----

| 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) |                |

----

| PART I. FINANCIAL INFORMATION: | Page(s)                                                                                        |
|--------------------------------|------------------------------------------------------------------------------------------------|
|                           |                                                                                           |
|                           | Glossary                                                                                       | 2 |
|                           |                                                                                           |   |
|                           | ITEM 1. Financial Statements (Unaudited):                                                      |   |
|                           |                                                                                           |
|                           | Condensed consolidated statement of operations.                                                | 3 |
|                           |                                                                                           |
|                           | Condensed consolidated balance sheet.                                                          | 4 - 5 |
|                           |                                                                                           |
|                           | Condensed consolidated statement of cash flows.                                                | 6 |
|                           |                                                                                           |
|                           | Condensed consolidated statement of partners’ capital and comprehensive income.          | 7 |
|                           |                                                                                           |
|                           | Notes to condensed consolidated financial statements.                                          | 8 |
|                           |                                                                                           |
|                           | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. | 18 |
|                           |                                                                                           |
|                           | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.                            | 21 |
|                           |                                                                                           |
|                           | ITEM 4. Controls and Procedures.                                                               | 21 |
|                           |                                                                                           |
| PART II. OTHER INFORMATION:    |                                                                                           |
|                           |                                                                                           |
|                           | ITEM 1. Legal Proceedings.                                                                     | 23 |
|                           |                                                                                           |
|                           | ITEM 1A.  Risk Factors.                                                              | 23 |
|                           |                                                                                           |
|                           | ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds.                | 23 |
|                           |                                                                                           |   |
|                           | ITEM 3.  Defaults Upon Senior Securities.                                            | 23 |
|                           |                                                                                           |
|                           | ITEM 4.  Reserved.                                                                   | 23 |
|                           |                                                                                           |
|                           | ITEM 5.  Other Information.                                                          | 23 |
|                           |                                                                                           |
|                           | ITEM 6. Exhibits.                                                                              | 24 |
|                           |                                                                                           |
|                           | SIGNATURES                                                                                     | 26 |
|                           |                                                                                           |

----

----

|                                                     |   | Three Months Ended |    |
|----------------------------------------------------------|--------|--------------------|---------|
|                                                     |   | March 31,          |    |
|                                                     |   | 2010               |    |   | 2009 |   |
|                                                     |   | (In thousands)     |    |
| Operating revenue                                        |   |               |    |   |   |   |
| Transportation and storage of natural gas                |   | $                  | 146,728 |   |   | $ | 157,117 |   |
| LNG terminalling revenue                                 |   |               | 37,586  |   |   |   | 33,077 |   |
| Other revenue                                            |   |               | 2,361   |   |   |   | 2,101 |   |
| Total operating revenue                                  |   |               | 186,675 |   |   |   | 192,295 |   |
|                                                     |   |               |    |   |   |   |   |   |
| Operating expenses                                       |   |               |    |   |   |   |   |   |
| Operation, maintenance and general                       |   |               | 53,884  |   |   |   | 71,246 |   |
| Operation, maintenance and general - affiliates (Note 4) |   |               | 13,877  |   |   |   | 11,742 |   |
| Depreciation and amortization                            |   |               | 29,177  |   |   |   | 27,863 |   |
| Taxes, other than on income                              |   |               | 9,228   |   |   |   | 8,925 |   |
| Total operating expenses                                 |   |               | 106,166 |   |   |   | 119,776 |   |
|                                                     |   |               |    |   |   |   |   |   |
|                                                     |   |               |    |   |   |   |   |   |
| Operating income                                         |   |               | 80,509  |   |   |   | 72,519 |   |
|                                                     |   |               |    |   |   |   |   |   |
| Other income (expense)                                   |   |               |    |   |   |   |   |   |
| Interest expense                                         |   |               | (22,389 | ) |   |   | (20,181 | ) |
| Interest income - affiliates (Note 4)                    |   |               | 2,013   |   |   |   | 2,292 |   |
| Other, net                                               |   |               | 44      |   |   |   | 162 |   |
| Total other income (expense)                             |   |               | (20,332 | ) |   |   | (17,727 | ) |
|                                                     |   |               |    |   |   |   |   |   |
| Earnings before income taxes                             |   |               | 60,177  |   |   |   | 54,792 |   |
|                                                     |   |               |    |   |   |   |   |   |
| Income taxes                                             |   |               | 26,585  |   |   |   | 21,903 |   |
|                                                     |   |               |    |   |   |   |   |   |
| Net earnings                                             |   | $                  | 33,592  |   |   | $ | 32,889 |   |

