<PAGE>

================================================================================
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

  For Quarter Ended September 30, 2001           Commission File Number 1-4456

                         TEXAS EASTERN TRANSMISSION, LP
             (Exact name of Registrant as Specified in its Charter)


                 Delaware                                  76-0677232
(State or Other Jurisdiction of Incorporation  (IRS Employer Identification No.)

                              5400 Westheimer Court
                                  P.O. Box 1642
                             Houston, TX 77251-1642
                    (Address of Principal Executive Offices)
                                   (Zip code)

                                  713-627-5400
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ___
                                      ---
The Registrant meets the conditions set forth in General Instructions (H)(1)(a)
and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format. Part I, Item 2 has been reduced and Part II, Item 4 has been
omitted in accordance with such Instruction H.

All of the Registrant's limited partnership interests and all of the limited
liability company interests of its general partner are indirectly owned by Duke
Energy Corporation (File No. 1-4928), which files reports and proxy materials
pursuant to the Securities Exchange Act of 1934.

================================================================================
<PAGE>

                         TEXAS EASTERN TRANSMISSION, LP
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001
                                      INDEX


<TABLE>
<CAPTION>
Item                                                                                                       Page
----                                                                                                       ----
                          PART I. FINANCIAL INFORMATION
<S>                                                                                                      <C>
1.   Financial Statements.................................................................................   1
     Consolidated Statements of Operations for the Three and Nine Months Ended
         September 30, 2001 and 2000 .....................................................................   1
     Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
         September 30, 2001 and 2000......................................................................   2
     Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000...........................   3
     Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended
         September 30, 2001 and 2000 .....................................................................   5
     Notes to Consolidated Financial Statements...........................................................   6
2.   Management's Discussion and Analysis of Results of Operations and Financial Condition................  10

                           PART II. OTHER INFORMATION

1.   Legal Proceedings....................................................................................  12
6.   Exhibits and Reports on Form 8-K.....................................................................  12

     Signature............................................................................................  13
</TABLE>



SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995

From time to time, the Company's reports, filings and other public announcements
may include assumptions, projections, expectations, intentions or beliefs about
future events. These statements are intended as "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995. The Company cautions
that assumptions, projections, expectations, intentions or beliefs about future
events may and often do vary from actual results and the differences between
assumptions, projections, expectations, intentions or beliefs and actual results
can be material. Accordingly, there can be no assurance that actual results will
not differ materially from those expressed or implied by the forward-looking
statements. Some of the factors that could cause actual achievements and events
to differ materially from those expressed or implied in such forward-looking
statements include state and federal legislative and regulatory initiatives that
affect cost and investment recovery, have an impact on rate structures and
affect the speed and degree to which competition enters the natural gas
industry; the weather and other natural phenomena; the timing and extent of
changes in commodity prices and interest rates; changes in environmental and
other laws and regulations to which the Company is subject or other external
factors over which the Company has no control; the results of financing efforts,
including the Company's ability to obtain financing on favorable terms, which
can be affected by the Company's credit rating and general economic conditions;
level of creditworthiness of counterparties to transactions; growth in
opportunities for the Company; and the effect of accounting policies issued
periodically by accounting standard-setting bodies.

                                       i

<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

                         TEXAS EASTERN TRANSMISSION, LP
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                                  (In millions)


<TABLE>
<CAPTION>
                                                                Three Months Ended              Nine Months Ended
                                                                   September 30,                  September 30,
                                                             -----------------------        -----------------------
                                                                2001         2000              2001         2000
                                                             ----------   ----------        ----------   ----------
<S>                                                         <C>            <C>            <C>            <C>
Operating Revenues
      Transportation of natural gas                          $    152       $     176       $     454      $     547
      Storage of natural gas and other services                    44              42             142            136
                                                             ----------     ----------      ----------     ----------
           Total operating revenues                               196             218             596            683
                                                             ----------     ----------      ----------     ----------

