**UNITED STATES SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-Q**

**xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

**For the quarterly period**ended September 30, 2006

**or**

**oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934**

**Forthe Transition period from                   to                   **

**Commission FileNumber:  000-26091**

**TC PipeLines, LP**

**(Exactname of registrant as specified in its charter)**

| **Delaware**                                   | ** ** | **52-2135448**                           |
|------------------------------------------------|------------|------------------------------------------|
| (State or other  jurisdiction of incorporation |       | (I.R.S. Employer  Identification Number) |
| or organization)                               |       | ** **                               |
|                                           |       | ** **                               |
| **110  Turnpike Road, Suite 203**              | ** ** | ** **                               |
| **Westborough,  Massachusetts**                | ** ** | **01581**                                |
| (Address of  principal executive offices)      |       | (Zip code)                               |

 

**508-871-7046**

(Registrant’stelephone number, including area code)

**Indicateby check mark if the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.**

**Yes**x                    No o

**Indicateby check mark whether the registrant is a large accelerated filer, an acceleratedfiler, or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerate filer” in Rule 12b-2 ofthe Exchange Act.**
| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o |
|---------------------------|---------------------|-------------------------|

 

**Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).**

**Yes**o                    No x

**As ofNovember 3, 2006, there were 17,500,000 of the registrant’s common unitsoutstanding.**

 

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**TCPIPELINES, LP**

**TABLEOF CONTENTS**
| **PART I**   | **FINANCIAL  INFORMATION**                                                                        |   |
|--------------|---------------------------------------------------------------------------------------------------|--------|
| ** **   | ** **                                                                                        |   |
| Item  1.     | Financial  Statements                                                                             |   |
|         |                                                                                              |   |
|         | Statement  of Income – Three and nine months ended September 30, 2006 and 2005               |   |
|         | Statement of Comprehensive Income – Three and nine  months ended September 30, 2006 and 2005 |   |
|         | Balance  Sheet – September 30, 2006 and December 31, 2005                                    |   |
|         | Statement  of Cash Flows – Nine months ended September 30, 2006 and 2005                     |   |
|         | Statement of Changes in Partners’ Equity – Nine months  ended September 30, 2006        |   |
|         | Notes  to Financial Statements                                                                    |   |
|         |                                                                                              |   |
| Item 2.      | Management’s Discussion and Analysis of Financial  Condition and Results of Operations       |   |
|         |                                                                                              |   |
|         | Results of  Operations of TC PipeLines, LP                                                        |   |
|         | Liquidity  and Capital Resources of TC PipeLines, LP                                              |   |
|         | Results of Operations of Northern Border Pipeline  Company                                        |   |
|         | Liquidity and Capital Resources of Northern Border  Pipeline Company                              |   |
|         | Results of Operations of Tuscarora Gas Transmission  Company                                      |   |
|         | Liquidity  and Capital Resources of Tuscarora Gas Transmission Company                            |   |
|         |                                                                                              |   |
| Item 3.      | Quantitative and Qualitative Disclosures About Market  Risk                                       |   |
|         |                                                                                              |   |
| Item 4.      | Controls and Procedures                                                                           |   |
|         |                                                                                              |   |
| **PART  II** | **OTHER  INFORMATION**                                                                            |   |
| ** **   | ** **                                                                                        |   |
| Item  1A.    | Risk  Factors                                                                                     |   |
|         |                                                                                              |   |
| Item  5.     | Other  Information                                                                                |   |
|         |                                                                                              |   |
| Item 6.      | Exhibits                                                                                          |   |

 

**Allamounts are stated in United States dollars unless otherwise indicated.**

----

 

**PARTI.  FINANCIAL INFORMATION**

**ITEM1.  FINANCIAL STATEMENTS**

** **

**TC PipeLines, LP**

 

**Statement of Income**
| **(unaudited)**                                                                 | ** ** | **Three months ended  September 30** | ** ** | **Nine months ended  September 30** | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| **(millions of dollars except per unit amounts)** | ** ** | **2006**                                            | ** ** | **2005**                                           | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                      | ** ** | ** **                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Equity income from  investment in Northern Border Pipeline                      | ** ** | **16.6**                                            |       | 13.9                                               | ** ** | **40.1** |   | 34.7 |   |
| Equity income from  investment in Tuscarora                                     | ** ** | **1.3**                                             |       | 1.7                                                | ** ** | **4.9** |   | 5.5 |   |
| General and  administrative expenses                                            | ** ** | **(0.5**                                            | **)**      | (0.5                                               | )          | **(1.8** | **)** | (1.5 | ) |
| Financial charges and  other                                                    | ** ** | **(5.4**                                            | **)**      | (0.3                                               | )          | **(9.8** | **)** | (0.8 | ) |
| **Net income**                                                                  | ** ** | **12.0**                                            |       | 14.8                                               | ** ** | **33.4** |   | 37.9 |   |
|                                                                            |       |                                                |       |                                               |       |   |   |   |   |
| **Net income allocation**                                                       | ** ** | ** **                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Common units                                                                    | ** ** | **11.3**                                            |       | 14.1                                               | ** ** | **31.3** |   | 35.8 |   |
| General partner                                                                 | ** ** | **0.7**                                             |       | 0.7                                                | ** ** | **2.1** |   | 2.1 |   |
|                                                                            | ** ** | **12.0**                                            |       | 14.8                                               | ** ** | **33.4** |   | 37.9 |   |
| **Net income per common unit**                                                  | ** ** | **$**                                               | **0.65**   |                                               | $          | 0.81 | ** ** | **$** | **1.79** |   | $ | 2.05 |   |
| **Units outstanding (millions)**                                                | ** ** | **17.5**                                            |       | 17.5                                               | ** ** | **17.5** |   | 17.5 |   |
|                                                                                 |            |                                                     |            |                                                    |            |  |  |  |  |  |  |  |  |

 

**Statement of ComprehensiveIncome**
| **(unaudited)**                                                          | ** ** | **Three months ended  September 30** | ** ** | **Nine months ended  September 30** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| **(millions of dollars)**                                      | ** ** | **2006**                                            | ** ** | **2005**                                           | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                               | ** ** | ** **                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income                                                               | ** ** | **12.0**                                            |       | 14.8                                               | ** ** | **33.4** |   | 37.9 |   |
| Other comprehensive  income                                              |       |                                                |       |                                               |       |   |   |   |   |
| Change  associated with current period hedging transactions of investees |       | **(0.2**                                            | **)**      | (0.1                                               | )          | **(0.5** | **)** | (0.3 | ) |
| **Total comprehensive income**                                           | ** ** | **11.8**                                            |       | 14.7                                               | ** ** | **32.9** |   | 37.6 |   |

 

See accompanying notes to the financialstatements.

3

----

 

**Balance Sheet**
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(millions of dollars)**        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current assets                             |       |                   |       |                  |       |
| Cash and short-term investments            | ** ** | **7.0**                |       | 2.3                   |       |
| Investment in  Northern Border Pipeline    | ** ** | **569.1**              |       | 274.5                 |       |
| Investment in  Tuscarora                   | ** ** | **37.6**               |       | 38.9                  |       |
| Other assets                               | ** ** | **0.7**                |       | —                |       |
|                                       | ** ** | **614.4**              |       | 315.7                 |       |
| **Liabilities  and Partners’ Equity** | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current  liabilities                       |       |                   |       |                  |       |
| Accrued liabilities                        | ** ** | **5.1**                |       | 0.6                   |       |
| Current portion of long-term debt          | ** ** | **—**             |       | 13.5                  |       |
|                                       | ** ** | **5.1**                |       | 14.1                  |       |
|                                       | ** ** | ** **             |       |                  |       |
| Long-term debt                             | ** ** | **307.0**              |       | —                |       |
|                                       | ** ** | ** **             |       |                  |       |
| Partners’ equity                      |       |                   |       |                  |       |
| Common units                               | ** ** | **295.6**              |       | 294.4                 |       |
| General partner                            | ** ** | **6.5**                |       | 6.5                   |       |
| Accumulated other comprehensive income     | ** ** | **0.2**                |       | 0.7                   |       |
|                                       | ** ** | **302.3**              |       | 301.6                 |       |
|                                       | ** ** | **614.4**              |       | 315.7                 |       |

 

Subsequent events(Note 8)

 

See accompanying notes to the financial statements.

4

----

 

**Statement of Cash Flows**

 
| ** **                                                  | ** ** | **Nine months ended** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                                             | ** ** | **September 30**           | ** ** |
| **(millions of dollars)**                         | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| **Cash  Generated From Operations**                         |       |                            |       |   |   |
| Net income                                                  | ** ** | **33.4**                        |       | 37.9 |   |
| Add:                                                        |       |                            |       |   |   |
| Equity income  greater than distributions received          | ** ** | **—**                      |       | (2.0 | ) |
| Decrease in  operating working capital                      | ** ** | **4.5**                         |       | 0.1 |   |
| Amortization of  other assets                               | ** ** | **0.2**                         |       | — |   |
|                                                        | ** ** | **38.1**                        |       | 36.0 |   |
| **Investing  Activities**                                   |       |                            |       |   |   |
| Return of  capital from Northern Border Pipeline            | ** ** | **16.0**                        |       | 11.1 |   |
| Return of  capital from Tuscarora                           | ** ** | **1.3**                         |       | 0.8 |   |
| Investment in  Northern Border Pipeline                     | ** ** | **(311.1**                      | **)**      | — |   |
| Investment in  Tuscarora                                    | ** ** | **—**                      |       | (0.3 | ) |
| Other assets                                                | ** ** | **(0.9**                        | **)**      | — |   |
|                                                        | ** ** | **(294.7**                      | **)**      | 11.6 |   |
| **Financing  Activities**                                   |       |                            |       |   |   |
| Distributions  paid                                         | ** ** | **(32.2**                       | **)**      | (32.2 | ) |
| Long-term debt  issued                                      | ** ** | **310.0**                       |       | — |   |
| Long-term debt  repaid                                      | ** ** | **(16.5**                       | **)**      | (16.5 | ) |
|                                                        | ** ** | **261.3**                       |       | (48.7 | ) |
|                                                        |       |                            |       |   |   |
| **Increase/(decrease)  in cash and short-term investments** | ** ** | **4.7**                         |       | (1.1 | ) |
| **Cash  and short-term investments, beginning of period**   | ** ** | **2.3**                         |       | 2.5 |   |
| **Cash  and short-term investments, end of period**         | ** ** | **7.0**                         |       | 1.4 |   |
|                                                        |       |                            |       |   |   |
| Interest payments made                                      | ** ** | **5.3**                         |       | 0.9 |   |

 

**Statement of Changes inPartners’ Equity**
| ** **                                       | ** ** | ** **            | ** ** | ** **           | ** ** | ** **           | ** ** | **Accumulated**                | ** ** | ** **         | ** ** | ** **           | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|----------------------|------------|----------------------|------------|--------------------------------|------------|--------------------|------------|----------------------|------------|
| ** **                                       | ** ** | ** **            | ** ** | ** **           | ** ** | ** **           | ** ** | **Other**                      | ** ** | ** **         | ** ** | ** **           | ** ** |
| ** **                                       | ** ** | ** **            | ** ** | ** **           | ** ** | **General**          | ** ** | **Comprehensive**              | ** ** | ** **         | ** ** | ** **           | ** ** |
| **(unaudited)**                                  | ** ** | **Common Units** | ** ** | **Partner**          | ** ** | **Income**           | ** ** | **Partners’ Equity** | ** ** |
| ** **                                       | ** ** | **(millions**         | ** ** | **(millions**        | ** ** | **(millions**        | ** ** | **(millions**                  | ** ** | **(millions**      | ** ** | **(millions**        | ** ** |
| ** **                                       | ** ** | **of units)**    | ** ** | **of dollars)** | ** ** | **of dollars)** | ** ** | **of dollars)**           | ** ** | **of units)** | ** ** | **of dollars)** | ** ** |
|                                             |       |                  |       |                 |       |                 |       |                           |       |               |       |                 |       |
| Partners’ equity  at December 31, 2005      |       | 17.5                  |       | 294.4                |       | 6.5                  |       | 0.7                            |       | 17.5               |       | 301.6                |       |
| Net income                                       |       | —                |       | 31.3                 |       | 2.1                  |       | —                         |       | —             |       | 33.4                 |       |
| Distributions  paid                              |       | —                |       | (30.2                | )          | (2.0                 | )          | —                         |       | —             |       | (32.2                | )          |
| Other  comprehensive income                      |       | —                |       | —               |       | —               |       | (0.5                           | )          | —             |       | (0.5                 | )          |
| **Partners’ equity at September  30, 2006** | ** ** | **17.5**              | ** ** | **295.5**            | ** ** | **6.6**              | ** ** | **0.2**                        | ** ** | **17.5**           | ** ** | **302.3**            | ** ** |

 

See accompanying notes tothe financial statements.

