----

|  X | ANNUAL REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---------|------------------------------------------------------------------------------------------------|

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

| Delaware                                      | 44-0382470               |
|-----------------------------------------------|--------------------------|
| (State      or other jurisdiction of          | (I.R.S.      Employer    |
| incorporation      or organization)           | Identification      No.) |
|                                          |                     |
|                                          |                     |
| 5444 Westheimer      Road                     | 77056-5306               |
| Houston,      Texas                           | (Zip      Code)          |
| (Address      of principal executive offices) |                     |

| Title of each      Class                   |   | Name of each exchange      in which registered |
|--------------------------------------------|--------|------------------------------------------------|
| 4.80% Senior Notes due 2008,      Series B |   | New York Stock      Exchange                   |
| 6.05% Senior Notes due 2013,      Series B |   | New York Stock      Exchange                   |

----

PANHANDLE EASTERN PIPELINE COMPANY, LP

|                                                 |                                                                                                                     | Page   |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                 | PART I                                                                                                                   |   |
| ITEM 1.                                              | Business.                                                                                                                | 1      |
| ITEM 1A.                                             | Risk Factors.                                                                                                            | 5      |
| ITEM 1B.                                             | Unresolved Staff Comments.                                                                                               | 11     |
| ITEM 2.                                              | Properties.                                                                                                              | 11     |
| 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. | 11     |
| ITEM 6.                                              | Selected Financial Data.                                                                                                 | 11     |
| ITEM 7.                                              | Management's Discussion and Analysis of Financial Condition      and Results of Operation.                          | 11     |
| ITEM 7A.                                             | Quantitative and Qualitative Disclosures About Market      Risk.                                                         | 19     |
| ITEM 8.                                              | Financial Statements and Supplementary    Data.                                                                          | 19     |
| ITEM 9.                                              | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure.                               | 19     |
| ITEM  9A(T).                               | Controls and Procedures.                                                                                                 | 19     |
| ITEM 9B.                                             | Other Information.                                                                                                       | 21     |
|                                                 | PART III                                                                                                                 |   |
| ITEM 10.                                             | Directors, Executive Officers and Corporate      Governance.                                                             | 21     |
| ITEM 11.                                             | Executive Compensation.                                                                                                  | 21     |
| ITEM 12.                                             | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters.                     | 21     |
| ITEM 13.                                             | Certain Relationships and Related Transactions, and      Director Independence.                                          | 21     |
| ITEM 14.                                             | Principal Accounting Fees and Services.                                                                                  | 22     |
|                                                 | PART IV                                                                                                                  |   |
| ITEM 15.                                             | Exhibits, Financial StatementSchedules.                                                                                  | 22     |
| Signatures                                           |                                                                                                                     | 25     |
| Index to the Consolidated Financial      Statements. | F-1                                                                                                                      |

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ITEM 1.Business.

|   | · | PEPL,      an indirect wholly-owned subsidiary of Southern Union    Company; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | Trunkline      Gas Company, LLC (Trunkline), a direct      wholly-owned subsidiary of PEPL; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Sea      Robin Pipeline Company, LLC (Sea Robin), an indirect      wholly-owned subsidiary of PEPL; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Trunkline      LNG Holdings, LLC (LNG      Holdings), an indirect wholly-owned subsidiary of    PEPL; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | Trunkline      LNG Company, LLC (Trunkline LNG), a      direct wholly-owned subsidiary of LNG Holdings;  and |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | Pan      Gas Storage, LLC (d.b.a. Southwest Gas Storage),      a direct wholly-owned subsidiary ofPEPL. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

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|                             |   | Year Ended December      31,    |   |
|----------------------------------|--------|------------------------------------------------|--------|
|                             |   | 2007                                           |   |   | 2006 |   |   | 2005 |   |
|                             |   |                                           |   |   |   |   |   |   |   |
| PEPL                             |   |                                           | 662    |   |   |   | 579 |   |   |   | 609 |   |
| Trunkline                        |   |                                           | 648    |   |   |   | 486 |   |   |   | 459 |   |
| Sea      Robin                   |   |                                           | 144    |   |   |   | 115 |   |   |   | 146 |   |
| Trunkline      LNG Usage Volumes |   |                                           | 261    |   |   |   | 149 |   |   |   | 108 |   |

|                                                                                |   | As of           |   |
|-------------------------------------------------------------------------------------|--------|-----------------|--------|
|                                                                                |   | December    31, |   |
|                                                                                |   | 2007            |   |
| Approximate      Miles of Pipelines                                                 |   |            |   |
| PEPL                                                                                |   |            | 6,000  |   |
| Trunkline                                                                           |   |            | 3,500  |   |
| Sea      Robin                                                                      |   |            | 400    |   |
| Peak      Day Delivery Capacity (Bcf/d)                                             |   |            |   |   |
| PEPL                                                                                |   |            | 2.8    |   |
| Trunkline                                                                           |   |            | 1.7    |   |
| Sea      Robin                                                                      |   |            | 1.0    |   |
| Trunkline      LNG                                                                  |   |            | 2.1    |   |
| Trunkline      LNG Sustainable Send Out Capacity (Bcf/d)                            |   |            | 1.8    |   |
| Underground      Storage Capacity-Owned (Bcf)                                       |   |            | 74.4   |   |
| Underground      Storage Capacity-Leased (Bcf)                                      |   |            | 19.9   |   |
| Trunkline      LNG Terminal Storage Capacity (Bcf)                                  |   |            | 9.0    |   |
| Average      Number of Transportation Customers                                     |   |            | 500    |   |
| Weighted      Average Remaining Life in Years of Firm Transportation      Contracts |   |            |   |   |
| PEPL                                                                                |   |            | 4.6    |   |
| Trunkline                                                                           |   |            | 9.0    |   |
| Sea      Robin (1)                                                                  |   |            | N/A    |   |
| Weighted      Average Remaining Life in Years of Firm Storage Contracts             |   |            |   |   |
| PEPL                                                                                |   |            | 5.9    |   |
| Trunkline                                                                           |   |            | 3.1    |   |
|                                                                                |   |            |   |   |

| (1) | Sea      Robin’s contracts are primarily interruptible, with only one firm contract      in place. |
|-----|----------------------------------------------------------------------------------------------------------|

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|                        |                              |                   | Percent    of       |   |                                                 | Weighted                  |
|-----------------------------|-----------------------------------|------------------------|---------------------|--------|------------------------------------------------------|---------------------------|
|                        |                              |                   | Revenues            |   |                                                 | Average    Life           |
|                        |                              |                   | For Year      Ended |   |                                                 | of Firm Contracts      at |
| Customer                    |                              | December 31,      2007 |                |   | December 31,      2007                               |
|                        |                              |                   |                |   |                                                 |                      |
|                        |                              |                   |                |   |                                                 |                      |
| BG      LNG Services        |                              | 28                     |  %             |   | 16      years (LNG, transportation)                  |
| ProLiance                   |                              | 11                     |                |   | 5.2      years (transportation), 6.9 years (storage) |
| Other      top 10 customers |                              | 26                     |                |   | N/A                                                  |
| Remaining      customers    |                              | 35                     |                |   | N/A                                                  |
|                        |   Total      percentage |                   | 100                 | %      |                                                 |                      |
|                        |                              |                   |                |   |                                                 |                      |

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|                       |   | Date of    Last   |   |                                                                 |
|----------------------------|--------|-------------------|--------|----------------------------------------------------------------------|
| Company                    |   | Rate    Filing    |   | Status                                                               |
|                       |   |              |   |                                                                 |
| PEPL                       |   | May      1992     |   | Settlement      effective April 1997                                 |
| Trunkline                  |   | January      1996 |   | Settlement      effective May 2001                                   |
| Sea      Robin             |   | June      2007    |   | Ongoing;      procedural schedule currently suspended  (1) |
| Trunkline      LNG         |   | June      2001    |   | Settlement      effective January 2002  (2)                |
| Southwest      Gas Storage |   | August      2007  |   | Settlement      approved February 2008                               |

| (2) | Settlement      provided for a rate moratorium through2015. |
|-----|-------------------------------------------------------------|

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ITEM 1A.Risk Factors.

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|   | · | changes      in demand for natural gas by the Company’s customers, in the composition      of the Company’s customer base and in the sources of natural gas available      to the Company; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      effects of inflation and the timing and extent of changes in the prices      and overall demand for and availability of natural gas as well as      electricity, oil, coal and other bulk materials and    chemicals; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | adverse      weather conditions, such as warmer than normal weather in the Company’s      service territories, and the operational impact of natural      disasters; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes      in laws or regulations, third-party relations and approvals, decisions of      courts, regulators and governmental bodies affecting or involving the      Company, including deregulation initiatives and the impact of rate and      tariff proceedings before FERC and various state regulatory      commissions; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      outcome of pending and futurelitigation; |
|--------|--------|---------------------------------------------------|

|   | · | the      Company’s ability to comply with or to challenge successfully existing or      new environmental regulations; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | unanticipated      environmental liabilities; |
|--------|--------|-----------------------------------------------|

|   | · | the      Company’s ability to acquire new businesses and assets and integrate those      operations into its existing operations, as well as its ability to expand      its existing businesses andfacilities; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      Company’s ability to control costs successfully and achieve operating      efficiencies, including the purchase and implementation of new      technologies for achieving suchefficiencies; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      impact of factors affecting operations such as maintenance or repairs,      environmental incidents, gas pipeline system constraints and relations      with labor unions representing bargaining-unit  employees; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | exposure      to customer concentration with a significant portion of revenues realized      from a relatively small number of customers and any credit risks      associated with the financial position of those  customers; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes      in the ratings of the Company’s debt securities or any of its      subsidiaries; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | changes      in interest rates and other general capital markets conditions, and in the      Company’s ability to continue to access the capital    markets; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | acts      of nature, sabotage, terrorism or other acts causing damage greater than      the Company’s insurance coveragelimits; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | market      risks beyond the Company’s control affecting its risk management      activities including market liquidity, commodity price volatility and      counterparty creditworthiness; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | other      risks and unforeseen events. |
|--------|--------|-----------------------------------------|

ITEM1B.  Unresolved Staff Comments.

ITEM 2.Properties.

ITEM 3. LegalProceedings.

ITEM4.  Submission of Matters to a Vote of SecurityHolders.

ITEM5.  Market for Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities.

ITEM6.  Selected Financial Data.

ITEM7.  Management's Discussion and Analysis of Financial Condition andResults of Operation.