Operating Expenses
      Operation and maintenance                                    66              88             180            268
      Depreciation and amortization                                21              22              67             67
      Property and other taxes                                     11              12              34             36
                                                             ----------     ----------      ----------     ----------
           Total operating expenses                                98             122             281            371
                                                             ----------     ----------      ----------     ----------

Operating Income                                                   98              96             315            312

Other Income and Expenses, Net                                      -               -               -              3

Interest Expense                                                   13              28              41             82
                                                             ----------     ----------       ---------     ----------

Earnings Before Income Taxes                                       85              68             274            233

Income Taxes                                                       31              25              99             87
                                                             ----------     ----------      ----------     ----------

Net Income                                                   $     54       $      43       $     175      $     146
                                                             ==========     ==========      ==========     ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       1
<PAGE>

                         TEXAS EASTERN TRANSMISSION, LP
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In millions)

<TABLE>
<CAPTION>
                                                                                           Nine Months Ended
                                                                                              September 30,
                                                                                ------------------------------------------
                                                                                      2001                    2000
                                                                                ------------------      ------------------
<S>                                                                             <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                            $              326      $              272
                                                                                ------------------      ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Capital and investment expenditures                                                    (114)                    (78)
      Net increase in advances receivable - affiliate                                        (109)                   (203)
      Retirements                                                                               7                       9
                                                                                ------------------      ------------------
                      Net cash used in investing activities                                  (216)                   (272)
                                                                                ------------------      ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Payments for the redemption of long-term debt                                          (110)                      -
                                                                                ------------------      ------------------
                      Net cash used in financing activities                                  (110)                      -
                                                                                ------------------      ------------------

      Net change in cash and cash equivalents                                   $               -       $               -

      Cash and cash equivalents at beginning of period                                          -                       -
                                                                                ------------------      ------------------
      Cash and cash equivalents at end of period                                $               -       $               -
                                                                                ==================      ==================

Supplemental Disclosures
      Cash paid for interest, net of amount capitalized                         $              37       $              85
      Cash paid for income taxes                                                $               1       $             122

</TABLE>
                See Notes to Consolidated Financial Statements.

                                       2
<PAGE>

                         TEXAS EASTERN TRANSMISSION, LP
                           CONSOLIDATED BALANCE SHEETS
                                  (In millions)

<TABLE>
<CAPTION>
                                                         September 30,      December 31,
                                                             2001              2000
                                                         (Unaudited)
                                                      -----------------------------------

<S>                                                    <C>                 <C>
ASSETS

Current Assets
      Accounts receivable                             $         79      $         85
      Inventory                                                 26                26
      Other                                                     45               127
                                                      ---------------   -------------
           Total current assets                                150               238
                                                      ---------------   -------------

Investments and Other Assets
      Advances receivable - affiliate                          441               332
      Goodwill, net                                            138               141
                                                      ---------------   -------------
           Total investments and other assets                  579               473
                                                      ---------------   -------------

Property, Plant and Equipment
      Cost                                                   3,859             3,767
      Less accumulated depreciation and amortization         1,179             1,135
                                                      ---------------   -------------
           Net property, plant and equipment                 2,680             2,632
                                                      ---------------   -------------

Regulatory Assets and Deferred Debits                          154               182
                                                      ---------------   -------------

      Total Assets                                    $      3,563      $      3,525
                                                      ===============   =============

</TABLE>

                See Notes to Consolidated Financial Statements.

                                       3
<PAGE>

                        TEXAS EASTERN TRANSMISSION, LP
                          CONSOLIDATED BALANCE SHEETS
                                 (In millions)

<TABLE>
<CAPTION>
                                                                                   September 30,        December 31,
                                                                                       2001                 2000
                                                                                    (Unaudited)
                                                                                 ---------------------------------------
<S>                                                                              <C>                     <C>
LIABILITIES AND PARTNERS' CAPITAL

Current Liabilities
      Accounts payable                                                           $              14    $              13
      Taxes accrued                                                                            244                  168
      Current maturities of long-term debt                                                     106                  116
      Other                                                                                    112                  231
                                                                                 ------------------   ------------------
           Total current liabilities                                                           476                  528
                                                                                 ------------------   ------------------

