UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    Form 10-Q
(Mark One)
 X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---
EXCHANGE ACT OF 1934

For the quarterly period ended         September 30, 2000
                               -----------------------------------------------

                                                                  OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---
EXCHANGE ACT OF 1934

For the transition period from                        to
                               ----------------------    ---------------------

                         Commission file number 1-14161
                                    --------

                               KEYSPAN CORPORATION
                              ---------------------
             (Exact name of Registrant as specified in its charter)

              New York                                   11-3431358
-----------------------------                ---------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)


                 One MetroTech Center, Brooklyn, New York 11201
              175 East Old Country Road, Hicksville, New York 11801
           -----------------------------------------------------------
               (Address of principal executive offices) (Zip Code)


                            (718) 403-1000 (Brooklyn)
                           (631) 755-6650 (Hicksville)
                          -----------------------------
              (Registrant's telephone number, including area code)


(Former name,former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
   Class of Common Stock                        Outstanding at October 26, 2000
---------------------------                    --------------------------------
      $.01 par value                                       134,642,772


<PAGE>



                      KEYSPAN CORPORATION AND SUBSIDIARIES

                                      INDEX

                   Part I.   FINANCIAL INFORMATION                     Page No.
                                                                       --------

Item 1. Financial Statements

        Consolidated Balance Sheet -
        September 30, 2000 and December 31, 1999                           3

        Consolidated Statement of Income -
        Nine Months Ended September 30, 2000 and 1999                      5

        Consolidated Statement of Cash Flows -
        Nine Months Ended September 30, 2000 and 1999                      6

        Notes to Consolidated Financial Statements                         7

Item 2. Management's Discussion and Analysis Of Financial
        Condition and Results of Operations                               17

Item 3. Quantitative and Qualitative Disclosures
        About Market Risk                                                 36

                   Part II.   OTHER INFORMATION

Item 1 - Legal Proceedings                                                36

Item 6 - Exhibits and Reports on Form 8-K                                 37


Signatures                                                                38



                                        2

<PAGE>


<TABLE>

                                                      CONSOLIDATED BALANCE SHEET
                                                       (IN THOUSANDS OF DOLLARS)


<CAPTION>

                                                                SEPTEMBER 30, 2000                  December 31, 1999
----------------------------------------------------------------------------------------------------------------------------
                                                                 (Unaudited)                           (Audited)
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                         <C>
ASSETS
CURRENT ASSETS
    Cash and temporary cash investments              $                    63,618     $                128,602
    Customer accounts receivable                                         609,890                      425,643
    Other accounts receivable                                            222,478                      235,156
    Allowance for uncollectible accounts                                 (26,281)                     (20,294)
    Special deposits                                                      42,485                       60,863
    Gas in storage, at average cost                                      260,738                      144,256
    Materials and supplies, at average cost                               95,004                       84,813
    Other                                                                 88,629                       98,914
                                                           ---------------------        ---------------------
                                                                       1,356,561                    1,157,953
                                                           ---------------------        ---------------------


EQUITY INVESTMENTS AND OTHER                                             427,557                      391,731
                                                           ---------------------        ---------------------

PROPERTY
    Electric                                                           1,386,206                    1,346,851
    Gas                                                                3,584,690                    3,449,384
    Other                                                                393,252                      375,657
    Accumulated depreciation                                          (1,688,283)                  (1,589,287)
    Gas exploration and production, at cost                            1,346,357                    1,177,916
    Accumulated depletion                                               (582,912)                    (520,509)
                                                           ---------------------        ---------------------
                                                                       4,439,310                    4,240,012
                                                           ---------------------        ---------------------

DEFERRED CHARGES
    Regulatory assets                                                    320,931                      319,167
    Goodwill, net of amortizations                                       350,552                      255,778
    Other                                                                357,610                      366,050
                                                           ---------------------        ---------------------
                                                                       1,029,093                      940,995
                                                           ---------------------        ---------------------

                                                           ---------------------        ---------------------
TOTAL ASSETS                                         $                 7,252,521     $              6,730,691
                                                           =====================        =====================

</TABLE>
               See accompanying Notes to the Consolidated Financial Statements.



                                        3

<PAGE>


<TABLE>
                                                      CONSOLIDATED BALANCE SHEET
                                                      (IN THOUSANDS OF DOLLARS)


<CAPTION>
                                                                            SEPTEMBER 30, 2000                  December 31, 1999
----------------------------------------------------------------------------------------------------------------------------------
                                                                             (Unaudited)                         (Audited)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                                     <C>
LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES
    Current redemption of preferred stock                       $                    -              $                  363,000
    Accounts payable and accrued expenses                                      670,869                                 645,347
    Commercial paper                                                           382,090                                 208,300
    Dividends payable                                                           61,276                                  61,306
    Taxes accrued                                                               90,195                                  50,437
    Customer deposits                                                           30,552                                  31,769
    Interest accrued                                                            23,879                                  28,093
                                                                     -----------------                       -----------------
                                                                             1,258,861                               1,388,252
                                                                     -----------------                       -----------------

DEFERRED CREDITS AND OTHER LIABILITIES
    Regulatory liabilities                                                      44,350                                  26,618
    Deferred income tax                                                        238,748                                 186,230
    Postretirement benefits and other reserves                                 542,596                                 501,603
    Other                                                                       95,018                                  66,200
                                                                     -----------------                       -----------------
                                                                               920,712                                 780,651
                                                                     -----------------                       -----------------

CAPITALIZATION
    Common stock, $.01 par value, authorized
       450,000,000 shares; outstanding 134,575,028 and
       133,866,077 shares stated at                                          2,987,242                               2,973,388
    Retained earnings                                                          481,658                                 456,882
    Accumulated foreign currency adjustment                                     (6,476)                                  7,714
    Treasury stock purchased                                                  (702,435)                               (722,959)
                                                                     -----------------                       -----------------
      Total common shareholders' equity                                      2,759,989                               2,715,025
    Preferred stock                                                             84,323                                  84,339
    Long-term debt                                                           2,120,752                               1,682,702
                                                                     -----------------                       -----------------
TOTAL CAPITALIZATION                                                         4,965,064                               4,482,066
                                                                     -----------------                       -----------------

MINORITY INTEREST IN SUBSIDIARY COMPANIES                                      107,884                                  79,722
                                                                     -----------------                       -----------------
TOTAL LIABILITIES AND CAPITALIZATION                            $            7,252,521              $                6,730,691
                                                                     =================                       =================
</TABLE>


               See accompanying Notes to the Consolidated Financial Statements.







                                        4

<PAGE>


<TABLE>
                                                   CONSOLIDATED STATEMENT OF INCOME
                                                             (Unaudited)
                                         (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

<CAPTION>
                                                        THREE MONTHS        Three Months            NINE MONTHS        Nine Months
                                                           ENDED                Ended                  ENDED                Ended
                                                        SEPTEMBER 30,       September 30,          SEPTEMBER 30,       September 30,
                                                            2000                1999                   2000                 1999
--------------------------------------------------------------------------------------------- --------------------------------------
<S>                                                         <C>                 <C>                 <C>                 <C>
REVENUES
Gas Distribution                                       $     292,352 $           208,572  $          1,458,595 $         1,208,254
Electric Services                                            374,517             241,259             1,097,616             606,552
Gas Exploration and Production                                62,748              42,081               169,966             103,622
Energy Related Services and Other                            217,520              46,557               485,161             124,675
                                                          ----------   -----------------    ------------------   -----------------
Total Revenues                                               947,137             538,469             3,211,338           2,043,103
                                                          ----------   -----------------    ------------------   -----------------
OPERATING EXPENSES
Purchased gas for resale                                     140,415              68,195               717,140             498,609
Fuel and purchased power                                     161,086                   -               334,135                   -
Operations and maintenance                                   389,116             293,044             1,123,581             765,221
Depreciation, depletion and amortization                      72,973              63,130               216,364             180,698
Operating taxes                                               91,469              77,317               298,010             258,355
                                                          ----------   -----------------    ------------------   -----------------
Total Operating Expenses                                     855,059             501,686             2,689,230           1,702,883
                                                          ----------   -----------------    ------------------   -----------------

OPERATING INCOME                                              92,078              36,783               522,108             340,220
                                                          ----------   -----------------    ------------------   -----------------

OTHER INCOME AND (DEDUCTIONS)
Income from equity investments                                 4,405               4,268                16,333               9,749
Minority interest                                             (5,952)             (3,035)              (13,747)             (5,226)
Interest income and other                                       (259)              4,585                 6,510              27,679
                                                          ----------   -----------------    ------------------   -----------------
Total Other Income                                            (1,806)              5,818                 9,096              32,202
                                                          ----------   -----------------    ------------------   -----------------
INCOME BEFORE INTEREST CHARGES
  AND INCOME TAXES                                            90,272              42,601               531,204             372,422
                                                          ----------   -----------------    ------------------   -----------------
INTEREST CHARGES                                              42,781              28,045               120,106              98,824
                                                          ----------   -----------------    ------------------   -----------------
INCOME TAXES
    Current                                                    7,579             (23,111)              116,396             (14,886)
    Deferred                                                  25,282              28,651                54,462             113,258
                                                          ----------   -----------------    ------------------   -----------------
Total Income Taxes                                            32,861               5,540               170,858              98,372
                                                          ----------   -----------------    ------------------   -----------------
NET INCOME                                                    14,630               9,016               240,240             175,226
Preferred stock dividend requirements                          1,476               8,688                16,453              26,067
                                                          ----------   -----------------    ------------------   -----------------
EARNINGS FOR COMMON STOCK                              $      13,154 $               328  $            223,787 $           149,159
Foreign currency adjustment                                   (4,760)             (2,281)              (14,190)              3,454
                                                          ----------   -----------------    ------------------   -----------------
COMPREHENSIVE INCOME (LOSS)                            $       8,394 $            (1,953) $            209,597 $           152,613
                                                          ==========   =================    ==================   =================

BASIC AND DILUTED EARNINGS
    PER COMMON SHARE                                      $     0.10  $             0.00   $              1.67  $              1.06
                                                          ==========   =================    ==================   =================
AVERAGE COMMON SHARES OUTSTANDING (000)                      134,335             136,506               133,965             140,079
</TABLE>


               See accompanying Notes to the Consolidated Financial Statements.







                                        5

<PAGE>



<TABLE>
                                                 CONSOLIDATED STATEMENT OF CASH FLOWS
                                                             (Unaudited)
                                                      (IN THOUSANDS OF DOLLARS)

<CAPTION>
                                                              NINE MONTHS         Nine Months
                                                                 ENDED                Ended
                                                             SEPTEMBER 30,        September 30,
                                                                 2000                 1999
------------------------------------------------------- ------------------------------------------
<S>                                                         <C>                 <C>
OPERATING ACTIVITIES
Net Income                                                    240,240 $           175,226
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
    Depreciation, depletion and amortization                  216,364             180,698
    Deferred income tax                                        54,462             113,258
    Income from equity investments                            (16,333)             (9,749)
    Dividends from equity investments                          19,568               6,375
CHANGES IN ASSETS AND LIABILITIES
    Accounts receivable                                       (38,759)            155,538
    Materials and supplies, fuel oil and
         gas in storage                                      (128,705)            (18,997)
    Accounts payable and accrued expenses                      27,451            (143,858)
    Interest accrued                                          (12,269)            (11,050)
    Special deposits                                           18,378              55,050
    Prepayments and other                                      86,803             (59,437)
                                                    -----------------    -----------------
Net Cash Provided by Operating Activities                     467,200             443,054
                                                    -----------------    -----------------
INVESTING ACTIVITIES
Capital expenditures                                         (403,611)           (512,991)
Investments                                                  (175,977)                  -
Other                                                           7,599              10,749
                                                    -----------------    ----------------
Net Cash (Used in) Investing Activities                      (571,989)           (502,242)
                                                    -----------------    ----------------
FINANCING ACTIVITIES
Treasury stock issued (purchased)                              20,951            (289,172)
Issuance of commercial paper, net                             173,790             103,950
Issuance of long-term debt                                    463,627              40,523
Payment of long-term debt                                     (37,000)           (397,000)
Payment of preferred stock                                   (363,000)                  -
Preferred stock dividends paid                                (18,600)            (26,067)
Common stock dividends paid                                  (179,049)           (185,375)
Other                                                         (20,914)               (548)
                                                    -----------------    ----------------
Net Cash Provided by (Used in) Financing
    Activities                                                 39,805            (753,689)
                                                    -----------------    ----------------
Net (Decrease) in Cash and
     Temporary Cash Investments                      $        (64,984)           (812,877)
                                                    =================   =================
Cash and temporary cash investments at
    beginning of period                                       128,602 $           942,776
Net (Decrease) in cash and
     temporary cash investments                               (64,984)           (812,877)
                                                    ----------------    -----------------
Cash and Temporary Cash Investments at
    End of Period                                              63,618 $           129,899
                                                    =================   =================
</TABLE>
Temporary cash investments are short-term  marketable  securities purchased with
maturities of three months or less that were carried at cost which  approximates
fair value.
                See accompanying Notes to the Consolidated Financial Statements.




