SOUTHERN CALIFORNIA EDISON CoSCE-PG
SOUTHERN CALIFORNIA EDISON Co Leases Disclosure
Leases
Leases as Lessee
SCE enters into various agreements to purchase power, electric capacity and other energy products that may be accounted for as leases when SCE has dispatch rights that determine when and how a plant runs. SCE also leases property and equipment primarily related to vehicles, office space and other equipment. The terms of the contracts included in the table below are primarily 3 to 20 years for PPA leases, 5 to 72 years for office leases, and 5 to 13 years for the remaining other operating leases.
The following table summarizes SCE's lease payments for operating and finance leases as of December 31, 2020:
| (in millions) | PPA Operating Leases1 | Other Operating Leases2 | PPA Finance Leases1 | ||||||||||||||
| 2021 | $ | 204 | $ | 39 | $ | 1 | |||||||||||
| 2022 | 208 | 32 | 1 | ||||||||||||||
| 2023 | 159 | 26 | 1 | ||||||||||||||
| 2024 | 47 | 21 | — | ||||||||||||||
| 2025 | 47 | 18 | — | ||||||||||||||
| Thereafter | 443 | 104 | 5 | ||||||||||||||
| Total lease payments | 1,108 | 240 | 8 | ||||||||||||||
Amount representing interest3 | 203 | 60 | 4 | ||||||||||||||
| Lease liabilities | $ | 905 | $ | 180 | $ | 4 | |||||||||||
1Excludes expected purchases from most renewable energy contracts, which do not meet the definition of a lease payment since renewable power generation is contingent on external factors.
2Excludes escalation clauses based on consumer price or other indices and residual value guarantees that are not considered probable at the commencement date of the lease.
3Lease payments are discounted to their present value using SCE's incremental borrowing rates.
Supplemental balance sheet information related to SCE's leases was as follows:
| (in millions) | December 31, 2020 | December 31, 2019 | |||||||||
| Operating leases: | |||||||||||
Operating lease ROU assets1 | $ | 1,085 | $ | 689 | |||||||
| Current portion of operating lease liabilities | 214 | 79 | |||||||||
| Operating lease liabilities | 871 | 610 | |||||||||
Total operating lease liabilities1 | $ | 1,085 | $ | 689 | |||||||
| Finance leases included in: | |||||||||||
| Utility property, plant and equipment, gross | $ | 4 | $ | 14 | |||||||
| Accumulated depreciation | — | (5) | |||||||||
| Utility property, plant and equipment, net | 4 | 9 | |||||||||
| — | 1 | ||||||||||
| 4 | 8 | ||||||||||
| Total finance lease liabilities | $ | 4 | $ | 9 | |||||||
1During the year ended 2020, a PPA operating lease commenced and one PPA was amended resulting in a total of $463 million additions in ROU assets and lease liabilities.
The timing of SCE's recognition of the lease expense conforms to ratemaking treatment for SCE's recovery of the cost of electricity and is included in purchased power for operating leases and interest and amortization expense for finance leases. The following table summarizes the components of SCE's lease expense:
| (in millions) | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
| PPA leases: | |||||||||||
| Operating lease cost | $ | 111 | $ | 118 | |||||||
| Finance lease cost | 1 | 1 | |||||||||
Variable lease cost1 | 1,917 | 2,087 | |||||||||
| Total PPA lease cost | 2,029 | 2,206 | |||||||||
| Other operating leases cost | 47 | 46 | |||||||||
| Total lease cost | $ | 2,076 | $ | 2,252 | |||||||
1Includes lease costs from renewable energy contracts where payments are based on contingent external factors such as wind, hydro and solar power generation.
Other information related to leases was as follows:
| (in millions, except lease term and discount rate) | Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | |||||||||||
| PPA leases | $ | 111 | $ | 118 | |||||||
| Other leases | 44 | 44 | |||||||||
| Financing cash flows from PPA finance leases | 1 | 1 | |||||||||
ROU assets obtained in exchange for lease obligations: | |||||||||||
| PPA operating leases | $ | 463 | — | ||||||||
| Other operating leases | 58 | 34 | |||||||||
| Weighted average remaining lease term (in years): | |||||||||||
| Operating leases | |||||||||||
| PPA leases | 9.75 | 16.05 | |||||||||
| Other leases | 12.13 | 12.73 | |||||||||
| PPA Finance leases | 16.67 | 11.51 | |||||||||
| Weighted average discount rate: | |||||||||||
| Operating leases | |||||||||||
| PPA leases | 3.12 | % | 4.46 | % | |||||||
| Other leases | 3.63 | % | 3.88 | % | |||||||
| PPA Finance leases | 11.29 | % | 8.76 | % | |||||||
Leases as Lessor
SCE also enters into operating leases to rent certain land and facilities as a lessor. These leases primarily have terms that range from 15 to 65 years. During the twelve months ended December 31, 2020 and December 31, 2019, SCE recognized $17 million and $18 million, respectively, in lease income, which is included in operating revenue on the consolidated statements of income. At December 31, 2020, the undiscounted cash flow expected to be received from lease payments for the remaining years is as follows:
| (in millions) | |||||
| 2021 | $ | 11 | |||
| 2022 | 10 | ||||
| 2023 | 8 | ||||
| 2024 | 7 | ||||
| 2025 | 6 | ||||
| Thereafter | 128 | ||||
| Total | $ | 170 | |||
EME, a wholly-owned subsidiary of Edison International, emerged from bankruptcy in 2014 and retained a lease investment in a hydroelectric power plant in Vidalia, Louisiana. In November 2020, the lessee exercised an option in the lease agreement and purchased the asset upon expiration of the lease term. Edison International recognized the net proceeds of $132 million as a pre-tax gain and has no remaining investment balance as of December 31, 2020 related to the lease investment. The revenue recognized for the lease in 2020 is immaterial to Edison International's consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2020 | Feb 25, 2021 | Showing above |
| 2019 | Feb 27, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.