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|                                           |   | Years Ended December      31, |    |
|------------------------------------------------|--------|-------------------------------|---------|
|                                           |   | 2007                          |    | 2006 |   |
|                                           |   | (In      thousands)           |    |
| Operating      revenue:                        |   |                          |    |   |   |
| Transportation      and storage of natural gas |   | $                             | 511,340 |   | $ | 451,513 |   |
| LNG      terminalling revenue                  |   |                          | 135,447 |   |   | 111,821 |   |
| Other      revenue                             |   |                          | 11,659  |   |   | 13,848 |   |
| Total      operating revenue                   |   |                          | 658,446 |   |   | 577,182 |   |
|                                           |   |                          |    |   |   |   |   |
| Operating      expenses:                       |   |                          |    |   |   |   |   |
| Operation,      maintenance and general        |   |                          | 254,986 |   |   | 206,181 |   |
| Depreciation      and amortization             |   |                          | 85,641  |   |   | 72,724 |   |
| Taxes,      other than on income               |   |                          | 29,698  |   |   | 25,405 |   |
| Total      operating expenses                  |   |                          | 370,325 |   |   | 304,310 |   |
|                                           |   |                          |    |   |   |   |   |
| Operating      income                          |   |                          | 288,121 |   |   | 272,872 |   |
|                                           |   |                          |    |   |   |   |   |
| Other      income (expense):                   |   |                          |    |   |   |   |   |
| Interest      expense                          |   |                          | (82,551 | ) |   | (61,989 | ) |
| Other,      net                                |   |                          | 41,172  |   |   | 14,911 |   |
| Total      other expense, net                  |   |                          | (41,379 | ) |   | (47,078 | ) |
|                                           |   |                          |    |   |   |   |   |
| Earnings      before income taxes              |   |                          | 246,742 |   |   | 225,794 |   |
|                                           |   |                          |    |   |   |   |   |
| Income      taxes                              |   |                          | 96,318  |   |   | 88,039 |   |
|                                           |   |                          |    |   |   |   |   |
| Net      earnings                              |   | $                             | 150,424 |   | $ | 137,755 |   |
|                                           |   |                          |    |   |   |   |   |

| · | Increased      transportation and storage revenue of $59.8 million attributable      to: |
|--------|------------------------------------------------------------------------------------------|

|   | · | Higher      transportation reservation revenues of $27.4 million primarily due to      reduced discounting resulting in higher average rates realized on      contracts driven by higher customer demand and utilization of contract      capacity; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher      parking revenues of $18 million resulting from customer demand for parking      services and market conditions; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher      storage revenues of $7.8 million due to increased contracted capacity;      and |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Higher      other commodity revenues of $6.5 million due to higher throughput volumes      including transportation of higher LNG volumes on Trunkline, higher      volumes on Sea Robin due to adverse hurricane impacts on 2006 throughput,      and higher throughput on Panhandle due to storage refill      activity. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | A      $23.6 million increase in LNG terminalling revenue based on a capacity      increase on the BG LNG Services contract as a result of the Trunkline LNG      Phase I and Phase II expansions, which were placed in service in April      2006 and July 2006, respectively, as well as higher volumes resulting from      an increase in LNG cargoes; and |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | A      decrease in other revenue of $2.2 million primarily due to higher      operational sales of gas in 2006. |
|--------|-----------------------------------------------------------------------------------------------------------------|

| · | An      increase in operation, maintenance and general expenses of $48.8 million      as the result of: |
|--------|---------------------------------------------------------------------------------------------------------|

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|              · | A      $15.6 million increase in corporate services costs relating to Southern      Union’s disposition of certain assets during 2006, resulting in a larger      allocation of corporate services costs to the remaining business      units; |
|--------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      $13.1 million increase in contract storage costs attributable to an      increase in leased capacity; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | A      $6.2 million increase in LNG power costs resulting from increased      cargoes; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | A      $4.5 million net increase in labor and benefits primarily due to incentive      and merit increases and a $1.9 million charge associated with other      postretirement benefit costs for transferred  employees; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      $3.4 million increase in fuel tracker costs primarily due to a net      under-recovery in 2007; and |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | A      $1.8 million increase in insurance due to higher  premiums. |
|--------|--------|--------------------------------------------------------------------|

| · | Increased      depreciation and amortization expense of $12.9 million due to a $411.2      million increase in property, plant and equipment placed in service in      2007.  Depreciation and amortization expense is expected to      continue to increase primarily due to higher capital spending, including      compression modernization and other expenditures;  and |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Higher      taxes other than on income of $4.3 million primarily due to a $2.8 million      refund received in 2006 for franchise and sales taxes and higher property      and compressor fuel taxes in 2007. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                             |   | Years Ended December      31, |    |
|--------------------------------------------------|--------|-------------------------------|---------|
| Property, Plant and Equipment      Additions     |   | 2007                          |    |   | 2006 |   |   | 2005 |   |
|                                             |   | (In      thousands)           |    |
|                                             |   |                          |    |   |   |   |   |   |   |
| LNG      Terminal Expansions/Enhancements        |   | $                             | 133,469 |   |   | $ | 57,045 |   |   | $ | 75,263 |   |
| Trunkline      Field Zone Expansion              |   |                          | 185,180 |   |   |   | 12,314 |   |   |   | 169 |   |
| East      End Enhancement                        |   |                          | 80,249  |   |   |   | 52,102 |   |   |   | 1,012 |   |
| Compression      Modernization                   |   |                          | 81,687  |   |   |   | 11,642 |   |   |   | - |   |
| Other,      primarily pipeline integrity, system |   |                          |    |   |   |   |   |   |   |   |   |   |
| reliability,      information technology, air    |   |                          |    |   |   |   |   |   |   |   |   |   |
| emission      compliance                         |   |                          | 110,568 |   |   |   | 111,718 |   |   |   | 112,971 |   |
| Total   (1)                       |   | $                             | 591,153 |   |   | $ | 244,821 |   |   | $ | 189,415 |   |
|                                             |   |                          |    |   |   |   |   |   |   |   |   |   |

| (1) | Includes      net capital accruals totaling $71,181, $15,910 and $(5,537) for the years      ended December 31, 2007, December 31, 2006 and December 31, 2005,      respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     |   | Contractual Obligations (In      thousands) |      |
|------------------------------------------|--------|---------------------------------------------|-----------|
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2013 and |   |
|                                     |   | Total                                       |      |   | 2008 |   |   | 2009 |   |   | 2010 |   |   | 2011 |   |   | 2012 |   |   | thereafter |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Leases (1)                |   | $                                           | 106,376   |   |   | $ | 10,017 |   |   | $ | 13,028 |   |   | $ | 12,192 |   |   | $ | 11,624 |   |   | $ | 11,287 |   |   | $ | 48,228 |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      long term debt (2)            |   |                                        | 1,884,648 |   |   |   | 309,831 |   |   |   | 60,623 |   |   |   | 40,500 |   |   |   | - |   |   |   | 857,389 |   |   |   | 616,305 |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      payments on debt (3)  |   | 616,456                                     |      |   |   | 107,743 |   |   |   | 93,343 |   |   |   | 87,732 |   |   |   | 86,061 |   |   |   | 54,549 |   |   |   | 187,028 |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Firm      capacity payments (4)          |   |                                        | 155,382   |   |   |   | 27,533 |   |   |   | 19,540 |   |   |   | 14,104 |   |   |   | 13,645 |   |   |   | 13,645 |   |   |   | 66,915 |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPEB      funding (5)                    |   |                                        | 38,215    |   |   |   | 7,643 |   |   |   | 7,643 |   |   |   | 7,643 |   |   |   | 7,643 |   |   |   | 7,643 |   |   |   | - |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                    |   | $                                           | 2,801,077 |   |   | $ | 462,767 |   |   | $ | 194,177 |   |   | $ | 162,171 |   |   | $ | 118,973 |   |   | $ | 944,513 |   |   | $ | 918,476 |   |
|                                     |   |                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1) | Lease      of various assets utilized foroperations. |
|-----|------------------------------------------------------|

| (2) | The      long-term debt cash obligations exclude $6.1 million of unamortized debt      premium as of December 31, 2007. |
|-----|-------------------------------------------------------------------------------------------------------------------------|

| (3) | Interest      payments on debt are based upon the applicable stated or variable interest      rates as of December 31, 2007. |
|-----|------------------------------------------------------------------------------------------------------------------------------|

| (4) | Charges      for third party storage capacity. |
|-----|------------------------------------------------|

| (5) | Panhandle      is committed to the funding levels of $7.6 million per year until modified      by future rate proceedings, the timing of which is    uncertain. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM7A.  Quantitative and Qualitative Disclosures About MarketRisks.

ITEM8.  Financial Statements and SupplementaryData.

ITEM9.  Changes in and Disagreements With Accountants on Accounting andFinancial Disclosure.

ITEM9A(T).  Controls and Procedures.

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| · | Provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that receipts and expenditures of the Company      are being made only in accordance with authorizations of management and      directors of the Company; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Pertain      to the maintenance of records that in reasonable detail accurately and      fairly reflect the transactions and dispositions of the assets of the      Company; and |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Provide      reasonable assurance regarding the prevention or timely detection of      unauthorized acquisition, use or disposition of the Company’s assets that      could have a material effect on the financial  statements. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM9B.  Other Information.

ITEM10.  Directors, Executive Officers and CorporateGovernance.

ITEM11.  Executive Compensation.

ITEM12.  Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters.

ITEM13.  Certain Relationships and Related Transactions, and DirectorIndependence.

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ITEM 14.  Principal Accountant Fees andServices.

|                                                     |   | Years Ended December      31, |   |
|----------------------------------------------------------|--------|-------------------------------|--------|
| Fee    Category                                          |   | 2007                          |   |   | 2006 |   |
|                                                     |   | (In      thousands)           |   |
| Audit      Fees     (1)         |   |                          |   |   |   |   |
| PricewaterhouseCoopers      LLP                          |   | $                             | 990    |   |   | $ | 999 |   |
|                                                     |   |                          |   |   |   |   |   |   |
| Audit-Related      Fees     (2) |   |                          |   |   |   |   |   |   |
| PricewaterhouseCoopers      LLP                          |   |                          | 186    |   |   |   | - |   |
|                                                     |   |                          |   |   |   |   |   |   |
| All      Other Fees     (3)     |   |                          | -      |   |   |   | - |   |
|                                                     |   |                          |   |   |   |   |   |   |
|                                                     |   |                          |   |   |   |   |   |   |
| Total      Fees                                          |   | $                             | 1,176  |   |   | $ | 999 |   |
|                                                     |   |                          |   |   |   |   |   |   |

| (1) | Audit      Fees represents fees billed for professional services rendered for the      Company’s integrated annual audit. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

| (2) | Audit-Related      Fees represents fees billed for the issuance of debt and audit of the      Company’s centralized data center’sprocedures. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | All      Other Fees consists of fees associated with other services provided by the      principal audit firm. |
|-----|----------------------------------------------------------------------------------------------------------------|

ITEM 15. Exhibits,Financial Statement Schedules.

| (a)(1)      and (2) | Financial      Statements and Financial StatementSchedules. |
|---------------------|-------------------------------------------------------------|

|  (a)(3) | Exhibits. |
|--------------|-----------|

| Exhibit      No. | Description                                                                                                                                                                                                                                                                                                                                       |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                                                                                                                                              |
| 3(a)             | Certificate      of Formation of Panhandle Eastern Pipe Line Company,      LP.  (Filed as Exhibit 3.A to the Form 10-K for the year ended      December 31, 2004 and incorporated herein byreference.)                                                                                                                             |
|             |                                                                                                                                                                                                                                                                                                                                              |
| 3(b)             | Limited      Partnership Agreement of Panhandle Eastern Pipe Line Company, LP, dated as      of June 29, 2004, between Southern Union Company and Southern Union      Panhandle LLC.  (Filed as Exhibit 3.B to the Form 10-K for the      year ended December 31, 2004 and incorporated herein by      reference.)                      |
|             |                                                                                                                                                                                                                                                                                                                                              |
| 4(a)             | Indenture      dated as of March 29, 1999, among CMS Panhandle Holding      Company,Panhandle      Eastern Pipe Line Company and The Bank of New York Trust Company, N.A.,      successor to NBD Bank, as Trustee. (Filed as Exhibit 4(a) to the Form 10-Q      for the quarter ended March 31, 1999, and incorporated herein by      reference.) |
|             |                                                                                                                                                                                                                                                                                                                                              |