                                        6

<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     KeySpan Corporation  (referred to in the notes to the Financial  Statements
     as "we", "us", and "our") is a holding company operating two utilities that
     distribute  natural gas to approximately  1.6 million customers in New York
     City and on Long  Island,  making it the fourth  largest  gas  distribution
     company in the United States.  We are also a major, and growing,  generator
     of  electricity.  We own and operate  five large  generating  plants and 42
     smaller  facilities in Nassau and Suffolk Counties on Long Island and lease
     and  operate a major  facility  in Queens  County in New York  City.  Under
     contractual  arrangements,  we provide  power,  electric  transmission-and-
     distribution   services,   billing   and  other   customer   services   for
     approximately  one million  electric  customers  of the Long  Island  Power
     Authority.  Our other  subsidiaries are involved in oil and gas exploration
     and  production;  gas  storage;  wholesale  and  retail  gas  and  electric
     marketing;  appliance  service;  heating,  ventilation and air conditioning
     installation and services; large energy-system ownership,  installation and
     management;  telecommunications; and energy-related internet activities. We
     also invest in, and participate in the development of,  pipelines and other
     energy-related projects, domestically and internationally.


1.  BASIS OF PRESENTATION

     In  our  opinion,  the  accompanying   unaudited   Consolidated   Financial
     Statements  contain  all  adjustments   necessary  to  present  fairly  our
     financial  position  as of  September  30,  2000,  and the  results  of our
     operations  for the three and nine  months  ended  September  30,  2000 and
     September  30, 1999 and cash flows for the nine months ended  September 30,
     2000 and September 30, 1999. The accompanying  financial  statements should
     be read in conjunction with the consolidated financial statements and notes
     included  in our 1999  Annual  Report on Form  10-K.  Income  from  interim
     periods may not be indicative of future results. Certain  reclassifications
     were made to conform  prior period  financial  statements  with the current
     period financial statement presentation.  Other than as noted,  adjustments
     were of a normal, recurring nature.


2.  BUSINESS SEGMENTS

    We have six reportable segments:  Gas Distribution,  Electric Services, Gas
    Exploration and Production, Energy Services, Energy Investments and Other.

    The  Gas   Distribution   segment  consists  of  our  two  gas  distribution
    subsidiaries.  The Brooklyn Union Gas Company d/b/a KeySpan Energy  Delivery
    New York  provides  gas  distribution  services to customers in the New York
    City  Boroughs  of  Brooklyn,  Queens and Staten  Island.  KeySpan  Gas East
    Corporation   d/b/a  KeySpan  Energy   Delivery  Long  Island  provides  gas
    distribution services to customers in the Long Island counties of Nassau and
    Suffolk and the Rockaway Peninsula of the Borough of Queens.

    The Electric  Services  segment  consists of  subsidiaries  that operate the
    electric transmission and distribution system owned by the Long Island Power
    Authority; own and provide capacity to and



                                        7

<PAGE>



    produce  energy for the Long  Island  Power  Authority  from our  generating
    facilities  located on Long  Island;  and manage fuel  supplies for the Long
    Island Power Authority to fuel our Long Island  generating  facilities,  all
    through  long-term  service  contracts having terms that range from eight to
    fifteen years. The Electric Services segment also includes subsidiaries that
    own, lease and operate the 2,168  megawatt  Ravenswood  electric  generation
    facility, located in Queens, New York. Our contract with Consolidated Edison
    Company of New York,  which  provided  Consolidated  Edison with 100% of the
    available  capacity  of the  Ravenswood  facility  on a fixed  monthly  fee,
    expired on April 30,  2000.  We now provide all of the energy,  capacity and
    ancillary  services  related  to the  Ravenswood  facility  to the New  York
    Independent  System Operator.  Currently,  our primary  electric  generation
    customers are the Long Island Power  Authority and the New York  Independent
    System Operator energy markets.

    The  Gas  Exploration  and  Production  segment  is  engaged  in gas and oil
    exploration and production,  and the development and acquisition of domestic
    natural  gas and oil  properties.  This  segment  consists of our 70% equity
    interest in The Houston Exploration  Company, an independent natural gas and
    oil exploration company, as well as KeySpan Exploration and Production, LLC,
    our  wholly  owned  subsidiary  engaged  in a  joint  venture  with  Houston
    Exploration.  On March 31, 2000,  under a pre-existing  credit  arrangement,
    approximately  $80  million  in debt owed by Houston  Exploration  to us was
    converted into common equity of Houston  Exploration.  Upon such conversion,
    our common equity ownership interest in Houston  Exploration  increased from
    64% to the current level of approximately 70%.

     The Energy  Services  segment  primarily  includes  companies  that provide
     energy related services to customers  located within the New York tri-state
     metropolitan area, Rhode Island and Pennsylvania through the following four
     lines of business:  (i) Home Energy Services provides residential customers
     with service and maintenance of energy systems and  appliances,  as well as
     the retail  marketing of natural gas and  electricity  to  residential  and
     small commercial  customers;  (ii) Business Solutions provides professional
     engineering-consulting  and design of energy  systems  for  commercial  and
     industrial  customers,   including   installation  of  plumbing,   heating,
     ventilation and air  conditioning  equipment;  (iii) Commodity  Procurement
     provides management and procurement services for fuel supply and management
     of energy sales,  primarily for and from the Ravenswood facility;  and (iv)
     Telecommunications  Services provides various services to carriers of voice
     and data transmission on Long Island and in New York City.

    Subsidiaries in the Energy Investments segment hold a 20% equity interest in
    the Iroquois Gas Transmission System LP, a pipeline that transports Canadian
    gas supply to markets in the  Northeastern  United States; a 50% interest in
    the Premier  Transmission  Pipeline and a 24.5% interest in Phoenix  Natural
    Gas, both in Northern Ireland;  investments in certain midstream natural gas
    assets in Western Canada owned jointly with Gulf Canada  Resources  Limited,
    through the Gulf Midstream Services Partnership and the ownership of certain
    oil  producing  properties  in  Alberta,   Canada.  These  subsidiaries  are
    primarily accounted for under the equity method. Accordingly,  equity income
    from these  investments is reflected in other income and (deductions) in the
    Consolidated  Statement of Income.  In October 2000, we sold our interest in
    certain oil producing  properties in Alberta,  Canada.  An after-tax gain of
    approximately  $1.3  million  from the sale will be  reported  in the fourth
    quarter of 2000.  Further,  also in October  2000, we acquired the remaining
    50% interest in Gulf Midstream,  making us the sole owner of Gulf Midstream.
    The



                                        8

<PAGE>



    transaction  required us to borrow an additional $48 million from a Canadian
    bank.  For future  financial  reporting  purposes,  the  operations  of Gulf
    Midstream,  which will now be known as KeySpan Energy Canada,  will be fully
    consolidated in our financial statements.

    The  Other  segment  represents  primarily  unallocated  administrative  and
    general expenses, interest income earned on temporary cash investments,  and
    preferred stock dividends.

    The  accounting  policies of the segments are the same as those used for the
    preparation  of the  Consolidated  Financial  Statements.  Our  segments are
    strategic  business  units  that are  managed  separately  because  of their
    different operating and regulatory environments.  At September 30, 2000, the
    total assets of certain  reportable  segments increased from levels reported
    at December  31,  1999 as  follows:  the Energy  Services  segment's  assets
    increased by approximately  $260 million due primarily to the acquisition of
    four  additional  companies  that  provide  energy-related  services and the
    investment in MyHomeKey.com,  Inc. The segment  information  presented below
    reflects amounts reported in the Consolidated  Financial  Statements for the
    three and nine months ended September 30, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                                                       (IN THOUSANDS OF DOLLARS)
-----------------------------------------------------------------------------------------------------------------------------------
                            Gas         Electric    Gas Exploration    Energy      Energy
                        Distribution    Services    and Production     Services    Investments   Other   Eliminations   Consolidated
------------------------------------- ------------- ----------------- ----------- ------------- -------  -------------   ----------
<S>                     <C>           <C>               <C>           <C>            <C>          <C>        <C>           <C>
THREE MONTHS ENDED
SEPTEMBER 30, 2000

Unaffiliated Revenue   $ 292,352 $     374,517 $          62,748 $      215,871 $     1,649       $ -         $    -      $ 947,137
Intersegment Revenue                                                     15,903                              (15,903)             -
Operating Income        (21,542)        73,007            30,985         19,653       (969)       (9,056)          -         92,078
Earnings for
  Common Stock          (28,033)        31,796            13,418          9,636       2,687       (16,350)         -         13,154
Basic and Diluted
  Earnings Per Share    $(0.21)         $0.24             $0.10           $0.07        $0.02      $(0.12)         $-          $0.10

THREE MONTHS ENDED
SEPTEMBER 30, 1999

Unaffiliated Revenue   $ 208,572 $     241,259 $          42,081 $      46,096  $       461     $    -        $    -      $ 538,469
Intersegment Revenue           -             -                 -              -           -          -             -              -
Operating Income        (28,635)        49,392            15,798              -     (1,234)       1,462            -         36,783
Earnings for
  Common Stock          (29,037)        28,164             5,435            116       2,821       (7,171)          -            328
Basic and Diluted
  Earnings Per Share    $(0.21)         $0.21              $0.04           $0.00       $0.02     $ (0.06)      $     -        $0.00
---------------------    ----------- -------------  ----------------- -------------- ------------- ----------- -------------  ------
</TABLE>








                                        9

<PAGE>




<TABLE>
<CAPTION>


                                                                                                       (IN THOUSANDS OF DOLLARS)
-----------------------------------------------------------------------------------------------------------------------------------
                             Gas         Electric     Gas Exploration    Energy       Energy
                         Distribution    Services     and Production     Services    Investments  Other  Eliminations   Consolidated
----------------------- -------------- ------------- ----------------- -----------   ----------- ------   -----------   -----------
<S>                      <C>            <C>                <C>             <C>       <C>            <C>       <C>          <C>
NINE MONTHS ENDED
SEPTEMBER 30, 2000

Unaffiliated Revenue    $ 1,458,595 $   1,097,616 $         169,966 $      480,511 $    4,650      $ -      $    -    $    3,211,338
Intersegment Revenue           -             -               -              48,677       -           -       (48,677)              -
Operating Income            212,688       204,834            72,514         51,958    (4,022)     (15,864)       -           522,108
Earnings for
  Common Stock              101,025       103,316            29,381         25,221      7,877     (43,033)       -           223,787
Basic and Diluted
  Earnings Per Share         $0.75          $0.77             $0.22          $0.19      $0.06      $(0.32)     $ -             $1.67

NINE MONTHS ENDED
SEPTEMBER 30, 1999

Unaffiliated Revenue    $ 1,208,254 $     606,552 $         103,622 $     123,165  $   1,510       $  -     $   -     $    2,043,103
Intersegment Revenue              -             -                 -              -          -         -         -                  -
Operating Income            198,565       112,652            29,879        (4,491)    (3,949)      7,564        -            340,220
Earnings for
  Common Stock               92,873        59,786             9,239        (2,384)      5,937     (16,292)      -            149,159
Basic and Diluted
  Earnings Per Share        $0.66          $0.43              $0.07        $(0.02)      $0.04     $(0.12)     $ -              $1.06
------------------------- -------------- -------------  --------------  -----------   --------  ---------  ------------- -----------

</TABLE>
3.  ENVIRONMENTAL MATTERS

    MANUFACTURED  GAS PLANT SITES: We have identified  thirty-four  manufactured
    gas plant sites that were  historically  owned or operated by KeySpan Energy
    Delivery  New  York  and  KeySpan  Energy  Delivery  Long  Island  (or  such
    companies'  predecessors).  These former sites,  some of which are no longer
    owned by us,  have  been  identified  to the New York  State  Department  of
    Environmental   Conservation   for  inclusion  on  appropriate   waste  site
    inventories.

