Audit Committee Charter

I. STATEMENT OF PURPOSE

The Board of Directors of TC PipeLines GP, Inc., the general partner (the “General Partner” or the “Company”) of TC PipeLines, LP (the “Partnership”), shall have a committee known as the Audit Committee.  The Audit Committee's purpose is to oversee the auditing of the Partnership's financial statements as well as the Partnership's accounting and financial reporting procedures.

The Audit Committee shall have the sole responsibility for the appointment, compensation and oversight of the work of the Partnership's independent auditors. 

The Audit Committee shall have oversight responsibility for:

1. The integrity of the financial statements of the Company and the Partnership;
2. The Partnership's compliance with legal and regulatory reporting requirements;
3. The independent auditors’ qualification and independence;
4. The performance of the Partnership's internal audit function and independent auditors;
5. The adequacy of internal controls;
6. The establishment of procedures for the receipt, retention and treatment of complaints received by the Partnership regarding accounting, internal accounting controls or auditing matters; and the confidential, anonymous submission by employees of the General Partner of concerns regarding questionable accounting or auditing matters; and
7. The establishment of guidelines and polices to govern the Partnership’s exposure to major financial risks and to discuss the steps taken by management to monitor and control such exposures, including management’s assessment of such risks.

To carry out these responsibilities, the Board of Directors (the “Board”) believes the duties and responsibilities of the Audit Committee should remain flexible in order to best deal with changing conditions and to enable it to assure to the Board that the Partnership’s financial systems and reporting practices are in accordance with all requirements.

II. COMPOSITION

The Audit Committee shall consist of no fewer than three members.  The members shall be appointed by the Board and shall be chosen among the members of the Board.  Each member shall satisfy the independence requirements of the Nasdaq Stock Market or such other national exchange on which the Partnership may list its securities, Section 10A of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002, and the rules promulgated thereunder.  In addition, each member shall be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement.  At least one member must have past employment experience in finance or accounting, or other similar experience (such as serving as a CEO, CFO or other senior officer with financial oversight responsibilities).

III. MEETINGS

The Audit Committee shall meet at least quarterly and at other times, as circumstances require.  Following each meeting of the Audit Committee and whenever so requested by the Board, the Audit Committee shall report to the Board on the Audit Committee’s activities, findings and recommendations.  The Partnership's independent auditors shall report directly to the Audit Committee.  The Audit Committee shall maintain open lines of communications with the Board, management and its independent auditors. The Audit Committee shall also meet as necessary with the Partnership’s legal counsel to discuss legal matters that may have a significant impact to the Audit Committee’s duties.  

IV. QUORUM

A majority of the members of the Audit Committee present in person, telephone or other telecommunication device that permits all persons participating in the meeting to speak to each other shall constitute a quorum.

V. OVERSIGHT RESPONSIBILITIES REGARDING THE AUDIT FUNCTION

1. Selection and Review of Independent Auditors.  The Audit Committee shall have the sole authority to appoint or replace the independent auditors and shall pre-approve, or adopt appropriate procedures to pre-approve all audit and non-audit services to be provided by the independent auditors.  The Audit Committee may delegate to a single member of its committee the pre-approval of non-audit services.  

The following are among the factors the Audit Committee may consider in its review of the independent auditors:

1. Opinions on the performance of the public accounting firm by management;
2. Materials regarding the proposed audit fee, the independent auditors’ annual report to the Audit Committee and explanations for fee changes;
3. The expected level of participation by senior management personnel in the audit examination, rotation of the audit partner and review of the examination by an independent partner;
4. If a new public accounting firm is being considered, the steps planned to ensure a smooth and effective transition;
5. The report of the public accounting firm’s latest review conducted pursuant to any statutorily mandated inspection or professional quality control program;
6. Any significant litigation problems or disciplinary actions by the SEC or others;
7. The public accounting firm’s credentials, professional standing and required registrations, capabilities, reputation and clients in the same industry and geographical area;
8. The extent of non-audit services and fees, including consideration of their effect, if any, on the independence of the independent auditors; and
9. The tenure of the lead audit partner and the audit partner of the independent auditors responsible for reviewing the audit and the rotation of the lead audit partner at least every five years as required by the Sarbanes-Oxley Act of 2002.

The Audit Committee shall receive the written disclosures and the letter from the independent auditors as required by the Independence Standards Board Standard No. 1, which requires the independent auditors to provide to the Audit Committee an annual written report of all relationships that may reasonably be thought to bear on the independence of the independent auditors.

The Audit Committee shall also recommend to the Board policies for the Partnership's hiring of employees of the independent auditors who were engaged on the Company’s account (recognizing the Sarbanes-Oxley Act of 2002 does not permit the CEO, controller, CFO or chief accounting officer to have participated in the Company’s audit as an employee of the independent auditors’ firm itself during the preceding one-year period).

2. Annual Report to the Audit Committee.  Another oversight responsibility of the Audit Committee shall be to review the independent auditors’ annual report to the Audit Committee, which has been reviewed by management.  Such annual report should contain the following:
   
   
1. The proposed audit scope for the current year as well as the related estimated fees; and
2. A summary comparison of current and prior year audit and non-audit services, including related fees.
   
