**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K**

**x**                               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended DECEMBER 31, 2006**

**OR**

**o**                                  TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from                to                **

**CommissionFile Number: 1-31383**

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**ENBRIDGE ENERGYMANAGEMENT, L.L.C.**

(Exact name of Registrantas specified in its charter)

| **Delaware**                     |   | **61-1414604**       |
|----------------------------------|--------|----------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer     |
| incorporation or  organization)  |   | Identification  No.) |

 

**1100 Louisiana, Suite 3300**

**Houston, Texas 77002**

(Address of principalexecutive offices and zip code)

**(713) 821-2000**

(Registrant’s telephonenumber, including area code)

Securities registeredpursuant to Section 12(b) of the Act:

| **Title of each class**                                  |   | **Name of  each exchange on which registered** |
|----------------------------------------------------------|--------|------------------------------------------------|
| Shares  representing limited liability company interests |   | New York Stock  Exchange                       |

 

Securities registeredpursuant to Section 12(g) of the Act: **NONE**

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes o No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o No x

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

| Large Accelerated Filer o | Accelerated Filer x | Non-Accelerated Filer o |
|---------------------------|---------------------|------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o No x

As of June 30, 2006,the aggregate market value of the Registrant’s Listed Shares held bynon-affiliates of the Registrant was $418,561,368. based on the last reportedsale price of such Listed Shares on the New York Stock Exchange on that date.

As of February 22,2007, the Registrant has 12,902,675 Listed Shares outstanding.

**DOCUMENTSINCORPORATED BY REFERENCE:**

**Annual Report on Form 10-Kof Enbridge Energy Partners, L.P. for the year ended December 31, 2006**

 

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**TABLE OF CONTENTS**
|                                                | ** **                                                                                                         | ** ** | **Page** |
|------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|------------|----------|
|                                           | **PART I**                                                                                                    |       |     |
| **Item 1.**                                    | Business                                                                                                           |       | 3        |   |
| **Item  1A.**                                  | Risk Factors                                                                                                       |       | 5        |   |
| **Item 1B.**                                   | Unresolved Staff Comments                                                                                          |       | 10       |   |
| **Item 2.**                                    | Properties                                                                                                         |       | 10       |   |
| **Item  3.**                                   | Legal Proceedings                                                                                                  |       | 11       |   |
| **Item 4.**                                    | Submission of Matters to a Vote of Security Holders                                                                |       | 11       |   |
| ** **                                     | **PART II**                                                                                                   |       |     |   |
| **Item 5.**                                    | Market for Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities |       | 12       |   |
| **Item  6.**                                   | Selected  Financial Data                                                                                           |       | 13       |   |
| **Item 7.**                                    | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                        |       | 14       |   |
| **Item 7A.**                                   | Quantitative and Qualitative Disclosures About Market  Risk                                                        |       | 18       |   |
| **Item 8.**                                    | Financial Statements and Supplementary Data                                                                        |       | 18       |   |
| **Item 9.**                                    | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure                              |       | 18       |   |
| **Item 9A.**                                   | Controls and Procedures                                                                                            |       | 18       |   |
| **Item  9B.**                                  | Other  Information                                                                                                 |       | 19       |   |
| ** **                                     | **PART III**                                                                                                  |       |     |   |
| **Item 10.**                                   | Directors and Executive Officers of the Registrant                                                                 |       | 20       |   |
| **Item 11.**                                   | Executive Compensation                                                                                             |       | 24       |   |
| **Item 12.**                                   | Security Ownership of Certain Beneficial Owners and  Management                                                    |       | 25       |   |
| **Item 13.**                                   | Certain Relationships and Related Transactions, and  Director Independence                                         |       | 27       |   |
| **Item 14.**                                   | Principal Accountant Fees and Services                                                                             |       | 28       |   |
| ** **                                     | **PART IV**                                                                                                   |       |     |   |
| **Item 15.**                                   | Exhibits, Financial Statement Schedules                                                                            |       | 29       |   |
| **Signatures**                                 |                                                                                                               | 30         |     |
| **Index to Consolidated Financial Statements** |                                                                                                               | F-1        |     |

 

*This Annual Reporton Form 10-K contains forward-looking statements. Theseforward-looking statements are identified as any statement that does notrelate strictly to historical or current facts. They use words such as “anticipate,”“believe,” “continue,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,”“position,” “projection,” “strategy,” “could,” “should” or “will” or thenegative of those terms or other variations of them or comparable terminology.In particular, statements, expressed or implied, concerning future actions,conditions or events or future operating results or the ability to generaterevenue, income or cash flow are forward-looking statements. Forward-lookingstatements are not guarantees of performance. They involve risks, uncertaintiesand assumptions. Future actions, conditions or events and future results ofoperations may differ materially from those expressed in these forward-lookingstatements. Many of the factors that will determine these results are beyondthe ability of Enbridge Energy Management, L.L.C. to control or predict. Foradditional discussion of risks, uncertainties and assumptions, see “Item 1A.Risk Factors” included elsewhere in this Form 10-K.*

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**PART I**

**Item 1.**                        Business

**OVERVIEW**

In this report, unless the context requires otherwise,references to “we,” “us,” “our,” the “Company,” or “Enbridge Management” areintended to mean Enbridge Energy Management, L.L.C. and its consolidatedsubsidiary. Our shares, representing limited liability company interests, whichwe refer to as our Listed Shares, are traded on the New York Stock Exchange, orNYSE, under the symbol “EEQ.” References to our “shares” in this Annual Reportmean, collectively, our Listed Shares and our voting shares.

We are a publicly-traded Delaware limitedliability company that was formed on May 14, 2002. We are a limitedpartner in Enbridge Energy Partners, L.P. (the “Partnership”), through ourownership of i-units, a special class of the Partnership’s limitedpartner interests. The Partnership’s Class A common units are traded onthe NYSE under the symbol “EEP.” Under a delegation of control agreement amongus, the Partnership and its general partner, Enbridge Energy Company, Inc.(the “General Partner”), we manage the Partnership’s business and affairs. TheGeneral Partner is an indirect, wholly-owned subsidiary of Enbridge Inc.,an energy company located in Calgary, Canada that we refer to herein asEnbridge.

As of December 31, 2006 and 2005, we owned anapproximate 16.0 percent and 17.5 percent limited partnership interest of thePartnership, respectively. At December 31, 2006, the General Partner owned1.41 (100 percent) voting shares, as well as 2,182,770 (17.2 percent) Listed Shares,while the remaining 10,491,377 (82.8 percent) Listed Shares are held by thepublic. Our performance depends on the operations and management of thePartnership. Accordingly, we incorporate by reference the Partnership’s AnnualReport on Form 10-K for the year ended December 31, 2006 (the“Partnership’s 10-K”).

On October 17, 2002, we became a limited partnerin the Partnership and, pursuant to a delegation of control agreement, assumedthe management of the Partnership’s business and affairs. The delegation ofcontrol agreement provides that we will not amend or propose to amend thePartnership’s partnership agreement, allow a merger or consolidation involvingthe Partnership, allow a sale or exchange of all or substantially all of theassets of the Partnership or dissolve or liquidate the Partnership without theapproval of the General Partner.

The General Partner remains responsible to thePartnership for actions taken or omitted by us while serving as the delegate ofthe General Partner as if the General Partner had taken or omitted to take suchactions. The General Partner owns all of our voting shares. The General Partnerhas agreed not to voluntarily withdraw as general partner of the Partnershipand has agreed not to transfer its interest as general partner of thePartnership unless the transferee agrees in writing to be bound by the termsand conditions of the delegation of control agreement that apply to the GeneralPartner.

Under its partnership agreement, except for theavailable cash that the Partnership is required to retain in respect of thei-units, the Partnership distributes all of its available cash to its generalpartner and holders of its common units on a quarterly basis. The amount ofcash distributed by the Partnership depends on the operations of thePartnership and its subsidiaries and is determined by our board of directors inaccordance with the Partnership’s partnership agreement. We do not, however,receive distributions of cash in respect of the i-units we own and do nototherwise have any cash flow attributable to our ownership of the i-units.Instead, when the Partnership makes distributions of cash to its generalpartner and holders of its common units, the number of i-units we own increasesautomatically under the Partnership’s partnership agreement and the amount ofavailable cash that is attributable to the i-units is retained by thePartnership. The amount of this increase is calculated by dividing the amountof the cash distribution paid by the Partnership on each of its common units bythe average closing price of one of our 

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Listed Shares on the NYSEas determined for a 10-trading day period ending on the trading dayimmediately prior to the ex-dividend date for our shares. Concurrently, withthe increase in the number of i-units we own, we make distributions on ourshares in the form of additional shares, with the result that the number ofshares that are then outstanding equal the number of i-units that we own.

We have elected to be treated as a corporation forfederal income tax purposes. Therefore, an owner of our shares does not reporton its federal income tax return any of our items of income, gain, loss anddeduction relating to an investment in us. We are subject to federal income taxon our taxable income; however, the i-units owned by us generally are notentitled to allocations of income, gain, loss or deduction of the Partnershipunless there is a liquidation of the Partnership. Therefore, we do notanticipate that we will have material amounts of taxable income resulting fromour ownership of the i-units unless we enter into a sale or exchange of thei-units, or the Partnership is liquidated.

The Partnership recognizes the delegation of rightsand powers to us, and indemnifies and protects us, our officers and our directorsto the same extent as it does with respect to the General Partner under thePartnership’s partnership agreement. In addition, the Partnership reimburses usfor expenses to the same extent as it does with respect to the General Partnerunder the Partnership’s partnership agreement and reimburses us for any Texasfranchise taxes and any other foreign, state and local taxes not otherwise paidor reimbursed pursuant to a tax indemnification agreement between Enbridge andus.

The delegation ofcontrol agreement with the General Partner continues until:

·       eitherthe General Partner has withdrawn (whether voluntarily or involuntarily) or hasbeen removed as the general partner of the Partnership;

·       allof our shares are owned by the General Partner of the Partnership or itsaffiliates, and termination of the delegation of control agreement has beenapproved by us and the General Partner of the Partnership; or

·       terminationof the delegation of control agreement has been approved by us, the GeneralPartner, the record holders of a majority of the outstanding Listed Shares(other than the General Partner, the record holder of the voting shares ortheir respective affiliates) and the record holders of the majority of thevoting shares.

The General Partner is the only general partner of thePartnership. The General Partner retains its general partner interest andshares in the profits, losses and distributions from the Partnership.

If the General Partner’spower and authority as general partner are modified in the partnershipagreement of the Partnership, then the power and authority delegated to us willbe modified on the same basis. The delegation of control agreement can beamended by all parties to the agreement except for any amendment that, in thesole discretion of our board of directors, would reduce the time for any noticeto which owners of our shares are entitled or would materially adversely affectthe rights or preferences of the holders of our shares.

**EMPLOYEES**

We have entered intoagreements with the General Partner and several of its affiliates to provide uswith the necessary services and support personnel, who act on our behalf as ouragents.

**AVAILABLEINFORMATION**

We file annual, quarterly and other reports and otherinformation with the Securities and Exchange Commission (“SEC”) under theSecurities Exchange Act of 1934 (the “Exchange Act”). You may read and copy anymaterials that we file with the SEC at the SEC’s Public Reference Room at100F Street, NE, Washington, DC 20549. You may obtain additional informationabout the Public Reference Room by 

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calling the SEC at 1-800-SEC-0330.In addition, the SEC maintains an Internet site at *http://www.sec.gov* that contains reports, proxy andinformation statements and other information regarding issuers that fileelectronically with the SEC, including us.

We also make availablefree of charge on or through our Internet website at *http://www.enbridgemanagement.com*, our Annual Report on Form 10-K, Quarterly Reportson Form 10-Q, Current Reports on Form 8-K and otherinformation statements, and if applicable, amendments to those reports filed orfurnished pursuant to Section 13(a) of the Exchange Act as soon asreasonably practicable after we electronically file such material with, orfurnish it to, the SEC. Information contained on our website is not part ofthis report.

**Item 1A.**                RiskFactors

As discussed above, ourresults of operations, financial position and cash flows depend upon theresults of operations, financial position and cash flows of the Partnership.Consequently, risks and uncertainties affecting the Partnership will directlyaffect our results of operations, financial position and cash flows and couldcause actual results to differ from the forward-looking statementsherein. For a discussion of the risk factors that could affect thePartnership’s actual results and cause such results to differ from forward-lookingstatements contained herein and in the Partnership’s Annual Report, please read“Risk Factors” contained in Part I, Item 1A of the Partnership’s 10-K,which discussion is incorporated herein by reference.

**RISKS RELATED TOOUR BUSINESS**

**Because our only assets are the Partnership’s i-unitsthat we own, our financial condition and results of operations depend solelyupon the performance of the Partnership.**

We are a limited partnerof the Partnership and our only assets are the Partnership’s i-units that weown. As a result, our financial condition and results of operations areentirely dependent upon the Partnership’s financial condition and results ofoperations. You should read the risk factors contained in the Partnership’sAnnual Report on Form 10-K for the year ended December 31, 2006and any subsequent annual and quarterly reports filed by the Partnership withthe SEC for information regarding the risks and uncertainties that could affectthe Partnership’s financial condition and results of operations and, therefore,the value of your shares.

**The distributions of additional shares that we make toour shareholders depend upon the amount of cash that the Partnershipdistributes to its Class A and B common unitholders.**

When the Partnership makes a cash distribution on itsClass A and B common units, we distribute on each of our shares thatfraction of a share determined by dividing the amount of the cash distributionpaid by the Partnership on each common unit by the average market price of oneof our shares. Therefore, if the Partnership decreases the cash distributionsthat it pays to its common unitholders, the value of the distributions ofadditional shares that we make to our shareholders will decrease as well.

Our board of directors may establish cash reserves atthe Partnership that it believes are necessary to fund the Partnership’s futureoperating and capital expenditures, provide for the proper conduct of itsbusiness, comply with applicable laws or agreements to which the Partnership isa party, or provide funds for future distributions to partners. These cashreserves affect the amount of cash available for distribution by the Partnershipto its common unitholders and, consequently, the value of the distributions ofadditional shares that we make to our shareholders.

In addition, the fractionof a share to be issued in each quarterly distribution on our outstandingshares is based on the average closing price of our shares for the tenconsecutive trading days preceding 

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theex-dividend date for our shares. Because the market price of our shares mayvary substantially over time, the value of the additional shares that wedistribute to our shareholders may vary substantially from the cash that youwould have received had you owned common units of the Partnership instead ofour shares.

**The Partnership may issue additional common or otherclasses of units, and we may issue additional shares, which would dilute yourownership interest.**

The issuance ofadditional common or other classes of units by the Partnership or shares by us,other than our quarterly distributions to you, may have the following effects:

·       theamount available for distributions on each share may decrease;

·       therelative voting power of each previously outstanding share may decrease; and

·       themarket price of the Listed Shares may decline.

Additionally, the public sale by the General Partnerof a significant portion of the 3,912,750 Class B common units that itcurrently owns could reduce the market price of the Class A common unitsand, indirectly, our shares. The Partnership’s partnership agreement allows theGeneral Partner to cause the Partnership to register for public sale any unitsheld by the General Partner or its affiliates. A public sale of theClass B common units currently held by the General Partner could absorbsome of the trading market demand for the outstanding Class A commonunits, which indirectly could reduce the market price of our shares. Inaddition, the General Partner may sell its Class B common units in privatetransactions at any time, which could have a similar effect on the market forthe outstanding Class A common units and, indirectly, the shares.