    We  presently  estimate  that the  remaining  cost of our  manufactured  gas
    plant-related  environmental  cleanup  activities will be approximately $119
    million;  which amount has been accrued as our current best  estimate of our
    aggregate  environmental  liability  for known  sites.  The  currently-known
    conditions  of the former  manufactured  gas plant  sites,  their period and
    magnitude of operation, generally observed cleanup requirements and costs in
    the industry,  current land use and ownership,  and possible reuse have been
    considered  in  establishing  contingency  reserves.  We believe that in the
    aggregate,  the accrued  liability for  investigation and remediation of the
    manufactured gas plant sites  identified  above are reasonable  estimates of
    likely cost within a range of reasonable, foreseeable costs.

    Thirteen of the identified sites are currently the subject of Administrative
    Consent Orders with the Department of Environmental Conservation and another
    site is subject to the negotiation of an Administrative  Consent Order or an
    agreement  under the Department of  Environmental  Conservation's  Voluntary
    Clean-up Program. Our remaining manufactured gas plant sites may



                                       10

<PAGE>



    not become  subject to  Administrative  Consent  Orders in the  future,  and
    accordingly no liability has been accrued for these sites.

    Under prior rate orders,  the Public Service  Commission of the State of New
    York has  allowed  recovery  of costs  related  to  certain  KeySpan  Energy
    Delivery New York manufactured gas plant sites. We believe that current rate
    plans in effect for both Gas Distribution  subsidiaries provide for recovery
    of  environmental  costs  attributable to the Gas Distribution  segment.  At
    September 30, 2000, we had a total  regulatory  asset of  approximately  $98
    million.  Expenditures  incurred to date by us with respect to  manufactured
    gas plant-related activities total approximately $20 million.


4.  LIQUIDITY AND FINANCINGS

    During the nine months ended  September 30, 2000, we issued $1.6 billion and
    repaid $1.4 billion of commercial paper to satisfy working capital needs and
    the mandatory redemption of preferred stock as discussed below. At September
    30,  2000,  we had $382.1  million of  commercial  paper  outstanding  at an
    average annualized interest rate of 6.73%.

    Houston  Exploration  also  issued  and repaid  commercial  paper to satisfy
    working  capital needs during the nine months ended  September 30, 2000. For
    the nine months ended September 30, 2000, Houston  Exploration  borrowed $30
    million  under its credit  facility  with a  commercial  bank and repaid $37
    million of  outstanding  borrowings.  At September  30,  2000,  $174 million
    remained  outstanding  under this facility at a weighted average  annualized
    interest rate of 7.84%. In addition,  during the nine months ended September
    30, 2000, a  subsidiary  in the Energy  Investments  segment  increased  its
    borrowings under a revolving loan agreement with a financial  institution in
    Canada by $33.6 million. At September 30, 2000, $118 million was outstanding
    at a weighted average annualized interest rate of 6.48%.

     In August, we filed a shelf registration  statement with the Securities and
     Exchange  Commission  for  the  issuance  of up to  $1.65  billion  of debt
     securities.  We intend to issue the debt  securities  to replace short term
     borrowings to be entered into in connection with our acquisition of Eastern
     Enterprises  and  EnergyNorth,  Inc.  (See note 5  Acquisition  of  Eastern
     Enterprises.)

    On June 1, 2000, we redeemed, at maturity, all 14,520,000 outstanding shares
    of our 7.95%  Preferred  Stock Series AA. Our  obligation of $370.2  million
    included the mandatory  redemption  price of $25 per share  totaling  $363.0
    million and dividends  payable  totaling $7.2 million.  The  redemption  was
    satisfied  through  utilization of internally  generated  funds and proceeds
    from the issuance of commercial paper.

    KeySpan  Energy  Delivery Long Island filed a shelf  registration  statement
    with  the  Securities  and  Exchange  Commission  in  December  1999 for the
    issuance of up to $600  million of medium  term notes.  On February 1, 2000,
    KeySpan  Energy  Delivery Long Island  issued $400 million  7.875% Notes due
    February 1, 2010.  The net proceeds from the issuance were used to repay our
    treasury for costs in extinguishing  $397 million of promissory notes to the
    Long Island Power Authority



                                       11

<PAGE>



    that   matured  in  June  1999.   The  medium   term  notes  are  fully  and
    unconditionally  guaranteed  by us.  Currently,$200  million of medium  term
    notes remain available for issuance under this shelf registration statement.


5.  ACQUISITION OF EASTERN ENTERPRISES

    On November 4, 1999, we and Eastern Enterprises announced that the companies
    had signed a definitive  merger agreement under which we will acquire all of
    the  common  stock of  Eastern  for  $64.00  per share in cash,  subject  to
    adjustment.  The  Agreement  and Plan of Merger is included as an exhibit to
    our Form 10K for the year ended  December 31, 1999.  The  transaction  has a
    total  value  of  approximately  $2.5  billion  and  will be  accounted  for
    utilizing purchase accounting.

    In connection with the merger, Eastern has amended its merger agreement with
    EnergyNorth,  Inc.  to  provide  for an all cash  acquisition  by Eastern of
    EnergyNorth  shares at a price per share of $61.13,  subject to  adjustment.
    The restructured  EnergyNorth merger is expected to close  contemporaneously
    with the  KeySpan/Eastern  transaction.  The  EnergyNorth  transaction has a
    total value of approximately $250 million.

    We intend to access the financial  markets in the fourth  quarter of 2000 to
    finance   approximately   $2  billion  for  the   Eastern  and   EnergyNorth
    transactions.  We intend to use bridge financing to fund these  transactions
    initially and then replace the bridge  financing with $1.65 billion of long-
    term  debt  securities  as soon as  practicable  thereafter.  The  remaining
    balance  will be financed  through  the  issuance of  commercial  paper.  We
    anticipate issuing several different maturities of long-term debt to balance
    our future debt capital maturity structure.

    We expect pre-tax annual cost savings  resulting from the transactions to be
    approximately  $40 million.  These cost savings  result  primarily  from the
    elimination  of duplicate  corporate and  administrative  programs,  greater
    efficiencies in operations and business processes,  and increased purchasing
    efficiencies.  We expect to achieve the majority of the reductions through a
    variety of programs  which  would  include  hiring  freezes,  attrition  and
    separation programs, including implementation of an early retirement program
    and targeted  severance  programs.  We have begun to initiate  some of these
    programs  and will  report  the  potential  effect of these  initiatives  on
    earnings and cash flow from operations when job positions and cost estimates
    have been finalized.

    Following the closing of these  transactions,  we will become subject to the
    regulation of the Securities and Exchange Commission as a registered holding
    company under the Public Utility Holding Company Act of 1935, as amended. As
    such,  our corporate and financial  activities as well as our  subsidiaries,
    including  such  entities'  ability  to pay  dividends,  will be  subject to
    Securities  and Exchange  Commission  regulation.  The merger is conditioned
    upon the approval of the Securities and Exchange Commission. Shareholders of
    both Eastern and  EnergyNorth,  as well as the New Hampshire  Public Utility
    Commission  (with  respect to Eastern's  acquisition  of  EnergyNorth)  have
    approved the transactions. We anticipate that the transaction will be



                                       12

<PAGE>



    consummated  in the fourth quarter of 2000, but are unable to determine when
    or if the required  Securities  and  Exchange  Commission  approval  will be
    obtained.


6.  NEW YORK STATE INDEPENDENT SYSTEM OPERATOR MATTERS

    We currently realize revenues from our investment in the Ravenswood facility
    through the  wholesale  sale of energy,  capacity  and  ancillary  services.
    Ancillary  services  include  spinning  reserves and non-spinning  reserves
    available  to  replace  energy  that is  unable to be  delivered  due to the
    unexpected loss of a major energy source.

    Due  to  the  increase  in  the   market-clearing   price  of  spinning  and
    non-spinning  reserves  during  the  first  quarter  of  2000,  the New York
    Independent  System  Operator  requested that the Federal Energy  Regulatory
    Commission approve a bid cap on reserves as well as requiring a refunding of
    so-called alleged "excess  payments"  received by sellers into the ancillary
    services market, including the Ravenswood facility and the Long Island Power
    Authority.  Other  market  participants,  including  buyers of reserves  and
    electric  utilities as load serving  entities also filed complaints with the
    Federal Energy  Regulatory  Commission and intervened in the various Federal
    Energy Regulatory Commission  proceedings related to reserves,  and proposed
    alternative remedies.

     On May 31, 2000, the Federal Energy  Regulatory  Commission issued an order
     on reserves that granted  approval of a bid cap for  non-spinning  reserves
     which  includes  payments  for the  opportunity  cost of not making  energy
     sales.  The  other  requests  - such as a bid cap  for  spinning  reserves,
     retroactive  refunds,  recalculation  of reserve prices for March 2000, and
     convening a technical conference and settlement proceeding - were rejected.
     Pursuant  to the May  31,  2000  order,  the New  York  Independent  System
     Operator made its first compliance  filing to the Federal Energy Regulatory
     Commission  on June 15,  2000.  However,  the New York  Independent  System
     Operator and several other market  participants have requested rehearing of
     the May 31, 2000 order.  In  response  to the New York  Independent  System
     Operator request, the Federal Energy Regulatory  Commission has allowed the
     New York Independent System Operator to recalculate prices for reserves for
     the March 2000 period as if the bid cap  approved  effective  April 1, 2000
     had been effective for March,  pending its review on the rehearing requests
     of the May 31, 2000 order.

    On September 5, 2000 New York State  Electric  and Gas  Corporation  filed a
    lawsuit against the New York Independent  System Operator,  in Supreme Court
    Broome County,  seeking  recovery of overcharges  and damages related to the
    New  York  Independent  System  Operator's  administration  of the  reserves
    market. We are not a party to the lawsuit.

    Additionally,  the  wholesale  energy  market  has also  been  the  focus of
    increased  market based pricing.  On June 30, 2000, the New York Independent
    System  Operator  petitioned  the Federal  Energy  Regulatory  Commission to
    approve a $1,300  megawatt/hour  ("MWh") bid cap in the energy  market to be
    effective July 6, 2000 through  October 28, 2000.  The New York  Independent
    System  Operator  requested the bid cap because it believed that there was a
    lack of price responsive  demand and that the start-up  problems  associated
    with implementation of the New



                                       13

<PAGE>



    York Independent  System Operator might cause severe price spikes during the
    summer peak  months.  In  response,  on July 26,  2000,  the Federal  Energy
    Regulatory  Commission issued an order approving a $1,000/MWh bid cap in the
    energy market effective July 26, 2000 through October 28, 2000. The July 26,
    2000  order  also  required  the New York  Independent  System  Operator  to
    identify  certain  "market flaw  problems" and to report them to the Federal
    Energy Regulatory Commission by September 1, 2000.

    On September 8, 2000 the New York Independent  System Operator issued to the
    Federal Energy Regulatory  Commission  revised tariff sheets and a corrected
    combined  compliance  filing and report  related  to  reserve  markets.  The
    compliance  filing proposes tariff changes to become  effective  November 1,
    2000  with the  exception  of the  effective  date for the  payment  of lost
    opportunity  costs to  suppliers of  10-minute  reserves,  where such filing
    proposes an effective date of May 31, 2000. The compliance filing proposed a
    number of  changes,  including  the  gradual  removal  of the bid cap in the
    reserve market from $15.00/MWh on November 1, 2000, to $30.00/MWh on January
    1, 2001 and to eliminate it completely on May 1, 2001. Various parties filed
    comments to the compliance  filing requesting  additional  changes including
    extending  the  $1,000/MWh  energy price cap beyond  October 28,  2000.  The
    compliance  filing and  comments are pending the Federal  Energy  Regulatory
    Commission review.

    We are opposing  the relief  requested  by the New York  Independent  System
    Operator  and the load  serving  entities  and  believe  that  the  ultimate
    resolution  of  these  issues  will  not  have  a  material  effect  on  our
    consolidated financial position or results of operations.