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| 4(b)           | 1st      Supplemental Indenture dated as of March 29, 1999, among CMS Panhandle      Holding Company, Panhandle Eastern Pipe Line Company and The Bank of New      York Trust Company, N.A., successor to NBD Bank, as Trustee, including a      form of Guarantee by Panhandle Eastern Pipe Line Company of the      obligations of CMS Panhandle Holding Company. (Filed as Exhibit 4(b) to      the Form 10-Q for the quarter ended March 31, 1999, and incorporated      herein by reference.)        |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4(c)           | 2nd      Supplemental Indenture dated as of March 27, 2000, between Panhandle, as      Issuer and The Bank of New York Trust Company, N.A., successor to Bank One      Trust Company, National Association, as Trustee. (Filed as Exhibit 4(e) to      the Form S-4 filed on June 22, 2000, and incorporated herein by      reference.)                                                                                                                                                                   |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4(d)           | 3rd      Supplemental Indenture dated as of August 18, 2003, between Panhandle, as      Issuer and The Bank of New York Trust Company, N.A., successor to Bank One      Trust Company, National Association, as Trustee. (Filed as Exhibit 4(d) to      the Form 10-Q for the quarter ended September 30, 2003, and incorporated      herein by reference.)                                                                                                                                               |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4(e)           | 4th      Supplemental Indenture dated as of March 12, 2004, between Panhandle, as      Issuer and      The Bank of New York Trust Company, N.A., successor to J.P. Morgan Trust      Company, National Association, as Trustee.  (Filed as Exhibit      4.E      to the Form 10-K for the year ended December 31, 2004 and incorporated      hereinby      reference.)                                                                                                                          |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4(f)           | Fifth      Supplemental Indenture dated as of October 26, 2007, between Panhandle and      The Bank of New York Trust Company, N.A., as Trustee (Filed as Exhibit 4.1      to Panhandle’s Current Report on Form 8-K filed on October 29, 2007 and      incorporated herein by reference.)                                                                                                                                                                                                          |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4(g)           | Indenture      dated as of February 1, 1993, between Panhandle and Morgan Guaranty Trust      Company effective January 1, 1982, as amended December 3,      1999.  (Filed as Exhibit 4 to the Form S-3 filed February 19,      1993, and incorporated herein by reference.)                                                                                                                                                                                                                    |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10(a)          | Amended      and Restated Credit Agreement between Trunkline LNG Holdings, LLC, as      borrower, Panhandle Eastern Pipe Line Company, LP and CrossCountry Citrus,      LLC, as guarantors, the financial institutions listed therein and      Bayerische Hypo-Und Vereinsbank AG, New York Branch, as administrative      agent, dated as of June 29, 2007 (Filed as Exhibit 10.1 to Panhandle’s      Current Report on Form 8-K filed on July 6, 2007 and incorporated herein      by reference.) |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10(b)          | Credit      Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle      Eastern Pipe Line Company, LP and Trunkline LNG Company, LLC, as      guarantors, the financial institutions listed therein and Bayerische Hypo-      Und Vereinsbank AG, New York Branch, as administrative agent, dated as of      March 15, 2007.  (Filed as Exhibit 10.1 to Panhandle’s Current      Report on Form 8-K filed on March 21, 2007 and incorporated herein by      reference.)    |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10(c)          | Amended and Restated Promissory Note made by CrossCountry      Citrus, LLC, as borrower, in favor of Trunkline LNG Holdings LLC, as      holder, dated as of June 29, 2007.                                                                                                                                                                                                                                                                                                                               |
|  12  |  Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|  23.1     | Consent      of Independent Registered Public Accounting Firm for      Panhandle Eastern Pipe Line Company, LP                                                                                                                                                                                                                                                                                                                                                                        |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 24             | Power of Attorney.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.1           | Certificate by President and Chief Operating Officer      pursuant to Rule 13a – 14(a) or 15d – 14(a) promulgated under the      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                  |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

| 31.2   | Certificate by Senior Vice President and Chief Financial      Officer pursuant to Rule 13a – 14(a) or 15d – 14(a)  promulgated      under the Securities Exchange Act of 1934, as adopted pursuant to |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |

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|   | Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                    |
| 32.1   | Certificate by President and Chief Operating Officer      pursuant to Rule 13a – 14(b) or 15d – 14(b) promulgated under the      Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act      of 2002, 18 U.S.C. Section 1350.            |
|   |                                                                                                                                                                                                                                                                    |
| 32.2   | Certificate by Senior Vice President and Chief Financial      Officer pursuant to Rule 13a – 14(b) or 15d – 14(b) promulgated under the      Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act      of 2002, 18 U.S.C. Section1350. |

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SIGNATURES

|   | PANHANDLE      EASTERN PIPE LINE COMPANY, LP                                   |
|--------|--------------------------------------------------------------------------------|
|   |                                                                           |
|   | By:      /s/  ROBERT O. BOND                                         |
|   |       Robert      O. Bond                        |
|   |       President      and Chief Operating Officer |

|  SIGNATURE                                                                                        |  TITLE                                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (i)                                                                                              |  Principle      executive officer:/s/ ROBERT O.      BOND     Robert      O. Bond                                                                                 |    President      and Chief Operating Officer |
|  (ii)                                                                                             |  Principal      financial officer:/s/ RICHARD N.      MARSHALL     Richard      N. Marshall                                                                       |    Senior      Vice President and Chief Financial Officer |
|  (iii)                                                                                            |  Principal      accounting officer:/s/ GARY W.      LEFELAR     Gary      W. Lefelar                                                                              |    Senior      Vice President and Chief Accounting Officer |
|  (iv)                                                                                             |  A      majority of the Board of Directors of Southern Union Company, Sole Member      of Southern Union Panhandle, LLC, General Partner of Panhandle Eastern      Pipe Line Company, L.P. |
|  SIGNATURE                                                                                        |  TITLE                                                                                                                                                                                     |
|  /s/ GEORGE L.      LINDEMANN     George      L. Lindemann               |   Chairman,      Southern Union Company                                                                                                                                               |
|  /s/ DAVID      BRODSKY     David      Brodsky                           |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ FRANK W.      DENIUS     Frank      W. Denius                       |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ KURT A. GITTER,      M.D.     Kurt      A. Gitter, M.D.             |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ HERBERT H.      JACOBI     Herbert      H. Jacobi                   |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ ADAM M.      LINDEMANN     Adam      M. Lindemann                   |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ THOMAS N.      McCARTER, III     Thomas      N. McCarter, III       |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ GEORGE ROUNTREE,      III     George      Rountree, III             |   Director,      Southern Union Company                                                                                                                                               |
|  /s/ ALLAN D.      SCHERER     Allan      D. Scherer                     |   Director,      Southern Union Company                                                                                                                                               |
|                                                                                                   |                                                                                                                                                                                            |
| *By:  /s/ RICHARD N.      MARSHALL                                                           | *By:  /s/ ROBERT O.      BOND                                                                                                                                                         |
|         Senior      Vice President and Chief Financial Officer |         President      and Chief Operating Officer                                                                                                      |
|         Attorney-in-fact                                       |         Attorney-in-fact                                                                                                                                |

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INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS

| Financial      Statements and Supplementary Data:                         |                 |
|---------------------------------------------------------------------------|----------------------|
| Consolidated Statement of      Operations                                 | F-2                  |
| Consolidated Balance Sheet                                                | F-3      – F-4 |
| Consolidated Statement of Cash    Flows                                   | F-5                  |
| Consolidated Statement of Partners' Capital and      Comprehensive Income | F-6                  |
| Notes to Consolidated Financial      Statements                           | F-7-F-36             |
| Report of Independent Registered Public Accounting      Firm              | F-37                 |

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CONSOLIDATEDSTATEMENT OFOPERATIONS

|                                                                    |   | Years Ended December      31, |    |
|-------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                    |   | 2007                          |    |   | 2006 |   |   | 2005 |   |
|                                                                    |   | (In      thousands)           |
| Operating      revenue                                                  |   |                          |    |   |   |   |   |   |   |
| Transportation      and storage of natural gas                          |   | $                             | 511,340 |   |   | $ | 451,513 |   |   | $ | 434,537 |   |
| LNG      terminalling revenue                                           |   |                          | 135,447 |   |   |   | 111,821 |   |   |   | 62,569 |   |
| Other      revenue                                                      |   |                          | 11,659  |   |   |   | 13,848 |   |   |   | 8,127 |   |
| Total      operating revenue                                            |   |                          | 658,446 |   |   |   | 577,182 |   |   |   | 505,233 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Operating      expenses                                                 |   |                          |    |   |   |   |   |   |   |   |   |   |
| Operation,      maintenance and general                                 |   |                          | 207,125 |   |   |   | 171,166 |   |   |   | 172,705 |   |
| Operation,      maintenance and general - affiliate  (Note 4) |   |                          | 47,861  |   |   |   | 35,015 |   |   |   | 31,756 |   |
| Depreciation      and amortization                                      |   |                          | 85,641  |   |   |   | 72,724 |   |   |   | 62,171 |   |
| Taxes,      other than on income                                        |   |                          | 29,698  |   |   |   | 25,405 |   |   |   | 28,196 |   |
| Total      operating expenses                                           |   |                          | 370,325 |   |   |   | 304,310 |   |   |   | 294,828 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Operating      income                                                   |   |                          | 288,121 |   |   |   | 272,872 |   |   |   | 210,405 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Other income      (expense)                                             |   |                          |    |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                   |   |                          | (82,551 | ) |   |   | (61,989 | ) |   |   | (48,285 | ) |
| Interest      income - affiliates  (Note 4)                   |   |                          | 39,405  |   |   |   | 11,334 |   |   |   | 3,523 |   |
| Other,      net                                                         |   |                          | 1,767   |   |   |   | 3,577 |   |   |   | 546 |   |
| Total      other income (expense)                                       |   |                          | (41,379 | ) |   |   | (47,078 | ) |   |   | (44,216 | ) |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Earnings before income      taxes                                       |   |                          | 246,742 |   |   |   | 225,794 |   |   |   | 166,189 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Income      taxes  (Note 6)                                   |   |                          | 96,318  |   |   |   | 88,039 |   |   |   | 64,627 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net    earnings                                                         |   | $                             | 150,424 |   |   | $ | 137,755 |   |   | $ | 101,562 |   |
|                                                                    |   |                          |    |   |   |   |   |   |   |   |   |   |

