----

**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,      D. C.  20549**

**_______________**

**FORM      10-Q**

**Quarterly      Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of      1934**

**For      the quarterly period ended**

**September      30, 2007**

**Commission      File No. 1-2921**

**_______________**

**PANHANDLE      EASTERN PIPE LINE COMPANY, LP**

| **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) |                               |

**  (713)      989-7000**

| 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                   |

**P**

**P**

** **
**P**

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**PANHANDLE      EASTERN PIPE LINE COMPANY, LP**

**FORM      10-Q**

**September      30, 2007**

**Table      of Contents**

| **PART                I. FINANCIAL INFORMATION:** |                 Page(s)                      |
|---------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|
|                                              |                                                                                                                         |
|                                              | ITEM                1. Financial Statements (Unaudited):                                                                     |   |
|                                              |                                                                                                                         |
|                                              | Condensed                consolidated statement of                operations                                                 | 2-3 |
|                                              |                                                                                                                         |
|                                              | 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. | 23 |
|                                              |                                                                                                                         |
|                                              | ITEM                3. Quantitative and Qualitative Disclosures About                Market Risk.                            | 27 |
|                                              |                                                                                                                         |
|                                              | ITEM                4. Controls and Procedures.                                                                              | 27 |
|                                              |                                                                                                                         |
| **PART                II. OTHER INFORMATION:**    |                                                                                                                         |
|                                              |                                                                                                                         |
|                                              | ITEM                1. Legal Proceedings.                                                                                    | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                1A.  Risk Factors.                                                                             | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                2.  Unregistered Sales of Equity Securities                and Use of Proceeds.                | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                3.  Defaults Upon Senior                Securities.                                            | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                4.  Submission of Matters to a Vote of                Security Holders.                        | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                5.  Other Information.                                                                         | 29 |
|                                              |                                                                                                                         |
|                                              | ITEM                6. Exhibits.                                                                                             | 29 |
|                                              |                                                                                                                         |
|                                              | SIGNATURES                                                                                                                   | 32 |
|                                              |                                                                                                                         |

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE, LP**

**CONDENSED          CONSOLIDATED STATEMENT OF OPERATIONS**

**(UNAUDITED)**

|                                                       |   | **Three                  Months Ended September 30,** |    |
|------------------------------------------------------------|--------|-------------------------------------------------------|---------|
|                                                       |   | **2007**                                              |    |   | **2006** |   |
|                                                       |   | (In                  thousands of dollars)            |    |
| **Operating                  revenue**                     |   |                                                  |    |   |   |   |
| Transportation                  and storage of natural gas |   | $                                                     | 122,340 |   |   | $ | 106,100 |   |
| LNG                  terminalling revenue                  |   |                                                  | 34,034  |   |   |   | 32,308 |   |
| Other                  revenue                             |   |                                                  | 2,589   |   |   |   | 4,989 |   |
| Total                  operating revenue                   |   |                                                  | 158,963 |   |   |   | 143,397 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Operating                  expenses**                    |   |                                                  |    |   |   |   |   |   |
| Operation,                  maintenance and general        |   |                                                  | 65,905  |   |   |   | 51,928 |   |
| Depreciation                  and amortization             |   |                                                  | 21,863  |   |   |   | 18,425 |   |
| Taxes,                  other than on income               |   |                                                  | 7,340   |   |   |   | 6,327 |   |
| Total                  operating expenses                  |   |                                                  | 95,108  |   |   |   | 76,680 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Operating                  income**                      |   |                                                  | 63,855  |   |   |   | 66,717 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Other                  income (expense)**                |   |                                                  |    |   |   |   |   |   |
| Interest                  expense, net                     |   |                                                  | (19,492 | ) |   |   | (15,266 | ) |
| Other,                  net                                |   |                                                  | 9,258   |   |   |   | 2,493 |   |
| Total                  other income (expense)              |   |                                                  | (10,234 | ) |   |   | (12,773 | ) |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Earnings                  before income taxes**          |   |                                                  | 53,621  |   |   |   | 53,944 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Income                  taxes**                          |   |                                                  | 20,961  |   |   |   | 21,108 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
|                                                       |   |                                                  |    |   |   |   |   |   |
| **Net                  earnings**                          |   | $                                                     | 32,660  |   |   | $ | 32,836 |   |
|                                                       |   |                                                  |    |   |   |   |   |   |

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE, LP**

**CONDENSED          CONSOLIDATED STATEMENT OF OPERATIONS**

**(UNAUDITED)**

|                                                       |   | **Nine                  Months Ended September 30,** |    |
|------------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                       |   | **2007**                                             |    |   | **2006** |   |
|                                                       |   | (In                  thousands of dollars)           |    |
| **Operating                  revenue**                     |   |                                                 |    |   |   |   |
| Transportation                  and storage of natural gas |   | $                                                    | 376,752 |   |   | $ | 329,212 |   |
| LNG                  terminalling revenue                  |   |                                                 | 104,155 |   |   |   | 78,877 |   |
| Other                  revenue                             |   |                                                 | 8,792   |   |   |   | 14,060 |   |
| Total                  operating revenue                   |   |                                                 | 489,699 |   |   |   | 422,149 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Operating                  expenses**                    |   |                                                 |    |   |   |   |   |   |
| Operation,                  maintenance and general        |   |                                                 | 186,759 |   |   |   | 149,340 |   |
| Depreciation                  and amortization             |   |                                                 | 63,634  |   |   |   | 52,823 |   |
| Taxes,                  other than on income               |   |                                                 | 22,436  |   |   |   | 21,069 |   |
| Total                  operating expenses                  |   |                                                 | 272,829 |   |   |   | 223,232 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Operating                  income**                      |   |                                                 | 216,870 |   |   |   | 198,917 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Other                  income (expense)**                |   |                                                 |    |   |   |   |   |   |
| Interest                  expense, net                     |   |                                                 | (62,979 | ) |   |   | (44,382 | ) |
| Other,                  net                                |   |                                                 | 31,055  |   |   |   | 9,310 |   |
| Total                  other income (expense)              |   |                                                 | (31,924 | ) |   |   | (35,072 | ) |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Earnings                  before income taxes**          |   |                                                 | 184,946 |   |   |   | 163,845 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Income                  taxes**                          |   |                                                 | 72,186  |   |   |   | 63,887 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
|                                                       |   |                                                 |    |   |   |   |   |   |
| **Net                  earnings**                          |   | $                                                    | 112,760 |   |   | $ | 99,958 |   |
|                                                       |   |                                                 |    |   |   |   |   |   |