7.  DERIVATIVE FINANCIAL INSTRUMENTS

     In  connection  with our  anticipated  purchase  of  Eastern  (See  Note 5,
     "Acquisition  of Eastern  Enterprises")  and the  anticipated  issuance  of
     long-term  debt  securities  to finance the  acquisition,  we entered  into
     forward  starting  swap  agreements to hedge a portion of the risk that the
     cost of the future issuance of fixed-rate debt may be adversely affected by
     changes in interest rates. Through September 30, 2000, we have entered into
     $1.5 billion of forward starting swap  agreements.  The interest lock rates
     range  from  6.86% to 7.78% and have  maturities  that  range  from 5 to 30
     years. Under a forward starting swap agreement,  we agree to pay or receive
     an amount equal to the difference between the net present value of the cash
     flows for a notional amount of indebtedness  based on the existing yield of
     a  hedging  instrument  at the  date of the  agreement  and at the date the
     agreement is settled. Gains and losses on these agreements will be deferred
     and  amortized  over  the life of the  underlying  debt to be  issued.  The
     notional amounts of the agreements are not exchanged.  We have entered into
     these agreements with more than one major financial institution in order to
     minimize counter party credit risk.



                                       14

<PAGE>



     Based on interest rates  effective as of October 30, 2000, we estimate that
     we may be obligated to pay counterparties  approximately $60 million at the
     time of the issuance of the long-term  debt.  This amount will be amortized
     over the life of the long-term  debt, with maturities that are estimated to
     range from 5 to 30 years. This amount reflects the significant  decrease in
     interest  rates  since we  entered  into the  forward  starting  swap  lock
     agreements.  As a result of the significant  decrease in interest rates, we
     will be able to issue the anticipated long-term debt at lower rates.

    Also  during the  quarter,  we have  engaged in the use of  derivative  swap
    instruments  to fix the  selling  price on a portion of our  estimated  2001
    summer peak electric  energy sales from the  Ravenswood  facility and to fix
    the purchase price of fuel used to generate  electricity.  For the months of
    July and August  2001,  we have hedged the sales  price on 105,600  megawatt
    hours  of  summer  peak  electric  sales  to  protect  against  a  potential
    degradation in market prices during the summer. Under these swap agreements,
    we will receive a fixed price per megawatt hour of  electricity  sold during
    summer peak hours and pay the counter party the then current floating market
    price for peak electric  supply.  We will receive the then current  floating
    market price of peak  electric  energy when the  Ravenswood  facility  sells
    electric  energy  to  the  New  York  Independent  System  Operator.   These
    derivatives are accounted for as hedges. We also have a tolling  arrangement
    with two counter parties under which we have  "locked-in" a profit margin on
    52,800  megawatt hours of summer season sales and 211,200  megawatt hours of
    winter sales. Under these arrangements,  we will receive an up-front fee and
    will pay the counter party,  on a monthly basis,  our realized profit margin
    from the sale of electric energy. As a result of these hedging arrangements,
    we have hedged  approximately  9% of our estimated peak 2001 summer electric
    sales and approximately 6% of our estimated 2001 yearly electric sales.

8.    NEW FINANCIAL ACCOUNTING STANDARDS

     In June 1999, the Financial  Accounting  Standards  Board  ("FASB")  issued
     Statement of Financial  Accounting  Standard ("SFAS") No. 137,  "Accounting
     for  Derivative  Instruments  and  Hedging  Activities  -  Deferral  of the
     Effective  Date of SFAS No. 133." SFAS No. 137 defers the effective date of
     SFAS No.  133 to  fiscal  years  beginning  after  July 15,  2000.  We will
     therefore adopt SFAS No. 133 in the first quarter of fiscal year 2001. SFAS
     No. 133  establishes  accounting  and reporting  standards  for  derivative
     instruments and for hedging activities.

    In June  2000,  the  FASB  issued  SFAS No.  138,  "Accounting  for  Certain
    Derivative Instruments and Certain Hedging Activities - An Amendment of FASB
    Statement  No  133."  SFAS No.  138  amends  the  accounting  and  reporting
    standards of SFAS No. 133 for a number of transactions. The most significant
    amendment  to SFAS 133 as it  relates to our  operations  is that the normal
    purchases and normal sales exception found in SFAS 133 may now be applied to
    contracts that implicitly or explicitly permit net settlement, and contracts
    that have a market mechanism to facilitate net settlement.  Therefore, under
    SFAS  138 our  gas  procurement  contracts  are  not  considered  derivative
    financial instruments.

    All of our  derivative  financial  instruments,  except for an interest rate
    swap, are cash-flow  hedges.  SFAS No. 133 requires that an entity recognize
    all  derivatives  as  either  assets  or  liabilities  in the  statement  of
    financial  position and measure those  instruments  at fair value.  Periodic
    changes  in market  value of  derivatives  which  meet the  definition  of a
    cash-flow   hedge  are  recorded  as   comprehensive   income,   subject  to
    effectiveness,  and then  included  in net  income to match  the  underlying
    hedged transactions.  Our derivative  instruments currently in place qualify
    for hedge



                                       15

<PAGE>



     accounting, and as a result implementation of SFAS No. 133 and SFAS No. 138
     when adopted are not expected to have a material  effect on our net income,
     but could have a  significant  effect on  comprehensive  income  because of
     fluctuations  in the market value of the  derivatives  employed for hedging
     certain risks.

























                                       16

<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The  following  is a  summary  of items  affecting  comparative  earnings  and a
discussion  of material  changes in revenues and  expenses  during the three and
nine month periods ended September 30, 2000 compared to the three and nine month
periods ended September 30, 1999.  Capitalized  terms used in the discussions to
follow  but not  otherwise  defined,  have the same  meaning as when used in the
Footnotes  to the  Consolidated  Financial  Statements  included  under  Item 1.
References to "we", "us", and "our" mean KeySpan Corporation,  together with its
consolidated subsidiaries. For all periods presented, diluted earnings per share
is the same as basic  earnings per share,  since there was no effect on earnings
per share from our outstanding options.


Earnings Summary

Earnings (loss) by reporting segment is set forth in the following table for the
periods indicated:
<TABLE>
<CAPTION>
                                                                                                           (IN THOUSANDS OF DOLLARS)
-----------------------------------------------------------------------------------------------------------------------------------
                                  Three Months             Three Months              Nine Months              Nine Months
                                     Ended                     Ended                    Ended                    Ended
                                 September 30,             September 30,            September 30,            September 30,
                                      2000                     1999                     2000                     1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                      <C>                      <C>                      <C>
Gas Distribution            $       (28,033) $               (29,037) $               101,025  $                92,873
Electric Services                    31,796                   28,164                  103,316                   59,786
Gas Exploration and
    Production                       13,418                    5,435                   29,381                    9,239
Energy Services                       9,636                      116                   25,221                   (2,384)
Energy Investments                    2,687                    2,821                    7,877                    5,937
Other                               (16,350)                  (7,171)                 (43,033)                 (16,292)
-----------------------------------------------------------------------------------------------------------------------------------
Consolidated Earnings       $        13,154  $                   328  $               223,787  $               149,159
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Consolidated  earnings  per  share  were  $0.10 and $1.67 for the three and nine
months ended  September 30, 2000,  respectively  compared to $0.00 and $1.06 for
the corresponding  periods last year. Our average common shares  outstanding for
the quarter and nine months ended September 30, 2000 were  approximately two and
four percent lower,  respectively than the same periods last year due to a stock
repurchase program in 1999.





                                       17

<PAGE>



The increase in consolidated  earnings in both periods  reflects,  primarily the
operations  associated with our investment in the Ravenswood  facility which was
acquired in June 1999,  as well as,  earnings from our Energy  Services  segment
which reflect,  primarily earnings from intercompany fuel procurement and energy
management services provided to the Ravenswood facility.  Consolidated  earnings
for the three and nine months ended  September 30, 2000,  also reflect  improved
performance  from our Gas Exploration and Production  segment,  which benefitted
from significantly  higher realized gas prices and increased  production volumes
compared to last year. In addition, on March 31, 2000 we increased our ownership
in Houston Exploration from 64% to 70%.

Gas  distribution  earnings  for  quarters  ended  September  30  generally  are
unprofitable  due to the seasonal  nature of gas heating sales.  The increase in
earnings from the Gas  Distribution  segment for the nine months ended September
30,  2000,  compared  to the  corresponding  period last year  reflects  revenue
benefits from  continued  gas sales growth and favorable gas prices  compared to
oil prices.

Partially  offsetting the  aforementioned  benefits to comparative  earnings are
certain  corporate  expenses  which  have not been  allocated  to the  operating
segments. Further, we made an additional contribution to the KeySpan Foundation,
a  not-for-profit   philanthropic  foundation  that  makes  donations  to  local
charitable  community  organizations.  In  addition,  for the nine months  ended
September  30,  2000,  we  realized  lower  interest  income on  temporary  cash
investments as compared to the comparable period last year.  Interest income has
been decreasing as we used cash to finance acquisitions and repurchase shares of
our common stock in 1999.

Revenues
--------

Consolidated  revenues were $947.1 million for the three months ended  September
30, 2000, compared to $538.5 million for the corresponding  period last year, an
increase of $408.6 million or 76%. For the nine months ended  September 30, 2000
consolidated  revenues  were $3.2  billion,  compared  to $2.0  billion  for the
corresponding  period  last  year,  an  increase  of $1.2  billion  or 57%.  The
increases in revenues are due  primarily  to: (i) increases in revenues from the
Ravenswood  facility of $139.8 million and $457.8 million for the three and nine
months  ended   September  30,  2000,   respectively;   (ii)  increases  in  Gas
Distribution revenues of $83.8 million and $250.3 million for the three and nine
months ended  September 30, 2000,  respectively;  and (iii)  increases of $169.8
million  and $357.3  million in  revenues  for the three and nine  months  ended
September 30, 2000, respectively from the Energy Services segment.

Revenues  from the  Ravenswood  facility  benefitted  from  the sale of  energy,
capacity and ancillary  services to the New York Independent  System Operator at
competitive market prices. Prior to the start of the New York Independent System
Operator on November 19 1999, all of the energy and capacity from the Ravenswood
facility was sold to Consolidated Edison on a cost recovery and fixed fee basis.
Revenues from the Gas Distribution  segment  benefitted from continued gas sales
growth and favorable gas prices as compared to oil prices. Revenues from the Gas
Distribution segment



                                       18

<PAGE>



also include recovery of gas costs, which have been significantly higher in 2000
compared to 1999.  The  increase in revenues  from the Energy  Services  segment
resulted from recent acquisitions of companies providing various  energy-related
services  throughout the New York tri-state  metropolitan area and Rhode Island,
and sales growth related to our gas and electric marketing subsidiary.

Operating Expenses
------------------

Consolidated  operating  expenses  were $855.1  million for the third quarter of
2000,  compared to $501.7  million for the  corresponding  period last year,  an
increase of $353.4 million, or 70%. For the nine months ended September 30, 2000
consolidated  operating  expenses were $2.7 billion compared to $1.7 billion for
the  corresponding  period last year, an increase of $1.0  billion,  or 58%. The
increases in operating  expenses were  primarily the result of higher  purchased
fuel and gas costs,  and higher  operations and maintenance  expenses.  Fuel and
purchased  power expense for the operation of the Ravenswood  facility was $94.5
million and $235.1 million for the quarter and period ended  September 30, 2000,
respectively.  We did not incur any fuel costs for the  Ravenswood  facility for
the corresponding periods last year. The prior owner of the Ravenswood facility,
Consolidated  Edison,  owned and  supplied  the fuel  necessary  to operate  the
Ravenswood  facility  from  June  19,  1999  until  the  start  of the New  York
Independent System Operator's operations on November 19, 1999. During this time,
all of  the  energy  generated  by  the  Ravenswood  facility  was  supplied  to
Consolidated  Edison.  Fuel and  purchased  power  expense also  reflects  costs
incurred by our gas and electric marketing subsidiary.  This subsidiary has been
providing  residential,  and small  commercial  and  industrial  customers  with
electric sales since January 2000.

The  increase in gas costs for both periods of 2000  compared to the  comparable
periods last year,  resulted from gas sales growth  associated  with our two gas
distribution subsidiaries and our gas and electric marketing subsidiary, as well
as significantly higher gas prices.  Variations in utility gas costs have little
impact on operating results as the current gas rate structure of each of our gas
distribution  utilities  includes a gas  adjustment  clause,  pursuant  to which
variations  between  actual gas costs and gas cost  recoveries  are deferred and
subsequently refunded to or collected from customers. Fluctuations in gas costs,
however, can affect earnings of our gas and electric marketing subsidiary.  This
subsidiary  employs derivative  financial  instruments to hedge a portion of the
risk associated with higher future gas costs.