5

----

 

** **

**Notes to Financial Statements**

**(unaudited)**

**Note 1    Basis of Presentation**

TC PipeLines, LP, and itssubsidiary limited partnerships, TC PipeLines Intermediate Limited Partnershipand TC Tuscarora Intermediate Limited Partnership, all Delaware limitedpartnerships, are collectively referred to herein as TC PipeLines or thePartnership.  TC PipeLines was formed byTransCanada PipeLines Limited, a subsidiary of TransCanada Corporation(collectively referred to herein as TransCanada), to acquire, own andparticipate in the management of United States (U.S.) - based pipeline assets.  The Partnership commenced operations on May28, 1999.

Thefinancial statements have been prepared by management in accordance with U.S.generally accepted accounting principles (U.S. GAAP).  Amounts are stated in U.S. dollars.  Since a determination of many assets,liabilities, revenues and expenses is dependent upon future events, thepreparation of these financial statements requires the use of estimates andassumptions which have been made using careful judgment.  In the opinion of management, these financialstatements have been properly prepared within reasonable limits of materialityand include all adjustments (consisting of normal recurring accruals) necessaryto present fairly the results of operations for the three and nine months endedSeptember 30, 2006 and 2005, the financial position as at September 30, 2006and December 31, 2005, cash flows for the nine months ended September 30, 2006and 2005, and statement of partners’ equity at September 30, 2006.

Theresults of operations for the three and nine months ended September 30, 2006and 2005 are not necessarily indicative of the results that may be expected fora full fiscal year.  The interimfinancial statements should be read in conjunction with the Partnership’sfinancial statements and notes included in TC PipeLines’ annual report on Form10-K for the year ended December 31, 2005.

##### **Note2    Investment in Northern BorderPipeline Company**

The Partnership owns a 50per cent general partner interest in Northern Border Pipeline Company (NorthernBorder Pipeline), a Texas general partnership which owns a 1,249-mile U.S.interstate pipeline system that transports natural gas from the U.S. - Canadianborder near Port of Morgan, Montana to a terminus near North Hayden, Indiana.  Northern Border Pipeline’s system connectswith multiple pipelines providing shippers access to the various natural gasmarkets served by those pipelines.  Theother 50 per cent partnership interest in Northern Border Pipeline is held byONEOK Partners, LP (ONEOK), a publicly traded limited partnership.  The Northern Border Pipeline system isoperated by ONEOK Partners GP, LLC (ONEOK Partners GP), a wholly ownedsubsidiary of ONEOK.  Northern Border Pipelineis regulated by the Federal Energy Regulatory Commission (FERC).

On April 6, 2006,the Partnership acquired an additional 20 per cent general partnership interestin Northern Border Pipeline.  ThePartnership uses the equity method of accounting for its investment in NorthernBorder Pipeline.  TC PipeLines’ equityincome for the three and nine months ended September 30, 2006 includes 30 percent of the net income of Northern Border Pipeline up to April 6, 2006 and 50per cent thereafter.

**The following tables set out summarized financialinformation of Northern Border Pipeline:**

**Northern Border Pipeline Income Statement**

 
| ** **                          | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                     | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                            | ** ** | **80.3**                         |       | 89.0                            | ** ** | **231.5** |   | 241.6 |   |
| Costs and  expenses                 | ** ** | **(22.0**                        | **)**      | (18.7                           | )          | **(60.1** | **)** | (52.8 | ) |
| Depreciation                        | ** ** | **(14.6**                        | **)**      | (14.5                           | )          | **(44.0** | **)** | (43.2 | ) |
| Financial  charges                  | ** ** | **(10.8**                        | **)**      | (10.7                           | )          | **(32.5** | **)** | (31.9 | ) |
| Other income                        | ** ** | **0.8**                          |       | 1.1                             | ** ** | **1.5** |   | 1.9 |   |
| Net income                          | ** ** | **33.7**                         |       | 46.2                            | ** ** | **96.4** |   | 115.6 |   |

 

6

----

 

**Northern Border Pipeline Balance Sheet**
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(millions of dollars)**        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                 |       |                   |       |                  |       |
| Cash and cash  equivalents                 | ** ** | **20.0**               |       | 22.0                  |       |
| Other current  assets                      | ** ** | **37.8**               |       | 45.7                  |       |
| Plant, property  and equipment, net        | ** ** | **1,489.0**            |       | 1,516.1               |       |
| Other assets                               | ** ** | **22.6**               |       | 20.9                  |       |
|                                       | ** ** | **1,569.4**            |       | 1,604.7               |       |
| **Liabilities  and Partners’ Equity** |       |                   |       |                  |       |
| Current  liabilities                       | ** ** | **223.0**              |       | 56.0                  |       |
| Reserves and  deferred credits             | ** ** | **5.4**                |       | 4.8                   |       |
| Long-term debt                             | ** ** | **450.5**              |       | 628.9                 |       |
| Partners’ equity                      |       |                   |       |                  |       |
| Partners’ capital                     | ** ** | **889.4**              |       | 912.7                 |       |
| Accumulated other comprehensive income     | ** ** | **1.1**                |       | 2.3                   |       |
|                                       | ** ** | **1,569.4**            |       | 1,604.7               |       |

 

The accumulated other comprehensive income amount relates toterminated interest rate swap agreements for cash flow hedges.

##### **Note3    Investment in Tuscarora GasTransmission Company**

The Partnership owns a 49per cent general partner interest in Tuscarora Gas Transmission Company(Tuscarora), a Nevada general partnership, which owns a 240-mile U.S.interstate pipeline system that originates at an interconnection point withfacilities of Gas Transmission Northwest Corporation, a wholly-owned subsidiaryof TransCanada, near Malin, Oregon and runs southeast through northeasternCalifornia and northwestern Nevada.  Theremaining general partner interests in Tuscarora are held 50 per cent by SierraPacific Resources and 1 per cent by TransCanada.  The Tuscarora pipeline system is operated bya wholly owned subsidiary of Sierra Pacific Resources.  Tuscarora’s largest shipper, accounting forapproximately 69 per cent of total available capacity through 2017, is also awholly-owned subsidiary of Sierra Pacific Resources.

As aresult of the purchase price allocation performed when the interest inTuscarora was acquired, an annual amortization of $0.4 million has beenincluded in the Partnership’s equity income from Tuscarora.  Tuscarora is regulated by the FERC.

The Partnershipuses the equity method of accounting for its investment in Tuscarora.  TC PipeLines’ equity income for the three andnine months ended September 30, 2006 and 2005 includes 49 per cent of the netincome of Tuscarora for the same periods.

The followingtables set out summarized financial information of Tuscarora:

**Tuscarora Income Statement**
| ** **                          | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                     | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                            | ** ** | **6.7**                          |       | 7.8                             | ** ** | **22.6** |   | 24.1 |   |
| Costs and  expenses                 | ** ** | **(1.0**                         | **)**      | (1.0                            | )          | **(3.4** | **)** | (3.2 | ) |
| Depreciation                        | ** ** | **(1.6**                         | **)**      | (1.5                            | )          | **(4.7** | **)** | (4.6 | ) |
| Financial  charges                  | ** ** | **(1.3**                         | **)**      | (1.5                            | )          | **(4.1** | **)** | (4.4 | ) |
| Other income                        | ** ** | **0.1**                          |       | —                          | ** ** | **0.2** |   | 0.1 |   |
| Net income                          | ** ** | **2.9**                          |       | 3.8                             | ** ** | **10.6** |   | 12.0 |   |

 

7

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**Tuscarora Balance Sheet**

 
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(millions of dollars)**        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                 |       |                   |       |                  |       |
| Cash and cash  equivalents                 | ** ** | **5.5**                |       | 3.8                   |       |
| Other current  assets                      | ** ** | **2.4**                |       | 3.0                   |       |
| Plant, property  and equipment, net        | ** ** | **127.2**              |       | 131.6                 |       |
| Other assets                               | ** ** | **1.4**                |       | 1.4                   |       |
|                                       | ** ** | **136.5**              |       | 139.8                 |       |
| **Liabilities  and Partners’ Equity** |       |                   |       |                  |       |
| Current  liabilities                       | ** ** | **8.0**                |       | 6.8                   |       |
| Long-term debt                             | ** ** | **68.7**               |       | 71.1                  |       |
| Partners’ equity                      |       |                   |       |                  |       |
| Partners’ capital                     | ** ** | **59.7**               |       | 61.8                  |       |
| Accumulated other comprehensive income     | ** ** | **0.1**                |       | 0.1                   |       |
|                                       | ** ** | **136.5**              |       | 139.8                 |       |

 

##### **Note4    Credit Facilities and Long-Term Debt**

On February 28, 2006, thePartnership renewed a $20 million unsecured credit facility (Revolving CreditFacility).  Loans under the RevolvingCredit Facility may bear interest, at the option of the Partnership, at a one-,two-, three-, or six-month LIBOR plus 0.75 per cent or 1.00 per cent if totaldebt is greater than or equal to 15 per cent of capitalization, or at afloating rate based on the higher of the federal funds effective rate plus 0.5per cent and the prime rate.  TheRevolving Credit Facility matures in February 2007.  Borrowings on the facility are limited tomaximum leverage rates specified in the agreement.  The Partnership had nil and $13.5 millionoutstanding under the Revolving Credit Facility at September 30, 2006 and December31, 2005, respectively.  The interestrate on the Revolving Credit Facility averaged 5.60 per cent and 4.22 per centfor the nine months ended September 30, 2006 and 2005, respectively.

On March 31, 2006, the Partnership entered into an unsecured creditagreement for a $310 million credit facility (Bridge Loan Credit Facility) witha banking syndicate.  Borrowings underthe Bridge Loan Credit Facility bear interest, at the option of thePartnership, at the LIBOR or the base rate plus an applicable margin.  The Bridge Loan Credit Facility matures on March 31, 2008, atwhich time all amounts outstanding will be due and payable.  Borrowingsunder the facility are limited to maximum leverage rates specified in theagreement.  On April 5, 2006, thePartnership borrowed $307 million under the Bridge Loan Credit Facility tofinance the purchase price and a $10 million transaction fee payable inconnection with the acquisition of an additional 20 per cent generalpartnership interest in Northern Border Pipeline.  The remaining $3 million commitment under theBridge Loan Credit Facility was terminated. The interest rate on theBridge Loan Credit Facility averaged 6.26 per cent to September 30, 2006 andthe interest rate was 6.45 per cent as at September 30, 2006.