----

|                                                         |   | March 31, 2010 |      |   | December 31, 2009 |   |
|--------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| Assets                                                       |   | (In thousands) |      |
|                                                         |   |           |      |   |              |   |
| Current assets                                               |   |           |      |   |              |   |
| Cash and cash equivalents                                    |   | $              | 59        |   |              | $      | 55 |   |
| Accounts receivable, billed and unbilled, less allowances of |   |           |      |   |              |   |   |   |
| $1,147 and $1,147, respectively                              |   |           | 68,856    |   |              |   | 67,485 |   |
| Accounts receivable - related parties (Note 4)               |   |           | 4,959     |   |              |   | 6,083 |   |
| Natural gas imbalances - receivable                          |   |           | 115,449   |   |              |   | 126,842 |   |
| System natural gas and operating supplies (Note 3)           |   |           | 114,843   |   |              |   | 214,706 |   |
| Deferred income taxes                                        |   |           | 18,124    |   |              |   | 20,707 |   |
| Other                                                        |   |           | 6,936     |   |              |   | 8,343 |   |
| Total current assets                                         |   |           | 329,226   |   |              |   | 444,221 |   |
|                                                         |   |           |      |   |              |   |   |   |
| Property, plant and equipment                                |   |           |      |   |              |   |   |   |
| Plant in service                                             |   |           | 3,848,938 |   |              |   | 3,353,822 |   |
| Construction work-in-progress                                |   |           | 46,151    |   |              |   | 495,588 |   |
|                                                         |   |           | 3,895,089 |   |              |   | 3,849,410 |   |
| Less accumulated depreciation and amortization               |   |           | 537,244   |   |              |   | 493,873 |   |
| Net property, plant and equipment                            |   |           | 3,357,845 |   |              |   | 3,355,537 |   |
|                                                         |   |           |      |   |              |   |   |   |
| Note receivable - Southern Union (Note 4)                    |   |           | 396,830   |   |              |   | 327,480 |   |
| Note receivable - CrossCountry Citrus (Note 4)               |   |           | 368,126   |   |              |   | 368,126 |   |
| Non-current system natural gas (Note 3)                      |   |           | 7,851     |   |              |   | 8,831 |   |
| Other                                                        |   |           | 20,864    |   |              |   | 20,202 |   |
|                                                         |   |           |      |   |              |   |   |   |
| Total assets                                                 |   | $              | 4,480,742 |   |              | $      | 4,524,397 |   |

----

|                                         |   | March 31, 2010 |      |   | December 31, 2009 |   |
|----------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                         |   | (In thousands) |      |
| Partners' Capital                            |   |           |      |   |              |   |
| Partners' capital                            |   | $              | 1,526,628 |   |              | $      | 1,493,036 |   |
| Accumulated other comprehensive loss         |   |           | (20,037   | )      |              |   | (19,541 | ) |
| Tax sharing note receivable - Southern Union |   |           | (4,711    | )      |              |   | (5,218 | ) |
| Total partners' capital                      |   |           | 1,501,880 |   |              |   | 1,468,277 |   |
|                                         |   |           |      |   |              |   |   |   |
| Long-term debt (Note 7)                      |   |           | 1,984,291 |   |              |   | 1,984,246 |   |
| Total capitalization                         |   |           | 3,486,171 |   |              |   | 3,452,523 |   |
|                                         |   |           |      |   |              |   |   |   |
| Current liabilities                          |   |           |      |   |              |   |   |   |
| Current portion of long-term debt (Note 7)   |   |           | 40,500    |   |              |   | 40,500 |   |
| Accounts payable                             |   |           | 13,976    |   |              |   | 8,228 |   |
| Accounts payable - related parties (Note 4)  |   |           | 50,947    |   |              |   | 24,881 |   |
| Natural gas imbalances - payable             |   |           | 208,267   |   |              |   | 321,638 |   |
| Accrued taxes                                |   |           | 16,718    |   |              |   | 17,975 |   |
| Accrued interest                             |   |           | 25,748    |   |              |   | 15,125 |   |
| Capital accruals                             |   |           | 36,284    |   |              |   | 50,246 |   |
| Asset retirement obligations                 |   |           | 46,302    |   |              |   | 45,971 |   |
| Other                                        |   |           | 65,354    |   |              |   | 75,068 |   |
| Total current liabilities                    |   |           | 504,096   |   |              |   | 599,632 |   |
|                                         |   |           |      |   |              |   |   |   |
| Deferred income taxes, net                   |   |           | 436,044   |   |              |   | 418,992 |   |
| Other                                        |   |           | 54,431    |   |              |   | 53,250 |   |
|                                         |   |           |      |   |              |   |   |   |
| Commitments and contingencies (Note 12)      |   |           |      |   |              |   |   |   |
|                                         |   |           |      |   |              |   |   |   |
| Total partners' capital and liabilities      |   | $              | 4,480,742 |   |              | $      | 4,524,397 |   |

