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Panhandle Eastern Pipeline, Form 10-Q March 31, 2007

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

March 31, 2007

Commission File No. 1-2921

_______________

PANHANDLE EASTERN PIPE LINE COMPANY, LP

(Exact name of registrant as specified in its charter)

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)

Registrant's telephone number, including area code: (713) 989-7000

Securities Registered Pursuant to Section 12(b) of the Act:

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

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes P No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer Accelerated filer ___ Non-accelerated filer P

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes No P

Panhandle Eastern Pipe Line, LP meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format. Item 2 of Part I has been reduced and Item 3 of Part I and Items 2, 3 and 4 of Part II have been omitted in accordance with Instruction H.

PANHANDLE EASTERN PIPE LINE COMPANY, LP

FORM 10-Q

March 31, 2007

Table of Contents

PART I. FINANCIAL INFORMATION:			Page(s)

	ITEM 1. Financial Statements (Unaudited):

		Condensed consolidated statement of operations.	2

		Condensed consolidated balance sheet.	3-4

		Condensed consolidated statement of cash flows.	5

		Condensed consolidated statement of partners’ capital and comprehensive income.	6

		Notes to condensed consolidated financial statements.	7

	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		20

	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.		22

	ITEM 4. Controls and Procedures.		23

PART II. OTHER INFORMATION:

	ITEM 1. Legal Proceedings.		24

	ITEM 1A. Risk Factors.		24

	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.		24

	ITEM 3. Defaults Upon Senior Securities.		25

	ITEM 4. Submission of Matters to a Vote of Security Holders.		25

	ITEM 5. Other Information.		25

	ITEM 6. Exhibits.		25

	SIGNATURES		27

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31,
	2007			2006
	(In thousands of dollars)
Operating revenue
Transportation and storage of natural gas	$	133,705		$	121,332
LNG terminalling revenue		32,902			19,555
Other revenue		2,423			3,756
Total operating revenue		169,030			144,643

Operating expenses
Operation, maintenance and general		56,280			46,098
Depreciation and amortization		20,709			17,474
Taxes, other than on income		7,795			7,350
Total operating expenses		84,784			70,922


Operating income		84,246			73,721

Other income (expense)
Interest expense, net		(22,026	)		(12,875	)
Other, net		11,057			3,241
Total other income (expense)		(10,969	)		(9,634	)

Earnings before income taxes		73,277			64,087

Income taxes		28,796			25,022


Net earnings	$	44,481		$	39,065

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	March 31, 2007		December 31, 2006
Assets	(In thousands of dollars)

Current assets
Cash and cash equivalents	$	427	$	531
Accounts receivable, less allowances of $1,176 and $1,176, respectively		62,518		61,047
Accounts receivable - related parties (Note 5)		7,658		17,994
Gas imbalances - receivable		106,294		68,013
System gas and operating supplies (Note 3)		126,024		127,303
Deferred income taxes, net		3,410		3,117
Note receivable - CrossCountry Citrus		11,806		6,664
Other		8,381		10,691
Total current assets		326,518		295,360

Property, plant and equipment
Plant in service		2,465,776		2,418,917
Construction work-in-progress		163,446		166,085
		2,629,222		2,585,002
Less accumulated depreciation and amortization		225,700		207,606
Net property, plant and equipment		2,403,522		2,377,396

Investment in affiliate		1,604		1,457


Note receivable - Southern Union		168,205		148,655
Note receivable - CrossCountry Citrus		446,530		458,336
Intangibles, net		7,532		7,618
Debt issuance cost		3,651		2,376
Non-current system gas (Note 3)		13,222		14,850
Other		2,306		2,472

Total assets	$	3,373,090	$	3,308,520

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	March 31, 2007			December 31, 2006
	(In thousands of dollars)
Partners' Capital
Partners' capital	$	1,086,204		$	1,041,723
Accumulated other comprehensive income (Note 8)		14,570			15,477
Tax sharing note receivable - Southern Union		(16,431	)		(16,431	)
Total partners' capital		1,084,343			1,040,769

Long-term debt (Note 7)		1,627,905			1,185,391
Total capitalization		2,712,248			2,226,160

Current liabilities
Current portion of long-term debt (Note 7)		11,806			461,011
Accounts payable		3,087			6,679
Accounts payable - overdrafts		6,567			23,776
Accounts payable - related parties (Note 5)		27,584			15,962
Gas imbalances - payable		190,772			144,137
Accrued taxes		37,111			12,030
Accrued interest		8,516			19,669
Retained fuel obligation		6,920			12,418
Labor and benefit accruals		8,110			16,868
Other operating expense accruals		7,030			9,832
Capital accruals		20,121			26,929
Other		17,579			20,623
Total current liabilities		345,203			769,934

Deferred income taxes, net		248,932			243,697
Post-retirement benefits		2,824			4,436
Other		63,883			64,293
Commitments and contingencies (Note 11)

Total partners' capital and liabilities	$	3,373,090		$	3,308,520

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Three Months Ended March 31,
	2007			2006
	(In thousands of dollars)
Cash flows provided by (used in) operating activities:
Net earnings	$	44,481		$	39,065
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		20,709			17,474
Deferred income taxes		5,319			12,952
Gain on sale of assets		-			(1,654	)
Debt premium and discount amortization, net		(109	)		(323	)
Changes in operating assets and liabilities		21,531			(4,107	)
Net cash flows provided by operating activities		91,931			63,407

Cash flows provided by (used in) investing activities:
Net increase in note receivable - Southern Union		(19,550	)		(36,050	)
Capital and investment expenditures		(53,527	)		(30,469	)
Sale of assets		-			2,450
Decrease in note receivable - CrossCountry Citrus		6,664			-
Other		(599	)		(229	)
Net cash flows used in investing activities		(67,012	)		(64,298	)

Cash flows provided by (used in) financing activities:
Increase (decrease) in bank overdrafts		(17,209	)		442
Debt issuance		455,000			-
Debt retirements		(462,289	)		-
Debt issuance costs		(525	)		-
Net cash flows provided by (used in) financing activities		(25,023	)		442

Change in cash and cash equivalents		(104	)		(449	)

Cash and cash equivalents at beginning of period		531			585
Cash and cash equivalents at end of period	$	427		$	136

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

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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 January 1, 2007	$	1,041,723	$	15,477		$	(16,431	)	$	1,040,769

Comprehensive income:
Net earnings		44,481		-			-			44,481
Recognized prior service credit related to other
postretirement plan, net of tax		-		(678	)		-			(678	)
Net gain related to interest rate swaps, net of tax		-		(229	)		-			(229	)
Comprehensive income		44,481		(907	)		-			43,574

Balance March 31, 2007	$	1,086,204	$	14,570		$	(16,431	)	$	1,084,343

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

ITEM 1. Financial Statements

The accompanying unaudited interim condensed consolidated financial statements of Panhandle Eastern Pipe Line Company, LP, a Delaware limited partnership (PEPL), and its subsidiaries (collectively, Panhandle, or the Company), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for quarterly reports on Form 10-Q. These statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (GAAP), and should be read in conjunction with Panhandle’s financial statements and notes thereto for the twelve months ended December 31, 2006, included in Panhandle’s Form 10-K filed with the SEC. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP and reflect adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim period. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Due to seasonal nature of the Company’s operations, the results of operations and cash flows for any interim period are not necessarily indicative of the results that may be expected for the full year.

