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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015



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

Commission file number 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 incorporation or organization)	(I.R.S. Employer Identification No.)

8111 Westchester Drive, Suite 600, Dallas, Texas 75225

(Address of principle executive offices) (zip code)

(214) 981-0700

(Registrant’s telephone number, including area code)

3738 Oak Lawn Avenue, Dallas, Texas 75219

(Former address, if changed since last report)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨

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

Panhandle Eastern Pipe Line Company, 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.

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FORM 10-Q

PANHANDLE EASTERN PIPE LINE COMPANY, LP

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PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income (Loss)	4
	Consolidated Statement of Partners’ Capital	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13

ITEM 4.	CONTROLS AND PROCEDURES	13

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	13

ITEM 1A.	RISK FACTORS	13

ITEM 6.	EXHIBITS	14

SIGNATURE		15

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Forward-Looking Statements

Certain matters discussed in this report, excluding historical information, as well as some statements by Panhandle Eastern Pipe Line Company, LP and its subsidiaries (the “Company”) in periodic press releases and some oral statements of the Company’s officials during presentations about the Company, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “believe,” “intend,” “project,” “plan,” “expect,” “continue,” “estimate,” “goal,” “forecast,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Company believes such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations, or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated, projected, forecasted, estimated or expressed in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I — Item 1A. Risk Factors” in the Company’s Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on February 27, 2015.

Definitions

The following is a list of certain acronyms and terms generally used in the energy industry and throughout this document:



Bcf		Billion cubic feet

Btu		British thermal units

ETE		Energy Transfer Equity, L.P.

ETP		Energy Transfer Partners, L.P., a subsidiary of ETE

Exchange Act		Securities Exchange Act of 1934

FERC		Federal Energy Regulatory Commission

GAAP		Accounting principles generally accepted in the United States of America

Lake Charles LNG		Lake Charles LNG Company, LLC

LNG		Liquefied natural gas

OPEB Plans		Other postretirement employee benefit plans

PCBs		Polychlorinated biphenyls

PEPL		Panhandle Eastern Pipe Line Company, LP

PEPL Holdings		PEPL Holdings, LLC

Regency		Regency Energy Partners LP

Sea Robin		Sea Robin Pipeline Company, LLC

SEC		United States Securities and Exchange Commission

Southern Union		Southern Union Company

Southwest Gas		Pan Gas Storage LLC

TBtu		Trillion British thermal units

Trunkline		Trunkline Gas Company, LLC

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	September 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	30		$	32
Accounts receivable, net	41			58
Accounts receivable from related companies	120			128
Exchanges receivable	9			11
Inventories	99			119
Other current assets	15			13
Total current assets	314			361
Property, plant and equipment:
Plant in service	3,408			3,352
Construction work in progress	48			43
	3,456			3,395
Accumulated depreciation and amortization	(342		)	(269		)
Net property, plant and equipment	3,114			3,126
Investments in unconsolidated affiliates	15			1,443
Other non-current assets, net	127			109
Note receivable from related party	1,369			—
Goodwill	923			1,152
Total assets	$	5,862		$	6,191

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	September 30, 2015		December 31, 2014
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Current maturities of long-term debt	$	1	$	1
Accounts payable and accrued liabilities	4		6
Accounts payable to related companies	57		38
Exchanges payable	83		114
Accrued interest	24		12
Customer advances and deposits	9		10
Other current liabilities	60		56
Total current liabilities	238		237
Long-term debt, less current maturities	1,172		1,189
Deferred income taxes	722		1,511
Advances from affiliates	566		51
Other non-current liabilities	289		278
Commitments and contingencies
Partners’ capital:
Partners’ capital	2,874		2,925
Accumulated other comprehensive income	1		—
Total partners’ capital	2,875		2,925
Total liabilities and partners’ capital	$	5,862	$	6,191

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions)

