UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,
D.C. 20549  FORM 10-Q  QUARTERLY REPORT PURSUANT
  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period
ended June 30, 2002  Commission
File Number:  000-26091  TC PipeLines, LP (Exact
name of registrant as specified in its charter)  Delaware
  
  52-2135448(State
  or other jurisdiction of incorporation
  or organization)
  
  (I.R.S.
  Employer Identification 
  Number)110 Turnpike Road, Suite 203 
  Westborough, Massachusetts
  
  01581(Address
  of principal executive offices)
  
  (Zip
  code)508-871-7046Registrants
  telephone number, including area code  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesýNoo  As of
August 5, 2002 there were 15,627,129 of the registrants common units
outstanding. 
  
   TC
PipeLines, LP  Table of Contents  PART I.
  FINANCIAL INFORMATIONITEM 1.         Financial StatementsStatement of Income - Three and
  six months ended June 30, 2002 and 2001Statement of Comprehensive
  Income - Three and six months ended June 30, 2002 and 2001Balance Sheet - June 30, 2002 and
  December 31, 2001Statement of Cash Flows - Six
  months ended June 30, 2002 and 2001Notes to
  Condensed Financial StatementsITEM
  2.         Managements Discussion and
  Analysis of Financial Condition and Results of OperationsResults of
  Operations of TC PipeLines, LPLiquidity
  and Capital Resources of TC PipeLines, LPResults
  of Operations of Northern Border Pipeline CompanyLiquidity
  and Capital Resources of Northern Border Pipeline CompanyResults
  of Operations of Tuscarora Gas Transmission CompanyLiquidity
  and Capital Resources of Tuscarora Gas Transmission CompanyITEM
  3.         Quantitative and Qualitative
  Disclosures about Market RiskPART II.
  OTHER INFORMATIONITEM 6.         Exhibits and Reports on Form 8-K  2 
   PART I.   FINANCIAL INFORMATION  ITEM 1.   FINANCIAL STATEMENTS  TC
PipeLines, LP  Statement of
Income  (unaudited)(thousands of dollars, except
  per unit amounts)
  
  Three months ended
  June 30
  
  Six months ended
  June 302002
  
  2001
  
  2002
  
  2001Equity Income
  from Investment in Northern Border Pipeline Company
  
  11,552
  
  9,489
  
  22,853
  
  20,256Equity Income
  from Investment in Tuscarora Gas Transmission Company
  
  1,027
  
  868
  
  2,113
  
  1,779General and
  Administrative Expenses
  
  (304
  )
  (299
  )
  (681
  )
  (656
  )Financial
  Charges
  
  (61
  )
  (265
  )
  (149
  )
  (623
  )Net Income
  
  12,214
  
  9,793
  
  24,136
  
  20,756Net Income AllocationCommon units
  
  9,832
  
  7,935
  
  19,493
  
  16,882Subordinated
  units
  
  1,881
  
  1,517
  
  3,728
  
  3,228General partner
  
  501
  
  341
  
  915
  
  64612,214
  
  9,793
  
  24,136
  
  20,756Net Income per
  Unit
  
  $
  0.67
  
  $
  0.54
  
  $
  1.33
  
  $
  1.15Units
  Outstanding (thousands)
  
  17,500
  
  17,500
  
  17,500
  
  17,500  Statement of
Comprehensive Income  (unaudited)
  (thousands of dollars)
  
  Three months ended
  June 30
  
  Six months ended
  June 302002
  
  2001
  
  2002
  
  2001Net Income
  
  12,214
  
  9,793
  
  24,136
  
  20,756Other
  Comprehensive IncomeTransition
  adjustment from adoption of SFAS No. 133
  
  
  
  
  
  
  
  3,104Change
  associated with current period hedging transactions
  
  (866
  )
  1,550
  
  (698
  )
  2,282Total
  Comprehensive Income
  
  11,348
  
  11,343
  
  23,438
  
  26,142  See accompanying Notes to Condensed Financial Statements.  3 
   TC
PipeLines, LP  Balance Sheet  (thousands of dollars)
  
  June 30,
  2002
  (unaudited)
  
  December
  31,
  2001AssetsCurrent AssetsCash
  
  6,268
  
  9,194Investment in
  Northern Border Pipeline Company
  
  248,454
  
  250,078Investment in
  Tuscarora Gas Transmission Company
  
  29,042
  
  29,297Deferred Amounts
  
  170
  
  119283,934
  
  288,688Liabilities and Partners EquityCurrent
  LiabilitiesAccounts payable
  
  395
  
  426Accrued interest
  
  27
  
  58422
  
  484Long-Term Debt
  
  11,500
  
  21,500Partners EquityCommon units
  
  223,737
  
  218,935Subordinated
  units
  
  40,148
  
  39,229General partner
  
  5,817
  
  5,532Other
  comprehensive income
  
  2,310
  
  3,008272,012
  
  266,704283,934
  
  288,688  Statement of Cash
Flows  (unaudited)(thousands of dollars)
  
  Six months ended June 302002
  
  2001Cash
  Generated from OperationsNet income
  
  24,136
  
  20,756Add/(Deduct):Distributions
  received in excess of/(less than) equity income
  
  1,181
  
  (250
  )Increase in
  operating working capital
  
  (62
  )
  (270
  )25,255
  
  20,236Investing ActivitiesDeferred amounts
  
  (51
  )
  (45
  )Financing ActivitiesDistributions
  paid
  
  (18,130
  )
  (17,100
  )Repayment of
  long-term debt
  
  (10,000
  )
  (28,130
  )
  (17,100
  )(Decrease)/Increase in Cash
  
  (2,926
  )
  3,091Cash, Beginning of Period
  
  9,194
  
  1,566Cash, End of Period
  
  6,268
  
  4,657  See accompanying Notes to Condensed
Financial Statements.  4 
   TC PipeLines, LP  Notes to Condensed Financial
Statements (unaudited)  Note 1    Basis of Presentation TC
PipeLines, LP, and its subsidiary limited partnerships, TC PipeLines
Intermediate Limited Partnership and TC Tuscarora Intermediate Limited
Partnership, all Delaware limited partnerships, are collectively referred to
herein as TC PipeLines or the Partnership. 
The Partnership commenced operations on May 28, 1999.  The financial statements
have been prepared by management in accordance with United States generally
accepted accounting principles.  Other
comprehensive income recorded by TC PipeLines arises through its equity
investments in Northern Border Pipeline Company (Northern Border Pipeline) and
Tuscarora Gas Transmission Company (Tuscarora) and relates to cash flow hedges
transacted by Northern Border Pipeline and Tuscarora.  Amounts are stated in United States dollars.  Since a determination of
many assets, liabilities, revenues and expenses is dependent upon future
events, the preparation of these financial statements requires the use of
estimates and assumptions which have been made using careful judgment.  In the opinion of management, these
financial statements have been properly prepared within reasonable limits of
materiality and include all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the results of operations for
the three and six months ended June 30, 2002 and 2001, the financial position
as at June 30, 2002 and December 31, 2001 and cash flows for the six months
ended June 30, 2002 and 2001.  The results of operations
for the three and six months ended June 30, 2002 and 2001 are not necessarily
indicative of the results that may be expected for a full fiscal year.  The interim financial statements should be
read in conjunction with the Partnerships financial statements and notes
included in TC PipeLines Annual Report on Form 10-K for the year ended
December 31, 2001.  Note 2    Investment in Northern Border Pipeline Company The Partnership owns a 30% general partner interest in Northern Border
Pipeline, a partnership which owns a 1,249-mile United States interstate
pipeline system that transports natural gas from the Montana-Saskatchewan
border to markets in the midwestern United States. The remaining 70%
partnership interest in Northern Border Pipeline is held by Northern Border
Partners, L.P., a publicly traded limited partnership that is not affiliated
with the Partnership.  The general
partners of Northern Border Partners, L.P. are controlled by affiliates of
Enron Corp. (Enron), which hold a 1.65% general partner interest, and The
Williams Companies, Inc. (Williams), which holds the remaining 0.35% general
partner interest.  As a result, TC
PipeLines has one member and controls 30% of the voting power of the Northern
Border Pipeline management committee, Enron has two members and controls 57.75%
of the voting power, and Williams has the one remaining member and 12.25% of
the voting power of the Northern Border Pipeline management committee.  The Northern Border pipeline system is
operated by Northern Plains Natural Gas Company, a wholly owned subsidiary of
Enron.  Northern Border Pipeline is
regulated by the Federal Energy Regulatory Commission (FERC).  The Northern Border
pipeline system serves more than 50 firm transportation shippers with diverse
operating and financial profiles.  Enron  5 
   Notes to
Condensed Financial Statements (continued) (unaudited)  North
America (ENA), an affiliate of Enron that has filed for Chapter 11 bankruptcy
protection, is a party to a shipper contract obligating ENA to pay demand
charges for approximately 1.7% of Northern Border Pipelines capacity.  ENA must effect a permanent release of the
contract capacity or assume or reject the contract by October 31, 2002.  Northern Border Pipeline has estimated its
financial exposure for the last six months of 2002 to be approximately $1.7
million of revenues, with TC PipeLines share equating to approximately $0.5
million.  6 
   Notes to
Condensed Financial Statements (continued) (unaudited)  TC PipeLines uses the
equity method of accounting for its investment in Northern Border
Pipeline.  TC PipeLines equity income
for the three and six months ended June 30, 2002 and 2001 represents 30% of the
net income of Northern Border Pipeline for the same periods.  Retained earnings of TC PipeLines at June
30, 2002 and December 31, 2001 include undistributed earnings from Northern
Border Pipeline of $4.5 million and $5.7 million, respectively.  The following sets out summarized financial
information representing 100% of the operations of Northern Border Pipeline for
the three and six months ended June 30, 2002 and 2001 and as at June 30, 2002
and December 31, 2001.  Three
  months ended June 30
  