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CONSOLIDATEDBALANCESHEET

|                                                                      |   | December 31,      2007    |      |   | December 31,      2006 |   |
|---------------------------------------------------------------------------|--------|---------------------------|-----------|--------|------------------------|--------|
| Assets                                                                    |   | (In      thousands)  |      |
|                                                                      |   |                      |      |   |                   |   |
| Current      assets                                                       |   |                      |      |   |                   |   |
| Cash      and cash equivalents                                            |   | $                         | 320       |   |                   | $      | 531 |   |
| Accounts      receivable, billed and unbilled,                            |   |                      |      |   |                   |   |   |   |
|    less      allowances of $1,163 and $1,176, respectively |   |                      | 68,219    |   |                   |   | 61,047 |   |
| Accounts      receivable - related parties  (Note 4)            |   |                      | 12,067    |   |                   |   | 17,994 |   |
| Gas      imbalances - receivable                                          |   |                      | 104,124   |   |                   |   | 68,013 |   |
| System      gas and operating supplies                                    |   |                      | 180,801   |   |                   |   | 127,303 |   |
| Deferred      income taxes, net  (Note 6)                       |   |                      | 320       |   |                   |   | 3,117 |   |
| Note      receivable - CrossCountry Citrus (Note 4)                       |   |                      | 9,831     |   |                   |   | 6,664 |   |
| Other                                                                     |   |                      | 19,545    |   |                   |   | 10,691 |   |
| Total      current assets                                                 |   |                      | 395,227   |   |                   |   | 295,360 |   |
|                                                                      |   |                      |      |   |                   |   |   |   |
| Property, plant and equipment      (Note 7)                               |   |                      |      |   |                   |   |   |   |
| Plant      in service                                                     |   |                      | 2,830,068 |   |                   |   | 2,418,917 |   |
| Construction      work-in-progress                                        |   |                      | 355,695   |   |                   |   | 166,085 |   |
|                                                                      |   |                      | 3,185,763 |   |                   |   | 2,585,002 |   |
| Less      accumulated depreciation and amortization                       |   |                      | 290,465   |   |                   |   | 207,606 |   |
| Net      property, plant and equipment                                    |   |                      | 2,895,298 |   |                   |   | 2,377,396 |   |
|                                                                      |   |                      |      |   |                   |   |   |   |
| Investment      in unconsolidated subsidiary  (Note 9)          |   |                      | 1,757     |   |                   |   | 1,457 |   |
|                                                                      |   |                      |      |   |                   |   |   |   |
| Note      receivable - Southern Union (Note 4)                            |   |                      | 221,655   |   |                   |   | 148,655 |   |
| Note      receivable - CrossCountry Citrus (Note 4)                       |   |                      | 402,389   |   |                   |   | 458,336 |   |
| Intangible      customer contract, net  (Note 8)                |   |                      | 7,272     |   |                   |   | 7,618 |   |
| Debt      issuance cost                                                   |   |                      | 5,791     |   |                   |   | 2,376 |   |
| Non-current      system gas                                               |   |                      | 18,947    |   |                   |   | 14,850 |   |
| Other                                                                     |   |                      | 1,866     |   |                   |   | 2,472 |   |
|                                                                      |   |                      |      |   |                   |   |   |   |
| Total    assets                                                           |   | $                         | 3,950,202 |   |                   | $      | 3,308,520 |   |
|                                                                      |   |                      |      |   |                   |   |   |   |

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|                                                          |   | December 31,      2007 |      |   | December 31,      2006 |   |
|---------------------------------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
|                                                          |   | (In      thousands)    |      |
| Partners'      capital                                        |   |                   |      |   |                   |   |
| Partners'      capital                                        |   | $                      | 1,192,147 |   |                   | $      | 1,041,723 |   |
| Accumulated      other comprehensive income                   |   |                   | 1,636     |   |                   |   | 15,477 |   |
| Tax      sharing note receivable - Southern Union             |   |                   | (12,704   | )      |                   |   | (16,431 | ) |
| Total      partners' capital                                  |   |                   | 1,181,079 |   |                   |   | 1,040,769 |   |
|                                                          |   |                   |      |   |                   |   |   |   |
| Long-term      debt  (Note 11)                      |   |                   | 1,581,061 |   |                   |   | 1,185,391 |   |
| Total      capitalization                                     |   |                   | 2,762,140 |   |                   |   | 2,226,160 |   |
|                                                          |   |                   |      |   |                   |   |   |   |
| Current      liabilities                                      |   |                   |      |   |                   |   |   |   |
| Current      portion of long-term debt  (Note 11)   |   |                   | 309,680   |   |                   |   | 461,011 |   |
| Accounts      payable                                         |   |                   | 3,180     |   |                   |   | 6,679 |   |
| Accounts      payable - overdrafts                            |   |                   | 17,934    |   |                   |   | 23,776 |   |
| Accounts      payable - related parties  (Note 4)   |   |                   | 56,706    |   |                   |   | 15,962 |   |
| Gas      imbalances - payable                                 |   |                   | 271,450   |   |                   |   | 144,137 |   |
| Accrued      taxes                                            |   |                   | 14,501    |   |                   |   | 12,030 |   |
| Accrued      interest                                         |   |                   | 20,304    |   |                   |   | 19,669 |   |
| Capital      accruals                                         |   |                   | 97,662    |   |                   |   | 26,929 |   |
| Other                                                         |   |                   | 54,043    |   |                   |   | 59,741 |   |
| Total      current liabilities                                |   |                   | 845,460   |   |                   |   | 769,934 |   |
|                                                          |   |                   |      |   |                   |   |   |   |
| Deferred      income taxes, net  (Note 6)           |   |                   | 256,448   |   |                   |   | 243,697 |   |
| Post-retirement      benefits  (Note 14)            |   |                   | 763       |   |                   |   | 4,436 |   |
| Other                                                         |   |                   | 85,391    |   |                   |   | 64,293 |   |
| Commitments      and contingencies   (Note 13) |   |                   |      |   |                   |   |   |   |
|                                                          |   |                   |      |   |                   |   |   |   |
| Total partners' capital and      liabilities                  |   | $                      | 3,950,202 |   |                   | $      | 3,308,520 |   |
|                                                          |   |                   |      |   |                   |   |   |   |

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CONSOLIDATEDSTATEMENT OF CASHFLOWS

|                                                                                          |   | Years Ended December      31, |         |
|-----------------------------------------------------------------------------------------------|--------|-------------------------------|--------------|
|                                                                                          |   | 2007                          |         |   | 2006 |   |   | 2005 |   |
|                                                                                          |   | (In      thousands)           |         |
| Cash flows provided by (used      in) operating activities                                    |   |                          |         |   |   |   |   |   |   |
| Net      earnings                                                                             |   | $                             | 150,424      |   |   | $ | 137,755 |   |   | $ | 101,562 |   |
| Adjustments      to reconcile net earnings to net cash provided by operating      activities: |   |                          |         |   |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                            |   |                          | 85,641       |   |   |   | 72,724 |   |   |   | 62,171 |   |
| Deferred      income taxes, net                                                               |   |                          | 25,770       |   |   |   | 59,898 |   |   |   | 42,133 |   |
| Other                                                                                         |   |                          | 3,360        |   |   |   | (3,600 | )  |   |   | (1,293 | )  |
| Changes      in operating assets and liabilities:                                             |   |                          |         |   |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                      |   |                          | (1,245       | ) |   |   | (13,699 | ) |   |   | (9,970 | ) |
| Inventory                                                                                     |   |                          | 7,309        |   |   |   | 6,821 |   |   |   | (6,683 | ) |
| Other      assets                                                                             |   |                          | 4,464        |   |   |   | 614 |   |   |   | 1,045 |   |
| Accounts      Payable                                                                         |   |                          | (8,197       | ) |   |   | 11,027 |   |   |   | 4,687 |   |
| Accrued      taxes                                                                            |   |                          | 6,200        |   |   |   | 3,966 |   |   |   | 24,587 |   |
| Interest      accrued                                                                         |   |                          | 635          |   |   |   | 100 |   |   |   | 450 |   |
| Other      liabilities                                                                        |   |                          | (11,249      | ) |   |   | (26,384 | ) |   |   | (13,316 | ) |
| Net      cash flows provided by operating activities                                          |   |                          | 263,112      |   |   |   | 249,222 |   |   |   | 205,373 |   |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
| Cash flows provided by (used      in) investing activities                                    |   |                          |         |   |   |   |   |   |   |   |   |   |
| Net      increase in note receivable - Southern Union                                         |   |                          | (73,000      | ) |   |   | (38,075 | ) |   |   | (19,835 | ) |
| Net      increase in income taxes payable - related parties (Note4)                           |   |                          |  38,998 |   |   |   |  - |   |   |   |  - |   |
| Decrease      (increase) in note receivable - CrossCountry Citrus                             |   |                          | 52,780       |   |   |   | (465,000 | ) |   |   | - |   |
| Additions      to property, plant and equipment                                               |   |                          | (519,972     | ) |   |   | (228,911 | ) |   |   | (194,952 | ) |
| Other                                                                                         |   |                          | 2,858        |   |   |   | 1,800 |   |   |   | (657 | ) |
| Net      cash flows used in investing activities                                              |   |                          | (498,336     | ) |   |   | (730,186 | ) |   |   | (215,444 | ) |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
| Cash flows provided by (used      in) financing activities                                    |   |                          |         |   |   |   |   |   |   |   |   |   |
| Increase      (decrease) in book overdraft                                                    |   |                          | (5,842       | ) |   |   | 15,910 |   |   |   | (12,237 | ) |
| Issuance      of long-term debt                                                               |   |                          | 755,000      |   |   |   | 465,000 |   |   |   | 255,626 |   |
| Repayment      of debt                                                                        |   |                          | (508,406     | ) |   |   | - |   |   |   | (258,433 | ) |
| Issuance      costs of debt                                                                   |   |                          | (5,739       | ) |   |   | - |   |   |   | (354 | ) |
| Net      cash flows provided by (used in) financing activities                                |   |                          | 235,013      |   |   |   | 480,910 |   |   |   | (15,398 | ) |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
| Change      in cash and cash equivalents                                                      |   |                          | (211         | ) |   |   | (54 | ) |   |   | (25,469 | ) |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                         |   |                          | 531          |   |   |   | 585 |   |   |   | 26,054 |   |
| Cash and cash equivalents at      end of period                                               |   | $                             | 320          |   |   | $ | 531 |   |   | $ | 585 |   |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |
| Supplemental disclosures of      cash flow information                                        |   |                          |         |   |   |   |   |   |   |   |   |   |
| Cash paid during the period      for:                                                         |   |                          |         |   |   |   |   |   |   |   |   |   |
| Interest      (net of interest rate swap and amounts capitalized)                             |   | $                             | 83,214       |   |   | $ | 69,570 |   |   | $ | 63,180 |   |
| Income      taxes (net of refunds)                                                            |   |                          | 25,400       |   |   |   | 26,674 |   |   |   | 7 |   |
|                                                                                          |   |                          |         |   |   |   |   |   |   |   |   |   |