Long-term Debt                                                                                 435                  535
                                                                                 ------------------   ------------------

Deferred Credits and Other Liabilities
      Deferred income taxes                                                                    642                  626
      Other                                                                                    154                  156
                                                                                 ------------------   ------------------
           Total deferred credits and other liabilities                                        796                  782
                                                                                 ------------------   ------------------

Partners' Capital
      Partners' Capital                                                                      1,855                1,680
      Accumulated other comprehensive income                                                     1                    -
                                                                                 ------------------   ------------------
           Total partners' capital                                                           1,856                1,680
                                                                                 ------------------   ------------------

      Total Liabilities and Partners' Capital                                    $           3,563    $           3,525
                                                                                 ==================   ==================
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       4
<PAGE>

                         TEXAS EASTERN TRANSMISSION, LP
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)
                                  (In millions)


<TABLE>
<CAPTION>
                                                                  Three Months Ended                      Nine Months Ended
                                                                      September 30,                          September 30,
                                                           -----------------------------------   ----------------------------------
                                                                2001               2000               2001               2000
                                                           ----------------   ----------------   ---------------    ---------------
<S>                                                        <C>               <C>                  <C>              <C>
Net Income                                                 $            54    $            43    $          175     $          146

Other Comprehensive Income, net of tax
  Cumulative effect of change in accounting principle                    -                  -                (2)                 -
  Unrealized net gain on cash flow hedges                                6                  -                 2                  -
  Reclassification adjustment into earnings                              -                  -                 1                  -
                                                           ----------------   ----------------   ---------------    ---------------
      Total Other Comprehensive Income                                   6                  -                 1                  -

                                                           ----------------   ----------------   ---------------    ---------------
Total Comprehensive Income                                 $            60    $            43    $          176     $          146
                                                           ================   ================   ===============    ===============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. General

On April 16, 2001, Texas Eastern Transmission Corporation (TETCO), a Delaware
corporation, changed its form of organization from a corporation to a limited
partnership. Pursuant to the conversion, all rights and liabilities of TETCO
vested in Texas Eastern Transmission, LP, a Delaware limited partnership
(together with its subsidiaries, the "Company"). The Company is an indirect,
wholly owned subsidiary of Duke Energy Corporation (Duke Energy). The Company's
limited partner filed an election with the Internal Revenue Service to be taxed
as a C-corporation for federal income tax purposes. The Company will also be
subject to corporate income tax as a division of the limited partner. There was
no effect on the Company's results of operations, cash flows or financial
position as a result of this conversion.

The Company is primarily engaged in the interstate transportation and storage of
natural gas. The interstate natural gas transmission and storage operations of
the Company are subject to the rules and regulations of the Federal Energy
Regulatory Commission (FERC).

The Consolidated Financial Statements include the accounts of the Company and
all majority-owned subsidiaries after the elimination of significant
intercompany transactions and balances. These Consolidated Financial Statements
reflect all normal recurring adjustments that are, in the opinion of management,
necessary to present fairly the results of operations, cash flows and financial
position for the respective periods.

2. Summary of Significant Accounting Policies

Accounting for Hedges. The Company enters into derivative transactions that are
hedges of the future cash flows of forecasted transactions (cash flow hedges).
These derivatives are recognized on the Consolidated Balance Sheets at their
fair value as Regulatory Assets and Deferred Debits or Deferred Credits and
Other Liabilities, as appropriate.

The Company formally assesses, both at the hedge's inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items.