  Six months
  ended June 30(millions of dollars)
  
  2002
  
  2001
  
  2002
  
  2001Northern Border Pipeline Income StatementRevenues
  
  80.2
  
  77.0
  
  158.3
  
  154.0Costs
  and expenses
  
  (13.7
  )
  (16.0
  )
  (27.4
  )
  (28.2
  )Depreciation
  
  (14.5
  )
  (14.3
  )
  (29.0
  )
  (28.7
  )Financial
  charges
  
  (13.8
  )
  (13.7
  )
  (26.8
  )
  (28.8
  )Other
  income/(expense)
  
  0.3
  
  (1.4
  )
  1.1
  
  (0.8
  )Net
  income
  
  38.5
  
  31.6
  
  76.2
  
  67.5  Northern Border
Pipeline has recorded other comprehensive income of $(2.9) million and $5.2
million, for the three months ended June 30, 2002 and 2001, respectively and
$(1.6) million and $18.0 million (including transition adjustment of $10.3
million) for the six months ended June 30, 2002 and 2001, respectively.  (millions of dollars)
  
  June 30,
  2002
  
  December 31,
  2001
  (audited)Northern Border Pipeline Balance
  SheetAssetsCash and cash
  equivalents
  
  5.5
  
  11.0Other current assets
  
  36.7
  
  36.3Plant, property
  and equipment, net
  
  1,660.1
  
  1,685.7Other assets
  
  23.8
  
  18.91,726.1
  
  1,751.9Liabilities and Partners EquityCurrent
  liabilities
  
  125.5
  
  399.0Reserves and
  deferred credits
  
  5.4
  
  5.6Long-term debt,
  net of current maturities
  
  767.1
  
  513.7Partners equityPartners
  capital
  
  820.6
  
  824.4Accumulated
  other comprehensive income
  
  7.5
  
  9.21,726.1
  
  1,751.9  7 
   Notes to
Condensed Financial Statements (continued) (unaudited)  Note 3    Investment in Tuscarora Gas Transmission Company The Partnership owns a 49% general partner interest in Tuscarora, a
partnership that owns a 229-mile United States interstate pipeline system that
transports natural gas from Oregon, where it interconnects with facilities of
PG&E National Energy Group, Gas Transmission Northwest, to northern
Nevada.  The remaining general partner
interests in Tuscarora are held 50% by Sierra Pacific Resources and 1% by
TransCanada PipeLines Limited, the parent of the Partnerships general
partner.  The Tuscarora pipeline system
is operated by Tuscarora Gas Operating Company, a wholly owned subsidiary of
Sierra Pacific Resources.  Sierra
Pacific Power Company, a subsidiary of Sierra Pacific Resources, is Tuscaroras
largest shipper, accounting for 94% of Tuscaroras available capacity.  Tuscarora is regulated by the FERC.  The Partnership uses the
equity method of accounting for its investment in Tuscarora.  TC PipeLines equity income for the three
and six months ended June 30, 2002 and 2001 represents 49% of the net income of
Tuscarora for the same periods. 
Retained earnings of TC PipeLines at June 30, 2002 and December 31, 2001
include undistributed earnings from Tuscarora of $0.6 million and $0.6 million,
respectively.  The following sets out
summarized financial information representing 100% of the operations of
Tuscarora for the three and six months ended June 30, 2002 and 2001 and as at
June 30, 2002 and December 31, 2001.  Three months ended June 30
  
  Six months ended June 30(millions of dollars)
  
  2002
  
  2001
  
  2002
  
  2001Tuscarora Income StatementRevenues
  
  5.6
  
  5.3
  
  11.2
  
  10.5Costs
  and expenses
  
  (0.7
  )
  (0.6
  )
  (1.3
  )
  (1.2
  )Depreciation
  
  (1.2
  )
  (1.2
  )
  (2.4
  )
  (2.3
  )Financial
  charges
  
  (1.5
  )
  (1.6
  )
  (3.0
  )
  (3.1
  )Other
  income
  
  0.2
  
  0.1
  
  0.3
  
  0.2Net
  income
  
  2.4
  
  2.0
  
  4.8
  
  4.1  Tuscarora has recorded other comprehensive income of less than $0.1
million and nil for the three months ended June 30, 2002, and 2001,
respectively, and $(0.4) million and nil for the six months ended June 30, 2002
and 2001, respectively.  (millions of dollars)
  
  June 30, 2002
  
  December 31, 2001
  (audited)Tuscarora Balance SheetAssetsCash and cash
  equivalents
  
  1.2
  
  1.1Other current
  assets
  
  2.1
  
  2.1Plant, property
  and equipment, net
  
  129.4
  
  121.3Other assets
  
  1.4
  
  1.6134.1
  
  126.1Liabilities and Partners EquityCurrent
  liabilities
  
  7.8
  
  7.7Long-term debt,
  net of current maturities
  
  88.0
  
  80.0Partners equityPartners
  capital
  
  38.2
  
  37.9Accumulated
  other comprehensive income
  
  0.1
  
  0.5134.1
  
  126.1  8 
   Notes to
Condensed Financial Statements (continued) (unaudited)  Note 4    Credit Facilities and Long-Term Debt On August 22, 2000, the Partnership entered into an unsecured
three-year credit facility (Revolving Credit Facility) with Bank One, NA, as
agent, under which the Partnership may borrow up to an aggregate principal
amount of $30 million. Loans under the Revolving Credit Facility bear interest
at a floating rate.  The Revolving
Credit Facility matures on August 31, 2003. Amounts borrowed may be repaid in
part or in full prior to that time without penalty.  The Revolving Credit Facility may be used to finance capital
expenditures and for other general purposes. 
At June 30, 2002 and December 31, 2001, the Partnership had borrowings
of $11.5 million and $21.5 million, respectively, outstanding under the
Revolving Credit Facility.  The fair
value of the Revolving Credit Facility approximates its carrying value because
the interest rate is a floating rate. 
The interest rate on the Revolving Credit Facility averaged 2.8% and
5.5% for the three months ended June  9 
   Notes to
Condensed Financial Statements (concluded) (unaudited)  30, 2002 and 2001, respectively, 2.8% and 6.3% for the six months ended
June 30, 2002 and 2001, respectively, and was 2.9% and 3.0% at June 30, 2002
and December 31, 2001, respectively.  On May 28, 2001, the
Partnership renewed its $40 million unsecured two-year revolving credit
facility (TransCanada Credit Facility) with TransCanada Pipeline USA Ltd., an
affiliate of the general partner.  The
TransCanada Credit Facility bears interest at London Interbank Offered Rate
plus 1.25%. The purpose of the TransCanada Credit Facility is to provide
borrowings to fund capital expenditures, to fund capital contributions to
Northern Border Pipeline, Tuscarora, and any other entity in which the
Partnership directly or indirectly acquires an interest, to fund working
capital and for other general business purposes, including temporary funding of
cash distributions to partners, if necessary. At June 30, 2002 and December 31,
2001 the Partnership had no amount outstanding under the TransCanada Credit
Facility.  Note 5    Net Income per Unit Net income per unit is
computed by dividing net income, after deduction of the general partners
allocation, by the weighted average number of common and subordinated units
outstanding.  The general partners
allocation is equal to an amount based upon the general partners 2% interest,
adjusted to reflect an amount equal to incentive distributions.  Net income per unit was determined as
follows:  Three months ended June 30
  