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**CONDENSED          CONSOLIDATED BALANCE SHEET**

**(UNAUDITED)**

|                                                                                                      |   | **September                  30, 2007**    |      |   | **December                  31, 2006** |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|--------|----------------------------------------|--------|
| **Assets**                                                                                                |   | (In                  thousands of dollars) |      |
|                                                                                                      |   |                                       |      |   |                                   |   |
| **Current                  assets**                                                                       |   |                                       |      |   |                                   |   |
| Cash                  and cash equivalents                                                                |   | $                                          | 684       |   |                                   | $      | 531 |   |
| Accounts                  receivable, less allowances of $1,176 and $1,176,                  respectively |   |                                       | 57,654    |   |                                   |   | 61,047 |   |
| Accounts                  receivable - related parties (Note 5)                                           |   |                                       | 8,526     |   |                                   |   | 17,994 |   |
| Gas                  imbalances - receivable                                                              |   |                                       | 78,854    |   |                                   |   | 68,013 |   |
| System                  gas and operating supplies (Note 3)                                               |   |                                       | 155,272   |   |                                   |   | 127,303 |   |
| Deferred                  income taxes, net                                                               |   |                                       | 245       |   |                                   |   | 3,117 |   |
| Note                  receivable - CrossCountry Citrus                                                    |   |                                       | 15,117    |   |                                   |   | 6,664 |   |
| Other                                                                                                     |   |                                       | 17,665    |   |                                   |   | 10,691 |   |
| Total                  current assets                                                                     |   |                                       | 334,017   |   |                                   |   | 295,360 |   |
|                                                                                                      |   |                                       |      |   |                                   |   |   |   |
| **Property,                  plant and equipment**                                                        |   |                                       |      |   |                                   |   |   |   |
| Plant                  in service                                                                         |   |                                       | 2,515,769 |   |                                   |   | 2,418,917 |   |
| Construction                  work-in-progress                                                            |   |                                       | 447,879   |   |                                   |   | 166,085 |   |
|                                                                                                      |   |                                       | 2,963,648 |   |                                   |   | 2,585,002 |   |
| Less                  accumulated depreciation and amortization                                           |   |                                       | 266,645   |   |                                   |   | 207,606 |   |
| Net                  property, plant and equipment                                                        |   |                                       | 2,697,003 |   |                                   |   | 2,377,396 |   |
|                                                                                                      |   |                                       |      |   |                                   |   |   |   |
| **Unconsolidated                  investment**                                                            |   |                                       | 1,680     |   |                                   |   | 1,457 |   |
|                                                                                                      |   |                                       |      |   |                                   |   |   |   |
| Note                  receivable - Southern Union                                                         |   |                                       | 63,505    |   |                                   |   | 148,655 |   |
| Note                  receivable - CrossCountry Citrus                                                    |   |                                       | 412,192   |   |                                   |   | 458,336 |   |
| Intangibles,                  net                                                                         |   |                                       | 7,358     |   |                                   |   | 7,618 |   |
| Debt                  issuance cost                                                                       |   |                                       | 3,569     |   |                                   |   | 2,376 |   |
| Non-current                  system gas (Note 3)                                                          |   |                                       | 12,011    |   |                                   |   | 14,850 |   |
| Other                                                                                                     |   |                                       | 2,808     |   |                                   |   | 2,472 |   |
|                                                                                                      |   |                                       |      |   |                                   |   |   |   |
| **Total                  assets**                                                                         |   | $                                          | 3,534,143 |   |                                   | $      | 3,308,520 |   |
|                                                                                                      |   |                                       |      |   |                                   |   |   |   |

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**CONDENSED          CONSOLIDATED BALANCE SHEET**