1. Corporate Structure

Panhandle is primarily engaged in the interstate transportation and storage of natural gas and also provides liquefied natural gas (LNG) terminalling and regasification services. The Company is subject to the rules and regulations of the Federal Energy Regulatory Commission (FERC). The Company’s entities include the following:

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.

The Company’s pipeline assets include approximately 10,000 miles of interstate pipelines that transport natural gas from the Gulf of Mexico, South Texas and the panhandle regions of Texas and Oklahoma to major U.S. markets in the Midwest and Great Lakes region. The pipelines have a combined peak day delivery capacity of 5.3 billion cubic feet per day (Bcf/d) and approximately 66 billion cubic feet (Bcf) of owned underground storage capacity. Trunkline LNG, located on Louisiana's Gulf Coast, operates one of the largest LNG import terminals in North America, based on current send out capacity, and has 9.0 Bcf of above ground LNG storage capacity.

Southern Union Panhandle, LLC, a direct wholly-owned subsidiary of Southern Union Company, serves as the general partner of PEPL and owns a one percent general partner interest. Southern Union Company owns a ninety-nine percent limited partner interest in PEPL.

2. New Accounting Principles

Accounting Principles Recently Adopted.

FIN 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109” (FIN 48): Issued by the Financial Accounting Standards Board (FASB) in June 2006, the Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition and measurement threshold attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company’s condensed consolidated financial statements have not been materially impacted by the adoption of FIN 48 as of January 1, 2007. See Note 10 - Accounting for Uncertainty in Income Taxes.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Accounting Principles Not Yet Adopted.

FASB Statement No. 157, “Fair Value Measurements”: Issued by the FASB in September 2006, this Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Where applicable, this Statement simplifies and codifies related guidance within GAAP. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact of this Interpretation on its condensed consolidated financial statements.

FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”: Issued by the FASB in February 2007, this Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The Statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. The Statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of this Statement on its condensed consolidated financial statements.

3. System Gas and Operating Supplies

System gas and operating supplies consist of gas held for operations and materials and supplies, both of which are carried at the lower of weighted average cost or market, while gas received from or owed back to customers is valued at market. The gas held for operations that the Company does not expect to consume in operations in the next 12 months is reflected in non-current assets. Gas held for operations at March 31, 2007 was $125.8 million, or 17,534,944 million British thermal units (MMBtu), of which $13.2 million was classified as non-current. Gas held for operations at December 31, 2006 was $129.4 million, or 20,965,000 MMBtu, of which $14.9 million was classified as non-current. Materials and supplies inventories was $13.4 million and $13.2 million at March 31, 2007 and December 31, 2006, respectively.

4. Regulatory Matters

The Company has commenced construction of an additional enhancement at its Trunkline LNG terminal. This infrastructure enhancement project, which is expected to cost approximately $250 million, plus capitalized interest, will increase send out flexibility at the terminal and lower fuel costs. The project is scheduled to be in operation in 2008. In addition, Trunkline LNG and BG LNG Services agreed to extend the existing terminal and pipeline services agreements through 2028, representing a five-year extension. Approximately $59.3 million and $40.8 million of costs are included in the line item Construction work-in-progress at March 31, 2007 and December 31, 2006, respectively.

The Company has received approval from FERC to modernize and replace various compression facilities on PEPL. Such replacements will be made at twelve different compressor stations and are expected to be installed by the end of 2009. The estimated cost of these replacements is approximately $290 million, which includes the compression component of a PEPL east end project already under construction. The Company has also filed for FERC approval to replace approximately 32 miles of existing pipeline on the east end of the PEPL system with a current estimated cost of approximately $80 million, which would further improve system integrity. The project is planned to be completed in late 2007. Approximately $36.7 million and $57.9 million of costs related to these projects are included in the line item Construction work-in-progress at March 31, 2007 and December 31, 2006, respectively.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Trunkline has announced a field zone expansion project, which includes adding capacity to its pipeline system in Texas and Louisiana to increase deliveries to Henry Hub. The field zone expansion project includes the previously announced north Texas expansion as well as additional capacity to Henry Hub. Trunkline will increase the capacity along existing rights of way from Kountze, Texas, to Longville, Louisiana, by approximately 510 million cubic feet per day with the construction of approximately 45 miles of 36-inch diameter pipeline. The project includes horsepower additions and modifications at existing compressor stations. Trunkline also will create additional capacity to Henry Hub with the construction of a 13.5-mile, 36-inch diameter pipeline loop from Kaplan, Louisiana, directly into Henry Hub. The Henry Hub lateral will provide capacity of 475 million cubic feet per day from Kaplan, Louisiana to Henry Hub. Trunkline received FERC approval on April 23, 2007. This project has an anticipated in-service date during the fourth quarter of 2007. The Company estimates the project will cost approximately $200 million, plus capitalized interest including a $40 million contribution in aid of construction (CIAC) to a subsidiary of Energy Transfer, L.P. (Energy Transfer), a non-affiliated entity, to move its delivery point to a location near Buna, Texas, increasing the field zone project capacity by up to 330,000 dekatherms per day. Energy Transfer has recently indicated that the Buna route is problematic and the parties are currently engaged in discussion of alternate delivery points. The ultimate return and accounting for the CIAC to Energy Transfer depends on completion of construction by Energy Transfer, additional capacity created and sale by Trunkline of the additional capacity. Approximately $17.2 million and $12.5 million of costs for this project are included in the line item Construction work-in-progress at March 31, 2007 and December 31, 2006, respectively.

FERC is responsible under the Natural Gas Act for assuring that rates charged by interstate pipelines are "just and reasonable". To enforce that requirement, FERC applies a ratemaking methodology that determines an allowed rate of return on common equity for the companies it regulates. On October 25, 2006, a group including producers and various trade associations filed a complaint under Section 5 of the Natural Gas Act against Southwest Gas Storage requesting that FERC initiate an investigation into Southwest Gas Storage’s rates, terms and conditions of service and grant immediate interim rate relief. FERC initiated a Section 5 proceeding on December 21, 2006, setting this issue for hearing. Pursuant to FERC order, Southwest Gas Storage filed a cost and revenue study with FERC on February 20, 2007, with a hearing scheduled for August 27, 2007. The ultimate resolution of the Southwest Gas Storage matter has many variables and potential outcomes and it is impossible to predict its timing or materiality at this time. No proceeding has been initiated against PEPL, but any potential rate reductions from such a proceeding would be expected to be mitigated by the impact of significant ongoing capital spending at PEPL for pipeline integrity, safety, environmental (including air emissions), compression modernization and other requirements.