  Six months ended June 30(thousands of dollars, except per unit amounts)
  
  2002
  
  2001
  
  2002
  
  2001Net income
  
  12,214
  
  9,793
  
  24,136
  
  20,756Net income allocated to general partner
  
  (245
  )
  (197
  )
  (483
  )
  (416
  )Adjustment to reflect incentive
  distribution income allocation
  
  (256
  )
  (144
  )
  (432
  )
  (230
  )(501
  )
  (341
  )
  (915
  )
  (646
  )Net income allocable to units
  
  11,713
  
  9,452
  
  23,221
  
  20,110Weighted average units outstanding
  (thousands)
  
  17,500
  
  17,500
  
  17,500
  
  17,500Net income per unit
  
  $
  0.67
  
  $
  0.54
  
  $
  1.33
  
  $
  1.15  Note
6       Distributions On July 22, 2002, the
Partnership declared a cash distribution of $0.525 per unit for the quarter
ended June 30, 2002.  The distribution
is payable on August 14, 2002 to unitholders of record as of July 31, 2002.  Note
7       Subsequent Event On August 1, 2002, 936,435 subordinated units, representing one third
of the outstanding subordinated units held by the general partner, were
converted into an equal number of common units as provided for in the amended
and restated partnership agreement of TC PipeLines.  10 
   ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS  TC
PipeLines, LP  Cautionary
Statement Regarding Forward-Looking Information This quarterly report includes
forward-looking statements regarding future events and the future financial
performance of TC PipeLines, LP.  All
forward-looking statements are based on the Partnerships beliefs as well as
assumptions made by and information currently available to the
Partnership.  Words such as believes,
expects, intends, forecasts, projects, and similar expressions,
identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. These statements reflect the Partnerships
current views with respect to future events and are subject to various risks,
uncertainties and assumptions including: ·regulatory
decisions, particularly those of the Federal Energy Regulatory Commission; ·majority
control of the Northern Border Pipeline Company management committee by
affiliates of Enron Corp., which has filed for bankruptcy protection; ·the
failure of a shipper on either one of the Partnerships pipelines to perform
its contractual obligations, including Sierra Pacific Power Company, the
shipper of 94% of Tuscarora Gas Transmission Companys capacity; ·cost
of acquisitions; ·future
demand for natural gas; ·overcapacity
in the industry; and ·prevailing
economic conditions, particularly conditions of the capital and equity markets; and other risks discussed in the
Partnerships filings with the Securities and Exchange Commission (SEC),
including the Partnerships Annual Report on Form 10-K for the year ended
December 31, 2001.  If one or more of
these risks or uncertainties materialize, or if the underlying assumptions
prove incorrect, actual results may vary materially from those described in the
forward-looking statements.  Results
of Operations of TC PipeLines, LP TC PipeLines, LP was formed in 1998 as a Delaware
limited partnership to acquire, own and participate in the management of United
States based pipeline assets.  TC
PipeLines, LP, and its subsidiary limited partnerships, TC PipeLines
Intermediate Limited Partnership, and TC Tuscarora Intermediate Limited
Partnership, all Delaware limited partnerships, are collectively referred to
herein as TC PipeLines or  11 
   the Partnership. 
TC PipeLines GP, Inc., a wholly owned subsidiary of TransCanada
PipeLines Limited, is the general partner of the Partnership.  The Partnership owns a 30% general partner interest in Northern Border
Pipeline. The Partnership acquired this asset from affiliates of its general
partner.  The remaining 70% general
partner interest in Northern Border Pipeline is held by Northern Border
Partners, L.P., a publicly traded limited partnership not affiliated with TC
PipeLines.  The general partners of
Northern Border Partners, L.P. are controlled by affiliates of Enron (see
Update on the Impact of Enrons Chapter 11 Filing on Northern Border
Pipelines Business"), which hold a 1.65% general partner interest, and
The Williams Companies, Inc., which holds the remaining 0.35% general partner
interest.  As a result, TC PipeLines has
one member and controls 30% of the voting power of the Northern Border Pipeline
management committee, Enron has two members and controls 57.75% of the voting
power, and Williams has the one remaining member and 12.25% of the voting power
of the Northern Border Pipeline management committee.  The Northern Border pipeline system is operated by Northern
Plains Natural Gas Company, a wholly owned subsidiary  12 
   of
Enron (see Update on the Impact of Enrons Chapter 11 Filing on Northern
Border Pipelines Business"). 
Northern Border Pipeline owns a 1,249-mile United States interstate pipeline
system that transports natural gas from the Montana-Saskatchewan border to
markets in the midwestern United States.  The Partnership also owns a 49% general partner
interest in Tuscarora Gas Transmission Company.  The Partnership acquired this interest from affiliates of its
general partner in September 2000. The
remaining general partner interests in Tuscarora are held 50% by Sierra Pacific
Resources and 1% by TCPL Tuscarora Ltd., an indirect subsidiary of TransCanada,
the parent of the Partnerships general partner.  The Tuscarora pipeline system is operated by Tuscarora Gas
Operating Company, a wholly owned subsidiary of Sierra Pacific Resources.  Sierra Pacific Power Company, a subsidiary
of Sierra Pacific Resources, is Tuscaroras largest shipper, accounting for 94%
of Tuscaroras available capacity. 
Tuscarora owns a 229-mile United States interstate pipeline system that
transports natural gas from Oregon, where it interconnects with facilities of
PG&E National Energy Group, Gas Transmission Northwest, to northern Nevada.  On
March 29, 2002, the Public Utility Commission of Nevada (PUCN) rejected the
recovery by Nevada Power Co., a subsidiary of Sierra Pacific Resources, of
approximately $437 million of the approximate $922 million in deferred energy
costs sought by Nevada Power.  Nevada
Power is allowed to recover the remaining $485 million in deferred energy costs
over the next three years.  As a result,
Sierra Pacific Resources credit rating for unsecured debt, as well as such
credit rating for its subsidiaries, Sierra Pacific Power and Nevada Power, were
downgraded by Standard & Poors, a Division of The McGraw-Hill Companies,
Inc. and Moodys Investor Services, Inc. to below investment grade.  On May 28, 2002, the PUCN rejected the
recovery by Sierra Pacific Power, of approximately $55 million of the
approximate $205 million in deferred energy costs sought by Sierra Pacific
Power.  Sierra Pacific Power is allowed
to recover the remaining $150 million in deferred energy costs over the next
three years.  While TC PipeLines has no
current indication that Sierra Pacific Power is in default under its
contractual obligations to Tuscarora, TC PipeLines is unable to predict the
future financial condition of Sierra Pacific Power and, accordingly, its long-term
ability to meet its obligations under existing agreements with Tuscarora
including Tuscarora Gas Operating Companys obligation under the operating
agreement with Tuscarora.  Critical Accounting
Policy TC PipeLines accounts for its investments in both Northern Border
Pipeline and Tuscarora using the equity method of accounting as  13 
   detailed
in notes two and three to the financial statements.  The equity method of accounting is appropriate where the investor
is able to exercise significant influence over the operating and financial
policies of an investee.  TC PipeLines
is able to exercise significant influence over its investments in Northern
Border Pipeline and Tuscarora as evidenced by its representation on their
respective management committees.  Second Quarter 2002
Compared with Second Quarter 2001 Net income increased $2.4 million, or 24%, to $12.2
million for the second quarter of 2002, compared to $9.8 million for the same
period last year.  This increase is
primarily due to increased equity income from Northern Border Pipeline.  Equity income from the Partnerships investment in
Northern Border Pipeline increased $2.1 million, or 22%, to $11.6 million for
the second quarter of 2002, compared to $9.5 million for the same period last
year.   Approximately $1.0 million of
the increase is due to incremental revenues from Project 2000, Northern Border
Pipelines 35-mile pipeline extension and expansion, which was completed in
October 2001.  Uncollected revenues
associated with the transportation capacity held by Enron North America (ENA),
an affiliate of Enron that has filed for Chapter 11 bankruptcy protection, (see
Update on the Impact of Enrons Chapter 11 Filing on Northern Border
Pipelines Business) offsets the increase in equity income by approximately
$0.1 million.   Approximately $0.5
million of the increase in Northern Border Pipeline equity income is due to a
decrease in operations and maintenance expenses.  In addition, a charge booked in the second quarter of 2001 for an
uncollectible receivable from a telecommunications company that had purchased
excess capacity on Northern Border Pipelines communication system caused 2002
second quarter equity income from Northern Border Pipeline to be approximately
$0.5 million higher than last year.  Equity income from the Partnerships investment in Tuscarora was $1.0
million for the second quarter of 2002, representing a $0.1 million increase
from the 2001 second quarter equity income of $0.9 million.  The Partnership reported general and administrative expenses of $0.3
million for each of the second quarters of 2002 and 2001. Financial charges of the Partnership decreased $0.2
million, to $0.1 million for the second quarter of 2002, compared to $0.3 million
for the same period last year.  This