Operations and maintenance  expenses  increased by $96.1 million or 33%, for the
three months ended  September  30, 2000,  and by $358.4  million or 47%, for the
nine months ended September 30, 2000 compared to the corresponding  periods last
year,  primarily  as a result  of recent  acquisitions  of  companies  providing
various  energy-related  services, the operations of the Ravenswood facility and
the installation of an underground  transmission  line to reinforce the electric
system  capacity  on the  southfork  of Long Island on behalf of the Long Island
Power Authority.




                                       19

<PAGE>



Other Income and (Deductions)
-----------------------------

Other income  includes  equity income from  subsidiaries  comprising  the Energy
Investments  segment,  primarily our investments in Canada.  In addition,  other
income also includes  interest  income from temporary cash  investments  and the
effect on net  income  from the  minority  interest  associated  primarily  with
Houston Exploration, as well as certain non-operating expenses.

As  previously  mentioned,  we  incurred an expense of $5 million in the quarter
ended September 30, 2000,  reflecting a contribution to the KeySpan  Foundation.
Further,  for the nine months ended September 30, 2000,  other income includes a
charge of $9 million  related to certain rate settlement  issues,  compared to a
charge of $6 million  recorded in the nine months ended  September  30, 1999. We
also realized lower interest income on temporary cash investments as compared to
the comparable period last year.

Other Expenses
--------------

Interest  expense was $14.7 million and $21.3  million  higher for the three and
nine months ended September 30, 2000, respectively compared to the corresponding
periods last year.  Interest  expense for both periods ended  September 30, 2000
reflects higher levels of debt outstanding, primarily related to the medium term
notes  issued  in  February  2000,  and  debt   associated   with  our  Canadian
investments, as well as higher commercial paper borrowings.

Income tax expense  reflects the higher level of pre-tax  income for the quarter
and nine months ended September 30, 2000, compared to the corresponding  periods
last year. Further, during the three months ended September 30, 2000, we changed
our basis for  computing  certain  local income taxes which  contributed  to the
increase in income tax expense for both the quarter and period  ended  September
30, 2000.

Income tax expense  for the nine months  ended  September  30, 1999  reflects an
adjustment  to deferred tax expense and current tax expense for the  utilization
of previously  deferred net operating  loss  carryforwards  recorded in 1998. In
1998,  we recorded as a deferred tax asset,  a benefit of $71.1  million for net
operating  loss  carryforwards.  We estimated that $57.4 million of the benefits
from the net  operating  loss  carryforwards  from 1998 would be realized in our
consolidated  1999  federal and state income tax returns  and,  accordingly,  we
applied  the net  operating  loss  benefits  in our 1999  federal  and state tax
provisions.


ANTICIPATED FUTURE DEVELOPMENTS

Acquisition of Eastern Enterprises
----------------------------------

On November 4, 1999,  we and Eastern  announced  that the companies had signed a
definitive  merger agreement under which we will acquire all of the common stock
of Eastern for $64.00 per share,



                                       20

<PAGE>



subject to  adjustment.  Further,  in  connection  with the merger,  Eastern has
amended its merger agreement with  EnergyNorth,  Inc. to provide for an all cash
acquisition by Eastern of  EnergyNorth at price of $61.13 per share,  subject to
adjustment. The proposed transactions are expected to close contemporaneously in
the  fourth  quarter  of  calendar  year  2000.  See Note 5 to the  Consolidated
Financial  Statements,  "Acquisition  of  Eastern  Enterprises"  for  a  further
explanation of the proposed transactions.

We expect to raise  approximately $2 billion in financing for the  transactions.
The goodwill  associated  with the  transactions  is  currently  estimated to be
approximately  $1.3 billion.  Consolidated  proforma results of operations for a
twelve month period,  including  future interest expense and the amortization of
goodwill,  indicate  that the  transactions  will have a dilutive  effect on net
income.  However, the consolidated proforma results do not take into account: i)
continued gas sales growth throughout our current and future service  territory,
especially  on Long Island and New England;  ii) earnings  enhancement  from our
investment in the Ravenswood facility; iii) the continued successful integration
of  acquired  companies  providing  energy-related  services  within  our Energy
Services segment; and iv) anticipated  before-tax synergy savings of $40 million
annually starting in 2001. We currently expect that these earnings  enhancements
will offset the dilutive effects of the Eastern and EnergyNorth transactions.

Based on current  forecasts,  we believe that year-end earnings in 2000 could be
as much as 40% higher than  earnings  achieved in 1999,  excluding the impact of
transaction,  restructuring  and early retirement  charges to be recorded in the
fourth quarter which we currently estimate will be at least $50 million. In line
with our objective to realize  synergy  savings,  we have  implemented  an early
retirement program and targeted severance  programs.  We are also completing our
resource allocation process for 2001 and are encouraged that we will achieve the
growth and synergy  savings  projected  as part of the  Eastern and  EnergyNorth
acquisitions.  Currently,  we are  hopeful  that we can  exceed  the First  Call
consensus earnings forecast of $2.41 per share in 2001. Moreover,  we anticipate
disposing of certain  non-core assets (i.e.,  assets other than those associated
with our gas distribution and electric  generation  operations)  within the next
several years.  However, we are unable to predict when or if any such sales will
occur or their impact on our results of operations or financial condition.

Following  the  announcement  that we had entered  into an agreement to purchase
Eastern,  Standard  & Poor's  Rating  Services  placed  our and  certain  of our
subsidiaries', as well as Eastern's corporate credit, senior unsecured debt, and
preferred stock on Credit Watch with negative implications.  Similarly,  Moody's
Investors Service also placed our and certain of our  subsidiaries',  as well as
Eastern's  corporate  credit,   senior  unsecured  debt,  commercial  paper  and
preferred  stock on review for possible  downgrade.  Moody's has  finalized  its
review process and has reaffirmed our long-term A3 Issuer Rating.  We anticipate
that Standard & Poor's will finalize its review process in our fourth quarter.





                                       21

<PAGE>



SEGMENT RESULTS

Gas Distribution
----------------

KeySpan Energy Delivery New York provides gas distribution services to customers
in the New York City Boroughs of Brooklyn, Queens and Staten Island, and KeySpan
Energy Delivery Long Island provides gas  distribution  services to customers in
the Long Island counties of Nassau and Suffolk and the Rockaway Peninsula of the
Borough of Queens.

The table below  highlights  certain  significant  financial  data and operating
statistics for the Gas Distribution segment for the periods indicated.
<TABLE>

                                                                                                          (IN THOUSANDS OF DOLLARS)
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                   Three Months           Three Months            Nine Months            Nine Months
                                                       Ended                 Ended                   Ended                  Ended
                                                   September 30,         September 30,           September 30,         September 30,
                                                       2000                   1999                    2000                     1999
---------------------------------------------  --------------------- ----------------------  ----------------------  ---------------
<S>                                               <C>                   <C>                    <C>                      <C>
Revenues                                       $   292,352 $              208,572  $            1,458,595  $              1,208,254
Purchased gas for resale                           132,617                 62,560                 663,246                   470,633
Revenue taxes                                       14,615                 12,675                  78,695                    75,578
---------------------------------------------   -------------------- ----------------------  ----------------------  --------------
Net Revenues                                       145,120                133,337                 716,654                   662,043
---------------------------------------------   -------------------- ----------------------  ----------------------  --------------
Operations and maintenance                         103,876                108,849                 323,401                   306,364
Depreciation and amortization                       29,330                 24,630                  86,698                    73,235
Operating taxes                                     33,456                 28,493                  93,867                    83,879
---------------------------------------------  --------------------- ----------------------  ---------------------   --------------
Total Operating Expenses                           166,662                161,972                 503,966                   463,478
---------------------------------------------  --------------------- ----------------------  ----------------------  ---------------
Operating Income (Loss)                           $(21,542)$              (28,635) $              212,688  $                198,565
---------------------------------------------  --------------------- ----------------------  ----------------------  ---------------
Earnings (Loss) for Common Stock                  $(28,033)$              (29,037) $              101,025  $                 92,873
---------------------------------------------  --------------------- ----------------------  ----------------------  ---------------
Firm gas sales (MDTH)                               17,547                 16,353                 125,318                   120,401
Firm transportation (MDTH)                           3,679                  2,889                  19,306                    15,030
Transportation - Electric
     Generation (MDTH)                              14,711                 32,352                  45,342                    61,763
Other sales (MDTH)                                  24,887                 12,441                  67,380                    38,279
Warmer than normal                                     N/A                    N/A                     5.9%                     9.7%
---------------------------------------------  --------------------- ----------------------  ----------------------  ---------------
</TABLE>
An MDTH is 10,000  therms  (British  Thermal  Units) and  reflects  the  heating
content of  approximately  one million  cubic feet of gas. A therm  reflects the
heating content of  approximately  100 cubic feet of gas. One billion cubic feet
(BCF) of gas equals approximately 1,000 MDTH.

NET REVENUES

Net gas revenues  increased  during the third  quarter of 2000,  compared to the
third  quarter of last year,  by $11.8  million or 9%. For the nine months ended
September 30, 2000,  net gas revenues  increased by $54.6 million or 8% compared
to the  corresponding  period of last year.  These increases in net gas revenues
were due to continued gas sales growth and favorable gas prices  compared to oil
prices.  Firm net gas revenues grew approximately $7 million and $26 million for
the three and nine



                                       22

<PAGE>



months ended September 30, 2000,  respectively over the corresponding periods in
1999,  through the  addition of new gas  customers  and oil to gas  conversions,
primarily  in  the  Long  Island  market.  Long  Island  has a low  natural  gas
saturation rate and significant gas sales growth  opportunities  are believed to
be available.  We estimate that on Long Island less than 30% of the  residential
and multi-family  markets,  and  approximately  70% of the  commercial  market
currently use natural gas for space heating. In the Long Island service area, we
will continue to seek growth through the expansion of our  distribution  system,
as well as through the conversion of residential homes from oil-to-gas for space
heating  purposes  and  the  pursuit  of  opportunities  to  grow  multi-family,
industrial and commercial markets.

In the large  volume  heating  markets and other  interruptible  markets,  which
include large apartment houses, government buildings and schools, gas service is
provided  under rates that are set to compete with prices of  alternative  fuel,
including  No. 2 and No. 6 grade  heating oil.  The price of both heating  grade
fuel oil and natural gas has increased significantly during the past few months.
During the three and nine months ended  September 30, 2000 gas generally sold at
a slight  discount  to  heating  oil.  We  increased  sales in these  markets by
approximately  $3 million and $23  million  for the three and nine months  ended
September 30, 2000, respectively compared to the same periods last year, through
aggressive unit pricing and the addition of two large  commercial and industrial
customers.

The Gas  Distribution  segment is  influenced  by seasonal  weather  conditions.
Annual  gas  revenues  are  substantially  realized  during the  heating  season
(November 1 to April 30) as a result of the large  proportion of heating  sales,
primarily  residential,  compared  with  total  sales.  Accordingly,  results of
operations for gas  distribution  operations  historically are most favorable in
the three  months  ended March 31, with  results of  operations  being next most
favorable in the three months ended  December 31.  Results for the quarter ended
June 30 are  marginally  profitable  or  unprofitable,  and losses are generally
incurred in the quarter ended September 30.

Our gas  distribution  subsidiaries  each  operate  under a utility  tariff that
contains a weather  normalization  adjustment that largely offsets shortfalls or
excesses of firm net revenues (i.e.,  revenues less gas costs and revenue taxes)
during a heating season due to variations from normal weather.

SALES, TRANSPORTATION AND OTHER QUANTITIES

Comparative firm gas sales and transportation  quantities for the three and nine
months  ended  September  30,  2000,  reflect the  increase  in firm  sales,  as
discussed above. Firm gas transportation  quantities increased in both the three
and nine  months  ended  September  30,  2000,  as we  continue  our natural gas
deregulation  initiatives.  Our  net  margins  are  currently  not  affected  by
customers  opting to  purchase  their  gas  supply  from  other  sources,  since
distribution  rates  charged to  transportation  customers are the same as those
charged to full sales service customers.

