The following discusses the results of operations and liquidity and capital resources of TC PipeLines, LP, along with those of Great Lakes Gas Transmission Limited Partnership (Great Lakes), Northern Border Pipeline Company (Northern Border) and Tuscarora Gas Transmission Company (Tuscarora), (together "our pipeline systems"), as a result of the Partnership's ownership interests.

FORWARD-LOOKING STATEMENTS

The statements in this report that are not historical information, including statements concerning plans and objectives of management for future operations, economic performance or related assumptions, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements may include words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "forecast" and other words and terms of similar meaning. The absence of these words, however, does not mean that the statements are not forward-looking.

These statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. Certain factors that could cause actual results to differ materially from those contemplated in the forward-looking statements include:

· the ability of Great Lakes and Northern Border to continue to make distributions at their current levels;

· the impact of unsold capacity on Great Lakes and Northern Border being greater or less than expected;

· competitive conditions in our industry and the ability of our pipeline systems to market pipeline capacity on favorable terms, which is affected by:

o future demand for and prices of natural gas;

o level of natural gas basis differentials;

o competitive conditions in the overall natural gas and electricity markets;

o availability of supplies of Canadian and United States (U.S.) natural gas, including newly discovered natural gas developments such as the Horn River and Montney shale gas developments in Western Canada, U.S. Rockies and U.S. Mid-Continent shale gas developments, and the Marcellus shale gas developments;

o availability of additional storage capacity and current storage levels;

o level of liquefied natural gas imports;

o weather conditions that impact supply and demand;

o ability of shippers to meet credit worthiness requirements; and

o competitive developments by Canadian and U.S. natural gas transmission companies;

· changes in relative cost structures of natural gas producing basins, such as changes in royalty programs, that may prejudice the development of the Western Canada Sedimentary Basin (WCSB);

· the decision by other pipeline companies to advance projects which will affect our pipeline systems and the regulatory, financing and construction risks related to construction of interstate natural gas pipelines;

· performance of contractual obligations by customers of our pipeline systems;

· the imposition of entity level taxation by states on partnerships;

· operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;

· the impact of current and future laws, rulings and governmental regulations, particularly Federal Energy Regulatory Commission (FERC) regulations, and proposed and pending legislation by Congress and the Environmental Protection Agency (EPA) related to green house gas emissions on us and our pipeline systems;

· our ability to control operating costs; and

· the severity and length of the current economic downturn, which impacts:

o the debt and equity capital markets and our ability to access these markets;

o the overall demand for natural gas by end users; and

o natural gas prices

The following discussion and analysis should be read in conjunction with our 2008 Annual Report on Form 10-K and the unaudited financial statements and notes thereto included in Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. All amounts are stated in U.S. dollars.

PARTNERSHIP OVERVIEW

TC PipeLines, LP was formed in 1998 as a Delaware limited partnership by TransCanada PipeLines Limited, a wholly-owned subsidiary of TransCanada Corporation, to acquire, own and participate in the management of energy infrastructure assets in North America. Our strategic focus is on delivering stable, sustainable cash distributions to our unitholders and finding opportunities to increase cash distributions while maintaining a low risk profile.

TC PipeLines, LP and its subsidiaries are collectively referred to herein as "TC PipeLines" or "the Partnership." In this report, references to "we", "us" or "our" collectively refer to TC PipeLines or the Partnership. The general partner of the Partnership is TC PipeLines GP, Inc., a wholly-owned subsidiary of TransCanada. TransCanada and its subsidiaries are herein collectively referred to as "TransCanada".

We own a 46.45 per cent general partner interest in Great Lakes. The other 53.55 per cent general partner interest in Great Lakes is held by TransCanada.

We own a 50 per cent general partner interest in Northern Border, while the other 50 per cent general partner interest is held by ONEOK Partners, L.P., a publicly traded limited partnership that is controlled by ONEOK, Inc.

We own a 100 per cent general partner interest in Tuscarora.

Our general partner interests in Great Lakes, Northern Border and Tuscarora represent our only material assets at March 31, 2009. As a result, we are dependent upon our pipeline systems for all of our available cash. Our pipeline systems derive their operating revenue from transportation of natural gas.

Great Lakes Overview

Great Lakes is a Delaware limited partnership formed in 1990. Great Lakes was originally constructed as an operational loop of the TransCanada Mainline Northern Ontario system. Great Lakes receives natural gas from TransCanada at the Canadian border near Emerson, Manitoba and extends across Minnesota, Northern Wisconsin and Michigan, and redelivers gas to TransCanada at the Canadian border at Sault Ste. Marie, Michigan and St. Clair, Michigan.