**(UNAUDITED)**

|                                                             |   | **September                  30, 2007**    |      |   | **December                  31, 2006** |   |
|------------------------------------------------------------------|--------|--------------------------------------------|-----------|--------|----------------------------------------|--------|
|                                                             |   | (In                  thousands of dollars) |      |
| **Partners'                  Capital**                           |   |                                       |      |   |                                   |   |
| Partners'                  capital                               |   | $                                          | 1,154,483 |   |                                   | $      | 1,041,723 |   |
| Accumulated                  other comprehensive income (Note 8) |   |                                       | 9,332     |   |                                   |   | 15,477 |   |
| Tax                  sharing note receivable - Southern Union    |   |                                       | (13,636   | )      |                                   |   | (16,431 | ) |
| Total                  partners' capital                         |   |                                       | 1,150,179 |   |                                   |   | 1,040,769 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| Long-term                  debt (Note 7)                         |   |                                       | 1,292,182 |   |                                   |   | 1,185,391 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| Total                  capitalization                            |   |                                       | 2,442,361 |   |                                   |   | 2,226,160 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| **Current                  liabilities**                         |   |                                       |      |   |                                   |   |   |   |
| Current                  portion of long-term debt (Note 7)      |   |                                       | 315,117   |   |                                   |   | 461,011 |   |
| Accounts                  payable                                |   |                                       | 13,764    |   |                                   |   | 6,679 |   |
| Accounts                  payable - overdrafts                   |   |                                       | 16,786    |   |                                   |   | 23,776 |   |
| Accounts                  payable - related parties (Note 5)     |   |                                       | 42,790    |   |                                   |   | 15,962 |   |
| Gas                  imbalances - payable                        |   |                                       | 208,109   |   |                                   |   | 144,137 |   |
| Accrued                  taxes                                   |   |                                       | 20,469    |   |                                   |   | 12,030 |   |
| Accrued                  interest                                |   |                                       | 8,272     |   |                                   |   | 19,669 |   |
| Capital                  accruals                                |   |                                       | 90,417    |   |                                   |   | 26,929 |   |
| Other                                                            |   |                                       | 47,788    |   |                                   |   | 59,741 |   |
| Total                  current liabilities                       |   |                                       | 763,512   |   |                                   |   | 769,934 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| Deferred                  income taxes, net                      |   |                                       | 255,008   |   |                                   |   | 243,697 |   |
| Post-retirement                  benefits                        |   |                                       | 4,118     |   |                                   |   | 4,436 |   |
| Other                                                            |   |                                       | 69,144    |   |                                   |   | 64,293 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| Commitments                  and contingencies (Note 11)         |   |                                       |      |   |                                   |   |   |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |
| **Total                  partners' capital and liabilities**     |   | $                                          | 3,534,143 |   |                                   | $      | 3,308,520 |   |
|                                                             |   |                                       |      |   |                                   |   |   |   |

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**CONDENSED          CONSOLIDATED STATEMENT OF CASH FLOWS**

**(UNADITED)**

|                                                                                                                  |   | **Nine                  Months Ended September 30,** |     |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|----------|
|                                                                                                                  |   | **2007**                                             |     |   | **2006** |   |
|                                                                                                                  |   | (In                  thousands of dollars)           |     |
| **Cash                  flows provided by (used in) operating activities:**                                           |   |                                                 |     |   |   |   |
| Net                  earnings                                                                                         |   | $                                                    | 112,760  |   |   | $ | 99,958 |   |
| Adjustments                  to reconcile net earnings to net cash provided by operating                  activities: |   |                                                 |     |   |   |   |   |   |
| Depreciation                  and amortization                                                                        |   |                                                 | 63,634   |   |   |   | 52,823 |   |
| Deferred                  income taxes                                                                                |   |                                                 | 17,559   |   |   |   | 50,131 |   |
| Gain                  on sale of assets                                                                               |   |                                                 | -        |   |   |   | (2,267 | ) |
| Other                                                                                                                 |   |                                                 | (4,255   | ) |   |   | (989 | ) |
| Changes                  in operating assets and liabilities                                                          |   |                                                 | 48,881   |   |   |   | 9,790 |   |
| Net                  cash flows provided by operating activities                                                      |   |                                                 | 238,579  |   |   |   | 209,446 |   |
|                                                                                                                  |   |                                                 |     |   |   |   |   |   |
| **Cash                  flows provided by (used in) investing activities:**                                           |   |                                                 |     |   |   |   |   |   |
| Net                  decrease (increase) in note receivable - Southern Union                                          |   |                                                 | 85,150   |   |   |   | (82,725 | ) |
| Capital                  and investment expenditures                                                                  |   |                                                 | (315,134 | ) |   |   | (132,287 | ) |
| Sale                  of assets                                                                                       |   |                                                 | -        |   |   |   | 2,450 |   |
| Proceeds                  from note receivable - CrossCountry Citrus                                                  |   |                                                 | 37,691   |   |   |   | - |   |
| Other                                                                                                                 |   |                                                 | 1,536    |   |   |   | (925 | ) |
| Net                  cash flows used in investing activities                                                          |   |                                                 | (190,757 | ) |   |   | (213,487 | ) |
|                                                                                                                  |   |                                                 |     |   |   |   |   |   |
| **Cash                  flows provided by (used in) financing activities:**                                           |   |                                                 |     |   |   |   |   |   |
| Increase                  (decrease) in book overdrafts                                                               |   |                                                 | (6,990   | ) |   |   | 4,915 |   |
| Issuance                  of long-term debt                                                                           |   |                                                 | 455,000  |   |   |   | - |   |
| Repayment                  of debt obligations                                                                        |   |                                                 | (493,316 | ) |   |   | - |   |
| Issuance                  costs of debt                                                                               |   |                                                 | (2,363   | ) |   |   | - |   |
| Net                  cash flows provided by (used in) financing activities                                            |   |                                                 | (47,669  | ) |   |   | 4,915 |   |
|                                                                                                                  |   |                                                 |     |   |   |   |   |   |
| Change                  in cash and cash equivalents                                                                  |   |                                                 | 153      |   |   |   | 874 |   |
|                                                                                                                  |   |                                                 |     |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                     |   |                                                 | 531      |   |   |   | 585 |   |
| **Cash                  and cash equivalents at end of period**                                                       |   | $                                                    | 684      |   |   | $ | 1,459 |   |
|                                                                                                                  |   |                                                 |     |   |   |   |   |   |

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**CONDENSED          CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL AND COMPREHENSIVE          INCOME**