In August 2006, thePartnership issued approximately 10.8 million Class C units, representinga new class of limited partner interest, 50 percent to our general partner and50 percent to an institutional investor. After August 2009, the holders ofthe Class C units may request that the Class C units be convertedinto Class A common units which could absorb some of the trading demandfor the outstanding Class A common units, which indirectly could reducethe market price of our shares. Should a majority of the Partnership’sunitholders not approve the conversion of the Class C units, the holders(including holders of the Class A common units, Class B common units,Class C units and i-units) of these units would be entitled to receive cashdistributions equal to 115 percent of the amount paid to holders of thePartnership’s common and i-units which could indirectly reduce the market priceof our shares. Additionally, the holders of the Class C units may sellthem in private transactions at any time, which could have a similar effect onthe market for outstanding Class A common units, and indirectly, theshares.

**If we are not fully reimbursed or indemnified forobligations and liabilities we incur in managing the business and affairs ofthe Partnership, we may be unable to pay those liabilities and the value of ourshares could decline.**

Under the delegation ofcontrol agreement, we have been delegated management of the Partnership and itsoperating subsidiaries. To the extent we incur liabilities or other obligationsin connection with our performance under the delegation of control agreement,we are entitled to be reimbursed or indemnified by the Partnership to the sameextent as the General Partner under the Partnership’s partnership agreement. Inthe event the Partnership and the General Partner are either unwilling orunable to reimburse or indemnify us, we likely will be unable to satisfy theseliabilities or obligations. Additionally, our right to reimbursement orindemnification is limited under certain circumstances, including if we act inbad faith or if we violate laws, like the U.S. federal securities laws, whereindemnification may be against public policy.

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**If in the future we cease to manage the business andaffairs of the Partnership, we may be deemed to be an investment company underthe Investment Company Act of 1940.**

If we cease to manage thePartnership’s business and are deemed to be an investment company under theInvestment Company Act of 1940, we would either have to register as aninvestment company under the Investment Company Act, obtain exemptive relieffrom the SEC, or modify our organizational structure or our contract rights tofall outside the definition of an investment company. Registering as aninvestment company could, among other things, materially limit our ability toengage in transactions with our affiliates, including the purchase and sale ofcertain securities or other property to or from our affiliates, restrict ourability to borrow funds or engage in other transactions involving leverage andrequire us to add directors who are independent of us or our affiliates.

**TAX RISKS TO OURSHAREHOLDERS**

**If the Partnership were treated as a corporation forU.S. federal income tax purposes, the value of our shares would besubstantially reduced, and the owner of our voting shares would have the rightto merge us into the Partnership.**

The anticipated benefit of an investment in our sharesdepends largely on the continued treatment of the Partnership as a partnershipfor U.S. federal income tax purposes. Current law requires the Partnership toderive at least 90% of its annual gross income from specific activities tocontinue to be treated as a partnership for U.S. federal income tax purposes.The Partnership may not find it possible, regardless of its efforts, to meetthis income requirement or may inadvertently fail to meet this incomerequirement. Current law could change so as to cause the Partnership to betreated as a corporation for U.S. federal income tax purposes without regard toits sources of income or otherwise subject the Partnership to entity-leveltaxation.

If the Partnership were to be treated as a corporationfor U.S. federal income tax purposes, it would pay U.S. federal income tax onits income at the corporate tax rate, which currently is a maximum of 35%, andwould pay state income taxes at varying rates. Because a tax would be imposedupon the Partnership as a corporation, the cash available for distribution toits common unitholders could be substantially reduced, which could reduce thevalue of the i-units we own and the value of your shares. In addition, theautomatic increase in the number of i-units that we will own after eachquarterly distribution of cash to holders of common units generally would betaxed as a corporate distribution to us.

Under the provisions ofour limited liability company agreement and the Partnership’s partnershipagreement, if the Partnership were to be treated as a corporation for U.S.federal income tax purposes, the owner of our voting shares has the right tocause us to merge with or into the Partnership or one of its subsidiaries. As acondition to such merger, we must obtain either an opinion of counsel that suchmerger should be currently non-taxable to holders of our shares or a ruling fromthe IRS that such merger will be currently non-taxable to holders of ourshares, except as to the consideration received for fractional shares or as tothe termination of any rights or obligations related to the purchaseprovisions. In such event, you would receive common units or other securitiessubstantially similar to the common units in exchange for your shares.

**RISKS ARISING FROM OURORGANIZATIONAL STRUCTURE AND RELATIONSHIPS WITH ENBRIDGE, THE GENERAL PARTNERAND THE PARTNERSHIP**

**Shares are subject to purchase provisions that couldresult in your having to sell your shares at a time or price that may beunfavorable to you.**

If Enbridge exercises anyof its rights to purchase our shares, you will be required to sell your sharesat a time or price that may be undesirable, and you could receive less than youpaid for your shares. Any sale of our shares to Enbridge or otherwise for cashwill be a taxable transaction to the owner of the shares 

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sold.Accordingly, a gain or loss will be recognized on the sale equal to thedifference between the cash received and the owner’s tax basis in the sharessold.

**The shares you own are not entitled to vote to electour directors, and, therefore, you will have little or no opportunity toinfluence or change our management.**

You have little or noopportunity to influence or change our management, because Enbridge indirectlyowns all of our voting shares and elects all of our directors. Through theelection of our directors, Enbridge indirectly controls us and the Partnership.Furthermore, if a person or group owns 20% or more of the aggregate number ofissued and outstanding common units and our shares, that person or group maynot vote its shares. This limitation does not apply to Enbridge and itsaffiliates. This provision may discourage a person or group from attempting totake over control of us or the Partnership and reduce the price at which ourshares will trade under certain circumstances.

**The terms of our shares may be changed in ways you maynot like, because our board of directors will have the power to change theterms of our shares in ways our board determines, in its sole discretion, arenot materially adverse to you.**

As an owner of our shares,you may not like the changes made to the terms of our shares, if any, and youmay disagree with our board of directors’ decision that the changes are notmaterially adverse to you as a shareholder. If you should disagree with ourboard of directors’ decisions, your recourse will be limited because ourlimited liability company agreement gives broad latitude and discretion to ourboard of directors and eliminates or reduces many of the fiduciary duties thatour board of directors otherwise would owe to you.

**Our limited liability company agreement limits thefiduciary duties that our directors owe to our shareholders and restricts theremedies available to our shareholders for actions taken by our board ofdirectors that might otherwise constitute a breach of a fiduciary duty.**

Our limitedliability company agreement contains provisions that modify the fiduciaryduties that our board of directors would otherwise owe to our shareholdersunder state fiduciary duty law. For example, our limited liability companyagreement:

·       permitsour board of directors to make a number of decisions, including thedetermination of which factors it will consider in resolving conflicts ofinterest, in its “sole discretion.” This entitles our board of directors toconsider only the interests and factors that it desires, and it has no duty orobligation to give consideration to any interest of, or factors affecting, us,our affiliates or any shareholder;

·       providesthat Enbridge, its affiliates, and their officers and directors who are alsoour officers and directors are not required to offer us any businessopportunities; and

·       providesthat none of our directors or officers will be liable to us or any other personfor any act or omission taken or omitted by such director or officer, so longas such director or officer acted in good faith and in a manner that suchdirector or officer reasonably believed to be in, or not opposed to, our bestinterests.

These and similarprovisions in our limited liability company agreement may restrict the remediesavailable to our shareholders for actions taken by our board of directors thatmight otherwise constitute a breach of a fiduciary duty. The Partnership’spartnership agreement contains similar provisions that modify the fiduciaryduties that the board of directors of the General Partner would otherwise oweto the Partnership’s unitholders under state fiduciary duty law. As thedelegate of the General Partner, these provisions apply to our directors andofficers in managing the business and affairs of the Partnership.

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**Potential conflicts of interest may arise amongEnbridge and its shareholders, on the one hand, and us and our shareholders andthe Partnership and its common unitholders, on the other hand. Because thefiduciary duties of our directors have been modified, our board of directorsmay be permitted to make decisions that benefit Enbridge and its shareholdersor the Partnership and its unitholders more than us and our shareholders.**

Conflicts ofinterest may arise from time to time among Enbridge and its shareholders, onthe one hand, and us and our shareholders and the Partnership and its commonunitholders, on the other hand. Conflicts of interest may also arise from timeto time between us and our shareholders, on the one hand, and the Partnershipand its unitholders, on the other hand. In managing and controlling us and thePartnership, our board of directors may consider the interests of all partiesto a conflict and may resolve those conflicts by making decisions that benefitEnbridge and its shareholders or the Partnership and its unitholders more thanus and our shareholders. The following decisions, among others, could involveconflicts of interest:

·       whetherthe Partnership or Enbridge will pursue certain acquisitions or other businessopportunities;

·       whetherthe Partnership will issue additional units or other equity securities orwhether it will purchase outstanding units;

·       whetherwe will issue additional shares;

·       theamount of payments to Enbridge and its affiliates for any servicesrendered for the Partnership’s benefit;

·       theamount of costs that are reimbursable to us or Enbridge by the Partnership;

·       theenforcement of obligations owed to the Partnership by us, the General Partnerand Enbridge, including obligations regarding competition between Enbridge andthe Partnership; and

·       theretention of separate counsel, accountants or others to perform services for usand the Partnership.

In these and similar situations, any decision by ourboard of directors may benefit one group more than another, and in making suchdecisions, our board of directors may consider the interests of all groups, aswell as other factors, in deciding whether to take a particular course ofaction.

In othersituations, Enbridge may take certain actions, including engaging in businessesthat compete with the Partnership, that are adverse to us and our shareholdersand the Partnership and its unitholders. For example, although Enbridge and itssubsidiaries are generally restricted from engaging in any business that is indirect material competition with our businesses, that restriction is subject tothe following significant exceptions:

·       Enbridgeand its subsidiaries are not restricted from continuing to engage inbusinesses, including the normal development of such businesses, in which theywere engaged at the time of the Partnership’s initial public offering inDecember 1991;

·       Suchrestriction is limited geographically only to those routes and products forwhich the Partnership provided transportation at the time of its initial publicoffering;

·       Enbridgeand its subsidiaries are not prohibited from acquiring any business thatmaterially and directly competes with the Partnership as part of a largeracquisition, so long as the majority of the value of the business or assetsacquired, in Enbridge’s reasonable judgment, is not attributable to thecompetitive business; and

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·       Enbridgeand its subsidiaries are not prohibited from acquiring any business thatmaterially and directly competes with the Partnership if that business is firstoffered for acquisition to the Partnership and our board of directors and thePartnership’s unitholders determine not to pursue the acquisition.

Since the Partnership was not engaged in any aspect ofthe natural gas business at the time of its initial public offering, Enbridgeand its subsidiaries are not restricted from competing with the Partnership inany aspect of the natural gas business. In addition, Enbridge and itssubsidiaries would be permitted to transport crude oil and liquid petroleumover routes that are not the same as the Partnership’s Lakehead system, even ifsuch transportation is in direct material competition with the Partnership’sbusiness.

These exceptions alsoexpressly permitted the reversal by Enbridge in 1999 of one of its pipelinesthat extends from Sarnia, Ontario to Montreal, Quebec. As a result of thisreversal, Enbridge competes with the Partnership to supply crude oil to theOntario, Canada market.

**In the event of a liquidation of the Partnership notresulting from any action taken by the Partnership or otherwise approved by usat the direction of our shareholders, the value of our shares would likelydecline.**

The Partnership may not take any action to cause aliquidation of the Partnership unless, prior to such liquidation, Enbridge hasagreed to purchase all of our shares or we have voted to approve suchliquidation at the direction of our shareholders. In the event of a liquidationof the Partnership not resulting from any action taken by the Partnership orotherwise approved by us at the direction of our shareholders, the value ofyour shares will depend on the after-tax amount of the liquidating distributionreceived by us as the owner of i-units. The terms of the i-units provide thatno allocations of income, gain, loss or deduction will be made in respect ofthe i-units until such time as there is a liquidation of the Partnership. Ifthere is a liquidation of the Partnership, it is intended that we will beallocated income and gain in an amount necessary for the capital accountattributable to each i-unit to be equal to that of a common unit. As a result,we likely will realize taxable income upon the liquidation of the Partnership.However, there may not be sufficient amounts of income and gain to cause thecapital account attributable to each i-unit to be equal to that of a commonunit. If they are not equal, we and, therefore, you will receive less valuethan would be received by an owner of common units. In that event, theliquidating distribution per common unit will exceed the liquidatingdistribution per i-unit.

Further, the tax indemnityprovided to us by Enbridge only indemnifies us for our tax liabilities arisingout of a transaction involving the i-units to the extent we have not receivedsufficient cash in the transaction generating the tax liability to pay theassociated tax. Prior to any liquidation of the Partnership, we do not expectto receive cash in a taxable transaction. If a liquidation of the Partnershipoccurs, however, we likely would receive cash which we would use, at least inpart, to pay taxes. As a result, our residual value and the value of our shareswill likely be less than the value of the common units upon the liquidation ofthe Partnership.

**Item 1B.**               UnresolvedStaff Comments

None.

**Item 2.**                        Properties

None.

10

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**Item 3.**                        LegalProceedings

We are a participant invarious legal proceedings arising in the ordinary course of business. Some ofthese proceedings are covered, in whole or in part, by insurance. We believethat the outcome of all these proceedings will not, individually or inaggregate, have a material adverse effect on our financial condition.

**Item 4.**                        Submissionof Matters to a Vote of Security Holders

None.

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**PART II**

**Item 5.**                        Marketfor Registrant’s Common Equity and Related Stockholder Matters

OurListed Shares are traded on the NYSE under the symbol “EEQ.” The quarterlyprice ranges per Listed Share are summarized as follows:

| ** **              | ** ** | **Market Price Data** | ** ** |
|-------------------------|------------|---------------------------------|------------|
| ** **              | ** ** | **2006**                        | ** ** | **2005** | ** ** |
| **Quarter ended:** | ** ** | ** **                      | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** | **High** | ** ** |
| March 31           |       | $                               | 42.15      |   | $ | 48.45 |   | $ | 47.51 |   | $ | 54.12 |   |
| June 30            |       | $                               | 40.75      |   | $ | 44.05 |   | $ | 47.08 |   | $ | 52.35 |   |
| September 30       |       | $                               | 41.08      |   | $ | 47.09 |   | $ | 50.12 |   | $ | 55.98 |   |
| December 31        |       | $                               | 45.39      |   | $ | 49.90 |   | $ | 43.25 |   | $ | 55.50 |   |
|                         |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

On February 21, 2007, the last reported salesprice of the Listed Shares on the NYSE was $51.30. There were approximately9,600 holders of our Listed Shares as of February 21, 2007, which includesindividual participants in security positions listings.

*Distributions.**  *Under the terms of our limitedliability company agreement, except in connection with our liquidation, we donot pay distributions on our Listed Shares in cash, but instead makedistributions on our Listed Shares in additional shares or fractions of shares.At the same time the Partnership makes a distribution on its common units andi-units, we distribute on each of our shares that fraction of a sharedetermined by dividing the amount of the cash distribution to be made by thePartnership on each common unit by the average market price of a sharedetermined for the ten-trading day period ending on the trading day immediatelyprior to the ex-dividend date for our Listed Shares.

