The following table provides information regarding the presentation of leases on the Consolidated Balance Sheets:


Amounts Recognized on TVA's Consolidated Balance Sheets At September 30
		2021		2020
Assets
Operating	Operating lease assets, net of amortization	$	165	$	232
Finance	Finance leases	692		516
Total lease assets		$	857	$	748

Liabilities
Current
Operating	Accounts payable and accrued liabilities	$	40	$	63
Finance	Accounts payable and accrued liabilities	60		41
Non-current
Operating	Other long-term liabilities	122		171
Finance	Finance lease liabilities	687		525
Total lease liabilities		$	909	$	800

TVA's leases consist primarily of railcars, equipment, real estate/land, power generating facilities, and gas pipelines. TVA's leases have various terms and expiration dates remaining from less than one year to approximately 25 years. The components of lease costs were as follows:


Lease Costs For the years ended September 30 (in millions)
	2021		2020
Operating lease costs(1)	$	52	$	84
Variable lease costs(1)	75		75
Short-term lease costs(1)	12		7
Finance lease costs
Amortization of lease assets(2)	51		15
Interest on lease liabilities(3)(4)	39		33
Total finance lease costs	90		48
Total lease costs	$	229	$	214

(1) Costs are included in Operating and maintenance expense, Fuel expense, Purchased power expense, and Tax equivalents expense on the Consolidated Statements of Operations. TVA's rental expense for operating leases was approximately $97 million for the year ended September 30, 2019.

(2) Expense is included in Depreciation and amortization expense on the Consolidated Statements of Operations.

(4) Certain finance leases receive regulatory accounting treatment and are reclassified to Fuel expense and Purchased power expense.

TVA's variable lease costs are primarily related to renewable energy purchase agreements that require TVA to purchase all output from the underlying facility. Payments under those agreements are solely based on the actual output over the lease term. Certain TVA lease agreements contain renewal options. Those renewal options that are reasonably certain to be exercised are included in the lease measurements.

The following table contains additional information with respect to cash and non-cash activities related to leases:


Amounts Recognized on TVA's Consolidated Statements of Cash Flows For the years ended September 30 (in millions)
	2021		2020
Operating cash flows for operating leases	$	53	$	85
Operating cash flows for finance leases	39		33
Financing cash flows for finance leases	52		15

Lease assets obtained in exchange for lease obligations (non-cash)
Operating leases(1)	$	(22)	$	110
Finance leases	233		394

(1) Amount for 2021 represents a non-cash reduction due to a lease that was amended during the fiscal year resulting in derecognition of the operating lease asset and obligation upon remeasurement. Amount for 2020 excludes operating lease assets recorded as a result of the adoption of the new lease standard.

TVA has certain finance leases under PPAs under which the present value of the minimum lease payments exceeds the fair value of the related lease asset at the date of measurement. This resulted in an interest rate that was higher than TVA's incremental borrowing rate. The weighted average remaining lease term in years and the weighted average discount rate for TVA's operating and financing leases were as follows:


Weighted Averages At September 30
	2021	2020
Weighted average remaining lease terms
Operating leases	5 years	5 years
Finance leases	12 years	12 years

Weighted average discount rate(1)
Operating leases	1.5%	1.6%
Finance leases	17.7%	21.8%

(1) The discount rate is calculated using the rate implicit in a lease if it is readily determinable. If the rate used by the lessor is not readily determinable, TVA uses its incremental borrowing rate as permitted by accounting guidance. The incremental borrowing rate is influenced by TVA's credit rating and lease term and as such may differ for individual leases, embedded leases, or portfolios of leased assets.

The following table presents maturities of lease liabilities and a reconciliation of the undiscounted cash flows to lease liabilities at September 30, 2021:


Future Minimum Lease Payments Minimum Payments Due at September 30, 2021
Operating leases
2022	$	42
2023	40
2024	37
2025	34
2026	10
Thereafter	5
Minimum annual payments	168
Less: present value discount	(6)
Operating present value of net minimum lease payments	$	162

Finance leases
2022	$	115
2023	112
2024	107
2025	106
2026	105
Thereafter	656
Minimum annual payments	1,201
Less: amount representing interest	(454)
Finance present value of net minimum lease payments	$	747

TVA has entered into five PPAs with renewable resource providers for solar generation and rights to charge and discharge battery energy storage systems. The systems are considered a lease component in these agreements. These PPAs have terms of 20 years, and are expected to commence between October 2022 and December 2024. Payments made over the term of these PPAs are expected to total approximately $413 million.