Northern Border Overview

Northern Border is a Texas general partnership formed in 1978. Northern Border transports natural gas from the Canadian border near Port of Morgan, Montana to a terminus near North Hayden, Indiana. Additionally, Northern Border transports natural gas produced in the Williston Basin of Montana and North Dakota, and in the Powder River Basin of Wyoming and Montana, as well as synthetic gas produced at the Dakota Gasification plant in North Dakota.

Tuscarora Overview

Tuscarora is a Nevada general partnership formed in 1993. Tuscarora originates at an interconnection point with existing facilities of Gas Transmission Northwest Corporation, a wholly-owned subsidiary of TransCanada, near Malin, Oregon and runs southeast through Northeastern California and Northwestern Nevada. Tuscarora's pipeline system terminates near Wadsworth, Nevada. Along its route, deliveries are made in Oregon, Northern California and Northwestern Nevada.

FACTORS THAT IMPACT OUR BUSINESS

Key factors that impact our business are the cash flows received from our investments and our ability to maintain a strong and balanced financial position. Cash flows from our investments are dependent upon the ability of Great Lakes and Northern Border to make distributions to us and of Tuscarora to generate positive operating cash flows. Partnership cash flows from our investments are necessary to fund distributions to our unitholders. A strong financial position will ensure that we are able to maintain a prudent level of available cash to make distributions to our unitholders.

FACTORS THAT IMPACT THE BUSINESS OF OUR PIPELINE SYSTEMS

Our pipeline systems provide natural gas transportation services to their customers. Key factors that impact their business are the supply of and demand for natural gas in the markets in which our pipeline systems operate; the customers of our pipeline systems and the mix of services they require; competition; and government regulation of natural gas pipelines. These factors are discussed in more detail below.

Supply and Demand of Natural Gas

Our pipeline systems depend upon the continued availability of natural gas production and reserves in the regions we access, primarily the WCSB. Our pipeline systems provide their customers with natural gas transportation services to market demand areas. The net WCSB Flows to Markets are dependent upon natural gas production levels, demand for natural gas in Western Canada, and storage capacity for Western Canadian natural gas and demand for storage injection. The net WCSB Flows to Markets were lower in the first quarter of 2009 compared to the same period in 2008, due mainly to a decrease in production and combined with an increase in Western Canadian demand. Western Canadian demand increased mainly due to demand related to oil sands production activities as well as an increase in electric power generation demand associated with unseasonably cool weather conditions. U.S. natural gas production, a supply competitor to the WCSB, continues to be strong, mainly due to the development of unconventional reserves in the lower 48 states.

Decreases in WCSB production are expected to continue throughout the remainder of 2009 due to a decline in drilling and exploration activity by WCSB producers, mainly related to the sharp reductions in commodity prices which began in the last half of 2008 and continued into the first quarter of 2009. Natural gas prices are expected to continue to be under pressure during the remainder of 2009 due to declining oil prices, declining natural gas demand, current levels of gas in storage and the general economic slowdown. The impact of depressed natural gas prices is impacting production from all producing regions. Continued low oil and gas commodity prices, combined with restrictions on liquidity and access to capital, have contributed to the postponement and/or cancellation of certain oil sands projects, which could decrease Western Canadian demand for WCSB natural gas.

Factors which may mitigate declines related to WCSB production in the future include strengthening gas prices and decreases in oil prices as they affect demand from Alberta oil sands production. We expect WCSB producers will continue to explore and develop new fields in Western Canada as well as direct significant activity at unconventional resources such as coal bed methane and shale gas. Additional Canadian natural gas supply sources may be available in the future if new pipeline projects associated with the Montney and Horn River shale gas regions in Western Canada, the Mackenzie Delta in Northern Canada and the North Slope of Alaska are constructed.

Factors which may impact the overall demand for natural gas include weather conditions, economic conditions, government regulation, availability and price of alternative energy sources, fuel conservation measures, and technological advances in fuel economy and energy generation devices. Although demand for natural gas is expected to decline in North America in 2009 with the current economic downturn, we expect a demand increase in the long term. In certain sectors, such as the electric generation sector, lower natural gas prices lead to an expected increase in demand for natural gas.

Demand for natural gas transportation service on our pipeline systems is directly related to the activity in the natural gas markets served by these systems. Factors that may impact demand for transportation service on any one system include the ability and willingness of natural gas shippers to utilize one system over alternative pipelines, transportation rates, and the volume of natural gas delivered to markets from other supply sources and storage facilities. The impact of changes in demand for natural gas transportation services on operating revenues for our pipeline systems is dependent upon the extent to which capacity has been contracted under long term firm contracts.

Net WCSB Flows to Markets is one of the factors which impacts the throughput on our pipeline systems. However, the activity in the natural gas markets served by our pipeline systems was the major factor affecting throughput of our pipeline systems for the first quarter of 2009 compared to the first quarter of 2008. We cannot predict the impact of any continued declines in net WCSB Flows to Markets and uncertain market conditions are expected to continue to affect throughput for the remainder of 2009.