Transportation   quantities   related  to   electric   generation   reflect  the
transportation  of gas to our  electric  generating  facilities  located on Long
Island. Net revenues from these services are minimal.



                                       23

<PAGE>



Other sales quantities include on-system  interruptible  quantities,  off-system
sales quantities  (sales made to customers  outside of our service  territories)
and  related  transportation.  Effective  April  1,  2000,  we  entered  into an
agreement with Coral Resources,  L.P., a subsidiary of Shell Oil Company.  Coral
assists  in  the   origination,   structuring,   valuation   and   execution  of
energy-related transactions. A sharing exists between gas ratepayers and our two
gas distribution subsidiaries  (collectively referred to as the "Gas Companies")
for off-system gas transactions. The Gas Companies' share of the profits on such
transactions is then shared with Coral. The Gas Companies also share in revenues
arising from certain  transactions  initiated by Coral.  Prior to this agreement
with Coral, KeySpan Energy Delivery New York had an agreement with Enron Capital
and Trade Resources  Corp., a subsidiary of Enron Corp.,  which expired on March
30,  2000.  Pursuant  to this  agreement,  Enron  provided  gas supply and asset
management  services to KeySpan Energy Delivery New York for a fee, and obtained
the right to earn revenues based upon its management of KeySpan Energy  Delivery
New  York's  gas  supply  requirements,   storage  arrangements  and  off-system
capacity.  As a result of this  agreement,  KeySpan Energy Delivery New York did
not report any off-system sales quantities in 1999.

OPERATING EXPENSES

Operating  expenses  increased by $4.7  million,  or 3%, in the third quarter of
2000 compared to the corresponding  quarter last year, and by $40.5 million,  or
9% for the nine months  ended  September  30,  2000  compared to the nine months
ended  September 30, 1999.  Operations and  maintenance  expense in both periods
reflects, generally higher labor costs and associated employee benefit expenses,
and  higher  marketing  costs  and  incentives  related  to  our  gas  expansion
initiatives  on Long  Island.  The  increase in  depreciation  and  amortization
expense generally reflects continued property additions, and the amortization of
certain  regulatory  items previously  deferred and now being recovered  through
revenue recovery  mechanisms.  Further,  operating taxes which include state and
local taxes on property have increased as the  applicable  property base and tax
rates generally have increased.

EARNINGS

In addition to the  aforementioned,  earnings  available  for common  stock also
reflect interest expense and federal income tax provisions. Interest expense for
the quarter ended  September 30, 2000 is $2.3 million  higher as compared to the
comparable  period last year due to the  issuance of $400 million of medium term
notes in February 2000.


Electric Services
-----------------

The Electric Services segment primarily consists of subsidiaries that own, lease
and operate oil and gas fired  generating  plants in Queens and Long Island and,
through long-term contracts,  manage the electric  transmission and distribution
system, the fuel and electric  purchases,  and the off-system electric sales for
the Long Island Power Authority.



                                       24

<PAGE>



Selected  financial data for the Electric  Services  segment is set forth in the
table below for the periods indicated.
<TABLE>
                                                                                                         (IN THOUSANDS OF DOLLARS)
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                               Three Months            Three Months             Nine Months              Nine Months
                                                  Ended                    Ended                   Ended                    Ended
                                               September 30,           September 30,            September 30,          September 30,
                                                   2000                    1999                     2000                    1999
----------------------------------------  ----------------------  ----------------------- ------------------------ -----------------
<S>                                             <C>                      <C>                    <C>                       <C>
Revenues
  LIPA service agreements                 $       173,277  $               179,835 $                569,691 $               536,428
  Ravenswood Facility                             201,240                   61,424                  527,925                  70,124
----------------------------------------  ---------------------   -----------------------  ----------------------- ----------------
Total Revenues                                    374,517                  241,259                1,097,616                 606,552
Purchased fuel                                     94,482                        -                  235,131                       -
----------------------------------------  ---------------------   ----------------------- ------------------------ ----------------
Net Revenues                                      280,035                  241,259                  862,485                 606,552
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
  Operations and maintenance                      154,357                  142,748                  503,234                 367,078
  Depreciation                                     12,253                   12,395                   36,814                  32,660
  Operating taxes                                  40,418                   36,724                  117,603                  94,162
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
Total Operating Expenses                          207,028                  191,867                  657,651                 493,900
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
Operating Income                          $        73,007  $                49,392 $                204,834 $               112,652
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
Earnings for Common Stock                 $        31,796  $                28,164 $                103,316 $                59,786
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
Electric sales (MWH)                            1,465,196                2,155,496                4,013,843               2,155,496
Degree Days                                           761                    1,013                   1,124                    1,416
Capacity (MW)                                       2,294                    2,120                    2,294                   2,120
----------------------------------------  ---------------------   ----------------------- ------------------------ -----------------
</TABLE>

NET REVENUES

Net revenues increased by $38.8 million,  or 16%, and by $255.9 million,  or 42%
in the three and nine months ended September 30, 2000, respectively, compared to
the comparable  periods last year. The increase in net revenues is due primarily
to the  Ravenswood  facility  that we acquired in June 1999.  Revenues  from the
Ravenswood facility  benefitted from the sale of energy,  capacity and ancillary
services  to the New York  Independent  System  Operator at  competitive  market
prices, and from effective hedging strategies.  Prior to the start of operations
of the New York  Independent  System  Operator on November 19, 1999,  all of the
energy and capacity from the Ravenswood facility was sold to Consolidated Edison
on a cost  recovery  and  fixed  fee  basis.  Further,  there  were no  sales of
ancillary services in 1999.

Purchased  fuel expense for the operation of the  Ravenswood  facility was $94.5
million and $235.1 million for the quarter and period ended  September 30, 2000,
respectively.  We did not incur any fuel costs for the  Ravenswood  facility for
the corresponding  period last year. The prior owner of the Ravenswood facility,
Consolidated Edison, owned and supplied the fuel necessary to operate the



                                       25

<PAGE>



Ravenswood  facility  from  June  19,  1999  until  the  start  of the New  York
Independent System Operator on November 19, 1999.

Revenues from our service  agreements  with the Long Island Power Authority were
$33.3  million  higher for the nine months ended  September 30, 2000 compared to
the  comparable  period  last  year,  but were $6.6  million  lower in the third
quarter  of 2000  compared  to the  third  quarter  of  1999.  The  increase  in
comparative nine month revenues is primarily the result of a major  construction
project  performed by us on behalf of The Long Island Power  Authority.  In June
2000, we completed  the  installation  of an  underground  transmission  line to
reinforce  the electric  system  capacity on the  southfork of Long Island.  The
project was  performed  under a fixed fee  contract  with the Long Island  Power
Authority, as part of the management services agreement.  Further,  revenues for
nine months ended  September  30, 2000 include $14 million of  off-system  sales
from our Long Island electric  generation  units.  Under the terms of the energy
management  agreement,  we are  entitled  to  one-third  of the profit  from any
off-system electricity sales arranged by us on the Long Island Power Authority's
behalf.  (For a description of Long Island Power Authority  service  agreements,
see our Annual Report on Form 10K for the year ended December 31, 1999.)

We have  realized  significant  revenues  and  profits  from the sale of energy,
capacity and  ancillary  services from the  Ravenswood  facility and through the
energy management  agreement.  (Ancillary  services include  primarily  spinning
reserves and  non-spinning  reserves.)  Due to the  significant  increase in the
market-clearing  price for electricity and certain ancillary  services,  the New
York Independent  System Operator and other market  participants  have requested
that the Federal  Energy  Regulatory  Commission  cap the sales  prices for both
energy sales and the sale of ancillary services.  See Note 6 to the Consolidated
Financial Statements, "New York State Independent System Operator Matters" for a
further discussion of these matters.


OPERATING EXPENSES

Operating  expenses for the third quarter of 2000  increased by $15.2 million or
8% compared to the third quarter of 1999. Operating expenses for the nine months
ended  September 30, 2000,  increased by $163.8 million or 33%,  compared to the
comparable  period in 1999. The increase in operating  expenses for both periods
in 2000, reflects primarily the operations of the Ravenswood facility. Operating
expenses  associated with the Ravenswood facility increased by $29.5 million and
$120.2  million  for the  three  and  nine  months  ended  September  30,  2000,
respectively,  compared  to the  corresponding  periods  of  1999.  Included  in
operating expenses for the Ravenswood  facility are charges of $15.9 million and
$48.7  million  for the  quarter  and nine  months  ended  September  30,  2000,
respectively  for fuel management  services  provided by one of our subsidiaries
within the Energy Services  segment.  There were no comparable  charges in 1999.
Further,  since  the  Ravenswood  facility  was  acquired  by us in  June  1999,
operating  expenses for the period ended  September 30, 2000 reflect a full nine
months of operations  compared to only three months of operations for the period
ended September 30, 1999.  Operating  expenses  incurred under Long Island Power
Authority  Service  Agreements  decreased by $14.3  million for the three months
ended



                                       26

<PAGE>



September  30,  2000  compared to the same  period in 1999.  Operating  expenses
incurred under these service agreements  increased by $43.5 million for the nine
months ended September 30, 2000 compared to the comparable  period last year due
primarily  to costs  incurred  to install  the new  electric  transmission  line
discussed above.

EARNINGS

In addition to the  aforementioned,  earnings  available  for common  stock also
reflect  interest  expense,  as well as  city,  state  and  federal  income  tax
provisions.  During the three months ended  September  30, 2000,  we changed our
basis for computing certain local income taxes and, as a result, recorded higher
taxes in 2000 compared to 1999. Further, for the nine months ended September 30,
2000,  earnings also include an after-tax charge of $2.2 million for the loss on
the sale of certain assets.

OTHER ISSUES

We have filed an application  with the New York State Public Service  Commission
to build a new 250 MW cogeneration facility at the Ravenswood facility site. The
new facility,  which will generate  electricity  and steam, is expected to be in
service in 2003.  Further,  we continue to evaluate the  electric  needs on Long
Island and may, if economic  circumstances and energy needs so warrant,  proceed
with strategies to add additional electric capacity on Long Island.


Gas Exploration and Production

The Gas Exploration and Production segment is engaged in gas and oil exploration
and production,  and the development and acquisition of domestic natural gas and
oil  properties.  This  segment  consists of our 70% equity  interest in Houston
Exploration, as well as KeySpan Exploration and Production LLC, our wholly owned
subsidiary  engaged in a joint  venture with Houston  Exploration.  On March 31,
2000, under a pre-existing credit arrangement, approximately $80 million in debt
owed by Houston  Exploration to us was converted into Houston Exploration common
equity.  Upon such conversion,  our common equity ownership  interest in Houston
Exploration increased from 64% to approximately 70%.

<PAGE>

Selected  financial data and operating  statistics for the Gas  Exploration  and
Production  segment  are set  forth  in the  following  table  for  the  periods
indicated.
<TABLE>
                                                                                                           (IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                   Three Months           Three Months            Nine Months            Nine Months
                                                      Ended                  Ended                   Ended                   Ended
                                                   September 30,          September 30,           September 30,        September 30,
                                                       2000                   1999                    2000                   1999
--------------------------------------------  ---------------------- ----------------------  ----------------------  ---------------
<S>                                                 <C>                     <C>                    <C>                    <C>
Revenues                                      $       62,748 $               42,081  $              169,966  $             103,622
Depreciation and amortization                         22,008                 18,644                  65,257                 53,673
Other operating expenses                               9,755                  7,639                  32,195                 20,070
--------------------------------------------  ---------------------- ----------------------  ----------------------  ---------------
Operating Income                              $       30,985 $               15,798  $               72,514  $              29,879
--------------------------------------------  ---------------------- ----------------------  ----------------------  ---------------
Earnings for Common Stock                     $       13,418 $                5,435  $               29,381  $               9,239
--------------------------------------------  ---------------------- ----------------------  ----------------------  ---------------
Natural gas production (Mmcfe)                        19,172                 17,922                  58,228                 51,572
Natural gas (per Mcf) realized                $        3.24          $        2.33           $        2.88           $       2.00
Natural gas (per Mcf) unhedged                $        4.22          $        2.47           $        3.33           $       2.05
--------------------------------------------  ---------------------- ----------------------  ----------------------  ---------------
</TABLE>
       Operating  income  above  represents  100%  of our  gas  exploration  and
       production  subsidiaries'  results for the periods  indicated.  Earnings,
       however,  are adjusted to reflect  minority  interest  and,  accordingly,
       include 70% of Houston  Exploration's results since April 1, 2000 and 64%
       of Houston Exploration's results for all periods prior to March 31, 2000.
       Gas reserves and production are stated in BCFe and Mmcfe,  which includes
       equivalent oil reserves.


