Exhibit 10.5




                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY



                                       and



                         THE BROOKLYN UNION GAS COMPANY
                     d/b/a KEYSPAN ENERGY DELIVERY NEW YORK



                         ------------------------------

                             PARTICIPATION AGREEMENT
                         ------------------------------


                          Dated as of November 1, 2005





                                 - relating to -
                    $55,000,000 Gas Facilities Revenue Bonds
(The Brooklyn Union Gas Company d/b/a KeySpan Energy Delivery New York Project),
                                  2005 Series B





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<TABLE>

                                TABLE OF CONTENTS
<CAPTION>

                                                                                                                Page
                                                                                                                ----

                                    ARTICLE I

       DEFINITIONS; EFFECTIVE DATE AND DURATION OF PARTICIPATION AGREEMENT
<S>              <C>                                                                                            <C>
Section 1.01.     Definitions.....................................................................................2
Section 1.02.     Effective Date of Participation Agreement; Duration of Participation Agreement..................2

                                   ARTICLE II

                                 REPRESENTATIONS

Section 2.01.     Representations by the Authority................................................................2
Section 2.02.     Representations by the Company..................................................................3

                                   ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

Section 3.01.     Construction of the Project.....................................................................4
Section 3.02.     Sale of Bonds and Deposit of Proceeds; Additional Bonds; Liability under
                  Bonds...........................................................................................4
Section 3.03.     [Reserved]......................................................................................5
Section 3.04.     Investment of Moneys in Funds under the Indenture...............................................5

                                   ARTICLE IV

                       CORPORATION OBLIGATION AND PAYMENTS

Section 4.01.     Execution and Delivery of Company Obligation to Trustee.........................................5
Section 4.02.     Prepayment to Redeem Bonds......................................................................6
Section 4.03.     Obligation for Payment Absolute; Deficiencies...................................................6
Section 4.04.     Administration Fees; Expenses, etc..............................................................7
Section 4.05.     Compensation of Trustee and Registrar and Paying Agent, Auction Agent
                  and Remarketing Agent...........................................................................7
Section 4.06.     Project Not Security for Bonds..................................................................8
Section 4.07.     Payment of Taxes and Assessments; No Liens or Charges...........................................8
Section 4.08.     Indemnification of Authority and Trustee........................................................8
Section 4.09.     Company to Pay Attorneys' Fees and Disbursements................................................9
Section 4.10.     No Abatement of Administration Fees and Other Charges...........................................9
Section 4.11.     Prepayment of Company Obligation................................................................9
Section 4.12.     Payment to Registrar and Paying Agent...........................................................9
Section 4.13.     Agreements of the Company Relating to Support Facilities........................................9


                                       i

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Section 4.14.     Company Liable to Owners of Bonds in the Case of Certain Events of
                  Taxability....................................................................................10

                                    ARTICLE V

                                SPECIAL COVENANTS

Section 5.01.     No Warranty as to Suitability of Project.......................................................10
Section 5.02.     Authority's Rights to Inspect Project and Plans and Specifications.............................10
Section 5.03.     Company Consent to Amendment of Indenture......................................................11
Section 5.04.     Tax Covenant...................................................................................11
Section 5.05.     Company Agrees to Perform Obligations Imposed by Indenture.....................................11
Section 5.06.     Certificates as to Defaults....................................................................11
Section 5.07.     Compliance with Laws...........................................................................11
Section 5.08.     Maintenance of Office or Agency................................................................12
Section 5.09.     Performance of and Compliance with Other Covenants.............................................12
Section 5.10.     Consolidation, Merger or Sale of Assets........................................................12
Section 5.11.     Financial Statements of Company................................................................13
Section 5.12.     Recording and Filing...........................................................................13
Section 5.13.     Ratings........................................................................................13
Section 5.14.     Notices........................................................................................13
Section 5.15.     Maintenance of Properties......................................................................13
Section 5.16.     Insurance......................................................................................13
Section 5.17.     Proper Books of Record and Account.............................................................14
Section 5.18.     Compliance with Laws...........................................................................14
Section 5.19.     Further Assurances.............................................................................14

                                   ARTICLE VI

                        DEFAULTS BY CORPORATION; REMEDIES

Section 6.01.     Events of Default; Acceleration................................................................14
Section 6.02.     Events of Default Relating to Fees or Indemnification..........................................16
Section 6.03.     Judicial Proceedings by Trustee................................................................16
Section 6.04.     Rights of the Credit Facility Issuer; Other  Rights of the Trustee to
                  Enforce this Participation Agreement...........................................................16

                                   ARTICLE VII

                                  MISCELLANEOUS

Section 7.01.     Disposition of Amounts After Payment of Bonds..................................................17
Section 7.02.     Notices........................................................................................17
Section 7.03.     Successors and Assigns.........................................................................17
Section 7.04.     Amendment of Participation Agreement...........................................................17
Section 7.05.     Assignment by Authority........................................................................17
Section 7.06.     Participation Agreement Supersedes Any Prior Agreements........................................18


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<PAGE>


Section 7.07.     Counterparts...................................................................................18
Section 7.08.     Severability...................................................................................18
Section 7.09.     Law and Place of Enforcement of this Participation Agreement...................................18
Section 7.10.     The Policy.....................................................................................18
Section 7.11.     Company Request to Transfer Bond Proceeds......................................................18
Section 7.12.     Delegation of Duties by Authority..............................................................18
Section 7.13.     Survival of Representations, Warranties and Covenants..........................................18




EXHIBIT A.......................................................................................................A-1
EXHIBIT B.......................................................................................................B-1
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                                     (iii)

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     This  PARTICIPATION  AGREEMENT,  dated as of November 1, 2005,  between NEW
YORK STATE ENERGY  RESEARCH AND  DEVELOPMENT  AUTHORITY,  a body  corporate  and
politic,  constituting a public benefit  corporation,  established  and existing
under and by virtue of the laws of the State of New York (the  "Authority")  and
The  Brooklyn  Union Gas Company  d/b/a  KeySpan  Energy  Delivery  New York,  a
corporation duly organized and existing and qualified to do business as a public
utility under the laws of the State of New York (the "Company"),

                                   WITNESSETH:

     WHEREAS,  pursuant  to special act of the  Legislature  of the State of New
York (Title 9 of Article 8 of the Public  Authorities  Law of New York,  as from
time to time amended and supplemented,  herein called the "Act"),  the Authority
has been  established,  as a body  corporate and politic,  constituting a public
benefit corporation; and

     WHEREAS,  pursuant to the Act, the  Authority is empowered to contract with
any power  company to  participate  in the  incorporation  of  features in power
plants and the  construction of associated  facilities to the extent required by
the public interest in development,  health, recreation, safety, conservation of
natural resources and aesthetics; and

     WHEREAS,  the Authority is also  authorized  under the Act to borrow moneys
and issue its negotiable  bonds to provide  sufficient  moneys for achieving its
corporate  purposes,  including the refunding of outstanding  bonds and notes of
the Authority; and

     WHEREAS,  the Authority is also authorized  under the Act to enter into any
contracts  and to  execute  all  instruments  necessary  or  convenient  for the
exercise of its corporate powers and the fulfillment of its corporate  purposes;
and

     WHEREAS,  the Company is a public utility corporation doing business in the
State of New York; and

     WHEREAS,  the Company has requested that the Authority  issue bonds for the
purpose of refunding the Authority's Gas Facilities Revenue Bonds, Series C (The
Brooklyn Union Gas Company Project) (the "Prior Bonds"),  issued pursuant to the
Trust  Indenture  dated as of June 1, 1990  (the  "Prior  Original  Indenture"),
between the Authority and Manufacturers Hanover Trust Company, as trustee, which
Prior Original  Indenture was amended and  supplemented by a First  Supplemental
Trust Indenture, dated as of July 1, 1993 (together with the Original Indenture,
the "Prior  Indenture"),  between the  Authority and JPMorgan  Chase Bank,  N.A.
(formerly  known as Chemical Bank, as successor to  Manufacturers  Hanover Trust
Company), as trustee (in such capacity, a "Prior Trustee'); and

