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LIPA OKs National Grid/KeySpan Agreement

Significant Ratepayer, Reliability & Repowering Benefits for LIPA’s Customers and Region

Uniondale, N.Y. – June 6, 2007 – The Long Island Power Authority (LIPA) Board of Trustess today approved the Agreement in Principle with National Grid/KeySpan that will provide significant ratepayer, reliability and repowering or power plant emission reduction benefits to LIPA’s electric customers and to the Long Island region.

When combined with the significant package of benefits resulting from an earlier negotiated extension of its Management Services Agreement with KeySpan that was announced in December, 2005, the economic benefits of both agreements are valued at approximately $236 million. Additionally, savings of approximately $34 million per year to be derived from lower fees paid by LIPA under the Management Services Agreement.

Highlights of Benefits to LIPA Customers
LIPA’s customers will benefit in many ways as a result of the combined elements of both the December 2005 LIPA/KeySpan Definitive Agreement and the new LIPA/KeySpan/National Grid Agreement in Principle. These benefits include:

Ratepayer Economic Benefits: ($236 Million)

• $120 million settlement of disputes that had arisen under the terms of the original Management Services Agreement with KeySpan;
• $34 million net present value in annual operating cost savings through 2013;
• $91 million in synergy savings taken over the remaining seven-year of the MSA term of the period;
• $7 million in incremental cash consideration to LIPA;
• National Grid will provide $12 million to fund a LIPA/National Grid joint effort to promote electric and gas efficiency programs;
• Freeze transportation rate for the delivery of natural gas to power plants on Long Island at the current level through May 2013; and
• National Grid will not initiate any property tax rate challenges on its Long Island generation assets without prior approval by LIPA.

Reliability & Service Benefits:

• National Grid will provide $6 million in funding for LIPA’s Storm Hardening Initiative;
• National Grid agrees to maintain on-island field personnel at mutually agreed upon levels to meet LIPA’s target performance metrics or suffer financial penalties;
• National Grid will maintain its customer service functions – Customer Call Center and District Offices – on Long Island;
• National Grid will integrate its Long Island storm response priorities with its other US operations which will provide LIPA with a “first call” opportunity that can quickly move upstate and out of state National Grid crews to Long Island to assist with an enhanced restoration response to severe storms and emergencies;
• National Grid will follow LIPA’s directives regarding service performance, emergency response, and capital projects;
• Eighteen performance metrics have been established that can trigger financial penalties if not met; and
• Greater information access and operational transparency provided to LIPA on a daily basis.

Repowering and/or Emission Reduction Benefits:

• LIPA obtains the option to purchase at book value the E.F. Barrett plant and Combustion Turbines and the Far Rockaway generating plant for the purpose of repowering;
• LIPA also obtains the option to purchase KeySpan’s fleet of Combustion Turbines (peaking units) at Wading River and at Shoreham for 1.25 times book value. This option enhances repowering opportunities at all of these locations;
• National Grid commits to begin to install $100 million in NOx emission reduction equipment and efficiency improvement equipment at Northport units and NOx reduction equipment at Port Jefferson units immediately. The level of cost recovery for these improvements will be limited to the level of fuel and emission allowance savings achieved during the term of the Power Supply Agreement;
• National Grid and LIPA will perform a detailed Northport plant and Port Jefferson plant engineering and economics repowering studies;
• National Grid will provide summer availability replacement power insurance for a minimum of 3 years; and
• LIPA gains the Right of First Refusal if National Grid proposes to sell its generation to a foreign-controlled entity.

LIPA will send the Agreement to the State Attorney General’s Office and the State Comptroller’s Office for review and approval.