Thefollowing table sets forth the share distributions, as approved by the board ofdirectors, for each period in the years ended December 31, 2006 and 2005.

| **Dividend  Declaration Date** | ** ** | ** **       | ** ** | **Dividend  Payment Date** | ** ** | **Record Date** | ** ** | **Distribution  per Unit  of the  Partnership** | ** ** | **Average  Closing  Price of  the Listed   Shares** | ** ** | **Additional  i-units  owned** | ** ** | **Listed  Shares  distributed  to Public** | ** ** | **Listed  Shares  distributed  to General  Partner** | ** ** |
|-------------------------------------|------------|------------------|------------|---------------------------------|------------|----------------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------------------|------------|
| **2006**                            | ** ** | ** **       | ** ** | ** **                      | ** ** |                 | ** ** | ** **                                                |       |                                                               | ** ** | ** **                     |       |                                            | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| October 27                     |       | November 14 |       | November 6                 |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 49.24      | ** **                                      |       |                                                      | 233,693    | ** ** |   |   | 193,446 | ** ** |   |   | 40,247 | ** ** |   |
| July 28                        |       | August 14   |       | August 4                   |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 44.50      | ** **                                      |       |                                                      | 253,310    | ** ** |   |   | 209,684 | ** ** |   |   | 43,626 | ** ** |   |
| April 27                       |       | May 15      |       | May 5                      |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 43.43      | ** **                                      |       |                                                      | 254,126    | ** ** |   |   | 210,360 | ** ** |   |   | 43,766 | ** ** |   |
| January 30                     |       | February 14 |       | February 7                 |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 47.47      | ** **                                      |       |                                                      | 228,071    | ** ** |   |   | 188,792 | ** ** |   |   | 39,279 | ** ** |   |
|                                |       |             |       |                            |       |                 |       | ** **                                                |       |                                                               |       | ** **                     |       |                                            | 969,200    | ** **                                                |       |   | 802,282 | ** ** |   |   | 166,918 | ** ** |   |
| **2005**                            | ** ** | ** **       | ** ** | ** **                      | ** ** |                 | ** ** | ** **                                                |       |                                                               | ** ** | ** **                     |       |                                            | ** ** | ** **                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| October 26                     |       | November 14 |       | November 3                 |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 51.28      | ** **                                      |       |                                                      | 207,393    | ** ** |   |   | 171,675 | ** ** |   |   | 35,718 | ** ** |   |
| July 28                        |       | August 12   |       | August 5                   |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 54.67      | ** **                                      |       |                                                      | 191,301    | ** ** |   |   | 158,355 | ** ** |   |   | 32,946 | ** ** |   |
| April 25                       |       | May 13      |       | May 4                      |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 50.12      | ** **                                      |       |                                                      | 204,865    | ** ** |   |   | 169,583 | ** ** |   |   | 35,282 | ** ** |   |
| January 24                     |       | February 14 |       | February 3                 |       |                 | $          | 0.925                                                     | ** ** |                                                               |       | $                              | 50.68      | ** **                                      |       |                                                      | 198,980    | ** ** |   |   | 164,711 | ** ** |   |   | 34,269 | ** ** |   |
|                                |       |             |       |                            |       |                 |       | ** **                                                |       |                                                               |       | ** **                     |       |                                            | 802,539    | ** **                                                |       |   | 664,324 | ** ** |   |   | 138,215 | ** ** |   |

 

In 2006 and 2005, we had non-cash investing activitiesin the form of the distributions from the i-units and corresponding non-cashfinancing activities in the form of the distributions to the shareholders ofour Listed Shares of $44.6 million and $41.5 million, respectively.

On January 26, 2007, our board of directorsdeclared a share distribution payable on February 14, 2007, toshareholders of record as of February 6, 2007, based on the $0.925 percommon unit distribution 

12

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declared by thePartnership. The Partnership’s distribution increases the number of i-units weown. The amount of i-units we received from the Partnership on February 14,2007 was 228,528.

The total i-unitsdistributed to us was computed by dividing $0.925, the cash amount distributedper common unit, by $51.30, the average closing price of the Listed Shares onthe NYSE for the ten consecutive trading days prior to the ex-dividend date,multiplied by 12,674,148, the number of shares outstanding prior to thedistribution. We distributed additional Listed Shares to the holders of ourListed Shares and additional shares to the General Partner in respect of theseadditional i-units.

**Item 6.**                        SelectedFinancial Data

Thefollowing table sets forth our summary historical financial data for theperiods and at the dates indicated. We derived the historical financialdata from, and it should be read in conjunction with, our consolidatedfinancial statements and notes thereto beginning at page F-1. Seealso “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations.”

| ** **                                                       | ** ** | **Year ended  December 31,  2006**                         | ** ** | **Year ended  December 31,  2005** | ** ** | **Year ended  December 31,  2004** | ** ** | **Year ended  December 31,  2003** | ** ** | **May 14, 2002  (inception) through  December 31, 2002** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                       | ** ** | **(in millions, except per share amounts)** | ** ** |
| Equity income from investment in Enbridge Energy  Partners, L.P. |       |                                                                 | $          | 44.6                                         |       |                                         |       | $                                            | 12.0       |                                                                              |       |   | $ | 21.6 |   |   |   | $ | 18.9 |   |   |   | $ | 4.7 |   |   |
| Gain on issuance of units by Enbridge Energy  Partners, L.P |       |                                                                 | —     |                                         |       |                                         | 10.3       |                                         |       |                                                                              | 7.2        |   |   |   | 16.2 |   |   |   | — |   |   |
| Income tax expense                                               |       |                                                                 | (15.9      | )                                            |       |                                         | (9.9       | )                                            |       |                                                                              | (10.1      | ) |   |   | (12.3 | ) |   |   | (1.6 | ) |   |
| Net income                                                       |       |                                                                 | $          | 28.7                                         |       |                                         |       | $                                            | 12.4       |                                                                              |       |   | $ | 18.7 |   |   |   | $ | 22.8 |   |   |   | $ | 3.1 |   |   |
| Basic and diluted earnings per share                             |       |                                                                 | $          | 2.35                                         |       |                                         |       | $                                            | 1.10       |                                                                              |       |   | $ | 1.78 |   |   |   | $ | 2.35 |   |   |   | $ | 1.05 |   |   |
| Weighted average shares outstanding                              |       |                                                                 | 12.2       |                                         |       |                                         | 11.3       |                                         |       |                                                                              | 10.5       |   |   |   | 9.7 |   |   |   | 2.9 |   |   |
| Equivalent distribution value per share(1)                       |       |                                                                 | $          | 3.70                                         |       |                                         |       | $                                            | 3.70       |                                                                              |       |   | $ | 3.70 |   |   |   | $ | 3.70 |   |   |   | $ | 0.90 |   |   |
| Number of additional shares distributed                          |       |                                                                 | 0.97       |                                         |       |                                         | 0.80       |                                         |       |                                                                              | 0.84       |   |   |   | 0.83 |   |   |   | 0.23 |   |   |
| Total assets at  December 31                                |       |                                                                 | $          | 428.9                                        |       |                                         |       | $                                            | 366.5      |                                                                              |       |   | $ | 376.6 |   |   |   | $ | 358.0 |   |   |   | $ | 332.6 |   |   |

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(1)                 Represents the cash distribution paid on each commonunit of the Partnership for each period shown. As more fully discussed inNote 3 to our consolidated financial statements included in this AnnualReport beginning on page F-1, we receive distributions of additionali-units rather than cash.

Selected financial data of the Partnership is found inPart II, Item 6. of the Partnership’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2006, which is hereby incorporatedby reference as our results of operations, financial position and cash flowsare dependent on the results of operations, financial position and the cashflows of the Partnership.

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**Item 7.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

The following discussionand analysis of our financial condition and results of operations is based on andshould be read in conjunction with our Consolidated Financial Statements and theaccompanying notes beginning on page F-1 of this Annual Report onForm 10-K.

**BUSINESS OVERVIEW**

We are a Delaware limited liability company that wasformed on May 14, 2002. We have elected to be treated as a corporation forU.S. federal income tax purposes. The General Partner owns all of our votingshares and is an indirect, wholly-owned subsidiary of Enbridge.

By agreement with the Partnership and the GeneralPartner, we manage the business and affairs of the Partnership, subject to theGeneral Partner’s right to approve specified actions.

The information set forthunder “Part II, Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” in the Partnership’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006, is herebyincorporated by reference as our results of operation, financial position andcash flows are dependent on the results of operation, financial position andcash flows of the Partnership.

**RESULTS OFOPERATIONS**

Our results of operations consist of our share ofearnings of the Partnership attributed to the i-units we own. At December 31,2006, 2005 and 2004, through our ownership of i-units, we had an approximate16.0 percent, 17.5 percent and 18.1 percent limited partner interest in thePartnership, respectively. Our percentage ownership in the Partnership willchange over time as the number of i-units we own becomes a different percentageof the total units outstanding due to our ownership of additional i-units andother issuances of limited partner units by the Partnership.

Thefollowing table presents the Partnership’s allocation of net income to itsGeneral Partner and limited partners for the periods presented.

| ** **                                         | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                         | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                         | ** ** | **(in millions)**                     | ** ** |
| Net income of the  Partnership                     |       | $                                          | 284.9      |   | $ | 89.2 |   | $ | 138.2 |   |
| Less: net income  allocated to the General Partner |       | (30.9                                      | )          | (23.5 | ) | (22.5 | ) |
| Net income allocated to  limited partners          |       | $                                          | 254.0      |   | $ | 65.7 |   | $ | 115.7 |   |

 

 

On August 15, 2006, the Partnership sold approximately10.8 million Class C units to the General Partner and an institutional investorat a purchase price of $46.00 per unit in a private transaction. As a result ofthis issuance, our limited partnership interest in the Partnership was reducedfrom approximately 18.4 percent immediately prior to the issuance to 15.8percent following the transaction. We expect the income we are allocated forour limited partnership interest to be lower in future periods due to thereduction of our ownership interest in the Partnership and as a result offurther issuances of Class A common units and potentially Class C units.

Our net income of $28.7 million, $12.4 million and$18.7 million for the years ended December 31, 2006, 2005 and 2004,respectively, represents equity in earnings attributable to the i-units that weown, plus the dilution gain from the Partnership’s issuance of Class A commonunits, reduced by deferred income tax expense. Deferred income tax expense iscalculated based on the difference between the accounting and tax basis of ourinvestment in the Partnership and the combined federal and state income taxrate of 36.8% in 2006, 37.3% in 2005 and 35% in 2004, of our share of theearnings of the Partnership. Our earnings 

14

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increased by $16.3 millionfrom 2005 to 2006, primarily due to higher equity income from our investment inthe Partnership that was partially offset by a reduction in our percentageownership of the Partnership due to its Class C unit issuance in August 2006.Our 2006 earnings were also offset by a reduction of dilution gains in 2006that we recognize when the Partnership issues additional Class A common unitsand greater income tax expense associated with additional taxable income. 

Our earnings were lower in 2005 than 2004 by$6.3 million primarily due to lower equity income from our investment inthe Partnership and a $1.6 million charge for cumulative state income taxes onthe differences between book and taxable net income resulting from theamendment to the delegation of control agreement, partially offset by highergains resulting from the Partnership issuing more Class A common units in 2005than 2004.

Both basic and diluted earnings per share arecalculated by dividing our net income by our weighted-average number ofoutstanding shares during the period. Earnings per share was $2.35 for the yearended December 31, 2006 as compared with $1.10 for the year endedDecember 31, 2005. Earnings per share was $1.10 for the year endedDecember 31, 2005 as compared with $1.78 for the year endedDecember 31, 2004. The increase in earnings per share from 2005 to 2006 isattributable to higher net income that was partially offset by an increase inthe weighted average number of our shares outstanding. The decrease in earningsper share from 2004 to 2005 is attributable to lower net income and slightlyhigher weighted average shares outstanding and a higher effective tax rate in2005.

We do not have anysecurities outstanding that may be converted into or exercised for our shares.

**LIQUIDITY AND CAPITAL RESOURCES**

Our authorized capital structure consists of twoclasses of membership interests: (1) our Listed Shares, which representlimited liability company interests with limited voting rights, and(2) our voting shares. At December 31, 2006, our issuedcapitalization consisted of $498.6 million associated with our 12,674,147outstanding Listed Shares. At December 31, 2005, our issued capitalizationconsisted of $454.0 million associated with our 11,704,947 outstanding ListedShares. 

The number of our shares outstanding, including thevoting shares owned by the General Partner, will at all times equal the numberof i-units we own in the Partnership. Typically, the General Partner and ownersof the Partnership’s Class A and B common units will receive distributions fromthe Partnership in cash. Instead of receiving cash distributions, however, thenumber of i-units we own will increase automatically under the Partnership’spartnership agreement. The amount of this increase is calculated by dividingthe amount of the cash distribution paid by the Partnership on each of its ClassA and B common units by the average closing price of one of our Listed Shareson the New York Stock Exchange, or NYSE, as determined for a 10-tradingday period ending on the trading day immediately prior to the ex-dividend datefor our shares, multiplied by the number of shares outstanding on the recorddate. We make share distributions to our shareholders concurrently with thei-unit distributions we receive from the Partnership that increases the numberof i-units we own. As a result of our share distributions, the number ofshares outstanding is equal to the number of i-units that we own in thePartnership.

We used substantially all of the net proceeds from ourinitial public offering to purchase i-units from the Partnership and tocompensate Enbridge (the ultimate parent company of the General Partner) forits purchase provisions and tax indemnities. Under the Enbridge purchaseprovisions, which are a part of our limited liability company agreement,Enbridge has the right, under limited circumstances, to purchase ouroutstanding shares. In addition, Enbridge generally agreed to indemnify us forany tax liability attributable to our formation, our management of the Partnershipor our ownership of the i-units. Additionally, Enbridge generally agreed toindemnify us for any taxes arising from a transaction involving the i-units tothe extent the transaction does not generate sufficient cash to pay such taxes,in each case, other than any 

15

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Texas franchise taxes orany other similar capital-based foreign, state or local taxes that are requiredto be paid or reimbursed by the Partnership under the delegation of controlagreement.

If we incur liabilities or other obligations inconnection with the performance of our obligations under the delegation ofcontrol agreement, we are entitled to be reimbursed or to be indemnified by thePartnership or the General Partner. Thus, we expect that our expendituresassociated with managing the business and affairs of the Partnership and thereimbursement of these expenses that we receive will continue to be equal. Asstated above, we do not receive quarterly distributions of cash on the i-unitswe hold. Therefore, we expect neither to generate nor to require significantamounts of cash in ongoing operations. Any net cash proceeds we receive fromthe sale of additional shares will immediately be used to purchase additionali-units. Accordingly, we do not anticipate any other sources of or needs foradditional liquidity.

We are not permitted toborrow money or incur debt other than with Enbridge and its affiliates withoutthe approval of holders owning at least a majority of our shares.

**INCOME TAXES**

We are a limited liability company that has elected tobe treated as a corporation for federal income tax purposes. Deferred incometax assets and liabilities are recognized for temporary differences between thebasis of our assets and liabilities for financial reporting and income taxpurposes.

Pursuant to a delegation of control agreement with theGeneral Partner, the Partnership has agreed to reimburse us and EnbridgeManagement Services, L.L.C., our wholly-owned subsidiary (“EMS”), for anydirect and indirect expenses we or EMS incur to the same extent as it does withrespect to the General Partner as general partner, including certain taxexpenses.

The delegation of control agreement with the GeneralPartner was amended effective February 21, 2005. As a result of theamendment, the General Partner bears the economic impact for our taxes only inthe event we do not have sufficient cash to pay them. Accordingly, we beganaccruing state income taxes in 2005 in addition to federal income taxes. 

The effective tax rate used in computing the incometax provision in 2006 is 36.8%, which represents the federal statutory rate of35.0% and the effective state rate of 1.8%. 

Our income tax expense of $15.9 million for the year endedDecember 31, 2006, is $6.0 million greater than the $9.9 million we incurredfor the same period in 2005. The increase in income tax expense related to theincrease of equity income from the Partnership net income in 2006 is partiallyoffset by decreases resulting fromstate effective tax rate reductions impacting our deferred tax liability andfrom the $1.6 million charge we recorded in 2005 for cumulative state incometaxes on the differences between book and taxable net income resulting from anamendment in 2005 to the delegation of control agreement.

