EXHIBIT 10.3

Execution Version

SUBORDINATION AND INTERCREDITOR AGREEMENT

THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this “ Agreement ”) is entered into as of this February 13, 2007, by and among TRANSCANADA PIPELINES LIMITED, a Canada corporation  (together with its successors and any permitted assigns, the “ Subordinated Creditor ”),(1) TC PIPELINES, LP a Delaware limited partnership (the “ Borrower ”) and SUNTRUST BANK, as Administrative Agent for all Senior Lenders party to the Senior Credit Agreement defined below (“ Administrative Agent ”).

R E C I T A L S

A.             The Borrower, Administrative Agent and Senior Lenders (as hereinafter defined) have entered into an Amended and Restated Revolving Credit and Term Loan Agreement of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Senior Credit Agreement ”), pursuant to which, among other things, Senior Lenders have agreed, subject to the terms and conditions set forth in the Senior Credit Agreement, to make certain loans and financial accommodations to the Borrower.

B.            The Borrower and Subordinated Creditor have entered into a Subordinated Loan Agreement of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted hereunder, the “ Subordinated Loan Agreement ”), pursuant to which Subordinated Creditor is extending credit to the Borrower as evidenced by a Subordinated Note of even date herewith in the principal amount of up to $300,000,000 (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted hereunder, the “ Subordinated Note ”).

C.            As an inducement to and as one of the conditions precedent to the agreement of Administrative Agent and Senior Lenders to consummate the transactions contemplated by the Senior Credit Agreement, Administrative Agent and Senior Lenders have required the execution and delivery of this Agreement by Subordinated Creditor and the Borrower in order to set forth the relative rights and priorities of Administrative Agent, Senior Lenders and Subordinated Creditor under the Senior Loan Documents and the Subordinated Loan Documents (as hereinafter defined).

NOW, THEREFORE, in order to induce Administrative Agent and Senior Lenders to consummate the transactions contemplated by the Senior Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

(1)  If additional subordinated lenders are added, this agreement will need to be revised accordingly.

1.             Definitions . Terms defined in the Senior Credit Agreement are used herein with the same meanings. The following terms shall have the following meanings in this Agreement:

“ Administrative Agent ” shall mean SunTrust Bank, as Administrative Agent for the Senior Lenders, or any other Person appointed by the holders of the Senior Debt as Administrative Agent for purposes of the Senior Loan Documents and this Agreement.

“ Bankruptcy Code ” shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

“ Distribution ” means, with respect to any indebtedness or obligation, (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account of such indebtedness or obligation, (b) any redemption, purchase or other acquisition of such indebtedness or obligation by any Person or (c) the granting of any lien or security interest to or for the benefit of the holders of such indebtedness or obligation in or upon any property of any Person.

“ Enforcement Action ” shall mean (a) to take from or for the account of the Borrower or any guarantor of the Subordinated Debt, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by the Borrower or any such guarantor with respect to the Subordinated Debt, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against the Borrower or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Subordinated Debt or (ii) commence judicial enforcement of any of the rights and remedies under the Subordinated Loan Documents or applicable law with respect to the Subordinated Debt, (c) to accelerate the Subordinated Debt, (d) to exercise any put option or to cause the Borrower or any such guarantor to honor any redemption or mandatory prepayment obligation under any Subordinated Loan Document or (e) to take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of the Borrower or any such guarantor.

“ Permitted Subordinated Debt Payments ” means (a) regularly scheduled payments of interest on the Subordinated Note due and payable on a non-accelerated basis in accordance with the terms of the Subordinated Loan Documents as in effect on the date hereof or as modified in accordance with the terms of this Agreement, provided that such cash payments of interest cannot exceed 6% of then outstanding principal amount of the Subordinated Note and (b) so long as the total principal amount outstanding with respect to the Senior Debt is less than $600,000,000 and so long as no Default or Event of Default exists or would occur as a result thereof, voluntary payments of principal of the Subordinated Note, in whole or in part, by the Borrower with the proceeds of the issuance of common units by the Borrower, provided that no other

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payments (either mandatory or voluntary prepayments) of principal of the Subordinated Note shall constitute Permitted Subordinated Debt Payments.

“ Person ” shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority.

“ Proceeding ” shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of the Borrower or any of its subsidiaries.

“ Senior Debt ” shall mean all obligations, liabilities and indebtedness of every nature of the Borrower or any guarantor from time to time owed to Administrative Agent or any Senior Lender under the Senior Loan Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest thereon and all fees, costs and expenses owed thereunder or pursuant thereto, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof to the extent not prohibited by the terms of this Agreement and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim.  Senior Debt shall be considered to be outstanding whenever any loan commitment under the Senior Loan Document is outstanding.