8

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**Note 5    Net Income per Common Unit**

Net income per commonunit is computed by dividing net income, after deduction of the general partner’sallocation, by the weighted average number of common units outstanding.  The general partner’s allocation is equal toan amount based upon the general partner’s two per cent interest, adjusted toreflect an amount equal to incentive distributions.  Net income per unit was determined asfollows:
| ** **                                                                      | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                                                                 | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars except per unit amounts)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                                                      | ** ** | **12.0**                         |       | 14.8                            | ** ** | **33.4** |   | 37.9 |   |
| Net income  allocated to general partner                                        |       |                             |       |                            |       |   |   |   |   |
| General partner interest                                                        | ** ** | **(0.3**                         | **)**      | (0.3                            | )          | **(0.7** | **)** | (0.7 | ) |
| Incentive distribution income allocation                                        | ** ** | **(0.4**                         | **)**      | (0.4                            | )          | **(1.4** | **)** | (1.4 | ) |
|                                                                            | ** ** | **(0.7**                         | **)**      | (0.7                            | )          | **(2.1** | **)** | (2.1 | ) |
| Net income  allocable to common units                                           | ** ** | **11.3**                         |       | 14.1                            | ** ** | **31.3** |   | 35.8 |   |
| Weighted average  units outstanding (millions)                                  | ** ** | **17.5**                         |       | 17.5                            | ** ** | **17.5** |   | 17.5 |   |
| Net income per common  unit                                                     | ** ** | **$**                            | **0.65**   |                            | $          | 0.81 | ** ** | **$** | **1.79** |   | $ | 2.05 |   |
|                                                                                 |            |                                  |            |                                 |            |  |  |  |  |  |  |  |  |

 

**Note 6    Capital Requirements**

The Partnershipcontributed $3.1 million in the first quarter of 2006, representing its then 30per cent share of a $10.3 million cash call issued by Northern BorderPipeline.  The funds were used byNorthern Border Pipeline to fund an expansion project.  The payment to Northern Border Pipeline wasfunded through cash from operations.

**Note 7    Acquisition**

On April 6, 2006, thePartnership acquired an additional 20 per cent general partnership interest inNorthern Border Pipeline for approximately $297 million plus a $10 milliontransaction fee payable to a subsidiary of TransCanada, bringing thepartnership’s total interest to 50 per cent. Through the acquisition TC PipeLines indirectly assumed approximately$120 million of debt of Northern Border Pipeline.  The Partnership funded the transactionthrough the Bridge Loan Credit Facility and intends to refinance the loan witha combination of equity and debt.  Inconnection with this transaction, a subsidiary of TransCanada will become theoperator of Northern Border Pipeline in April 2007.

The acquisitionwas accounted for using the purchase method of accounting.  The purchase price was allocated using anestimate of fair value of the net assets at the date of acquisition.  The difference between the purchase price andthe fair value was recorded as part of the Partnership’s investment in NorthernBorder Pipeline.  The $10 milliontransaction fee payable to a subsidiary of TransCanada, who will become theoperator of Northern Border Pipeline in April 2007, has been recorded as partof the Partnership’s investment in Northern Border Pipeline and is beingamortized over the term of the related operating agreement.

The following proforma statements of income for the three months and nine months ended September30, 2006 and 2005 have been prepared as if the acquisition occurred at thebeginning of the respective periods:

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| ** **                                                                      | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                                                                 | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars except per unit amounts)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                            |       |                             |       |                            |       |   |   |   |   |
| Equity income  from investment in Northern Border Pipeline                      | ** ** | **16.6**                         |       | 23.1                            | ** ** | **47.6** |   | 57.8 |   |
| Equity income  from investment in Tuscarora                                     | ** ** | **1.3**                          |       | 1.7                             | ** ** | **4.9** |   | 5.5 |   |
| General and  administrative expenses                                            | ** ** | **(0.5**                         | **)**      | (0.5                            | )          | **(1.8** | **)** | (1.5 | ) |
| Financial  charges and other                                                    | ** ** | **(5.0**                         | **)**      | (5.0                            | )          | **(14.9** | **)** | (15.3 | ) |
| **Net  income**                                                                 | ** ** | **12.4**                         |       | 19.3                            | ** ** | **35.8** |   | 46.5 |   |
|                                                                            |       |                             |       |                            |       |   |   |   |   |
| **Net  income allocation**                                                      |       |                             |       |                            |       |   |   |   |   |
| Common units                                                                    | ** ** | **11.7**                         |       | 18.5                            | ** ** | **33.7** |   | 44.2 |   |
| General partner                                                                 | ** ** | **0.7**                          |       | 0.8                             | ** ** | **2.1** |   | 2.3 |   |
|                                                                            | ** ** | **12.4**                         |       | 19.3                            | ** ** | **35.8** |   | 46.5 |   |
|                                                                            | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| **Net  income per common unit**                                                 | ** ** | **$**                            | **0.67**   |                            | $          | 1.06 | ** ** | **$** | **1.93** |   | $ | 2.53 |   |
| ** **                                                                      | ** ** | ** **                       |       |                            | ** ** | ** ** |   |   |   |
| **Units outstanding (millions)**                                                | ** ** | **17.5**                         |       | 17.5                            | ** ** | **17.5** |   | 17.5 |   |
|                                                                                 |            |                                  |            |                                 |            |  |  |  |  |  |  |  |  |

 

**Note 8    Subsequent Events**

On November 2, 2006, TCPipeLines announced it has signed agreements to purchase an additional 50 percent general partnership interest in Tuscarora for $100 million.  The Partnership will also indirectly assumeapproximately $37 million of Tuscarora debt. Upon completion of the transaction, TC PipeLines will own or control 99per cent of Tuscarora.  The Partnershipwill account for its interest in Tuscarora using the consolidation method.  In connection with this transaction,TransCanada will become the operator of Tuscarora, which is currently operatedby an affiliate of Sierra Pacific Resources. The Partnership intends to fund the transaction with a combination ofbank debt and equity.  The transaction isexpected to close by the end of 2006, subject to regulatory approvals.

Northern Border Pipelinedeclared and paid a distribution of approximately $48.8 million on November 1,2006.  The Partnership received its 50per cent share ($24.4 million) on November 1, 2006.

Tuscarora declared adistribution of approximately $3.1 million on October 12, 2006.  The Partnership received its 49 per centshare ($1.5 million) on October 31, 2006.

On October 20, 2006, thePartnership announced its third quarter cash distribution in the amount of$0.60 per unit, payable on November 14, 2006, to unitholders of record onOctober 31, 2006.  The cash distributionrepresents a quarterly increase of $0.025 per unit, or an annual cashdistribution increase of $0.10 per unit, to an indicated annual cashdistribution of $2.40 per unit.

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OFOPERATIONS**

**TCPipeLines, LP**

**Cautionary Statement RegardingForward-Looking Information**

# A number of statements made by TC PipeLines in thisquarterly report are forward-looking and relate to, among other things,anticipated financial performance, business prospects, strategies, marketforces and commitments of TC PipeLines. All forward-looking statements are based on the Partnership’s beliefs aswell as assumptions made by and information currently available to thePartnership.  The Partnership assumes noobligation to update any such forward-looking statements to reflect events orcircumstances as occurring after the date hereof.  Words such as “anticipate”, “believe”, “estimate”,“expect”, “plan”, “intend”, “forecast”, and similar expressions, identifyforward-looking statements.  Readers arecautioned not to place undue reliance on this forward-looking information,which is as of the date of this Form 10-Q. These statements reflect the Partnership’s current views with respect tofuture events and are subject to various risks, uncertainties and assumptionsincluding:

·                                          the Partnership’s50 per cent general partner interest in Northern Border Pipeline and 49 percent general partner interest in Tuscarora represent its only materialassets.  As a result, the Partnership isdependent upon Northern Border Pipeline and Tuscarora for all of its availablecash;

·                                          operation ofNorthern Border Pipeline by affiliates of ONEOK and any further developments inEnron’s filing of bankruptcy protection;

·                                          regulatorydecisions, particularly those of the FERC;

·                                          orders by theFERC in Northern Border Pipeline’s November 2005 rate case which aresignificantly different than its filed stipulation and agreement;

·                                          the ability ofNorthern Border Pipeline to recontract its capacity and the transportation ratesat which that capacity is contracted;

·                                          developments inpending FERC proceedings that impact the ability of Northern Border Pipelineand Tuscarora to recover income taxes in their rates;

·                                          the failure ofa shipper on either one of the pipelines in which the Partnership has aninterest to perform its contractual obligations;

·                                          the ability ofaffiliates of Sierra Pacific Resources to continue to meet their contractualobligations to Tuscarora;

·                                          theavailability of and demand for Western Canadian natural gas for import into theU.S.;

·                                          the amount ofstorage capacity in Western Canada and overall strong demand for storageinjection; and

·                                          prevailingeconomic conditions, particularly conditions of the capital and equity markets;

# and other risks are discussed in the Partnership’sfilings with the Securities and Exchange Commission (SEC), including under Item1A, “Risk Factors,” in the Partnership’s annual report on Form 10-K for theyear ended December 31, 2005 and the quarterly reports on Form 10-Q for thequarters ended March 31 and June 30, 2006. By its nature, such forward-looking information is subject to variousrisks and uncertainties, which could cause TC PipeLines’ actual results andexperience to differ materially from the anticipated results or otherexpectations expressed in this quarterly report.

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# **Resultsof Operations of TC PipeLines, LP**

*Asa result of the Partnership’s ownership interests in both Northern BorderPipeline and Tuscarora, the following discusses the results of operations andliquidity and capital resources of TC PipeLines, then those of each of NorthernBorder Pipeline and Tuscarora.*

The following discussions of the financial condition and results ofoperations of the Partnership, Northern Border Pipeline and Tuscarora should beread in conjunction with the financial statements and notes thereto of thePartnership included elsewhere in this report (see Item 1. Financial Statements).

***Overview***

TC PipeLines, LP wasformed in 1998 as a Delaware limited partnership to acquire, own andparticipate in the management of U.S.-based pipeline assets.  TC PipeLines, LP and its subsidiary limitedpartnerships, TC PipeLines Intermediate Limited Partnership and TC TuscaroraIntermediate Limited Partnership, are collectively referred to herein as “TCPipeLines” or “the Partnership.”  TCPipeLines GP, Inc., an indirect wholly owned subsidiary of TransCanada, is thegeneral partner of the Partnership.  At September30, 2006, the Partnership owned a 50 per cent general partner interest inNorthern Border Pipeline and a 49 per cent general partner interest inTuscarora.

***SignificantDevelopments in 2006***

On April 6, 2006, TCPipeLines acquired an additional 20 per cent general partnership interest inNorthern Border Pipeline for approximately $297 million, plus a $10 milliontransaction fee payable to a subsidiary of TransCanada.  Through the acquisition, TC PipeLines hasalso indirectly assumed approximately $120 million of debt of Northern BorderPipeline.  TC PipeLines now owns a 50 percent interest in Northern Border Pipeline. TC PipeLines continues to account for its interest in Northern BorderPipeline using the equity method of accounting. The Partnership funded the acquisition with a $307 million bridge loan creditfacility.  The Partnership intends torefinance this loan with a combination of equity and debt.

In connection with this transaction, in April 2007 asubsidiary of TransCanada will become operator of Northern Border Pipeline,which is currently operated by ONEOK Partners GP.

In September 2006,Northern Border Pipeline filed a stipulation and agreement which documents thesettlement in its pending rate case. The settlement was reached betweenNorthern Border Pipeline and its participant customers and is supported by theFERC trial staff.  The uncontestedsettlement was certified on October 20, 2006 by the administrative law judgeand provided to the FERC for approval. The approval process is expected to becompleted by late 2006.