**(UNAUDITED)**

|                                                                        |   | **Partners'                  Capital**     |      |   | **Accumulated                  Other Comprehensive Income** |   |   | **Tax                  Sharing Note Receivable-Southern Union** |   |   | **Total** |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------------|-----------|--------|-------------------------------------------------------------|--------|--------|-----------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                        |   | (In                  thousands of dollars) |      |
|                                                                        |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |
| Balance                  December 31, 2006                                  |   | $                                          | 1,041,723 |   |                                                        | $      | 15,477 |                                                            |   | $      | (16,431   | )      |   | $ | 1,040,769 |   |
|                                                                        |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |   |   |   |   |
| Comprehensive                  income (loss):                               |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |   |   |   |   |
| Net                  earnings                                               |   |                                       | 112,760   |   |                                                        |   | -      |                                                            |   |   | -         |   |   |   | 112,760 |   |
| Net                  recognized prior service credit related to other       |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |   |   |   |   |
| postretirement                  benefits, net of tax                        |   |                                       | -         |   |                                                        |   | (3,608 | )                                                               |   |   | -         |   |   |   | (3,608 | ) |
| Change                  in fair value of interest rate hedges, net of tax   |   |                                       | -         |   |                                                        |   | (1,923 | )                                                               |   |   | -         |   |   |   | (1,923 | ) |
| Net                  gain related to interest rate swaps, net of tax        |   |                                       | -         |   |                                                        |   | (614   | )                                                               |   |   | -         |   |   |   | (614 | ) |
| Comprehensive                  income                                       |   |                                       | 112,760   |   |                                                        |   | (6,145 | )                                                               |   |   | -         |   |   |   | 106,615 |   |
|                                                                        |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |   |   |   |   |
| Settlement                  against tax sharing receivable - Southern Union |   |                                       | -         |   |                                                        |   | -      |                                                            |   |   | 2,795     |   |   |   | 2,795 |   |
| Balance                  September 30, 2007                                 |   | $                                          | 1,154,483 |   |                                                        | $      | 9,332  |                                                            |   | $      | (13,636   | )      |   | $ | 1,150,179 |   |
|                                                                        |   |                                       |      |   |                                                        |   |   |                                                            |   |   |      |   |   |   |   |   |

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*PEPL*
*Panhandle*
*the Company*
*SEC*
*GAAP*

*FASB*
*Accounting for the Effects of Certain      Types of Regulation *
*Statement No. 71*

**1.  Description      of Business**

*LNG*
*FERC*

|   | · | PEPL,                an indirect wholly-owned subsidiary of Southern Union Company                (*Southern Union Company* and, together with its subsidiaries,                *Southern Union*); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 of PEPL. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

*Bcf/d*
*Bcf*

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*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**2.  New      Accounting Principles**

***Accounting      Principles Recently Adopted.***

***FIN      48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB      Statement 109” (FIN 48):***
*Accounting for Income Taxes*
*Note 10 – Accounting for Uncertainty in Income      Taxes*

***FSP      No. FIN 48-1, “Definition of ‘Settlement’ in FASB Interpretation No. 48” (FIN      48-1): ***

***Accounting      Principles Not Yet Adopted.***

***FASB      Statement No. 157, “Fair Value      Measurements”***
**:**

***FASB      Statement No. 159, “The Fair Value Option for Financial Assets and Financial      Liabilities – Including an Amendment of FASB Statement No.      115”***
**:**

**3.  System      Gas and Operating Supplies**

*MMBtu*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**4.  Regulatory      Matters**

*Construction work-in-progress*

*Construction work-in-progress *

*CIAC*
*Energy Transfer*
*Construction work-in-progress*

*Note 12 – Subsequent Event*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*HCAs*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**5.  Related      Party Transactions**

|                                                       |   |                                    |   |   |                                   |   |   |     |   |   |     |   |
|------------------------------------------------------------|--------|-----------------------------------------|--------|--------|----------------------------------------|--------|--------|----------|--------|--------|----------|--------|
|                                                       |   | **Three                  Months Ended** |   |   | **Nine                  Months Ended** |   |
|                                                       |   | **September                  30,**      |   |   | **September                  30,**     |   |
| **Related                  Party Transactions**            |   | **2007**                                |   |   | **2006**                               |   |   | **2007** |   |   | **2006** |   |
|                                                       |   | (In                  thousands)         |   |   | (In                  thousands)        |   |
|                                                       |   |                                    |   |   |                                   |   |   |     |   |   |     |   |
| Transportation                  and storage of natural gas |   | $                                       | 788    |   |                                   | $      | 769    |     |   | $      | 3,094    |   |   | $ | 3,126 |   |
| Operation                  and maintenance:                |   |                                    |   |   |                                   |   |   |     |   |   |     |   |   |   |   |   |
| Management                  and royalty fees               |   |                                    | 3,966  |   |                                   |   | 3,581  |     |   |   | 12,219   |   |   |   | 10,549 |   |
| Other                  expenses                            |   |                                    | 7,375  |   |                                   |   | 5,070  |     |   |   | 22,668   |   |   |   | 14,618 |   |
| Other                  income, net                         |   |                                    | 9,195  |   |                                   |   | 2,556  |     |   |   | 29,946   |   |   |   | 6,194 |   |
|                                                       |   |                                    |   |   |                                   |   |   |     |   |   |     |   |   |   |   |   |

*Other, net*
*Note receivable – Southern      Union*
*Note receivable – Southern Union*
*Note 12 –Subsequent Event *