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CONSOLIDATEDSTATEMENT OF PARTNERS’ CAPITAL AND COMPREHENSIVEINCOME

|                                                                                           |   | Partners'      Capital |      |   | Accumulated      Other Comprehensive Income (Loss) |   |    | Tax      Sharing Note Receivable-Southern Union |   |   | Total   |   |
|------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|----------------------------------------------------|--------|---------|-------------------------------------------------|--------|--------|---------|--------|
|                                                                                           |   | (In      thousands)    |      |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |
| Balance      December 31, 2004                                                                 |   | $                      | 802,406   |   |                                               | $      | 1,231   |                                            |   | $      | (70,971 | )      |   | $ | 732,666 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Tax      sharing receivable - Southern Union (See Note 4)                                      |   |                   | -         |   |                                               |   | -       |                                            |   |   | 20,109  |   |   |   | 20,109 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Comprehensive      income:                                                                     |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
|   Net      earnings                                                                  |   |                   | 101,562   |   |                                               |   | -       |                                            |   |   | -       |   |   |   | 101,562 |   |
|   Unrealized      gain related to interest rate swaps, net of tax                    |   |                   | -         |   |                                               |   | 108     |                                            |   |   | -       |   |   |   | 108 |   |
|   Comprehensive      income                                                          |   |                   | 101,562   |   |                                               |   | 108     |                                            |   |   | -       |   |   |   | 101,670 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Balance      December 31, 2005                                                                 |   | $                      | 903,968   |   |                                               | $      | 1,339   |                                            |   | $      | (50,862 | )      |   | $ | 854,445 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Tax      sharing receivable - Southern Union (See Note 4)                                      |   |                   | -         |   |                                               |   | -       |                                            |   |   | 34,431  |   |   |   | 34,431 |   |
| Adjustment      to initially  apply FASB Statement No. 158, net of      tax          |   |                   | -         |   |                                               |   | 15,248  |                                            |   |   | -       |   |   |   | 15,248 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Comprehensive      income:                                                                     |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
|   Net      earnings                                                                  |   |                   | 137,755   |   |                                               |   | -       |                                            |   |   | -       |   |   |   | 137,755 |   |
|   Realized      gain related to interest rate swaps, net of tax                      |   |                   | -         |   |                                               |   | (1,110  | )                                               |   |   | -       |   |   |   | (1,110 | ) |
|   Comprehensive      income                                                          |   |                   | 137,755   |   |                                               |   | (1,110  | )                                               |   |   | -       |   |   |   | 136,645 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Balance      December 31, 2006                                                                 |   | $                      | 1,041,723 |   |                                               | $      | 15,477  |                                            |   | $      | (16,431 | )      |   | $ | 1,040,769 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Tax      sharing receivable - Southern Union (See Note 4)                                      |   |                   | -         |   |                                               |   | -       |                                            |   |   | 3,727   |   |   |   | 3,727 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Comprehensive      income:                                                                     |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
|   Net      earnings                                                                  |   |                   | 150,424   |   |                                               |   | -       |                                            |   |   | -       |   |   |   | 150,424 |   |
|   Net      recognized prior service credit related to other                          |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
|          postretirement      benefits, net of tax |   |                   | -         |   |                                               |   | (2,113  | )                                               |   |   | -       |   |   |   | (2,113 | ) |
|   Change      in fair value of interest rate hedges, net of tax                      |   |                   | -         |   |                                               |   | (8,392  | )                                               |   |   | -       |   |   |   | (8,392 | ) |
|   Net      gain related to interest rate swaps, net of tax                           |   |                   | -         |   |                                               |   | (970    | )                                               |   |   | -       |   |   |   | (970 | ) |
|   Realized      loss on interest rate hedge                                          |   |                   | -         |   |                                               |   | (2,366  | )                                               |   |   | -       |   |   |   | (2,366 | ) |
|   Comprehensive      income                                                          |   |                   | 150,424   |   |                                               |   | (13,841 | )                                               |   |   | -       |   |   |   | 136,583 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |
| Balance      December 31, 2007                                                                 |   | $                      | 1,192,147 |   |                                               | $      | 1,636   |                                            |   | $      | (12,704 | )      |   | $ | 1,181,079 |   |
|                                                                                           |   |                   |      |   |                                               |   |    |                                            |   |   |    |   |   |   |   |   |

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NOTES TOCONSOLIDATED FINANCIALSTATEMENTS

|   | · | PEPL,      an indirect wholly-owned subsidiary of Southern Union    Company; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | Trunkline      Gas Company, LLC (Trunkline), a direct      wholly-owned subsidiary of PEPL; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Sea      Robin Pipeline Company, LLC (Sea Robin), an indirect      wholly-owned subsidiary of PEPL; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Trunkline      LNG Holdings, LLC (LNG      Holdings), an indirect wholly-owned subsidiary of    PEPL; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | Trunkline      LNG Company, LLC (Trunkline LNG), a      direct wholly-owned subsidiary of LNG Holdings;  and |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | Pan      Gas Storage, LLC (d.b.a. Southwest Gas Storage),      a direct wholly-owned subsidiary ofPEPL. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

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|                                                            |   | Years Ended December      31,         |   |
|-----------------------------------------------------------------|--------|---------------------------------------|--------|
| Allowance for Doubtful      Accounts                            |   | 2007                                  |   |   | 2006 |   |   | 2005 |   |
|                                                            |   |    (In      thousands) |   |
|                                                            |   |                                  |   |   |   |   |   |   |   |
| Beginning      balance                                          |   | $                                     | 1,176  |   |   | $ | 1,168 |   |   | $ | 1,289 |   |
| Additions:  charged      to cost and expenses         |   |                                  | -      |   |   |   | 9 |   |   |   | (76 | ) |
| Deductions:  write-off      of uncollectible accounts |   |                                  | (13    | ) |   |   | (1 | ) |   |   | (45 | ) |
| Ending      balance                                             |   | $                                     | 1,163  |   |   | $ | 1,176 |   |   | $ | 1,168 |   |
|                                                            |   |                                  |   |   |   |   |   |   |   |   |   |   |

|                        |   | Percent of Operating Revenue      for |
|-----------------------------|--------|---------------------------------------|
|                        |   | Years Ended December      31,         |
| Customer                    |   | 2007                                  |   |   | 2006 |   |   | 2005 |
|                        |   |                                  |   |   |   |   |   |   |   |   |   |
| BG      LNG Services        |   |                                  | 28 |  % |   |   |   | 24 |  % |   |   |   | 17 | % |
| ProLiance                   |   |                                  | 11 |   |   |   |   | 12 |   |   |   |   | 16 |   |
| Ameren      Corp            |   |                                  | 9 |   |   |   |   | 10 |   |   |   |   | 11 |   |
| Other      top 10 customers |   |                                  | 17 |   |   |   |   | 19 |   |   |   |   | 22 |   |
| Remaining      customers    |   |                                  | 35 |   |   |   |   | 35 |   |   |   |   | 34 |   |
| Total      percentage       |   |                                  | 100 | % |   |   |   | 100 | % |   |   |   | 100 | % |
|                        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |

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| December 31,      2007             |          |                           |   | (In      thousands) |   |
|------------------------------------|---------------|--------------------------------|--------|---------------------|--------|
|                               | In    Service |                           |   |                |   |
| ARO      Description               | Date          | Long-Lived      Assets         |   | Amount              |   |
| Retire      offshore lateral lines | Various       | Offshore      lateral lines    |   | $                   | 5,539  |   |
| Remove      asbestos               | Various       | Mainlines      and compressors |   |                | 882    |   |

|                   |   | Years Ended December      31, |
|------------------------|--------|-------------------------------|
|                   |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
|                   |   | (In      thousands)           |
|                   |   |                          |   |   |   |   |   |   |   |
| Beginning      Balance |   | $                             | 9,608 |   |   | $ | 8,200 |   |   | $ | 5,657 |   |
| Incurred               |   |                          | 2,250 |   |   |   | 1,189 |   |   |   | 2,371 |   |
| Settled                |   |                          | (799 | ) |   |   | (414 | ) |   |   | (285 | ) |
| Accretion      Expense |   |                          | 767 |   |   |   | 633 |   |   |   | 457 |   |
| Ending      Balance    |   | $                             | 11,826 |   |   | $ | 9,608 |   |   | $ | 8,200 |   |
|                   |   |                          |   |   |   |   |   |   |   |   |   |   |

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|                                                               |   | Year    Ended          |    |
|--------------------------------------------------------------------|--------|------------------------|---------|
|                                                               |   | December 31,      2005 |    |
|                                                               |   | (In      thousands)    |    |
|                                                               |   |                   |    |
| Net      earnings, as reported                                     |   | $                      | 101,562 |   |
| Add      stock-based compensation expense included in         |   |                   |    |   |
|        reported net earnings, net of related taxes       |   |                   | 710     |   |
| Deduct      stock-based employee compensation expense         |   |                   |    |   |
|        determined under fair value based method for all  |   |                   |    |   |
|        awards, net of related taxes                           |   |                   | 1,001   |   |
| Pro      forma net earnings                                        |   | $                      | 101,271 |   |
|                                                               |   |                   |    |   |

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|                             |   | Years Ended December      31, |   |
|----------------------------------|--------|-------------------------------|--------|
| Related Party      Transactions  |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
|                             |   | (In      thousands)           |   |
|                             |   |                          |   |   |   |   |   |   |   |
| Transportation      and storage  |   |                          |   |   |   |   |   |   |   |
| of      natural gas              |   | $                             | 4,175  |   |   | $ | 4,282 |   |   | $ | 3,962 |   |
| Operation      and maintenance:  |   |                          |   |   |   |   |   |   |   |   |   |   |
| Management      and royalty fees |   |                          | 16,430 |   |   |   | 14,423 |   |   |   | 12,630 |   |
| Other      expenses              |   |                          | 31,431 |   |   |   | 20,592 |   |   |   | 19,126 |   |
| Other      income, net           |   |                          | 39,704 |   |   |   | 11,506 |   |   |   | 3,749 |   |

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|                                              |   | Years Ended December      31, |   |
|---------------------------------------------------|--------|-------------------------------|--------|
| Related      Party                                |   | 2007                          |   | 2006 |   |
| Accounts receivable - related      parties:       |   | (In      thousands)           |   |
| Southern      Union (1)                           |   | $                             | 1,174  |   | $ | 14,448 |   |
| Other      (2)                                    |   |                          | 10,893 |   |   | 3,546 |   |
|                                              |   |                          | 12,067 |   |   | 17,994 |   |
| Accounts payable - related      parties:          |   |                          |   |   |   |   |   |
| Southern      Union - income taxes  (3) |   | $                             | 41,420 |   | $ | 2,422 |   |
| Southern      Union - other (4)                   |   |                          | 14,945 |   |   | 11,442 |   |
| Other      (5)                                    |   |                          | 341    |   |   | 2,098 |   |
|                                              |   | $                             | 56,706 |   | $ | 15,962 |   |
|                                              |   |                          |   |   |   |   |   |

| (1) | Primarily      related to expenditures made on behalf of Southern Union and interest      associated with the Note      receivable – Southern Union. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Primarily      related to interest from CrossCountry Citrus in 2007 and    2006. |
|-----|----------------------------------------------------------------------------------|

| (3) | Related      to income taxes payable to Southern Union per the tax sharing agreement,      which was amended in September 2007, to provide for taxes to be remitted      upon the filing of the tax return. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Primarily      related to payroll funding provided by Southern Union, reimbursable      medical and insurance costs paid by Southern Union on behalf of the      Company. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Primarily      related to various administrative and operating costs paid by other      affiliate companies on behalf of theCompany. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