----

|                                                                                                   |   | Three Months Ended March 31, |        |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------|-------------|
|                                                                                                   |   | 2010                         |        |   | 2009 |   |
|                                                                                                   |   | (In thousands)               |        |
| Cash flows provided by operating activities:                                                           |   |                         |        |   |   |   |
|     Net earnings                                                                        |   | $                            | 33,592      |   |   | $ | 32,889 |   |
|     Adjustments to reconcile net earnings to net cash provided by operating activities: |   |                         |        |   |   |   |   |   |
|         Depreciation and amortization                               |   |                         | 29,177      |   |   |   | 27,863 |   |
|         Deferred income taxes                                       |   |                         | 19,957      |   |   |   | 9,942 |   |
|         Changes in operating assets and liabilities                 |   |                         | 15,217      |   |   |   | 24,967 |   |
|         Net cash flows provided by operating activities             |   |                         | 97,943      |   |   |   | 95,661 |   |
|                                                                                                   |   |                         |        |   |   |   |   |   |
| Cash flows provided by (used in) investing activities:                                                 |   |                         |        |   |   |   |   |   |
|     Net increase in note receivable - Southern Union                               |   |                         | (69,350     | ) |   |   | (43,900 | ) |
|     Net decrease in income taxes payable - related parties                              |   |                         | 6,122       |   |   |   | 14,500 |   |
|     Decrease in note receivable - CrossCountry Citrus                                   |   |                         | -           |   |   |   | 24,265 |   |
|     Additions to property, plant and equipment                                          |   |                         | (41,517     | ) |   |   | (92,362 | ) |
|     Other                                                                               |   |                         |  5,316 |   |   |   | 1,314 |   |
|         Net cash flows used in investing activities            |   |                         | (99,429     | ) |   |   | (96,183 | ) |
|                                                                                                   |   |                         |        |   |   |   |   |   |
| Cash flows provided by financing activities:                                                           |   |                         |        |   |   |   |   |   |
|     Increase in book overdraft                                                     |   |                         | 1,490       |   |   |   | 529 |   |
|         Net cash flows provided by financing activities             |   |                         | 1,490       |   |   |   | 529 |   |
|                                                                                                   |   |                         |        |   |   |   |   |   |
| Change in cash and cash equivalents                                                                    |   |                         | 4           |   |   |   | 7 |   |
|                                                                                                   |   |                         |        |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                                       |   |                         | 55          |   |   |   | 28 |   |
| Cash and cash equivalents at end of period                                                             |   | $                            | 59          |   |   | $ | 35 |   |