     WHEREAS,  the Prior Bonds were issued to provide funds for the acquisition,
construction, and installation of certain facilities for the local furnishing of
gas within The City of New York (such facilities as further described in Exhibit
A hereto hereinafter referred to as the "Project"); and

     WHEREAS,  by Resolution No. 1094, adopted September 19, 2005, the Authority
has determined to issue its Gas Facilities Revenue Bonds (The Brooklyn Union Gas
Company  d/b/a KeySpan  Energy  Delivery New York  Project),  2005 Series B (the


<PAGE>


"Bonds") in an aggregate  principal  amount not to exceed  $55,000,000,  for the
purpose of refunding the outstanding  principal amount of the Prior Bonds, to be
issued  under and secured by an  Indenture of Trust dated as of November 1, 2005
between the Authority and Citibank, N.A., as Trustee (the "Indenture");

     NOW, THEREFORE,  for and in consideration of the premises and of the mutual
covenants  and  agreements  hereinafter  set forth,  it is hereby  agreed by and
between the parties as follows:

                                   ARTICLE I

                   DEFINITIONS; EFFECTIVE DATE AND DURATION OF
                             PARTICIPATION AGREEMENT

     Section  1.01.  Definitions.  Each of the terms used in this  Participation
Agreement  which is  defined  in Section  1.01 of the  Indenture  shall have the
meaning herein which such term is given in said Section 1.01 of the Indenture.

     Section  1.02.  Effective  Date of  Participation  Agreement;  Duration  of
Participation Agreement.  This Participation Agreement shall become effective on
the  Effective  Date,  and shall  continue  in full force and  effect  until the
principal of and premium, if any, and interest on the Bonds have been fully paid
(or  provision  for their payment has been made and all such Bonds are deemed to
be no longer outstanding in accordance with the provisions of the Indenture) and
all sums to which the  Authority,  the Trustee and the Bond Insurer are entitled
hereunder have been fully paid.

     Notwithstanding  the  Effective  Date,  for  convenience  and  purposes  of
reference this Participation Agreement shall be dated as of November 1, 2005 and
may be  cited  and  referred  to as the  "Participation  Agreement  dated  as of
November 1, 2005."

                                   ARTICLE II

                                 REPRESENTATIONS

     Section 2.01. Representations by the Authority. The Authority represents as
follows:

          (a) The  Authority is a body  corporate  and politic,  constituting  a
     public benefit corporation,  established and existing under the laws of the
     State of New York;

          (b) The  Authority has full power and authority to execute and deliver
     the Bonds, this Participation  Agreement, the Tax Regulatory Agreement, the
     Indenture and the Bond  Purchase  Trust  Agreement  and to  consummate  the
     transactions  contemplated  hereby and thereby and perform its  obligations
     hereunder and thereunder;


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          (c) The Authority is not in default under any of the provisions of the
     laws of the State of New York  which  would  affect  its  existence  or its
     powers referred to in the preceding paragraph (b);

          (d) The Authority has determined that its participation in the Project
     and the refunding of the Prior Bonds, as contemplated by this Participation
     Agreement, is in the public interest; and

          (e) The  Authority has duly  authorized  the execution and delivery of
     this Participation  Agreement,  the Tax Regulatory Agreement, the Indenture
     and the Bond Purchase Trust Agreement and the execution and delivery of the
     other documents incidental to this transaction.

     Section 2.02.  Representations by the Company. 1. The Company represents as
follows:


          (a)  The  Company  is a  corporation  duly  incorporated  and in  good
     standing  under the laws of the State of New York,  is duly  qualified  and
     authorized  to engage in business  as a public  utility in the State of New
     York,  has power to enter  into,  execute and  deliver  this  Participation
     Agreement,  the Tax  Regulatory  Agreement,  and to issue and  deliver  the
     Company  Obligation and by proper  corporate action has duly authorized the
     execution and delivery of this Participation  Agreement, the Tax Regulatory
     Agreement,  the  Insurance  Agreement  and the issuance and delivery of the
     Company Obligation;

          (b) The execution and delivery of this  Participation  Agreement,  the
     Tax  Regulatory  Agreement  and the  issuance  and  delivery of the Company
     Obligation and the  consummation of the  transactions  herein  contemplated
     will not conflict  with or  constitute  a breach of or a default  under the
     Company's Certificate of Incorporation or By-Laws or any material judgment,
     decree, order, statute, rule or regulation applicable to the Company or any
     indenture,  mortgage,  loan  agreement or other  contract or  instrument to
     which the Company is a party or by which it is bound;

          (c) The Participation  Agreement, the Tax Regulatory Agreement and the
     Insurance  Agreement  have been duly  executed and delivered by the Company
     and  constitute  valid and  legally  binding  obligations  of the  Company,
     enforceable  against the Company in accordance with their respective terms,
     except as enforcement may be limited by applicable bankruptcy,  insolvency,
     moratorium,  reorganization  or other laws  relating  to or  affecting  the
     enforcement of creditors'  rights or contractual  obligations  generally or
     principles of equity or judicial discretion; and

          (d)  All  necessary  authorizations  or  approvals  required  for  the
     execution  and  delivery  of  this  Participation  Agreement  and  the  Tax
     Regulatory  Agreement and the issuance of the Company  Obligation have been
     obtained by the Company,  including but not limited to the authorization of
     the Public Service Commission of the State of New York.

          (e) The Company agrees to reimburse the Bond Insurer  immediately  and
     unconditionally  upon  demand,  to the  extent  permitted  by law,  for all
     reasonable expenses,  including  attorneys' fees and expenses,  incurred by


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     the Bond Insurer in connection with (i) the enforcement by the Bond Insurer
     of the Company's obligations,  or the preservation or defense of any rights
     of the Bond Insurer,  under this Indenture and any other document  executed
     in  connection  with the  issuance  of the  Bonds,  and  (ii) any  consent,
     amendment,  waiver or other  action with  respect to the  Indenture  or any
     related  document,  whether  or not  granted  or  approved,  together  with
     interest on all such  expenses  from and including the date incurred to the
     date of payment at  Citibank's  Prime Rate plus 3% or the maximum  interest
     rate permitted by law, whichever is less. In addition, the Insurer reserves
     the  right  to  charge a fee in  connection  with  its  review  of any such
     consent, amendment or waiver, whether or not granted or approved .

          (f) The  Company  agrees  not to use the  Bond  Insurer's  name in any
     public  document  including,   without  limitation,   a  press  release  or
     presentation,  announcement  or  forum  without  the Bond  Insurer's  prior
     consent.  In the event that the Company is advised by counsel that it has a
     legal  obligation to disclose the Bond Insurer's name in any press release,
     public announcement or other public document, the Company shall provide the
     Bond Insurer with at least three (3) business days' prior written notice of
     its  intent  to use the Bond  Insurer's  name  together  with a copy of the
     proposed  use of the  Bond  Insurer's  name  and  of any  description  of a
     transaction with the Bond Insurer and shall obtain the Bond Insurer's prior
     consent  as to the  form  and  substance  of the  proposed  use of the Bond
     Insurer's name and any such description.

          (g) The  Company  shall  not  enter  into any  agreement  nor shall it
     consent to or  participate in any  arrangement  pursuant to which Bonds are
     tendered  or  purchased  for any  purpose  other  than the  redemption  and
     cancellation  or legal  defeasance  of such Bonds without the prior written
     consent of the Bond Insurer.