*CrossCountry Citrus*
*2006 Term Loan*
*Other, net*
*Note receivable– CrossCountry Citrus*

*Partners'      Capital*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

| **Related                  Party**                          |   | **September                  30, 2007** |   |   | **December 31,                  2006** |   |
|-------------------------------------------------------------|--------|-----------------------------------------|--------|--------|---------------------------------------------|--------|
|                                                        |   | (In                  thousands)         |   |
| **Accounts                  receivable - related parties:** |   |                                    |   |   |                                        |   |
| Southern                  Union (1)                         |   | $                                       | 366    |   |                                        | $      | 14,448 |   |
| Other                  (2)                                  |   |                                    | 8,160  |   |                                        |   | 3,546 |   |
|                                                        |   |                                    | 8,526  |   |                                        |   | 17,994 |   |
| **Accounts                  payable - related parties:**    |   |                                    |   |   |                                        |   |   |   |
| Southern                  Union (3)                         |   | $                                       | 42,306 |   |                                        | $      | 14,978 |   |
| Other                  (4)                                  |   |                                    | 484    |   |                                        |   | 984 |   |
|                                                        |   | $                                       | 42,790 |   |                                        | $      | 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) | Primarily                related to corporate services and payroll funding provided by Southern                Union, reimbursable medical and insurance costs paid by Southern                Union on                behalf of the Company, and income taxes payable to Southern Union                per the                tax-sharing agreement. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**6.  Derivative      Instruments and Hedging Activities**

*Accumulated other comprehensive      income*
*Accumulated other comprehensive income*
*Note 12 – Subsequent Event*

*Other*
*Accumulated other comprehensive      income*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*Accumulated other      comprehensive income*
*Accumulated other comprehensive income*
*Accumulated other comprehensive      income*

*Note 7 –Debt*

**7.  Debt**

| **Long-term                  Debt Obligations**           |   | **September                  30, 2007** |      |   | **December                  31, 2006** |   |
|-----------------------------------------------------------|--------|-----------------------------------------|-----------|--------|----------------------------------------|--------|
|                                                      |   | (In                  thousands)         |      |
|                                                      |   |                                    |      |   |                                   |   |
| 2.75%                  Senior Notes due 2007              |   | $                                       | -         |   |                                   | $      | 200,000 |   |
| 4.80%                  Senior Notes due 2008              |   |                                    | 300,000   |   |                                   |   | 300,000 |   |
| 6.05%                  Senior Notes due 2013              |   |                                    | 250,000   |   |                                   |   | 250,000 |   |
| 6.50%                  Senior Notes due 2009              |   |                                    | 60,623    |   |                                   |   | 60,623 |   |
| 8.25%                  Senior Notes due 2010              |   |                                    | 40,500    |   |                                   |   | 40,500 |   |
| 7.00%                  Senior Notes due 2029              |   |                                    | 66,305    |   |                                   |   | 66,305 |   |
| Term                  Loan due 2007                       |   |                                    | -         |   |                                   |   | 255,626 |   |
| Term                  Loan due 2012 (1)                   |   |                                    | 427,309   |   |                                   |   | 465,000 |   |
| Term                  Loan due 2012                       |   |                                    | 455,000   |   |                                   |   | - |   |
| Net                  premiums on long-term debt           |   |                                    | 7,562     |   |                                   |   | 9,613 |   |
| Total                  debt outstanding                   |   |                                    | 1,607,299 |   |                                   |   | 1,647,667 |   |
| Current                  portion of long-term debt        |   |                                    | (315,117  | )      |                                   |   | (461,011 | ) |
| Interest                  rate swaps (2.75% Senior Notes) |   |                                    | -         |   |                                   |   | (1,265 | ) |
| Total                  long-term debt                     |   | $                                       | 1,292,182 |   |                                   | $      | 1,185,391 |   |
|                                                      |   |                                    |      |   |                                   |   |   |   |

| (1) | At                December 31, 2006, this Term Loan was due in 2008.  See the                following *LNG Holdings Term Loans* discussion for information                related to the extension of the maturity date from April 4, 2008                to June                29, 2012. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***LNG      Holdings Term Loans.***
*Amended Credit      Agreement*

*2012 Term Loan*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*Note 6 – Derivative      Instruments and Hedging Activities*

*Note 12 – Subsequent      Event*

**Retirement      of Debt Obligations**

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**8.  Accumulated      Other Comprehensive Income**

|                                                                     |   | **Three                  Months**        |   |    | **Nine                  Months**         |   |
|--------------------------------------------------------------------------|--------|------------------------------------------|--------|---------|------------------------------------------|--------|
|                                                                     |   | **Ended                  September 30,** |   |    | **Ended                  September 30,** |   |
|                                                                     |   | **2007**                                 |   |    | **2006**                                 |   |   | **2007** |   |   | **2006** |   |
|                                                                     |   | (In                  thousands)          |   |    | (In                  thousands)          |   |
|                                                                     |   |                                     |   |    |                                     |   |   |   |   |   |   |   |
| Net                  earnings                                            |   | $                                        | 32,660 |    |                                     | $      | 32,836 |   |   | $ | 112,760 |   |   | $ | 99,958 |   |
|                                                                     |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Realized                  gain on cash flow hedging                      |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| activities,                  net of taxes of $(186), $(185),             |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| $(341)                  and $(556), respectively                         |   |                                     | (385   | )  |                                     |   | (276 | ) |   |   | (614 | ) |   |   | (828 | ) |
| Net                  recognized prior service credit related to          |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| other                  postretirement benefits, net                      |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| of                  taxes of $(1,218), $0, $(1,662) and $0, respectively |   |                                     | (2,252 | )       |                                     |   | - |   |   |   | (3,608 | ) |   |   | - |   |
| Change                  in fair value of interest rate hedges, net of    |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| taxes                  of $(4,329), $0, $(1,374) and $(3), respectively  |   |                                     | (6,318 | )       |                                     |   | - |   |   |   | (1,923 | ) |   |   | (5 | ) |
| Total                  other comprehensive income (loss)                 |   |                                     | (8,955 | )       |                                     |   | (276 | ) |   |   | (6,145 | ) |   |   | (833 | ) |
|                                                                     |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income                              |   | $                                        | 23,705 |    |                                     | $      | 32,560 |   |   | $ | 106,615 |   |   | $ | 99,125 |   |
|                                                                     |   |                                     |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |

*Accumulated other      comprehensive income*

|                                                                                                                                   |   | **September                  30,** |   |   | **December                  31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|-----------------------------------|--------|
| **Components                  in Accumulated Other Comprehensive Income**                                                              |   | **2007**                           |   |   | **2006**                          |   |
|                                                                                                                                   |   | (In                  thousands)    |   |
|                                                                                                                                   |   |                               |   |   |                              |   |
| Other                  postretirement plan - net actuarial loss and prior service credit,                  net of                  tax |   | $                                  | 11,640 |   |                              | $      | 15,248 |   |
| Interest                  rate hedges, net of tax                                                                                      |   |                               | (2,308 | )      |                              |   | 229 |   |
| Total                  Accumulated other comprehensive income, net of tax                                                              |   | $                                  | 9,332  |   |                              | $      | 15,477 |   |
|                                                                                                                                   |   |                               |   |   |                              |   |   |   |

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**9.  Postretirement      Benefits**

|                                                     |   | **Postretirement                  Benefits** |        |
|----------------------------------------------------------|--------|----------------------------------------------|-------------|
|                                                     |   | **Three                  Months Ended**      |        |   | **Nine                  Months Ended** |   |
|                                                     |   | **September                  30,**           |        |   | **September                  30,** |   |
|                                                     |   | **2007**                                     |        |   | **2006** |   |   | **2007** |   |   | **2006** |   |
|                                                     |   | (In                  thousands)              |        |   | (In                  thousands) |   |
|                                                     |   |                                         |        |   |   |   |   |   |   |   |   |   |
| Service                  cost                            |   | $                                            | 336         |   |   | $ | 440 |   |   | $ | 1,008 |   |   | $ | 1,319 |   |
| Interest                  cost                           |   |                                         | 511         |   |   |   | 544 |   |   |   | 1,534 |   |   |   | 1,632 |   |
| Expected                  return on plan assets          |   |                                         | (484        | ) |   |   | (344 | ) |   |   | (1,451 | ) |   |   | (1,032 | ) |
| Prior                  service credit amortization       |   |                                         | (900        | ) |   |   | (911 | ) |   |   | (2,701 | ) |   |   | (2,732 | ) |
| Recognized                  actuarial loss               |   |                                         | -           |   |   |   | 127 |   |   |   | - |   |   |   | 381 |   |
| Transfer                of net obligation from affiliate |   |                                         | 1,912  |   |   |   | -  |   |   |   | 1,912  |   |   |   | -  |   |
| Net                  periodic benefit cost (credit)      |   | $                                            | (537        | ) |   | $ | (144 | ) |   | $ | (1,610 | ) |   | $ | (432 | ) |
|                                                     |   |                                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

**10.  Accounting      for Uncertainty in Income Taxes**

*Partners’ capital*

**11.  Commitments      and Contingencies**

***Litigation.***
** **
*Accounting for Contingencies*

*Hope Land*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*MMS*

***Environmental      Matters.  ***
*Environmental Remediation      Liabilities*

***Environmental      Remediation.***
*PCB*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*PRPs*

*U.S.      EPA*

*IEPA*

|                                             |   | **September                  30,** |   |   | **December                  31,** |   |
|--------------------------------------------------|--------|------------------------------------|--------|--------|-----------------------------------|--------|
|                                             |   | **2007**                           |   |   | **2006**                          |   |
|                                             |   | (In                  thousands)    |   |
|                                             |   |                               |   |   |                              |   |
| Current                                          |   | $                                  | 985    |   |                              | $      | 1,962 |   |
| Noncurrent                                       |   |                               | 7,384  |   |                              |   | 6,760 |   |
| Total                  Environmental Liabilities |   | $                                  | 8,369  |   |                              | $      | 8,722 |   |
|                                             |   |                               |   |   |                              |   |   |   |

***Air      Quality Control.***
*NOx SIP Call*

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

*NOx*

*IPCB*
* *

*MACT*
*HAPs*

***Spill      Control.  ***

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

***Other      Commitments and Contingencies.  ***

***Hurricane      Damage.***

***Energy      Transfer Commitment.***

***Controlled      Group Pension Liabilities.***

----

*Table          of Contents*

**PANHANDLE          EASTERN PIPE LINE COMPANY, LP**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**12.  Subsequent        Event**