decrease is due primarily to lower average debt balances and lower interest
rates (see Liquidity and Capital Resources of TC PipeLines, LP - Cash Flows
from Financing Activities).  14 
   Six
Months Ended June 30, 2002 Compared with Six Months Ended June 30, 2001 Net income increased $3.3 million, or 16%, to $24.1
million for the first six months of 2002, compared to $20.8 million for the
same period last year.  This increase is
primarily due to increased equity income from Northern Border Pipeline and
reduced financial charges.  Equity income from the Partnerships investment in
Northern Border Pipeline increased $2.6 million, or 13%, to $22.9 million for
the first six months  of 2002, compared
to $20.3 million for the same period last year.  Approximately $2 million of the increase is due to incremental
revenues from Project 2000.  
Approximately $0.5 million relating to uncollected revenues associated
with transportation capacity held by ENA (see Update on the Impact of Enrons
Chapter 11 Filing on Northern Border Pipelines Business) partially offsets
the increase in equity income from Northern Border Pipeline.  Lower operations and maintenance expenses
and lower interest expense, resulting from lower average interest rates
increased equity income by approximately $0.9 million and $0.6 million,
respectively.  In addition, a charge
booked in the second quarter of 2001 for an uncollectible receivable from a
telecommunications company that had purchased excess capacity on Northern
Border Pipelines communication system caused equity income to be approximately
$0.5 million higher for the first six months of 2002 compared to the same
period last year.  Equity income from
Northern Border Pipeline was $0.7 million lower for the first six months of
2002 compared to the same period last year due to increased ad valorem taxes in
2002 as a result of the completion of Project 2000 and because smaller
adjustments to estimates of ad valorem taxes were required in the first six
months of 2002 compared to the same period last year.  Equity income from the Partnerships investment in Tuscarora increased
$0.3 million, or 17%, to $2.1 million for the first six months of 2002,
compared to $1.8 million for the same period last year.  The Partnership reported general and administrative expenses of $0.7
million for each of the first six months of 2002 and 2001.  Financial charges of the Partnership decreased $0.5 million to $0.1
million for the first six months of 2002, compared to $0.6 million for the same
period last year.  This decrease is due
primarily to lower average debt balances and lower interest rates (see
Liquidity and Capital Resources of TC PipeLines, LP - Cash Flows from Financing
Activities).  15 
   Liquidity
and Capital Resources of TC PipeLines, LP  Early Conversion of Subordinated Units On August 1, 2002, 936,435 subordinated units, representing one third
of the outstanding subordinated units held by the general partner, were
converted into an equal number of common units as provided for in the amended
and restated partnership agreement of TC PipeLines.  Cash Distribution Policy of TC PipeLines, LP During the subordination period, which generally cannot end before June
30, 2004, the Partnership will make distributions of available cash as defined
in the partnership agreement in the following manner: First, 98% to the common
units, pro rata, and 2% to the general partner, until there has been
distributed for each outstanding common unit an amount equal to the minimum
quarterly distribution for that quarter; Second, 98% to the common
units, pro rata, and 2% to the general partner, until there has been
distributed for each outstanding common unit an amount equal to any arrearages
in payment of the minimum quarterly distribution on the common units for that
quarter and for any prior quarters during the subordination period; Third, 98% to the
subordinated units, pro rata, and 2% to the general partner, until there has
been distributed for each outstanding subordinated unit an amount equal to the
minimum quarterly distribution for that quarter; and Thereafter, in a manner
whereby the general partner has rights (referred to as incentive distribution
rights) to receive increasing percentages of excess quarterly distributions
over specified distribution thresholds.  2002 Second Quarter
Cash Distribution On July 22, 2002, the board of directors of the general
partner declared the Partnerships 2002 second quarter cash distribution in the
amount of $0.525 per unit, representing a $0.025 per unit increase from the
previous quarterly distribution level of $0.50 per unit.  This distribution will be paid on August 14,
2002 to unitholders of record as of July 31, 2002.  The second quarter cash distribution totaling $9.6 million will
be paid in the following manner:  $7.7
million to common unitholders (including $1.5 million to an affiliate of
TransCanada as holder of 2,800,000 common units), $1.5 million to the general
partner as holder of the subordinated units, and $0.4 million to the general
partner as holder of incentive distribution rights and in respect of its 2%
general partner interest.  General On April 23, 2002, the Partnership filed a shelf registration statement
with the SEC to sell, from time to time, up to $200 million  16 
   of common units representing limited partner interests and/or debt
securities.  The Partnership intends to
use the net proceeds for general purposes, repayment of debt, future
acquisitions, capital expenditures and working capital.  Cash Flows from Operating Activities Cash flows provided by operating activities increased $5.1 million, or
25%, to $25.3 million for the first six months of 2002, compared to $20.2
million for the same period last year. 
For the first six months of 2002 and 2001, the Partnership received cash
distributions of $24.0 million and $21.0 million, respectively, from its equity
investment in Northern Border Pipeline. 
The Partnership also received cash distributions of $2.2 million and
$0.8 million from its equity investment in Tuscarora for the first six months
of 2002 and 2001, respectively. 
Tuscarora did not make a cash distribution in the first quarter of 2001
due to the timing of the implementation of its cash distribution policy.  Cash Flows from Financing Activities In the first six months of 2002, the Partnership paid $18.1 million in
cash distributions: $14.7 million to common unitholders, $2.8 million to the
general partner as holder of the subordinated units, and $0.6 million to the
general partner, as holder of incentive distribution rights and in respect of
its 2% general partner interest.  This
compares to cash distributions of $17.1 million, which were paid by the
Partnership in the first six months of 2001.  On August 22, 2000, the Partnership entered into an unsecured
three-year credit facility (Revolving Credit Facility) with Bank One, NA, as
agent, under which the Partnership may borrow up to an aggregate principal
amount of $30 million.  Loans under the
Revolving Credit Facility bear interest, at the option of the Partnership, at a
one-, two-, three-, or six-month London Interbank Offered Rate (LIBOR) plus
0.875% or at a floating rate based on the higher of the federal funds effective
rate plus 0.5% or the prime rate.  The
Revolving Credit Facility matures on August 31, 2003. Amounts borrowed may be
repaid in part or in full prior to that time without penalty.  The Revolving Credit Facility may be used to
finance capital expenditures and for other general purposes.  On September 1, 2000, the Partnership
borrowed $24.5 million under the Revolving Credit Facility to fund a portion of
the purchase price of the 49% general partner interest in Tuscarora.  In the second quarter of 2002 the
Partnership made principal re-payments on the Revolving Credit Facility of $10
million.  At June 30, 2002, the Partnership
had borrowings of $11.5 million outstanding under the Revolving Credit Facility.
The interest rate on the Revolving Credit Facility averaged 2.8% for both the
three and six months ended June 30, 2002 and was 2.9% at June 30, 2002.  17 
   On May 28, 2001, the Partnership renewed its $40 million unsecured
two-year revolving credit facility (TransCanada Credit Facility) with
TransCanada PipeLine USA Ltd., an affiliate of the general partner.  The TransCanada Credit Facility bears
interest at LIBOR plus 1.25%.  The
purpose of the TransCanada Credit Facility is to provide borrowings to fund
capital expenditures, to fund capital contributions to Northern Border
Pipeline, Tuscarora, and any other entity in which the Partnership directly or
indirectly acquires an interest, to fund working capital and for other general
business purposes, including temporary funding of cash distributions to
partners, if necessary.  At June 30,
2002, the Partnership had no amount outstanding under the TransCanada Credit
Facility.  Capital
Requirements To the extent TC PipeLines has any capital requirements with respect to
its investments in Northern Border Pipeline and Tuscarora or makes acquisitions
in 2002, TC PipeLines expects to fund these requirements with operating cash
flows, debt and/or equity.  Since the interests in Northern Border Pipeline and Tuscarora are
currently the Partnerships only significant sources of income, the
Partnerships results of operations are influenced by and reflect the same
factors that influence the financial results of Northern Border Pipeline and
Tuscarora.  Results of Operations of Northern Border Pipeline
Company The following sets out summarized financial
information for Northern Border Pipeline for the three and six months ended
June 30, 2002 and 2001 and as at June 30, 2002 and December 31, 2001. Amounts
discussed represent 100% of the operations of Northern Border Pipeline, of
which the Partnership has held a 30% interest since May 28, 1999.  18 
   (unaudited) 
  (millions of dollars)
  