          (h) The Company has  corporate  power to take all actions  required or
     permitted  to be taken by the  Company  by or  under,  and to  perform  and
     observe  the  covenants  and  agreements  on its  part  contained  in,  the
     Indenture.

     2. The  representations  and warranties of the Company set forth in the Tax
Regulatory  Agreement are hereby  incorporated  by reference as though fully set
forth herein.

                                  ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

     Section 3.01.  Construction of the Project.  The Company hereby  represents
that it has caused the Project to be completed  and  acknowledges  that it shall
not be entitled to any reimbursement for the cost of construction of the Project
from the  Authority,  the Trustee or the  Holders of the Bonds,  nor shall it be
entitled to any diminution or postponement  of the payments  required to be paid
by  the  Company  pursuant  to  this  Participation  Agreement  or  the  Company
Obligation.

     Section  3.02.  Sale of Bonds and Deposit of  Proceeds;  Additional  Bonds;
Liability  under Bonds.  1. In order to provide  funds for the  refunding of the
Prior  Bonds,  the  Authority,  on  the  date  specified  in the  Bond  Purchase


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Agreement,  and  concurrently  with the  issuance and delivery to the Trustee as
provided in Section 4.01  hereof,  will issue,  sell and deliver the Bonds,  all
pursuant to and as provided in the Bond  Purchase  Agreement  and subject to the
conditions set forth in Section 2.06 of the Indenture,  and the proceeds of such
sale will be  deposited  by the  Trustee  as  directed  in  Section  9.01 of the
Indenture.

     2. The Bonds shall not be general  obligations of the Authority,  and shall
not constitute an  indebtedness of or a charge against the general credit of the
Authority  or  give  rise  to any  pecuniary  liability  of the  Authority.  The
liability  of the  Authority  under the Bonds shall be  enforceable  only to the
extent provided in the Indenture, and the Bonds shall be payable solely from the
Company  Obligation  Payments,  and any other  funds held by the  Trustee in any
accounts  established  under the Indenture and  specifically  available for such
payment. The Bonds shall not be a debt of the State of New York and the State of
New York shall not be liable thereon.

     Section 3.03. [Reserved].

     Section 3.04. Investment of Moneys in Funds under the Indenture. Any moneys
held as a part of any Fund created  under the  Indenture  shall,  at the written
direction of an Authorized Company Representative,  be invested or reinvested by
the Trustee as provided in Section 10.04 of the Indenture. In the absence of any
such  written  direction,  amounts  held in any  fund or  account  shall  remain
uninvested.

                                   ARTICLE IV

                       CORPORATION OBLIGATION AND PAYMENTS

     Section 4.01.  Execution and Delivery of Company Obligation to Trustee.  In
order to evidence the  obligation  of the Company to the  Authority to repay the
advance of the proceeds of the Bonds,  the Authority hereby directs the Company,
and the Company hereby  agrees,  to deliver or cause to be delivered the Company
Obligation to the Trustee on the Effective Date. The Company Obligation shall be
in substantially  the form attached hereto as Exhibit B, with only such changes,
omissions and  insertions  thereto as shall have been approved by the Authority.
The Company shall be entitled to receive a credit  against its obligation to pay
the principal of and premium, if any, and interest on, the Company Obligation in
accordance with the Indenture. The Company Obligation shall:

          (a)  be in an  aggregate  principal  amount  equal  to  the  aggregate
     principal amount of the Bonds then being  authenticated  and delivered (the
     "Bonds");

          (b) provide for payments of interest equal to the payments of interest
     on the Bonds;

          (c) require payments of principal,  or principal plus a premium, equal
     to the payments required to be made on the Bonds;


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<PAGE>


          (d)  contain  redemption  provisions,  including  premium,  if any, or
     provisions  with  respect  to  amortization  of  principal,  together  with
     premium, if any, identical to the redemption or amortization  provisions of
     the Bonds;

          (e) require  that all  payments of  principal,  premium,  if any,  and
     interest on the Company  Obligation  be made to the Trustee in such coin or
     currency of the United States of America as at the time of payment shall be
     legal  tender for the  payment of public and private  debts,  and that each
     such payment be made on the due date for the  corresponding  payment on the
     Bonds;

          (f) provide  that the amount of any such  payment  shall be reduced by
     the amount, if any,  available under the Indenture on the due date for such
     payment and applied to the corresponding payment on the Bonds; and

          (g) provide for payment of amounts due under the Insurance Agreement.

     Section 4.02. Prepayment to Redeem Bonds. Whenever any Bonds are redeemable
in whole or in part (other than pursuant to Section 5.06 of the Indenture),  the
Authority will redeem the same at the written direction of an Authorized Company
Representative,  and the Company will pay, as a prepayment  of the amount due on
the Company Obligation corresponding to such Bonds, an amount equal to the total
cost of such redemption,  less the amount,  if any, in the Bond Fund on the date
fixed for such redemption and available for such redemption payment.

     Section 4.03.  Obligation for Payment Absolute;  Deficiencies.  The Company
agrees that its obligation to make the Company Obligation  Payments at the times
and in the  amounts  provided in the  Company  Obligation  and to make all other
payments  provided  for in  this  Participation  Agreement  shall  be  absolute,
irrevocable  and  unconditional  and shall not be subject to any defense  (other
than payment) or any rights of setoff,  recoupment,  abatement,  counterclaim or
deduction  and  without  any  rights of  suspension,  deferment,  diminution  or
reduction it might  otherwise have against the Authority or Trustee or the owner
of any Bond.  The Company will not suspend or  discontinue  any such payments or
terminate this Participation Agreement for any cause including, without limiting
the  generality  of the  foregoing,  the  unenforceability  (because of judicial
decision  or  otherwise)  or the  impossibility  of  performance  of the Company
Obligation obligations,  or any breach by the Authority of any obligation to the
Company,  whether  under this  Participation  Agreement or any  indebtedness  or
liability at any time owing to the Company by the  Authority or the  destruction
by fire or other casualty of any Project or any portion  thereof,  or the taking
of title  thereto  or the use  thereof by the  exercise  of the power of eminent
domain or  condemnation  or any  change in the tax or other  laws of the  United
States, the State or any political subdivision of either thereof.  Except to the
extent provided in the first and second sentences in this Section 4.03,  nothing
contained  herein  shall  constitute  a waiver or release by the  Company of any
right,  claim or  cause of  action  which  the  Company  may  have  against  the
Authority, the Trustee or others,  including, but not, limited to, those rights,
causes of action or claims which may arise out of the breach of their respective
obligations or the inaccuracy of their respective warranties; provided, however,
that the Company  may pursue any such right,  claim or cause of action only by a
separate proceeding or action and not by counterclaim or setoff and the bringing
of such separate  proceeding or action shall not affect the Company's  absolute,


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<PAGE>


irrevocable  and  unconditional  obligation  to make  payments  pursuant to this
Section  4.03.  No  provisions  set forth  herein  shall  constitute a waiver or
release  by the  Authority  of any  right,  claim or cause of  action  which the
Authority may have against the Company,  the Trustee or others,  including,  but
not limited to, those rights,  causes of action or claims which arise out of the
breach of their  respective  obligations or the  inaccuracy of their  respective
warranties.  No provisions set forth herein shall constitute a waiver or release
by the Trustee of any right, claim or cause of action which the Trustee may have
against the Company or others,  including,  but not  limited to,  those  rights,
causes of action or claims  which  arise out of the  breach of their  respective
obligations or the inaccuracy of their  respective  warranties.  Notwithstanding
anything herein to the contrary,  if for any reason Company Obligation Payments,
together  with other moneys held by the Trustee in any account and  specifically
available  for such purpose,  would not be sufficient to make the  corresponding
payments of  principal  of and  premium,  if any, and interest on the Bonds when
such  payments are due, the Company will pay the amounts  required  from time to
time to make up any such deficiency.