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
OPERATING REVENUES
Transportation and storage of natural gas	$	121		$	125		$	393		$	417
Other	5			7			16			22
Total operating revenues	126			132			409			439
OPERATING EXPENSES
Cost of natural gas and other energy	1			1			4			4
Operating and maintenance expense	56			55			159			151
General and administrative expense	12			12			35			33
Depreciation and amortization	31			33			101			96
Total operating expenses	100			101			299			284
OPERATING INCOME	26			31			110			155
OTHER INCOME (EXPENSE)
Interest expense, net	(13		)	(15		)	(38		)	(52		)
Income from unconsolidated affiliates	28			9			26			7
Interest income — affiliates	6			5			7			17
Other, net	1			1			5			5
Total other expenses, net	22			—			—			(23		)
INCOME BEFORE INCOME TAX EXPENSE	48			31			110			132
Income tax expense (benefit)	(28		)	8			9			128
NET INCOME	76			23			101			4
Less: Net income attributable to noncontrolling interest	—			—			—			6
NET INCOME (LOSS) ATTRIBUTABLE TO PARTNERS	$	76		$	23		$	101		$	(2	)

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Net income	$	76	$	23	$	101	$	4
Other comprehensive income (loss), net of tax:
Actuarial gain (loss) relating to postretirement benefit plans	—		—		1		(1		)
	—		—		1		(1		)
Comprehensive income	$	76	$	23	$	102	$	3

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(Dollars in millions)

(unaudited)



	Partners’ Capital			Accumulated Other Comprehensive Income		Total
Balance, December 31, 2014	$	2,925		$	—	$	2,925
Distributions to partners	(125		)	—		(125		)
Unit-based compensation expense	2			—		2
Other comprehensive income	—			1		1
Contribution to SUG Holding	(29		)	—		(29		)
Net income	101			—		101
Balance, September 30, 2015	$	2,874		$	1	$	2,875

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)



	Nine Months Ended September 30,
	2015			2014
OPERATING ACTIVITIES
Net income	$	101		$	4
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	101			96
Deferred income taxes	22			(238		)
Amortization included in interest expense	(17		)	(16		)
Derivative valuation changes	—			(12		)
Unit-based compensation expense	5			4
(Income) loss from unconsolidated affiliates	(26		)	(7		)
Distributions of earnings received from unconsolidated affiliates	9			18
Cash flow changes in other assets and liabilities	5			(5		)
Cash flow changes in operating assets and liabilities	(23		)	336
Net cash flows provided by operating activities	177			180
INVESTING ACTIVITIES
Capital expenditures	(99		)	(70		)
Distributions in excess of earnings from unconsolidated affiliates	45			36
Repayment of note receivable from related party	40			10
Note receivable issued to related party	(40		)	—
Other	—			(16		)
Net cash flows used in investing activities	(54		)	(40		)
FINANCING ACTIVITIES
Distributions to partners	(125		)	(102		)
Net cash flows used in financing activities	(125		)	(102		)
Net change in cash and cash equivalents	(2		)	38
Cash and cash equivalents, beginning of period	32			17
Cash and cash equivalents, end of period	$	30		$	55

NON-CASH INVESTING ACTIVITIES
Note receivable issued in exchange for investment	$	1,369		$	—

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

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts are in millions)

(unaudited)


1.	ORGANIZATION AND BASIS OF PRESENTATION

Organization

Panhandle Eastern Pipe Line Company, LP (“PEPL”) and its subsidiaries (the “Company”) are primarily engaged in interstate pipelines that transport natural gas from the Gulf of Mexico, south Texas and the panhandle region of Texas and Oklahoma to major United States markets in the Midwest and Great Lakes regions and storage of natural gas and are subject to the rules and regulations of the FERC. The Company’s subsidiaries are Trunkline Gas Company, LLC, Sea Robin Pipeline Company, LLC and PanGas Storage LLC.

Southern Union Panhandle LLC, an indirect wholly-owned subsidiary of ETP, owns a 1% general partnership interest in PEPL and ETP indirectly owns a 99% limited partnership interest in PEPL.

The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of the Company’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.


2.	RELATED PARTY TRANSACTIONS

Accounts receivable from related companies reflected on the consolidated balance sheets primarily related to services provided to ETE, ETP and other affiliates. Accounts payable to related companies reflected on the consolidated balance sheets related to various services provided by ETP and other affiliates.

