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 (in millions)
		2023		2022
Assets
Operating	Operating lease assets, net of amortization	$	177	$	155
Finance	Finance leases	572		630
Total lease assets		$	749	$	785

Liabilities
Current
Operating	Accounts payable and accrued liabilities	$	71	$	59
Finance	Accounts payable and accrued liabilities	56		59
Non-current
Operating	Other long-term liabilities	93		93
Finance	Finance lease liabilities	576		628
Total lease liabilities		$	796	$	839

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 23 years. The components of lease costs were as follows:


Lease Costs For the years ended September 30 (in millions)
	2023		2022		2021
Operating lease costs(1)	$	69	$	56	$	52
Variable lease costs(1)	134		78		75
Short-term lease costs(1)	18		26		12
Finance lease costs
Amortization of lease assets(2)	57		58		51
Interest on lease liabilities(3)(4)	43		42		39
Total finance lease costs	100		100		90
Total lease costs	$	321	$	260	$	229

(1) Costs are included in Operating and maintenance expense, Fuel expense, Purchased power expense, and Tax equivalents expense on the Consolidated Statements of Operations.

(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)
	2023		2022		2021
Operating cash flows for operating leases	$	77	$	57	$	53
Operating cash flows for finance leases	43		42		39
Financing cash flows for finance leases	56		60		52

Lease assets obtained in exchange for lease obligations (non-cash)
Operating leases(1)	$	84	$	43	$	(22)
Finance leases	3		—		233

(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.

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 terms in years and the weighted average discount rate for TVA's operating and financing leases were as follows:


Weighted Averages At September 30
	2023	2022
Weighted average remaining lease terms
Operating leases	3 years	3 years
Finance leases	10 years	11 years

Weighted average discount rate(1)
Operating leases	4.1%	1.5%
Finance leases	21.6%	17.8%

(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, 2023:


Future Minimum Lease Payments Minimum payments outstanding at September 30, 2023 (in millions)
Operating leases
2024	$	76
2025	51
2026	24
2027	9
2028	3
Thereafter	11
Minimum annual payments	174
Less: present value discount	(10)
Operating present value of net minimum lease payments	$	164

Finance leases
2024	$	109
2025	107
2026	106
2027	104
2028	102
Thereafter	450
Minimum annual payments	978
Less: amount representing interest	(346)
Finance present value of net minimum lease payments	$	632

During the fourth quarter of 2023, TVA entered into a PPA with a term of 2 years that commenced in October 2023. Lease payments made over the term are expected to total approximately $43 million.

TVA has entered into three 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 April 2024 and April 2025. Total capacity payments related to these batteries over the term of these PPAs are expected to total $394 million.