     Section  4.04.  Administration  Fees;  Expenses,  etc. In order to defray a
portion  of  the  expenses   incurred  by  the  Authority  in   conducting   and
administering its gas facility financing programs,  the Company shall pay to the
Authority an initial Administration Fee in the amount of $137,500 on the date of
authentication and delivery of the Bonds to the initial purchasers  thereof,  an
annual fee equal to $130 per  million  dollar  principal  amount of the Bonds on
November  1, 2006,  and on  November 1 of each year  thereafter,  based upon the
amount  of Bonds  Outstanding  as of such  November  1 and for  purposes  of the
calculation of such fee,  rounding up to the nearest whole million  dollars.  In
addition to such  Administration  Fees,  the Company will pay or  reimburse  the
Authority upon its request for  reasonable  expenses,  disbursements,  advances,
taxes,  assessments or impositions,  not otherwise paid under this Participation
Agreement or the Indenture, incurred by or imposed upon the Authority (including
printing  costs and the  reasonable  fees,  expenses  and  disbursements  of its
counsel and bond counsel) in connection with its  administration and enforcement
of, and compliance with, this Participation  Agreement,  the Company Obligation,
the Policy, the Auction Agency Agreement, the Bond Purchase Trust Agreement, any
Remarketing Agreement and the Indenture or any transaction,  instrument or event
contemplated  by any such  document,  which  amounts the Company is obligated to
pay, including, but not limited to, reasonable attorneys' fees. In addition, the
Company  shall  wire  to the  State  of New  York a  bond  issuance  charge  fee
applicable to the Bonds pursuant to Section 2976 of the Public  Authorities  Law
of the State of New York in the amount  specified by such section on the date of
authentication and delivery of the Bonds to the initial purchasers thereof.

     Section  4.05.  Compensation  of Trustee and  Registrar  and Paying  Agent,
Auction Agent and  Remarketing  Agent.  The Company agrees to pay to the Trustee
until the  principal of,  premium,  if any, and interest on the Bonds shall have
been fully paid:  (i) an amount  equal to the initial or  acceptance  fee of the
Trustee and the annual fee of the Trustee for its ordinary services rendered and
its ordinary expenses  incurred as Trustee under the Indenture,  as and when the
same become due; (ii) reasonable  fees and charges of the Trustee,  as Registrar
and Paying  Agent,  and any other  Registrar  and Paying Agent for the Bonds for
acting as Registrar and Paying Agent, as provided in the Indenture,  as and when
the same become due; (iii)  reasonable fees and  disbursements of counsel to the
Trustee,  as and when the same  become  due;  and (iv) the  reasonable  fees and


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<PAGE>


charges of the Trustee for the necessary  extraordinary  services rendered by it
and extraordinary  expenses incurred by it under the Indenture,  as and when the
same become due;  provided,  that the Company  may,  without  creating a default
hereunder,  contest  in good  faith  the  necessity  for any such  extraordinary
services or  extraordinary  expenses  and the  reasonableness  of any such fees,
charges or expenses.  Such fees,  charges and expenses shall be paid directly to
the  Trustee for its own use or for  disbursement  to the  Registrar  and Paying
Agent,  as the case may be. The Company  agrees to pay to the Auction  Agent and
the Remarketing Agents an amount equal to the reasonable fees and charges of the
Auction Agent and the  Remarketing  Agents,  respectively,  as and when the same
become due.

     Section 4.06. Project Not Security for Bonds. It is expressly recognized by
the parties  that the Project will not  constitute  any part of the security for
the Bonds. The principal  security for the Bonds shall be the Company Obligation
and the absolute,  irrevocable  and  unconditional  obligation of the Company to
make the Company Obligation Payments.

     Section 4.07.  Payment of Taxes and Assessments;  No Liens or Charges.  The
Company will (a) pay, when the same shall become due, all taxes and assessments,
including income, profits,  property or excise taxes, if any, or other municipal
or governmental charges,  imposed,  levied or assessed by the Federal,  state or
any  municipal  government  upon the  Authority or the Trustee in respect of any
payments  (other than  payments  made pursuant to Sections 4.05 and 4.08 hereof)
made or to be made  pursuant  to this  Participation  Agreement  or the  Company
Obligation, and (b) pay or cause to be discharged,  within sixty (60) days after
the same shall  accrue,  any lien or charge upon any such  payment made or to be
made under this Participation Agreement, provided, that the Company shall not be
required  to pay any such tax or  assessment  so long as (i) the  Company at its
expense contests by appropriate  legal  proceedings  conducted in good faith and
with due  diligence  the  amount,  validity  or  application  of any  such  tax,
assessment or charge,  (ii) such proceedings shall have the effect of suspending
the collection thereof from the Authority and the Trustee, and (iii) the Company
shall indemnify and hold the Authority and the Trustee harmless from any losses,
costs, charges, expenses (including attorneys' fees and expenses), judgments and
liabilities  arising  in  respect  of such tax,  assessment  or  charge  and the
non-payment thereof.

     Section 4.08.  Indemnification of Authority and Trustee.  Any obligation of
the Authority created by or arising out of this Participation Agreement shall be
a  limited  obligation  of  the  Authority,  payable  solely  from  the  Company
Obligation  Payments and any other funds held by the Trustee under the Indenture
and available for such payment, and shall not constitute an indebtedness of or a
charge  against the general  credit of the Authority and shall not constitute or
give rise to any  pecuniary  liability of the  Authority;  nevertheless,  if the
Authority  shall  incur any such  pecuniary  liability,  then in such  event the
Company shall indemnify and hold the Authority  harmless by reason thereof.  The
Company  releases the Authority and the Trustee from,  agrees that the Authority
and the Trustee  shall not be liable for, and agrees to  indemnify  and hold the
Authority and the Trustee harmless from, any liability for any loss or damage to
property or any injury to or death of any person that may be  occasioned  by any
cause whatsoever  arising out of the construction or operation of any Project or
the financing  thereof.  The Company agrees to indemnify and hold the Authority,
its members,  officers and employees harmless from any losses,  costs,  charges,
expenses   (including   attorneys'  fees  and   disbursements),   judgments  and
liabilities  incurred by it or them, as the case may be, in connection  with any


                                       8
<PAGE>


action,  suit or proceeding  instituted  or  threatened  in connection  with the
transactions contemplated by this Participation Agreement so long as it or they,
as the  case may be,  have  acted in good  faith to carry  out the  transactions
contemplated by this  Participation  Agreement.  The Company agrees to indemnify
and hold the Trustee and any director, officer, employee or agent of the Trustee
harmless in connection  with any loss,  liability,  claim or reasonable  expense
(including costs and expenses of litigation, and of investigation, counsel fees,
damages,  judgments and amounts paid in settlement),  action, suit or proceeding
instituted or threatened  in connection  with or arising under the  transactions
contemplated by this  Participation  Agreement in the manner provided in Article
XII of the  Indenture,  except for its own willful  misconduct  or negligence in
carrying out the transactions contemplated by this Participation Agreement.

     Section 4.09.  Company to Pay  Attorneys'  Fees and  Disbursements.  If the
Company  shall  default  under  any  of the  provisions  of  this  Participation
Agreement and the Authority or the Trustee shall employ attorneys or incur other
expenses for the collection of payments due under this  Participation  Agreement
or for the  enforcement  of  performance  or  observance  of any  obligation  or
agreement on the part of the Company contained in this Participation  Agreement,
the  Company  will on demand  therefor  reimburse  the  reasonable  fees of such
attorneys and such other reasonable disbursements so incurred.