Northern BorderPipeline’s new rates based on its November 1, 2005 rate case filing wereeffective May 1, 2006, and were collected subject to refund through September30, 2006.  Based on the settlement of therate case, rates in effect prior to the rate case filing will be collected forthe months of October to December 2006, and will not result in collectingadditional amounts subject to refund. Northern Border Pipeline expects to refund the $10.6 million estimatedliability included on its balance sheet at September 30, 2006, plus interestaccrued through the date the refunds are paid.

On November 2,2006, TC PipeLines announced it has signed agreements to purchase an additional50 per cent general partnership interest in Tuscarora for $100 million.  The Partnership will also indirectly assumeapproximately $37 million of Tuscarora debt. Upon completion of the transaction, TC PipeLines will own or control 99per cent of Tuscarora.  The Partnershipwill account for its interest in Tuscarora using the consolidation method.  In connection with this transaction,TransCanada will become the operator of Tuscarora, which is currently operatedby an affiliate of Sierra Pacific Resources. The Partnership intends to fund the transaction with a combination ofbank debt and equity.  The transaction isexpected to close by the end of 2006, subject to regulatory approvals.

***Investment in Northern Border Pipeline Company***

Northern BorderPipeline owns a 1,249-mile U.S. interstate pipeline system that transportsnatural gas from the U.S. – Canadian border near Port of Morgan, Montana to aterminus near North Hayden, Indiana for its customers.  Northern Border Pipeline’s system connectswith multiple pipelines providing shippers access to the various natural gasmarkets served by those pipelines.  ThePartnership owns a 50 per cent general partner interest in Northern BorderPipeline.

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Theremaining 50 per cent general partner interest in Northern Border Pipeline isheld by ONEOK Partners, LP, a publicly traded limited partnership.  The management committee of Northern BorderPipeline consists of four members.  TCPipeLines and ONEOK Partners, LP each designate two members of the managementcommittee and each have 50 per cent of the voting power of the managementcommittee.

#### ***Investment in Tuscarora GasTransmission Company***

Tuscarora owns a 240-mile U.S. interstate pipeline system that originatesat an interconnection point with facilities of GTN, a wholly-owned subsidiaryof TransCanada, near Malin, Oregon and runs southeast through northeasternCalifornia and northwestern Nevada.

The Partnership owns a 49 per cent general partnerinterest in Tuscarora.  The remaininggeneral partner interest in Tuscarora is held 50 per cent by Tuscarora GasPipeline Co., a wholly-owned subsidiary of Sierra Pacific Resources and one percent by TCPL Tuscarora Ltd., an indirect wholly-owned subsidiary ofTransCanada.

***CriticalAccounting Policy***

TC PipeLinesaccounts for its interests in both Northern Border Pipeline and Tuscarora usingthe equity method of accounting as detailed in notes 2 and 3 to the financialstatements.  The equity method ofaccounting is appropriate where the investor does not control an investee, butrather is able to exercise significant influence over the operating andfinancial policies of an investee.  TCPipeLines is able to exercise significant influence over its investments inNorthern Border Pipeline and Tuscarora because of its representation on theirmanagement committees.

The 50per cent general partner interest in Northern Border Pipeline and 49 per centgeneral partner interest in Tuscarora are currently the Partnership’s onlymaterial sources of income.  ThePartnership’s results of operations are affected by and reflect the samefactors that affect the operating results of Northern Border Pipeline andTuscarora.

Therehas been no change to the Partnership’s critical accounting policies during thenine months ended September 30, 2006.

***RecentAccounting Pronouncements***

In September 2006, theFASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), whichestablishes a framework for measuring fair value and requires additionaldisclosures about fair value measurements. SFAS No. 157 is effective for TC PipeLines’ fiscal year beginningJanuary 1, 2008.  The Partnership iscurrently reviewing the applicability of SFAS No. 157 to its results ofoperations and financial position.

In September 2006,the SEC staff issued SAB Topic 1N, “Financial Statements – Considering theEffects of Prior Year Misstatements When Quantifying Misstatements in CurrentYear Financial Statements” (SAB No. 108), which addresses how to quantify theeffect of an error on the financial statements. SAB No. 108 is effective for TC PipeLines’ fiscal year ending December31, 2006.  The Partnership is currentlyreviewing the applicability of SAB No. 108 to its results of operations andfinancial position.

***ThirdQuarter 2006 Compared with Third Quarter 2005***

Net income decreased $2.8million, or 19 per cent, to $12.0 million in the third quarter of 2006,compared to $14.8 million for the same period in 2005.  The decrease was primarily due to lowerearnings from Northern Border Pipeline and Tuscarora by $4.3 million, offset by$6.5 million in additional earnings from Northern Border Pipeline resultingfrom the acquisition of an additional 20 per cent general partnerinterest.  Interest expense increased$5.1 million compared to the same period last year due primarily to the financingof the additional 20 per cent general partner interest in Northern BorderPipelines.

Equity income from the Partnership’s investment inNorthern Border Pipeline increased $2.7 million, or 19 per cent, to $16.6million for the three months ended September 30, 2006, compared to $13.9million for the same period in 2005.  Theincrease in equity income from Northern Border Pipeline was largely due to thePartnership’s additional 20 per cent general partner interest which contributed$6.5 million in equity income, partially offset by a reduction in NorthernBorder Pipeline’s net income primarily due to lower revenues and higher operationsand maintenance expenses. The decrease in net operating revenues of Northern BorderPipeline is mainly due to a one-time increase in revenues in the third quarterof 2005 of $9.4 million due to the recognition of the sale of its bankruptcyclaims against Enron and Enron North America. The increased operations and maintenance expenses of Northern BorderPipeline as compared to the same period last year is due to increased generaland administrative expenses and electric compression charges associated withthe Chicago III Expansion Project.

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Equity income from the Partnership’s investment inTuscarora decreased $0.4 million, or 24 per cent, to $1.3 million for the threemonths ended September 30, 2006, compared with the same quarter in 2005.  The decrease in equity income from Tuscarorawas predominantly due to lower revenues. Revenues decreased due to new transportation rates put into effect on June1, 2006 as a result of Tuscarora’s rate settlement with its customers. ThePartnership’s general and administrative expenses were $0.5 million for the threemonths ended September 30, 2006, consistent with the same period in 2005.

ThePartnership’s financial charges and other were $5.4 million for the threemonths ended September 30, 2006, an increase of $5.1 million compared to thesame quarter in 2005, due to increased debt issued to finance the acquisitionof the additional 20 per cent interest in Northern Border Pipeline.

***NineMonths Ended September 30, 2006 Compared with Nine Months Ended September 30,2005***

Net income decreased $4.5million, or 12 per cent, to $33.4 million in the first nine months of 2006,compared to $37.9 million for the same period in 2005.  The decrease was largely due to increasedinterest expense related to the $307 million bridge loan credit facilitypartially offset by an increase in equity income from Northern Border Pipelineresulting from the Partnership’s additional 20 per cent general partnerinterest.

Equity income from the Partnership’s investment inNorthern Border Pipeline increased $5.4 million, or 16 per cent, to $40.1million for the nine months ended September 30, 2006, compared to $34.7 millionfor the same period in 2005.  Theincrease in equity income from Northern Border Pipeline was due to thePartnership’s additional 20 per cent general partner interest which contributed$11.2 million in equity income, partially offset by a reduction in Northern BorderPipeline’s net income primarily due to decreased net operating revenues andincreased operations and maintenance expenses. The decrease in net operatingrevenues of Northern Border Pipeline is mainly due to a one-time increase inrevenues in the third quarter of 2005 of $9.4 million due to the recognition ofthe sale of its bankruptcy claims against Enron and Enron North America.  The increased operations and maintenanceexpenses of Northern Border Pipeline as compared to the same period last yearis due to increased general and administrative expenses, electric compressioncharges associated with the Chicago III Expansion Project, and the reduction ofits allowance for doubtful accounts related to bankruptcy claims against Enronin the second quarter of 2005.

Equity income fromthe Partnership’s investment in Tuscarora decreased $0.6 million, or 11 percent, to $4.9 million in the first nine months of 2006, compared to $5.5million for the same period in 2005.  Thedecrease in equity income from Tuscarora was predominantly due to lowerrevenues.  Revenues decreased due to new transportationrates which were put into effect on June 1, 2006 as a result of the settlement reachedwith customers.

ThePartnership recorded general and administrative expenses of $1.8 million forthe nine months ended September 30, 2006, which increased by $0.3 million whencompared to the same period in 2005. General and administrative expenses increased mainly due to highersalaries and benefits.

ThePartnership’s financial charges and other were $9.8 million for the first ninemonths of 2006, an increase of $9.0 million compared to the same period in2005, due to increased debt.

**Liquidityand Capital Resources of TC PipeLines, LP**

***Debtand Credit Facilities***

The following tablesummarizes TC PipeLines’ debt and credit facilities outstanding as of September30, 2006:
|                                     | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | ** **                                | ** ** | **Less than 1** | ** ** | **Long-term** | ** ** |
| **(millions of dollars)** | ** ** | **Total**                                 | ** ** | **year** | ** ** | **portion** | ** ** |
|                                |       |                                      |       |   |   |   |   |
| Revolving Credit  Facility          |       | —                                    |       | — |   | — |   |
| Bridge Loan  Credit Facility        |       | 307.0                                     |       | — |   | 307.0 |   |
| Total                               |       | $                                         | 307.0      |   | $ | — |   | $ | 307.0 |   |
|                                     |            |                                           |            |  |  |  |  |  |  |  |

 

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On March 31, 2006, the Partnership enteredinto an unsecured credit agreement for a $310 million credit facility (BridgeLoan Credit Facility) with a banking syndicate. Borrowings under the Bridge Loan Credit Facility bear interest, atthe option of the Partnership, at the LIBOR or the base rate plus an applicablemargin.  The Bridge Loan Credit Facility matures on March 31, 2008, atwhich time all amounts outstanding will be due and payable. Borrowings under the facility are limited to maximum leverage ratesspecified in the agreement.  On April 5,2006, the Partnership borrowed $307 million under the Bridge Loan CreditFacility to finance the purchase price and $10 million in a transaction feepayable in connection with the acquisition of an additional 20 per cent generalpartnership interest in Northern Border Pipeline.  The remaining $3 million commitment under theBridge Loan Credit Facility was terminated. The interest rate on the Bridge Loan Credit Facility averaged 6.26per cent to September 30, 2006 and the interest rate was 6.45 per cent as at September30, 2006.  The Partnership was in compliance with all financial covenants as of September30, 2006.

***CashDistribution Policy of TC PipeLines, LP***

The Partnership has madedistributions of Available Cash (as defined in the Partnership Agreement) inthe following manner:

·First, 98 per cent to the common units, pro rata, and 2 per cent to the generalpartner, until there is distributed for each outstanding unit an amount equalto the minimum quarterly distribution for that quarter; and

·Thereafter, in a manner whereby the general partner has rights (referred to asincentive distribution rights) to receive increasing percentages of excessquarterly cash distributions over specified cash distribution thresholds.

After the distributionsdescribed above are met, additional Available Cash from Operating Surplus (asdefined in the Partnership Agreement) for that quarter will be distributedamong the unitholders and the general partner in the following manner:

·First, 85 per cent to all units, pro rata, and 15 per cent to the generalpartner, until each unitholder has received a total of $0.5275 for thatquarter;

·Second, 75 per cent to all units, pro rata, and 25 per cent to the generalpartner, until each unitholder has received a total of $0.6900 for thatquarter; and

·Thereafter, 50 per cent to all units, pro rata, and 50 per cent to the generalpartner.

The distribution to thegeneral partner described above, other than in its capacity as a holder of2,035,106 units that are in excess of its aggregate 2 per cent general partnerinterest, represents the incentive distribution rights.