----

*Table          of Contents*

**ITEM      2.  Management's Discussion and Analysis of      Financial Condition and Results of Operations**

**Overview**

*Bcf/d*
*Bcf*

*TBtu*

----

*Table          of Contents*

**Results      of Operations**

|                                                       |   |                                                  |    |   |     |   |    |       |   |
|------------------------------------------------------------|--------|-------------------------------------------------------|---------|--------|----------|--------|---------|------------|--------|
|                                                       |   | **Three                  Months Ended September 30,** |    |   |     |   |
|                                                       |   | **2007**                                              |    |   | **2006** |   |    | **Change** |   |
|                                                       |   | (In                  thousands)                       |    |
|                                                       |   |                                                  |    |   |     |   |    |       |   |
| **Operating                  revenue:**                    |   |                                                  |    |   |     |   |    |       |   |
| Transportation                  and storage of natural gas |   | $                                                     | 122,340 |   |     | $      | 106,100 |       |   | $ | 16,240 |   |
| LNG                  terminalling revenue                  |   |                                                  | 34,034  |   |     |   | 32,308  |       |   |   | 1,726 |   |
| Other                  revenue                             |   |                                                  | 2,589   |   |     |   | 4,989   |       |   |   | (2,400 | ) |
| Total                  operating revenue                   |   |                                                  | 158,963 |   |     |   | 143,397 |       |   |   | 15,566 |   |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| **Operating                  expenses:**                   |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| Operation,                  maintenance and general        |   |                                                  | 65,905  |   |     |   | 51,928  |       |   |   | 13,977 |   |
| Depreciation                  and amortization             |   |                                                  | 21,863  |   |     |   | 18,425  |       |   |   | 3,438 |   |
| Taxes,                  other than on income               |   |                                                  | 7,340   |   |     |   | 6,327   |       |   |   | 1,013 |   |
| Total                  operating expenses                  |   |                                                  | 95,108  |   |     |   | 76,680  |       |   |   | 18,428 |   |
| **Operating                  income**                      |   |                                                  | 63,855  |   |     |   | 66,717  |       |   |   | (2,862 | ) |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| **Other                  income (expense):**               |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| Interest                  expense, net                     |   |                                                  | (19,492 | )      |     |   | (15,266 | )          |   |   | (4,226 | ) |
| Other,                  net                                |   |                                                  | 9,258   |   |     |   | 2,493   |       |   |   | 6,765 |   |
| Total                  other expense, net                  |   |                                                  | (10,234 | )      |     |   | (12,773 | )          |   |   | 2,539 |   |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| **Earnings                  before income taxes**          |   |                                                  | 53,621  |   |     |   | 53,944  |       |   |   | (323 | ) |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| **Income                  taxes**                          |   |                                                  | 20,961  |   |     |   | 21,108  |       |   |   | (147 | ) |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |
| **Net                  earnings**                          |   | $                                                     | 32,660  |   |     | $      | 32,836  |       |   | $ | (176 | ) |
|                                                       |   |                                                  |    |   |     |   |    |       |   |   |   |   |

***Operating      Revenue***
**.**

| · | Increased                transportation and storage revenue of $16.2 million attributable                to: |
|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | Higher                transportation reservation revenues of $7.1 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 $5.8 million resulting from customer demand for                parking services and market                conditions; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher                storage revenues of $1.7 million due to increased contracted capacity;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Higher                commodity revenues of $1.6 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                $1.7 million increase in LNG terminalling revenue based on higher                volumes                resulting from an increase in LNG cargoes;                and |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | A                decrease in other revenue of $2.4 million primarily due to higher                operational sales of gas in 2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

***Operating      Expenses.***

| · | An                increase in operation, maintenance and general expenses of $14 million                as                the result of: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $4.2 million increase in contract storage costs attributable to an                increase in leased capacity; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $2.9 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; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

|   | · | A                $1.3 million increase in fuel tracker costs based on a net under-recovery                in 2007; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | A                $1.3 million increase in LNG power costs resulting from increased                cargoes;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $3 million net increase in labor and benefits, including a $1.9 million                charge associated with other post-retirement benefit costs for transferred                employees. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Increased                depreciation and amortization expense of $3.4 million due to an increase                in property, plant and equipment placed in                service.  Depreciation and amortization expense is expected to                continue to increase primarily due to higher capital spending, including                compression modernization and other                expenditures. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Other      Expense, Net.***

***Income      Taxes.***

|                                                       |   |                                                 |    |   |     |   |    |       |   |
|------------------------------------------------------------|--------|------------------------------------------------------|---------|--------|----------|--------|---------|------------|--------|
|                                                       |   | **Nine                  Months Ended September 30,** |    |   |     |   |
|                                                       |   | **2007**                                             |    |   | **2006** |   |    | **Change** |   |
|                                                       |   | (In                  thousands)                      |    |
|                                                       |   |                                                 |    |   |     |   |    |       |   |
| **Operating                  revenue:**                    |   |                                                 |    |   |     |   |    |       |   |
| Transportation                  and storage of natural gas |   | $                                                    | 376,752 |   |     | $      | 329,212 |       |   | $ | 47,540 |   |
| LNG                  terminalling revenue                  |   |                                                 | 104,155 |   |     |   | 78,877  |       |   |   | 25,278 |   |
| Other                  revenue                             |   |                                                 | 8,792   |   |     |   | 14,060  |       |   |   | (5,268 | ) |
| Total                  operating revenue                   |   |                                                 | 489,699 |   |     |   | 422,149 |       |   |   | 67,550 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| **Operating                  expenses:**                   |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| Operation,                  maintenance and general        |   |                                                 | 186,759 |   |     |   | 149,340 |       |   |   | 37,419 |   |
| Depreciation                  and amortization             |   |                                                 | 63,634  |   |     |   | 52,823  |       |   |   | 10,811 |   |
| Taxes,                  other than on income               |   |                                                 | 22,436  |   |     |   | 21,069  |       |   |   | 1,367 |   |
| Total                  operating expenses                  |   |                                                 | 272,829 |   |     |   | 223,232 |       |   |   | 49,597 |   |
| **Operating                  income**                      |   |                                                 | 216,870 |   |     |   | 198,917 |       |   |   | 17,953 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| **Other                  income (expense):**               |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| Interest                  expense, net                     |   |                                                 | (62,979 | )      |     |   | (44,382 | )          |   |   | (18,597 | ) |
| Other,                  net                                |   |                                                 | 31,055  |   |     |   | 9,310   |       |   |   | 21,745 |   |
| Total                  other expense, net                  |   |                                                 | (31,924 | )      |     |   | (35,072 | )          |   |   | 3,148 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| **Earnings                  before income taxes**          |   |                                                 | 184,946 |   |     |   | 163,845 |       |   |   | 21,101 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| **Income                  taxes**                          |   |                                                 | 72,186  |   |     |   | 63,887  |       |   |   | 8,299 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |
| **Net                  earnings**                          |   | $                                                    | 112,760 |   |     | $      | 99,958  |       |   | $ | 12,802 |   |
|                                                       |   |                                                 |    |   |     |   |    |       |   |   |   |   |