OPERATING INCOME

Operating  income increased by $15.2 million and $42.6 million for the three and
nine months ended  September 30, 2000,  respectively  compared to  corresponding
periods in 1999. The increase in operating  income for the third quarter of 2000
compared to the third quarter of 1999  reflects the benefits  derived from an 7%
increase in production volumes, combined with a 39% increase in average realized
gas prices  (average  wellhead price received for production  plus hedging gains
and losses).  For the nine months ended  September  30, 2000,  operating  income
reflects  the  benefits  derived  from a 13%  increase  in  production  volumes,
combined  with a 44%  increase in average  realized  gas prices over  comparable
amounts for the corresponding period in 1999.

At December 31, 1999 our gas  exploration  and production  subsidiaries  had 553
BCFe of net proved  reserves  of natural  gas, of which  approximately  75% were
classified as proved developed.


Energy Services
---------------

The Energy Services segment primarily  includes  companies that provide services
through four lines of business to clients  located within the New York tri-state
metropolitan area, Rhode Island and Pennsylvania. The lines of business include:
home  energy  services;   business   solutions;   commodity   procurement;   and
telecommunications services.

In  February  2000,  we  acquired  three   additional   companies  that  provide
energy-related services within these lines of business. Further, in August 2000,
we  acquired  another  company  that  builds,  installs  and  services  heating,
ventilation  and  air-conditioning  equipment  throughout New Jersey and Eastern
Pennsylvania,  with customers ranging from small industrial  facilities to large
pharmaceutical  plants.  This company has 400 employees and reported revenues of
$93 million in 1999. In addition, we are also involved, through a joint venture,
in  providing  energy-related  services to consumers  through the  MyHomeKey.com
website. MyHomeKey is a personalized, Internet-based home management system that
puts service  providers at customers'  fingertips,  delivers advice and one-stop
shopping for most home  products  and  services.  MyHomeKey.com  was launched in
September 2000.




                                       28

<PAGE>



Selected  financial  data for the  Energy  Services  segment is set forth in the
following table for the periods indicated.
<TABLE>
                                                                                                          (IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                 Three Months           Three Months           Nine Months             Nine Months
                                                    Ended                  Ended                  Ended                   Ended
                                                 September 30,         September 30,           September 30,           September 30,
                                                     2000                   1999                   2000                    1999
------------------------------------------- ----------------------  --------------------  ----------------------  ------------------
<S>                                               <C>                     <C>                    <C>                    <C>
 Unaffiliated revenues                      $       215,871  $             46,096  $              480,511  $              123,165
 Intersegment revenues                               15,903                     -                  48,677                       -
 Cost of goods sold                                 188,026                36,659                 408,985                 100,706
 ------------------------------------------ ---------------------- ---------------------  ----------------------  ------------------
 Gross Profit Margin                                 43,748                 9,437                 120,203                  22,459
 Depreciation and amortization                        2,665                   938                   7,252                   2,292
 Other operating expenses                            21,430                 8,499                  60,993                  24,658
 ------------------------------------------ ---------------------  --------------------  ----------------------  -------------------
 Operating Income (Loss)                    $        19,653   $                 -  $               51,958  $               (4,491)
------------------------------------------- ---------------------  --------------------  ----------------------  -------------------
 Earnings (Loss) for Common Stock           $         9,636  $                116  $               25,221  $               (2,384)
------------------------------------------- ---------------------  --------------------  ----------------------  -------------------
</TABLE>

The increase in earnings of the Energy  Services  segment for both the three and
nine months ended  September 30, 2000 compared to the  corresponding  periods in
1999,  reflects  primarily fuel- management  services provided to the Ravenswood
facility. For the three and nine months ended September 30, 2000, these services
provided  this  segment  with  earnings  of  $8.4  million  and  $25.7  million,
respectively.  A subsidiary within this segment, KeySpan Energy Supply, provides
the Ravenswood facility with energy procurement advisory services and acts as an
energy  broker for the sale of  electricity  and ancillary  services.  For these
services,  KeySpan  Energy  Supply  receives a management  fee and shares in the
operating profit generated by the Ravenswood facility on the sale of electricity
and ancillary  services.  There was no energy  procurement  and  fuel-management
advisory  services  agreement  between  KeySpan Energy Supply and the Ravenswood
facility in 1999.

This segment also realized  significantly  greater gross profit margins for both
the  three  and  nine  months  ended   September  30,  2000,   compared  to  the
corresponding periods last year, for each of its other lines of business.  These
gross  margin  enhancements  resulted  from  recent  acquisitions  of  companies
providing  energy-related  services and through  customer  additions  related to
energy sales.  These benefits to gross profit margins,  however,  were offset by
increases in general and  administrative  expenses.  This segment is expected to
continue to realize  earnings from its energy  procurement  and  fuel-management
advisory  services for the  remainder of 2000 and the other  business  lines are
projected to be profitable in 2000.





                                       29

<PAGE>



Energy Investments
------------------

Earnings for this segment are derived,  primarily,  from our 20% interest in the
Iroquois  Gas  Transmission  System  LP;  our  50%  ownership  interest  in Gulf
Midstream;  our  ownership  interest  in certain  oil  producing  properties  in
Alberta,  Canada; and our 50% interest in the Premier Transmission  Pipeline and
24.5%  interest in Phoenix  Natural Gas,  both in Northern  Ireland.  In October
2000,  we sold our  interest in certain  oil  producing  properties  in Alberta,
Canada.  An after- tax gain of approximately  $1.3 million from the sale will be
reported  in the fourth  quarter of 2000.  Further,  also in  October  2000,  we
acquired the remaining 50% interest in Gulf  Midstream  making us the sole owner
of Gulf  Midstream.  The  transaction  required us to borrow an  additional  $48
million from a Canadian bank. For financial reporting  purposes,  the operations
of Gulf  Midstream  will  now be  fully  consolidated  for  financial  reporting
services.

Earnings for this segment remained  relatively  constant in the third quarter of
2000  compared to the  corresponding  quarter  last year.  Earnings for the nine
months ended  September 30, 2000  increased by $2.0 million over the  comparable
period  last  year  reflecting  earnings  growth  from  the  Company's  Canadian
investments.  Results of operations  from Canadian gas and oil  operations  were
enhanced  through the  acquisition,  in the fourth  quarter  1999, of the Paddle
River Gas Plant and certain oil  producing  properties in Alberta,  Canada,  and
more efficient  operations of Gulf  Midstream.  In addition,  Iroquois  realized
higher  transportation  sales  quantities  and revenues  from its  interruptible
customers  during this period compared with the same period last year.  Earnings
from our  investments in Northern  Ireland in 2000 are  essentially  the same as
earnings for last year. The subsidiaries in this segment are primarily accounted
for under the  equity  method  since our  ownership  interests  are 50% or less.
Accordingly,  income from these  investments  is reflected,  in other income and
(deductions) in the Consolidated Statement of Income.

Other

The Other  segment  incurred  losses of $16.4  million and $43.0 million for the
three and nine months ended September 30, 2000,  respectively compared to losses
of $7.1 million and $16.3 million for the three and nine months ended  September
30, 1999, respectively.  Results for the Other segment generally reflect charges
incurred by our corporate and administrative  areas that have not been allocated
to the various business segments and preferred stock dividends, offset, in part,
by interest  income  earned on temporary  cash  investments.  During the quarter
ended  September 30, 2000 we incurred an expense of $5 million for an additional
contribution to the KeySpan  Foundation.  Further,  during the nine months ended
September 30, 2000, we recorded  charges of $9 million  associated  with certain
outstanding regulatory issues, compared to a similar charge of $6 million in the
nine months ended September 30, 1999.  Moreover,  we incurred an expense of $5.6
million in the nine months  ended  September  30,  2000 to  write-off a computer
system  that  will  not  be  utilized  as  a  result  of  the  proposed  Eastern
acquisition. Finally, interest income has been decreasing as we utilized cash to
finance certain acquisitions and repurchase shares of our common stock.





                                       30

<PAGE>



LIQUIDITY, CAPITAL EXPENDITURES AND FINANCING

LIQUIDITY

The increase in cash flow provided by operating  activities  for the nine months
ended  September  30, 2000  reflects  stable  growth  from our gas  distribution
operations,  as well as positive  contributions  from the  Ravenswood  facility.
Further,  during  the third  quarter  of 2000,  we  received  a cash  payment of
approximately  $48 million  from the Long Island  Power  Authority  representing
amounts due for past  services  performed  by us under the  various  Long Island
Power Authority service agreements.  These benefits to cash flow from operations
were offset, in part, by a decrease in interest income,  negative operating cash
flow  from  our  Energy  Services  segment,  an  increase  in the cost of gas in
storage, which will be recovered from customers in later periods and an increase
in interest payments due to increased levels of outstanding debt.  Further,  for
the nine months ended September 30 1999 cash flow from  operations  reflects the
cash  utilization  of a $57.4 million  federal  income tax net operating loss on
income tax payments for 1999, as previously discussed.

At September  30, 2000,  we had cash and  temporary  cash  investments  of $63.6
million. In addition, we have a $700 million revolving credit agreement,  with a
one-year term and one-year  renewal  option,  with a commercial  bank syndicate.
This  credit  facility  is used to support  our $700  million  commercial  paper
program. During the nine months ended September 30, 2000, we issued $1.6 billion
of commercial paper and repaid $1.4 billion,  including the outstanding  balance
at December 31, 1999.  Commercial  paper was issued during the nine months ended
September 30, 2000 to support  ongoing  working  capital needs and the mandatory
redemption of our preferred stock 7.95% Series AA. At September 30, 2000, $382.1
million  of  commercial  paper  remained   outstanding  at  a  weighted  average
annualized  interest rate of 6.73%. We had available borrowing of $317.9 million
at September 30, 2000.

Houston  Exploration has an unsecured available line of credit with a commercial
bank that provides for a maximum commitment of $250 million,  subject to certain
conditions. During the nine months ended September 30, 2000, Houston Exploration
borrowed  $30  million  under its credit  facility  and repaid $37  million;  at
September 30, 2000,  $174 million  remained  outstanding  at a weighted  average
annualized  interest rate of 7.84%. At September 30, 2000,  Houston  Exploration
had available  borrowing of $35.6  million.  Also, a subsidiary  included in the
Energy  Investments  segment has a  revolving  loan  agreement  with a financial
institution in Canada.  Borrowings  under this agreement  during the nine months
ended  September 30, 2000 were $33.6  million and, at September  30, 2000,  $118
million was outstanding at a weighted average annualized interest rate of 6.48%.
Further,  subsequent  to  September  30,  2000,  an  additional  $48 million was
borrowed to finance the acquisition of the remaining 50% of Gulf Midstream.  The
Energy Investments segment now has available borrowing of $50.1 million.

We  satisfy  our  seasonal  working  capital   requirements   primarily  through
internally  generated  funds and the issuance of commercial  paper. In addition,
beginning in the third quarter of 2000,  we began  issuing  shares of our common
stock out of treasury to satisfy the requirements of our common stock



                                       31

<PAGE>



plans.  We believe that our sources of funds are sufficient to meet our seasonal
working capital needs.