**SUBSEQUENT EVENTS**

***Share distribution***

On January 26, 2007, our board of directors declared a sharedistribution payable on February 14, 2007,to shareholders of record as of February 6, 2007, based on the $0.925 per limitedpartner unit distribution declared by Enbridge Energy Partners, L.P. (the“Partnership”). We received 228,528i-units from the Partnership, which is computed by dividing $0.925, the cashamount distributed per limited partner unit, by the average closing price ofone of our Listed Shares on the NYSE as determined for the 10-trading dayperiod ending on the trading day immediately prior to the ex-dividend date forour shares multiplied by the number of shares outstanding prior to thedistribution. We distributed 228,528additional 

16

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ListedShares to our listed shareholders and additional shares to the General Partnerin respect of these additional i-units.

**CRITICAL ACCOUNTING POLICIES**

Our consolidated financialstatements are prepared in accordance with accounting principles generallyaccepted in the United States of America, which we refer to herein as U.S.GAAP. The preparation of these consolidated financial statements in conformitywith U.S. GAAP requires our management to make estimates and assumptions thataffect the reported amount of assets, liabilities, revenues and expenses, andthe disclosure of contingent assets and liabilities. Our management evaluatesthese estimates on an ongoing basis, utilizing historical experience,consultation with experts and other methods considered reasonable in theparticular circumstances. Nevertheless, actual results may differ significantlyfrom these estimates. Any effects on the consolidated financial statementsresulting from revisions to these estimates are recorded in the period in whichthe facts that give rise to the revision become known.

**Accountingfor Investment in Enbridge Energy Partners, L.P.**

We use the equity methodof accounting for our ownership interest in the Partnership’s net income andcomprehensive income because we exercise significant influence over the Partnership.We record our share of earnings of the Partnership in the period in which it isearned. At December 31, 2006 and 2005, we owned approximately 16.0 percentand 17.5 percent of the Partnership, respectively. Our ownership percentagechanges as the Partnership distributes additional limited partner units. Changesin the calculation of our ownership percentage affects our net income andcomprehensive income.

**Gainon issuance of units by Enbridge Energy Partners, L.P.**

We recognize a gain orloss when our ownership interest in the Partnership is diluted. This occurswhen the Partnership issues additional Class A common units and we do notparticipate in the issuance. To the extent the new issuance price per unit isgreater than or less than our adjusted average cost per unit, such amount isfurther adjusted and a gain/(loss) is recognized.

**OFF-BALANCE SHEET ARRANGEMENTS**

We have no off-balancesheet arrangements.

**RECENT ACCOUNTINGPRONOUNCEMENTS NOT YET ADOPTED**

**Accounting forUncertainty in Income Taxes**

In July 2006, theFinancial Accounting Standards Board (“FASB”) issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes - an Interpretation of FASBStatement 109*. This Interpretation clarifies the accounting foruncertainty in income taxes recognized in a company’s financial statements inaccordance with FASB Statement No. 109, Accounting for Income Taxes and iseffective for fiscal years beginning after December 15, 2006. We do not expectour adoption of FIN 48 to materially affect our operating results, financial position or cash flows. 

***Staff Accounting Bulletin No.108***

In September 2006, the Securities and ExchangeCommission issued Staff Accounting Bulletin No. 108. This Bulletinrequires a “dual approach” for quantifications of errors using both a methodthat focuses on the income statement impact, including the cumulative effect ofprior years’ misstatements, and a method that focuses on the period-end balancesheet. We adopted SAB No. 108 as of December 31, 2006. The adoption ofthis Bulletin did not have a material impact on our consolidated financialstatements.

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**Item 7A.**                Quantitativeand Qualitative Disclosure About Market Risk

The nature of our business and operations is such thatno activities or transactions of the type requiring discussion under this itemare conducted.

For a discussion of thesematters as they pertain to the Partnership, please read “Part II, Item7A.” of the Partnership’s Annual Report on Form 10-K for the year endedDecember 31, 2006 which is hereby incorporated by reference as activities ofthe Partnership have an impact on our results of operations and financialposition.

**Item 8.**                        FinancialStatements and Supplementary Data

Our consolidated financial statements, together withthe notes thereto and the report of the independent registered publicaccounting firm, and unaudited supplementary information, begin on page F-1of this Report and are hereby incorporated by reference.

The consolidated financialstatements of the Partnership, together with the notes thereto, the report ofthe independent registered public accounting firm and unaudited supplementaryinformation, can be found in the Partnership’s Annual Report on Form 10-Kfor the year ended December 31, 2006 in “Part II, Item 8,” which is herebyincorporated by reference as activities of the partnership have an impact onour results of operations and financial position.

**Item 9.**                        Changesin and Disagreements with Accountants on Accounting and Financial Disclosure

None.

**Item 9A.**                Controlsand Procedures

**DISCLOSURE CONTROLS AND PROCEDURES**

Enbridge Management andEnbridge maintain systems of disclosure controls and procedures designed toprovide reasonable assurance that we are able to record, process, summarize andreport the information required in our annual and quarterly reports under theExchange Act. Our management has evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2006. Based upon thatevaluation, our principal executive officer and principal financial officerconcluded that our disclosure controls and procedures are effective toaccomplish their purpose. In conducting this assessment, our management reliedon similar evaluations conducted by employees of Enbridge affiliates whoprovide certain treasury, accounting and other services on our behalf. Nochanges in our internal control over financial reporting were made during thethree months ended December 31, 2006, that would materially affect ourinternal control over financial reporting.

**INTERNALCONTROL OVER FINANCIAL REPORTING**

***Management’s Report on Internal Control Over FinancialReporting***

Our management is responsible for establishing andmaintaining adequate internal control over our financial reporting as such termis defined in the Securities Exchange Act Rule 13a-15(f).

Our internal control over financial reporting is aprocess designed under the supervision and with the participation of ourprincipal executive and principal financial officers to provide reasonableassurance regarding the reliability of our financial reporting and the preparation of our financialstatements for external reporting purposes in accordance with U.S. GAAP.

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Our internal control over financial reporting includes policiesand procedures that:

·       Pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect our transactions and dispositions of our assets;

·       Providereasonable assurance that our transactions are recorded as necessary to permitpreparation of our financial statements in accordance with U.S. GAAP, and thatour receipts and expenditures are being made only in accordance with theauthorization of our management and directors; and

·       Providereasonable assurance that unauthorized acquisition, use or disposition of ourassets that could have a material effect on our financial statements isprevented or timely detected.

Our internal control over financial reporting may notprevent or detect all misstatements because of its inherent limitations. Additionally,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or deterioration in the degree of compliance with our policies and procedures.

Our management assessed the effectiveness of ourinternal control over financial reporting as of December 31, 2006, basedon the framework established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Based on this assessment, ourmanagement concluded that our internal control over financial reporting is effectiveas of December 31, 2006.

Our management’sassessment of the effectiveness of our internal control over financial reportingas of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their reportbeginning on page F-2.

**Item 9B.**               OtherInformation

None.

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**PART III**

**Item 10.**                 Directorsand Executive Officers of the Registrant

**DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT**

Our business and affairs are managed by our board ofdirectors.

Setforth below is certain information concerning the directors and executiveofficers of the General Partner and us as the delegate of the General Partnerunder a delegation of control agreement among the Partnership, the GeneralPartner and us. All directors of the General Partner are elected annually andmay be removed by Enbridge Pipelines Inc. (“Enbridge Pipelines”), as the solestockholder of the General Partner. All directors were elected and may beremoved by the General Partner, as the sole holder of our voting shares. All ofour officers and those of the General Partner serve at the discretion of therespective boards of directors of the General Partner and us. All directors andofficers of the General Partner hold identical positions with us.

| **Name**       | ** ** | ** ** | **Age** | ** **                                                                       | ** ** | **Position** | ** ** |
|----------------|------------|------------|---------|----------------------------------------------------------------------------------|------------|--------------|------------|
| J.A. Connelly  |       | 60         |    | Director                                                                         |       |
| E.C. Hambrook  |       | 69         |    | Director                                                                         |       |
| M.O. Hesse     |       | 64         |    | Director                                                                         |       |
| G.K. Petty     |       | 65         |    | Director                                                                         |       |
| S.J.J. Letwin  |       | 51         |    | Managing Director and  Director                                                  |       |
| T.L. McGill    |       | 52         |    | President and Director                                                           |       |
| J.R. Bird      |       | 57         |    | Executive Vice  President—Liquids Pipelines and Director                    |       |
| L.A. Zupan     |       | 51         |    | Vice President—Liquids  Pipelines Operations                                |       |
| M.A. Maki      |       | 42         |    | Vice President—Finance                                                      |       |
| R.L. Adams     |       | 42         |    | Vice  President—Operations and Technologies                                 |       |
| J.M. Gerez     |       | 50         |    | Vice President—Liquids Pipelines Project Management &  Engineering |       |
| J.A. Holder    |       | 49         |    | Vice President—Liquids  Pipelines Support Services                          |       |
| J.A. Loiacono  |       | 44         |    | Vice  President—Commercial Activities                                       |       |
| D.V. Krenz     |       | 55         |    | Vice President                                                                   |       |
| V.D. Yu        |       | 40         |    | Treasurer                                                                        |       |
| J.N. Rose      |       | 39         |    | Assistant Treasurer                                                              |       |
| S.J. Neyland   |       | 39         |    | Controller                                                                       |       |
| E.C. Kaitson   |       | 50         |    | Assistant Secretary                                                              |       |
| B.A. Stevenson |       | 51         |    | Corporate Secretary                                                              |       |

 

J.A. Connelly was elected a director of the GeneralPartner and Enbridge Management in January 2003 and serves as the Chairmanof its Audit, Finance & Risk Committee. Mr. Connelly served as ExecutiveVice President, Senior Vice President and Vice President of the CoastalCorporation from 1988 to 2001. Mr. Connelly is a business consultantproviding executive management consulting services.

E.C. Hambrook was elected a director of the GeneralPartner and Enbridge Management in January 1992 and serves on its Audit,Finance & Risk Committee. Mr. Hambrook serves as Chairman of theboard of directors of the General Partner. Mr. Hambrook has served asPresident of Hambrook Resources, Inc. since its inception in 1991.Hambrook Resources, Inc. is a real estate investment, marketing and salescompany.

M.O. Hesse was elected a director of the GeneralPartner and Enbridge Management in March 2003 and serves as a member ofits Audit, Finance & Risk Committee. Ms. Hesse was President andCEO of Hesse Gas Company from 1990 through 2003. She served as Chairman of theU.S. Federal Energy 

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Regulatory Commission from1986 to 1989. Ms. Hesse also served as Senior Vice President, FirstChicago Corporation and Assistant Secretary for Management and Administration,U.S. Department of Energy. She currently serves as a director of Arizona PublicService Company, Pinnacle West Capital Corporation, and Terra Industries, Inc.

G.K. Petty was elected a director of the General Partnerand Enbridge Management in February 2001 and serves on its Audit, Finance &Risk Committee. Mr. Petty has served as a director of Enbridge since January 2001.Mr. Petty served as President and Chief Executive Officer of TelusCorporation, a Canadian telecommunications company, from November 1994 to November 1999.Mr. Petty is a business consultant providing executive managementconsulting services to the telecommunications industry.

S.J.J. Letwin was elected Managing Director of theGeneral Partner and Enbridge Management in May 2006. Prior to his electionhe served Enbridge, the indirect parent of our General Partner, as Group VicePresident, Gas Strategy & Corporate Development since April 2003;prior thereto he served Enbridge as Group Vice President, Distribution &Services since September 2000.

T. L. McGill was elected to serve as President of theGeneral Partner and Enbridge Management in May 2006. Prior to that heserved as Vice President, Commercial Activity and Business Development of theGeneral Partner and Enbridge Management since April 2002 and ChiefOperating Officer since July 2004. Prior to that time, Mr. McGill wasPresident of Columbia Gulf Transmission Company from January 1996 to March 2002.

J.R. Bird served as a director of the General Partnerand Enbridge Management from September 2000 to January 2003 and wasreelected as a Director in October 2003. He has also served as ExecutiveVice President, Liquids Pipelines of the General Partner from May 2006,and holds similar responsibilities with Enbridge. Prior to that Mr. Birdserved as a Group Vice President, Liquids Transportation from May 2001 andin other senior leadership positions with Enbridge from August 1997.

L.A. Zupan was elected Vice President, Liquids PipelinesOperations of the General Partner and Enbridge Management in July 2004,and holds similar responsibilities with Enbridge. Prior to that he served asVice President, Development & Services for Enbridge Pipelines since2000 and prior to that as Director, Information Technology since November 1999.

M.A. Maki was elected Vice President, Finance of theGeneral Partner and Enbridge Management in July 2002. Prior to that time,he served as Controller of the General Partner since June 2001, and priorto that, as Controller of Enbridge Pipelines since September 1999.

R.L. Adams was elected Vice President, Operations andTechnologies of the General Partner and Enbridge Management in April 2003.Prior to his current position, he was Director of Technology & Operationsfor the General Partner since 2001, and Director of Field Operations andTechnical Services and Director of Commercial Activities for Ocensa/Enbridge inBogota, Columbia from 1997 to 2001.

J.M. Gerez was elected Vice President, LiquidsPipelines Project Management and Engineering, of the General Partner andEnbridge Management in May 2006, and holds similar responsibilities withEnbridge. Prior to that he was Vice President Operations with OCENSA, anEnbridge affiliate in Colombia from 2000 to May 2006.

J. A. Holder was elected Vice President, LiquidsPipelines Support Services of the General Partner and Enbridge Management in April 2006,and holds similar responsibilities with Enbridge. Prior to that she served asVice President, Market Services for Enbridge Inc. since December 2004 andprior to that as Vice President, Operations for Enbridge Gas Distribution sinceMay 2001.

J.A. Loiacono was elected Vice President, CommercialActivities, of the General Partner and Enbridge Management in July 2006. Priorto that, he was Director of Commercial Activities for the 

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General Partner from April 2003and commenced employment with Midcoast Energy Resources in February 2000as an Asset Optimizer.

D.V. Krenz was elected Vice President of the GeneralPartner and Enbridge Management in January 2005. Prior to that, he wasPresident of Shell Gas Transmission, LLC (previously Shell Gas Pipelines Co.)from March 1996 to December 2004.

V. D. Yu was elected as Treasurer of the GeneralPartner and Enbridge Management in July 2005 and is also Vice President,Enterprise Risk of Enbridge. Since July 2002 he was Director FinancialManagement at Enbridge and previously Manager, Capital Markets and RiskManagement since October 2000.

J. N. Rose was appointed as Assistant Treasurer of theGeneral Partner and Enbridge Management in July 2005 and is also aManager, Corporate Finance of Enbridge, a position he has held since April 2004.Prior to that Mr. Rose was a Vice President with Citigroup GlobalCorporate and Investment Bank from 2001 to 2004.

S.J. Neyland, was elected Controller of the GeneralPartner and Enbridge Management effective September 2006. Prior to hiselection he served as Controller, Natural Gas since January 2005,Assistant Controller from May 2004 to January 2005, and in othermanagerial roles in Finance and Accounting from December 2001 to May 2004.Prior to that  Mr. Neyland wasController of Koch Midstream Services from 1999 to 2001.

E.C. Kaitson was elected Assistant Secretary of theGeneral Partner and Enbridge Management in July 2004. He served asCorporate Secretary of the General Partner from October 2001 to July 2004.He also currently serves as Associate General Counsel of Enbridge. He waspreviously Assistant Corporate Secretary and General Counsel of Midcoast EnergyResources, Inc. from 1997 until Enbridge acquired it on May 11, 2001.