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|                             |   | Years Ended December      31, |   |
|----------------------------------|--------|-------------------------------|--------|
| Income Tax      Expense          |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
|                             |   | (In      thousands)           |   |
| Current      income taxes        |   |                          |   |   |   |   |   |   |   |
| Federal                          |   | $                             | 61,445 |   |   | $ | 21,170 |   |   | $ | 20,153 |   |
| State                            |   |                          | 9,103  |   |   |   | 6,971 |   |   |   | 2,341 |   |
| Total      current income taxes  |   |                          | 70,548 |   |   |   | 28,141 |   |   |   | 22,494 |   |
|                             |   |                          |   |   |   |   |   |   |   |   |   |   |
| Deferred      income taxes       |   |                          |   |   |   |   |   |   |   |   |   |   |
| Federal                          |   |                          | 19,249 |   |   |   | 52,574 |   |   |   | 34,330 |   |
| State                            |   |                          | 6,521  |   |   |   | 7,324 |   |   |   | 7,803 |   |
| Total      deferred income taxes |   |                          | 25,770 |   |   |   | 59,898 |   |   |   | 42,133 |   |
|                             |   |                          |   |   |   |   |   |   |   |   |   |   |
| Total      income tax expense    |   | $                             | 96,318 |   |   | $ | 88,039 |   |   | $ | 64,627 |   |
|                             |   |                          |   |   |   |   |   |   |   |   |   |   |

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| Income Tax Expense      --                      |   | Years Ended December      31, |
|-------------------------------------------------|--------|-------------------------------|
| Reconciliation to Statutory      Rate           |   | 2007                          |   | 2006 |   | 2005 |   |
|                                            |   | (In      thousands)           |   |
|                                            |   |                          |   |   |   |   |   |
| Income      tax, computed at the statutory rate |   | $                             | 86,360 |   | $ | 79,028 |   | $ | 58,166 |   |
| Adjustments:                                    |   |                          |   |   |   |   |   |   |   |   |
| State      income tax, net of federal effect    |   |                          | 10,156 |   |   | 9,292 |   |   | 6,594 |   |
| Permanent      differences and other            |   |                          | (198) |   |   | (281) |   |   | (133 | ) |
| Total      income tax expense                   |   | $                             | 96,318 |   | $ | 88,039 |   | $ | 64,627 |   |
|                                            |   |                          |   |   |   |   |   |   |   |   |
| Effective      tax rate                         |   |                          | 39.0% |   |   | 39.0% |   |   | 38.9% |   |
|                                            |   |                          |   |   |   |   |   |   |   |   |

|                                                        |   | Years Ended December      31, |     |
|-------------------------------------------------------------|--------|-------------------------------|----------|
| Net Deferred Income Tax Asset      (Liability) Components   |   | 2007                          |     |   | 2006 |   |
|                                                        |   | (In      thousands)           |     |
|                                                        |   |                          |     |   |   |   |
| Property,      plant and equipment                          |   | $                             | (254,078 | ) |   | $ | (242,510 | ) |
| Current      assets                                         |   |                          | 259      |   |   |   | (338 | ) |
| Investments                                                 |   |                          | (186     | ) |   |   | (183 | ) |
| Other      deferred debits                                  |   |                          | (2,557   | ) |   |   | 4,080 |   |
| Other      assets                                           |   |                          | (741     | ) |   |   | - |   |
| Current      liabilities                                    |   |                          | 1,375    |   |   |   | 2,197 |   |
| Deferred      credits and other liabilities                 |   |                          | 18,716   |   |   |   | 17,094 |   |
| Long      term debt                                         |   |                          | 8,041    |   |   |   | 3,018 |   |
| Other                                                       |   |                          | (100     | ) |   |   | (102 | ) |
| State      deferred income taxes, net of federal tax effect |   |                          | (26,857  | ) |   |   | (23,836 | ) |
| Net      deferred income tax asset (liability)              |   | $                             | (256,128 | ) |   | $ | (240,580 | ) |
|                                                        |   |                          |     |   |   |   |   |   |
| Gross      deferred tax liabilities                         |   | $                             | (284,260 | ) |   | $ | (266,969 | ) |
| Gross      deferred tax assets                              |   |                          | 28,132   |   |   |   | 26,389 |   |
| Net      deferred income tax asset (liability)              |   | $                             | (256,128 | ) |   | $ | (240,580 | ) |
|                                                        |   |                          |     |   |   |   |   |   |
|                                                        |   |                          |     |   |   |   |   |   |
| Non      current deferred income tax asset (liability)      |   | $                             | (256,448 | ) |   | $ | (243,697 | ) |
| Current      tax asset                                      |   |                          | 320      |   |   |   | 3,117 |   |
| Net      deferred income tax asset (liability)              |   | $                             | (256,128 | ) |   | $ | (240,580 | ) |
|                                                        |   |                          |     |   |   |   |   |   |

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|                                                                                                           |   | Lives    |   |    | Years Ended December      31,         |      |
|----------------------------------------------------------------------------------------------------------------|--------|----------|--------|---------|---------------------------------------|-----------|
| Property, Plant and      Equipment                                                                             |   | In Years |   |    | 2007                                  |      |   | 2006 |   |
|                                                                                                           |   |     |   |    | (In      thousands)    |      |
|                                                                                                           |   |     |   |    |                                  |      |   |   |   |
| Transmission                                                                                                   |   | 36-46    |   |    | $                                     | 1,770,742 |   |   | $ | 1,400,547 |   |
| Gathering                                                                                                      |   | 26       |   |    |                                  | 52,221    |   |   |   | 44,402 |   |
| Underground      storage                                                                                       |   | 36-46    |   |    |                                  | 290,753   |   |   |   | 279,845 |   |
| General      plant - LNG                                                                                       |   | 20-40    |   |    |                                  | 624,250   |   |   |   | 619,018 |   |
| General      plant - other   (1)                                                                |   | 1-10     |   |    |                                  | 92,102    |   |   |   | 75,105 |   |
| Plant      in service (2)                                                                                      |   |     |   |    |                                  | 2,830,068 |   |   |   | 2,418,917 |   |
| Construction      work-in-progress                                                                             |   |     |   |    |                                  | 355,695   |   |   |   | 166,085 |   |
| Total      property, plant and equipment                                                                       |   |     |   |    |                                  | 3,185,763 |   |   |   | 2,585,002 |   |
| Less      accumulated depreciation and amortization (1)                                                   |   |     |   | 290,465 |                                  |      |   | 207,606 |   |
| Net      property, plant and equipment                                                                         |   |     |   |    | $                                     | 2,895,298 |   |   | $ | 2,377,396 |   |
|                                                                                                           |   |     |   |    |                                  |      |   |   |   |   |   |
| (1)      Includes capitalized computer software costs totaling:                                                |   |     |   |    |                                  |      |   |   |   |
|                                                                                                           |   |     |   |    |                                  |      |   |   |   |   |   |
| Computer      software cost                                                                                    |   |     |   |    | $                                     | 67,457    |   |   | $ | 56,804 |   |
|        Less accumulated amortization                                                                      |   |     |   |    |                                  | 24,567    |   |   |   | 16,734 |   |
|        Net computer software costs                                                                        |   |     |   |    | $                                     | 42,890    |   |   | $ | 40,070 |   |
|                                                                                                           |   |     |   |    |                                  |      |   |   |   |   |   |   |
| (2)      The composite weighted-average depreciation rates for the years ended      December 31, 2007, 2006    |   |
|            and 2005 were 3.0 percent, 3.0 percent and 2.9 percent,      respectively. |   |     |   |    |                                  |

|                                   |   | Useful   |   |   |                                        |   |   |   |   |
|----------------------------------------|--------|----------|--------|--------|---------------------------------------------|--------|--------|--------|--------|
|                                   |   | Lives    |   |   | Years Ended December      31,          |
| Intangible customer      contract      |   | In Years |   |   | 2007                                        |   |   | 2006   |   |
|                                   |   |     |   |   | (In      thousands)     |
|                                   |   |     |   |   |                                        |   |   |   |   |
| Customer      contract                 |   |  25 |   |   | $                                           | 9,503  |   |   | $      | 9,503 |   |
| Less      accumulated amortization     |   |     |   |   |                                        |   | 2,231  |   |   |   | 1,885 |   |
| Intangible      customer contract, net |   |     |   |   |                                        | $      | 7,272  |   |   | $ | 7,618 |   |
|                                   |   |     |   |   |                                        |   |   |   |   |   |   |   |

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|                                          |   |                                                                                                                                   |   | December 31,      2007                                                    |      |   | December 31,      2006 |   |
|-----------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|-----------|--------|------------------------|--------|
| Long-term      Debt                           |   | Year Due                                                                                                                               |   | Book    Value                                                             |      |   | Fair    Value          |   |   | Book    Value |   |   | Fair    Value |   |
|                                          |   |                                                                                                                                   |   | (In      thousands)          |      |
|                                          |   |                                                                                                                                   |   |                                                                      |      |   |                   |   |   |   |   |   |   |   |
| 2.75%      Senior Notes                       |   | 2007                                                                                                                                   |   | $                                                                         | -         |   |                   | $      | - |   |   | $ | 200,000 |   |   | $ | 200,000 |   |
| 4.80%      Senior Notes                       |   | 2008                                                                                                                                   |   |                                                                      | 300,000   |   |                   |   | 298,140 |   |   |   | 300,000 |   |   |   | 300,000 |   |
| 6.05%      Senior Notes                       |   | 2013                                                                                                                                   |   |                                                                      | 250,000   |   |                   |   | 252,650 |   |   |   | 250,000 |   |   |   | 251,053 |   |
| 6.20%      Senior Notes                       |   | 2017                                                                                                                                   |   |                                                                      | 300,000   |   |                   |   | 297,240 |   |   |   | - |   |   |   | - |   |
| 6.50%      Senior Notes                       |   | 2009                                                                                                                                   |   |                                                                      | 60,623    |   |                   |   | 62,132 |   |   |   | 60,623 |   |   |   | 61,721 |   |
| 8.25%      Senior Notes                       |   | 2010                                                                                                                                   |   |                                                                      | 40,500    |   |                   |   | 43,396 |   |   |   | 40,500 |   |   |   | 43,180 |   |
| 7.00%      Senior Notes                       |   | 2029                                                                                                                                   |   |                                                                      | 66,305    |   |                   |   | 65,198 |   |   |   | 66,305 |   |   |   | 71,947 |   |
| Term      Loan                                |   | 2007                                                                                                                                   |   |                                                                      | -         |   |                   |   | - |   |   |   | 255,626 |   |   |   | 255,626 |   |
| Term      Loan                                |   |                           2012 (1) |   |                                                                      | 412,220   |   |                   |   | 412,220 |   |   |   | 465,000 |   |   |   | 465,000 |   |
| Term      Loan                                |   | 2012                                                                                                                                   |   |                                                                      | 455,000   |   |                   |   | 455,000 |   |   |   | - |   |   |   | - |   |
| Unamortized      debt premium, net            |   |                                                                                                                                   |   |                                                                      | 6,093     |   |                   |   | 6,093 |   |   |   | 9,613 |   |   |   | 9,613 |   |
| Total      debt outstanding                   |   |                                                                                                                                   |   |                                                                      | 1,890,741 |   |                   | $      | 1,892,069 |   |   |   | 1,647,667 |   |   | $ | 1,658,140 |   |
| Current      portion of long-term debt        |   |                                                                                                                                   |   |                                                                      | (309,680  | )      |                   |   |   |   |   |   | (461,011 | ) |   |   |   |   |
| Interest      rate swaps (2.75% Senior Notes) |   |                                                                                                                                   |   |                                                                      | -         |   |                   |   |   |   |   |   | (1,265 | ) |   |   |   |   |
| Total      long-term debt                     |   |                                                                                                                                   |   | $                                                                         | 1,581,061 |   |                   |   |   |   |   | $ | 1,185,391 |   |   |   |   |   |
|                                          |   |                                                                                                                                   |   |                                                                      |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |

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|                                                                                                                                               |   |         | Years Ended December      31,            |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------------------------------------------------------|--------|
|                                                                                                                                               |   |         | 2007                                                    |   |   | 2006 |   |   | 2005 |   |
|                                                                                                                                               |   |         | (In      thousands)       |   |
|                                                                                                                                               |   |         |                                                    |   |   |   |   |   |   |   |
| Net      earnings                                                                                                                                  |   | $            | 150,424                                                 |   |   | $ | 137,755 |   |   | $ | 101,562 |   |
|                                                                                                                                               |   |         |                                                    |   |   |   |   |   |   |   |   |   |   |
| Reclassification      of unrealized (gain) loss on interest rate        hedges into      earnings, net of tax of $(621), $(742) and |   |         |                                                    |   |   |   |   |   |   |   |   |
|         $1,587,      respectively                                                                                                   |   | (970         | )                                                       |   |   | (1,105 | ) |   |   | 2,495 |   |
| Actuarial      gain and prior service credit relating to other         postretirement benefits,      net of tax of $(1,066), $0 and |   |         |                                                    |   |   |   |   |   |   |   |   |
|         $0,      respectively                                                                                                            |   |         | 88                                                      |   |   |   | - |   |   |   | - |   |
| Change      in fair value of interest rate hedges, net of tax of                                                                              |   |         |                                                    |   |   |   |   |   |   |   |   |
|         $(5,722),      $(3) and $(1,515), respectively                                                                                   |   |         | (8,392                                                  | )      |   |   | (5 | ) |   |   | (2,387 | ) |
| Realized      loss on interest rate hedges, net of tax of                                                                                          |   |         |                                                    |   |   |   |   |   |   |   |   |
|         $(1,488), $0 and      $0, respectively                                                                                      |   |  (2,366 | )                                                       |   |   | - |   |   |   |  - |   |
| Reclassification      of actuarial gain and prior service                                                                                     |   |         |                                                    |   |   |   |   |   |   |   |   |
|         credit (cost) relating to other postretirement benefits                                                                     |   |         |                                                    |   |   |   |   |   |   |   |   |
|         into      earnings, net of tax of      $(1,326), $0 and $0,                                                                 |   |         |                                                    |   |   |   |   |   |   |   |   |
|         respectively                                                                                                                |   | (2,201       | )                                                       |   |   | - |   |   |   | - |   |
| Total      other comprehensive income (loss)                                                                                                       |   |         | (13,841                                                 | )      |   |   | (1,110 | ) |   |   | 108 |   |
|                                                                                                                                               |   |         |                                                    |   |   |   |   |   |   |   |   |   |   |
| Total      comprehensive income                                                                                                                    |   | $            | 136,583                                                 |   |   | $ | 136,645 |   |   | $ | 101,670 |   |
|                                                                                                                                               |   |         |                                                    |   |   |   |   |   |   |   |   |   |   |

|                                                                                               |   | Years Ended December      31, |    |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
| Components in Accumulated Other      Comprehensive Income                                          |   | 2007                          |    |   | 2006 |   |
|                                                                                               |   | (In      thousands)           |    |
| Other      postretirement plan - net actuarial gain and prior service credit,      net of tax |   | $                             | 13,135  |   |   | $ | 15,248 |   |
| Interest      rate hedges, net of tax                                                              |   |                          | (11,499 | ) |   |   | 229 |   |
| Total      Accumulated other comprehensive income, net of tax                                      |   | $                             | 1,636   |   |   | $ | 15,477 |   |
|                                                                                               |   |                          |    |   |   |   |   |   |

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|                                 |   | Years Ended December      31,         |   |
|--------------------------------------|--------|---------------------------------------|--------|
|                                 |   | 2007                                  |   |   | 2006 |   |
|                                 |   | (In      thousands)    |   |
|                                 |   |                                  |   |   |   |   |
| Current                              |   | $                                     | 996    |   |   | $ | 1,962 |   |
| Noncurrent                           |   |                                  | 6,901  |   |   |   | 6,760 |   |
| Total      Environmental Liabilities |   | $                                     | 7,897  |   |   | $ | 8,722 |   |
|                                 |   |                                  |   |   |   |   |   |   |

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|                                                                                    |   |   |   |   | Other      Postretirement Plans    |                                                                                                                           |                                                                                                                                      |
|-----------------------------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                    |   |   |   |   |                                              |                                                                                                                           |                                                                                                                                      |   | SFAS      158 |   |   |   |   |   |
|                                                                                    |   |   |   |   |                                              |                                                                                                                           |                                                                                                                                      |   |  adoption |   |   | Post-SFAS |   |   |
|                                                                                    |   |   |   |   | Pre-SFAS      158                                 |                                                                                                                           |                                                                                                                                      | adjustment |   |   | 158 |   |   |
|                                                                                    |   |   |   |   |                                              | (In      thousands)                                                                              |                                                                                                                                      |   |
| Postretirement      liabilities, noncurrent (included in Post-retirement      benefits) |   | $      | 24,677 |   |                                              |  $              (20,241)                            |                                                                                                                                      |   |  $              4,436 |   |   |
| Accumulated      deferred income taxes                                                  |   |   |   | -      |                                              |                                                                                                                           |                       4,993 |   |   |                   4,993 |   |   |
| Accumulated      other comprehensive income, net of tax                                 |   |   | -      |   |                                              |                     15,248 |                                                                                                                                      |   |                  15,248 |   |   |
| Accumulated      other comprehensive income, pre-tax                                    |   |   | -      |   |                                              |                     20,241 |                                                                                                                                      |   |                  20,241 |   |   |
|                                                                                    |   |   |   |   |                                              |                                                                                                                           |                                                                                                                                      |   |   |   |   |   |   |   |

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|                                                                  |   | Other Postretirement      Benefits          |    |
|-----------------------------------------------------------------------|--------|---------------------------------------------|---------|
|                                                                  |   | At December      31,         |    |
|                                                                  |   | 2007                                        |    |   | 2006 |   |
|                                                                  |   |  (In      thousands)    |    |
| Change      in benefit obligation:                                    |   |                                        |    |   |   |   |
| Benefit      obligation at beginning of period                        |   | $                                           | 34,390  |   |   | $ | 39,594 |   |
| Service      cost                                                     |   |                                        | 1,155   |   |   |   | 1,323 |   |
| Interest      cost                                                    |   |                                        | 1,922   |   |   |   | 1,781 |   |
| Actuarial      gain and other                                         |   |                                        | (539    | ) |   |   | (8,340 | ) |
| Benefits      paid, net                                               |   |                                        | (20     | ) |   |   | 32 |   |
| Plan      amendments                                                  |   |                                        | 2,509   |   |   |   | - |   |
| Benefit      obligation at end of period                              |   | $                                           | 39,417  |   |   | $ | 34,390 |   |
|                                                                  |   |                                        |    |   |   |   |   |   |
| Change      in plan assets:                                           |   |                                        |    |   |   |   |   |   |
| Fair      value of plan assets at beginning of period                 |   | $                                           | 29,954  |   |   | $ | 20,400 |   |
| Return      on plan assets and other                                  |   |                                        | 994     |   |   |   | 1,707 |   |
| Employer      contributions                                           |   |                                        | 7,726   |   |   |   | 7,815 |   |
| Benefits      paid, net                                               |   |                                        | (20     | ) |   |   | 32 |   |
| Fair      value of plan assets at end of period                       |   | $                                           | 38,654  |   |   | $ | 29,954 |   |
|                                                                  |   |                                        |    |   |   |   |   |   |
| Funded      status:                                                   |   |                                        |    |   |   |   |   |   |
| Funded      status                                                    |   | $                                           | (763    | ) |   | $ | (4,436 | ) |
|                                                                  |   |                                        |    |   |   |   |   |   |
| Amounts      recognized in the Consolidated Balance Sheet consist of: |   |                                        |    |   |   |   |   |   |
| Noncurrent      liabilities                                           |   | $                                           | (763    | ) |   | $ | (4,436 | ) |
|                                                                  |   |                                        |    |   |   |   |   |   |
|                                                                  |   |                                        |    |   |   |   |   |   |
| Amounts      recognized in Accumulated other comprehensive income     |   |                                        |    |   |   |   |   |   |
|    (pre-tax      basis) consist of:                    |   |                                        |    |   |   |   |   |   |
| Net      actuarial loss (gain)                                        |   | $                                           | (566    | ) |   | $ | 924 |   |
| Prior      service cost (credit)                                      |   |                                        | (15,170 | ) |   |   | (21,165 | ) |
|                                                                  |   | $                                           | (15,736 | ) |   | $ | (20,241 | ) |
|                                                                  |   |                                        |    |   |   |   |   |   |

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|                                           |   | Postretirement      Benefits  |   |
|------------------------------------------------|--------|-------------------------------|--------|
|                                           |   | Years Ended December      31, |   |
|                                           |   | 2007                          |   |   | 2006 |   |   | 2005 |   |
|                                           |   | (In      thousands)           |   |
| Net      Periodic Benefit Cost:                |   |                          |   |   |   |   |   |   |   |
| Service      cost                              |   | $                             | 1,155  |   |   | $ | 1,323 |   |   | $ | 2,264 |   |
| Interest      cost                             |   |                          | 1,922  |   |   |   | 1,781 |   |   |   | 2,926 |   |
| Expected      return on plan assets            |   |                          | (1,918 | ) |   |   | (1,378 | ) |   |   | (891 | ) |
| Prior      service credit amortization         |   |                          | (3,487 | ) |   |   | (3,643 | ) |   |   | (1,077 | ) |
| Actuarial      (gain) loss amortization        |   |                          | (40    | ) |   |   | 508 |   |   |   | 231 |   |
| Transfer      of net obligation from affiliate |   |                          | 1,915  |   |   |   | - |   |   |   | - |   |
| Net      periodic benefit cost (credit)        |   | $                             | (453   | ) |   | $ | (1,409 | ) |   | $ | 3,453 |   |
|                                           |   |                          |   |   |   |   |   |   |   |   |   |   |

|                            |   | Years Ended December      31,    |   |
|---------------------------------|--------|-------------------------------------------------|--------|
|                            |   | 2007                                            |   |   | 2006 |   |   | 2005 |   |
|                            |   |                                            |   |   |   |   |   |   |   |
| Discount      rate              |   |                                            | 6.06   | % |   |   | 5.50 | % |   |   | 5.75 | % |
| Expected      return on assets: |   |                                            |   |   |   |   |   |   |   |   |   |   |
| Tax      exempt accounts        |   |                                            | 7.00   | % |   |   | 7.00 | % |   |   | 7.00 | % |
| Taxable      accounts           |   |                                            | 5.00   | % |   |   | 5.00 | % |   |   | 5.00 | % |
|                            |   |                                            |   |   |   |   |   |   |   |   |   |   |

