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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

TEXAS EASTERN TRANSMISSION, LP

(Exact name of Registrant as Specified in its Charter)

5400 Westheimer Court

P.O. Box 1642

Houston, TX 77251-1642

(Address of Principal Executive Offices)

(Zip code)

713-627-5400

(Registrant’s telephone number, including area code)

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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  ¨

The registrant 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. Part I, Item 2 has been reduced and Part I, Item 3 and Part II, Items 2, 3, and 4 have been omitted in accordance with such Instruction H.

All of the registrant’s limited partnership interests and all of the limited liability company interests of its general partner are indirectly owned by Duke Energy Corporation (File No. 1-4928), which files reports and proxy materials pursuant to the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨     No  x

TEXAS EASTERN TRANSMISSION, LP

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004

INDEX

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Texas Eastern Transmission, LP’s (together with its subsidiaries, the “Company’s”) reports, filings and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast” and other similar words. Those statements represent the Company’s intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside the Company’s control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Those factors include:

i

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than the Company has described. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ii

PART I. FINANCIAL INFORMATION

TEXAS EASTERN TRANSMISSION, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)

See Notes to Consolidated Financial Statements.

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TEXAS EASTERN TRANSMISSION, LP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

See Notes to Consolidated Financial Statements.

2

TEXAS EASTERN TRANSMISSION, LP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

See Notes to Consolidated Financial Statements.

3

TEXAS EASTERN TRANSMISSION, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

See Notes to Consolidated Financial Statements.

4

TEXAS EASTERN TRANSMISSION, LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

See Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations

Texas Eastern Transmission, LP (together with its subsidiaries, the “Company”) is an indirect, wholly-owned subsidiary of Duke Energy Corporation (Duke Energy). The Company is primarily engaged in the interstate transportation and storage of natural gas. The Company’s interstate natural gas transmission and storage operations are subject to the rules and regulations of the Federal Energy Regulatory Commission (FERC).

2. Summary of Significant Accounting Policies

Consolidation. The Consolidated Financial Statements include the accounts of the Company and all wholly-owned subsidiaries, after eliminating intercompany transactions and balances. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. Amounts reported in the interim Consolidated Statements of Operations are not necessarily indicative of amounts expected for the respective annual periods due to the effects of seasonal temperature variations on energy consumption.

Conformity with generally accepted accounting principles (GAAP) in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes. Although these estimates are based on management’s best available knowledge of current and expected future events, actual results could be different from those estimates.

3. Regulatory Matters

FERC Orders No. 2004 and 2004-A (Standards of Conduct). In November 2003, the FERC issued Order 2004, which harmonizes the standards of conduct applicable to natural gas pipelines and electric transmitting public utilities (“Transmission Providers”) previously subject to differing standards. In December 2003, Duke Energy filed a request for clarification and rehearing with the FERC regarding: (i) restrictions on how companies and their affiliates interact and share information, including corporate governance information, and (ii) expansion of coverage to affiliated gatherers, processors and intrastate and Hinshaw pipelines. On April 16, 2004, FERC issued Order 2004-A adopting revised standards of conduct governing information flow between Transmission Providers and their “energy affiliates.” Order 2004-A accommodates unique corporate governance issues raised by Duke Energy’s corporate structure and clarifies provisions governing information flows for governance purposes. The FERC also clarified the expanded coverage of the rules to gatherers, processors and intrastate and Hinshaw pipelines. The Company will be implementing compliance programs to meet the requirements of the order related to information flow and governance processes. The Company expects to be in full compliance with the orders, including significant training and information posting requirements, by the September 1, 2004 deadline, and expects the orders to have no material adverse effect on its consolidated results of operations, cash flows or financial position.

Fuel Tracker. At March 31, 2004 and December 31, 2003, Other Current Assets on the Consolidated Balance Sheets included $22 million and $30 million, respectively, for costs related to fuel and balancing activity of the pipeline system that are recovered annually in transportation rates in accordance with the Company’s FERC gas tariff.

4. Gas Imbalances

The Consolidated Balance Sheets include in-kind balances as a result of differences in gas volumes received and delivered for customers. As the settlement of imbalances are in-kind, changes in the balances do not have an impact on the Company’s Consolidated Statements of Cash Flows. Accounts Receivable and Other Current Liabilities each include $47 million as of March 31, 2004 and $80 million as of December 31, 2003, related to gas imbalances. Natural gas volumes owed to (by) the Company are valued at natural gas market prices as of the balance sheet dates.

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5. Commitments and Contingencies

Environmental. The Company is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters.

Remediation activities. The Company is responsible for environmental remediation at various impacted properties or contaminated sites. These include some sites that are part of ongoing Company operations or are owned by the Company as well as sites owned by third parties. These matters typically involve management of contaminated soils and may involve ground water remediation. They are managed in conjunction with the relevant federal, state, and local agencies. These sites or matters vary, for example, with respect to site conditions and location, remedial requirements, sharing of responsibility by other entities, and complexity. Certain matters can involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, whereby the Company could potentially be held responsible for contamination caused by other parties. In some instances, the Company may share any liability associated with contamination with other potentially responsible parties, and the Company may benefit from insurance policies or contractual indemnities that cover some cleanup costs. All of these sites generally are managed in the normal course of business. At March 31, 2004, the Company has recorded reserves for remediation activities on an undiscounted basis for approximately $25 million. Management believes that completion or resolution of these matters will have no material adverse effect on consolidated results of operations, cash flows, or financial position.