B.A. Stevenson was electedCorporate Secretary of the General Partner and Enbridge Management in July 2004.Between 2000 and 2004 Mr. Stevenson held management positions with ReliantEnergy, Inc. and Arthur Andersen LLP. Prior to that Mr. Stevenson wasGeneral Counsel & Corporate Secretary of Alberta Natural GasCompany Ltd, a Canadian gas processing and transmission company,  that was acquired by TransCanada Pipelines.

**SECTION 16(a) BENEFICIALOWNERSHIP REPORTING COMPLIANCE**

Section 16(a) ofthe Exchange Act requires our directors, executive officers and 10% beneficialowners to file with the SEC reports of ownership and changes in ownership ofour equity securities and to furnish us with copies of all reports filed. Toour knowledge, based solely on a review of the copies of reports furnished tous and written representations that no other reports were required, theofficers, directors, and greater than 10% beneficial owners complied with allapplicable filing requirements of Section 16(a) of the Exchange Actduring the year.

**GOVERNANCE MATTERS**

We are a “controlled company,” as that term is used inNYSE Rule 303A, because all of our voting shares are owned by the GeneralPartner. Because we are a controlled company, the NYSE listing standards do notrequire that we or the General Partner have a majority of independent directorsor a nominating or compensation committee of the General Partner’s board ofdirectors.

The NYSE listing standardsrequire our CEO to annually certify that he is not aware of any violation bythe Partnership of the NYSE corporate governance listing standards.Accordingly, this certification was provided as required to the NYSE on March 17,2006.

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**CODE OF ETHICS, STATEMENTOF BUSINESS CONDUCT AND CORPORATE GOVERNANCE GUIDELINES**

We have adopted a Code of Ethics applicable to oursenior financial officers, including the principal executive officer, principalfinancial officer and principal accounting officer. A copy of the Code ofEthics for Senior Financial Officers is available on our website at *www.enbridgemanagement.com* and is includedherein as Exhibit 14.1. We intend to post on our website any amendments toor waivers of our Code of Ethics for Senior Financial Officers. Additionally,this material is available in print, free of charge, to any person who requeststhe information. Persons wishing to obtain this printed material should submita request to Corporate Secretary, c/o Enbridge Energy Management, L.L.C., 1100Louisiana, Suite 3300, Houston, TX 77002.

We also have a Statement of Business Conductapplicable to all of our employees, officers and directors. A copy of theStatement of Business Conduct is available on our website at *www.enbridgemanagement.com*. We intend topost on our website any amendments to or waivers of our Statement of BusinessConduct. Additionally, this material is available in print, free of charge, toany person who requests the information. Persons wishing to obtain this printedmaterial should submit a request to Corporate Secretary, c/o Enbridge EnergyManagement, L.L.C., 1100 Louisiana, Suite 3300, Houston TX 77002.

We also have a statementof Corporate Governance Guidelines that sets forth the expectation of how theBoard should function and the Board’s position with respect to key corporategovernance issues. A copy of the Corporate Governance Guidelines is availableon our website at *www.enbridgemanagement.com*.We intend to post on our website any amendments to our Corporate GovernanceGuidelines. Additionally, this material is available in print, free of charge,to any person who requests the information. Persons wishing to obtain thisprinted material should submit a request to Corporate Secretary, c/o EnbridgeEnergy Management, L.L.C., 1100 Louisiana, Suite 3300, Houston TX 77002.

**AUDIT, FINANCE &RISK COMMITTEE**

We have an Audit, Finance & Risk Committee(the “Audit Committee”) comprised of four board members who are independent asthe term is used in Section 10A of the Exchange Act of 1934, as amended.None of these members is relying upon any exemptions from the foregoingindependence requirements. The members of our Audit Committee are J.A.Connelly, E.C. Hambrook, M.O. Hesse, and G.K. Petty. Our Audit Committee providesindependent oversight with respect to our internal controls, accountingpolicies, financial reporting, internal audit function and the report of theindependent registered public accounting firm. Our Audit Committee also reviewsthe scope and quality, including the independence and objectivity of theindependent and internal auditors and the fees paid for both audit andnon-audit work and makes recommendations concerning audit matters, includingthe engagement of the independent auditors, to the board of directors.

The charter of our Audit Committee is filed as anexhibit to this Annual Report on Form 10-K and is available on ourwebsite at *www.enbridgemanagement.com*.The charter of our Audit Committee complies with the listing standards of theNYSE currently applicable to us.

Our board of directors has determined that J.A.Connelly, E.C. Hambrook and M.O. Hesse qualify as “Audit Committee financialexperts” as defined in Item 407(d)(ii) of SEC Regulation S-K. Each of the members of our Audit, Finance, and RiskCommittee is independent as defined by Section 303A of the listingstandards of the NYSE.

Mr. Petty also serves on theAudit Committees of the General Partner, Enbridge Management, Fuel Cell Energy,Inc. and of Enbridge Inc. In compliance with the provisions of the Audit,Finance & Risk 

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CommitteeCharter, the board of directors of the General Partner and of EnbridgeManagement have determined that Mr. Petty’s simultaneous service on such auditcommittees would not impair his ability to effectively serve on the Audit,Finance & Risk Committee.

Our Audit Committee hasestablished procedures for the receipt, retention and treatment of complaintswe receive regarding accounting, internal accounting controls or auditingmatters and the confidential, anonymous submission by our employees of concernsregarding questionable accounting or auditing matters. Persons wishing tocommunicate with our Audit Committee may do so by writing in care of Chairman,Audit Committee, c/o Enbridge Energy Management, L.L.C., 1100 Louisiana, Suite 3300,Houston TX 77002.

**EXECUTIVE SESSIONSOF NON-MANAGEMENT DIRECTORS**

Our non-managementdirectors meet at regularly scheduled executive sessions without management.J.A. Connelly or E.C. Hambrook serve as the presiding director at thoseexecutive sessions. Persons wishing to communicate with our non-managementdirectors may do so by writing in care of Chairman, Board of Directors,Enbridge Energy Management, L.L.C., 1100 Louisiana, Suite 3300, Houston,TX 77002.

**Item 11.**                 ExecutiveCompensation

We do not directly employ any of the individualsresponsible for managing or operating our business. We obtain managerial,administrative and operational services from the General Partner and Enbridgepursuant to service agreements among us, the General Partner and otheraffiliates of Enbridge. Pursuant to these service agreements, the Partnershiphas agreed to reimburse the General Partner and affiliates of Enbridge for thecost of managerial, administrative, operational and director services theyprovide to us.

The compensation policies and philosophy of Enbridgegovern the types and amount of compensation of the Named Executive Officers, orNEOs. Since these policies and philosophy are those of Enbridge, we refer youto a discussion of those items as set forth in the Executive Compensationsection of the Enbridge “Management Information Circular” on the Enbridgewebsite at *www.enbridge.com*. The Enbridge “ManagementInformation Circular” is produced by Enbridge pursuant to Canadian securitiesregulations and is not incorporated into this document by reference or deemedfurnished or filed by us under the Securities Exchange Act of 1934, as amended;rather the reference is to provide our investors with an understanding of thecompensation policies and philosophy of the ultimate parent of the GeneralPartner.

The discussion of executive compensation of thePartnership is found in Part III, Item 11 of the Partnership’s AnnualReport on Form 10-K for the year ended December 31, 2006, whichis hereby incorporated by reference as the Partnership pays a portion of thecompensation of our directors and officers for he services they provide to us,the General Partner and the Partnership.

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**Item 12.**                 SecurityOwnership of Certain Beneficial Owners and Management

**SECURITY OWNERSHIPOF CERTAIN BENEFICIAL OWNERS**

The following table sets forth information as of February 15,2006, unless otherwise noted, with respect to persons known by Enbridge Managementto be the beneficial owners of more than 5% of our shares:

| ** **                                                                                                                                    | ** ** | **Listed Shares**(1) | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|
| **Name and Address of Beneficial Owner**                                                                             | ** ** | ** **                | ** ** | **Number of Shares** | ** ** | **Percent of Class** | ** ** |
| Enbridge Energy  Company, Inc.(1)(2)1100 Louisiana, Suite 3300  Houston, TX 77002                                                   |       |                      | 2,222,127  |   |   |   | 17.2 | % |   |
| Oppenheimer  Funds, Inc.(3)   Two World Financial Center  225 Liberty Street, 11th Floor  New York, NY 10281                        |       |                      | 670,277    |   |   |   | 5.3 | % |   |
| Goldman,  Sachs & Co.(4)The Goldman Sachs Group, Inc.  85 Broad St.  New York, NY 10004                                         |       |                      | 843,731    |   |   |   | 6.7 | % |   |
| Kayne Anderson  Capital Advisors, L.P.(5)Kayne Anderson Capital Advisors, L.P.  1800 Avenue of the Stars, Second Floor  Los Angeles, CA 90067 |       |                      | 1,365,805  |   |   |   | 10.6 | % |   |
| Neuberger  Berman, Inc.(6)605 3rd Avenue  New York, NY 10158                                                                             |       |                      | 1,496,012  |   |   |   | 11.6 | % |   |
|                                                                                                                                               |            |                           |            |  |  |  |  |  |  |  |  |

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(1)                As of February 22,2007, there were 12,902,675 Listed Shares issued and outstanding. In all caseswe will vote, or refrain from voting, the Partnership’s i-units that we own inthe manner that the owners of our shares, including our voting shares, vote, orrefrain from voting, their shares through the provisions in the Partnership’spartnership agreement and our limited liability company agreement. The numberof our outstanding shares and the number of the Partnership’s i-units will atall times be equal.

(2)                The GeneralPartner also owns 100% of our voting shares, which are not Listed Shares.

(3)                As per its reporton Schedule 13G filed February 6, 2006, Oppenheimer Funds, Inc. hasshared dispositive power as to 270,277 shares and shared voting as to 670,277power, and Oppenheimer Capital Income Fund has shared voting power and shareddispositive power as to all shares included. Oppenheimer Funds, Inc.disclaims beneficial ownership of all shares indicated. The address ofOppenheimer Funds, Inc. is Two World Financial Center, 225 Liberty Street,11th Floor, New York, NY 10281, and the address of Oppenheimer Capital IncomeFund is 6803 South Tucson Way, Centennial, CO 80112.

(4)                As per its reporton Schedule 13G filed January 31, 2007, Goldman, Sachs & Co.and The Goldman Sachs Group, Inc. have shared voting power as to 110shares and shared dispositive power as to all shares indicated. Goldman, Sachs &Co. and The Goldman Sachs Group, Inc. each disclaim beneficial ownershipof the securities beneficially owned by (a) any client accounts withrespect to which Goldman, Sachs & Co. or its employees have voting orinvestment discretion or both, and (b) certain investment entities, ofwhich a subsidiary of The Goldman Sachs Group, Inc. or Goldman, Sachs &Co. is the general partner, managing general partner or other manager, to theextent interests in such 

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entities are held bypersons other than The Goldman Sachs Group, Inc., Goldman, Sachs & Co. or their affiliates. The address ofGoldman, Sachs & Co. and the Goldman Sachs Group, Inc. is 85Broad Street, New York, NY 10004.

(5)                Kayne AndersonCapital Advisors, L.P. and Richard A. Kayne reported shared votingpower and shared dispositive power with respect to all of such shares in itsreport on Form SC 13G filed February 13, 2007. Kayne AndersonCapital Advisors, L.P. disclaims beneficial ownership of the securitiesreported, except those attributable to it by virtue of its general partnerinterests in the limited partnerships. Mr. Kayne disclaims beneficialownership of the securities reported, except those held by him or attributableto him by virtue of his limited partnership interests in the limitedpartnerships, his indirect interest in the interest of Kayne Anderson CapitalAdvisors, L.P. in the limited partnerships, and his ownership of commonstock of the registered investment company.

(6)                As per its reporton Schedule 13G/A filed February 13, 2007, Neuberger Berman, LLC has solevoting power as to 1,380,570 shares, shared voting power as to 1,101 shares,and shared dispositive power as to 1,496,012 shares. The address of NeubergerBerman, Inc. and Neuberger Berman, LLC is 605 Third Avenue, New York,NY 10158-3698.

We do not have any sharesthat have been approved for issuance under an equity compensation plan.

**SECURITY OWNERSHIPOF MANAGEMENT AND DIRECTORS**

Thefollowing table sets forth information as of February 15, 2006, regardingthe beneficial ownership of our Listed Shares by all directors and executiveofficers of Enbridge Management.

| ** **                                                        | ** ** | **Enbridge Energy Management, L.L.C.** | ** ** | **Enbridge Energy Partners, L.P.** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------|------------|
| **Name**                                                          | ** ** | **Title of Class**                          | ** ** | **Number of  Shares**(1)                     | ** ** | **Percent  Of Class** | ** ** | **Title of Class** | ** ** | **Amount and  Nature of  Beneficial  Ownership**(1) | ** ** | **Percent  Of Class** | ** ** |
| J.A. Connelly                                                     |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | 5,000 |   |   |   | * |   |   |
| E.C. Hambrook                                                     |       | Listed Shares                                         |       |                                              | 1,282.30   |   |   |   | * |   |   | Class A common units |   |   | 2,000 |   |   |   | * |   |   |
| M.O. Hesse                                                        |       | Listed Shares                                         |       |                                              | 7,152.60   |   |   |   | * |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| G.K. Petty                                                        |       | Listed Shares                                         |       |                                              | 967.70     |   |   |   | * |   |   | Class A common units |   |   | 2,617 |   |   |   | * |   |   |
| S.J.J. Letwin                                                     |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | 15,000 |   |   |   | * |   |   |
| T.L. McGill                                                       |       | Listed Shares                                         |       |                                              | 1,364.70   |   |   |   | * |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| J.R. Bird(2)                                                      |       | Listed Shares                                         |       |                                              | 10,752.20  |   |   |   | * |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| L.A. Zupan                                                        |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| M.A. Maki                                                         |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| R.L. Adams                                                        |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| J.M. Gerez                                                        |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| J.A. Holder                                                       |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| J.A. Loiacono                                                     |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| D.V. Krenz                                                        |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| V.D. Yu                                                           |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| J.N. Rose                                                         |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| S.J. Neyland                                                      |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| E.C. Kaitson                                                      |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| B.A. Stevenson                                                    |       | Listed Shares                                         |       |                                              | —     |   |   |   | — |   |   | Class A common units |   |   | — |   |   |   | — |   |   |
| All Officers, directors  and nominees as a group 17 persons) |       | Listed Shares                                         |       |                                              | 21,519.50  |   |   |   | * |   |   | Class A common units |   |   | 24,617 |   |   |   | * |   |   |

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*        Lessthan 1%

(1)      Eachbeneficial owner has sole voting and investment power with respect to all theshares or units attributed to him/her.

(2)      All of such shares held are pledged as security for debt.

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**Item13.**                 CertainRelationships and Related Transactions, and Director Independence

**MANAGEMENTARRANGEMENTS AND RELATED AGREEMENTS**

Under the delegation of control agreement, the GeneralPartner delegated, and we assumed, all of the General Partner’s power andauthority to manage the business and affairs of the Partnership and itssubsidiaries subject to certain approval rights retained by the GeneralPartner. At the same time, we entered into an Agency Agreement with EnbridgeManagement Services, L.L.C., or EMS, our wholly-owned subsidiary, underwhich EMS agreed to serve as our agent to carry out the ordinary course,day-to-day activities of the Partnership under the authority delegated to us bythe General Partner.

The Partnership has agreed to reimburse EMS and usunder the delegation of control agreement for any direct and indirect expenseswe or EMS incur to the same extent as it does with respect to the GeneralPartner as general partner. In addition, the Partnership will reimburse EMS andus for any Texas franchise taxes and any other foreign, state and local taxesnot otherwise paid or reimbursed pursuant to the tax indemnification agreementbetween Enbridge and us. The Partnership has also agreed to indemnify andprotect us, EMS and our respective officers and directors in performing thesemanagement and control functions to the same extent as it does with respect tothe General Partner as general partner.