----

|                                            |   | Partners' Capital |      |   | Accumulated Other Comprehensive Loss |   |    | Tax Sharing Note Receivable-Southern Union |   |   | Total  |   |
|-------------------------------------------------|--------|-------------------|-----------|--------|--------------------------------------|--------|---------|--------------------------------------------|--------|--------|--------|--------|
|                                            |   | (In thousands)    |      |
|                                            |   |              |      |   |                                 |   |    |                                       |   |   |   |   |
| Balance December 31, 2009                       |   | $                 | 1,493,036 |   |                                 | $      | (19,541 | )                                          |   | $      | (5,218 | )      |   | $ | 1,468,277 |   |
|                                            |   |              |      |   |                                 |   |    |                                       |   |   |   |   |   |   |   |   |
| Tax sharing receivable - Southern Union         |   |              | -         |   |                                 |   | -       |                                       |   |   | 507    |   |   |   | 507 |   |
|                                            |   |              |      |   |                                 |   |    |                                       |   |   |   |   |   |   |   |   |
| Comprehensive income:                           |   |              |      |   |                                 |   |    |                                       |   |   |   |   |   |   |   |   |
| Net earnings                                    |   |              | 33,592    |   |                                 |   | -       |                                       |   |   | -      |   |   |   | 33,592 |   |
| Net change in other comprehensive loss (Note 6) |   |              | -         |   |                                 |   | (496    | )                                          |   |   | -      |   |   |   | (496 | ) |
| Comprehensive income                            |   |              |      |   |                                 |   |    |                                       |   |   |   |   |   |   | 33,096 |   |
|                                            |   |              |      |   |                                 |   |    |                                       |   |   |   |   |   |   |   |   |
| Balance March 31, 2010                          |   | $                 | 1,526,628 |   |                                 | $      | (20,037 | )                                          |   | $      | (4,711 | )      |   | $ | 1,501,880 |   |

----

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

| ·   | Trunkline, a direct wholly-owned subsidiary of PEPL; |
|--------------------|------------------------------------------------------|

| ·   | Sea Robin, an indirect wholly-owned subsidiary of PEPL; |
|--------------------|---------------------------------------------------------|

| ·   | LNG Holdings, an indirect wholly-owned subsidiary of PEPL; |
|--------------------|------------------------------------------------------------|

| ·   | Trunkline LNG, a direct wholly-owned subsidiary of LNG Holdings; and |
|--------------------|----------------------------------------------------------------------|

| ·   | Southwest Gas Storage, a direct wholly-owned subsidiary of PEPL. |
|--------------------|------------------------------------------------------------------|

----

|                   |   | March 31, 2010 |    |   | December 31, 2009 |   |
|------------------------|--------|----------------|---------|--------|-------------------|--------|
|                   |   | (In thousands) |    |
| Current                |   |           |    |   |              |   |
| Natural gas (1)        |   | $              | 98,912  |   |              | $      | 198,712 |   |
| Materials and supplies |   |           | 15,931  |   |              |   | 15,994 |   |
| Total current          |   |           | 114,843 |   |              |   | 214,706 |   |
| Non-Current            |   |           |    |   |              |   |   |   |
| Natural gas (1)        |   |           | 7,851   |   |              |   | 8,831 |   |
|                   |   | $              | 122,694 |   |              | $      | 223,537 |   |

| (1)   | Natural gas volumes held for operations at March 31, 2010 and December 31, 2009 were 23,705,000 MMBtu and 35,039,000 MMBtu, respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                            |   |   | Three Months Ended |   |
|-----------------------------------------------------------------|--------|--------|--------------------|--------|
|                                                            |   |   | March 31,          |   |
| Related Party Transactions                                      |   |   | 2010               |   |   | 2009 |   |
|                                                            |   |   | (In thousands)     |
|                                                            |   |   |               |   |   |   |   |
| Transportation and storage of natural gas  (1)        |   | $      | 1,277              |   |   | $ | 1,124 |   |
| Operation, maintenance and general - affiliates:                |   |   |               |   |   |   |   |   |
|       Management and royalty fees |   |   |               | 4,683  |   |   |   | 4,796 |   |
|       Other expenses  (2)    |   |   |               | 9,194  |   |   |   | 6,946 |   |
| Other income (3)                                                |   |   | 2,072              |   |   |   | 2,329 |   |

| (1)   | Represents transportation and storage revenues with Missouri Gas Energy, a Southern Union division. |
|-----------------|-----------------------------------------------------------------------------------------------------|

| (2)   | Primarily includes allocations of corporate charges from Southern Union, partially offset for expenses attributable to services provided by Panhandle on behalf of other affiliate companies. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Primarily includes interest income associated with the Southern Union and CrossCountry Citrus note receivables. |
|-----------------|-----------------------------------------------------------------------------------------------------------------|