  Three
  months ended June 30
  
  Six months
  ended June 302002
  
  2001
  
  2002
  
  2001Northern Border Pipeline Income StatementRevenues
  
  80.2
  
  77.0
  
  158.3
  
  154.0Costs
  and expenses
  
  (13.7
  )
  (16.0
  )
  (27.4
  )
  (28.2
  )Depreciation
  
  (14.5
  )
  (14.3
  )
  (29.0
  )
  (28.7
  )Financial
  charges
  
  (13.8
  )
  (13.7
  )
  (26.8
  )
  (28.8
  )Other
  income/(expense)
  
  0.3
  
  (1.4
  )
  1.1
  
  (0.8
  )Net
  income
  
  38.5
  
  31.6
  
  76.2
  
  67.5  (millions of dollars)
  
  June 30,
  2002
  (unaudited)
  
  December
  31, 2001Northern Border Pipeline Balance
  SheetAssetsCash and cash equivalents
  
  5.5
  
  11.0Other current
  assets
  
  36.7
  
  36.3Plant, property
  and equipment, net
  
  1,660.1
  
  1,685.7Other assets
  
  23.8
  
  18.91,726.1
  
  1,751.9Liabilities and Partners EquityCurrent
  liabilities
  
  125.5
  
  399.0Reserves and
  deferred credits
  
  5.4
  
  5.6Long-term debt,
  net of current maturities
  
  767.1
  
  513.7Partners equityPartners
  capital
  
  820.6
  
  824.4Accumulated
  other comprehensive income
  
  7.5
  
  9.21,726.1
  
  1,751.9  Second Quarter 2002
Compared with Second Quarter 2001 Net income to partners increased $6.9 million (22%) for the second
quarter of 2002, as compared to the same period in 2001.  Northern Border Pipelines operating results
benefited from increased operating revenues from Project 2000 as well as
reductions in operations and maintenance expenses.  The 2001 results also included a write-off for an uncollectible
receivable.  Revenues  increased $3.2 million (4%) for the second
quarter of 2002, as compared to the same period in 2001, due primarily to
additional revenues of approximately $3.4 million related to Project 2000.  The impact of the additional revenues
associated with Project 2000 was partially offset by uncollected revenues
associated with the transportation capacity held by ENA, which filed for
Chapter 11 bankruptcy protection in December 2001 (see Update on the Impact of
Enrons Chapter 11 Filing on Northern Border Pipelines Business).  19 
   For the second
quarter of 2002, the revenues lost on this capacity totaled approximately $0.3
million.  Costs and expenses
consist of operations and maintenance expense and taxes other than income.  Operations and maintenance
expense decreased $1.8 million (20%) for the second quarter of 2002, as
compared to the same period in 2001,due primarily to a decrease in
employee benefits and administrative expenses.  Other income
(expense) increased $1.6 million for the second quarter of 2002, as compared to
the same period in 2001.  The amount for
the second quarter of 2001 includes a charge of approximately $1.7 million for
an uncollectible receivable from a telecommunications company that had
purchased excess capacity on Northern Border Pipelines communication system.  Six Months Ended
June 30, 2002 Compared with Six Months Ended June 30, 2001 Net income to partners increased $8.7 million (13%) for the first
half of 2002, as compared to the same period in 2001.  Northern Border Pipelines operating results benefited from
increased operating revenues from Project 2000, reductions in interest expense
due to lower interest rates as well as reductions in operations and maintenance
expenses.  The 2001 results also
included a write-off for an uncollectible receivable.  Revenues increased
$4.3 million (3%) for the first half of 2002, as compared to the same period in
2001, due primarily to additional revenues of approximately $6.8 million
related to Project 2000.  The impact of
the additional revenues associated with Project 2000 was partially offset by
uncollected revenues associated with the transportation capacity held by ENA,
which filed for Chapter 11 bankruptcy protection in December 2001 (see Update
on the Impact of Enrons Chapter 11 Filing on Northern Border Pipelines
Business).  For the first half of 2002,
the revenues lost on this capacity totaled approximately $1.8 million.  Costs and expenses
consist of operations and maintenance expense and taxes other than income.  Operations
and maintenance expense decreased $3.1 million (18%) for the first half of
2002, as compared to the same period in 2001,due primarily to a
decrease in employee benefits and administrative expenses.  20 
   Taxes other than
income increased $2.3 million (21%) for the first half of 2002, as compared to
the same period in 2001.  Both the 2002
and 2001 expense included reductions to previous
estimates of ad valorem taxes. 
Northern Border Pipeline periodically reviews and adjusts its estimates
of ad valorem taxes.  Reductions to
previous estimates in 2001 exceeded reductions to previous estimates in 2002 by
approximately $1.6 million.  In
addition, the estimates for 2002 ad valorem taxes have increased due to the
completion of Project 2000 in 2001.  Financial charges
decreased $2.0 million (7%) for the first half of 2002, as compared to the same
period in 2001, due primarily to a decrease in Northern Border Pipelines
average interest rate between 2001 and 2002.  Other income
(expense) increased $1.8 million for the first half of 2002, as compared to the
same period in 2001.  The amount for
2001 includes a charge of approximately $1.7 million for an uncollectible
receivable from a telecommunications company that had purchased excess capacity
on Northern Border Pipelines communication system.  21 
   Liquidity
and Capital Resources of Northern Border Pipeline Company  Debt and Credit
Facilities Northern Border Pipelines
debt and credit facilities outstanding at June 30, 2002, are as follows:  Payments
  Due by PeriodTotal
  
  Current
  Portion
  (Less Than
  1 Year)
  
  Long-Term
  Portion(In Thousands)2002 Pipeline
  Credit Agreement, average 2.47%
  
  $
  22,000
  
  $
  
  
  $
  22,0001992 Series C and D Senior Notes, average 8.53%
  
  143,000
  
  78,000
  
  65,0006.25% Senior
  Notes due 2007
  
  225,000
  
  
  
  225,0007.75% Senior
  Notes due 2009
  
  200,000
  
  
  
  200,0007.50% Senior
  Notes due 2021
  
  250,000
  
  
  