On January 26, 2007, Southwest Gas Storage filed an abandonment application to reduce the certificated storage capacity of its North Hopeton field by approximately 6 Bcf. This filing brings the certificated capacity in line with operational performance of the field. Southwest Gas Storage has entered into a third party agreement to replace this storage capability.

On December 15, 2003, the U.S. Department of Transportation issued a final rule requiring pipeline operators to develop integrity management programs to comprehensively evaluate their pipelines, and take measures to protect pipeline segments located in what the regulation defines as “high consequence areas” (HCAs). This rule resulted from the enactment of the Pipeline Safety Improvement Act of 2002. The rule requires operators to have identified HCAs along their pipelines by December 2004, and to have begun baseline integrity assessments, comprised of in-line inspection (smart pigging), hydrostatic testing or direct assessment, by June 2004. Operators must rank the risk of their pipeline segments containing HCAs and must complete assessments on at least 50 percent of the segments using one or more of these methods by December 2007. Assessments will generally be conducted on the higher risk segments first, with the balance being completed by December 2012. The costs of utilizing these methods typically range from a few thousand dollars per mile to well over $15,000 per mile. In addition, some system modifications will be necessary to accommodate the in-line inspections. All systems operated by the Company will be compliant with the rule; however, while identification and location of all the HCAs has been completed, it is not practicable to determine the total scope of required remediation activities prior to completion of the assessments and inspections. The required modifications and inspections are preliminarily estimated to be in the range of approximately $22.5 million to $30 million per year through 2009, inclusive of remediation costs.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. Related Party Transactions

PEPL receives transportation revenues from Missouri Gas Energy, a Southern Union division, which account for less than one percent of annual consolidated revenues. The following table provides a summary of related party transactions for the periods presented.


	Three Months Ended
	March 31,
Related Party Transactions	2007		2006
	(In thousands)

Transportation and storage of natural gas	$	1,393	$	1,456
Operation and maintenance:
Management and royalty fees		4,225		3,616
Other expenses		7,912		4,565
Other income, net		10,488		1,480

Pursuant to a demand note with Southern Union Company under a cash management program, the Company has loaned excess cash, net of repayments, totaling $168.2 million to Southern Union since Southern Union acquired the Company. Net loans of $19.5 million were recorded during the three-month period ended March 31, 2007. The Company is credited with interest on the note at a one month LIBOR rate. Included in Other, net in the accompanying Condensed Consolidated Statement of Operations is interest income of $1.9 million and $1.4 million for the three-month periods ended March 31, 2007 and 2006, respectively, related to interest on the Note receivable - Southern Union. Due to uncertainties regarding the timing of the Company’s cash flows, including financings, capital expenditures, operating cash flows, the Company is reflecting the Note receivable - Southern Union as a non-current asset at March 31, 2007. The Company does have access to the funds via the demand note and does expect repayment to ultimately occur, with a portion or all amounts possibly drawn during 2007.

On December 1, 2006, LNG Holdings, as borrower, and PEPL and CrossCountry Citrus, LLC (CrossCountry Citrus) as guarantors, entered into a $465 million unsecured term loan facility due April 4, 2008 (2006 Term Loan) with various financial institutions. On December 1, 2006, LNG Holdings loaned the proceeds of the 2006 Term Loan to CrossCountry Citrus in exchange for an interest-bearing promissory note with a principal amount of $465 million, the amount of the proceeds of the 2006 Term Loan. Accrued interest under the promissory note is payable quarterly. The interest rate under the promissory note is based on the interest rate under the 2006 Term Loan, which at March 31, 2007 was a floating rate at 6.20 percent, plus a credit spread over LIBOR of 112.5 basis points. Included in Other, net in the accompanying Condensed Consolidated Statement of Operations is interest income of $8.4 million for the three-month period ended March 31, 2007 related to interest on the Note receivable - CrossCountry Citrus.

Southern Union structured the acquisition of PEPL in a manner intended to qualify as a like-kind exchange of property under Section 1031 of the Internal Revenue Code of 1986. For tax purposes, the Company’s assets that were part of the exchange were recorded at the tax basis of the Southern Union Company assets for which they were exchanged. The resulting transaction generated an estimated deferred tax liability of approximately $91 million at the acquisition date and a corresponding receivable from Southern Union reflected as a reduction to Partners Capital on the Company’s Condensed Consolidated Balance Sheet. Repayment of the receivable from Southern Union is limited to actual tax liabilities otherwise payable by the Company pursuant to the tax sharing agreement with Southern Union Company. The Company recorded a reduction of $27.3 million in 2006 to the tax sharing note receivable resulting from an Internal Revenue Service (IRS) audit of the Southern Union federal income tax return for the period ended June 30, 2003.

Accrued taxes at March 31, 2007 included $23.5 million which was settled in the second quarter of 2007 per the tax-sharing agreement with Southern Union.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table provides a summary of the accounts receivable and payable related party balances included in the Condensed Consolidated Balance Sheet at the dates indicated.

Related Party	March 31, 2007		December 31, 2006
	(In thousands)
Accounts receivable - related parties:
Southern Union (1)	$	-	$	14,448
Other (2)		7,658		3,546
		7,658		17,994
Accounts payable - related parties:
Southern Union (3)	$	24,198	$	14,978
Other (4)		3,386		984
	$	27,584	$	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 CrossCountry Energy transition service costs in 2006.

(3)	Primarily related to corporate services and payroll funding provided by Southern Union and reimbursable medical and insurance costs paid by Southern Union on behalf of the Company.

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

6. Derivatives Instruments and Hedging Activities

The Company uses interest rate swaps to reduce interest rate risks and to manage interest expense. By entering into these agreements, the Company converts floating-rate debt into fixed-rate debt or converts fixed-rate debt to floating. Interest differentials paid or received under the swap agreements are reflected as an adjustment to interest expense. These interest rate swaps are financial derivative instruments that qualify for hedge treatment.

On April 29, 2005, existing LNG Holdings’ bank loans due in January 2007 were repaid in full using the proceeds from a credit agreement entered into on April 26, 2005 which was due in March 2007. Interest rate swaps previously designated as cash flow hedges of the LNG Holdings’ bank loans were terminated upon repayment of the loans on April 29, 2005. As a result, a gain of $3.5 million ($2.1 million, net of tax), was recorded in Accumulated other comprehensive income in the Condensed Consolidated Balance Sheet and was amortized to interest expense through the maturity date of the original bank loans in 2007. For the three month periods ended March 31, 2007 and 2006, a realized gain of $384,000 ($229,000, net of tax) and $463,000 ($278,000, net of tax), respectively was included in Accumulated other comprehensive income related to these swaps. Current market pricing models were used to estimate fair values of interest rate swap agreements.