     Section 4.10. No Abatement of Administration  Fees and Other Charges. It is
understood  and  agreed  that so long as any  Bonds  are  outstanding  under the
Indenture,  Administration  Fees and  other  charges  payable  to the  Authority
pursuant to this  Participation  Agreement  shall  continue to be payable at the
times and in the amounts herein  specified,  whether or not any Project,  or any
portion thereof,  shall have been destroyed by fire or other casualty,  or title
thereto or the use thereof shall have been taken by the exercise of the power of
eminent domain, and that there shall be no abatement of any such  Administration
Fees and other charges by reason thereof.

     Section  4.11.  Prepayment  of Company  Obligation.  The Company  shall not
prepay any Company  Obligation  or any portion  thereof  except as  necessary in
connection  with the  redemption  prior to  maturity  of all or a portion of the
Bonds, or upon  acceleration of maturity of the Bonds or pursuant to Article XVI
of the Indenture.

     Section 4.12. Payment to Registrar and Paying Agent. The Company shall pay,
or cause to be paid,  to the  Registrar and Paying Agent for deposit in the Bond
Purchase Fund and credit to the Company Account therein an amount  sufficient to
provide for the payment of the Purchase  Price of any Bond tendered for purchase
pursuant to the Indenture and the Bond  Purchase  Trust  Agreement to the extent
that sufficient  moneys are not available for the payment of such Purchase Price
from the other sources described therein.

     Section 4.13. Agreements of the Company Relating to Support Facilities. The
Company  agrees not to request that the  interest  rate mode  applicable  to the
Bonds be adjusted to an Adjustable  Rate or a Fixed Rate unless on the effective
date of the  applicable  Change in the Interest Rate Mode the Policy shall be in
place,  or if the Policy is not in place,  the Bonds shall be rated at least "A"
by S&P or "A" by Moody's or an equivalent  rating by any  nationally  recognized
rating agency.  If the Policy is not in place, such rating of the Bonds may, but
is not required to, be achieved by obtaining a Support  Facility which meets the
requirements of Article VI of the Indenture.


                                       9
<PAGE>


     The  Company  further  agrees that it will  maintain a  Liquidity  Facility
issued by a financial  institution  with a long-term rating of not less than "A"
by at least one  nationally  recognized  rating agency in effect with respect to
the  Bonds at all times and a  short-term  rating of at least  "A-1+" by S&P and
"VMIG 1" by Moody's, or an equivalent rating by any nationally recognized rating
agency,  except with respect to Bonds bearing an Auction  Period Rate or a Fixed
Rate.  Notwithstanding  the  foregoing,  unless  otherwise  agreed  by the  Bond
Insurer,  the Company shall maintain a Liquidity  Facility issued by a financial
institution  with a  long-term  rating  of not less  than  "A" by at  least  one
nationally  recognized  rating agency in effect with respect to the Bonds at all
times and a short-term rating of at least "A-1+" by S&P and "VMIG 1" by Moody's,
or an equivalent rating by any nationally  recognized rating agency, except with
respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

     Section  4.14.  Company  Liable to  Owners of Bonds in the Case of  Certain
Events of  Taxability.  The Company  confirms  and agrees that if as a result of
action by the Company,  the owner of the Project as of the date  hereof,  or any
successor  owner of the Project,  the interest on the Bonds is  determined to be
included  for federal  income tax purposes in the gross income of any owner of a
Bond  (other  than a  "substantial  user" of the  Project or a "related  person"
within  the  meaning of  section  147(a)(1)  of the  Code),  as  evidenced  by a
published  or  private  ruling  of the  Internal  Revenue  Service  or a  final,
nonappealable judicial decision by a court of competent  jurisdiction,  then the
Company,  in addition to its  obligation to redeem the Bonds pursuant to Section
5.05 of the Indenture,  shall be liable to the affected  owners of the Bonds for
any taxes,  penalties and interest  assessed against such owners by the Internal
Revenue Service and attributable to the Bonds.

     The Authority and the Trustee agree not to object to the intervention in or
participation  by the Company at its own expense in any proceedings by or before
the Internal  Revenue  Service or any court relating to whether  interest on the
Bonds is includable  for federal  income tax purposes in the gross income of any
owner of a Bond  (other than a  "substantial  user" of the Project or a "related
person" within the meaning of Section 147(a)(1) of the Code).

                                   ARTICLE V

                                SPECIAL COVENANTS

     Section 5.01. No Warranty as to Suitability of Project. The Authority makes
no warranty, either express or implied, as to the actual or designed capacity of
any Project,  as to the suitability of any Project for the purposes specified in
this Participation  Agreement,  as to the condition of any Project,  or that any
Project will be suitable for the Company's purposes or needs.

     Section  5.02.   Authority's  Rights  to  Inspect  Project  and  Plans  and
Specifications.  The Authority  shall have the right at all reasonable  times to
examine and  inspect any and all records of the Company  relating to the Project
and,  to  the  extent  reasonably  available  to  the  Company,  the  plans  and
specifications therefor.


                                       10
<PAGE>


     Section  5.03.  Company  Consent to Amendment of  Indenture.  The Authority
shall not adopt any  indenture  supplemental  to or  amendatory of the Indenture
which affects the rights or obligations of the Company without the prior consent
of the Company as evidenced by a certificate  in writing signed by an Authorized
Company Representative.

     Section 5.04. Tax Covenant. Notwithstanding any other provision hereof, the
Company  covenants  and agrees that it will not take or  authorize or permit any
action to be taken  with  respect  to the  Project,  or the  proceeds  of Bonds,
including  any  amounts  treated as proceeds of Bonds for any purpose of Section
103 or any related  provisions of the Code, which will result in the loss of the
exclusion  of  interest  on any series of Bonds from  gross  income for  Federal
income tax  purposes  under  Section 103 of the Code (except for any Bond during
any period while any such Bond is held by a person referred to in Section 147(a)
of the Code). This provision shall control in case of conflict or ambiguity with
any other  provision of this  Participation  Agreement.  In  furtherance of such
covenant and  agreement,  the  Authority and the Company will enter into the Tax
Regulatory Agreement and the Company hereby agrees to comply with the provisions
thereof.

     Section 5.05. Company Agrees to Perform  Obligations  Imposed by Indenture.
The Company  agrees to perform such  obligations as may be required of it by the
provisions of the Indenture.

     Section 5.06.  Certificates as to Defaults. The Company shall file with the
Trustee,  on or before  the first day of the month in which any  series of Bonds
are  delivered  and on the  anniversary  of such  date as long as the  Bonds are
outstanding,  a  certificate  signed  by an  Authorized  Company  Representative
stating that,  to the best of his or her  knowledge and belief,  the Company has
kept, observed,  performed and fulfilled each and every one of its covenants and
obligations  contained  herein  and  there  does  not  exist at the date of such
certificate  any  default  hereunder  or,  if any such  default  shall so exist,
specifying the same and the nature and status thereof.

     Section 5.07. Compliance with Laws. The Company shall:

          (a) do or  cause  to be  done  all  things  necessary  on its  part to
     preserve  and keep in full  force and effect its  corporate  existence  and
     rights and such corporate and public utility franchises,  rights,  licenses
     and permits as are necessary for the conduct of its business; provided that
     the  Company  may  terminate  or  abandon,  or permit  the  termination  or
     abandonment  of,  any such  right,  franchise,  license or permit if in the
     opinion of the Company's Board of Directors, the termination or abandonment
     thereof is either necessary or in the best interests of the Company and, in
     any such case,  will not have a material  adverse  effect on the  Company's
     ability to pay amounts with respect to the Company Obligation in accordance
     with  their  terms  or   otherwise   to  comply  with  the  terms  of  this
     Participation Agreement; and

          (b) use  commercially  reasonable  efforts  to comply in all  material
     respects with all applicable  laws, rules and regulations and orders of any
     governmental  authority,  non-compliance  with which  would have a material
     adverse  effect  on  its  business,   financial  condition  or  results  of
     operations (to the extent the Company deems it can reasonably  comply while


                                       11
<PAGE>


     maintaining its public utility  operations) or would  materially  adversely
     affect the Company's ability to perform its obligations  hereunder or under
     the Company  Obligation,  except laws,  rules,  regulations or orders being
     contested in good faith.