The following table provides a summary of the related party activity included in our consolidated statements of operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Operating revenues	$	4	$	4	$	13	$	28
Operating and maintenance	4		4		12		12
General and administrative	8		9		24		25
Interest income — affiliates	6		5		7		17
Income from unconsolidated affiliates	28		9		26		7

The Company received $39 million and $6 million in cash distributions related to its investment in ETP during the nine months ended September 30, 2015 and 2014, respectively. The Company also received $16 million and $45 million in distributions related to its investment in Regency during the nine months ended September 30, 2015 and 2014, respectively. The Company paid $125 million in distributions to a subsidiary of ETP during the nine months ended September 30, 2015.

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3.	INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company’s investment in Regency consisted of 31.4 million Regency common units and 6.3 million Regency Class F units at December 31, 2014. In connection with the merger of ETP and Regency in April 2015, the Regency common units and Regency Class F units converted to 15.5 million ETP common units. The Company’s investment was accounted for using the equity method. Effective September 1, 2015, the Company exchanged these ETP common units, along with ETP common units that had been received in a previous transaction, for a note receivable from a subsidiary of ETP in the amount of $1.37 billion. The note receivable accrues interest annually at 4.75% and is due on September 1, 2035. In connection with this transaction, the Company also recorded a reduction in goodwill of $229 million and net deferred tax liabilities of $825 million, which amounts were associated with the exchanged ETP common units as a result of previous transactions whereby the Company had acquired ETP common units (and previously, Regency common units and Class F units) in exchange for other assets.

The following table presents aggregated selected income statement data for ETP (on a 100% basis for all periods presented):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Revenue	$	6,601	$	14,933	$	28,467	$	42,048
Operating income	576		810		2,072		2,284
Net income	393		514		1,500		1,544

The Company has other equity method investments which were not, individually or in the aggregate, significant to our consolidated financial statements.


4.	INCOME TAXES

For the nine months ended September 30, 2015, the statutory rate differed from the effective rate primarily due to $14 million of net state tax benefit attributable to statutory rate changes resulting from the merger of ETP and Regency in April 2015 and the non-taxable transfer of ETP common units to an affiliate in September 2015. Additionally, the Company recognized a net tax benefit of $7 million related to the settlement of the Southern Union 2004-2009 Internal Revenue Service (“IRS”) examination in July 2015. The effective tax rate exceeded the statutory rate for the nine months ended September 30, 2014 primarily due to the Lake Charles LNG Transaction. The Lake Charles LNG Transaction, which was treated as a sale for tax purposes, resulted in $81 million of incremental income tax expense.


5.	DERIVATIVE ASSETS AND LIABILITIES

The Company is exposed to certain risks in its ongoing business operations. The Company, from time to time, uses interest rate derivative contracts to manage interest rate risk associated with its long-term borrowings. The Company recognizes all derivative assets and liabilities at fair value on the consolidated balance sheets. The Company had no outstanding interest rate swap agreements as of September 30, 2015 or December 31, 2014.

The following table summarizes the location and amount (excluding income tax effects) of derivative instrument (gains) and losses reported in the Company’s consolidated financial statements:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2015		2014
Interest rate contracts:
Increase (decrease) in interest expense	$	—	$	(13	)	$	—	$	(6	)

Credit Risk

Credit risk refers to the risk that a shipper may default on its contractual obligations resulting in a credit loss to the Company. A credit policy has been approved and implemented to govern the Company’s portfolio of shippers with the objective of mitigating credit losses. This policy establishes guidelines, controls, and limits, consistent with FERC filed tariffs, to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing and potential shippers, monitoring agency credit ratings, and by implementing credit practices that limit credit exposure according

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to the risk profiles of the shippers. Furthermore, the Company may, at times, require collateral under certain circumstances in order to mitigate credit risk as necessary.

The Company’s shippers consist of a diverse portfolio of customers across the energy industry, including oil and gas producers, midstream companies, municipalities, utilities, and commercial and industrial end users. Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that could impact our shippers to one extent or another. Currently, management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of shipper non-performance.