Cash Flow Hedges. Changes in the fair value of a derivative that is designated
and qualifies as a cash flow hedge are included in the Consolidated Statements
of Comprehensive Income as Other Comprehensive Income (OCI) until earnings are
affected by the hedged item. Settlement amounts and ineffective portions of cash
flow hedges are removed from OCI and recorded in the Consolidated Statements of
Operations in the same accounts as the item being hedged. The Company
discontinues hedge accounting prospectively when it is determined that the
derivative no longer qualifies as an effective hedge or when it is no longer
probable that the hedged transaction will occur. When hedge accounting is
discontinued, the derivative will continue to be carried on the Consolidated
Balance Sheets at its fair value with subsequent changes in its fair value
recognized in current-period earnings. Gains and losses related to discontinued
hedges that were accumulated in OCI will remain in OCI until earnings are
affected by the hedged item unless it is no longer probable that the hedged
transaction will occur. Under these circumstances, gains and losses are
recognized in current-period earnings.

Cumulative Effect of Change in Accounting Principle. The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," on January 1, 2001. In
accordance with the transition provisions of SFAS No. 133, the Company recorded
a net-of-tax cumulative effect adjustment reducing OCI and Partners' Capital for
$1.5 million. For the nine months ended September 30, 2001, the Company
reclassified $1 million from OCI into earnings for derivatives included in the
transition adjustment related to hedge transactions that settled. There was no
impact on the Company's consolidated results of operations from the
implementation of SFAS No. 133.

                                       6
<PAGE>

New Accounting Standards. In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142
is effective for fiscal years beginning after December 15, 2001, and will be
adopted by the Company as of January 1, 2002. SFAS No. 142 requires that
goodwill no longer be amortized over an estimated useful life, as previously
required. Instead, goodwill amounts will be subject to a fair-value-based annual
impairment assessment. This standard also requires acquired intangible assets to
be recognized separately and amortized as appropriate. The Company expects that
the adoption of SFAS No. 142 will not have a significant impact on future
financial statements with the discontinuation of goodwill amortization expense.
For the nine months ended September 30, 2001, amortization expense for goodwill
was $3 million. The FASB and the Emerging Issues Task Force continue to field
questions surrounding the transition provisions and clarification of key aspects
of the standard. The Company is preparing to implement the new standard and
currently does not expect any material impact on its consolidated results of
operations, cash flows or financial position. In July 2001, the FASB issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides
the accounting requirements for retirement obligations associated with tangible
long-lived assets. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002, and early adoption is permitted. The Company is currently
assessing the new standard and has not yet determined the impact on its
consolidated results of operations, cash flows or financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The new rules supersede SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The new rules retain many of the fundamental recognition and
measurement provisions, but significantly change the criteria for classifying an
asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the new standard and
has not yet determined the impact on its consolidated results of operations,
cash flows or financial position.

3. Regulatory Matters

On February 9, 2000, the FERC issued Order 637, which sets forth revisions to
its regulations governing short-term natural gas transportation services and
policies governing the regulation of interstate natural gas pipelines.
"Short-term" has been defined as all transactions of less than one year. Among
the significant actions taken were the lifting of the price cap for short-term
capacity release by pipeline customers for an experimental 2 1/2-year period
ending September 1, 2002, and requiring that interstate pipelines file pro forma
tariff sheets to (i) provide for nomination equality between capacity release
and primary pipeline capacity; (ii) implement imbalance management services (for
which interstate pipelines may charge fees) while at the same time reducing the
use of operational flow orders and penalties; and (iii) provide segmentation
rights if operationally feasible. Order 637 also narrowed the right of first
refusal to remove economic biases perceived in the current rule. Order 637
imposed significant new reporting requirements for interstate pipelines that
were implemented by the Company during the third quarter of 2000. Additionally,
Order 637 permitted pipelines to propose peak/off-peak rates and
term-differentiated rates, and encouraged pipelines to propose experimental
capacity auctions. By Order 637-A, issued in February 2000, the FERC generally
denied requests for rehearing and several parties, including the Company, have
filed appeals in the District of Columbia Court of Appeals seeking court review
of various aspects of the Order. During the third quarter of 2001, the Company
submitted revised pro forma tariff sheets to update the filings originally
submitted in 2000. These filings are currently subject to review and approval by
the FERC.