***2006 ThirdQuarter Cash Distribution***

On October 20, 2006, theBoard of Directors of the general partner declared the Partnership’s 2006 thirdquarter cash distribution.  The thirdquarter cash distribution is payable on November 14, 2006 to unitholders ofrecord as of October 31, 2006.  The totalcash distribution of $11.3 million will be paid in the following manner: $10.5million to common unitholders (including $1.2 million to the general partner asholder of 2,035,106 common units), $0.6 million to the general partner asholder of the incentive distribution rights, and $0.2 million to the generalpartner in respect of its 2 per cent general partner interest.

***CashFlows from Operating Activities***

Cash flows provided byoperating activities increased $2.1 million, or six per cent, to $38.1 million forthe nine months ended September 30, 2006, compared to $36.0 million for thesame period in 2005.  The increase was primarilydue to $6.7 million of higher cash distributions received partially offset by$4.4 million of higher interest payments related to higher debt.  For the nine months ended September 30, 2006and 2005, the Partnership received cash distributions of $56.1 million and $43.7million, respectively, from its equity investment in Northern BorderPipeline.  The increase in cashdistributions from Northern Border Pipeline was largely due to the Partnership’sacquisition of an additional 20 per cent general partner interest.  The cash distributions received include $16.0million and $11.1 million classified as return of capital in the nine monthsended September 30, 2006 and 2005, respectively.  For the nine months ended September 30, 2006and 2005, the Partnership also received cash distributions of $6.2 million and$6.3 million, respectively, from its equity investment in Tuscarora.  The cash distributions received fromTuscarora include $1.3 million and $0.8 million classified as return of capitalin the nine months ended September 30, 2006 and 2005, respectively.  Distributions received in the first ninemonths of 2006 are based on the respective equity investments’ financialresults for the nine months ended June 30, 2006.

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***CashFlows from Investing Activities***

Cash used in investingactivities was $294.7 million for the nine months ended September 30,2006.  The Partnership incurred costs ofapproximately $297 million plus $10 million in a transaction fee payable to asubsidiary of TransCanada for the acquisition of an additional 20 per centgeneral partnership interest in Northern Border Pipeline.  The Partnership made an equity contributionof $3.1 million, representing its then 30 per cent share of a cash call issuedby Northern Border Pipeline to its partners on March 20, 2006.

Cashdistributions received from Northern Border Pipeline which were classified asreturn of capital were $16.0 million and $11.1 million for the nine monthsended September 30, 2006 and 2005, respectively.  Cash distributions received from Tuscarorawhich were classified as return of capital were $1.3 million and $0.8 million forthe nine months ended September 30, 2006 and 2005, respectively.

***CashFlows from Financing Activities***

Cashflows from financing activities were $261.3 million for the nine months endedSeptember 30, 2006. In the first nine months of 2006, TC PipeLines issued $310million of long-term debt, of which $307 million was issued under the BridgeLoan Credit Facility to finance the Partnership’s acquisition of an additional20 per cent general partner interest in Northern Border Pipeline.  The Partnership also repaid $16.5 million ofits outstanding debt balance.

For the nine months ended September 30, 2006,the Partnership paid $32.2 million in cash distributions in the followingmanner:  $30.1 million to commonunitholders (including $4.0 million to the general partner as holder of 2,305,106common units), $1.5 million to the general partner as holder of the incentivedistribution rights, and $0.6 million to the general partner in respect of its2 per cent general partner interest.

***Capital Requirements***

To the extent TCPipeLines has any capital requirements with respect to its investments inNorthern Border Pipeline and Tuscarora or makes acquisitions during theremainder of 2006, TC PipeLines expects to fund these requirements withoperating cash flows, debt and/or equity.

**Resultsof Operations of Northern Border Pipeline Company**

*In thefollowing discussion of the results of Northern Border Pipeline, all amountsrepresent 100 per cent of the operations of Northern Border Pipeline, in whichthe Partnership has held a 50 per cent interest since April 6, 2006.*

Thediscussion and analysis of Northern Border Pipeline’s financial condition andoperations are based on Northern Border Pipeline’s financial statements, whichwere prepared in accordance with U.S. GAAP.

***Overview***

Northern Border Pipelineis a Texas general partnership that was formed in 1978.  Northern Border Pipeline provides natural gastransportation services and is a leading transporter of natural gas importedfrom Canada into the U.S.  NorthernBorder Pipeline transports natural gas along 1,249 miles of pipeline with adesign capacity of approximately 2.4 Bcf/d that extends from theMontana-Saskatchewan border to a terminus near North Hayden, Indiana.  Northern Border Pipeline’s customers withfirm service transportation agreements pay a fee known as a demand charge toreserve pipeline capacity, regardless of use, for the term of theircontracts.  Firm service transportationcustomers also pay a fee known as a commodity charge that is based on thevolume of natural gas they transport.  Customers with interruptible servicetransportation agreements may utilize available capacity on Northern BorderPipeline’s system after firm service transportation requests aresatisfied.  Interruptible servicecustomers are assessed a commodity charge only.

Construction of Northern Border Pipeline’s system wasinitially completed in 1982 followed by expansions or extensions in 1991, 1992,1998, 2001 and 2005.  In April2006, the Chicago III Expansion Project went into service as planned, adding130 MMcf/d of transportation capacity on the eastern portion of the pipelineinto the Chicago area.

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***SignificantDevelopments in 2006***

*Purchase and Sale of PartnershipInterest*– In April 2006, ONEOK sold a 20 per centpartnership interest in Northern Border Pipeline to TC PipeLines.  ONEOK and TC PipeLines each now own a 50 percent interest in Northern Border Pipeline.

In April 2006,Northern Border Pipeline’s general partnership agreement was amended andrestated as a result of the ownership interest change.  The major provisions adopted or changedincluded the following:

·                  The ManagementCommittee consists of four members.  Eachpartner designates two members and TC PipeLines designates one of its membersas chairman.

·                  The ManagementCommittee designates the members of the Audit Committee, which consists ofthree members.  One member is selected bythe members of the Management Committee designated by the partner whoseaffiliate is the operator and two members are selected by the members of theManagement Committee designated by the other partner.

·                  ONEOK Partners GPis Northern Border Pipeline’s operator until April 1, 2007.  Effective April 1, 2007, TransCan NorthwestBorder Ltd. (TransCan), an affiliate of TransCanada, will become NorthernBorder Pipeline’s operator under a new operating agreement, described brieflybelow.

*Operating Agreement*–In April 2006, Northern Border Pipeline entered into an operating agreementwith TransCan.  Under the new operating agreement,TransCan will become Northern Border Pipeline’s operator effective April 1,2007.

*Chicago III Expansion Project*– In April 2006, the Chicago III Expansion Project went into service asplanned, adding approximately 130 MMcf/d of transportation capacity on theeastern portion of Northern Border Pipeline’s system into the Chicago area.

*Settlement of Rate Case -*InSeptember 2006, Northern Border Pipeline filed a stipulation and agreementwhich documents the settlement in its pending rate case. The settlement wasreached between Northern Border Pipeline and its participant customers and issupported by the FERC trial staff.  The uncontestedsettlement was certified on October 20, 2006 by the administrative law judgeand provided to the FERC for approval. The approval process is expected to becompleted by late 2006.  Additionalinformation about Northern Border Pipeline’s regulatory proceedings is includedunder “Regulatory Developments” in this section of the report.

***CriticalAccounting Estimate***

**Provisionfor Rate Refunds******–****NorthernBorder Pipeline is subject to regulation by the FERC.  Northern Border Pipeline transports gas forshippers under a tariff regulated by the FERC that specifies the calculation ofamounts to be paid by shippers and the general terms and conditions oftransportation service on its pipeline system. From time to time, certain revenue collected may be subject to possiblerefunds upon final FERC orders. Accordingly, estimates of rate refund reserves are recorded consideringregulatory proceedings and advice of counsel. As required by the provisions of the settlement of Northern BorderPipeline’s last rate case, on November 1, 2005, Northern Border Pipeline fileda rate case with the FERC.  The new rateswere effective May 1, 2006, and were collected subject to refund throughSeptember 30, 2006.  Based on thesettlement of the rate case, rates in effect prior to the rate case filing willbe collected for the months of October to December 2006, and will not result incollecting additional amounts subject to refund.  Northern Border Pipeline expects to refund$10.6 million recorded as a liability on its balance sheet at September 30,2006, plus interest accrued through the date the refunds are paid.   Additional information about Northern BorderPipeline’s regulatory proceedings is included in this section of the reportunder “Regulatory Developments”.

***KnownTrends and Uncertainties***

*Supply -*NorthernBorder Pipeline continues to expect that Canadian natural gas export volumes in2006 will remain near 2005 levels.  In2007, Canadian gas supplies available for export could be adversely impacted bythe development of oil sand reserves due to natural gas utilized in its production.  As a result, increased production of crudeoil reserves in Canada could reduce natural gas available for export to theU.S. if oil sands production and the related demand for natural gas aresignificantly greater than natural gas supply growth.

17

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*Demand -*The EnergyInformation Administration projects U.S. demand for natural gas in 2006 to beslightly less than 2005 levels primarily as a result of warmer-than-averagetemperatures in the first quarter of 2006. U.S gas consumption could increase in 2007 from 2006 levels assuming thereturn of colder temperatures during the 2006-2007 winter heating season (Novemberto March).

Natural gasstorage injections and withdrawals in Western Canada affect natural gasavailable for transportation on Northern Border Pipeline’s system.  As a result, demand for transportationservices is reduced during periods of Canadian storage injection and mayincrease during periods of storage withdrawal. At September 30, 2006, Western Canada storage injection and inventorieswere slightly above September 30, 2005 figures. A developing storage field in Western Canada is believed to haverecently reached full injection capabilities, adding capacity to total WesternCanadian storage capabilities.  NorthernBorder Pipeline anticipates that increased storage may reduce demand for itstransportation capacity if unseasonably warm weather is experienced in theMidwest throughout the 2006-2007 winter heating season.

Forthe nine months ended September 30, 2006 and 2005, Northern Border Pipeline’s contractedcapacity, including contracts of various lengths with some short-term innature, averaged approximately 97 per cent. At September 30, 2006, approximately 52 per cent of Northern BorderPipeline’s capacity was contracted on a firm basis for the 2006-2007 heatingseason.  At September 30, 2005,approximately 70 per cent of Northern Border Pipeline’s capacity was contractedon a firm basis for the 2005-2006 heating season. As a result of short-termcontracting activity, Northern Border Pipeline’s actual firm contractedcapacity averaged 102 per cent during the 2005-2006 heating season.  Weather conditions will be a primary driverof demand for the 2006-2007 heating season. Assuming the return of colderweather for the 2006-2007 heating season, Northern Border Pipeline expects the availablecapacity to be sold on a short-term basis at levels comparable to the 2005-2006heating season.

Revenuesfor the 2006-2007 heating season may be lower due to reduction of long-termrates starting January 1, 2007, resulting from the rate case settlementdiscussed under “Regulatory Developments” in this section.  In addition, revenue may vary on a quarterlybasis in 2007 due to the implementation of seasonal rates included in the ratecase settlement.  Discounting transportationrates on a short-term basis may be necessary to optimize revenue depending uponcurrent market conditions.

***RegulatoryDevelopments***

As required by theprovisions of the settlement of Northern Border Pipeline’s last rate case, onNovember 1, 2005, Northern Border Pipeline filed a rate case with the FERC.  In December 2005, the FERC issued an orderthat identified issues that were raised in the proceeding and accepted theproposed rates, but suspended their effectiveness until May 1, 2006.  Since that date, the new rates were collectedsubject to refund through September 30, 2006. Based on the settlement discussedbelow, the rates in effect prior to the rate case filing will be collected forthe months of October to December 2006, and will not result in collectingadditional amounts subject to refund.