6.	FAIR VALUE MEASURES

The Company did not have any assets or liabilities measured at fair value on a recurring basis at September 30, 2015 or December 31, 2014. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to their short-term maturities. Based on the estimated borrowing rates currently available to the Company and its subsidiaries for loans with similar terms and average maturities, the aggregate fair value of the Company’s consolidated debt obligations at September 30, 2015 and December 31, 2014 was $1.20 billion and $1.24 billion, respectively. The fair value of the Company’s consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities. The Company did not have any Level 3 instruments measured at fair value at September 30, 2015 or December 31, 2014, and there were no transfers between hierarchy levels.


7.	REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES

Sea Robin Rate Case

On December 2, 2013, Sea Robin filed a general NGA Section 4 rate case at the FERC as required by a previous rate case settlement. In the filing, Sea Robin seeks to increase its authorized rates to recover costs related to asset retirement obligations, depreciation, and return and taxes. A settlement was reached with the shippers and a stipulation and agreement was filed with the FERC on July 23, 2014. The settlement was certified to the FERC by the administrative law judge on October 7, 2014 and was approved by the FERC on June 26, 2015. In September 2015, related to the final settlement, Sea Robin made refunds to customers totaling $11 million, including interest.

PEPL Holdings Guarantee of Collection

The Company fully and unconditionally guaranteed (the “Panhandle Guarantee”) all of the payment obligations of Regency and Regency Energy Finance Corp. under their $600 million in aggregate principal amount of 4.50% senior notes due November 2023, until May 28, 2015, at which time ETP entered into a supplemental indenture relating to the senior notes pursuant to which it has agreed to become a co-obligor with respect to the payment obligations thereunder. Accordingly, pursuant to the terms of the senior notes, the Company’s obligations under the Panhandle Guarantee were released.

Contingent Residual Support Agreement with ETP

The Company provides contingent, residual support to Citrus ETP Finance LLC (on a non-recourse basis to the Company) with respect to Citrus ETP Finance LLC’s obligations to ETP to support the payment of $2 billion in principal amount of senior notes issued by ETP on January 17, 2012.

Environmental Matters

The Company’s operations are subject to federal, state and local laws, rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws, rules 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 laws, rules and regulations 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 applicable 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 is responsible for environmental remediation at certain sites on its natural gas transmission systems for contamination resulting from the past use of lubricants containing 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 implemented a program to remediate such contamination. The primary remaining remediation activity on the Company’s

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systems is associated with past use of paints containing PCBs or PCB impacts to equipment surfaces and to a building at one location. The PCB assessments are ongoing and the related estimated remediation costs are subject to further change. 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, the Company may share liability associated with contamination with other potentially responsible parties. 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’s environmental remediation activities are undertaken in cooperation with and under the oversight of appropriate regulatory agencies, enabling the Company under certain circumstances to take advantage of various voluntary cleanup programs in order to perform the remediation in the most effective and efficient manner.

The table below reflects the amount of accrued liabilities recorded on the consolidated balance sheets at the dates indicated to cover environmental remediation activities where management believes a loss is probable and reasonably estimable. The Company is not able to estimate the possible loss or range of loss in excess of amounts accrued. The Company does not have any material environmental remediation matters assessed as reasonably possible.



	September 30, 2015		December 31, 2014
Current	$	1	$	1
Non-current	3		3
Total environmental liabilities	$	4	$	4

Litigation and Other Claims

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.