   
3. General.  The Audit Committee shall have responsibility for oversight of the Partnership’s financial reporting processes.  In connection with this oversight function, the Audit Committee shall undertake the following practices:
   
   
1. Review of the financial statements, the accompanying independent auditors’ report and other financial disclosures included in the Partnership’s reports on Form 10-Q and its quarterly report to Unitholders, including the Management’s Discussion and Analysis section contained in any such report, and the selection, application and disclosure of critical accounting policies, with the independent auditors and financial management and approval of same prior to the filing of such reports with the securities and exchange regulatory authorities and mailing to Unitholders, as applicable. The quarterly review by the independent auditors shall be performed in accordance with the American Institute of Certified Public Accountants Statement of Auditing Standards;
2. Review of any news release containing the summary quarterly financial information of the Partnership (paying particular attention to any use of “pro-forma” or “adjusted” non-GAAP information) and approval of same prior to its release and furnishing to the SEC;
3. Review of the audited financial statements, the accompanying independent auditors’ opinion and other financial disclosures included in the Partnership’s annual report on Form 10-K and its Annual Report to Unitholders, including the Management’s Discussion and Analysis section contained in any such report, and the selection, application and disclosure of critical accounting policies, with the independent auditors and the recommendation by the Audit Committee to the Board that the audited financial statements be included in the Form 10-K filing. Review of all financial statements contained or incorporated by reference into prospectuses and other offering memoranda, with the independent auditors and financial management and recommendation of such report or financial statements to the Board prior to the filing of such reports with the SEC and mailing to Unitholders, as applicable;
4. Review disclosures made by the Partnership's principal executive officer and principal financial officer regarding compliance with their certification obligations as required under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder, including the Partnership's disclosure controls and procedures and internal controls for financial reporting and evaluations thereof;
5. Discussions with the independent auditors of the matters required to be discussed by SAS 61. SAS 61 requires that the independent auditors discuss with the Audit Committee the independent auditors judgments about the quality, rather than the acceptability, of the Partnership’s accounting principles and underlying estimates in its financial statements;
6. Inquire of management and the independent auditors if there were any significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements;
7. Review and discuss any management letter provided by the independent auditors and the Partnership's response to that letter;
8. Discuss with the independent auditors and resolve if necessary any problems, difficulties or differences encountered in the course of the audit work, including any disagreements with management or restriction on the scope of the independent auditors activities or on access to requested information and management’s response thereto;
9. Discuss with management and the independent auditors the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Partnership;
10. At its discretion, to meet privately with the independent auditors to determine their opinion on various matters, including the quality of financial and accounting personnel;
11. Discuss with the independent auditors any material concerns and whether they believe anything else should be brought to the attention of the Audit Committee that has not been raised or covered elsewhere, and consideration on whether the independent auditors should meet with the full Board to discuss any matters relative to the financial statements and to answer any questions that other directors may have;
12. Review the Partnership’s quarterly financial reporting procedures and, as appropriate, discuss any matters of accounting or auditing significance with the independent auditors and or management;
13. Evaluate the adequacy of management’s systems of internal accounting controls, review with the chief financial officer, controller and head of internal audit the overall compliance with administrative policies and consider any changes in the system of internal controls, procedures and practices which the Audit Committee determines to be appropriate; and
14. Consider and provide to the Board the Audit Committee’s recommendations concerning significant matters that may arise with respect to the Partnership’s financial and accounting policies, procedures, controls and practices, including with respect to any disagreements arising between the General Partner’s management and its independent auditors and any proposal to change the Partnership’s independent auditors.

VI. AUTHORITY

The Audit Committee is authorized to perform each of the duties enumerated herein and any other duties it considers necessary or advisable in order to carry out its oversight responsibilities and it shall have access to all records of the Partnership related thereto.  To the extent relevant to carry out its responsibilities, the Audit Committee is empowered to recommend that any activity of the General Partner or the Partnership be investigated and, in appropriate circumstances, the Audit Committee is empowered to investigate any activity of the General Partner or the Partnership.  The Audit Committee may perform other functions as requested or approved by the Board.  The Audit Committee is empowered to retain independent legal counsel, accounting or other advisors having special competence as necessary to assist it in fulfilling its responsibilities and duties hereunder.  The Audit Committee shall meet periodically with management and the independent auditors in separate executive sessions in furtherance of its purposes.

The Audit Committee shall establish procedures for:

1. The receipt, retention and treatment of complaints received by the Partnership regarding accounting, internal accounting controls or auditing matters; and
2. The confidential, anonymous submission by employees of the General Partner of concerns regarding questionable accounting or auditing matters. 

The adequacy of this Charter shall be reassessed annually by the Audit Committee and the Board.  The Audit Committee shall annually review its own performance and shall report to the Board the results of its self-evaluation. 

VII. LIMITATIONS OF AUDIT COMMITTEE’S ROLES

While the Audit Committee has the responsibilities and power set forth in this Charter, it is not the duty of the Audit Committee to prepare financial statements, plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.  Management is responsible for determining that the Partnership's financial statements are complete, accurate, and in accordance with generally accepted accounting principles and for ensuring that proper internal controls are in place.