“ Senior Default ” shall mean any  “Event of Default” as that term is defined the Senior Loan Documents, or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

“ Senior Default Notice ” shall mean a written notice from Administrative Agent to Subordinated Creditor pursuant to which Subordinated Creditor is notified of the occurrence of a Senior Default, which notice incorporates a reasonably detailed description of such Senior Default.

“ Senior Lenders ” shall mean the holders of the Senior Debt from time to time.

“ Senior Loan Documents ” shall mean the Senior Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, as the same may be amended, restated, supplemented or otherwise modified from time to time.

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“ Subordinated Debt ” shall mean all of the debts, liabilities and obligations of the Borrower, or any guarantor, to Subordinated Creditor evidenced by, incurred pursuant to, or arising from the Subordinated Loan Documents.

“ Subordinated Loan Documents ” shall mean the Subordinated Note , theSubordinated Loan Agreement and any guaranty with respect to the Subordinated Debt, and all other documents, agreements and instruments now existing or hereinafter entered into evidencing or pertaining to all or any portion of the Subordinated Debt.

“ Subordinated Debt Default ” shall mean any  “Event of Default” as that term is defined the Subordinated Loan Documents, or any condition or event that, after notice or lapse of time or both, would constitute such an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period set forth therein.

“ Subordinated Debt Default Notice ” shall mean a written notice from Subordinated Creditor or the Borrower to Administrative Agent pursuant to which Administrative Agent is notified of the occurrence of a Subordinated Debt Default, which notice incorporates a reasonably detailed description of such Subordinated Debt Default.

2.                                       Subordination .

2.1          Subordination of Subordinated Debt to Senior Debt . The Borrower covenants and agrees, and Subordinated Creditor by its acceptance of the Subordinated Loan Documents (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, notwithstanding anything to the contrary contained in any of the Subordinated Loan Documents, that the payment of any and all of the Subordinated Debt shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the prior indefeasible payment in full in cash of all Senior Debt and termination of all lending commitments under the Senior Loan Documents. Each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.

2.2          Liquidation, Dissolution, Bankruptcy . In the event of any Proceeding involving the Borrower or any of its Subsidiaries:

(a)           All Senior Debt shall first be indefeasibly paid in full in cash and all commitments to lend under the Senior Loan Documents shall be terminated before any Distribution, whether in cash, securities or other property, shall be made to Subordinated Creditor on account of any Subordinated Debt.

(b)           Any Distribution, whether in cash, securities or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Debtshall be paid or delivered directly to Administrative Agent (to be held and/or applied by Administrative Agent in accordance with the terms of the Senior Loan Documents) until all Senior Debt is indefeasibly paid in full in cash and all commitments

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to lend under the Senior Loan Documents shall have been terminated.  Subordinated Creditor irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to Administrative Agent. Subordinated Creditor also irrevocably authorizes and empowers Administrative Agent, in its name or in the name of Subordinated Creditor, to demand, sue for, collect and receive any and all such Distributions.

(c)           Subordinated Creditor agrees not to initiate, prosecute or participate in any claim, action or other proceeding challenging the creation, attachment, enforceability, validity of the Senior Debt.  None of the Subordinated Creditors will take any action that would interfere with any exercise of any remedies undertaken by the Administrative Agent or any other Senior Secured Party under the Senior Loan Documents.  No Subordinated Creditor shall object to any provision in any DIP financing relating to any provision or content of a plan of reorganization or to any plan of reorganization supported by the Senior Lenders.

(d)           Subordinated Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Debt requested by Administrative Agent in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Administrative Agent its attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim and (ii) vote such claim in any such Proceeding; provided Administrative Agent shall have no obligation to execute, verify, deliver, file and/or vote any such proof of claim. In the event that Administrative Agent votes any claim in accordance with the authority granted hereby, Subordinated Creditor shall not be entitled to change or withdraw such vote.

(e)           The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Senior Lenders and Subordinated Creditor even if all or part of the Senior Debt or the security interests securing the Senior Debt are subordinated, set aside, avoided, invalidated or disallowed in connection with any such Proceeding or otherwise, and this Agreement shall be reinstated if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt or any representative of such holder.

2.3          Subordinated Debt Payment Restrictions .

(a)           Notwithstanding the terms of the Subordinated Loan Documents, the Borrower hereby agrees that it may not make, directly or indirectly, and Subordinated Creditor hereby agrees that it will not accept, take or claim from the Borrower or any guarantor, any Distribution with respect to the Subordinated Debt until the Senior Debt is indefeasibly paid in full in cash and all commitments to lend under the Senior Loan Documents have terminated, other than Permitted Subordinated Debt Payments subject to the terms of Section 2.2; provided , however , that the Borrower and Subordinated Creditor

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