In March 2004, the Company entered into interest rate swaps to hedge the risk associated with the fair value of its $200 million 2.75 percent Senior Notes. These swaps were terminated in March 2007 upon repayment of the related debt. See related information in Note 7 - Debt.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. Debt

Long-term Debt Obligations	March 31, 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 2008		458,336			465,000
Term Loan due 2012		455,000			-
Net premiums on long-term debt		8,947			9,613
Total debt outstanding		1,639,711			1,647,667
Current portion of long-term debt		(11,806	)		(461,011	)
Interest rate swaps (2.75% Senior Notes)		-			(1,265	)
Total long-term debt	$	1,627,905		$	1,185,391

The Company has $1.64 billion of debt recorded at March 31, 2007. Debt of $726.4 million, including net premiums of $8.9 million, is at fixed rates ranging from 4.80 percent to 8.25 percent, with an average interest rate for 2007 of 5.50 percent including debt premium, discount and issuance cost amortization and 5.78 percent excluding debt premium, discount and issuance cost amortization. The $913.3 million of floating rate debt had an average interest rate of 6.13 percent for the three-month period ended March 31, 2007.

On March 13, 2007, LNG Holdings, as borrower, and PEPL and Trunkline LNG, as guarantors, entered into a $455 million unsecured term loan facility due March 13, 2012 (2012 Term Loan). The interest rate under the 2012 Term Loan is a floating rate tied to a LIBOR rate or prime rate at the Company’s option, in addition to a margin tied to the rating of PEPL’s unsecured senior funded debt. At March 31, 2007, the interest rate was 5.98 percent, including a credit spread of 62.5 basis points over LIBOR. The proceeds of the 2012 Term Loan were used to repay approximately $455 million in existing indebtedness that matured in March 2007, including the $200 million 2.75 percent Senior Notes and the LNG Holdings $255.6 million term loan.

The Company’s notes are subject to certain requirements, such as the maintenance of a fixed charge coverage ratio and a leverage ratio, which if not maintained, restrict the ability of the Company to make certain payments and impose limitations on the ability of the Company to subject its property to liens. At March 31, 2007, the Company, based on the currently most restrictive debt covenant requirements, was subject to a $274.1 million limitation on additional restricted payments including dividends and loans to affiliates, and a limitation of $302.9 million of additional secured or subsidiary level indebtedness or other defined liens based on a limitation on liens covenant. The Company is also subject to a limitation of $374.1 million of total additional indebtedness. At March 31, 2007, the Company was in compliance with all covenants.

At March 31, 2007, the Company had scheduled payments of $11.8 million, $746.6 million, $60.6 million, $40.5 million, nil and $771.3 million for remainder of 2007, the years 2008 through 2011 and in total thereafter, respectively.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Retirement of Debt Obligations

The Company plans to refinance or retire its $746.6 million of debt maturing in 2008 with proceeds from one or a combination of (i) new public debt or equity offering(s); (ii) bank financings; (iii) operating activities; and (iv) existing credit facilities. The Company is in the preliminary stages of planning for the refinancing of debt coming due in 2008. While an inability to repay these obligations would cause a material adverse change to the Company’s financial condition, the Company reasonably believes that it has the ability to refinance these obligations within the required timeframes, although there can be no assurances that the anticipated refinancings will occur.

8. Accumulated Other Comprehensive Income

The table below provides an overview of comprehensive income for the periods indicated.

	Three Months
	Ended March 31,
	2007			2006
	(In thousands)

Net earnings	$	44,481		$	39,065

Realized (gain) loss on cash flow hedging
activities, net of taxes of $(155) and $(185), respectively		(229	)		(276	)
Reclassification of prior service credit relating to other postretirement
benefits into earnings, net of taxes of $(222) and $0, respectively		(678	)		-
Unrealized gain (loss) on cash flow hedging
activities net of taxes of $0 and $0, respectively		-			(2	)
Total other comprehensive income (loss)		(907	)		(278	)

Total comprehensive income	$	43,574		$	38,787

The table below provides an overview of the components in Accumulated other comprehensive income (loss) as of the periods indicated:

	March 31,		December 31,
Components in Accumulated Other Comprehensive Income (loss)	2007		2006
	(In thousands)

Other postretirement plan - net actuarial loss and prior service credit, net of tax	$	14,570	$	15,248
Interest rate hedges, net of tax		-		229
Total Accumulated other comprehensive income, net of tax	$	14,570	$	15,477

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. Postretirement Benefits

Net periodic benefit cost for the three-month periods ended March 31, 2007 and 2006 includes the components noted in the table below.

	Postretirement Benefits
	Three Months Ended
	March 31,
	2007			2006
	(In thousands)

Service cost	$	336		$	440
Interest cost		511			544
Expected return on plan assets		(483	)		(344	)
Prior service credit amortization		(900	)		(911	)
Recognized actuarial loss		-			127
Net periodic benefit cost	$	(536	)	$	(144	)

10. Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109. FIN 48 prescribes a recognition and measurement threshold attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition.

The Company adopted FIN 48, on January 1, 2007. As a result of the implementation of FIN 48 there was no material impact on the condensed consolidated financial statements and no adjustment to Partners’ capital. The Company had no unrecognized tax benefits at January 1, 2007 or March 31, 2007.

The Company’s policy is to classify and accrue interest expense and penalties on income tax underpayments (overpayments) as a component of income tax expense in its Condensed Consolidated Statement of Operations, which is consistent with the recognition of these items in prior reporting periods.

The Company is no longer subject to U.S. federal, state or local examinations, for the tax year ended June 30, 2002 and prior years. Although the Company’s parent, Southern Union Company has settled the IRS examination of the year ended June 30, 2003, the statute remains open with the IRS until December 31, 2007. The state impact of the federal change remains subject to state and local examination, for a period of up to one year after formal notification to the state and local jurisdictions.

11. Commitments and Contingencies

Litigation. The Company is involved in legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business, some of which involve substantial amounts. Where appropriate, the Company has made accruals in accordance with FASB Statement No. 5, Accounting for Contingencies, in order to provide for such matters. The Company believes the final disposition of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Hope Land Mineral Corporation (Hope Land) contends that it owns the storage rights to property that contains a portion of the Company’s Howell storage field. During June 2003, the Michigan Court of Appeals reversed the trial court’s previous order, which had granted summary judgment in favor of the Company and dismissed the case. The Company filed an appeal of the Court of Appeals order with the Michigan Supreme Court, which was denied in December of 2003. In April 2005, Hope Land filed trespass and unjust enrichment complaints against the Company to prevent running of the statute of limitations. The Company then filed an action for condemnation to obtain the storage rights from Hope Land. Pursuant to a pre-filing settlement with Hope Land, the Company obtained legal title to the storage rights upon the filing of the condemnation action. The unjust enrichment claims were dismissed and then reinstated on December 6, 2006. The trial commenced in April 2007, and on May 2, 2007, the jury awarded Hope Land total compensation of approximately $91,000 in respect of condemnation and trespass.