----

|                                         |   | March 31, 2010 |   |   | December 31, 2009 |   |
|----------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                                         |   | (In thousands) |   |
|                                         |   |           |   |
| Accounts receivable - related parties (1)    |   | $              | 4,959  |   |              | $      | 6,083 |   |
|                                         |   |           |   |   |              |   |   |   |
| Accounts payable - related parties:          |   |           |   |   |              |   |   |   |
| Southern Union - income taxes  (2) |   | $              | 28,199 |   |              | $      | 22,077 |   |
| Southern Union - other (3)                   |   |           | 22,571 |   |              |   | 2,615 |   |
| Other (4)                                    |   |           | 177    |   |              |   | 189 |   |
|                                         |   | $              | 50,947 |   |              | $      | 24,881 |   |

| (1)   | Primarily related to interest income associated with the Note receivable – CrossCountry Citrus and services provided for Citrus. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Related to income taxes payable to Southern Union per the tax sharing agreement to provide for taxes to be remitted upon the filing of the tax return. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Primarily related to payroll funding provided by Southern Union. The December 31, 2009 amount is net of $16.1 million of insurance proceeds owed by Southern Union to the Company. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Primarily related to various administrative and operating costs paid by other affiliate companies on behalf of the Company. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------|

----

|                                                                |   | Three Months Ended |   |
|---------------------------------------------------------------------|--------|--------------------|--------|
|                                                                |   | March 31,          |   |
|                                                                |   | 2010               |   |   | 2009 |   |
|                                                                |   | (In thousands)     |   |
|                                                                |   |               |   |   |   |   |
| Net earnings                                                        |   | $                  | 33,592 |   |   | $ | 32,889 |   |
| Change in fair value of interest rate hedges, net of tax of         |   |               |   |   |   |   |   |   |
| $(2,306) and $(415), respectively                                   |   |               | (3,430 | ) |   |   | (618 | ) |
| Reclassification of unrealized loss on interest rate hedges into    |   |               |   |   |   |   |   |   |
| earnings, net of tax of $2,186 and $1,441, respectively             |   |               | 3,255  |   |   |   | 2,147 |   |
| Reclassification of net actuarial loss and prior service credit     |   |               |   |   |   |   |   |   |
| relating to other postretirement benefits into earnings, net of tax |   |               |   |   |   |   |   |   |
| of $(202) and $(91), respectively                                   |   |               | (321   | ) |   |   | (309 | ) |
| Total other comprehensive income (loss)                             |   |               | (496   | ) |   |   | 1,220 |   |
| Total comprehensive income                                          |   | $                  | 33,096 |   |   | $ | 34,109 |   |

| Long-term Debt Obligations        |   | March 31, 2010 |      |   | December 31, 2009 |   |
|-----------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                              |   | Carrying Value |      |   | Fair Value        |   |   | Carrying Value |   |   | Fair Value |   |
|                              |   | (In thousands) |      |
|                              |   |           |      |   |              |   |   |   |   |   |   |   |
| 6.05% Senior Notes due 2013       |   | $              | 250,000   |   |              | $      | 270,303 |   |   | $ | 250,000 |   |   | $ | 269,733 |   |
| 6.20% Senior Notes due 2017       |   |           | 300,000   |   |              |   | 318,780 |   |   |   | 300,000 |   |   |   | 319,455 |   |
| 8.125% Senior Notes due 2019      |   |           | 150,000   |   |              |   | 178,925 |   |   |   | 150,000 |   |   |   | 173,111 |   |
| 8.25% Senior Notes due 2010       |   |           | 40,500    |   |              |   | 40,500 |   |   |   | 40,500 |   |   |   | 41,143 |   |
| 7.00% Senior Notes due 2029       |   |           | 66,305    |   |              |   | 70,716 |   |   |   | 66,305 |   |   |   | 69,866 |   |
| 7.00% Senior Notes due 2018       |   |           | 400,000   |   |              |   | 445,804 |   |   |   | 400,000 |   |   |   | 434,560 |   |
| Term Loans due 2012               |   |           | 815,391   |   |              |   | 781,453 |   |   |   | 815,391 |   |   |   | 758,108 |   |
| Net premiums on long-term debt    |   |           | 2,595     |   |              |   | 2,595 |   |   |   | 2,550 |   |   |   | 2,550 |   |
| Total debt outstanding            |   |           | 2,024,791 |   |              | $      | 2,109,076 |   |   |   | 2,024,746 |   |   | $ | 2,068,526 |   |
| Current portion of long-term debt |   |           | (40,500   | )      |              |   |   |   |   |   | (40,500 | ) |   |   |   |   |
| Total long-term debt              |   | $              | 1,984,291 |   |              |   |   |   |   | $ | 1,984,246 |   |   |   |   |   |