For the years ended December 31, 2006, 2005 and2004, all expenses in connection with our management of the business andaffairs of the Partnership were paid by the Partnership.

Because neither we nor EMS have employees, we haveentered into various service agreements with Enbridge and certain of itssubsidiaries to fulfill our obligations under the delegation of controlagreement and the agency agreement. These service agreements allow EMS and usto obtain from Enbridge and its subsidiaries various administrative,operational, technical and professional services and the use of relatedpersonnel. The Partnership directly reimburses Enbridge and its subsidiariesfor the actual amount of direct and indirect expenses they incur and paymentsthey make on our behalf and that of EMS in connection with the services andpersonnel provided to EMS and us. In other cases, Enbridge allocates to itsaffiliates an agreed percentage of the total expenses with respect to aparticular type of service provided by Enbridge to all of its affiliates,including EMS and us. In either case, the Partnership pays directly orreimburses EMS and us for any amounts that EMS or we incur under the serviceagreements. The service agreements also provide that Enbridge and itsaffiliates will indemnify EMS and us for certain losses and defend us againstcertain claims in connection with providing or failing to provide the agreedservices. Similarly, we and EMS have agreed to indemnify Enbridge and itsaffiliates for certain losses and defend them against certain claims as aresult of their provision of the agreed services.

For the years ended December 31,2006, 2005 and 2004, expenses for services and personnel provided under theservices agreements were paid by the Partnership.

**SUPPORTIVEARRANGEMENTS WITH ENBRIDGE**

In connection with ourinitial public offering in October 2002, we entered into a taxindemnification agreement and purchase provisions with Enbridge. Under the taxindemnification agreement, Enbridge has agreed to indemnify us for any taxliability attributable to our formation, our management of the business andaffairs of the Partnership and for any taxes arising out of a transactioninvolving the i-units we own to the extent the transaction does not generatesufficient cash to pay our taxes with respect to such transaction. Under thepurchase provisions, Enbridge has the right to purchase our outstanding ListedShares in connection with certain significant events involving the Partnershipand also whenever Enbridge owns more than 80% of our outstanding Listed Shares.We paid Enbridge $500,000 in consideration of its obligations under the taxindemnification agreement and purchase provisions.

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**CONFLICTS OF INTEREST AND FIDUCIARY DUTIES**

Conflicts of interest mayarise because of the relationship between Enbridge, the General Partner, thePartnership and us. Our directors and officers have fiduciary duties to manageour business in a manner beneficial to us and to the holders of our shares.However, these fiduciary duties have been modified pursuant to the terms of ourlimited liability company agreement. Simultaneously, some of our directors andofficers are also directors and officers of Enbridge and the General Partnerand have fiduciary duties to manage the business of Enbridge or the GeneralPartner and the Partnership in a manner beneficial to Enbridge and itsshareholders or the General Partner, the Partnership and their respectiveshareholders or unitholders, as the case may be. Furthermore, through itsownership of our voting shares, the General Partner has the sole power to electall of our directors. The resolution of these conflicts of interest may not alwaysbe in our best interest or in the best interest of our shareholders.

**SECURITY OWNERSHIP AND DISTRIBUTIONS**

In connection with ourformation on May 14, 2002, we issued the General Partner one voting sharein consideration of the General Partner’s initial contribution to us. Inconnection with our initial public offering on October 17, 2002, theGeneral Partner acquired 1,550,000 of our Listed Shares at a price of $39.00per share. We make quarterly share distributions pursuant to the provisions ofour limited liability company agreement as described in Part II,Item 5 of this Annual Report. At February 22, 2007, the GeneralPartner owned approximately 2,222,128 or approximately 17.2%, of our ListedShares and 1.43, or 100%, of our voting shares.

At February 22, 2007,we owned 12,902,676 i-units, representing all of the outstanding i-units and anapproximate 16.2% limited partner interest in the Partnership. For furtherdiscussion of ownership and distributions as they pertain to the Partnership,please read “Part III, Item 13. Certain Relationships and RelatedTransactions, and Director Independence” of the Partnership’s Annual Report on Form 10-Kfor the year ended December 31, 2006, which is hereby incorporated byreference.

**OTHER RELATIONSHIPS AND RELATED TRANSACTIONS OF THEPARTNERSHIP**

For a discussion of otherrelationships and related transactions as they pertain to the Partnership,please read “Part III, Item 13. Certain Relationships and RelatedTransactions, and Director Independence” of the Partnership’s Annual Report, onForm 10-K for the year ended December 31, 2006, which is herebyincorporated by reference.

**Item 14.**                 PrincipalAccountant Fees and Services

The following table setsforth the aggregate fees billed for professional services rendered byPricewaterhouseCoopers LLP, Enbridge Management’s principal independentauditors, for each of our last two fiscal years.

| ** **         | ** ** | **For the years ended   December 31,** | ** ** |
|--------------------|------------|-----------------------------------------------------------------|------------|
| ** **         | ** ** | **2006**                                                        | ** ** | **2005** | ** ** |
| Audit fees(1)      |       | $                                                               | 108,640    |   | $ | 106,710 |   |
| Audit related fees |       | —                                                          |       | — |   |
| Tax fees           |       | —                                                          |       | — |   |
| All other fees     |       | —                                                          |       | — |   |
| Total              |       | $                                                               | 108,640    |   | $ | 106,710 |   |

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(1)                Audit fees consistof fees billed for professional services rendered for the audit of theconsolidated financial statements and review of the interim consolidatedfinancial statements.

28

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Engagements for services provided byPricewaterhouseCoopers LLP are subject to pre-approval by the Audit, Finance &Risk Committee of our Board of Directors, or services up to $50,000 may beapproved by the Chairman of the Audit, Finance & Risk Committee, underBoard of Directors delegated authority. All services in 2006 and 2005 wereapproved by the Audit, Finance & Risk Committee.

All fees, including theamounts shown above, that are billed by PricewaterhouseCoopers LLP for servicesrendered are paid by the Partnership on behalf of Enbridge Management.

**PART IV**

**Item 15.**                 Exhibits,Financial Statement Schedules

The following documentsare filed as a part of this report:

*(1)**         FinancialStatements, which are incorporated by reference in Item 8 are includedbeginning on page F-1*

a.                  Report ofPricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.

b.                 ConsolidatedStatements of Income for the years ended December 31, 2006, 2005 and 2004.

c.                  ConsolidatedStatements of Comprehensive Income for the years ended December 31, 2006,2005 and 2004.

d.                 ConsolidatedStatements of Cash Flows for the years ended December 31, 2006, 2005 and2004.

e.                  ConsolidatedStatements of Financial Position for the years ended December 31, 2006 and2005.

f.                    ConsolidatedStatements of Partners’ Capital for the years ended December 31, 2006,2005 and 2004.

g.                  Notesto the Consolidated Financial Statements.

*(2)**         FinancialStatement Schedules.*

Allschedules have been omitted because they are not applicable, any requiredinformation is shown in the Consolidated Financial Statements or Notes thereto,or the required information is immaterial.

*(3)**         Exhibits.*

Reference is made to the “Index of Exhibits” followingthe signature page, which is hereby incorporated into this Item.

29

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|                               |     | ENBRIDGE  ENERGY MANAGEMENT, L.L.C.  (Registrant) |     |
|-------------------------------|----------|---------------------------------------------------|----------|
|                          |     | By:                                               |     | /s/ STEPHEN J.J. LETWIN |   |
|                          |     |                                              |     | Stephen J.J. Letwin |   |
| Date: February  22, 2007 | * * | * *                                          | * * | *(Managing  Director)* | * * |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this Report hasbeen signed below on February  22, 2007 by the following persons on behalfof the Registrant and in the capacities indicated.
| /s/ STEPHEN J.J. LETWIN                                               |   | /s/ M.A. MAKI                                                          |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
| Stephen J.J. Letwin*Managing Director  (Principal Executive Officer)* |   | M.A. Maki*Vice President—Finance   (Principal Financial Officer)* |   |
| /s/ T.L.  MCGILL                                                      |   | /s/ J.R. BIRD                                                          |   |
| T.L. McGill*President*                                                |   | J.R. Bird*Director*                                                    |   |
| /s/ J.A.  CONNELLY                                                    |   | /s/ E.C. HAMBROOK                                                      |   |
| J.A. Connelly*Director*                                               |   | E.C. Hambrook*Director*                                                |   |
| /s/ M.O. HESSE                                                        |   | /s/ G.K. PETTY                                                         |   |
| M.O. Hesse*Director*                                                  |   | G.K. Petty*Director*                                                   |   |

 

30

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**INDEX TO EXHIBITS**

Eachexhibit identified below is filed as a part of this annual report. Exhibitsincluded in this filing are designated by an asterisk (“*”); all exhibits notso designated are incorporated by reference to a prior filing as indicated. Exhibitsdesignated with a “+” constitute a management contract or compensatory planarrangement required to be filed as an exhibit to this report pursuant to Item15(c) of Form 10-K.
| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                                                                                                               | ** ** | **Description** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| **3.1**          |       | Certificate of Formation  of Enbridge Energy Management, L.L.C. (incorporated by reference to  Exhibit 3.1 of Enbridge Management’s Registration Statement on  Form S-1 filed on May 31, 2002).                                                                                      |
| **3.2**          |       | Amended and Restated  Limited Liability Company Agreement of Enbridge Energy Management, L.L.C.  (including Purchase Provisions adopted by Enbridge) (incorporated by  reference to Exhibit 3.2 of Enbridge Management’s Quarterly Report on  Form 10-Q filed on November 25, 2002). |
| **10.1**         |       | Tax Indemnification  Agreement (incorporated by reference to Exhibit 10.1 of Enbridge  Management’s Quarterly Report on Form 10-Q filed on November 25,  2002).                                                                                                                      |
| **10.2**         |       | Delegation of Control  Agreement (incorporated by reference to Exhibit 10.2 of Enbridge  Management’s Quarterly Report on Form 10-Q filed on November 25,  2002).                                                                                                                    |
| **10.3**         |       | First Amending Agreement  to the Delegation of Control Agreement dated October 17, 2002  (incorporated by reference to Exhibit 10.1 of Enbridge Management’s  Quarterly Report on Form 10-Q filed on May 5, 2005).                                                              |
| **10.4**         |       | Amended and Restated  Treasury Services Agreement (incorporated by reference to Exhibit 10.3  of Enbridge Management’s Quarterly Report on Form 10-Q filed on  November 25, 2002).                                                                                                   |
| **10.5**         |       | Operational Services  Agreement (incorporated by reference to Exhibit 10.4 of Enbridge  Management’s Quarterly Report on Form 10-Q filed on November 25,  2002).                                                                                                                     |
| **10.6**         |       | General and  Administrative Services Agreement (incorporated by reference to  Exhibit 10.5 of Enbridge Management’s Quarterly Report on Form 10-Q  filed on November 25, 2002).                                                                                                      |
| **10.7****+**    |       | Employment agreement  between Mr. Letwin and Enbridge Inc. dated April 14, 2003  (incorporated by reference to our Current Report on Form 8-K dated  May 3, 2006).                                                                                                                   |
| **10.8*****+**   |       | Employment agreement  between Mr. Bird and Enbridge Inc. dated April 14, 2003.                                                                                                                                                                                                                 |
| **10.9****+**    |       | Executive Employment  Agreement, dated May 11, 2001, between E. Chris Kaitson, as Executive,  and Enbridge Inc., as Corporation (incorporated by reference to  Exhibit 10.27 of the Partnership’s Annual Report on Form 10-K filed  on March 28, 2003).                         |
| **10.10**        |       | First Amending Agreement  to the Delegation of Control Agreement dated as of February 21, 2005  (incorporated by reference to Exhibit 10.1 of Enbridge Management’s  Quarterly Report on Form 10-Q filed May 5, 2005).                                                     |
| **14.1**         |       | Code of Ethics for Senior  Financial Officers (incorporated by reference to Exhibit 14.1 of  Enbridge Management’s Annual Report on Form 10-K filed on March 12,  2004).                                                                                                             |
| **21.1**         |       | Subsidiaries of the  Registrant (incorporated by reference to Exhibit 21.1 of Enbridge  Management’s Annual Report on Form 10-K filed on March 12, 2004).                                                                                                                            |
| **31.1*******    |       | Certification of 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 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.                                                                                                                                                                                           |

31

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| **99.1**      |   | Charter of the Audit, Finance &  Risk Committee of Enbridge Energy Management, L.L.C. (incorporated by  reference to Exhibit 99.1 of Enbridge Management’s Annual Report on  Form 10-K filed on February 25, 2005.) |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **99.2******* |   | Enbridge Energy Partners, L.P. Annual Report on  Form 10-K for the year ended December 31, 2006.                                                                                                                                       |

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Copies of Exhibits may be obtained upon writtenrequest of any shareholder to Investor Relations, Enbridge Energy Management,L.L.C., 1100 Louisiana Street, Suite 3300, Houston, Texas 77002.

32

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**INDEX TOCONSOLIDATED FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULES**

**ENBRIDGE ENERGY MANAGEMENT, L.L.C.**

**FinancialStatements**
|                                                                                                                             | ** ** | **Page** |   |
|-----------------------------------------------------------------------------------------------------------------------------|------------|----------|--------|
| Report of Independent Registered Public Accounting  Firm                                                                    |       |     | F-2    |   |
| Consolidated  Statements of Income for each of the years ended December 31, 2006, 2005  and  2004                      |       |     | F-4    |   |
| Consolidated Statements of Comprehensive Income for  each of the years ended December 31, 2006, 2005 and 2004     |       |     | F-5    |   |
| Consolidated Statements of Cash Flows for each of the  years ended December 31, 2006, 2005 and 2004               |       |     | F-6    |   |
| Consolidated Statements of Financial Position as of  December 31, 2006 and 2005                                        |       |     | F-7    |   |
| Consolidated Statement of Stockholders’ Equity for  each of the years ended December 31, 2006, 2005 and 2004 |       |     | F-8    |   |
| Notes to the Consolidated Financial Statements                                                                              |       |     | F-9    |   |
|                                                                                                                             |            |          |        |  |  |

 

**FINANCIAL STATEMENTSCHEDULES**

Financial statement schedules not included in thisReport have been omitted because they are not applicable. Any requiredinformation is shown in the consolidated financial statements or notes thereto,or the required information is immaterial.

F-1

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**Report ofIndependent Registered Public Accounting Firm**

To the Board of Directors and Shareholders of EnbridgeEnergy Management, L.L.C.

We have completedintegrated audits of Enbridge Energy Management, L.L.C.’s consolidatedfinancial statements and of its internal control over financial reporting as ofDecember 31, 2006, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Our opinions, based on our audits,are presented below.