  250,000Total
  
  $
  840,000
  
  $
  78,000
  
  $
  762,000  Northern Border
Pipeline entered into a $175 million three-year credit agreement (2002 Pipeline
Credit Agreement) with certain financial institutions in May 2002.  The 2002 Pipeline Credit Agreement replaced
a credit agreement entered into in 1997. 
The 2002 Pipeline Credit Agreement is to be used to refinance existing
indebtedness and for general business purposes.  At June 30, 2002, $22 million was outstanding under the 2002
Pipeline Credit Agreement at an average interest rate of 2.47%.  At June 30, 2002,
Northern Border Pipeline had outstanding $143 million of senior notes issued in
a $250 million private placement under a July 1992 note purchase
agreement.  The Series C Notes, with a
principal amount of $78 million, mature in August 2002.  The Series D Notes will mature in August
2003.  Northern Border Pipeline
anticipates borrowing under the 2002 Pipeline Credit Agreement to repay the Series
C Notes.  In April 2002,
Northern Border Pipeline completed a private offering of $225 million of 6.25%
Senior Notes due 2007 (2002 Pipeline Senior Notes).  The indenture under which the 2002 Pipeline Senior Notes was
issued does not limit the amount of unsecured debt Northern Border Pipeline may
incur, but it does include restrictions on incurrence of secured
indebtedness.  The proceeds from the
2002 Pipeline Senior Notes of approximately $223.5 million were used to reduce
indebtedness outstanding under a previous credit agreement.  22 
   Short-term
liquidity needs will be met by operating cash flows and the 2002 Pipeline
Credit Agreement.  Long-term capital
needs may be met through the ability to issue long-term indebtedness.  Cash Flows from
Operating Activities Cash flows provided
by operating activities increased $13.1 million to $103.0 million for the first
half of 2002, as compared to the same period in 2001, primarily due to increases in operating income and lower interest
expense and the impact of rate case refunds in 2001.  Operating income has increased $4.9 million between 2001 and 2002
primarily due to Project 2000 and decreases in operations and maintenance
expenses and interest expense has decreased $2.0 million between 2001 and 2002
due to lower average interest rates.  Additionally in the first quarter of 2001, Northern Border
Pipeline realized net cash outflows of approximately $4.7 million related to
its rate case refunds.  During the first
quarter of 2001, Northern Border Pipeline made refunds to its shippers totaling
$6.8 million, which included approximately $2.1 million collected in the first
quarter of 2001 with the remainder collected previously.  23 
   Cash Flows from Investing Activities Capital
expenditures were $3.2 million for the first half of 2002 as compared to $15.6
million for the same period in 2001. 
The 2002 and 2001 amounts include $0.2 million and $12.4 million,
respectively, for Project 2000.  The
remaining capital expenditures for 2002 and 2001 were primarily related to
renewals and replacements of existing facilities.  Total capital expenditures for 2002 are estimated to
be $14 million, including $2 million for Project 2000.  Northern Border Pipeline currently
anticipates funding its 2002 capital expenditures primarily by borrowing on
debt facilities and using operating cash flows.  Cash Flows from Financing Activities Cash
flows used in financing activities were $105.3 million for the first half of
2002 as compared to $87.3 million for the same period in 2001.  Distributions to partners increased $10.1
million to $80.0 million for the first half of 2002, as compared to the same
period in 2001.  The distribution amount
paid is determined from the quarterly operating results.  For the second quarter of 2002, Northern
Border Pipeline declared a distribution of $42.3 million, which was paid on
August 1, 2002.  For 2002, Northern
Border Pipeline received net proceeds from the 2002 Pipeline Senior Notes of
approximately $223.5 million that were used to reduce indebtedness outstanding
under a previously outstanding credit agreement.  During the first half of 2002, Northern Border Pipeline had net
repayments under its credit agreements of $250.0 million as compared to net
borrowings in 2001 of $5.0 million.  In April 2002, Northern Border Pipeline received
$2.4 million from the termination of forward starting interest rate swaps.  For the first half of 2001, Northern
BorderPipeline recognized a
decrease in bank overdraft of $22.4 million. 
At December 31, 2000, Northern Border Pipeline reflected the bank
overdraft primarily due to rate refund checks outstanding.  Update on the Impact of Enrons Chapter 11 Filing on Northern
Border Pipelines Business As
more fully discussed in TC PipeLines Annual Report on Form 10-K for the year
ended December 31, 2001, on December 2, 2001, Enron Corp. filed a voluntary
petition for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code.  Certain wholly owned
Enron subsidiaries, including ENA, have also filed for Chapter 11 bankruptcy
protection.  ENA was a party to shipper
contracts obligating ENA to pay demand charges for approximately 3.4% of
Northern Border Pipelines capacity.  On June 13, 2002, the Bankruptcy Court approved a
Stipulation and Order entered into on May 15, 2002, by ENA and Northern Border
Pipeline pursuant to which ENA agreed that all but one of the shipper
contracts, representing 1.7% of pipeline capacity, will be deemed rejected and
terminated.  ENA must effect a permanent  24 
   release of the remaining contract capacity or assume or
reject the remaining contract by October 31, 2002.  Northern Border Pipeline posted the available capacity and
awarded approximately 94% of the capacity at maximum rates for varying
terms.  Payment received by Northern
Border Pipeline for the capacity awarded will mitigate claims against ENA.  For the period from January to June 2002, Northern
Border Pipeline has realized lost revenues of approximately $1.8 million
related to ENAs capacity.  If it is
unable to market the remaining capacity,Northern Border Pipeline has
advised TC PipeLines that its estimated financial exposure for the last six
months of 2002 will be approximately $1.7 million in revenues, with TC PipeLines
share equating to approximately $0.5 million. 
Northern Border Pipeline is
uncertain regarding the amount of damages for breach of contract or other
claims that it will be able to establish in the bankruptcy proceeding, and it
cannot predict the amounts, if any, that it will collect or the timing of
collection.  Northern Border Pipeline
believes, however, that any such failure to collect will not have a material
adverse effect on its financial condition, and any amounts collected will not
be material.  Northern
Border Pipeline has advised TC PipeLines that on May 3, 2002, Enron presented
to the creditors committee a proposal under which certain of Enrons core
energy assets would be separated from Enrons bankruptcy estate and operated
prospectively as a new integrated power and pipeline company.  Northern Plains Natural Gas Company and Pan
Border Gas Company are proposed to be included in this company.  Northern Plains and Pan Border are general
partners of Northern Border Intermediate Limited Partnership, which owns a 70%
interest in Northern Border Pipeline. 
If the creditors committee endorses this proposal, the inclusion of
Northern Plains and Pan Border in the new company would be subject to a Section
363 auction under the supervision of the Bankruptcy Court.  There is no assurance that Enrons proposal
will be adopted as proposed.  Even if
adopted as proposed, there is no assurance as to whether Northern Plains and
Pan Border would ultimately be included in the new company or sold to a different
bidder in a Section 363 auction.  TC
PipeLines plans to continue to monitor developments at Enron, to continue to
assess the impact on TC PipeLines of Northern Border Pipelines existing
agreements and relationships with Enron and to take appropriate action to
protect the interests of TC PipeLines and its unitholders.  Results of Operations of Tuscarora Gas Transmission
Company The following sets out summarized financial information for Tuscarora
for the three and six months ended June 30, 2002 and 2001 and as at June 30,
2002 and December 31, 2001.  Amounts
discussed represent 100%  25 
   of the operations of Tuscarora, of which the Partnership has held a 49%
interest since September 1, 2000.  (unaudited)
  (millions of dollars)
  
  Three months ended June 30
  
  Six months ended June 302002
  
  2001
  
  2002
  
  2001Tuscarora Income StatementRevenues
  
  5.6
  
  5.3
  
  11.2
  
  10.5Costs
  and expenses
  
  (0.7
  )
  (0.6
  )
  (1.3
  )
  (1.2
  )Depreciation
  
  (1.2
  )
  (1.2
  )
  (2.4
  )
  (2.3
  )Financial
  charges
  
  (1.5
  )
  (1.6
  )
  (3.0
  )
  (3.1
  )Other
  income
  
  0.2
  
  0.1
  
  0.3
  
  0.2Net
  income
  
  2.4
  
  2.0
  
  4.8
  
  4.1  (millions of dollars)
  
  June 30, 2002
  (unaudited)
  