Throughput on the Great Lakes pipeline system in the first quarter of 2009
[average 2,549 million cubic feet per day (MMcf/d)] was higher compared to the same period in 2008 (average 2,444 MMcf/d). Increases in short term and discretionary volumes more than offset the underutilization of firm contracts. Decreases in throughput related to underutilization of firm contracts have a minimal impact on revenue.

Throughput on Northern Border declined in the first quarter of 2009 (average 1,993 MMcf/d) relative to the same period in 2008 (average 2,452 MMcf/d) as the Midwest markets served by Northern Border continued to be impacted by the incremental supply from the Rockies natural gas basins transported to these markets on the western segment of the Rockies Express Pipeline (REX West). In addition to overall decreased demand due to the weaker economy, demand for natural gas in Northern Border's market was further impacted by warmer weather in the first quarter of 2009. Decreased overall demand reduces the ability to contract available pipeline capacity serving this market area.

Tuscarora's transportation capacity is substantially all contracted under long term firm contracts. Therefore, although throughput may vary, there is a minimal impact on revenue.

Customers and Contracting

Great Lakes' average contracted capacity was 106 per cent of its design capacity for the first quarter of 2009 compared to 104 percent in 2008. At March 31, 2009, 95 per cent of its average design capacity was contracted on a firm basis for the remainder of the year and the weighted average remaining life of firm transport contracts was 2.6 years. Great Lakes' competitive rate combined with strong spread values between Alberta and Dawn, Ontario continued to support strong transportation values for Great Lakes, which was sold out of long term firm capacity for the winter season and was also able to take advantage of daily sales in the short term market.

Northern Border's average contracted capacity was 87 per cent of its design capacity for the first quarter of 2009 compared to 106 per cent for the same period last year. As at March 31, 2009, Northern Border had approximately 60 percent of its design capacity uncontracted beginning in the second quarter of 2009 through the remainder of 2009. Prevailing market conditions and competitive factors in North America, including the Rockies Express Pipeline, will continue to impact the value of Northern Border's transportation and its ability to market available capacity. Northern Border expects to continue to discount transportation capacity as needed to optimize revenue. As at March 31, 2009, the weighted average remaining life of Northern Border's firm transportation contracts was 2.0 years.

Competition

Our pipeline systems compete primarily with other interstate and intrastate pipelines in the transportation of natural gas. Additionally, supply competition from other natural gas sources can impact demand for transportation on our pipeline systems. Growth in supplies available from other natural gas producing regions can impact prices for natural gas delivered to some of the markets our pipeline systems serve relative to other market regions.

Factors impacting the competition for WCSB gas available for export during the remainder of 2009 will include relatively low natural gas storage levels in Eastern Canada and low levels of hydro-electric power generation in the Northwestern U.S., which will result in an increased demand for natural gas fired power generation in that region.

Changes in North American gas flow patterns are expected as a result of new pipeline projects which will change the supply competition in the markets served by our pipeline systems. REX West introduced new gas supplies from the Rockies gas basin into the markets served by Northern Border in the second quarter of 2008.

The Eastern segment of the Rockies Express Pipeline (REX East), from Missouri to Ohio, will transport natural gas further east. This is expected to create additional supply in the markets Great Lakes serves, but may also provide opportunities for Great Lakes to market its Eastern zone capacity for storage injection and withdrawal. The in-service of REX East could mitigate excess supply in Northern Border's Ventura market which may improve opportunities for the marketing of this capacity, but may also increase supply to the Chicago market. Rockies Express Pipeline has announced that interconnects on REX East are expected to be placed in service in the second and fourth quarters of 2009.

Two new pipeline projects are expected to go into service in the second quarter of 2009 to transport volumes from the lower Mid-Continent east to the existing Gulf Coast pipeline infrastructure. These new projects could introduce new supply to the Chicago market, Eastern U.S. markets, or Gulf Coast markets, depending upon demand. Additional supply in the Chicago market may continue to impact Northern Border's ability to contract upstream available capacity for the remainder of 2009 if natural gas flows to Chicago materially decrease.

RECENT DEVELOPMENTS

Northern Border

Des Plaines Project - Northern Border's compressor station and interconnect facilities project went into service in March 2009, with a final cost of approximately $17 million, which was within the original cost estimate. The project is fully subscribed under long-term compression and transportation contracts. The new contract is expected to generate approximately $3.0 million in annual revenue.

RESULTS OF OPERATIONS OF TC PIPELINES

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires us to make estimates and assumptions with respect to values or conditions which cannot be known with certainty, that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions also affect the reported amounts of revenue and expenses during the reporting period. Although we believe these estimates and assumptions are reasonable, actual results could differ. There were no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2009.