----

|                              |   | Three Months Ended |   |
|-----------------------------------|--------|--------------------|--------|
|                              |   | March 31,          |   |
|                              |   | 2010               |   |   | 2009 |   |
|                              |   | (In thousands)     |
|                              |   |               |   |   |   |   |
| Service cost                      |   | $                  | 575    |   |   | $ | 550 |   |
| Interest cost                     |   |               | 872    |   |   |   | 785 |   |
| Expected return on plan assets    |   |               | (837   | ) |   |   | (600 | ) |
| Prior service credit amortization |   |               | (522   | ) |   |   | (522 | ) |
| Actuarial loss amortization       |   |               | -      |   |   |   | 125 |   |
| Net periodic benefit cost         |   | $                  | 88     |   |   | $ | 338 |   |

----

|             |                    |   |   | Asset Derivatives                                                                                                    |   |                                                                                                                             | Liability Derivatives |
|------------------|-------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|-----------------------|
|             |                    |   |   |                                                                                                                 |   | Fair Value (1)                                                                                                                   |                  |   |   |   | Fair Value (1) |
|             |                    |   |   | Balance Sheet Location                                                                                               |   | March 31, 2010                                                                                                                   |                  | December 31, 2009 |   |   | Balance Sheet Location |   | March 31, 2010 |   | December 31, 2009 |
|             |                    |   |   |                                                                                                                 |   | (In thousands)                                                                                                                   |                  |   |   |   | (In thousands) |
| Cash Flow Hedges |                    |   |   |                                                                                                                 |   |                                                                                                                             |                  |   |   |   |   |   |
|             | Interest rate contracts |   |   | $                   - |   | $                     - |                  |   |  Other current |   |   |   |   |
|             |                    |   |   |                                                                                                                 |   |                                                                                                                             |                  |   |   |   |      liabilities |   | $           19,278 |   |  $            18,754 |
|             |                    |   |   |                                                                                                                 |   |                                                                                                                             |                  |   |   |   |  Other noncurrent |   |   |   |
|             |                    |   |   |                                                                                                                 |   |                                                                                                                             |                  |   |   |   |      liabilities |   |              13,813 |   |                13,975 |
|             |                    |   |   |                                                                                                                 |   |  $                   -       |                  |  $                     - |   |   |   |   |  $           33,091 |   |  $            32,729 |

| (1)   | See Note 11– Fair Value Measurement for information related to the framework used by the Company to measure the fair value of its derivative instruments as of March 31, 2010. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                |   | Three Months Ended |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                |   | March 31,          |   |
|                                                                                                                |   | 2010               |   |   | 2009 |   |
| Cash Flow Hedges (1)                                                                                                |   | (In thousands)     |   |
|      Interest rate contracts:                                                                   |   |               |   |   |   |   |
|          Change in fair value - increase in Accumulated other comprehensive |   |               |   |   |   |   |
|       loss, excluding tax expense effect of $2,306 and $415, respectively                  |   | $                  | 5,736  |   |   | $ | 1,033 |   |
| Reclassification of unrealized loss from Accumulated other comprehensive                                            |   |               |   |   |   |   |   |   |
|       loss - increase of Interest expense, excluding tax expense effect of $2,186          |   |               |   |   |   |   |   |   |
|       and $1,441, respectively                                                        |   |               | 5,441  |   |   |   | 3,588 |   |

| (1)   | See Note 6 – Comprehensive Income for additional related information. |
|-----------------|-----------------------------------------------------------------------------|

|                      |   |           |   |   | Fair Value Measurements At March 31, 2010 |   |
|---------------------------|--------|----------------|--------|--------|-------------------------------------------|--------|
|                      |   |           |   |   | Using Fair Value Hierarchy                |   |
|                      |   |           |   |   | Quoted Prices in                          |   |   |   |   |
|                      |   | Fair Value     |   |   | Active Markets for                        |   |   | Significant Other |   |
|                      |   | as of          |   |   | Identical Assets                          |   |   | Observable Inputs |   |
|                      |   | March 31, 2010 |   |   | (Level 1)                                 |   |   | (Level 2) |   |
|                      |   | (In thousands) |   |
| Liabilities:              |   |           |   |   |                                      |   |   |   |   |
| Interest-rate derivatives |   | $              | 33,091 |   |                                      | $      | - |   |   | $ | 33,091 |   |
|    Total   |   | $              | 33,091 |   |                                      | $      | - |   |   | $ | 33,091 |   |

