<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 June 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 JUNE 30, 2001
                                     INDEX

<TABLE>
<CAPTION>
Item                                                                                                      Page
----                                                                                                      ----
<S>                                                                                                       <C>
                                          PART I. FINANCIAL INFORMATION

1.   Financial Statements....................................................................................1
     Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000.........1
     Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000.........2
     Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000...................................3
     Consolidated Statements of Comprehensive Income for the Three and Six Months Ended
         June 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;
growth in opportunities for the Company; and the effect of accounting policies
issued periodically by accounting standard-setting bodies.
<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          Six Months Ended
                                                   June 30,                   June 30,
                                            ------------------------  -----------------------
                                               2001          2000       2001           2000
                                            -----------   ----------  ----------   ----------
<S>                                         <C>           <C>         <C>          <C>
Operating Revenues
  Transportation of natural gas               $   147      $   180    $   302        $   371
  Storage of natural gas and other services        45           47         98             94
                                            -----------   ----------  ----------   ----------
       Total operating revenues                   192          227        400            465
                                            -----------   ----------  ----------   ----------
Operating Expenses

  Operation and maintenance                        57           83         114           180
  Depreciation and amortization                    23           23          46            45
  Property and other taxes                         11           12          23            24
                                            -----------   ----------  ----------   ----------
       Total operating expenses                    91          118         183           249
                                            -----------   ----------  ----------   ----------
Operating Income                                  101          109         217           216

Other Income and Expenses, Net                      -            2           -             3

Interest Expense                                   13           27          28            54
                                            -----------   ----------  ----------   ----------
Earnings Before Income Taxes                       88           84         189           165

Income Taxes                                       32           32          68            62
                                            -----------   ----------  ----------   ----------
Net Income                                    $    56      $    52     $   121        $  103
                                            ===========   ==========  ==========   ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended
                                                                                                     June 30,
                                                                                       ------------------------------------
                                                                                           2001                    2000
                                                                                       ------------           -------------
<S>                                                                                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                                   $        217           $         158
                                                                                       ------------           -------------

CASH FLOWS FROM INVESTING ACTIVITIES
       Capital and investment expenditures                                                      (73)                    (44)
       Net increase in advances receivable - affiliate                                         (143)                   (121)
       Retirements                                                                                9                       7
                                                                                       ------------           -------------
                      Net cash used in investing activities                                    (207)                   (158)
                                                                                       ------------           -------------

CASH FLOWS FROM FINANCING ACTIVITIES
       Payments for the redemption of long-term debt                                            (10)                      -
                                                                                       ------------           -------------
                      Net cash used in financing activities                                     (10)                      -
                                                                                       ------------           -------------

       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                               $         27           $          52
       Cash paid for income taxes                                                      $        114           $         120
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       2
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                  June 30,            December 31,
                                                                                    2001                  2000
                                                                                (Unaudited)
                                                                             ------------------    ------------------
<S>                                                                          <C>                   <C>
ASSETS

Current Assets
       Accounts receivable                                                       $           70       $            85
       Inventory                                                                             26                    26
       Other                                                                                 62                   127
                                                                                 --------------       ---------------
            Total current assets                                                            158                   238
                                                                                 --------------       ---------------

Investments and Other Assets
       Advances receivable - affiliate                                                      475                   332
       Goodwill, net                                                                        139                   141
                                                                                 --------------       ---------------
            Total investments and other assets                                              614                   473
                                                                                 --------------       ---------------

Property, Plant and Equipment
       Cost                                                                               3,821                 3,767
       Less accumulated depreciation and amortization                                     1,162                 1,135
                                                                                 --------------       ---------------
            Net property, plant and equipment                                             2,659                 2,632
                                                                                 --------------       ---------------

Regulatory Assets and Deferred Debits                                                       173                   182
                                                                                 --------------       ---------------

       Total Assets                                                              $        3,604       $         3,525
                                                                                 ==============       ===============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       3
<PAGE>

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

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

Current Liabilities
       Accounts payable                                                      $           24        $           13
       Taxes accrued                                                                    213                   168
       Current maturities of long-term debt                                             106                   116
       Other                                                                            147                   231
                                                                            ---------------       ---------------
            Total current liabilities                                                   490                   528
                                                                            ---------------       ---------------

Long-term Debt                                                                          535                   535

Deferred Credits and Other Liabilities
       Deferred income taxes                                                            632                   626
       Other                                                                            151                   156
                                                                            ---------------       ---------------
            Total deferred credits and other liabilities                                783                   782
                                                                            ---------------       ---------------

Partners' Capital
       Partners' Capital                                                              1,801                 1,680
       Accumulated other comprehensive loss                                              (5)                    -
                                                                            ---------------       ---------------
            Total partners' capital                                                   1,796                 1,680
                                                                            ---------------       ---------------