Information about our critical accounting estimates is included under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our annual report on Form 10-K for the year ended December 31, 2008.

Recent Accounting Pronouncements

The Partnership adopted the provision of Statement of Financial Accounting Standards (SFAS) No. 157-2, Effective Date of FASB Statement No. 157 (SFAS No. 157-2), for all non-financial assets and liabilities measured on a recurring basis, effective January 1, 2009. The adoption of SFAS No. 157-2 had no material impact on our results of operations or financial position for the quarter ending March 31, 2009.

The Emerging Issues Task Force of the Financial Accounting Standards Board (FASB) issued EITF 07-4, "Application of the Two-Class Method under FASB Statement No. 128, Earnings per share, to Master Limited Partnerships," which was ratified by the FASB in March 2008. EITF 07-4 is effective for fiscal years beginning after December 15, 2008. The Partnership adopted the provisions of EITF 07-4 effective January 1, 2009. Refer to Note 6 for the impact to our financial statements.

The Partnership adopted the provisions of SFAS No. 161, Disclosures about Derivatives Instruments and Hedging activities-an amendment of FASB Statement No. 133, effective January 1, 2009. There was no material effect on the Partnerships' disclosure following adoption of this standard.

Net Income

To supplement our financial statements, we have presented a comparison of the earnings contribution components from each of our investments. We have presented net income in this format in order to enhance investors' understanding of the way management analyzes our financial performance. We believe this summary provides a more meaningful comparison of our net income to prior periods, as we account for our partially owned pipeline systems using the equity method. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

The shaded areas in the tables below disclose the results from Great Lakes and Northern Border, representing 100 per cent of each entity's operations for the given period.

(unaudited)                                                           For the three months ended March 31, 2009
(millions of dollars)                 PipeLP                         TGTC                      Other                       GLGT                   NBPC(1)
Transmission revenues                    8.4                          8.4                          -                       82.5                      74.5
Operating expenses                      (2.6 )                       (1.4 )                     (1.2 )                    (16.0 )                   (18.5 )
                                         5.8                          7.0                       (1.2 )                     66.5                      56.0
Depreciation                            (1.8 )                       (1.8 )                        -                      (14.6 )                   (15.3 )

Financial charges,
net and other                           (7.3 )                       (1.1 )                     (6.2 )                     (8.2 )                    (9.1 )
Michigan business tax                      -                            -                          -                       (1.8 )                       -
                                                                                                                           41.9                      31.6
Equity income                           35.1                            -                          -                       19.5                      15.6
Net income                              31.8                          4.1                       (7.4 )                     19.5                      15.6


(unaudited)                                                           For the three months ended March 31, 2008
(millions of dollars)                 PipeLP                         TGTC                      Other                       GLGT                   NBPC(1)
Transmission revenues                    6.9                          6.9                          -                       79.7                      83.8
Operating expenses                      (2.2 )                       (1.2 )                     (1.0 )                    (15.1 )                   (19.4 )
                                         4.7                          5.7                       (1.0 )                     64.6                      64.4
Depreciation                            (1.6 )                       (1.6 )                        -                      (14.6 )                   (15.2 )
Financial charges,
net and other                           (7.6 )                       (0.9 )                     (6.7 )                     (8.2 )                    (9.7 )
Michigan business tax                      -                            -                          -                       (1.7 )                       -
                                                                                                                           40.1                      39.5
Equity income                           38.1                            -                          -                       18.6                      19.5
Net income                              33.6                          3.2                       (7.7 )                     18.6                      19.5

(1) TC PipeLines owns a 50 per cent general partner interest in Northern Border. Equity income from Northern Border includes amortization of a $10.0 million transaction fee paid to the operator of Northern Border at the time of the additional 20 per cent acquisition in April 2006.

First Quarter 2009 Compared with First Quarter 2008 Net income was $31.8 million in the first quarter of 2009, a decrease of $1.8 million compared to $33.6 million in the first quarter of 2008. This decrease is primarily due to lower equity income from Northern Border in 2009.

Equity income from Great Lakes increased $0.9 million to $19.5 million in the first quarter of 2009, compared to $18.6 million in the first quarter of 2008. At Great Lakes' level, net income increased $1.8 million compared to the first quarter of 2008, primarily due to an increase in transmission revenues partially offset by higher operating expenses. Great Lakes' transmission revenues for the three months ended March 31, 2009 increased $2.8 million compared to the same period last year, primarily due to increases in sales of short-term services, partially offset by decreased long-term services as a result of contract non-renewals on the eastern portion of the pipeline system. Operating expenses increased $0.9 million due primarily to higher pipeline maintenance and overhaul costs.

Equity income from Northern Border was $15.6 million in the first quarter of . . .