  December 31,
  2001Tuscarora Balance SheetAssetsCash and cash
  equivalents
  
  1.2
  
  1.1Other current
  assets
  
  2.1
  
  2.1Plant, property
  and equipment, net
  
  129.4
  
  121.3Other assets
  
  1.4
  
  1.6134.1
  
  126.1Liabilities and Partners EquityCurrent
  liabilities
  
  7.8
  
  7.7Long-term debt,
  net of current maturities
  
  88.0
  
  80.0Partners equityPartners
  capital
  
  38.2
  
  37.9Accumulated
  other comprehensive income
  
  0.1
  
  0.5134.1
  
  126.1  26 
   Second Quarter 2002
Compared with Second Quarter 2001 Revenues, costs and
expenses, depreciation and financial charges incurred and other income earned
by Tuscarora in the second quarter of 2002 are approximately the same as they
were in the same period last year.  Six Months Ended June 30, 2002 Compared with Six Months
Ended June 30, 2001 Revenues, costs
and expenses, depreciation and financial charges incurred and other income
earned by Tuscarora in the first six months of 2002 are approximately the same
as they were in the same period last year.  Liquidity
and Capital Resources of Tuscarora Gas Transmission Company  Cash Flows from Operating Activities Cash flows
provided by operating activities increased $2.9 million to $6.8 million for the
first six months of 2002 compared to $3.9 million for the same period last year
and is primarily due to changes in working capital.  Cash Flows from Investing Activities Net cash used in investing activities for the first six
months of 2002 and 2001 were $10.5 million and $3.1 million, respectively.  This change is due to an increase in capital
expenditures relating to Tuscaroras expansion project.  Cash Flows from Financing Activities On
January 4, 2002, Tuscarora entered into a credit agreement with a third party
for a $5 million, 364-day revolving credit facility which bears interest at
either the LIBOR rate plus 1% or the prime rate.  At June 30, 2002, Tuscarora had $0.7 million outstanding under
the revolving credit facility at an interest rate of 2.8%.  On March 15, 2002, Tuscarora issued Series C Senior Secured
Notes in the amount of $10 million. 
These notes bear interest at 6.89% and are due in 2012.  The proceeds from these notes are being used
to finance the construction of Tuscaroras expansion project.  For
the first six months of 2002, Tuscarora recorded cash flows from financing
activities of $3.9 million compared to cash flows used in financing activities
of $3.5 million for the same period in 2001. 
Tuscarora received proceeds of $10 million from the issuance of its Series
C Secured Notes and repaid $2.1 million of long-term debt in the first six
months of 2002.  Tuscarora also received
proceeds of $0.7 million from the issuance of notes payable.  Tuscarora paid cash distributions of $4.4
million in the first six months of 2002.  27 
   For
the first six months of 2001, Tuscarora repaid $2.1 million of long-term
debt.  In addition, Tuscarora paid cash
distributions of $1.7 million. 
Tuscarora did not make a cash distribution in the first quarter of 2001
due to the timing of the implementation of its cash distribution policy.  28 
   ITEM
3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK  TC
PipeLines, LP  TC PipeLines interest rate exposure results from its
Revolving Credit Facility, which is subject to variability in LIBOR interest
rates.  Since December 31, 2001, there
has not been any material change to TC PipeLines interest rate exposure.  The Partnerships
market risk sensitivity is also influenced by and reflects the same factors
that influence Northern Border Pipeline. 
Neither Northern Border Pipeline nor Tuscarora owns any of the natural
gas they transport, and, therefore, do not assume any of the related natural
gas commodity price risk.  Northern Border
Pipelines interest rate exposure results from variable rate borrowings from
commercial banks.  To mitigate potential
fluctuations in interest rates, Northern Border Pipeline attempts to maintain a
significant portion of its debt portfolio in fixed rate debt.   There have not been any material changes in
market risk exposures that would affect the quantitative and qualitative
disclosures presented as of December 31, 2001, in Item 7a of TC PipeLines
Annual Report on Form 10-K.  29 
   PART II. OTHER INFORMATION  ITEM 6. Exhibits and Reportson Form 8-K  TC
PipeLines, LP  (a)Exhibits  23.1    Consent of Independent Chartered Accounts  99.1    Chief Executive Officer Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.  99.2    Chief Financial Officer Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.  99.3    Consolidated balance sheet at December 31,
2001 of TC PipeLines GP, Inc., general partner of TC PipeLines, LP.  (b)Reports on Form 8-K  1.Report on Form 8-K dated May
15, 2002 and filed on May 24, 2002 reporting a Stipulation and Order entered
into by Northern Border Pipeline and Enron North America Corp.  30 
   SIGNATURES   Pursuant to the
requirements of the Securities and Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.   TC
  PipeLines, LP(a Delaware Limited Partnership)By:
  TC PipeLines GP, Inc., its general partnerBy:
  /s/  Russell K. GirlingDate:  August
  14, 2002
  
  
  Russell K. GirlingChief Financial Officer (duly authorized officer)By:
  /s/  Theresa JangDate:  August
  14, 2002
  
  
  Theresa JangController (duly authorized officer)  31 
   Exhibit Index  Exhibit No.
  
  Description23.1
  
  Consent of Independent
  Chartered Accountants99.1
  
  Chief Executive Officer Certification pursuant to 18
  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.99.2
  
  Chief Financial Officer Certification pursuant to 18
  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.99.3
  
  Consolidated balance sheet at December 31, 2001 of
  TC PipeLines GP, Inc., general partner of TC PipeLines, LP.  32 
   Exhibit 23.1  CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS  The Board of Directors TC PipeLines GP, Inc.   We consent to the incorporation by reference
in TC PipeLines, LPs Registration Statement on Form S-3 filed on April 23,
2002 (File No. 333-86804) of our report dated August 8, 2002, with respect to
the consolidated balance sheet of TC PipeLines GP, Inc. as of December 31,
2001.    /s/ KPMG LLP Chartered Accountants  Calgary, Canada August 13, 2002  
   Exhibit 99.1 Certification Pursuant to  18 U.S.C. Section 1350,  As Adopted Pursuant to  Section 906 of  the Sarbanes-Oxley Act of 2002   In connection with the Quarterly
Report of TC PipeLines, LP (the Partnership) on Form 10-Q for the period
ending June 30, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the Report), I, Ronald J. Turner, President and Chief
Executive Officer of TC PipeLines GP, Inc., the General Partner of the
Partnership, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:  1.The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and  2.The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Partnership.  Dated:  August 14, 2002
  
  
  /s/
  Ronald J. TurnerRonald
  J. TurnerPresident and Chief
  Executive OfficerTC PipeLines GP, Inc.   1 
   Exhibit 99.2 Certification Pursuant to  18 U.S.C. Section 1350,  As Adopted Pursuant to  Section 906 of  the Sarbanes-Oxley Act of 2002   In connection with the Quarterly
Report of TC PipeLines, LP (the Partnership) on Form 10-Q for the period
ending June 30, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the Report), I, Russell K. Girling, Chief Financial Officer
of TC PipeLines GP, Inc., the General Partner of the Partnership, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:  1.The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and  2.The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Partnership.  Dated:  August 14, 2002
  
  
  /s/
  Russell K. GirlingRussell
  K. GirlingChief Financial OfficerTC PipeLines GP, Inc.  1 
   Exhibit 99.3  TC
PipeLines GP, Inc.  Independent
Auditors Report  To the Board of Directors of TC PipeLines GP, Inc., General
Partner of TC PipeLines, LP:  We have audited the accompanying consolidated balance sheet
of TC PipeLines GP, Inc, (a Delaware corporation) as of December 31, 2001.  This consolidated balance sheet is the
responsibility of the Companys management. 
Our responsibility is to express an opinion on this consolidated balance
sheet based on our audit.  We conducted our audit in accordance with auditing
standards generally accepted in the United States of America.  Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the balance sheet
is  free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.  In our opinion, the consolidated balance sheet referred to
above presents fairly, in all material respects, the financial position of the
Company as of December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.   /s/ KPMG LLPChartered AccountantsCalgary, CanadaAugust 8, 2002    1 
   TC
PipeLines GP, Inc.  Consolidated Balance Sheet  (thousands of dollars)
  
  December
  31
  2001AssetsCurrent AssetsCash
  
  17,521Current tax
  recoverable
  
  33017,851Investment in
  Northern Border Pipeline Company
  
  250,078Investment in
  Tuscarora Gas Transmission Company
  
  29,297Deferred Amounts
  
  119297,345Liabilities and Stockholders
  EquityCurrent
  LiabilitiesAccounts payable
  
  426Accrued interest
  
  58Due to
  affiliates
  
  358842Long-Term Debt
  
  21,500Deferred Income
  Tax
  
  12,117Minority
  Interest
  
  221,411Stockholders
  EquityCommon stock
  ($0.01 par value; 1,000 shares authorized; 100 shares issued)
  