4. Related Party Transactions

Certain balances due to or from related parties included in the Consolidated
Balance Sheets are as follows:

-------------------------------------------------------------------------------
 In millions
-------------------------------------------------------------------------------
                                              September 30,     December 31,
                                                    2001              2000
                                            -----------------------------------
 Accounts receivable                                 $ 10             $  6
 Taxes accrued                                        194              128
-------------------------------------------------------------------------------

For the three and nine months ended September 30, 2000, there was $15 million
and $41 million respectively, of interest expense associated with notes payable
to parent that were repaid in the fourth quarter of 2000.

                                       7
<PAGE>

5. Gas Imbalances

The Consolidated Balance Sheets include in-kind balances as a result of
differences in gas volumes received and delivered. At September 30, 2001 and
December 31, 2000, Other Current Assets included $24 million and $101 million,
respectively, and Other Current Liabilities included $50 million and $178
million, respectively, related to gas imbalances. Natural gas volumes owed to
(from) the Company are valued at natural gas market prices as of the balance
sheet dates.

6. Derivative Instruments, Hedging Activities and Credit Risk

Commodity Cash Flow Hedges. The Company is exposed to market fluctuations in the
prices of energy-related commodities. The Company closely monitors the potential
impacts of commodity price changes, and where appropriate, uses various
instruments to lock in margins for a portion of its future revenues. These swap
instruments serve as cash flow hedges for natural gas liquids transactions. The
maximum term over which the Company is hedging exposures to the price
variability of these commodities is five years.

For the nine months ended September 30, 2001, the ineffective portion of
commodity cash flow hedges and the amount recognized for transactions that no
longer qualified as cash flow hedges were not material. As of September 30,
2001, $0.3 million of after-tax deferred net losses on derivative instruments
accumulated in OCI are expected to be reclassified to earnings during the next
twelve months. These losses will generally be more than offset by the related
revenues. However, due to the volatility of the commodities markets, the value
of the derivative instrument is subject to change prior to its reclassification
to earnings.

Market and Credit Risk. The Company's principal markets for natural gas
transportation and storage services are industrial end-users and utilities
located throughout the Mid-Atlantic and northeastern states. The Company has
concentrations of receivables from natural gas and electric utilities and their
affiliates, as well as industrial customers and gas marketers throughout these
regions. These concentrations of customers may affect the Company's overall
credit risk in that certain customers may be similarly affected by changes in
economic, regulatory or other factors. Where exposed to credit risk, the Company
analyzes the counterparties' financial condition prior to entering into an
agreement, establishes credit limits and monitors the appropriateness of these
limits on an ongoing basis.

7. Debt

In August 2001, the Company retired its $100 million of 10.0% notes.

8. Commitments and Contingencies

Litigation. The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding performance, contracts and other matters arising in the ordinary
course of business, some of which involve substantial amounts. Management
believes that the final disposition of these proceedings will not have a
material adverse effect on consolidated results of operations, cash flows or
financial position.

Environmental Matters. In October 1998, the Environmental Protection Agency
(EPA) issued a final rule on regional ozone control that required 22 eastern
states and the District of Columbia to revise their State Implementation Plans
to significantly reduce emissions of nitrogen oxide by May 1, 2003. The EPA's
rule was challenged in court by various states, industry and other interests,
including the Company's parent, Duke Energy. In March 2000, the court upheld
most aspects of the EPA's rule. The same court subsequently issued a decision
that extended the compliance deadline for implementation of emission reductions
to May 31, 2004.

In January 2000, the EPA finalized another ozone-related rule under Section 126
of the Clean Air Act that has virtually identical emission control requirements
as its October 1998 action, but with a May 1, 2003 compliance date. This rule
was challenged in court and on May 14, 2001, the US Court of Appeals for the DC
Circuit sided with the EPA on all issues except one. The court remanded the
electric generating unit (EGU) growth rate factor determinations used to
establish each state's emission cap until the EPA could engage in decision
making on how to set the EGU growth rate factors. On August 24, 2001, the DC
Circuit suspended the implementation schedule for

                                       8
<PAGE>

EGUs until the EPA completes a rulemaking in response to the court's May 14
remand order.  This ruling prevents the EPA from implementing the Section 126
program beginning May 1, 2003. Possible new implementation dates range from mid
July of 2003 to May 31, 2004.  Management estimates the Company will spend up to
$10 million for additional capital improvements to comply with the new EPA
rules.