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|                                                    |   | December 31,    |
|---------------------------------------------------------|--------|--------------------------------|
|                                                    |   | 2007                           |   | 2006 |
|                                                    |   |                           |   |   |   |   |
| Health      care cost trend rate assumed for next year  |   |                           | 10.00 | % |   |   | 11.00 | % |
| Ultimate      trend rate                                |   |                           | 5.20 | % |   |   | 4.85 | % |
| Year      that the rate reaches the ultimate trend rate |   |  2017                     |   |   |  2013 |   |

|                                                         |   | One      Percentage |   |   | One      Percentage |   |
|--------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|
|                                                         |   | Point      Increase |   |   | Point      Decrease |   |
|                                                         |   |                |   |   |                |   |
| Effect      on total of service and interest cost            |   | $                   | 669    |   |                | $      | (537 | ) |
| Effect      on accumulated postretirement benefit obligation |   |                | 6,421  |   |                |   | (5,227 | ) |

|                          |   | December    31, |
|-------------------------------|--------|-----------------|
| Asset      Category           |   | 2007            |   | 2006 |
|                          |   |            |   |   |   |   |
| Equity      securities        |   |            | 31 | % |   |   | 25 | % |
| Debt      securities          |   |            | 67 | % |   |   | 70 | % |
| Other      - cash equivalents |   |            | 2 | % |   |   | 5 | % |
| Total                         |   |            | 100 | % |   |   | 100 | % |
|                          |   |            |   |   |   |   |   |   |

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|      |   | Expected      Benefits                                  |   |   | Payments              |   |   |   |   |
|-----------|--------|---------------------------------------------------------|--------|--------|-----------------------|--------|--------|--------|--------|
|      |   | Before Effect      of                                   |   |   | Medicare Part      D  |   |   |   |   |
| Years     |   | Medicare Part      D                                    |   |   | Subsidy      Receipts |   |   | Net    |   |
|      |   | (In      thousands)       |   |
|      |   |                                                    |   |   |                  |   |   |   |   |
| 2008      |   | $                                                       | 323    |   |                  | $      | 7      |   |   | $ | 316 |   |
| 2009      |   |                                                    | 480    |   |                  |   | 9      |   |   |   | 471 |   |
| 2010      |   |                                                    | 739    |   |                  |   | 17     |   |   |   | 722 |   |
| 2011      |   |                                                    | 1,136  |   |                  |   | 24     |   |   |   | 1,112 |   |
| 2012      |   |                                                    | 1,660  |   |                  |   | 30     |   |   |   | 1,630 |   |
| 2013-2017 |   |                                                    | 16,870 |   |                  |   | 911    |   |   |   | 15,959 |   |
|      |   |                                                    |   |   |                  |   |   |   |   |   |   |   |

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|   | · | An      increase from 7,000,000 to 9,000,000 in the aggregate number of shares of      stock that may be issued under theplan; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | · | An      increase from 725,000 to 1,500,000 in the total number of shares of stock      that may be issued pursuant to stock awards, performance units and other      equity-based rights; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An      increase from 4,000 to 5,000 in the maximum number of shares of restricted      common stock that each non-employee director is eligible to receive      annually. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                         |   | Years Ended December      31,    |   |
|------------------------------|--------|-------------------------------------------------|--------|
|                         |   | 2007                                            |   |   | 2006 |   |   | 2005 |   |
| Expected      volatility     |   | 30.11%                                          |   |   | 32.90% |   |   | 37.04%      to 37.36% |   |
| Expected      dividend yield |   | 2.10%                                           |   |   | 1.43% |   |   |  0.00% |   |
| Risk-free      interest rate |   | 3.70%                                           |   |   | 4.69% |   |   | 4.06%      to 4.52% |   |
| Expected      life           |   | 6.00      years                                 |   |   | 6.00      years |   |   | 6.25      years |   |
|                         |   |                                            |   |   |   |   |   |   |   |   |   |   |

|                               |   |   |    |   |     |   |
|------------------------------------|--------|--------|---------|--------|----------|--------|
|                               |   |   |    |   | Weighted |   |
|                               |   | Shares |    |   | Average  |   |
|                               |   | Under  |    |   | Exercise |   |
|                               |   | Option |    |   | Price    |   |
|                               |   |   |    |   |     |   |
| Outstanding      January 1, 2005   |   |   | 217,770 |   |     | $      | 16.83 |   |
| Granted                            |   |   | 176,337 |   |     |   | 22.90 |   |
| Exercised                          |   |   | (31,425 | )      |     |   | 16.83 |   |
| Forfeited                          |   |   | (8,821  | )      |     |   | 16.83 |   |
| Outstanding      December 31, 2005 |   |   | 353,861 |   |     | $      | 19.88 |   |
| Granted      (1)                   |   |   | -       |   |     |   | - |   |
| Exercised                          |   |   | (18,280 | )      |     |   | 17.37 |   |
| Forfeited                          |   |   | (9,759  | )      |     |   | 20.13 |   |
| Outstanding      December 31, 2006 |   |   | 325,822 |   |     | $      | 20.01 |   |
| Granted      (2)                   |   |   | -       |   |     |   | - |   |
| Exercised                          |   |   | (46,170 | )      |     |   | 18.76 |   |
| Forfeited                          |   |   | (2,995  | )      |     |   | 17.66 |   |
| Outstanding      December 31, 2007 |   |   | 276,657 |   |     | $      | 20.25 |   |
|                               |   |   |    |   |     |   |   |   |
| Exercisable      December 31, 2005 |   |   | 29,739  |   |     | $      | 16.83 |   |
| Exercisable      December 31, 2006 |   |   | 92,120  |   |     | $      | 19.67 |   |
| Exercisable      December 31, 2007 |   |   | 122,826 |   |     | $      | 20.32 |   |

| (1) | Excludes      37,114 stock appreciation rights (SARs) which vest in equal increments on      December 27, 2007 through 2009.  Each SAR entitles the holder to      shares of Southern Union Company's common stock equal to the fair market      value of Southern Union Company's common stock in excess of $28.07 for      each SAR on the applicable vestingdate. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Excludes      108,078 SARS which vest in equal increments on December 17, 2008 through      2010.  Each SAR entitles the holder to shares of Southern Union      Company's common stock equal to the fair market value of Southern Union      Company's common stock in excess of $28.48 for each SAR on the applicable      vesting date. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                           |   | Numberof               |    |   | Weighted-Average |   |
|----------------------------------------------------------------|--------|------------------------|---------|--------|------------------|--------|
|                                                           |   | Restricted      Shares |    |   | Grant-Date       |   |
| Nonvested Restricted      Stock                                |   | Outstanding            |    |   | Fair-Value       |   |
|                                                           |   |                   |    |   |             |   |
| Nonvested      restricted shares at January  1, 2005 |   |                   | -       |   |             | $      | - |   |
| Granted                                                        |   |                   | 43,050  |   |             |   | 24.08 |   |
| Vested                                                         |   |                   | -       |   |             |   | - |   |
| Forfeited                                                      |   |                   | -       |   |             |   | - |   |
| Nonvested      restricted shares at December 31, 2005          |   |                   | 43,050  |   |             | $      | 24.08 |   |
| Granted                                                        |   |                   | -       |   |             |   | - |   |
| Vested                                                         |   |                   | (11,036 | )      |             |   | 24.08 |   |
| Forfeited                                                      |   |                   | (6,872  | )      |             |   | 24.06 |   |
| Nonvested      restricted shares at December 31, 2006          |   |                   | 25,142  |   |             | $      | 24.08 |   |
| Granted                                                        |   |                   | -       |   |             |   | - |   |
| Vested                                                         |   |                   | (8,381  | )      |             |   | 24.08 |   |
| Forfeited                                                      |   |                   | -       |   |             |   | - |   |
| Nonvested      restricted shares at December 31, 2007          |   |                   | 16,761  |   |             | $      | 24.08 |   |
|                                                           |   |                   |    |   |             |   |   |   |

|                                                  |   | Numberof                   |    |   | Weighted-Average |   |
|-------------------------------------------------------|--------|----------------------------|---------|--------|------------------|--------|
|                                                  |   | Cash Restricted      Units |    |   | Grant-Date       |   |
| Nonvested Cash Restricted      Units                  |   | Outstanding                |    |   | Fair-Value       |   |
|                                                  |   |                       |    |   |             |   |
| Nonvested      restricted shares at December 31, 2005 |   |                       | -       |   |             | $      | - |   |
| Granted                                               |   |                       | 52,846  |   |             |   | 28.07 |   |
| Vested                                                |   |                       | -       |   |             |   | - |   |
| Forfeited                                             |   |                       | -       |   |             |   | - |   |
| Nonvested      restricted shares at December 31, 2006 |   |                       | 52,846  |   |             | $      | 28.07 |   |
| Granted                                               |   |                       | 74,883  |   |             |   | 28.48 |   |
| Vested                                                |   |                       | (17,611 | )      |             |   | 28.07 |   |
| Forfeited                                             |   |                       | -       |   |             |   | - |   |
| Nonvested      restricted shares at December 31, 2007 |   |                       | 110,118 |   |             | $      | 28.35 |   |

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|                   |   | First                                                                                             |    |   | Second  |   |    | Third   |   |   | Fourth  |   |   |   |    |
|------------------------|--------|---------------------------------------------------------------------------------------------------|---------|--------|---------|--------|---------|---------|--------|--------|---------|--------|--------|--------|---------|
|                   |   | Quarter                                                                                           |    |   | Quarter |   |    | Quarter |   |   | Quarter |   |   | Total  |    |
| 2007                   |   | (In      thousands)                             |
| Operating      revenue |   | $                                                                                                 | 169,030 |   |    | $      | 161,706 |    |   | $      | 158,963 |   |   | $      | 168,747 |   |   | $ | 658,446 |   |
| Operating      income  |   |                                                                                              | 84,246  |   |    |   | 68,769  |    |   |   | 63,855  |   |   |   | 71,251  |   |   |   | 288,121 |   |
| Net      earnings      |   |                                                                                              | 44,481  |   |    |   | 35,619  |    |   |   | 32,660  |   |   |   | 37,664  |   |   |   | 150,424 |   |
|                   |   |                                                                                              |    |   |    |   |    |    |   |   |    |   |   |   |    |   |   |   |   |   |
|                   |   | First                                                                                             |    |   | Second  |   |    | Third   |   |   | Fourth  |   |   |   |    |   |
|                   |   | Quarter                                                                                           |    |   | Quarter |   |    | Quarter |   |   | Quarter |   |   | Total  |    |
| 2006                   |   | (In      thousands)              |
| Operating      revenue |   | $                                                                                                 | 144,643 |   |    | $      | 134,109 |    |   | $      | 143,397 |   |   | $      | 155,033 |   |   | $ | 577,182 |   |
| Operating      income  |   |                                                                                              | 73,721  |   |    |   | 58,479  |    |   |   | 66,717  |   |   |   | 73,955  |   |   |   | 272,872 |   |
| Net      earnings      |   |                                                                                              | 39,065  |   |    |   | 28,057  |    |   |   | 32,836  |   |   |   | 37,797  |   |   |   | 137,755 |   |

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