Jack Grynberg, an individual, has filed actions against a number of companies, including the Company, now transferred to the U.S. District Court for the District of Wyoming, for damages for mis-measurement of gas volumes and Btu content, resulting in lower royalties to mineral interest owners. On October 20, 2006, the District Judge adopted in part the earlier recommendation of the Special Master in the case and ordered the dismissal of the case against the Company. Grynberg is appealing that action. A similar action, known as the Will Price litigation, also has been filed against a number of companies, including the Company, in U.S. District Court for the District of Kansas. The Company is currently awaiting the decision of the trial judge on the defendants’ motion to dismiss the Will Price action. The Company believes that its measurement practices conformed to the terms of its FERC gas tariff, which was filed with and approved by FERC. As a result, the Company believes that it has meritorious defenses to these lawsuits (including FERC-related affirmative defenses, such as the filed rate/tariff doctrine, the primary/exclusive jurisdiction of FERC, and the defense that the Company complied with the terms of its tariff) and will continue to vigorously defend against them, including any appeal from the dismissal of the Grynberg case. The Company does not believe the outcome of these cases will have a material adverse effect on its consolidated financial position, results of operations or cash flows.

In 1993, the U.S. Department of the Interior announced its intention to seek, through the Mineral Management Service (MMS), additional royalties from gas producers as a result of payments received by such producers in connection with past take-or-pay settlements and buyouts and buy downs of gas sales contracts with natural gas pipelines. PEPL and Trunkline, with respect to certain producer contract settlements, may be contractually required to reimburse or, in some instances, to indemnify producers against such royalty claims. The potential liability of the producers to the government and of the pipelines to the producers involves complex issues of law and fact, which are likely to take substantial time to resolve. If required to reimburse or indemnify the producers, PEPL and Trunkline may file with FERC to recover these costs from pipeline customers. The Company believes these commitments and contingencies will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Environmental Matters. The Company’s operations are subject to federal, state and local laws and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws and regulations require the Company to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with environmental requirements may expose the Company to significant fines, penalties and/or interruptions in operations. The Company’s environmental policies and procedures are designed to achieve compliance with such laws and regulations. These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future. The Company engages in a process of updating and revising its procedures for the ongoing evaluation of its operations to identify potential environmental exposures and enhance compliance with regulatory requirements. The Company follows the provisions of American Institute of Certified Public Accountants Statement of Position 96-1, Environmental Remediation Liabilities, for recognition, measurement, display and disclosure of environmental remediation liabilities.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Environmental Remediation. The Company is responsible for environmental remediation at certain sites on its gas transmission systems. The contamination resulted from the past use of lubricants containing polychlorinated biphenyls (PCBs) in compressed air systems; the past use of paints containing PCBs; and the prior use of wastewater collection facilities and other on-site disposal areas. The Company has developed and is implementing a program to remediate such contamination. Remediation and decontamination has been completed at each of the 35 compressor station sites where auxiliary buildings that house the air compressor equipment were impacted by the past use of lubricants containing PCBs. At some locations, PCBs have been identified in paint that was applied many years ago. A program has been implemented to remove and dispose of PCB impacted paint during painting activities. At one location on the Trunkline system, PCBs were recently discovered on the painted surfaces of equipment in a building that is outside of the scope of the compressed air system program and the existing PCB impacted paint program. The estimated cost to remediate the painted surfaces at this location is approximately $300,000. An assessment program is being developed to determine whether this condition exists at any of the other 78 similar buildings on the PEPL and Trunkline systems. Until the results of the assessment program are available, the costs associated with remediation of the painted surfaces cannot be reasonably estimated.

Other remediation typically involves the management of contaminated soils and may involve remediation of groundwater. Activities vary with site conditions and locations, the extent and nature of the contamination, remedial requirements, complexity and sharing of responsibility. The ultimate liability and total costs associated with these sites will depend upon many factors. If remediation activities involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Company could potentially be held responsible for contamination caused by other parties. In some instances, such as the Pierce waste oil sites described below, the Company may share liability associated with contamination with other potentially responsible parties (PRP). The Company may also benefit from contractual indemnities that cover some or all of the cleanup costs. These sites are generally managed in the normal course of business or operations. The Company believes the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

PEPL and Trunkline, together with other non-affiliated parties, have been identified as potentially liable for conditions at three former waste oil disposal sites in Illinois - the Pierce Oil Springfield site, the Dunavan Waste Oil site and the McCook site. PEPL and Trunkline received notices of potential liability from the United States Environmental Protection Agency (U.S. EPA) for the Dunavan site by letters dated September 30, 2005. The notices demanded reimbursement to the U.S. EPA for costs incurred to date in the amount of approximately $1.8 million and encouraged each PRP to voluntarily negotiate an administrative settlement agreement with the U.S. EPA within certain limited time frames providing for the PRPs to conduct or finance the response activities required at the site. The demand was declined in a joint letter dated December 15, 2005 by the major PRPs, including PEPL and Trunkline. Although no formal notice has been received for the Pierce Oil Springfield site, special notice letters are anticipated and the process of listing the site on the National Priority List has begun. No formal notice has been received for the McCook site. The Company believes the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

On June 16, 2005, PEPL experienced a release of liquid hydrocarbons near Pleasant Hill, Illinois. The release occurred in the form of a mist at a valve that was in use to reduce the pressure in the pipeline as part of maintenance activities. The hydrocarbon mist affected several acres of adjacent agricultural land and a nearby marina. Approximately 27 gallons of hydrocarbons reached the Mississippi River. PEPL contacted appropriate federal and state regulatory agencies and the U.S. EPA took the lead role in overseeing the subsequent cleanup activities, which have been completed. PEPL has resolved claims of affected boat owners and the marina operator. PEPL received a violation notice from the Illinois Environmental Protection Agency (IEPA) alleging that PEPL was in apparent violation of several sections of the Illinois Environmental Protection Act by allowing the release. The violation notice did not propose a penalty. Responses to the violation notice were submitted and the responses were discussed with the agency. On December 14, 2005, the IEPA notified PEPL that the matter might be considered for referral to the Office of the Attorney General, the State’s Attorney or the U.S. EPA for formal enforcement action and the imposition of penalties. By letter dated November 22, 2006, PEPL received a follow-up information request from the IEPA on the status of certain measures PEPL had agreed to undertake in connection with the original responses to the violation notice. The Company believes the outcome of this matter will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On July 10, 2006, PEPL identified the possible subsurface release of approximately 745 gallons of methanol from a tank located at the Howell compressor station. Subsequent testing of the tank and associated piping confirmed that a release had taken place. Impacted soils were excavated in accordance with state specific regulatory requirements. The impacted soils were transported to an authorized disposal facility. The appropriate federal and state environmental agencies were notified of this release. The Michigan Department of Environmental Quality (MDEQ) conducted an inspection of the remediation effort on October 17, 2006 and indicated that an appropriate response and remediation action had been implemented. A final remediation report was submitted to the MDEQ and U.S. EPA on January 25, 2007. The Company believes the outcome of this matter will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

The table below reflects the amount of accrued liabilities recorded in the Condensed Consolidated Balance Sheet at March 31, 2007 and December 31, 2006 to cover probable environmental response actions:

	March 31,		December 31,
	2007		2006
	(In thousands)