Other Commitments and Contingencies. In 1993, the U.S. Department of the
Interior announced its intention to seek additional royalties from gas producers
as a result of payments received by such producers in connection with past
take-or-pay settlements, buyouts and buydowns of gas sales contracts with
natural gas pipelines. The Company, with respect to certain producer contract
settlements, may be contractually required to reimburse or, in some instances,
to indemnify producers against such royalty claims. The potential liability of
the producers to the government and of the pipelines to the producers involves
complex issues of law and fact, which are likely to take substantial time to
resolve. If required to reimburse or indemnify the producers, the Company will
file with FERC to recover a portion of these costs from pipeline customers.

Periodically, the Company may become involved in contractual disputes with
natural gas transmission customers involving potential or threatened abrogation
of contracts by the customers. If the customers are successful, the Company may
not receive the full value of anticipated benefits under the contracts.

Management believes that these commitments and contingencies will not have a
material adverse effect on consolidated results of operations, cash flows or
financial position.

                                       9
<PAGE>

Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.

INTRODUCTION

On April 16, 2001, Texas Eastern Transmission Corporation (TETCO), a Delaware
corporation, changed its form of organization from a corporation to a limited
partnership. Pursuant to the conversion, all rights and liabilities of TETCO
vested in Texas Eastern Transmission, LP, a Delaware limited partnership
(together with its subsidiaries, the "Company"). The Company is an indirect,
wholly owned subsidiary of Duke Energy Corporation (Duke Energy). The Company's
limited partner filed an election with the Internal Revenue Service to be taxed
as a C-corporation for federal income tax purposes. The Company will also be
subject to corporate income tax as a division of the limited partner. There was
no effect on the Company's results of operations, cash flows or financial
position as a result of this conversion.

The Company is primarily engaged in the interstate transportation and storage of
natural gas for customers primarily in the Mid-Atlantic and New England states.
The interstate natural gas transmission and storage operations of the Company
are subject to the rules and regulations of the Federal Energy Regulatory
Commission (FERC).

Management's Discussion and Analysis should be read in conjunction with the
Consolidated Financial Statements.

RESULTS OF OPERATIONS

Net income for the nine months ended September 30, 2001 increased $29 million,
compared to the same period in 2000. The increase was mainly attributable to
decreased interest expense as a result of repayment of notes payable to parent
in the fourth quarter of 2000. The decrease in transportation revenues, which is
offset by a decrease in operating costs, was the result of reduced rates
effective December 1, 2000 that reflect lower recovery requirements for
operating costs, primarily system fuel and FERC Order 636 transition costs.

LIQUIDITY AND CAPITAL RESOURCES

Capital expenditures for the first nine months of 2001 and 2000 totaled $114
million and $78 million, respectively. Projected 2001 capital expenditures,
including allowance for funds used during construction, are approximately $160
million, with market-expansion expenditures approximating 35% of the capital
budget. These projections are subject to periodic review and revision. Actual
expenditures incurred may vary from estimates due to various factors, including
business expansion opportunities and environmental matters. Expenditures for
2001 are expected to be funded by cash from operations, debt issuance and/or
collection of intercompany advances receivable.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Policies. The Company is exposed to market risks associated with interest
rates and commodity prices. Management has established comprehensive risk
management policies to monitor and manage these market risks. Duke Energy's
Policy Committee is responsible for the overall approval of market risk
management policies and the delegation of approval and authorization levels. The
Policy Committee is comprised of senior executives of Duke Energy who receive
periodic updates from Duke Energy's Chief Risk Officer (CRO) on market risk
positions, corporate exposures, credit exposures and overall results of the
Company's risk management activities. The CRO has responsibility for the overall
management of interest rate risk, foreign currency risk, credit risk and energy
risk, including monitoring of exposure limits. There have been no material
changes in the Company's market risk since December 31, 2000.