On September 18,2006, Northern Border Pipeline filed a stipulation and agreement whichdocuments the settlement in its pending rate case. The settlement was reachedbetween Northern Border Pipeline and its participant customers and is supportedby the FERC trial staff.  The uncontestedsettlement was certified on October 20, 2006 by the administrative law judgeand provided to the FERC for approval.  Theapproval process is expected to be completed by late 2006.  Based on the settlement of the rate caseNorthern Border Pipeline expects to refund $10.6 million recorded as a liabilityon its balance sheet at September 30, 2006, plus interest accrued through thedate the refunds are paid. Northern Border Pipeline anticipates refunds will bepaid during the first quarter of 2007.

The settlementestablishes maximum long-term mileage-based rates and charges for transportationon Northern Border Pipeline’s system. Beginning in 2007, overall rates will bereduced, compared with rates prior to the filing, by approximately five per cent. For the full transportation route fromPort of Morgan, Montana to the Chicago area, the previous charge ofapproximately $0.46 per Dth will now be approximately $0.44 per Dth, which iscomprised of a reservation rate, commodity rate and a compressor usagesurcharge. The factors used in calculating depreciation expense fortransmission plant are being increased from the current 2.25 per cent to 2.40per cent. The settlement also provides for seasonal rates for short-termtransportation services. Seasonal maximum rates vary on a monthly basis fromapproximately $0.54 per Dth to approximately $0.29 per Dth for the fulltransportation route from Port of Morgan, Montana to the Chicago area. Thesettlement includes a three-year moratorium on filing rate cases andparticipants challenging these rates, and requires that Northern BorderPipeline files a rate case within six years.

18

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***Resultsof Operations***

The following tables setout summarized financial information for Northern Border Pipeline for the threeand nine months ended September 30, 2006 and 2005 and as at September 30, 2006and December 31, 2005.  Amounts discussedrepresent 100 per cent of the operations of Northern Border Pipeline, in whichthe Partnership holds a 50 per cent interest as at September 30, 2006.

**Northern Border Pipeline Income Statement**

 
| ** **                          | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
| **(unaudited)**                     | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006**   | ** ** | **2005**   | ** ** |
| Revenues                            | ** ** | **80.3**                         |       | 89.0                            | ** ** | **231.5**  |       | 241.6      |       |
| Costs and  expenses                 | ** ** | **(22.0**                        | **)**      | (18.7                           | )          | **(60.1**  | **)**      | (52.8      | )          |
| Depreciation                        | ** ** | **(14.6**                        | **)**      | (14.5                           | )          | **(44.0**  | **)**      | (43.2      | )          |
| Financial  charges                  | ** ** | **(10.8**                        | **)**      | (10.7                           | )          | **(32.5**  | **)**      | (31.9      | )          |
| Other income                        | ** ** | **0.8**                          |       | 1.1                             | ** ** | **1.5**    |       | 1.9        |       |
| Net income                          | ** ** | **33.7**                         |       | 46.2                            | ** ** | **96.4**   |       | 115.6      |       |

 

**Northern Border PipelineBalance Sheet**

 
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(millions of dollars)**        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Cash and cash  equivalents                 | ** ** | **20.0**               |       | 22.0                  |       |
| Other current  assets                      | ** ** | **37.8**               |       | 45.7                  |       |
| Plant, property  and equipment, net        | ** ** | **1,489.0**            |       | 1,516.1               |       |
| Other assets                               | ** ** | **22.6**               |       | 20.9                  |       |
|                                       | ** ** | **1,569.4**            |       | 1,604.7               |       |
| **Liabilities  and Partners’ Equity** | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current  liabilities                       | ** ** | **223.0**              |       | 56.0                  |       |
| Reserves and  deferred credits             | ** ** | **5.4**                |       | 4.8                   |       |
| Long-term debt                             | ** ** | **450.5**              |       | 628.9                 |       |
| Partners’ equity                      |       |                   |       |                  |       |
| Partners’ capital                     | ** ** | **889.4**              |       | 912.7                 |       |
| Accumulated other comprehensive income     | ** ** | **1.1**                |       | 2.3                   |       |
|                                       | ** ** | **1,569.4**            |       | 1,604.7               |       |

 

***ThirdQuarter 2006 Compared with Third Quarter 2005***

Net income was $33.7million for the three months ended September 30, 2006, a decrease of $12.5million, or 27 per cent, compared with $46.2 million for the same period lastyear, primarily due to decreased net operating revenues and increasedoperations and maintenance expense.

Net revenues decreased$8.7 million, or 10 per cent, for the three months ended September 30, 2006,compared with the same period last year due to the following:

·                  a one-time increase in revenue in thethird quarter of 2005 of $9.4 million due to the recognition of the sale ofNorthern Border Pipeline’s bankruptcy claims for transportation contracts andassociated guarantees held against Enron and Enron North America;

·                  decreased net revenue of $1.5 milliondue to an increase in Northern Border Pipeline’s provision for billings subjectto refund to reflect the filed settlement of its current rate case; partiallyoffset by

·                  additional revenue of $1.5 milliondue to contracts related to the Chicago III Expansion Project; and

·                  increased revenue of $0.7 millionrelated to increased demand for other transportation services.

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Northern BorderPipeline reserved $8.2 million of transportation revenue during the third quarterof 2006, as the proposed rates in its current rate case are subject to refundupon final FERC orders.  Additionalinformation about Northern Border Pipeline’s current rate case is included inthis section under “Regulatory Developments.”

Costs and expensesincreased $3.3 million, or 18 per cent, for the three months ended September30, 2006, compared with the same period last year as a result of increasedgeneral and administrative expenses and increased operating costs related to electriccompression charges associated with the Chicago III Expansion Project.

The remainingdecrease in net income of $0.5 million for the three months ended September 30,2006, compared with the same period last year were due to increaseddepreciation and financial charges and decreased other income.

***NineMonths Ended September 30, 2006 Compared with Nine Months Ended September 30,2005***

Net income was $96.4million for the nine months ended September 30, 2006, a decrease of $19.2million, or 17 per cent, compared with $115.6 million for the same period lastyear, primarily due to decreased net operating revenues and increasedoperations and maintenance expenses.

Net revenuesdecreased $10.1 million, or 4 per cent, for the nine months ended September 30,2006, compared with the same period last year due to the following:

·                  a one-time increase in revenue in thethird quarter of 2005 of $9.4 million due to the recognition of the sale ofNorthern Border Pipeline’s bankruptcy claims for transportation contracts andassociated guarantees held against Enron and Enron North America;

·                  decreased firm demand revenue andcommodity charges of $2.6 million as a result of discounted transportationrates, transportation capacity that was sold for shorter transportation pathsand some unsold capacity in March 2006; and

·                  decreased revenue of $0.6 millionrelated to decreased demand for other transportation services; partially offsetby

·                  additional revenue of $2.5 milliondue to contracts related to the Chicago III Expansion Project.

Northern BorderPipeline reserved $10.5 million of transportation revenue during the ninemonths ended September 30, 2006, as the proposed rates in its current rate caseare subject to possible refund upon final FERC orders.

Costs and expensesincreased $7.3 million, or 14 per cent, for the nine months ended September 30,2006, compared with the same period last year as a result of increased generaland administrative expenses, electric compression charges associated with theChicago III Expansion Project and the reduction of Northern Border Pipeline’sallowance for doubtful accounts related to bankruptcy claims against EnronCorp. and Enron North America Corp. in the second quarter of 2005.

The remainingdecrease in net income of $1.8 million for the nine months ended September 30,2006, compared with the same period last year were due to increaseddepreciation and financial charges and decreased other income.

**Liquidityand Capital Resources of Northern Border Pipeline Company**

Northern Border Pipeline’sprincipal sources of liquidity include cash generated from operating activitiesand bank credit facilities.  NorthernBorder Pipeline funds its operating expenses, debt service and cashdistributions to its partners primarily with operating cash flow.  Capital resources for maintenance and growthexpenditures are funded by a variety of sources, including cash generated fromoperating activities, borrowings under Northern Border Pipeline’s credit agreement,issuance of senior unsecured notes and/or equity contributions from its partners.  Northern Border Pipeline’s ability to access thecapital markets to issue debt securities under reasonable terms depends on itsfinancial condition, credit ratings and market conditions.  Northern Border Pipeline believes that itsability to obtain financing and its history of consistent cash flow fromoperating activities provide a solid foundation to meet its short-term andlong-term liquidity and capital resource requirements.

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***Debtand Credit Facilities***

The following tablesummarizes Northern Border Pipeline’s debt and credit facilities outstanding asof September 30, 2006:
| ** **                                           | ** ** | **Payments Due by Period** | ** ** |
|------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                           | ** ** | ** **                                | ** ** | **Less than 1** | ** ** | **Long-term** | ** ** |
| **(millions of dollars)**                  | ** ** | **Total**                                 | ** ** | **year** | ** ** | **portion** | ** ** |
|                                                 |       |                                      |       |   |   |   |   |
| $175 million Pipeline  Credit Agreement due 2010 (a) |       | $                                         | 8.0        |   | $ | 8.0 |   | $ | — |   |
| 6.25% senior notes due  2007 (b)                     |       | $                                         | 150.0      |   | $ | 150.0 |   | $ | — |   |
| 7.75% senior notes due  2009                         |       | $                                         | 200.0      |   | $ | — |   | $ | 200.0 |   |
| 7.50% senior notes due  2021                         |       | $                                         | 250.0      |   | $ | — |   | $ | 250.0 |   |
| Total                                                |       | $                                         | 608.0      |   | $ | 158.0 |   | $ | 450.0 |   |

 

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(a) Northern Border Pipeline is required to pay a facility fee of 0.075% onthe principal commitment amount of its credit agreement.

(b)  Northern Border Pipeline intends to refinancethese notes on or before the May 1, 2007, maturity date.

***RevolvingCredit Agreement***

As of September 30, 2006,Northern Border Pipeline had outstanding borrowings of $8.0 million under its$175 million revolving credit agreement and was in compliance with thecovenants of its agreement.  The covenantsare described in Item 7, “Management’s Discussion and Analysis of FinancialCondition and Results of Operations–Liquidity and Capital Resources,” inNorthern Border Pipeline’s annual report on Form 10-K for the year endedDecember 31, 2005.  The weighted averageinterest rate related to the borrowings on our credit agreement was 7.30 percent at September 30, 2006.

***CashFlows***

Northern Border Pipeline’scash flows from operating activities for the nine months ended September 30,2006 decreased $10.1 million from the same period last year due to thefollowing:

·                  cash received in 2005 of $11.1million related to Northern Border Pipeline’s Enron Corp. and Enron NorthAmerica Corp. bankruptcy claims;

·                  increased expenditures related to itscurrent rate case of $1.3 million;

·                  increased cash paid for interest of$0.7 million; partially offset by

·                  increased cash received fromcustomers of $0.8 million as a result of higher gross operating revenues.

Cash used ininvesting activities was $17.0 million for each of the nine months endedSeptember 30, 2006 and 2005.  Maintenance capital expenditures were $6.7 million and $12.0 millionduring the nine months ended September 30, 2006 and 2005, respectively.  During the nine months ended September 30,2006 and 2005, growth capital expenditures related to the Chicago III ExpansionProject were $10.2 million and $4.3 million, respectively.  Cash used in financing activities was $138.8million for the nine months ended September 30, 2006, compared with $146.2million for the same period last year.

Northern BorderPipeline received equity contributions from its partners of $10.3 millionduring the first quarter of 2006 to fund approximately 50 per cent of theChicago III Expansion Project capital costs. Distributions to partners, which are calculated using operating resultsfrom the preceding quarter, decreased $15.8 million during the nine monthsended September 30, 2006, compared with the same period last year primarily dueto lower net income.