*Consolidatedfinancial statements*

In our opinion, theaccompanying consolidated statements of financial position and the relatedconsolidated statements of income and comprehensive income, of stockholders’equity and of cash flows present fairly, in all material respects, thefinancial position of Enbridge Energy Management L.L.C. and its subsidiary (the‘‘Company’’) at December 31, 2006 and 2005, and the results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2006 in conformity with accounting principles generallyaccepted in the United States of America. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits. We conducted ouraudits of these statements in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit offinancial statements includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

*Internal controlover financial reporting*

Also, in our opinion, management’s assessment,included in Management’s Report on Internal Control Over Financial Reportingappearing under Item 9A, that the Company maintained effective internal controlover financial reporting as of December 31, 2006 based on criteria establishedin *Internal Control—Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’),is fairly stated, in all material respects, based on those criteria.Furthermore, in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31,2006, based on *Internal Control—IntegratedFramework*issued by the COSO. The Company’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting. Our responsibility is to express opinions on management’s assessmentand on the effectiveness of the Company’s internal control over financialreporting based on our audit. We conducted our audit of internal control overfinancial reporting in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. An audit of internal control over financial reportingincludes obtaining an understanding of internal control over financialreporting, evaluating management’s assessment, testing and evaluating thedesign and operating effectiveness of internal control, and performing suchother procedures as we consider necessary in the circumstances. We believe thatour audit provides a reasonable basis for our opinions.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance 

F-2

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of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Houston, TexasFebruary 22, 2007

F-3

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**ENBRIDGEENERGY MANAGEMENT, L.L.C.**CONSOLIDATED STATEMENTS OF INCOME

| ** **                                                            | ** ** | **For the Year Ended December 31,**     | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **    2006    **         | ** ** | **    2005     ** | ** ** | **    2004    ** | ** ** |
| ** **                                                            | ** ** | **(in millions, except  per share amounts)** | ** ** |
| Equity income  from investment in Enbridge Energy Partners, L.P.      |       |                                                             | $          | 44.6 |   |   |   | $ | 12.0 |   |   |   | $ | 21.6 |   |   |
| Gain on issuance  of units by Enbridge Energy Partners, L.P. (Note 4) |       |                                                             | —     |   |   |   | 10.3 |   |   |   | 7.2 |   |   |
| Income before  income tax expense                                     |       |                                                             | 44.6       |   |   |   | 22.3 |   |   |   | 28.8 |   |   |
| Income tax  expense (Note 6)                                          |       |                                                             | 15.9       |   |   |   | 9.9 |   |   |   | 10.1 |   |   |
| Net income                                                            |       |                                                             | $          | 28.7 |   |   |   | $ | 12.4 |   |   |   | $ | 18.7 |   |   |
| Net income per  share, basic and diluted                              |       |                                                             | $          | 2.35 |   |   |   | $ | 1.10 |   |   |   | $ | 1.78 |   |   |
| Weighted average shares  outstanding                                  |       |                                                             | 12.2       |   |   |   | 11.3 |   |   |   | 10.5 |   |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-4

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**ENBRIDGE ENERGY MANAGEMENT, L.L.C.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

|                                                                                                                                                         | ** ** | **For the Year Ended December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                                                                                              | ** ** | **   2006   **                 | ** ** | **   2005   ** | ** ** | **   2004   ** | ** ** |
| ** **                                                                                                                                              | ** ** | **(in millions)**                                       | ** ** |
| Net income                                                                                                                                              |       |                                                         | $          | 28.7 |   |   |   | $ | 12.4 |   |   |   | $ | 18.7 |   |   |
| Equity in other comprehensive income (loss) of  Enbridge Energy Partners, L.P., net of tax expense (benefit) of $6.9, $(12.6), and $(3.5), respectively |       |                                                         | 10.9       |   |   |   | (19.8 | ) |   |   | (6.7 | ) |   |
| Comprehensive income (loss)                                                                                                                             |       |                                                         | $          | 39.6 |   |   |   | $ | (7.4 | ) |   |   | $ | 12.0 |   |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-5

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**ENBRIDGEENERGY MANAGEMENT, L.L.C.CONSOLIDATED STATEMENTS OF CASH FLOWS**

| ** **                                                                    | ** ** | **For the Year Ended  December 31,** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2006**                                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                    | ** ** | **(in millions)**                                   | ** ** |
| Cash provided by  operating activities                                        |       |                                                     |       |   |   |   |   |
| Net income                                                                    |       | $                                                        | 28.7       |   | $ | 12.4 |   | $ | 18.7 |   |
| Adjustments to reconcile  net income to cash flows from operating activities: |       |                                                     |       |   |   |   |   |
| Equity income from investment in Enbridge Energy  Partners, L.P.              |       | (44.6                                                    | )          | (12.0 | ) | (21.6 | ) |
| Gain on issuance of units by Enbridge Energy  Partners, L.P.                  |       | —                                                   |       | (10.3 | ) | (7.2 | ) |
| Deferred income taxes                                                         |       | 15.9                                                     |       | 9.9 |   | 10.1 |   |
| Net cash flows  from operating activities                                     |       | —                                                   |       | — |   | — |   |
| Net cash flows  from investing activities                                     |       | —                                                   |       | — |   | — |   |
| Net cash flows  from financing activities                                     |       | —                                                   |       | — |   | — |   |
| Net change in  cash and cash equivalents                                      |       | —                                                   |       | — |   | — |   |
| Cash and cash  equivalents at beginning of year                               |       | —                                                   |       | — |   | — |   |
| Cash and cash  equivalents at end of year                                     |       | $                                                        | —     |   | $ | — |   | $ | — |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-6

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**ENBRIDGE ENERGY MANAGEMENT, L.L.C.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION**

| ** **                                                                                                  | ** ** | **December 31,**  | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                  | ** ** | **2006**               | ** ** | **2005** | ** ** |
| ** **                                                                                                  | ** ** | **(in millions)** | ** ** |
| **ASSETS**                                                                                                  |       |                   |       |   |   |
| Investment in  Enbridge Energy Partners, L.P.                                                               |       | $                      | 428.9      |   | $ | 366.5 |   |
|                                                                                                        |       | $                      | 428.9      |   | $ | 366.5 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                               |       |                   |       |   |   |
| Deferred income  tax liability (Note 6)                                                                     |       | $                      | 36.2       |   | $ | 13.4 |   |
| Stockholders’ equity  (Note 3)                                                                         |       |                   |       |   |   |
| Voting shares—unlimited authorized; 1.41 and 1.30  issued and outstanding in 2006 and 2005   |       | —                 |       | — |   |
| Listed shares—unlimited authorized; 12,674,147 and 11,704,947 issued and  outstanding in 2006 and 2005 |       | 498.6                  |       | 454.0 |   |
| Accumulated  deficit                                                                                        |       | (82.2                  | )          | (66.3 | ) |
| Accumulated other  comprehensive loss                                                                       |       | (23.7                  | )          | (34.6 | ) |
|                                                                                                        |       | 392.7                  |       | 353.1 |   |
|                                                                                                        |       | $                      | 428.9      |   | $ | 366.5 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-7

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**ENBRIDGE ENERGY MANAGEMENT, L.L.C.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

| ** **                                                                      | ** ** | **For the Year Ended December 31,** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                      | ** ** | **2006**                                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                      | ** ** | **Shares**                                                   | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| ** **                                                                      | ** ** | **(in millions, except shares)**              | ** ** |
| **Voting shares**                                                               |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                               |       | 1.30                                                         |       |   | $ | — |   |   | 1.21 |   |   | $ | — |   |   | 1.12 |   | $ | — |   |
| Share dividends (Note 3)                                                        |       | 0.11                                                         |       |   | — |   |   | 0.09 |   |   | — |   |   | 0.09 |   | — |   |
| Ending balance                                                                  |       | 1.41                                                         |       |   | — |   |   | 1.30 |   |   | — |   |   | 1.21 |   | — |   |
| **Listed shares**                                                               |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                               |       | 11,704,947                                                   |       |   | 454.0 |   |   | 10,902,408 |   |   | 412.5 |   |   | 10,062,169 |   | 374.2 |   |
| Share dividends (Note 3)                                                        |       | 969,200                                                      |       |   | 44.6 |   |   | 802,539 |   |   | 41.5 |   |   | 840,239 |   | 38.3 |   |
| Ending balance                                                                  |       | 12,674,147                                                   |       |   | 498.6 |   |   | 11,704,947 |   |   | 454.0 |   |   | 10,902,408 |   | 412.5 |   |
| **Accumulated deficit**                                                         |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                               |       |                                                         |       |   | (66.3 | ) |   |   |   |   | (37.2 | ) |   |   |   | (17.6 | ) |
| Net income                                                                      |       |                                                         |       |   | 28.7 |   |   |   |   |   | 12.4 |   |   |   |   | 18.7 |   |
| Share dividends (Note 3)                                                        |       |                                                         |       |   | (44.6 | ) |   |   |   |   | (41.5 | ) |   |   |   | (38.3 | ) |
| Ending balance                                                                  |       |                                                         |       |   | (82.2 | ) |   |   |   |   | (66.3 | ) |   |   |   | (37.2 | ) |
| **Accumulated other comprehensive  loss**                                       |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                                                               |       |                                                         |       |   | (34.6 | ) |   |   |   |   | (14.8 | ) |   |   |   | (8.1 | ) |
| Equity in other comprehensive income (loss) of  Enbridge  Energy Partners, L.P. |       |                                                         |       |   | 10.9 |   |   |   |   |   | (19.8 | ) |   |   |   | (6.7 | ) |
| Ending balance                                                                  |       |                                                         |       |   | (23.7 | ) |   |   |   |   | (34.6 | ) |   |   |   | (14.8 | ) |
| **Total stockholders’ equity**                                             |       |                                                         |       |   | $ | 392.7 |   |   |   |   |   | $ | 353.1 |   |   |   |   | $ | 360.5 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-8

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**ENBRIDGE ENERGY MANAGEMENT, L.L.C.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**1.**                 GENERAL

EnbridgeEnergy Management, L.L.C. referred to herein with its subsidiary as “we,” “us,”“our,” the “Company,” or “Enbridge Management”, is a publicly traded Delawarelimited liability company that was formed on May 14, 2002. EnbridgeManagement’s Listed Shares (“Listed Shares”) are traded on the New York StockExchange (“NYSE”) under the symbol “EEQ.” We are a limited partner of EnbridgeEnergy Partners, L.P. (the “Partnership”) through our ownership of i-units, aspecial class of the Partnership’s limited partner interests. The Partnership’sClass A common units are traded on the NYSE under the symbol “EEP.” Byagreement with the Partnership and its general partner, Enbridge Energy Company, Inc.,(“the General Partner”), we manage the Partnership’s business and affairs. TheGeneral Partner is an indirect, wholly-owned subsidiary of Enbridge Inc. (“Enbridge”),an energy company based in Calgary, Alberta. The General Partner owns 1.41 or 100 percent of our Voting Shares,as well as 2,182,770 or 17.2 percent, of ourListed Shares while the remaining 10,491,377or 82.8 percent, of our Listed Shares were held by the public at December 31,2006.

**2.**                 SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

We prepare ourconsolidated financial statements in accordance with accounting principlesgenerally accepted in the United States of America. Our preparation of theseconsolidated financial statements requires us to make estimates and assumptionsthat affect the reported amount of assets, liabilities, revenues and expenses,and the disclosure of contingent assets and liabilities. We evaluate theseestimates utilizing historical experience, consultation with experts and othermethods we consider reasonable under the circumstances. Nevertheless, actualresults may differ significantly from these estimates. We record the effect ofany revisions to these estimates in our consolidated financial statements inthe period in which the facts that give rise to the revision become known.

***Principles ofconsolidation***

The consolidated financialstatements include the accounts of Enbridge Management and its wholly-ownedsubsidiary, Enbridge Management Services, L.L.C., on a consolidated basis. Allsignificant intercompany transactions and balances have been eliminated inconsolidation.

***Accounting forinvestment in Enbridge Energy Partners, L.P.***

We use the equity methodof accounting for our ownership in the Partnership because we exercisesignificant influence over the Partnership per a delegation of controlagreement. Our share of earnings of the Partnership is recorded in the periodin which it is earned. As of December 31, 2006, 2005 and 2004, we ownedapproximately 16.0 percent, 17.5 percent,and 18.1 percent in the Partnership, respectively.

On August 15, 2006,the Partnership sold approximately 10.8 million Class C units to theGeneral Partner and an institutional investor at a purchase price of $46.00 perunit in a private transaction. As a result of this issuance, our limitedpartnership interest in the Partnership was reduced from approximately 18.4percent immediately prior to the issuance to 16.0percent following the transaction.

***Gain on issuance ofunits by Enbridge Energy Partners, L.P.***

Werecognize a gain or loss when the Partnership issues additional Class Acommon units and we do not participate in the issuance, since our ownershipinterest in the Partnership is diluted. To the extent the new issuance priceper unit is greater than or less than our average cost per unit, a gain or lossis recognized.

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***Net income pershare***

Both basic and dilutedearnings per share are computed based on the weighted-average number of sharesoutstanding during each period. We have no securities outstanding that may beconverted into or exercised for our shares.

***Income taxes***

We are a limited liabilitycompany that has elected to be treated as a corporation for federal income taxpurposes. We recognize deferred income tax assets and liabilities for temporarydifferences between the basis of our assets and liabilities for financialreporting and tax purposes. Changes in tax legislation are included in therelevant computations in the period in which such changes are effective.Currently, the only temporary difference (and associated deferred tax expense)results from recording our equity in the earnings of the Partnership which willnot become taxable until the Partnership is liquidated, or the i-units areotherwise monetized.

We are a party to a taxindemnification agreement with Enbridge. Pursuant to this tax indemnificationagreement, Enbridge agreed to indemnify us from any tax liability attributableto our formation or our management of the business and affairs of thePartnership, and from any taxes arising out of a transaction involving thei-units owned to the extent the transaction does not generate sufficient cashto pay our taxes with respect to such transaction in each case, other than anyTexas franchise taxes and any other similar capital-based foreign, state orlocal taxes that are required to be paid or reimbursed by the Partnership underthe delegation of control agreement.

The delegation of controlagreement with the General Partner was amended effective February 21,2005. The effect of the amendment is that the General Partner bears theeconomic impact for our taxes only in the event we do not have sufficient cashto pay them. As a result, we began accruing state income taxes in 2005 inaddition to federal income tax.

***Comprehensiveincome***

Comprehensive incomediffers from net income due to the equity in other comprehensive income (loss)of the Partnership. The Partnership enters into a variety of derivativefinancial instruments to mitigate its exposure to commodity price and interestrate risk, most of which are qualified cash flow hedges under Statement ofFinancial Accounting Standards No. 133, *Accountingfor Derivative Instruments and Hedging Activities.*As such, changesin the fair market value of the Partnership’s derivative financial instrumentsresult in fluctuations in our Comprehensive income, which is reflected asEquity in other comprehensive income (loss) of Enbridge Energy Partners, L.P.

***Recent AccountingPronouncements Not Yet Adopted***

**Accounting for Uncertainty in Income Taxes**

In July 2006, the FinancialAccounting Standards Board (“FASB”) issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes—an Interpretation of FASBStatement 109*, or FIN 48. This Interpretation clarifies theaccounting for uncertainty in income taxes recognized in a company’s financialstatements in accordance with FASB Statement No. 109, *Accountingfor Income Taxes,*and is effective for fiscal years beginning after December 15,2006. FIN 48 is required to be implemented on January 1, 2007, and weexpect to adopt the provisions in the first quarter of 2007. We do not expectour adoption of FIN 48 to materially affect our operating results,financial position or cash flows.

***Staff Accounting Bulletin No. 108***

In September 2006, theSecurities and Exchange Commission issued Staff Accounting Bulletin No. 108.This Bulletin requires a “dual approach” for quantifications of errors usingboth a method that 

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focuseson the income statement impact, including the cumulative effect of prior years’misstatements, and a method that focuses on the period-end balance sheet. Weadopted SAB No. 108 as of December 31, 2006. The adoption of this Bulletindid not have a material impact on our consolidated financial statements.

**3.**                 SHAREDISTRIBUTIONS

Our authorized capital structure consists of twoclasses of interests: (1) Listed Shares, which represent limited liabilitycompany interests with limited voting rights, and (2) Voting Shares, allof which are held by the General Partner. Prior to our October 17, 2002initial public offering of our Listed Shares, our issued capitalizationconsisted of cash contributed by the General Partner for one voting share.