Attorney General of the Commonwealth of Massachusetts v. New England Gas Company

On July 7, 2011, the Massachusetts Attorney General (“AG”) filed a regulatory complaint with the Massachusetts Department of Public Utilities (“MDPU”) against New England Gas Company with respect to certain environmental cost recoveries. The AG is seeking a refund to New England Gas Company customers for alleged “excessive and imprudently incurred costs” related to legal fees associated with Southern Union’s environmental response activities. In the complaint, the AG requests that the MDPU initiate an investigation into the New England Gas Company’s collection and reconciliation of recoverable environmental costs including: (i) the prudence of any and all legal fees, totaling $19 million, that were charged by the Kasowitz, Benson, Torres & Friedman firm and passed through the recovery mechanism since 2005, the year when a partner in the firm, the Southern Union former Vice Chairman, President and Chief Operating Officer, joined Southern Union’s management team; (ii) the prudence of any and all legal fees that were charged by the Bishop, London & Dodds firm and passed through the recovery mechanism since 2005, the period during which a member of the firm served as Southern Union’s Chief Ethics Officer; and (iii) the propriety and allocation of certain legal fees charged that were passed through the recovery mechanism that the AG contends only qualify for a lesser, 50%, level of recovery. Southern Union has filed its answer denying the allegations and moved to dismiss the complaint, in part on a theory of collateral estoppel. The hearing officer has deferred consideration of Southern Union’s motion to dismiss. The AG’s motion to be reimbursed expert and consultant costs by Southern Union of up to $150,000 was granted. By tariff, these costs are recoverable through rates charged to New England Gas Company customers. The hearing officer previously stayed discovery pending resolution of a dispute concerning the applicability of attorney-client privilege to legal billing invoices. The MDPU issued an interlocutory order on June 24, 2013 that lifted the stay, and discovery has resumed. The Company (as successor to Southern Union) believes it has complied with all applicable requirements regarding its filings for cost recovery and has not recorded any accrued liability; however, the Company will continue to assess its potential exposure for such cost recoveries as the matter progresses.

Liabilities for Litigation and Other Claims

The Company records accrued liabilities for litigation and other claim costs when management believes a loss is probable and reasonably estimable. When management believes there is at least a reasonable possibility that a material loss or an additional material loss may have been incurred, the Company discloses (i) an estimate of the possible loss or range of loss

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in excess of the amount accrued; or (ii) a statement that such an estimate cannot be made. As of September 30, 2015 and December 31, 2014, the Company has litigation and other claim-related accrued liabilities of $21 million. The Company does not have any material litigation or other claim contingency matters assessed as probable or reasonably possible that would require disclosure in the financial statements.

Other Commitments and Contingencies

The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment (the transfer of property to the state) of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements. The Company is currently being examined by a third party auditor on behalf of nine states for compliance with unclaimed property laws.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(Tabular dollar amounts are in millions)

The information in Item 2 has been prepared pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q. Accordingly, this Item 2 includes only management’s narrative analysis of the results of operations and should be read in conjunction with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q; (ii) our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 27, 2015; and (iii) our management’s discussion and analysis of financial condition and results of operations included in our 2014 Form 10-K.

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RESULTS OF OPERATIONS



	Nine Months Ended September 30,
	2015			2014
OPERATING REVENUES
Transportation and storage of natural gas	$	393		$	417
Other	16			22
Total operating revenues	409			439
OPERATING EXPENSES
Cost of natural gas and other energy	4			4
Operating and maintenance expense	159			151
General and administrative expense	35			33
Depreciation and amortization	101			96
Total operating expenses	299			284
OPERATING INCOME	110			155
OTHER INCOME (EXPENSE)
Interest expense, net	(38		)	(52		)
Income from unconsolidated affiliates	26			7
Interest income — affiliates	7			17
Other, net	5			5
Total other expenses, net	—			(23		)
INCOME BEFORE INCOME TAX EXPENSE	110			132
Income tax expense	9			128
NET INCOME	101			4
Less: Net income attributable to noncontrolling interest	—			6
NET INCOME (LOSS) ATTRIBUTABLE TO PARTNERS	$	101		$	(2	)
Panhandle natural gas volumes transported (TBtu):
PEPL	450			458
Trunkline	501			518
Sea Robin	86			103

Operating Revenues. Operating revenues decreased for the nine months ended September 30, 2015 compared to the same period in the prior year primarily due to the impact of colder weather in the first quarter of 2014, which increased gas parking service related and firm reservation transportation revenues. Additionally, transportation revenues for the nine months ended September 30, 2015 decreased $7 million due to a managed contract roll off to facilitate the transfer of one of the pipelines at Trunkline that was taken out of service in advance of being repurposed from natural gas service to crude oil service.