     Section  5.08.  Maintenance  of Office or Agency.  The Company shall at all
times keep, in New York, New York, or another location in the State of New York,
an office or agency  where  notices  and  demands  with  respect to the  Company
Obligation and this Participation  Agreement may be served, and shall, from time
to time,  give  written  notice to the Trustee of the location of such office or
agency;  and, in case the Company shall fail so to do, notices may be served and
demands may be made at the principal office of the Trustee.

     Section 5.09.  Performance  of and  Compliance  with Other  Covenants.  The
Company  will  perform  and comply with each of the  covenants  set forth in the
Indenture  dated as of November 1, 2005 between the  Authority  and the Trustee,
together with the  definitions of all of the terms defined in such Indenture and
used in or  otherwise  applicable  therein,  being hereby  incorporated  in this
Participation  Agreement by reference as if such provisions and definitions were
set forth in full herein.

     Section 5.10. Consolidation, Merger or Sale of Assets. The Company will not
consolidate  with or permit  itself to be merged into any other  corporation  or
corporations,   or  sell,  lease,  transfer  or  otherwise  dispose  of  all  or
substantially  all of its properties  and assets,  except in the manner and upon
the terms and conditions set forth in this Section 5.10.

     Nothing  contained herein shall prevent (and this  Participation  Agreement
shall be construed as permitting and  authorizing)  any lawful  consolidation or
merger  of the  Company  with or into  any  other  corporation  or  corporations
lawfully  authorized to acquire and operate the properties of the Company,  or a
series of consolidations or mergers, or successive consolidations or mergers, in
which the Company or its successor or successors  shall be a party,  or any sale
of all or  substantially  all the  properties of the Company as an entirety to a
corporation  lawfully authorized to acquire and operate the same; provided that,
upon  any  consolidation,  merger  or  sale,  the  corporation  formed  by  such
consolidation,  or into which such merger may be made,  or making such  purchase
shall  execute  and  deliver to the Trustee an  instrument,  in form  reasonably
satisfactory to the Trustee,  whereby such corporation shall effectually  assume
the due and  punctual  payment of the  principal  of and  premium,  if any,  and
interest  on the  Company  Obligation  according  to its  tenor  and the due and
punctual  performance  and  observance  of all  covenants  and  agreements to be
performed  by the Company  pursuant  to this  Participation  Agreement,  the Tax
Regulatory Agreement and the Company Obligation.

     Every such successor corporation shall possess, and may exercise, from time
to time, each and every right and power hereunder of the Company, in its name or
otherwise;  and any act,  proceeding,  resolution or  certificate  by any of the
terms of this  Participation  Agreement and the Company  Obligation  required or
provided to be done,  taken and  performed or made,  executed or verified by any
board or officer of the Company  shall and may be done,  taken and  performed or
made, executed or verified with like force and effect by the corresponding board
or officer of any such successor Company.


                                       12
<PAGE>


     If consolidation,  merger or sale or other transfer is made as permitted by
this Section,  the  provisions of this Section shall  continue in full force and
effect and no further  consolidation,  merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.

     Section  5.11.  Financial  Statements  of Company.  The  Company  agrees to
furnish the Trustee  with,  not later than 135 days after the end of each fiscal
year of the Company,  commencing  with the year ending December 31, 2005, a copy
of its audited financial statements for each year. The Company further agrees to
furnish to the Trustee, and to any owner of the Bonds if requested in writing by
such  owner,  within 120 days after the end of each  fiscal  quarter,  unaudited
financial statements of the Company for such quarterly period.

     Section 5.12.  Recording and Filing.  The Company hereby  covenants that it
will cause all financing statements related to the Indenture and all supplements
thereto and this Participation Agreement and all supplements thereto, as well as
such other security agreements, financing statements and all supplements thereto
and other  instruments  as may be required  from time to time to be kept,  to be
recorded and filed in such manner and in such places as may from time to time be
required by law in order to preserve  and protect  fully the security of Holders
and the rights of the  Trustee  hereunder,  and to take or cause to be taken any
and all other action  necessary to perfect the security  interest created by the
Indenture.

     Section 5.13.  Ratings.  During any Auction Rate Period,  the Company shall
take  all  reasonable  action  necessary  to  enable  at  least  two  nationally
recognized,  statistical rating organizations (as that term is used in the rules
and  regulations  of the SEC under the Exchange Act) to provide  ratings for the
Auction Rate Bonds.

     Section  5.14.  Notices.  During any Auction  Rate  Period,  the Company on
behalf of the  Authority  shall  provide the Trustee and, so long as no Event of
Default has occurred  and is  continuing  and the  ownership of any Auction Rate
Bonds is maintained in book-entry form by the Securities Depository, the Auction
Agent,  with notice of any change in (a) the Statutory  Corporate Tax Rate under
the Indenture, (b) the Applicable Percentage,  or (c) the maximum rate permitted
by law on the Bonds. There is currently no such maximum rate.

     Section 5.15. Maintenance of Properties.  So long as the Company Obligation
remains  outstanding and unpaid,  the Company will at all times make or cause to
be made such expenditures for repairs,  maintenance and renewals,  or otherwise,
as shall be necessary to maintain its  properties in good repair,  working order
and condition as an operating  system or systems to the extent necessary to meet
the Company's  obligations under the Public Service Law of the State of New York
and the Participation Agreement.

     Section  5.16.  Insurance.  So  long  as  the  Company  Obligation  remains
outstanding and unpaid, the Company will keep or cause to be kept its properties
that are of an insurable nature, insured against loss or damage by fire or other
risks, the risk of which in the opinion of an Authorized Company  Representative
(who  shall  be an  officer  or  employee  of the  Company  responsible  for the
management of such risks) is customarily  insured against by companies similarly
situated and operating like  properties,  to the extent that property of similar
character is, in such Authorized Company Representative's  opinion,  customarily


                                       13
<PAGE>


insured  against by such companies,  either (a) by reputable  insurers or (b) in
whole  or in part in the  form of  reserves  or of one or more  insurance  funds
created by the Company, whether alone or with other Companys.

     Section  5.17.  Proper Books of Record and Account.  So long as the Company
Obligation remains outstanding and unpaid, the Company will at all times keep or
cause to be kept proper  books of record and  account,  in which full,  true and
correct entry will be made of all dealings, business and affairs of the Company,
including proper and complete entries to capital or property  accounts  covering
property  worn out,  obsolete,  abandoned or sold,  all in  accordance  with the
requirements  of any  system of  accounting  or keeping  accounts  or the rules,
regulations or orders  prescribed by a regulatory  commission with  jurisdiction
over the rates of the Company giving rise to at least fifty-one percent (51%) of
the Company's  gross  revenues,  or if there are no such  requirements or rules,
regulations or orders,  then in compliance  with generally  accepted  accounting
principles.

     Section  5.18.  Compliance  with Laws.  So long as the  Company  Obligation
remains   outstanding  and  unpaid,  the  Company  agrees  to  use  commercially
reasonable  efforts to comply in all material respects with all applicable laws,
rules and regulations and orders of any governmental  authority,  non-compliance
with which  would  have a material  adverse  effect on its  business,  financial
condition  or results of  operations  (to the  extent the  Company  deems it can
reasonably  comply while  maintaining  its public  utility  operations) or would
materially  adversely  affect the Company's  ability to perform its  obligations
hereunder,  except laws,  rules,  regulations or orders being  contested in good
faith.