***RecentAccounting Pronouncements***

In September 2006, theFASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), whichestablishes a framework for measuring fair value and requires additionaldisclosures about fair value measurements. SFAS No. 157 is effective for Northern Border Pipeline’s fiscal yearbeginning January 1, 2008.  NorthernBorder Pipeline is currently reviewing the applicability of SFAS No. 157 to itsresults of operations and financial position.

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In September 2006,the SEC staff issued SAB Topic 1N, “Financial Statements – Considering theEffects of Prior Year Misstatements When Quantifying Misstatements in CurrentYear Financial Statements” (SAB No. 108), which addresses how to quantify theeffect of an error on the financial statements. SAB No. 108 is effective for Northern Border Pipeline’s fiscal yearending December 31, 2006.  NorthernBorder Pipeline is currently reviewing the applicability of SAB No. 108 to itsresults of operations and financial position.

In December 2004,the FASB issued SFAS No. 123R, “Share-Based Payment” (SFAS No. 123R), whichrequires companies to expense the fair value of share-based payments andincludes changes related to the expense calculation for share-basedpayments.  ONEOK Partners GP adopted SFASNo. 123R as of January 1, 2006, and charges Northern Border Pipeline for itsproportionate share of the expense recorded by ONEOK Partners GP.  The adoption of SFAS No. 123R by ONEOKPartners GP did not have a material impact on Northern Border Pipeline’sresults of operations or financial position.

**Resultsof Operations of Tuscarora Gas Transmission Company**

*In thefollowing discussion of the results of Tuscarora, all amounts represent 100 percent of the operations of Tuscarora, in which the Partnership has held a 49 percent interest since September 1, 2000.*

***Overview***

Tuscarora is aNevada general partnership formed in 1993.  Tuscaroraowns a 240-mile, 20-inch diameter,U.S. interstate pipeline system that originates at an interconnectionpoint with facilities of GTN, awholly-owned subsidiary of TransCanada, near Malin, Oregon and runs southeastthrough northeastern California and northwestern Nevada.  The Tuscarora pipelinesystem terminates near Wadsworth, Nevada. Along its route, deliveries are made in Oregon, northern California andnorthwestern Nevada.  Deliveries are alsomade directly to the local gas distribution system of Sierra Pacific Power, asubsidiary of Sierra Pacific Resources.

Tuscarorahas firm transportation contracts for over 95 per cent of its available capacity,including contracts held by Sierra Pacific Power for 69 per cent of the totalavailable capacity, the majority of which expires on October 31, 2017.  As of September 30, 2006, theweighted-average contract life on the Tuscarora pipeline system was approximately11.7 years.

***RecentDevelopments***

*Cost andRevenue Study –*In accordance with a letter agreementexecuted on September 25, 2001 with the Public Utilities Commission of Nevada(PUCN), Tuscarora had an obligation to file a cost and revenue study with theFERC, within a reasonable timeframe following the third anniversary of thein-service date of its 2002 expansion project. The project was placed into service on December 1, 2002.  As a result of that requirement, Tuscaroraand the PUCN entered into settlement discussions with respect to a potentialrate adjustment.  On April 26, 2006 thePUCN approved a settlement with Tuscarora. The settlement results in a firm transportation rate of $0.40/decathermper day (dth-day) beginning June 1, 2006. This is a 17 per cent reduction to the current rate of $0.4811/dth-day,or approximately $5 million reduction in Tuscarora’s annual revenues.  In addition, the settlement results in amoratorium on all rate actions before the FERC by any party to the settlementfor a period of 48 months to May 31, 2010, including rate actions related toexpansion projects where Tuscarora proposes to price the expansion at thesettlement rate.  There is no requirementto file a cost and revenue study or rate case at the end of the moratoriumperiod.  The settlement also terminatesthe September 2001 requirement for Tuscarora to file a cost and revenuestudy.  All firm shippers have signed onwith the agreement settlement.  Thesettlement was approved by the FERC on July 3, 2006.  A compliance filing was made July 7, 2006 forthe new tariffs, which are to be effective as of June 1, 2006.  Approval for this filing was received onAugust 7, 2006.

*Change in Ownership -*OnNovember 2, 2006, TC PipeLines announced it has signed agreements to purchasean additional 50 per cent general partnership interest in Tuscarora for $100million.  The Partnership will alsoindirectly assume approximately $37 million of Tuscarora debt.  Upon completion of the transaction, TCPipeLines will own or control 99 per cent of Tuscarora.  The Partnership will account for its interestin Tuscarora using the consolidation method. In connection with this transaction, TransCanada will become theoperator of Tuscarora, which is currently operated by an affiliate of SierraPacific Resources.  The Partnershipintends to fund the transaction with a combination of bank debt andequity.  The transaction is expected toclose by the end of 2006, subject to regulatory approvals.

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***Resultsof Operations***

The following tables setout summarized financial information for Tuscarora for the three and ninemonths ended September 30, 2006 and 2005 and as at September 30, 2006 andDecember 31, 2005.  Amounts discussedrepresent 100 per cent of the operations of Tuscarora, in which the Partnershiphas held a 49 per cent interest since September 1, 2000.

**TuscaroraIncome Statement**

 
| ** **                          | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| **(unaudited)**                     | ** ** | **September 30**            | ** ** | **September 30**           | ** ** |
| **(millions of dollars)** | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                            | ** ** | **6.7**                          |       | 7.8                             | ** ** | **22.6** |   | 24.1 |   |
| Costs and  expenses                 | ** ** | **(1.0**                         | **)**      | (1.0                            | )          | **(3.4** | **)** | (3.2 | ) |
| Depreciation                        | ** ** | **(1.6**                         | **)**      | (1.5                            | )          | **(4.7** | **)** | (4.6 | ) |
| Financial  charges                  | ** ** | **(1.3**                         | **)**      | (1.5                            | )          | **(4.1** | **)** | (4.4 | ) |
| Other income                        | ** ** | **0.1**                          |       | —                          | ** ** | **0.2** |   | 0.1 |   |
| Net income                          | ** ** | **2.9**                          |       | 3.8                             | ** ** | **10.6** |   | 12.0 |   |

 

**TuscaroraBalance Sheet**

 
| ** **                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(millions of dollars)**        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Cash and cash  equivalents                 | ** ** | **5.5**                |       | 3.8                   |       |
| Other current  assets                      | ** ** | **2.4**                |       | 3.0                   |       |
| Plant, property  and equipment, net        | ** ** | **127.2**              |       | 131.6                 |       |
| Other assets                               | ** ** | **1.4**                |       | 1.4                   |       |
|                                       | ** ** | **136.5**              |       | 139.8                 |       |
| ** **                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| **Liabilities  and Partners’ Equity** | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current  liabilities                       | ** ** | **8.0**                |       | 6.8                   |       |
| Long-term debt                             | ** ** | **68.7**               |       | 71.1                  |       |
| Partners’ equity                      |       |                   |       |                  |       |
| Partners’ capital                     | ** ** | **59.7**               |       | 61.8                  |       |
| Accumulated other comprehensive income     | ** ** | **0.1**                |       | 0.1                   |       |
|                                       | ** ** | **136.5**              |       | 139.8                 |       |

 

***ThirdQuarter 2006 Compared with Third Quarter 2005***

Net income decreased $0.9million, or 24 per cent, to $2.9 million in the third quarter of 2006, comparedto $3.8 million for the same period in 2005. The decrease was primarily due to lower revenues.

Revenuesearned by Tuscarora decreased $1.1 million, or 14 per cent, to $6.7 million inthe three months ended September 30, 2006, compared to $7.8 million for thesame period in 2005.  The decrease wasmainly due to the lower rates charged.

Costsand expenses were $1.0 million for the third quarter of 2006 and 2005.  Depreciation of $1.6 million for the threemonths ended September 30, 2006 remained relatively consistent with the sameperiod in 2005, when the depreciation totaled $1.5 million.

23

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Financialcharges decreased $0.2 million, or 13 per cent, to $1.3 million for the thirdquarter of 2006, compared to $1.5 million for the same period in 2005.  The decrease is due to lower outstandingdebt.  Other income of $0.1 million forthe three months ended September 30, 2006 remained relatively consistent withthe same period in 2005, when there was negligible other income recorded.

***NineMonths Ended September 30, 2006 Compared with Nine Months Ended September 30,2005***

Net income decreased $1.4million, or 12 per cent, to $10.6 million for the nine months ended September30, 2006, compared to $12.0 million for the same period in 2005.  The decrease was primarily due to lowerrevenues.

Revenuesearned by Tuscarora decreased $1.5 million, or six per cent, to $22.6 millionin the nine months ended September 30, 2006, compared to $24.1 million for thesame period in 2005.  The decrease ismainly due to lower rates charged since June 2006.

Costsand expenses increased $0.2 million, or 6 per cent, to $3.4 million for thenine months ended September 30, 2006, compared to $3.2 million for the sameperiod in 2005.  The increase wasprimarily due to maintenance costs to repair the washout of Susanville Lateral.  Depreciation remained relatively consistentat $4.7 million in the nine months ended September 30, 2006 when compared tothe same period in 2005, where $4.6 million of depreciation was recorded.

Financial chargesdecreased $0.3 million, or 7 per cent, to $4.1 million for the nine months endedSeptember 30, 2006, compared to $4.4 million for the same period lastyear.  The decrease is mainly due to lessdebt outstanding.  Other income remainedrelatively consistent at $0.2 million for the first nine months of 2006,compared to $0.1 million in the same period of 2005.

**Liquidity and Capital Resources of Tuscarora Gas Transmission Company**

***Debtand Credit Facilities***

The following tablesummaries Tuscarora’s debt and credit facilities outstanding as of September30, 2006:
| ** **                          | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | ** **                                | ** ** | **Less Than** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **(millions of dollars)** | ** ** | **Total**                                 | ** ** | **1 Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **After 5 Years** | ** ** |
|                                |       |                                      |       |   |   |   |   |   |   |   |   |
| Series A Senior  Notes due 2010     |       | 59.8                                      |       | 3.5 |   | 6.5 |   | 49.8 |   | — |   |
| Series B Senior  Notes due 2010     |       | 6.2                                       |       | 0.5 |   | 1.0 |   | 4.7 |   | — |   |
| Series C Senior  Notes due 2012     |       | 7.5                                       |       | 0.8 |   | 1.6 |   | 1.6 |   | 3.5 |   |
| Operating Leases                    |       | 0.2                                       |       | 0.1 |   | 0.1 |   | — |   | — |   |
| Commitments (1)                     |       | 0.7                                       |       | 0.6 |   | 0.1 |   | — |   | — |   |
| Total                               |       | $                                         | 74.4       |   | $ | 5.5 |   | $ | 9.3 |   | $ | 56.1 |   | $ | 3.5 |   |
|                                     |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)  Tuscarora’s commitments relate to a contractwith a third party for maintenance services on certain components of itspipeline-related equipment.  The contractexpires in November 2007.

Short-term liquidityneeds will be met by operating cash flows. Long-term capital needs may be met through the issuance of long-termindebtedness.

***CashFlows***

Tuscarora’s cash providedby operating activities decreased $1.4 million to $16.9 million for the ninemonths ended September 30, 2006, compared to the same period last yearprimarily due to lower revenues.

Cash used ininvesting activities was $0.2 million and $0.9 million for the nine monthsended September 30, 2006 and 2005, respectively.  Tuscarora used more funds for growth capitalexpenditures in 2005, which were related to the Barrick Lateral.

Cash used in financing activities increased by $0.4million to $15.0 million for the nine months ended September 30, 2006, comparedto the same period in 2005 due to lower contributions received from Tuscarora’spartners in 2006, slightly offset by lower cash distributions paid to Tuscarora’spartners in 2006.