Operating and Maintenance Expenses. Operating and maintenance expenses increased for the nine months ended September 30, 2015 compared to the same period in the prior year primarily due to $5 million higher employee and fuel expenses as well as higher legal fees due to a reversal of a $3 million legal reserve during the first quarter of 2014.

Interest Expense, Net. Interest expense, net decreased for the nine months ended September 30, 2015 compared to the same period in the prior year due to the repayment of long-term debt during 2014.

Income from Unconsolidated Affiliates. Income from unconsolidated affiliates increased for the nine months ended September 30, 2015 compared to the same period in the prior year primarily due to a $25 million non-cash gain recorded during the nine months ended September 30, 2015, partially offset by a $9 million non-cash loss due to the conversion of the Regency common units and Regency Class F units owned by the Company into ETP common units and the corresponding reduction of the Company’s proportionate ownership in ETP compared to Regency.

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Interest Income - Affiliates. Interest income from affiliates decreased for the nine months ended September 30, 2015 compared to the same period in the prior year due to the settlement of a note receivable from related party during 2014.

Income Taxes. For the nine months ended September 30, 2015, the statutory rate differed from the effective rate primarily due to statutory rate changes as a result of the merger of ETP and Regency in April 2015. The effective tax rate exceeded the statutory tax rate for the nine months ended September 30, 2014 primarily due to the Lake Charles LNG Transaction. The Lake Charles LNG Transaction, which was treated as a sale for tax purposes, resulted in $81 million of incremental income tax expense in 2014.

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.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Under the supervision and with the participation of senior management, including the Chief Executive Officer (“Principal Executive Officer”) and the Chief Financial Officer (“Principal Financial Officer”) of our General Partner, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a–15(e) promulgated under the Exchange Act. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer of our General Partner concluded that our disclosure controls and procedures were effective as of September 30, 2015 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer of our General Partner, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) or Rule 15d-15(f) of the Exchange Act) during the three months ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to or has property subject to litigation and other proceedings, including matters arising under provisions relating to the protection of the environment, as described in Note 7 in this Quarterly Report on Form 10-Q and in Note 14 in the Company’s Form 10-K for the year ended December 31, 2014.

The Company is subject to federal and state requirements for the protection of the environment, including those for the discharge of hazardous materials and remediation of contaminated sites. As a result, the Company is a party to or has its property subject to various other lawsuits or proceedings involving environmental protection matters. For information regarding these matters, see Note 7 in this Quarterly Report on Form 10-Q and Note 14 included in the Company’s Form 10-K for the year ended December 31, 2014.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Company’s Form 10-K filed with the SEC on February 27, 2015.

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ITEM 6. EXHIBITS

The exhibits listed below are filed or furnished, as indicated, as part of this report:



	Exhibit Number		Description
	31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS*		XBRL Instance Document
	101.SCH*		XBRL Taxonomy Extension Schema Document
	101.CAL*		XBRL Taxonomy Calculation Linkbase Document
	101.DEF*		XBRL Taxonomy Extension Definitions Document
	101.LAB*		XBRL Taxonomy Label Linkbase Document
	101.PRE*		XBRL Taxonomy Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

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SIGNATURE

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
		(Registrant)


Date:	November 6, 2015	By:	/s/ A. Troy Sturrock
			A. Troy Sturrock
			Vice President and Controller (duly authorized to sign on behalf of the registrant)

Exhibit

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kelcy L. Warren, 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	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


d.	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 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: November 6, 2015



/s/ Kelcy L. Warren
Kelcy L. Warren
Chief Executive Officer

Exhibit

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas E. Long, 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my 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


d.	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 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: November 6, 2015



/s/ Thomas E. Long
Thomas E. Long
Chief Financial Officer

Exhibit

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 of Panhandle Eastern Pipe Line Company, LP (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kelcy L. Warren, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2015



/s/ Kelcy L. Warren
Kelcy L. Warren
Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to and will be retained by Panhandle Eastern Pipe Line Company, LP and furnished to the Securities and Exchange Commission upon request.

Exhibit

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 of Panhandle Eastern Pipe Line Company, LP (the “Company”) on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas E. Long, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2015



/s/ Thomas E. Long
Thomas E. Long
Chief Financial Officer