     Section  5.19.  Further   Assurances.   The  Company  will  make,  execute,
acknowledge  and  deliver,  or  cause  to be made,  executed,  acknowledged  and
delivered,  to the  Trustee  any and  all  such  further  acts,  instruments  or
assurances as may be reasonably  required for effectuating the intention of this
Participation Agreement and the Company Obligation.

                                   ARTICLE VI

                        DEFAULTS BY CORPORATION; REMEDIES

     Section 6.01. Events of Default;  Acceleration.  In case one or more of the
following events of default shall have occurred and be continuing;

          (a) failure by the  Company to pay when due any amount  required to be
     paid under this Participation  Agreement or the Company  Obligation,  which
     failure  causes a default in the payment when due of the  principal  of, or
     premium, if any, or interest on, any of the Bonds; or

          (b) failure by the  Company to pay when due any amount  required to be
     paid under  Section 4.11 of this  Participation  Agreement,  which  failure
     causes an Event of Default to occur  pursuant to  paragraph  (a) of Section
     13.01 of the Indenture; or

          (c) failure on the part of the Company  duly to observe or perform any
     other of the covenants or  agreements on the part of the Company  contained
     in the Participation  Agreement (other than failure to pay amounts required
     to be paid  under  Sections  4.04,  4.05  and  4.08),  the  Tax  Regulatory


                                       14
<PAGE>


     Agreement  or in the  Company  Obligation  for a period of ninety (90) days
     after the date on which  written  notice  of such  failure,  requiring  the
     Company  to remedy the same,  shall  have been given to the  Company by the
     Authority or the Trustee; or

          (d) the occurrence of an Event of Bankruptcy of the Company;

then,  and in any such event,  the Trustee (as assignee of the  Authority)  may,
with the consent of the Bond Insurer  (provided  that the Bond Insurer is not in
default under the Policy),  and/or the  direction of the Bond Insurer  (provided
that the Bond Insurer is not in default under the Policy),  or, upon the written
request or direction of the owners of not less than twenty-five percent (25%) in
aggregate principal amount of the Bonds then outstanding with the consent of the
Bond Insurer  shall,  proceed to protect and enforce all rights of the owners of
Bonds and the  Trustee and as  permitted  by the  Indenture  and the laws of the
State of New York, by such means or appropriate judicial proceedings as shall be
suitable or deemed by it most effective,  including suits or special proceedings
at law or in equity, or otherwise,  for specific  enforcement of any covenant or
agreement contained in the Participation Agreement, or to require the Company to
perform its duty under the Participation Agreement. Any amounts collected by the
Trustee  pursuant to action taken here shall be applied in  accordance  with the
Indenture.  In  addition,  if at any time the  principal of the Bonds shall have
been declared to be due and payable by acceleration pursuant to the terms of the
Indenture,  the Company Obligation shall thereupon become and be immediately due
and  payable,  subject  to such  declaration  with  respect  to the Bonds  being
annulled pursuant to Section 13.03 of the Indenture.  Furthermore,  in the event
of a Company default under the Insurance Agreement, the Company Obligation shall
thereupon become and be immediately due and payable.

     The right or  obligation  of the  Trustee to make any such  declaration  as
aforesaid,  however,  is  subject  to the  condition  that if, at any time after
declaration,  but before all the Bonds shall have  matured by their  terms,  the
principal of,  premium,  if any, and interest on, the Company  Obligation  which
shall have become due and payable  otherwise than by such  declaration,  and all
other sums payable under this Participation Agreement,  except the principal of,
and interest on, the Company  Obligation which shall have become due and payable
by such  declaration,  shall  have been paid or  provision  satisfactory  to the
Trustee shall have been made for such payment,  and the  reasonable  expenses of
the  Trustee  and of the owners of the Bonds  shall  have been  paid,  including
reasonable  attorneys'  fees paid or incurred,  and all defaults  hereunder  and
under the Bonds or under the  Indenture,  except as to the payment of  principal
and interest due and payable solely by reason of such declaration, shall be made
good or be secured to the satisfaction of the Trustee or provision deemed by the
Trustee to be adequate shall be made therefore, then and in every such case, the
Bond Insurer  (unless the Bond Insurer is then in default under the Policy),  or
the  owners of a  majority  in  aggregate  principal  amount  of the Bonds  then
outstanding,  with the  consent of the Bond  Insurer,  by written  notice to the
Authority  and to the  Trustee,  may  rescind  such  declaration  and annul such
default in its entirety, or, if the Trustee shall have acted in the absence of a
written request of the owners of at least twenty-five percent (25%) in aggregate
principal  amount of the  outstanding  Bonds,  and if there  shall not have been
theretofore  delivered to the Trustee  written  direction to the contrary by the
owners of a majority in aggregate  principal  amount of the  outstanding  Bonds,
then any such  declaration  shall ipso facto be deemed to be  rescinded  and any
such default and its consequences shall ipso facto be deemed to be annulled, but
no such  rescission  and  annulment  shall  extend to or affect  any  subsequent
default or impair or exhaust any right or power consequent thereon.


                                       15
<PAGE>


     In case the Trustee  shall have  proceeded  to enforce any right under this
Participation  Agreement or the Company  Obligation and such  proceedings  shall
have been discontinued or abandoned for any reason or shall have been determined
adversely  to the  Trustee,  then  and in  every  such  case  the  Company,  the
Authority,  the Bond Insurer and the Trustee shall be restored  respectively  to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company,  the Authority,  the Bond Insurer and the Trustee shall continue
as though no such proceedings had been taken.

     Section 6.02.  Events of Default  Relating to Fees or  Indemnification.  In
case the  Company  shall have  failed to pay  amounts  required to be paid under
Sections 4.04,  4.05 and 4.08,  which event shall have continued for a period of
ninety  (90)  days  after  the date on which  written  notice  of such  failure,
requiring  the Company to remedy the same,  shall have been given to the Company
by the Authority or the Trustee,  the Authority or the Trustee may take whatever
action at law or in equity as may  appear  necessary  or  desirable  to  enforce
performance or observance of any  obligations or agreements of the Company under
said Sections 4.04, 4.05 and 4.08.

     Section 6.03.  Judicial  Proceedings  by Trustee.  Upon the  occurrence and
continuance of an event of default under this Article, the Trustee may, and upon
the  written  request of the  owners of at least  twenty-five  percent  (25%) in
aggregate  principal amount of the Bonds then outstanding  shall,  institute any
actions or  proceedings  at law or in equity for the  collection  of any amounts
then due and unpaid on the Company Obligation, and may prosecute any such action
or  proceeding  to  judgment  or final  decree,  and may  collect  in the manner
provided by law the moneys adjudged or decreed to be payable.

     Section 6.04. Rights and Requirements of the Credit Facility Issuer;  Other
Rights of the Trustee to Enforce this Participation  Agreement.  Notwithstanding
anything herein to the contrary,  any judicial  proceedings of the Trustee under
Section  6.04 may be  instituted  only with the  written  consent  of the Credit
Facility  Issuer or Bond Insurer and shall be  instituted  by the Trustee at the
written direction of the Credit Facility Issuer or Bond Insurer.