Current	$	1,962	$	1,962
Noncurrent		6,845		6,760
Total Environmental Liabilities	$	8,807	$	8,722

Air Quality Control. The U.S. EPA issued a final rule on regional ozone control (NOx SIP Call) in April 2004 that impacts the Company in two midwestern states, Indiana and Illinois. Based on a U.S. EPA guidance document negotiated with gas industry representatives in 2002, the Company is required in states that follow the U.S. EPA guidance to reduce nitrogen oxide (NOx) emissions by 82 percent on the identified large internal combustion engines and will be able to trade off engines within the Company in an effort to create a cost effective NOx reduction solution. The final implementation date is May 2007. The rule will affect 20 large internal combustion engines on the Company’s system in Illinois and Indiana with an approximate cost of $22.3 million for capital improvements through 2007, based on current projections. Approximately $21.7 million of the $22.3 million of

capital expenditures has been incurred as of March 31, 2007. Indiana has promulgated state regulations to address the requirements of the NOx SIP Call rule that essentially follow the U.S. EPA guidance.

In early April, 2007 the IEPA proposed a rule to the Illinois Pollution Control Board (IPCB) for adoption to control NOx emissions from reciprocating engines and turbines, including a provision applying the rule beyond issues addressed by federal provisions, pursuant to a blanket statewide application. The proposed Illinois rule requires controls on engines regulated under the U.S. EPA NOx SIP Call by May 1, 2007 and the remaining engines by January 1, 2011. The state is requiring the controls to comply with U.S. EPA rules regarding the NOx SIP Call, ozone non-attainment and fine particulate standards. However, the statewide applicability provision proposed by the IEPA reaches beyond federal requirements without apparent justification. A pipeline consortium including PEPL and Trunkline filed an objection to the rule on April 16, 2007 requesting the IPCB to bifurcate and address separately the statewide applicability provision. The pipeline consortium specifically objected to treatment of the statewide applicability issue under an Illinois “Fast Track” rulemaking process. The Fast Track rulemaking process was developed and premised on meeting federally driven requirements. In an order dated April 19, 2007, the IPCB set in motion a schedule of hearings based on the Fast Track process pending the IPCB’s ruling on the objections. The IEPA filed a response to the objections on May 1, 2007. The first hearing is scheduled to start on May 21, 2007. The statewide applicability portion of the proposed Illinois rule serves as the primary driver of costs for PEPL and Trunkline. As currently proposed, the rule applies to all PEPL and Trunkline stations in Illinois. Preliminary estimates indicate compliance with the proposed rule would require minimum capital expenditures of approximately $45 million for emission controls in addition to the $22.3 million associated with federally based NOx reductions described above.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In 2002, the Texas Commission on Environmental Quality enacted the Houston/Galveston SIP regulations requiring reductions in NOx emissions in an eight-county area surrounding Houston. Trunkline’s Cypress compressor station is affected and requires the installation of emission controls. New regulations also require certain grandfathered facilities in Texas to enter into the new source permit program which may require the installation of emission controls at one additional facility owned by the Company. Management estimates capital improvements of $17.6 million will be needed at the two affected Texas locations. Approximately $16.4 million of the $17.6 million of capital expenditures have been incurred as of March 31, 2007. Permit limits were placed on grandfathered engines at two facilities in West Texas that are owned by PEPL. An estimated $3 million in capital expenditures will be required to comply with permit limitations.

The U.S. EPA promulgated various Maximum Achievable Control Technology (MACT) rules in February 2004. The rules require that PEPL and Trunkline control Hazardous Air Pollutants (HAPs) emitted from certain internal combustion engines at major HAPs sources. Most PEPL and Trunkline compressor stations are major HAPs sources. The HAPs pollutant of concern for PEPL and Trunkline is formaldehyde. As promulgated, the rule seeks to reduce formaldehyde emissions by 76 percent from these engines. Catalytic controls will be required to reduce emissions under these rules with a final implementation date of June 2007. PEPL and Trunkline could have up to 20 internal combustion engines subject to the rules. Management expects that compliance with these regulations will necessitate an estimated expenditure of $1.1 million for capital improvements, based on current projections. Most of the expenditures are required to lower facility emissions below thresholds of the EPA MACT applicability.

Spill Control. Environmental regulations were recently modified for the U.S. EPA’s Spill Prevention, Control and Countermeasures program. The Company is currently reviewing the impact of the modifications on its operations and expects to expend resources on tank integrity testing and any associated corrective actions as well as potential upgrades to containment structures. Costs associated with tank integrity testing and resulting corrective actions cannot be estimated with certainty at this time, but the Company believes such costs will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Other Commitments and Contingencies.

Kaplan Compressor Station Damage. On April 21, 2006, Trunkline experienced a fire at its Kaplan, Louisiana compressor station which resulted in damages to the facilities. Trunkline estimates capital expenditures associated with the fire will be approximately $11 million, $7.3 million of which is included in the line item Construction work in progress at March 31, 2007, before consideration of potential insurance recoveries which are subject to a $5 million deductible. The Company does not expect this incident to have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Hurricane Damage. Late in the third quarter of 2005, after coming through the Gulf of Mexico, Hurricanes Katrina and Rita came ashore along the Upper Gulf Coast. These hurricanes caused damage to property and equipment owned by Sea Robin, Trunkline and Trunkline LNG. As of March 31, 2007, the Company has incurred approximately $32 million of capital expenditures related to the hurricanes, primarily for replacement or abandonment of damaged property and equipment at Sea Robin and construction project delays at the Trunkline LNG terminal.

The Company anticipates reimbursement from its property insurance carriers for a significant portion of damages from Hurricane Rita in excess of its $5 million deductible. Such reimbursement is currently estimated by the Company’s property insurance carrier ultimately to be limited to 70 percent of the portion of the claimed damages accepted by the insurance carrier, but the amount is subject to the level of total ultimate claims from all companies relative to the carrier’s $1 billion total limit on payout per event. An estimated $10 million of the costs incurred related to the Trunkline LNG terminal expansion delays are not eligible for insurance recovery. As of March 31, 2007, the Company has received payments of $1.6 million from its insurance carriers. No receivables due from the insurance carriers have been recorded as of March 31, 2007.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In addition, after the 2005 hurricanes, the MMS mandated inspections by leaseholders and pipeline operators along the hurricane tracks. The Company has detected exposed pipe and other facilities on Trunkline and Sea Robin that must be re-covered to comply with applicable regulations. Capital expenditures are estimated at $4.8 million, $1.2 million of which had been incurred as of March 31, 2007. The Company will seek recovery of these expense and capital amounts as part of the hurricane-related claims.

Energy Transfer Commitment. In November 2006, PEPL provided a guaranty to a subsidiary of Energy Transfer, a non-affiliate, for the full performance by Trunkline of a $40 million CIAC obligation related to a modification of the field zone expansion project expected to be completed in late 2007. The CIAC would be made by Trunkline upon movement of Energy Transfer’s delivery point to a location near Buna, Texas. Energy Transfer has recently indicated that the Buna route is problematic and the parties are currently engaged in discussion of alternate delivery points. The ultimate return and accounting for the CIAC to Energy Transfer depends on completion of construction by Energy Transfer, additional capacity created and sale by Trunkline of the additional capacity.