       Total Liabilities and Partners' Capital                               $        3,604        $        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                  Six Months Ended
                                                                           June 30,                           June 30,
                                                               -----------------------------      -----------------------------
                                                                  2001               2000             2001             2000
                                                               -----------       -----------      -----------      ------------
<S>                                                            <C>               <C>              <C>              <C>
Net Income                                                     $        56       $        52      $       121      $        103

Other Comprehensive Income (Loss), Net of Tax
    Cumulative effect of change in accounting principle                  -                 -               (2)                -
    Unrealized net loss on cash flow hedges                              -                 -               (4)                -
    Reclassification adjustment into earnings                            -                 -                1                 -
                                                               -----------       -----------      -----------      ------------
         Total Other Comprehensive Loss                                  -                 -               (5)                -

                                                               -----------       -----------      -----------      ------------
Total Comprehensive Income                                     $        56       $        52      $       116      $        103
                                                               ===========       ===========      ===========      ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1. Nature of Operations

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.

Note 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 balance sheet 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. 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. If the forecasted transaction is no longer
probable, then such 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' Equity for
$1.5 million. For the six months ended June 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. 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 six months ended June 30, 2001,
amortization expense for goodwill was $2 million. 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 Obligations
Associated with the Retirement of Long-Lived Assets." 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.

Note 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.

Note 4. Related Party Transactions

Certain balances due to or from related parties included in the Consolidated
Balance Sheets at June 30, 2001 and December 31, 2000 are as follows:

---------------------------------------------------
 In millions
---------------------------------------------------
                           June 30,   December 31,
                             2001         2000
                        ---------------------------
Accounts receivable         $   7        $   6
Taxes accrued                 170          128
---------------------------------------------------

For the three and six months ended June 30, 2000, there was $13 million and $26
million respectively, of interest expense associated with notes payable to
parent that were repaid in the fourth quarter of 2000.

                                       7
<PAGE>

Note 5. Gas Imbalances

The Consolidated Balance Sheets include in-kind balances as a result of
differences in gas volumes received and delivered. At June 30, 2001 and December
31, 2000, Other Current Assets included $42 million and $101 million,
respectively, and Other Current Liabilities included $85 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.

Note 6. Derivative Instruments and Hedging Activities

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 six months ended June 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 June 30, 2001, $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. 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. On all transactions where the Company is
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.

Note 7. 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. Air Quality Control. 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 issued its decision. The court sided with the EPA on all issues except
the electric generating unit (EGU) growth rate factor determinations used to
establish each state's emission cap. Because the EPA has yet to act on the
court's remand order, a group of utilities, including Duke Energy, has filed a
motion with the court. The motion requests the court to reconsider its decision
not to vacate the EGU portion of the rule, or to suspend the May 1, 2003
compliance date until the EPA acts in accordance with the court's remand order.
It is not known at this time how the EPA will respond or if the May 1, 2003
compliance date will be changed as a result of the court's decision. Depending
on the resolution of these matters, costs to the Company may range up to $10
million for additional capital improvements.

                                       8
<PAGE>

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 operation, 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).

RESULTS OF OPERATIONS

Net income for the six months ended June 30, 2001 increased $18 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 six months of 2001 and 2000 totaled $73
million and $44 million, respectively. Projected 2001 capital expenditures,
including allowance for funds used during construction, are approximately $160
million, with market-expansion expenditures approximating 30% 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. Comprehensive risk management policies have been
established by management 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 Duke
Energy'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. Air Quality Control. 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 issued its decision. The court sided with the EPA on all issues except
the electric generating unit (EGU) growth rate factor determinations used to
establish each state's emission cap. Because the EPA has yet to act on the
court's remand order, a group of utilities, including Duke Energy, has filed a
motion with the court. The motion requests the court to reconsider its decision
not to vacate the EGU portion of the rule, or to suspend the May 1, 2003
compliance date until the EPA acts in accordance with the court's remand order.
It is not known at this time how the EPA will respond or if the May 1, 2003
compliance date will be changed as a result of the court's decision. Depending
on the resolution of these matters, costs to the Company may range up to $10
million for additional capital improvements.

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. 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 six months ended June 30, 2001,
amortization expense for goodwill was $2 million. The Company is preparing to
implement 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 Obligations
Associated with the Retirement of Long-Lived Assets." 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.

                                      11
<PAGE>

PART II. OTHER INFORMATION


Item 1. Legal Proceedings.

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

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

(a) Exhibits

         None.

(b) Reports on Form 8-K

         A Current Report on Form 8-K filed on April 17, 2001 contained
         disclosures under Item 5, Other Events.

         A Current Report on Form 8-K filed on May 22, 2001 contained
         disclosures under Item 5, Other Events and Item 7, Financial Statements
         and Exhibits.

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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



August 10, 2001        /s/ Dorothy M. Ables
                       ------------------------------------------------------
                       Dorothy M. Ables
                       Senior Vice President, Finance and Administration and
                       Chief Financial Officer

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