     The Company shall, as soon as practicable  after the filing or availability
thereof,  provide to the Credit  Facility  Issuer or Bond Insurer the  Company's
quarterly and annual financial  statements and the Company's annual report.  The
Company  further  agrees  that it will  permit the Bond  Insurer  (i) to discuss
financial  affairs or any information the Credit Facility Issuer or Bond Insurer
may reasonably request regarding the security for the Bonds which are insured by
such Credit Facility Issuer or Bond Insurer with  representatives of the Company
and (ii) to permit the Credit  Facility Issuer or Bond Insurer to have access to
the  Project  and have  access to and to make  copies  of all books and  records
relating to the Bonds which are insured by such Credit  Facility  Issuer or Bond
Insurer at any reasonable time.

     Nothing in this Participation Agreement shall limit any other rights of the
Trustee to enforce this Participation Agreement.


                                       16
<PAGE>


                                  ARTICLE VII

                                  MISCELLANEOUS

     Section 7.01.  Disposition  of Amounts After Payment of Bonds.  Any amounts
remaining in the funds  created  under the  Indenture  after  payment in full of
principal of, and premium,  if any, and interest on all the Bonds,  or provision
for payment  thereof  having been made in accordance  with the provisions of the
Indenture,  and payment of all the fees, charges and expenses of the Trustee and
Registrar  and Paying Agents in accordance  with this  Participation  Agreement,
shall belong to and be paid to the Company by the Trustee in accordance with the
provisions of the Indenture.

     Section  7.02.  Notices.  All  notices,  certificates,  requests  or  other
communications between the Authority, the Company and the Trustee required to be
given  under  this  Participation  Agreement  or under  the  Indenture  shall be
sufficiently  given and shall be deemed  given when  delivered  by hand or first
class mail, postage prepaid,  addressed as follows:  if to the Authority,  at 17
Columbia  Circle,  Albany,  New  York  12203,  Attention:  President;  if to the
Company,  at KeySpan  Corporation,  One  MetroTech  Center,  Brooklyn,  New York
11201-3851, Attention: Michael Taunton, Senior Vice President, Treasurer & Chief
Risk  Officer;  if to the  Trustee or the  Registrar  and Paying  Agent,  at 388
Greenwich Street,  14th Floor, New York, NY, 10013,  Attention:  Agency & Trust,
KeySpan; and if to the Bond Insurer, at 125 Park Avenue, 5th Floor, New York, NY
10017,  Attention:  Manager,  Global Utilities. A duplicate copy of each notice,
certificate,  request or other  communication  given hereunder to the Authority,
the Company or the Trustee shall also be given to the others.  The Company,  the
Authority and the Trustee may, by notice given hereunder,  designate any further
or different  addresses to which subsequent notices,  certificates,  requests or
other communications shall be sent.

     Section 7.03.  Successors and Assigns.  This Participation  Agreement shall
inure to the benefit of and shall be binding upon the Authority, the Company and
their respective successors and assigns.

     Section 7.04.  Amendment of  Participation  Agreement.  This  Participation
Agreement may not be amended  except by an  instrument in writing  signed by the
parties  hereto and, if such  amendment  occurs after the issuance of the Bonds,
upon compliance with the provisions of Article XV of the Indenture.

     Section  7.05.  Assignment by  Authority.  The  Authority  shall assign its
rights under and interest in this Participation Agreement (except the rights and
interest of the  Authority  under  Article III hereof and Sections  4.04,  4.08,
4.09, and 4.10 hereof) to the Trustee pursuant to the Indenture, as security for
payment of the  principal of and premium,  if any, and interest on the Bonds but
such  assignment  shall  be  subject  to the  provisions  of this  Participation
Agreement.  In addition,  the Trustee shall have the same power as the Authority
to enforce  from time to time the rights of the  Authority  set forth in Article
III hereof,  subject to the provisions of this Participation  Agreement relating
to the amendment hereof.  Except as provided in this Section 7.05, the Authority
will not sell, assign, transfer,  convey or otherwise dispose of its interest in
this Participation Agreement during the term of this Participation Agreement.


                                       17
<PAGE>


     Section 7.06. Participation Agreement Supersedes Any Prior Agreements. This
Participation Agreement supersedes any other prior agreements or understandings,
written  or  oral,   between  the  parties  with  respect  to  the  transactions
contemplated hereby except the Bond Purchase  Agreement,  dated October 25, 2005
by and among the  Authority,  the  Company,  Goldman,  Sachs & Co.,  BNY Capital
Markets,  Inc. Sovereign  Securities  Corporation,  LLC and The Williams Capital
Group, L.P.

     Section   7.07.   Counterparts.   This   Participation   Agreement  may  be
simultaneously executed in counterparts. Each such counterpart so executed shall
be deemed to be an original,  and all together shall  constitute but one and the
same instrument.

     Section  7.08.  Severability.  If any clause,  provision or section of this
Participation  Agreement be held illegal,  invalid or unenforceable by any court
or administrative body, such determination shall be construed and enforced as if
such illegal or invalid or  unenforceable  clause,  provision or section had not
been  contained  in this  Participation  Agreement.  In case  any  agreement  or
obligation contained in this Participation  Agreement be held to be in violation
of law, then such agreement or obligation shall be deemed to be the agreement or
obligation  of the  Authority  or the  Company,  as the case may be, to the full
extent permitted by law.

     Section 7.09. Law and Place of Enforcement of this Participation Agreement.
This  Participation  Agreement  shall be construed and interpreted in accordance
with the laws of the State of New York and all suits and actions  arising out of
this  Participation  Agreement  shall  be  instituted  in a court  of  competent
jurisdiction in the State of New York.

     Section 7.10. The Policy.  The Company  acknowledges that it will cause the
Bond Insurer to deliver the Policy insuring  payment of the regularly  scheduled
principal of and interest on the Bonds.

     Section 7.11. Company Request to Transfer Bond Proceeds. The Company hereby
requests  the  Authority  to direct the Trustee to transfer  the proceeds of the
Bonds, pursuant to Section 9.01 of the Indenture,  for deposit in the Prior Bond
Fund created pursuant to Article IX of the Prior Indenture.

     Section 7.12.  Delegation  of Duties by Authority.  It is agreed that under
the  terms of this  Participation  Agreement  and also  under  the  terms of the
Indenture the Authority  has  delegated  certain of its duties  hereunder to the
Company. The fact of such delegation shall be deemed a sufficient  compliance by
the Authority to satisfy the duties so delegated and the Authority  shall not be
liable  in any way by  reason  of acts done or  omitted  by the  Company  or any
Authorized  Company  Representative.  The Authority  shall have the right at all
times to act in reliance upon the authorization, representation or certification
of an Authorized Company Representative unless such reliance is in bad faith.

     Section 7.13.  Survival of Representations,  Warranties and Covenants.  The
respective  agreements,  representations,  warranties  and  covenants  set forth
herein will remain in full force and will survive the  execution and delivery of
this Participation Agreement.


                                       18
<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto  have  caused this  Participation
Agreement to be duly executed as of the day and year first written above.

                                           NEW YORK STATE ENERGY RESEARCH
                                               AND DEVELOPMENT AUTHORITY


                                           By____________________________
                                                       President

(SEAL)

ATTEST:


--------------------------------
     Assistant Secretary

                                           THE BROOKLYN UNION GAS COMPANY d/b/a
                                           KEYSPAN ENERGY DELIVERY NEW YORK


                                           By___________________________________
                                             Name:
                                             Title:

(SEAL)

ATTEST:


----------------------------
         Secretary





                                       19
<PAGE>





                                                                       EXHIBIT A

                           Description of the Project


     The  following  facilities  were  originally  financed with proceeds of the
Authority's Adjustable Rate Gas Facilities Revenue Bonds, Series C (The Brooklyn
Union Gas Company Project):











                                      A-1

<PAGE>





                                                                      EXHIBIT B

                              [Company Obligation]

               [See Item Number 15 of this Record of Proceedings]













                                      B-1