
Information for the components of lease expense is as follows:
| Three Months Ended June 30, 2023 |  | Six Months Ended June 30, 2023
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating lease cost: | $ | 2,468 |  |  | $ | 401 |  |  | $ | 2,869 |  |  | $ | 6,376 |  |  | $ | 830 |  |  | $ | 7,206 |
Amounts capitalized | (103) |  |  | (331) |  |  | (434) |  |  | (263) |  |  | (684) |  |  | (947) |
Total operating lease expense | 2,365 |  |  | 70 |  |  | 2,435 |  |  | 6,113 |  |  | 146 |  |  | 6,259 |
Financing lease cost: |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets | 1,123 |  |  | 1,098 |  |  | 2,235 |  |  | 2,132 |  |  | 2,162 |  |  | 4,329 |
Interest on lease liabilities | 140 |  |  | 112 |  |  | 252 |  |  | 262 |  |  | 223 |  |  | 486 |
Amounts capitalized | (778) |  |  | (699) |  |  | (1,477) |  |  | (1,469) |  |  | (1,699) |  |  | (3,167) |
Total financing lease expense | 485 |  |  | 511 |  |  | 1,010 |  |  | 925 |  |  | 686 |  |  | 1,648 |
Variable lease expense | 360 |  |  | — |  |  | 360 |  |  | 622 |  |  | — |  |  | 622 |
Short-term lease expense | 145 |  |  | 1 |  |  | 149 |  |  | 292 |  |  | 1 |  |  | 299 |
Total lease expense for the period | $ | 3,355 |  |  | $ | 582 |  |  | $ | 3,954 |  |  | $ | 7,952 |  |  | $ | 833 |  |  | $ | 8,828 |
| Three Months Ended June 30, 2022 |  | Six Months Ended June 30, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Operating lease cost: | $ | 6,665 |  |  | $ | 495 |  |  | $ | 7,181 |  |  | $ | 13,349 |  |  | $ | 1,023 |  |  | $ | 14,418 |
Amounts capitalized | (173) |  |  | (457) |  |  | (630) |  |  | (358) |  |  | (926) |  |  | (1,283) |
Total operating lease expense | 6,492 |  |  | 38 |  |  | 6,551 |  |  | 12,991 |  |  | 97 |  |  | 13,135 |
Financing lease cost: |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets | 769 |  |  | 799 |  |  | 1,583 |  |  | 1,501 |  |  | 1,555 |  |  | 3,095 |
Interest on lease liabilities | 79 |  |  | 80 |  |  | 160 |  |  | 147 |  |  | 153 |  |  | 301 |
Amounts capitalized | (563) |  |  | (764) |  |  | (1,327) |  |  | (1,060) |  |  | (1,480) |  |  | (2,540) |
Total financing lease expense | 285 |  |  | 115 |  |  | 416 |  |  | 588 |  |  | 228 |  |  | 856 |
Variable lease expense | 262 |  |  | — |  |  | 262 |  |  | 367 |  |  | — |  |  | 367 |
Short-term lease expense (1) | 1,137 |  |  | 3 |  |  | 1,147 |  |  | 2,269 |  |  | 3 |  |  | 2,317 |
Total lease expense for the period | $ | 8,176 |  |  | $ | 156 |  |  | $ | 8,376 |  |  | $ | 16,215 |  |  | $ | 328 |  |  | $ | 16,675 |
(1) Includes expense of $1.1 million and $2.3 million for the three and six months ended June 30, 2022 for rental of temporary cooling towers associated with the SJGS Unit 1 outage. These amounts are offset with insurance reimbursements of $1.1 million and $2.3 million for the three and six months ended June 30, 2022. Supplemental cash flow information related to the Company’s leases is as follows:
| Six Months Ended |  | Six Months Ended
| June 30, 2023 |  | June 30, 2022
| PNM |  | TNMP |  | PNMR Consolidated |  | PNM |  | TNMP |  | PNMR Consolidated
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases | $ | 16,208 |  |  | $ | 155 |  |  | $ | 16,363 |  |  | $ | 16,260 |  |  | $ | 75 |  |  | $ | 16,381 |
Operating cash flows from financing leases | 88 |  |  | 38 |  |  | 127 |  |  | 45 |  |  | 21 |  |  | 68 |
Finance cash flows from financing leases | 792 |  |  | 646 |  |  | 1,474 |  |  | 528 |  |  | 236 |  |  | 809 |
Non-cash information related to right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |  |  |  |  |  |
Operating leases | $ | 94 |  |  | $ | 6 |  |  | $ | 100 |  |  | $ | 1,079 |  |  | $ | — |  |  | $ | 1,079 |
Financing leases | 4,793 |  |  | 1,783 |  |  | 6,576 |  |  | 2,151 |  |  | 1,625 |  |  | 3,776 |
Capitalized lease costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022. Future expected lease payments are shown below:
| As of June 30, 2023
| PNM |  | TNMP |  | PNMR Consolidated
| Financing |  | Operating |  | Financing |  | Operating |  | Financing |  | Operating
| (In thousands)
Remainder of 2023 | $ | 2,539 |  |  | $ | 1,148 |  |  | $ | 2,343 |  |  | $ | 602 |  |  | $ | 4,900 |  |  | $ | 1,750 |
2024 | 4,204 |  |  | 8,149 |  |  | 4,068 |  |  | 945 |  |  | 8,286 |  |  | 9,094 |
2025 | 3,232 |  |  | 7,428 |  |  | 3,070 |  |  | 770 |  |  | 6,304 |  |  | 8,198 |
2026 | 2,735 |  |  | 7,019 |  |  | 1,912 |  |  | 76 |  |  | 4,647 |  |  | 7,094 |
2027 | 1,577 |  |  | 7,023 |  |  | 748 |  |  | — |  |  | 2,325 |  |  | 7,023 |
Later years | 1,229 |  |  | 17,510 |  |  | 81 |  |  | — |  |  | 1,310 |  |  | 17,510 |
Total minimum lease payments | 15,516 |  |  | 48,277 |  |  | 12,222 |  |  | 2,393 |  |  | 27,772 |  |  | 50,669 |
Less: Imputed interest | 1,302 |  |  | 7,060 |  |  | 715 |  |  | 126 |  |  | 2,017 |  |  | 7,186 |
Lease liabilities as of June 30, 2023 | $ | 14,214 |  |  | $ | 41,217 |  |  | $ | 11,507 |  |  | $ | 2,267 |  |  | $ | 25,755 |  |  | $ | 43,483 |
The above table includes $13.1 million, $12.0 million, and $25.1 million for PNM, TNMP, and PNMR at June 30, 2023 for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties. At June 30, 2023, the Company has various lease arrangements that have been executed but have not yet commenced, which are primarily related to battery storage agreements. The Company currently expects lease commencement dates in 2023 and 2024, with lease terms expiring in 2044, and will recognize lease assets and liabilities upon lease commencement. The expected total fixed consideration to be paid for these arrangements, which includes non-lease payments, is approximately $1.3 billion over the 20-year terms of the agreements.

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