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**ITEM 3.  QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**TC PipeLines, LP**

**TC PipeLines may**be exposed to market risk through changes ininterest rates.  The Partnership does nothave any material foreign exchange risks. TC PipeLines’ interest rate exposure results from its Bridge Loan CreditFacility and Revolving Credit Facility, which are subject to variability inLIBOR interest rates.  At September 30,2006, TC PipeLines had $307 million outstanding on its Bridge Loan CreditFacility and nil outstanding on its Revolving Credit Facility.  If LIBOR interest rates changed by one percent compared to the rates in effect at September 30, 2006, the Partnership’sinterest expense for the nine months ended September 30, 2006 would havechanged by approximately $1.5 million. This amount has been determined by considering the impact of thehypothetical interest rates on variable rate borrowings outstanding as ofSeptember 30, 2006.

The Partnership is alsoinfluenced by the same factors that influence Northern Border Pipeline andTuscarora.  Neither Northern BorderPipeline nor Tuscarora owns any of the natural gas it transports, therefore,neither assumes any of the related natural gas commodity price risk.

Northern Border Pipelineutilizes both fixed- and variable-rate debt and is exposed to market risk dueto the floating interest rates on its credit agreement.  Northern Border Pipeline regularly assessesthe impact of interest rate fluctuations on future cash flows and evaluateshedging opportunities to mitigate its interest rate risk.

Northern Border Pipelinemaintains a significant portion of its debt at fixed rates to reduce itssensitivity to interest rate fluctuations and utilizes interest rate swapagreements to convert fixed-rate debt to variable-rate debt to manage interestexpense.  As of September 30, 2006, 99per cent of Northern Border Pipeline’s outstanding debt was at fixed rates andthere were no interest rate swap agreements outstanding.

If interest rateshypothetically increased one per cent on Northern Border Pipeline’s variable-rateborrowings outstanding at September 30, 2006, its interest expense wouldincrease and its 2006 projected net income would decrease by approximately $0.1million.

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**PART I.  FINANCIAL INFORMATION (Concluded)**

**ITEM 4.  CONTROLS AND PROCEDURES**

**TCPipeLines, LP**

**Evaluationof disclosure controls and procedures.**

Based on theirevaluation of the Partnership’s disclosure controls and procedures as of theend of the period covered by this quarterly report, the President and ChiefExecutive Officer and Chief Financial Officer of the general partner of thePartnership have concluded that the Partnership’s disclosure controls andprocedures were effective in ensuring that the information required to bedisclosed by the Partnership in the reports that it files or submits under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms and thatinformation required to be disclosed by the Partnership in the reports that thePartnership files or submits under the Exchange Act is accumulated andcommunicated to the management of the general partner of the Partnership,including the President and Chief Executive Officer and Chief FinancialOfficer, as appropriate to allow timely decisions regarding requireddisclosure.

There were no changes inthe Partnership’s internal control over financial reporting during the mostrecent fiscal quarter that have materially affected, or are reasonably likelyto materially affect, the Partnership’s internal control over financialreporting.

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***PARTII.  OTHER INFORMATION***

***ITEM 1A.  RISK FACTORS***

***TC PipeLines, LP***

*Thefollowing modified risk factors should be read in conjunction with the riskfactors disclosed in Part I, Item 1A, “Risk Factors,” in our annual report onForm 10-K for the year ended December 31, 2005 and Part II, Item 1A, “RiskFactors” in our Quarterly reports on Form 10Q for the first and second quartersof 2006:*

***The outcome of Northern Border Pipeline’s pending ratecase could adversely impact the amount of cash distributed to us by NorthernBorder Pipeline.***

In November 2005,Northern Border Pipeline filed a rate case with the FERC requesting (1) a 7.8per cent increase in Northern Border Pipeline’s revenue requirement; (2) achange to its rate design establishing a new supply zone and market areautilizing a fixed rate per dekatherm and a dekatherm-mile rate, respectively;(3) an increase in the depreciation rate for transmission plant; (4) theimplementation of a short-term rate structure on a prospective basis; (5)continued inclusion of an income tax allowance in the rate calculation; (6) aroll-in of certain acquisition and expansion costs; (7) a decrease in ratebase; and (8) other changes to its rates. A number of Northern Border Pipeline’s customers and other interestedparties have protested the proposed changes and have claimed that NorthernBorder Pipeline’s rates should be lower than its proposed rates or its rates ineffect prior to the rate case.  NorthernBorder Pipeline’s proposed rates went into effect on May 1, 2006, subject torefund pending the outcome of the rate case. Any FERC determination that Northern Border Pipeline’s rates should beless than its proposed rates may have an adverse impact on the cash distributedto us.  If the FERC determines thatNorthern Border Pipeline’s rates should be below its proposed rates or itsrates in effect prior to the rate case, Northern Border would be required (1)to charge its customers those lower rates prospectively, following the FERC’sfinal determination on the rates, and (2) to refund its customers thedifference between the currently effective rates it began charging on May 1,2006, and the rates that were in effect prior to the rate case for the periodfrom May 1, 2006 until the FERC’s final determination on the rates goes intoeffect.  Northern Border Pipeline isaccruing cash reserves in an amount equal to that difference. Any FERCdetermination adverse to Northern Border Pipeline in its rate case may have anadverse impact on the cash distributed to us.

On September 18,2006, Northern Border Pipeline filed a stipulation and agreement whichdocuments the settlement in Northern Border Pipeline’s pending rate case.  The settlement was reached between NorthernBorder Pipeline and its participant customers and is supported by the FERCtrial staff.  The uncontested settlementwas certified on October 20, 2006 by the administrative law judge and providedto the FERC for approval.  The approvalprocess is expected to be completed by late 2006.  Based on the settlement of the rate case,Northern Border Pipeline expects to refund $10.6 million, recorded as aliability on its balance sheet at September 30, 2006, plus interest accruedthrough the date the refunds are paid.  NorthernBorder Pipeline anticipates refunds will be paid during the first quarter of2007.

The settlementestablishes maximum long-term rates and charges for transportation on NorthernBorder Pipeline’s system. Beginning in 2007, overall rates will be reduced,compared with rates prior to the filing, by approximately five per cent for thefull transportation route from Port of Morgan, Montana to the Chicago area. Theprevious charge of approximately $0.46 per Dth will now be approximately $0.44per Dth. The factors used in calculating depreciation expense for transmissionplant are being increased from the current 2.25 per cent to 2.40 per cent. Thesettlement also provides for seasonal rates for short-term transportationservices. The settlement includes a three-year moratorium on filing rate casesand participants challenging these rates, and requires that Northern BorderPipeline files a rate case within six years.

In May 2005, the FERC issued a policy statementpermitting the inclusion of an income tax allowance in the rates forpartnership interests held by partners with an actual or potential income taxliability. On December 16, 2005, the FERC issued its first significant case-specificpipeline review of the income tax allowance issue in another pipeline company’srate case.  The FERC reaffirmed its newincome tax allowance policy and directed the subject pipeline to providecertain evidence necessary for the pipeline to determine its income taxallowance. The new tax allowance policy and the December 16 order have beenappealed to the D.C. Circuit. As a result, the ultimate outcome of theseproceedings is not certain and could result in changes to the FERC’s treatmentof income tax allowances in cost of service. Depending upon how the policystatement on income tax allowances is applied in practice to pipelines owned bypartnerships, and whether it is ultimately upheld or modified on judicialreview, could affect the tariffs of FERC-regulated oil and natural gaspipelines like Northern Border Pipeline. We cannot predict the outcome of the case on appeal and its potentialeffect on Northern Border Pipeline’s rate case, or what, if any, effect anysuch outcome may have on Northern Border Pipeline. Northern Border Pipeline’spresent rates and recent rate case filing reflects an allowance for incometaxes of 35 per cent regardless of the partners’ taxpaying status.  Any FERC actions regarding this issue inNorthern Border Pipeline’s rate case that may adversely affect Northern BorderPipeline could have an adverse effect on the cash distributions we receive fromit.

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**ITEM 5. OTHER INFORMATION**

**TC PipeLines, LP**

On April 6, 2006,Northern Border Pipeline entered into an operating agreement with TransCanNorthwest Border Ltd. (TransCan), who will be Northern Border Pipeline’soperator effective April 1, 2007. TransCan is a wholly-owned subsidiary of TransCanada.  TransCanada develops and operates energyinfrastructure in North America.  TransCanadahas a significant network of pipelines that transport natural gas from WesternCanada to Canadian and U.S. markets. TransCan is an affiliate of TC PipeLines, who owns a fifty percentinterest in Northern Border Pipeline.

TransCanada hasadvised Northern Border Pipeline that it has retained, effective April 1, 2007,approximately 135 individuals, who currently operate Northern Border Pipeline’ssystem and will continue to operate Northern Border Pipeline’s system asemployees of TransCanada beginning April 1, 2007.  These employees are currently employed byONEOK Partners GP, Northern Border Pipeline’s current operator.

Additionally,TransCan has advised Northern Border Pipeline, effective as of April 1, 2007,that it has retained Paul F. Miller to assume the responsibilities of vice-presidentand general manager of TransCan and it has retained Patricia M. Wiederholt ascontroller, Northern Border Pipeline of TransCan.  Mr. Miller will have overall operational andfinancial performance responsibility for TransCan’s operations of NorthernBorder Pipeline.  Mr. Miller will be theequivalent of Northern Border Pipeline’s principal executive officer, and he iscurrently Vice President – Commercial, Northern Border Pipeline for ONEOKPartners GP.   Ms. Wiederholt iscurrently Partnership Controller for ONEOK Partners GP.  As controller of TransCan, Ms. Wiederholtwill be the equivalent of Northern Border Pipeline’s principal financialofficer.

 Northern Border Pipeline’s current operatingagreement with ONEOK Partners GP will terminate on March 31, 2007.  As a result William R. Cordes, President –Northern Border Pipeline for ONEOK Partners GP and Jerry L. Peters, Senior VicePresident – Chief Accounting Officer and Treasurer for ONEOK Partners GP, willno longer serve as the equivalent of Northern Border Pipeline’s principalexecutive officer and principal financial officer, respectively after March 31,2007.

As previouslydisclosed, Mr. Cordes will retire from ONEOK Partners GP effective April 1,2007.  On October 24, 2006, BoardwalkPipeline Partners, LP (Boardwalk) announced that Mr. Cordes was elected adirector and member of the audit committee of Boardwalk’s general partner.  Boardwalk, through its subsidiaries, is engagedin interstate transportation and storage of natural gas.

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**PARTII.  OTHER INFORMATION (Concluded)**

**ITEM 6. EXHIBITS**

**TC PipeLines, LP**

 
| No.    | ** ** | **Description**                                                                                                    |
|--------|------------|--------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                               |
| 31.1   |       | Certification of President and Chief Executive  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                               |
| 31.2   |       | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.               |
|   |       |                                                                                                               |
| 32.1   |       | Certification of President and Chief Executive  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                               |
| 32.2   |       | Certification of Chief Financial Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.               |

 

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### **SIGNATURES**

Pursuant to therequirements of the Securities and Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
| ** **                   | **TC PipeLines, LP**             |
|------------------------------|----------------------------------|
|                         | (a Delaware Limited Partnership) |
|                         |                             |
|                         | By:                              | TC PipeLines GP, Inc., its general partner |
|                         |                             |   |
|                         | By:                              | /s/  Gregory  A. Lohnes |   |
| Date:  November 3, 2006 |                             | Gregory A. Lohnes |
|                         |                             | Chief Financial Officer (duly authorized officer) |
|                         |                             |   |
|                         | By:                              | /s/  Amy Leong |   |
| Date:  November 3, 2006 |                             | Amy Leong |
|                         |                             | Controller (duly authorized officer) |

 

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