***Operating      Revenue***
**.**

| · | Increased                transportation and storage revenue of $47.5 million primarily attributable                to: |
|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher                transportation reservation revenues of $22.1 million primarily due                to                reduced discounting resulting in higher average rates realized on                contracts driven by higher customer demand and utilization of contract                capacity and increased capacity                sold; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Higher                parking revenues of $14 million resulting from customer demand for                parking                services and market conditions; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher                commodity revenues of $5.7 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 higher utilization driven                by                weather and storage refill activity;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Higher                storage revenues of $5.7 million due to increased contracted                capacity. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

| · | A                $25.3 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 $5.3 million primarily due to higher                operational sales of gas in 2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

***Operating      Expenses.***

| · | An                increase in operation, maintenance and general expenses of $37.4                million                as the result of: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $10.1 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 and                an increase in management and royalty fees due to higher                revenues; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                $8.9 million increase in contract storage costs primarily due to                an                increase in leased capacity; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $7.7 million increase in LNG power costs resulting from increased                cargoes; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | A                $4.4 million increase in labor and benefits, including a $1.9 million                charge associated with other post-retirement benefit costs for transferred                employees; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A                $3.7 million increase in fuel tracker costs based on a net under-recovery                in 2007; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | A                $1.1 million increase in insurance expense due to higher premiums;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | A                $1 million increase in legal costs. |
|--------|--------|------------------------------------------------------|

| · | Increased                depreciation and amortization expense of $10.8 million due to an                increase                in property, plant and equipment placed in service, including the                Trunkline LNG Phase I and Phase II                expansions. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Other      Expense, Net.***

***Income      Taxes.***

**OTHER      MATTERS**

***Contingencies***

*PART I, ITEM 1.  Financial Statements (Unaudited), Note 11 –Commitments and Contingencies*
*Note 4 – Regulatory Matters*

***Regulatory***

*PART I, ITEM 1.  Financial Statements (Unaudited), Note 4 –Regulatory Matters*

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*Table          of Contents*

***Insurance***

***Liquidity      and Capital Resources***

***2007      Capital Expenditure Funding Sources.***

***Debt      Refinancing.***

**ITEM      3.  Quantitative and Qualitative Disclosures About      Market Risk**

**ITEM      4.  Controls and Procedures**

***Evaluation      of Disclosure Controls and Procedures***

*Exchange Act*
*COO*
*CFO*

***Changes      in Internal Controls***

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*Table          of Contents*

**Cautionary      Statement Regarding Forward-Looking Information**

|   | · | 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 disasters such                as                Hurricanes Katrina and Rita; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 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, 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; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

**PART      II.  OTHER INFORMATION**

**ITEM      1. Legal Proceedings**

*ITEM 1. Financial Statements      (Unaudited), Note 11 – Commitments and Contingencies*
*ITEM 2. Management’s Discussion and Analysis of Financial Condition and      Results of Operations*
*Part I. Financial      Information*

**ITEM      1A.  Risk Factors**

**ITEM      2.  Unregistered Sales of Equity Securities and      Use of Proceeds**

**ITEM      3.  Defaults Upon Senior      Securities**

**ITEM      4.  Submission of Matters to a Vote of Security      Holders**

**ITEM      5.  Other Information**

**ITEM      6. 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 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, 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)                    | First                Supplemental Indenture dated as of March 29, 1999, among CMS Panhandle                Holding Company, Panhandle Eastern Pipe Line Company and 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)                    | Second                Supplemental Indenture dated as of March 27, 2000, between Panhandle,                as                Issuer and 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)                    | Third                Supplemental Indenture dated as of August 18, 2003, between Panhandle,                as                Issuer and 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)                    | Fourth                Supplemental Indenture dated as of March 12, 2004, between Panhandle,                as                Issuer and 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 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., 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)                   | $465,000,000                Promissory Note made by CrossCountry Citrus, LLC, as borrower, in                favor of                Trunkline LNG Holdings LLC, as holder, dated as of December 1, 2006.                (Filed as Exhibit 10.2 to Panhandle’s Current Report on Form 8-K filed on                December 7, 2006 and incorporated herein by reference.)                                                                                                                                                                                                                                              |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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.                                                                                                                                                                                                                                                                                                                            |

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|   |                                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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. |

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**SIGNATURES**

|                                             | PANHANDLE                EASTERN PIPE LINE COMPANY, LP                                                                                                                                                                                                                                                                                                  |
|--------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
| Date:  November                9, 2007 | 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) |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |
|                                             |                                                                                                                                                                                                                                                                                                                                                    |

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