Controlled Group Pension Liabilities. Southern Union (including certain of its divisions) sponsors a number of defined benefit pension plans for employees. Under applicable pension and tax laws, upon being acquired by Southern Union, the Company became a member of Southern Union’s “controlled group” with respect to those plans, and, along with Southern Union and any other members of that group, is jointly and severally liable for any failure by Southern Union (along with any other persons that may be or become a sponsor of any such plan) to fund any of these pension plans or to pay any unfunded liabilities that these plans may have if they are ever terminated. In addition, if any of the obligations of any of these pension plans is not paid when due, a lien in favor of that plan or the Pension Benefit Guaranty Corporation may be created against the assets of each member of Southern Union’s controlled group, including the Company and each of its subsidiaries. Based on the latest actuarial information available as of December 31, 2006, the aggregate amount of the projected benefit obligations of these pension plans was approximately $163 million and the estimated fair value of all of the assets of these plans was approximately $108.6 million.

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

Management’s Discussion and Analysis of Results of Operations and Financial Condition is provided as a supplement to the accompanying unaudited interim condensed consolidated financial statements and notes to help provide an understanding of the Company’s financial condition, results of operations and changes in financial condition. The following section includes an overview of the Company’s business as well as recent developments that the Company believes are important in understanding its results of operations and in anticipating future trends in those operations. Subsequent sections include an analysis of the Company’s results of operations on a consolidated basis and information relating to the Company’s liquidity and capital resources, quantitative and qualitative disclosures about market risk and other matters. The information required by this Item is presented in a reduced disclosure format pursuant to General Instruction H to Form 10-Q.

Overview

The Company is primarily engaged in the interstate transportation and storage of natural gas and also provides LNG terminalling and regasification services, with rates and services regulated by FERC. The Company’s entities include PEPL, Trunkline, Sea Robin, Trunkline LNG and Southwest Gas Storage. Collectively, the pipeline assets include approximately 10,000 miles of interstate pipelines that transport natural gas from the Gulf of Mexico, South Texas and the panhandle regions of Texas and Oklahoma to major U.S. markets in the Midwest and Great Lakes region. The pipelines have a combined peak day delivery capacity of 5.3 billion cubic feet per day (Bcf/d) and approximately 66 billion cubic feet (Bcf) of owned underground storage capacity. Trunkline LNG, located on Louisiana's Gulf Coast, operates one of the largest LNG import terminals in North America, based on current send out capacity, and has 9.0 Bcf of above ground LNG storage capacity.

The Company earns the majority of its revenue by entering into firm transportation and storage contracts, providing capacity for customers to transport or store natural gas in its facilities. Approximately 24 percent of the Company’s total operating revenue comes from long-term service agreements with local distribution company customers and their affiliates. The Company also provides firm transportation services under contract to gas marketers, producers, other pipelines, electric power generators and a variety of end-users. In addition, the Company’s pipelines offer both firm and interruptible transportation to customers on a short-term or seasonal basis. Demand for gas transmission on the Company’s pipeline systems is seasonal, with the highest throughput and a higher portion of annual total operating revenues and net earnings occurring in the traditional winter heating season in the first and fourth calendar quarters. Average reservation revenue rates realized by the Company are dependent on certain factors, including but not limited to rate regulation, customer demand for reserved capacity, capacity sold levels for a given period and, in some cases, utilization of capacity. Commodity revenues are also dependent upon a number of variable factors including weather, storage levels, and customer demand for firm interruptible and parking services. For the years 2004, 2005 and 2006, the Company’s combined throughput was 1,284 trillion British thermal units (TBtu), 1,214 TBtu and 1,180 TBtu, respectively. For the three-month periods ended March 31, 2007 and 2006, the Company’s combined throughput was 371 TBtu and 302 TBtu, respectively.

The Company’s regulated transportation and storage businesses periodically file (or can be required to file) for changes in their rates, which are subject to approval by FERC. Changes in rates and other tariff provisions resulting from these regulatory proceedings have the potential to negatively impact the Company’s results of operations and financial condition.

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Results of Operations


	Three Months Ended March 31,
	2007			2006			Change
	(In thousands)

Operating revenue:
Transportation and storage of natural gas	$	133,705		$	121,332		$	12,373
LNG terminalling revenue		32,902			19,555			13,347
Other revenue		2,423			3,756			(1,333	)
Total operating revenue		169,030			144,643			24,387

Operating expenses:
Operation, maintenance and general		56,280			46,098			10,182
Depreciation and amortization		20,709			17,474			3,235
Taxes, other than on income		7,795			7,350			445
Total operating expenses		84,784			70,922			13,862
Operating income		84,246			73,721			10,525

Other income (expense):
Interest expense, net		(22,026	)		(12,875	)		(9,151	)
Other, net		11,057			3,241			7,816
Total other expense, net		(10,969	)		(9,634	)		(1,335	)

Earnings before income taxes		73,277			64,087			9,190

Income taxes		28,796			25,022			3,774


Net earnings	$	44,481		$	39,065		$	5,416

Operating Revenue. For the three-month period ended March 31, 2007, operating revenue increased $24.4 million versus the same period in 2006 primarily due to:

A $13.3 million increase in LNG terminalling revenue due to 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

Increased transportation and storage revenue of $12.4 million due to higher parking revenues of $4.7 million, higher reservation revenues of $4.3 million, which were primarily driven by higher average rates on contracts, higher storage revenues of $2.3 million due to increased contracted capacity and higher commodity revenues of $1.1 million due to higher volumes.

Operating Expenses. Operating expenses for the three-month period ended March 31, 2007 increased $13.9 million versus the same period in 2006 primarily due to:

·	Increased depreciation and amortization expense of $3.2 million due to an increase in property, plant and equipment placed in service, including the Trunkline LNG Phase I and Phase II expansions;

·	An increase in operation, maintenance and general expenses of $10.2 million primarily due to:

a $3.8 million increase in corporate costs due to Southern Union’s disposition of certain assets during 2006 resulting in a larger allocation of corporate costs to the remaining business units;

a $2.1 million increase in LNG power costs resulting from increased cargoes;

a $1.2 million increase in Sea Robin fuel tracker costs due to an under recovery in the first quarter of 2007;

a $1 million increase in labor and benefits;

a $500,000 increase in legal costs;

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a $600,000 increase in insurance expense due to higher premiums and higher workers’ compensation losses; and

a $500,000 increase in contract storage costs primarily due to an increase in leased capacity and overrun charges.

The Company expects contract storage expense to increase beginning in the second quarter of 2007 due to the replacement of certain owned storage capacity, which has been filed for abandonment, with leased capacity, as well as other incremental storage leased in support of contracted storage and transportation services being provided to third party shippers.