We make share dividends at the same time that thePartnership declares and makes cash distributions to its general partner andthe holders of its limited partner units, which occurs on a quarterly basis. Wedo not, however, receive distributions of cash in respect of the i-units we ownand do not otherwise have any cash flow attributable to our ownership of thei-units. Instead, when the Partnership makes distributions of cash to itsgeneral partner and holders of its limited partner units, the number of i-unitswe own increases automatically under the Partnership’s partnership agreement.The amount of this increase is calculated by dividing the amount of the cashdistribution paid by the Partnership on each of its limited partner units bythe average closing price of one of our Listed Shares on the NYSE as determinedfor a 10-trading day period ending on the trading day immediately prior to theex-dividend date for our shares multiplied by the number of shares outstandingon the record date. Concurrently with the increase in the number of i-unitsthat we own, we make share dividends, with the result that the number of ouroutstanding shares, that are then outstanding, equal the number of i-units thatwe own in the Partnership.

Thefollowing table sets forth the share distributions, as approved by our board ofdirectors for each period in the years ended December 31, 2006, 2005 and2004.

| **Dividend  Declaration Date** | ** ** | **Dividend  Payment Date** | ** ** | **Record Date** | ** ** | **Distribution  per Unit  of the  Partnership** | ** ** | **Average  Closing  Price of  the Listed   Shares** | ** ** | **Additional  i-units  owned** | ** ** | **Listed  Shares  distributed  to Public** | ** ** | **Listed  Shares  distributed  to General  Partner** | ** ** |
|-------------------------------------|------------|---------------------------------|------------|----------------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------------------|------------|
| **2006**                            | ** ** | ** **                      | ** ** | ** **           | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| October 27                     |       | November 14                |       | November 6      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 49.24      | ** **                                                |       |   | 233,693 | ** ** |   |   | 193,446 | ** ** |   |   | 40,247 | ** ** |   |
| July 28                        |       | August 14                  |       | August 4        |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 44.50      | ** **                                                |       |   | 253,310 | ** ** |   |   | 209,684 | ** ** |   |   | 43,626 | ** ** |   |
| April 27                       |       | May 15                     |       | May 5           |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 43.43      | ** **                                                |       |   | 254,126 | ** ** |   |   | 210,360 | ** ** |   |   | 43,766 | ** ** |   |
| January 30                     |       | February 14                |       | February 7      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 47.47      | ** **                                                |       |   | 228,071 | ** ** |   |   | 188,792 | ** ** |   |   | 39,279 | ** ** |   |
|                                |       |                            |       |                 | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | 969,200    | ** ** |   |   | 802,282 | ** ** |   |   | 166,918 | ** ** |   |
| **2005**                            | ** ** | ** **                      | ** ** | ** **           | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| October 26                     |       | November 14                |       | November 3      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 51.28      | ** **                                                |       |   | 207,393 | ** ** |   |   | 171,675 | ** ** |   |   | 35,718 | ** ** |   |
| July 28                        |       | August 12                  |       | August 5        |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 54.67      | ** **                                                |       |   | 191,301 | ** ** |   |   | 158,355 | ** ** |   |   | 32,946 | ** ** |   |
| April 25                       |       | May 13                     |       | May 4           |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 50.12      | ** **                                                |       |   | 204,865 | ** ** |   |   | 169,583 | ** ** |   |   | 35,282 | ** ** |   |
| January 24                     |       | February 14                |       | February 3      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 50.68      | ** **                                                |       |   | 198,980 | ** ** |   |   | 164,711 | ** ** |   |   | 34,269 | ** ** |   |
|                                |       |                            |       |                 | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | 802,539    | ** ** |   |   | 664,324 | ** ** |   |   | 138,215 | ** ** |   |
| **2004**                            | ** ** | ** **                      | ** ** | ** **           | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| October 22                     |       | November 12                |       | November 1      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 43.98      | ** **                                                |       |   | 224,576 | ** ** |   |   | 185,899 | ** ** |   |   | 38,677 | ** ** |   |
| July 22                        |       | August 13                  |       | August 2        |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 43.89      | ** **                                                |       |   | 220,412 | ** ** |   |   | 182,452 | ** ** |   |   | 37,960 | ** ** |   |
| April 26                       |       | May 14                     |       | May 5           |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 45.97      | ** **                                                |       |   | 206,253 | ** ** |   |   | 170,732 | ** ** |   |   | 35,521 | ** ** |   |
| January 22                     |       | February 13                |       | February 2      |       |                                                      | $          | 0.925                                                              | ** ** |                           |       | $                                               | 49.25      | ** **                                                |       |   | 188,998 | ** ** |   |   | 156,448 | ** ** |   |   | 32,550 | ** ** |   |
|                                |       |                            |       |                 | ** ** |                                                      | ** ** | ** **                                                         |       |                           | ** ** | ** **                                      |       |                                                      | 840,239    | ** ** |   |   | 695,531 | ** ** |   |   | 144,708 | ** ** |   |

 

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We had non-cash operatingactivities in the form of i-units distributed to us by the Partnership andcorresponding non-cash financing activities in the form of our sharedistributions to the Listed Shareholders in amounts of $44.6 million, $41.5 million, and $38.3 million asof December 31, 2006, 2005, and 2004, respectively.

**4.**                 GAINON ISSUANCES OF UNITS BY ENBRIDGE ENERGY PARTNERS, L.P.

Thefollowing table presents the gains we recognized for the dilution of ourownership resulting from the issuances of additional Class A common units.Our ownership is diluted whenever the Partnership issues Class A commonunits and we do not participate in the offering.

| **Issuance Date**                            | ** ** | **Number of  Class A  Common  units Issued**                            | ** ** | **Offering Price  per Class A  Common unit** | ** ** | **Net Proceeds to  the Partnership**(1) | ** ** | **Ownership  Percent before  Issuance** | ** ** | **Ownership  Percent after  Issuance** | ** ** | **Dilution Gain**(2) | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|---------------------------|------------|
| ** **                                        | ** ** | **(in millions, except unit and per unit amounts)** | ** ** |
| **2006:**                                         |       |                                                                                   |       |                                                             |       |                                                   |       |                                         |       |                                        |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| No Class A common units were issued in 2006. |       |                                                                                   |       |                                                             |       |                                                   |       |                                         |       |                                        |       |                      |       |   |   |   |   |   |
| **2005:**                                         |       |                                                                                   |       |                                                             |       |                                                   |       |                                         |       |                                        |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| December                                          |       |                                                                                   | 136,200    |                                                             |       |                                                   | $          | 46.000                                       |       |                                        |       | $                         | 6.2        |   |   |   | 17.5 | % |   |   | 17.5 | % |   |   | $ | 0.2 |   |   |
| November                                          |       |                                                                                   | 3,000,000  |                                                             |       |                                                   | $          | 46.000                                       |       |                                        |       | 135.0                     |       |   |   | 18.4 | % |   |   | 17.5 | % |   |   | 4.5 |   |   |
| February                                          |       |                                                                                   | 2,506,500  |                                                             |       |                                                   | $          | 49.875                                       |       |                                        |       | 127.5                     |       |   |   | 18.1 | % |   |   | 17.3 | % |   |   | 5.6 |   |   |
| **2005  Totals**                                  |       |                                                                                   | 5,642,700  |                                                             |       |                                                   |       |                                         |       |                                        | $          | 268.7                     |       |   |   |   |   |   |   |   |   |   |   | $ | 10.3 |   |   |
| **2004:**                                         |       |                                                                                   |       |                                                             |       |                                                   |       |                                         |       |                                        |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| September                                         |       |                                                                                   | 3,680,000  |                                                             |       |                                                   | $          | 47.900                                       |       |                                        |       | $                         | 172.2      |   |   |   | 18.9 | % |   |   | 17.8 | % |   |   | $ | 6.3 |   |   |
| January                                           |       |                                                                                   | 450,000    |                                                             |       |                                                   | $          | 50.300                                       |       |                                        |       | 22.0                      |       |   |   | 18.2 | % |   |   | 18.2 | % |   |   | 0.9 |   |   |
| **2004 Totals**                                   |       |                                                                                   | 4,130,000  |                                                             |       |                                                   |       |                                         |       |                                        | $          | 194.2                     |       |   |   |   |   |   |   |   |   |   |   | $ | 7.2 |   |   |

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(1)                Net ofunderwriters’ fees and discounts, commissions and issuance expenses andincluding contributions from the General Partner to maintain its 2 percentgeneral partner interest.

(2)                Beforethe effect of income taxes.

**5.**                 RELATEDPARTY TRANSACTIONS

At the time of our initial public offering, we becamea limited partner in the Partnership and, pursuant to a delegation of controlagreement among us, the General Partner and the Partnership, assumed themanagement of the Partnership’s business and affairs. Pursuant to thisagreement, we have assumed substantially all of the General Partner’s power andauthority to manage the business and affairs of the Partnership and itssubsidiaries. The delegation of control agreement provides that we will notamend or propose to amend the Partnership’s partnership agreement, allow amerger or consolidation involving the Partnership, allow a sale or exchange ofall or substantially all of the assets of the Partnership or dissolve orliquidate the Partnership without the approval of the General Partner.

The General Partner remains responsible to thePartnership for actions taken or omitted by us while serving as the delegate ofthe General Partner as if the General Partner had itself taken or omitted totake such actions. The General Partner owns all of our Voting Shares. TheGeneral Partner has agreed not to voluntarily withdraw as general partner ofthe Partnership and has agreed not to transfer its interest as general partnerof the Partnership unless the transferee agrees in writing to be bound by theterms and conditions for the delegation of control agreement that apply to thegeneral partner.

The Partnership recognizes the delegation of rightsand powers to us and indemnifies and protects us and, our officers anddirectors, to the same extent as it does with respect to the General Partner.In 

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addition, the Partnershipreimburses our expenses to the same extent as it does with respect to theGeneral Partner as general partner. The Partnership also reimburses us for anyTexas franchise taxes and any other similar capital-based foreign, state andlocal taxes not otherwise paid or reimbursed by Enbridge pursuant to the taxindemnification agreement.

Enbridge Employee Services, Inc.(“EES”) is a wholly-owned subsidiary of the General Partner and providesemployees and related employee benefits services to us, the General Partner,the Partnership, the Partnership’s operating partnerships and subsidiaries andother Enbridge affiliates (collectively, the “Group”). Employees of EES areassigned to work for one or more members of the Group. The direct costs of allcompensation, benefits expenses, and employer expenses for these employees arecharged by EES to the appropriate members of the Group. EES does not includeprofit or margin on costs charged to the members of the Group. For the periodsending December 31, 2006, 2005 and 2004, all costs from EES incurred by uswere charged to the Partnership pursuant to service agreements among us, theGeneral Partner and the Partnership.

**6.**                 INCOMETAXES

Our long-term deferred income tax liability of $36.2 million and $13.4 million as of December 31,2006 and 2005, respectively, results from the deferred income tax expenseassociated with recording our equity in earnings of the Partnership and ourshare of the other comprehensive income of the Partnership. The terms of the i-unitsprovide that the units owned by us will not be allocated income, gain, loss ordeductions of the Partnership until such time that we dispose of our investmentin the Partnership, thus resulting in the deferred tax liability.

The delegation of control agreement with the GeneralPartner was amended effective February 21, 2005. The effect of theamendment is that the General Partner bears the economic impact for our taxesonly in the event we do not have sufficient cash to pay them. As a result, webegan accruing state income taxes in 2005 in addition to federal income tax.The effective tax rate used in computing the income tax provision in 2005 is37.3%, which represents the federal statutory rate of 35.0% and the effectivestate rate of 2.3%.

The effective tax rate weused in computing the income tax provision in 2006 is 36.8%, which represents the federal statutory rate of 35.0% and theeffective state rate of 1.8%. Our income tax expense of $15.9 million for the year ended December 31,2006, is $6.0 million greater than the $9.9 million we incurred for the same periodin 2005. The increase in income tax expense related to our equity inpartnership net income in 2006 is partially offset by decreases resulting fromstate effective tax rate reductions impacting our deferred tax liability andfrom the $1.6 million charge we recorded in 2005 for cumulative state incometaxes on the differences between book and taxable net income.

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**7.**                 SUMMARIZEDFINANCIAL INFORMATION FOR ENBRIDGE ENERGY PARTNERS, L.P.

EnbridgeEnergy Partners, L.P. is a publicly-traded Delaware limited partnership thatowns and operates crude oil and liquid petroleum transportation and storageassets, and natural gas gathering, treating, processing, transportation andmarketing assets in the United States of America. The following table providessummarized financial information of the Partnership:

| ** **             | ** ** | **2006**               | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------|------------|------------------------|------------|----------|------------|----------|------------|
| ** **             | ** ** | **(in millions)** | ** ** |
| Operating  revenues    |       | $                      | 6,509.0    |     | $          | 6,476.9  |       | $ | 4,291.7 |   |
| Operating  expenses    |       | 6,122.1                |       | 6,285.0  |       | 4,054.5  |       |
| Operating income       |       | $                      | 386.9      |     | $          | 191.9    |       | $ | 237.2 |   |
| Net income             |       | $                      | 284.9      |     | $          | 89.2     |       | $ | 138.2 |   |
| Current assets         |       | $                      | 1,009.3    |     | $          | 985.3    |       | $ | 633.8 |   |
| Long-term assets       |       | $                      | 4,214.5    |     | $          | 3,443.1  |       | $ | 3,136.9 |   |
| Current  liabilities   |       | $                      | 961.6      |     | $          | 971.3    |       | $ | 564.3 |   |
| Long-term  liabilities |       | $                      | 2,218.8    |     | $          | 2,093.3  |       | $ | 1,808.5 |   |
| Partners’ capital |       | $                      | 2,043.4    |     | $          | 1,363.8  |       | $ | 1,397.9 |   |

 

**8.**                 SUBSEQUENTEVENTS

***Share distribution***

On January 26, 2007, our Board of Directors declared a sharedistribution payable on February 14, 2007,to shareholders of record as of February 6, 2007, based on the $0.925 perlimited partner unit distribution declared by Enbridge Energy Partners, L.P.(the “Partnership”). We received 228,528i-units from the Partnership, which is computed by dividing $0.925, the cashamount distributed per limited partner unit, by the average closing price ofone of our Listed Shares on the NYSE as determined for the 10-trading dayperiod ending on the trading day immediately prior to the ex-dividend date forour shares multiplied by the number of shares outstanding prior to thedistribution. We distributed 228,528additional Listed Shares to our listed shareholders and additional shares tothe General Partner in respect of these additional i-units.

**9.**                 SUPPLEMENTALSELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

| ** **                                      | ** ** | **First**                                                                        | ** ** | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|------------|------------|-----------|------------|------------|------------|-----------|------------|
| ** **                                      | ** ** | **(dollars in millions, except per unit amounts)** | ** ** |
| **2006 Quarters**                               |       |                                                                             |       |       |       |      |       |       |       |      |       |   |   |   |   |
| Net income                                      |       | $                                                                                | 8.4        |       |       | $         | 7.3        |       |       | $         | 8.5        |   |   | $ | 4.5 |   |   | $ | 28.7 |   |
| Net income per  share, basic and diluted        |       | $                                                                                | 0.71       |       |       | $         | 0.60       |       |       | $         | 0.69       |   |   | $ | 0.36 |   |   | $ | 2.35 |   |
| **2005  Quarters**                              |       |                                                                             |       |       |       |      |       |       |       |      |       |   |   |   |   |
| Net income (loss)                               |       | $                                                                                | 4.4        |       |       | $         | 2.2        |       |       | $         | (2.2       | ) |   | $ | 8.0 |   |   | $ | 12.4 |   |
| Net income (loss) per  share, basic and diluted |       | $                                                                                | 0.40       |       |       | $         | 0.20       |       |       | $         | (0.19      | ) |   | $ | 0.69 |   |   | $ | 1.10 |   |

 

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