----

----

|                            |   | March 31,      |   |   | December 31, |   |
|---------------------------------|--------|----------------|--------|--------|--------------|--------|
|                            |   | 2010           |   |   | 2009         |   |
|                            |   | (In thousands) |   |
|                            |   |           |   |   |         |   |
| Current                         |   | $              | 4,794  |   |         | $      | 5,891 |   |
| Noncurrent                      |   |           | 5,724  |   |         |   | 5,654 |   |
| Total environmental liabilities |   | $              | 10,518 |   |         | $      | 11,545 |   |

----

----

----

|                                             |   | Three Months Ended |    |
|--------------------------------------------------|--------|--------------------|---------|
|                                             |   | March 31,          |    |
|                                             |   | 2010               |    |   | 2009 |   |
|                                             |   | (In thousands)     |    |
| Operating revenue                                |   |               |    |   |   |   |
| Transportation and storage of natural gas        |   | $                  | 146,728 |   |   | $ | 157,117 |   |
| LNG terminalling revenue                         |   |               | 37,586  |   |   |   | 33,077 |   |
| Other revenue                                    |   |               | 2,361   |   |   |   | 2,101 |   |
| Total operating revenue                          |   |               | 186,675 |   |   |   | 192,295 |   |
|                                             |   |               |    |   |   |   |   |   |
| Operating expenses                               |   |               |    |   |   |   |   |   |
| Operation, maintenance and general               |   |               | 67,761  |   |   |   | 82,988 |   |
| Depreciation and amortization                    |   |               | 29,177  |   |   |   | 27,863 |   |
| Taxes, other than on income                      |   |               | 9,228   |   |   |   | 8,925 |   |
| Total operating expenses                         |   |               | 106,166 |   |   |   | 119,776 |   |
|                                             |   |               |    |   |   |   |   |   |
|                                             |   |               |    |   |   |   |   |   |
| Operating income                                 |   |               | 80,509  |   |   |   | 72,519 |   |
|                                             |   |               |    |   |   |   |   |   |
| Other income (expense)                           |   |               |    |   |   |   |   |   |
| Interest expense, net                            |   |               | (22,389 | ) |   |   | (20,181 | ) |
| Other, net                                       |   |               | 2,057   |   |   |   | 2,454 |   |
| Total other income (expense)                     |   |               | (20,332 | ) |   |   | (17,727 | ) |
|                                             |   |               |    |   |   |   |   |   |
| Earnings before income taxes                     |   |               | 60,177  |   |   |   | 54,792 |   |
|                                             |   |               |    |   |   |   |   |   |
| Income taxes                                     |   |               | 26,585  |   |   |   | 21,903 |   |
|                                             |   |               |    |   |   |   |   |   |
| Net earnings                                     |   | $                  | 33,592  |   |   | $ | 32,889 |   |
|                                             |   |               |    |   |   |   |   |   |
| Operating information:                           |   |               |    |   |   |   |   |   |
| Panhandle natural gas volumes transported (TBtu) |   |               | 368     |   |   |   | 427 |   |

| ·   | Decreased transportation and storage revenue of $10.4 million primarily attributable to: |
|--------------------|------------------------------------------------------------------------------------------|

| o   | Lower interruptible parking revenues of $13.4 million due to less favorable market conditions; |
|---------------|------------------------------------------------------------------------------------------------|