CURRENT ISSUES

Environmental Matters. In October 1998, the Environmental Protection Agency
(EPA) issued a final rule on regional ozone control that required 22 eastern
states and the District of Columbia to revise their State Implementation Plans
to significantly reduce emissions of nitrogen oxide by May 1, 2003. The EPA's
rule was challenged in court by various states, industry and other interests,
including the Company's parent, Duke Energy. In March 2000, the court upheld
most aspects of the EPA's rule. The same court subsequently issued a decision
that extended the compliance deadline for implementation of emission reductions
to May 31, 2004.

                                      10
<PAGE>

In January 2000, the EPA finalized another ozone-related rule under Section 126
of the Clean Air Act that has virtually identical emission control requirements
as its October 1998 action, but with a May 1, 2003 compliance date. This rule
was challenged in court and on May 14, 2001, the US Court of Appeals for the DC
Circuit sided with the EPA on all issues except one. The court remanded the
electric generating unit (EGU) growth rate factor determinations used to
establish each state's emission cap until the EPA could engage in decision
making on how to set the EGU growth rate factors. On August 24, 2001, the DC
Circuit suspended the implementation schedule for EGUs until the EPA completes a
rulemaking in response to the court's May 14 remand order. This ruling prevents
the EPA from implementing the Section 126 program beginning May 1, 2003.
Possible new implementation dates range from mid July of 2003 to May 31, 2004.
Management estimates the Company will spend up to $10 million for additional
capital improvements to comply with the new EPA rules.

Notice of Proposed Rulemaking (NOPR). On September 27, 2001, the FERC issued a
NOPR announcing that the FERC is considering new regulations regarding standards
of conduct that would apply uniformly to natural gas pipelines and transmitting
public utilities that are currently subject to different gas or electric
standards. The proposed standards would change how companies and their
subsidiaries interact and share information by broadening the definition of
"affiliate" covered by the standards of conduct, from the more narrow definition
in the existing regulations. The Company is currently evaluating the impact of
this NOPR and will file comments with the FERC suggesting appropriate revisions
to the proposal.

New Accounting Standards. In June 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001, and will be adopted by the Company as
of January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized
over an estimated useful life, as previously required. Instead, goodwill amounts
will be subject to a fair-value-based annual impairment assessment. The standard
also requires acquired intangible assets to be recognized separately and
amortized as appropriate. The Company expects that the adoption of SFAS No. 142
will not have a significant impact on future financial statements with the
discontinuation of goodwill amortization expense. For the nine months ended
September 30, 2001, amortization expense for goodwill was $3 million. The FASB
and the Emerging Issues Task Force continue to field questions surrounding the
transition provisions and clarification of key aspects of the standard. The
Company is preparing to implement the new standard and currently does not expect
any material impact on its consolidated results of operations, cash flows or
financial position.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 provides the accounting requirements for retirement
obligations associated with tangible long-lived assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, and early adoption is
permitted. The Company is currently assessing the new standard and has not yet
determined the impact on its consolidated results of operations, cash flows or
financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The new rules supersede SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The new rules retain many of the fundamental recognition and
measurement provisions, but significantly change the criteria for classifying an
asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the new standard and
has not yet determined the impact on its consolidated results of operations,
cash flows or financial position.

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<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For information concerning material litigation and other contingencies, see Note
8 to the Consolidated Financial Statements.

Item 6. Exhibits and Reports on Form 8-K.

(a)      Exhibits

None.

(b)      Reports on Form 8-K

The Company filed no reports on Form 8-K during the third quarter of 2001.

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<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                TEXAS EASTERN TRANSMISSION, LP

                                By: Duke Energy Gas Transmission Services, LLC,
                                its General Partner



November 13, 2001               /s/ Dorothy M. Ables
                                ---------------------------
                                Dorothy M. Ables
                                Senior Vice President, Finance and
                                Administration and Chief Financial Officer

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