Litigation. The Company is involved in legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding performance, contracts and other matters arising in the ordinary course of business, some of which involve substantial amounts. Management believes that the final disposition of these proceedings will have no material adverse effect on consolidated results of operations, cash flows or financial position.

Purchase Commitments. In the first quarter of 2004, the Company entered into new capital expenditure purchase commitments of $35 million and $1 million for payments due in 2004 and 2005, respectively, and none thereafter.

6. Credit Risk

The Company’s principal customers for natural gas transportation and storage services are local distribution companies, industrial end-users, and natural gas marketers located throughout the Mid-Atlantic and northeastern states. The Company has concentrations of receivables from these industries throughout these regions. These concentrations of customers may affect the Company’s overall credit risk in that risk factors can negatively impact the credit quality of the entire sector. Where exposed to credit risk, the Company analyzes the counterparties’ financial condition prior to entering into an agreement, establishes credit limits and monitors the appropriateness of those limits on an ongoing basis. The Company also obtains cash, letters of credit or other acceptable forms of security from customers, where appropriate, based on a financial analysis of the customer and the regulatory or contractual terms and conditions applicable to each transaction.

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Introduction

Texas Eastern Transmission, LP (Texas Eastern) is an indirect wholly-owned subsidiary of Duke Energy Corporation (Duke Energy). Texas Eastern and its subsidiaries (the “Company”) are primarily engaged in the interstate transportation and storage of natural gas for customers primarily in the Mid-Atlantic and northeastern states. Interstate natural gas transmission and storage operations are subject to the Federal Energy Regulatory Commission’s (FERC’s) rules and regulations.

Because all of the partnership interests of the Company are owned indirectly by Duke Energy, the following discussion has been prepared in accordance with the reduced disclosure format permitted by Form 10-Q for certain issuers that are wholly-owned subsidiaries of reporting companies under the Securities Exchange Act of 1934 set forth in General Instruction H (1)(a) and (b) for Form 10-Q.

Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements.

RESULTS OF OPERATIONS

Net income for the three months ended March 31, 2004 decreased $5 million compared to the same period in 2003. The decrease was mainly attributable to increases in various operating expenses.

The Company’s throughput was 382 trillion British thermal units (TBtu) for the three months ended March 31, 2004 and 395 TBtu for the same period in 2003. The decrease of approximately 3% was primarily a result of the warmer weather in early 2004 in the Company’s primary market areas.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2004 and December 31, 2003, the Company had no cash or cash equivalents since all cash is managed collectively at the parent-company level and is therefore advanced to/from affiliates as cash is generated or paid by the Company. The Company’s working capital was a $294 million deficit as of March 31, 2004, compared to a $245 million deficit as of December 31, 2003. The decrease in working capital was primarily attributable to taxes accrued. The Company relies primarily upon cash flows from operations to fund its liquidity and capital requirements. The Company’s cash flows are relatively stable since they are supported by revenues from long-term firm contracts.

Cash flows from operating activities increased $43 million from the same period of the prior year mostly due to changes in working capital compared to the 2003 period.

Capital expenditures for the first three months of 2004 were $22 million and $21 million for the comparable 2003 period. Projected 2004 capital expenditures are expected to be lower than the $183 million disclosed in the Company’s Form 10-K for December 31, 2003 due to timing of expansion projects. All projected capital expenditures are subject to periodic review and revision and may vary significantly depending on a number of factors, including, but not limited to, industry restructuring, regulatory constraints, acquisition opportunities, market volatility and economic trends.

Increases and decreases in advances receivable–affiliates generally result from the movement of funds to provide for operations, capital expenditures and debt payments of the Company. Advances receivable-affiliates do not bear interest. Advances are carried as unsecured, open accounts and are not segregated between current and non-current amounts.

Cash flows from financing activities decreased $25 million from the same period of the prior year due to partnership distributions of $25 million in the first quarter of 2004.

Contractual Obligations and Commercial Commitments

In the first quarter of 2004, the Company entered into new capital expenditure purchase obligations of $35 million and $1 million for payments due in 2004 and 2005, respectively, and none thereafter. For an in-depth discussion of the Company’s contractual obligations and commercial commitments, see “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Form 10-K for December 31, 2003.

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CURRENT ISSUES

For information on current issues related to the Company, see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.”

9

The Company’s management, including the President and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) (Disclosure Controls Evaluation) and concluded that, as of the end of the period covered by this report, the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. The required information was effectively recorded, processed, summarized and reported within the time period necessary to prepare this quarterly report. The Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in the Company’s reports under the Exchange Act are accumulated and communicated to management, including the President and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management has concluded that the Disclosure Controls Evaluation identified no changes in the Company’s internal control over financial reporting that occurred during the first quarter of 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

For information concerning litigation and other contingencies, see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.”

(a) Exhibits

(b) Reports on Form 8-K

The Company filed no reports on Form 8-K during the first quarter of 2004.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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