| o   | Higher transportation commodity revenues of $1.3 million primarily due to higher volumes flowing on Sea Robin in 2010 versus in 2009, the 2009 volumes having been adversely impacted by Hurricane Ike; and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Higher transportation reservation revenues of $700,000 primarily due to higher average rates realized on PEPL, partially offset by lower average rates realized on Trunkline; and |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher LNG revenues of $4.5 million primarily due to the LNG terminal infrastructure enhancement construction project placed in service in March 2010. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower operating, maintenance and general expenses of $15.2 million in 2010 versus 2009 primarily attributable to: |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| o   | Impact of a provision for repair and abandonment costs of $16.1 million in 2009 for damages to offshore assets resulting from Hurricane Ike.  The majority of such costs are generally expected to be recovered in the future through insurance recoveries and rate proceedings; and |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Higher allocated corporate services costs of $2 million primarily due to higher short- and long-term incentive compensation; and |
|---------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased depreciation and amortization expense of $1.3 million in 2010 versus 2009 due to a $624.5 million increase in property, plant and equipment placed in service after March 31, 2009.  Depreciation and amortization expense is expected to continue to increase primarily due to significant capital additions, including capitalized costs associated with the LNG terminal infrastructure enhancement construction project placed in service in March 2010. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | changes in demand for natural gas and related services 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 speed and degree to which additional competition is introduced to the Company’s business and the resulting effect on revenues; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the outcome of pending and future litigation; |
|--------------------|-----------------------------------------------|

| ·   | 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 and facilities; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | the impact of factors affecting operations such as maintenance or repairs, environmental incidents, natural 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 debt securities of the Company 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; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | 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. |
|--------------------|------------------------------------|

----

----

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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 by reference.)                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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 NBD Bank (the predecessor to Bank One Trust Company, National Association, J.P. Morgan Trust Company, National Association, The Bank of New York Trust Company, N.A. and The Bank of New York Mellon Trust Company, N.A.), as Trustee. (Filed as Exhibit 4(a) to the Form 10-Q for the quarter ended March 31, 1999, and incorporated herein by reference.)                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4(b)   | First Supplemental Indenture dated as of March 29, 1999, among CMS Panhandle Holding Company, Panhandle Eastern Pipe Line Company and NBD Bank (the predecessor to Bank One Trust Company, National Association, J.P. Morgan Trust Company, National Association, The Bank of New York Trust Company, N.A. and The Bank of New York Mellon Trust Company, N.A.), 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)   | Second Supplemental Indenture dated as of March 27, 2000, between Panhandle and Bank One Trust Company, National Association (succeeded to by The Bank of New York Mellon Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A.), as Trustee. (Filed as Exhibit 4(e) to the Form S-4 (File No. 333-39850) filed on June 22, 2000, and incorporated herein by reference.)                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4(d)   | Third Supplemental Indenture dated as of August 18, 2003, between Panhandle and Bank One Trust Company, National Association (succeeded to by The Bank of New York Mellon Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A.), 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)   | Fourth Supplemental Indenture dated as of March 12, 2004, between Panhandle and J.P. Morgan Trust Company, National Association (succeeded to by The Bank of New York Mellon Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A.), as Trustee.  (Filed as Exhibit 4.E to the Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.)                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4(f)   | Fifth Supplemental Indenture dated as of October 26, 2007, between Panhandle and The Bank of New York Trust Company, N.A. (now known as The Bank of New York Mellon 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)  10(a)        | Form of Sixth Supplemental Indenture, dated as of June 12, 2008, between Panhandle and The Bank of New York Trust Company, N.A. (now known as The Bank of New York Mellon Trust Company, N.A.), as Trustee (Filed as Exhibit 4.1 to Panhandle’s Current Report on Form 8-K filed on June 11, 2008 and incorporated herein by reference.) Form of Seventh Supplemental Indenture, to be dated as of June 2, 2009, between Panhandle and The Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 toPanhandle’s Current Report on Form 8-K filed on May 28, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                      |
|------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10(b)                        | 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(c)   10(d) | Amendment Number 1 to the 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 13, 2008 (Filed as Exhibit 10(b) to the Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.) 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(e)                        | 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 13, 2008 (Filed as Exhibit 10(d) to the Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 12                           | Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 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 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. Section 1350.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

----

|                         | PANHANDLE EASTERN PIPE LINE COMPANY, LP                                                                                                                                                                                                        |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                                                                                                                                           |
|                         |                                                                                                                                                                                                                                           |
|                         |                                                                                                                                                                                                                                           |
|                         |                                                                                                                                                                                                                                           |
| Date:  May 7, 2010 | By: /s/   ROBERT O. BOND                                                                                                                                                                                                        |
|                         | Robert O. BondPresident and Chief Operating Officer(authorized officer)      /s/   GARY W. LEFELARGary W. LefelarSenior Vice President and Chief Accounting Officer(principal accounting officer) |

----