  1Additional paid-in
  capital
  
  43,212Due from
  affiliate
  
  (13,700
  )Retained
  earnings
  
  11,430Other
  comprehensive income
  
  53241,475297,345  The accompanying notes are an integral part of this
consolidated balance sheet.  2 
   TC PipeLines GP, Inc.  Notes to
Consolidated Balance Sheet  Note 1     Organization TC PipeLines GP, Inc. (the GP), a Delaware corporation, was formed by
TransCanada PipeLines Limited (TransCanada) in December 1998 to become the general
partner of TC PipeLines, LP (the LP), a Delaware limited partnership.  The GP and the LP are collectively referred
to herein as the Company.  The GP is an
indirect wholly owned subsidiary of TransCanada.  The GP holds a 2% general partner interest in the LP and also owns
2,809,306 subordinated units, representing an effective 15.7% limited partner
interest in the LP.  By virtue of the
GPs performance of all management and operating functions required for the LP
pursuant to the Amended and Restated Agreement of Limited Partnership of TC
PipeLines, LP (Partnership Agreement), the GP has control of the operating and
financial policies of the LP.  The LP is a publicly traded partnership.  Common units of the LP are listed on the Nasdaq Stock Market and
are quoted for trading under the symbol TCLP.  The LP owns a 30% general partner interest in Northern Border
Pipeline Company (Northern Border Pipeline) and a 49% interest in Tuscarora Gas
Transmission Company (Tuscarora). 
Northern Border Pipeline owns a 1,249-mile United States interstate
pipeline system that transports natural gas from the Montana-Saskatchewan
border to markets in the midwestern United States.  Tuscarora owns a 229-mile United States interstate pipeline
system that transports natural gas from Oregon, where it interconnects with
facilities of PG&E National Energy Group, Gas Transmission Northwest, to
northern Nevada.  Note 2     Significant Accounting Policies a)Basis of Presentation
and Use of Estimates The accompanying consolidated balance sheet and
related notes present the consolidated financial position of the Company and
its subsidiaries as of December 31, 2001. 
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements.  Although management
believes these estimates are reasonable, actual results could differ from these
estimates.  Amounts are stated in United
States dollars.  b)Principles of
Consolidation The consolidated balance sheet includes the accounts
of the GP and the LP.  The GP controls
the operations of the LP through its 2% general partner interest.  All significant intercompany transactions
and accounts have been eliminated on consolidation.  The Company uses the equity method of accounting for
its investments in Northern Border Pipeline and Tuscarora, over which it is
able to exercise significant influence. 
Other comprehensive income recorded by the Company arises through its
equity investments in Northern Border Pipeline and Tuscarora and relates to
cash flow hedges transacted by Northern Border Pipeline and Tuscarora.  c)Cash and Cash
Equivalents Cash equivalents consist of highly liquid investments
with original maturities of three months or less.  The carrying amount of cash and cash equivalents approximates
fair value because of the short maturity of these investments.  3 
   d)Income Taxes The Company follows the liability method of accounting
for income taxes in accordance with Statement of Financial Accounting Standards
No. 109 Accounting for Income Taxes (SFAS 109).  Under SFAS 109, deferred income taxes are recorded based upon
differences between the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the underlying assets are received and liabilities settled.  4 
   Note 3     Investment in Northern Border Pipeline Company The Company owns a 30% general partner interest in Northern Border
Pipeline.  The remaining 70% partnership
interest in Northern Border Pipeline is held by Northern Border Partners, L.P.,
a publicly traded limited partnership that is not affiliated with the
Company.  The general partners of
Northern Border Partners, L.P. are controlled by affiliates of Enron Corp.
(Enron), which hold a 1.65% general partner interest, and The Williams
Companies, Inc. (Williams), which holds the remaining 0.35% general partner
interest.  As a result, the Company has
one member and controls 30% of the voting power of the Northern Border Pipeline
management committee, Enron has two members and controls 57.75% of the voting
power, and Williams has the one remaining member and 12.25% of the voting power
of the Northern Border Pipeline management committee.  The Northern Border pipeline system is operated by Northern
Plains Natural Gas Company, a wholly owned subsidiary of Enron.   Northern Border Pipeline is regulated by
the Federal Energy Regulatory Commission (FERC).  Undistributed earnings of Northern Border Pipeline amounted
to $5.7 million for the year ended December 31, 2001.  The following sets out summarized balance sheet information for
Northern Border Pipeline as at December 31, 2001.  The Company has held its general partner interest since May 28,
1999.  (millions
  of dollars)
  
  December
  31
  2001Northern Border Pipeline Balance
  SheetAssetsCash and cash
  equivalents
  
  11.0Other current
  assets
  
  36.3Plant, property
  and equipment, net
  
  1,685.7Other assets
  
  18.91,751.9Liabilities and
  Partners EquityCurrent
  liabilities
  
  399.0Reserves and
  deferred credits
  
  5.6Long-term debt
  
  513.7Partners equityPartners
  capital
  
  824.4Accumulated
  other comprehensive income
  
  9.21,751.9  Note 4     Investment in Tuscarora Gas Transmission Company The Company owns a 49% general partner interest in
Tuscarora.   The remaining 50% and 1%
interests in Tuscarora are indirectly held by Sierra Pacific Resources Company
and TransCanada, respectively.  The
Tuscarora pipeline system is operated by Tuscarora Gas Operating Company, a
wholly owned subsidiary of Sierra Pacific Resources.  Tuscarora is regulated by the FERC.  Undistributed earnings of Tuscarora amounted to $0.6
million for the year ended December 31, 2001. 
The following sets out summarized balance sheet information for
Tuscarora as at December 31, 2001.  The
Company has held its general partner interest since September 1, 2000.  5 
   (millions
  of dollars)
  
  December
  31
  2001Tuscarora Balance SheetAssetsCash and cash
  equivalents
  
  1.1Other current
  assets
  
  2.1Plant, property
  and equipment, net
  
  121.3Other assets
  
  1.6126.1Liabilities and Partners EquityCurrent
  liabilities
  
  7.7Reserves and
  deferred credits
  
  Long-term debt
  
  80.0Partners equityPartners
  capital
  
  37.9Accumulated
  other comprehensive income
  
  0.5126.1  Note 5     Income Taxes Future income tax liability of $12.1 million for 2001 arises from the
Companys investments having higher book basis than tax basis.  Note 6    Credit Facilities and Long-Term Debt On August 22, 2000, the Company entered into an unsecured three-year
credit facility (Revolving Credit Facility) with Bank One, NA, as agent under
which the Company may borrow up to an aggregate principal amount of $30.0
million.  Loans under the Revolving
Credit Facility bear interest at a floating rate.  The Revolving Credit Facility matures on August 31, 2003.  Amounts borrowed may be repaid in part or in
full prior to that time without penalty. 
The Revolving Credit Facility may be used to finance capital
expenditures and for other general purposes. 
On September 1, 2000, the Company borrowed $24.5 million under the
Revolving Credit Facility to fund a portion of the purchase price of the 49%
general partner interest in Tuscarora. 
At December 31, 2001, the Company had borrowings of $21.5 million
outstanding under the  6 
   Revolving Credit Facility.  The
fair value of the Revolving Credit Facility approximates its carrying value
because the interest rate is a floating rate. 
The interest rate on the Revolving Credit Facility at December 31, 2001
was 3.0%.  7 
   On May 28, 2001, the Company renewed its $40 million unsecured two-year
revolving credit facility (TransCanada Credit Facility), with TransCanada
PipeLine USA Ltd., an affiliate of the Company.  The TransCanada Credit Facility bears interest at London
Interbank Offered Rate plus 1.25%.  The
purpose of the TransCanada Credit Facility is to provide borrowings to fund
capital expenditures, to fund capital contributions to Northern Border
Pipeline, Tuscarora and any other entity in which the Company directly or
indirectly acquires an interest, to fund working capital and for other general
business purposes, including temporary funding of cash distributions to
partners of the LP, if necessary.  At
December 31, 2001, the Company had no amount outstanding under the TransCanada
Credit Facility.  Note 7     Stockholders Equity A wholly owned subsidiary of TransCanada holds 100 common shares
representing 100% of the issued common stock of the Company.  As required by Securities and Exchange
Commission Regulation S-B, Rule 310(f), amounts due from an affiliate of the
general partner have been deducted from stockholders equity.  Note 8     Related Party Transactions The Company does not have any employees.  The management and operating functions are provided by
TransCanada. TransCanada does not receive a management fee or other
compensation in connection with its management of the Company.  The Company reimburses TransCanada for all
costs of services provided, including the costs of employee, officer and
director compensation and benefits, and all other expenses necessary or
appropriate to the conduct of the business of, and allocable to the
Company.  Total costs reimbursed to
TransCanada were approximately $0.5 million for the year ended December 31,
2001.  (thousands
  of dollars)
  
  December
  31
  2001Due
  to affiliatesTransCanada Pipeline USA Ltd.
  
  342TransCanada
  PipeLines Limited
  
  16358Due from affiliateTransCan
  Northern Ltd.
  
  13,700  8