Other Expense, Net. Other expense, net for the three-month period ended March 31, 2007 increased $1.3 million versus the same period in 2006. Interest expense increased $9.2 million primarily due to higher debt balances and higher LIBOR rates. Other, net increased $7.8 million primarily due to higher related party interest income caused by higher related party note receivable balances in 2007 (which offsets against a corresponding amount of the increased debt balance) and increases in the underlying LIBOR-based rates.

Income Taxes. The Company’s estimated annual consolidated federal and state effective income tax rate was 39 percent for the three-month periods ended March 31, 2007 and 2006, respectively. Income taxes during the three-month period ended March 31, 2007, versus the same period in 2006, increased $3.8 million due to higher pretax income.

OTHER MATTERS

Contingencies

See PART I, ITEM 1. Financial Statements (Unaudited), Note 11 - Commitments and Contingencies and Note 4 - Regulatory Matters, in this Quarterly Report on Form 10-Q.

Regulatory

See PART I, ITEM 1. Financial Statements (Unaudited), Note 4 - Regulatory Matters, in this Quarterly Report on Form 10-Q.

Insurance

The Company maintains insurance coverage provided under its policies similar to other comparable companies in the same lines of business. The insurance policies are subject to terms, conditions, limitations and exclusions that do not fully compensate the Company for all losses. Insurance deductibles range from $100,000 to $5 million for the various policies utilized by the Company. Effective June 1, 2007, insurance deductibles for the Company’s policies will range from $100,000 to $10 million. Furthermore, as the Company renews its policies, it is possible that full insurance coverage may not be obtainable on commercially reasonable terms due to the recent more restrictive insurance markets.

Debt Refinancing

The Company plans to refinance or retire its $746.6 million of debt maturing in 2008 with proceeds from one or a combination of (i) new public debt or equity offering(s); (ii) bank financings; (iii) operating activities; and (iv) existing credit facilities. The Company is in the preliminary stages of planning for the refinancing of debt coming due in 2008. While an inability to repay these obligations would cause a material adverse change to the Company’s financial condition the Company reasonably believes that it has the ability to refinance these obligations within the required timeframes, although there can be no assurances that the anticipated refinancings will occur.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Item 3, Quantitative and Qualitative Disclosures About Market Risk, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Panhandle has established disclosure controls and procedures to ensure that information required to be disclosed by the Company, including consolidated entities, in reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Operating Officer (COO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure. The Company performed an evaluation under the supervision and with the participation of management, including its COO and CFO, and with the participation of personnel from its Legal, Internal Audit, Risk Management and Financial Reporting Departments, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on that evaluation, Panhandle’s COO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2007.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Cautionary Statement Regarding Forward-Looking Information

The disclosure and analysis in this Form 10-Q contains some forward-looking statements that set forth anticipated results based on management’s plans and assumptions. From time to time, the Company also provides forward-looking statements in other materials it releases to the public as well as oral forward-looking statements. Such statements give the Company’s current expectations or forecasts of future events; they do not relate strictly to historical or current facts. The Company has tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated products, expenses, interest rates, the outcome of contingencies, such as legal proceedings, and financial results. The Company cannot guarantee that any forward-looking statement will be realized, although management believes that the Company has been prudent in its plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. If known or unknown risks or uncertainties should materialize, or if underlying assumptions should prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. Readers should bear this in mind as they consider forward-looking statements.

The Company undertakes no obligation publicly to update forward-looking statements, whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures the Company makes on related subjects in its 10-K, 10-Q and 8-K reports to the SEC. Also note that the Company provides the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to its businesses. These are factors that, individually or in the aggregate, management thinks could cause the Company’s actual results to differ materially from expected and historical results. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers should understand that it is not possible to predict or identify all such factors. Consequently, readers should not consider the following to be a complete discussion of all potential risks or uncertainties.

Factors that could cause actual results to differ materially from those expressed in the Company’s forward-looking statements include, but are not limited to, the following:

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;

additional level of competition potentially increasing the number of discounted revenue transactions;

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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 speed and degree to which additional competition is introduced to the Company’s business and the resulting effect on revenues;

the outcome of pending and future litigation;

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

unanticipated environmental liabilities;

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

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

the impact of factors affecting operations such as maintenance or repairs, environmental incidents, 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;

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

The Company and certain of its affiliates are occasionally parties to lawsuits and administrative proceedings incidental to their businesses involving, for example, claims for personal injury and property damage, contractual matters, various tax matters, and rates and licensing. The Company and its affiliates are also subject to various federal, state and local laws and regulations relating to the environment. Several of these companies have been named parties to various actions involving environmental issues. Based on our present knowledge and subject to future legal and factual developments, the Company’s management believes that it is unlikely that these actions, individually or in the aggregate, will have a material adverse effect on its financial condition. For additional information regarding various pending administrative and judicial proceedings involving regulatory, environmental and other legal matters, reference is made to ITEM 1. Financial Statements (Unaudited), Note 11 - Commitments and Contingencies, as well as to ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I. Financial Information.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in the Company’s Form 10-K.

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

Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

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ITEM 3. Defaults Upon Senior Securities

Item 3, Defaults Upon Senior Securities, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

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

Item 4, Submission of Matters to a Vote of Security Holders, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

ITEM 5. Other Information

N/A

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.)

4(b)	1st 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)	2nd 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)	3rd 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)	4th 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)	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.)

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10 (a)	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(b)	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 December 1, 2006. (Filed as Exhibit 10.1 to Panhandle’s Current Report on Form 8-K filed on December 7, 2006 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.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, Panhandle Eastern Pipe Line Company, LP has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PANHANDLE EASTERN PIPE LINE COMPANY, LP




Date: May 10, 2007	By: /s/ ROBERT O. BOND
	Robert O. Bond President and Chief Operating Officer (authorized officer) /s/ GARY W. LEFELAR Gary W. Lefelar Senior Vice President and Chief Accounting Officer (principal accounting officer)

Exhibit 31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert O. Bond, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Panhandle Eastern Pipe Line Company, LP;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2007

/s/ ROBERT O. BOND

Robert O. Bond

President and Chief Operating Officer

Exhibit 31.2

Exhibit 31.2

CERTIFICATIONS

I, Richard N. Marshall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Panhandle Eastern Pipe Line Company, LP;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2007

/s/ RICHARD N. MARSHALL

Richard N. Marshall

Senior Vice President and Chief Financial Officer

Exhibit 32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Panhandle Eastern Pipe Line Company, LP (the "Company") for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert O. Bond, as President and Chief Operating Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that (i) The Report fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROBERT O. BOND

Name: Robert O. Bond

Title: President and Chief Operating Officer

Date: May 10, 2007

This Certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Exhibit 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Panhandle Eastern Pipe Line Company, LP (the "Company") for the quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard N. Marshall, as Senior Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RICHARD N. MARSHALL

Name: Richard N. Marshall

Title: Senior Vice President and Chief Financial Officer

Date: May 10, 2007