CAPITAL EXPENDITURES

Construction Expenditures

The table  below sets forth our  construction  expenditures  by segment  for the
periods indicated:
<TABLE>
                                                                                                          (IN THOUSANDS OF DOLLARS)
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                           Three Months              Three Months             Nine Months             Nine Months
                                              Ended                     Ended                    Ended                   Ended
                                          September 30,             September 30,            September 30,           September 30,
                                               2000                      1999                     2000                    1999
------------------------------------ ------------------------  ------------------------  ----------------------  -------------------
<S>                                           <C>                       <C>                    <C>                     <C>
Gas Distribution                     $          67,925  $                 54,289  $              160,561  $              136,803
Electric Services                               18,775                    16,552                  42,421                 229,795
Gas Exploration and Production                  68,913                    44,230                 163,443                 112,006
Energy  Services                                 2,467                     2,576                  10,799                   3,323
Energy Investments and Other                     8,380                    20,660                  26,387                  31,064
------------------------------------ ------------------------  ------------------------  ----------------------  -------------------
                                     $         166,460  $                138,307  $              403,611  $              512,991
------------------------------------ ------------------------  ------------------------  ----------------------  -------------------
</TABLE>

Construction  expenditures  related to Gas  Distribution  were primarily for the
renewal and  replacement  of mains and services and for the expansion of the gas
distribution system on Long Island. Electric Service's construction expenditures
reflect primarily costs to maintain our electric generating  facilities and, for
the nine  months  ended  September  30,  1999,  reflect the  acquisition  of the
Ravenswood  facility.  Construction  expenditures related to Gas Exploration and
Production  reflect,  in part,  costs related to the  development  of properties
acquired  in  Southern  Louisiana  and in the Gulf of  Mexico  in 1999 and costs
related to the continued  development of other properties  previously  acquired.
Expenditures also include our joint venture with Houston  Exploration to explore
for natural gas and oil. Energy Investments and Other construction  expenditures
reflect, primarily costs related to Canadian affiliates.

Equity Investments

During the nine months ended  September 30, 2000,  the Energy  Services  segment
acquired  four   additional   companies   located  in  the  New  York  tri-state
metropolitan    area.    The   newly    acquired    companies    specialize   in
engineering-consulting,   plumbing  and  mechanical  contracting,  and  heating,
ventilation and air  conditioning  contracting.  Combined,  these companies have
over 1,300 employees and revenues of approximately $260 million.

In addition,  in March 2000, the Company and TXU Energy  Services formed a joint
venture with  MyHomeKey.com,  Inc. The Company and TXU Energy Services have each
invested $12.5 million



                                       32

<PAGE>



in the project;  Bechtel  Enterprises  has also invested $5 million.  TXU Energy
Services is a unit of TXU - an investor-owned energy service company and Bechtel
Enterprises is an affiliate of Bechtel.

FINANCING

In June 2000, we redeemed, at maturity,  preferred stock 7.95% Series AA through
the utilization of internally generated funds and the proceeds from the issuance
of commercial  paper.  Our obligation of $370.2  million  included the mandatory
redemption price of $25 per share totaling $363.0 million and a dividend payable
totaling  $7.2 million.  We  anticipate  issuing up to $400 million in preferred
stock during 2001 to replace outstanding commercial paper.

KeySpan  Energy  Delivery  Long  Island  has  an  effective  shelf  registration
statement on file with the Securities  and Exchange  Commission for the issuance
of up to $600 million of medium term notes. On February 1, 2000,  KeySpan Energy
Delivery Long Island issued $400 million  7.875% Notes due February 1, 2010. The
net proceeds from this issuance were used to reimburse our treasury for costs in
paying $397 million of promissory  notes to the Long Island Power Authority that
matured in June 1999. The medium term notes issued are fully and unconditionally
guaranteed  by us. At June 30,  2000,  $200  million of medium term notes remain
available for issuance under the shelf registration statement.

As  previously  indicated,  on November 4, 1999,  we entered  into a  definitive
agreement with Eastern, pursuant to which we will acquire all of the outstanding
common stock of Eastern. In connection with this merger, Eastern has amended its
merger  agreement  with  EnergyNorth  to provide for an all cash  acquisition by
Eastern of EnergyNorth  common stock.  The  restructured  EnergyNorth  merger is
expected to close contemporaneously with the KeySpan/Eastern  transaction.  (See
Note  5  to  the  Consolidated  Financial  Statements  "Acquisition  of  Eastern
Enterprises".)

We intend to access  the  financial  markets  in the  fourth  quarter of 2000 to
finance  approximately $2 billion for the Eastern and EnergyNorth  transactions.
We intend to use bridge  financing with a commercial  bank to fund $1.65 billion
of these transactions initially and then replace the bridge financing with $1.65
billion of long-term  debt  securities as soon as  practicable  thereafter.  The
remaining  balance will be financed through the issuance of commercial paper. We
anticipate issuing several different maturities of long-term debt to balance our
future capital  maturity  structure.  In August,  we filed a shelf  registration
statement with the Securities and Exchange  Commission for the issuance of up to
$1.65 billion of debt securities.

In connection with our anticipated Eastern and EnergyNorth transactions, and the
anticipated issuance of long-term debt securities,  we have entered into forward
starting  swap  agreements  to hedge a portion  of the risk that the cost of the
future  issuance  of  fixed-rate  debt may be  adversely  affected by changes in
interest rates. The agreements have a total notional principal amount of $1.5



                                       33

<PAGE>



billion. (See Note 4 to the Consolidated  Financial  Statements,  "Liquidity and
Financings" for additional details.)

In addition to our strategies  associated  with our financing of the Eastern and
EnergyNorth transactions and our intention to issue preferred stock during 2001,
we also intend to increase our current commercial paper program to $1.4 billion
in the last quarter of 2000. We anticipate that we may issue  approximately $800
million in commercial  paper in the last quarter of 2000 to finance a portion of
the Eastern  acquisition and meet the combined seasonal working capital needs of
KeySpan,  Eastern and EnergyNorth.  We believe that our sources of funding, i.e.
anticipated  long- term debt and preferred stock issuances and commercial  paper
borrowings will be sufficient to meet our  anticipated  cash needs. At the close
of the Eastern  acquisition,  we anticipate that our debt (including  commercial
paper) to capitalization  ratio will be approximately 65%. However, if we divest
of  certain  non-core  assets,  we  believe  that  we  can  achieve  a  debt  to
capitalization ratio of 45% to 50% within the next several years.

GAS DISTRIBUTION - RATE MATTERS

By orders  dated  February 5, 1998 and April 14, 1998 the New York State  Public
Service  Commission  approved a Stipulation  and Agreement  among KeySpan Energy
Delivery New York, the Long Island Lighting  Company,  the Staff of the New York
State Public Service  Commission  and six other parties that in effect  approved
the merger of KeySpan Energy  Corporation and the Long Island  Lighting  Company
and established gas distribution rates for our two gas distribution subsidiaries
that are currently in effect. On November 30, 2000, KeySpan Energy Delivery Long
Island's  rate  agreement  with the New York  State  Public  Service  Commission
expires.  Under the terms of the agreement,  current gas distribution rates will
remain in effect for 2001 unless either KeySpan  Energy  Delivery Long Island or
the New York State Public Service Commission  initiate a rate proceeding.  We do
not intend to initiate  such a proceeding  and at this time we have no reason to
believe  that the New York  State  Public  Service  Commission  will  initiate a
proceeding.  Therefore, we expect current gas distribution rates for our two gas
distribution  utilities to remain in effect through 2001. (For more  information
on these  agreements  refer to our Annual Report on Form 10-K for the year ended
December 31, 1999.)


ENVIRONMENTAL MATTERS

We are subject to various federal,  state and local laws and regulatory programs
related to the environment.  Ongoing environmental compliance activities,  which
have not been material, are charged to operation and maintenance activities.  We
estimate that the remaining  minimum cost of our manufactured gas  plant-related
environmental  cleanup  activities,  including costs of $5.0 million  associated
with the Ravenswood  facility,  will be  approximately  $119 million and we have
recorded a related liability for such amount. Further, as of September 30, 2000,
we have  expended  a total of  approximately  $20  million.  (See  Note 3 to the
Consolidated Financial Statements "Environmental Matters".)



                                       34

<PAGE>



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q concerning expectations, beliefs,
plans,  objectives,   goals,  strategies,   future  events  or  performance  and
underlying  assumptions and other  statements which are other than statements of
historical facts, are "forward-looking statements" within the meaning of Section
21E of the  Securities  Exchange Act of 1934, as amended.  Without  limiting the
foregoing,  all statements  relating to our future outlook,  anticipated capital
expenditures,  future cash flows and  borrowings,  pursuit of  potential  future
acquisition opportunities and sources of funding are forward-looking statements.
Such  forward-looking  statements  reflect  numerous  assumptions  and involve a
number of risks and  uncertainties and actual results may differ materially from
those  discussed in such  statements.  Among the factors that could cause actual
results to differ  materially are: general economic trends;  fluctuations in gas
and  electric  prices;  available  sources  and cost of fuel;  federal and state
regulatory  initiatives that increase competition,  threaten cost and investment
recovery,  and impact rate  structures;  our ability to successfully  reduce our
cost structure;  the successful  integration of our subsidiaries,  including the
Eastern companies; the degree to which we develop unregulated business ventures;
our  ability to identify  and make  complementary  acquisitions,  as well as the
successful  integration of such acquisitions;  inflationary  trends and interest
rates;  and other risks  detailed  from time to time in other  reports and other
documents  filed by us with the Securities and Exchange  Commission.  For any of
these statements, we claim the protection of the safe harbor for forward-looking
information  contained in the Private Securities  Litigation Reform Act of 1995,
as amended.






                                       35

<PAGE>



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK

We are subject to various risk exposures and  uncertainties  associated with our
operations.  The most significant  contingency involves the evolution of the gas
distribution  industry toward a more  competitive  and deregulated  environment.
Most  important to us, is the evolution of  regulatory  policy as it pertains to
our fixed charges associated with our firm gas purchase contracts.  In addition,
we are exposed to commodity price risk,  interest rate risk and foreign currency
translation risk. Our exposure to the  aforementioned  market risks has remained
substantially  unchanged from December 31, 1999. However, during the nine months
ended September 30, 2000, we have entered into a number of derivative  financial
instruments to limit our exposure to interest rate  fluctuations  and to lock-in
the sales price on a portion of our estimated 2001 summer electric sales.

As  previously  mentioned,  in  anticipation  of our purchase of Eastern and the
anticipated issuance of long-term debt securities,  we have entered into forward
starting  swap  agreements  during the nine months ended  September  30, 2000 to
hedge a portion of the risk that the cost of the future  issuance of  fixed-rate
debt may be adversely  affected by changes in interest  rates. We may, from time
to time,  enter  into  additional  derivative  instruments  to hedge  this  risk
exposure,  if market  conditions  so  warrant.  (See Note 7 to the  Consolidated
Financial  Statements,   "Derivative   Financial   Instruments"  for  a  further
discussion of these agreements.)

Also,  during  the  quarter  ended  September  30 we  entered  into a number  of
derivative  swap  instruments  to lock-in the selling  price on a portion of our
2001 estimated  electric  sales.  These  derivatives  have been accounted for as
cash-flow  hedges.  So far we have hedged the sales price on approximately 6% of
our total estimated  electric sales for 2001. We intend to enter into additional
derivative  instruments to hedge  approximately 30% of our estimated 2001 summer
electric  sales.  (See  Note  7  to  the  Consolidated   Financial   Statements,
"Derivative  Financial   Instruments"  and  Note  8  "New  Financial  Accounting
Standards" for a further explanation of derivative instruments.)


PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time,  we are subject to various legal  proceedings  arising out of
the  ordinary  course of our  business.  Except as  described  below,  we do not
consider  any of such  proceedings  to be material to our  business or likely to
result in a material  adverse  effect on our results of  operations or financial
condition.

In October 1998,  the County of Suffolk and the Towns of Huntington  and Babylon
commenced an action  against the Long Island Power  Authority,  us, the New York
Public Service Commission and others in the United States District Court for the
Eastern District of New York (the "Huntington Lawsuit").  The Huntington Lawsuit
alleges, among other things, that the Long Island Lighting



                                       36

<PAGE>



Company  ratepayers (i) have a property right to receive or share in the alleged
capital  gain that  resulted  from the  transaction  with the Long Island  Power
Authority  (which gain is alleged to be at least $1 billion);  and (ii) that the
Long Island Lighting  Company was required to refund to ratepayers the amount of
a  Shoreham-related  deferred tax reserve  (alleged to be at least $800 million)
carried on the books of the Long Island Lighting  Company at the consummation of
the Long Island Power Authority transaction. In December 1998, and again in June
1999, the plaintiffs  amended their complaint.  The amended  complaint  contains
allegations  relating to certain  payments the Long Island Lighting  Company had
determined  were  payable in  connection  with the Long Island  Power  Authority
transaction  and  KeySpan  Acquisition  to the Long  Island  Lighting  Company's
Chairman and certain former  officers and adds the recipients of the payments as
defendants.  In June 1999, we were served with the second amended complaint.  On
June 16, 2000,  we filed a motion to dismiss the second  amended  complaint.  On
August 14, 2000,  the Court  granted our motion and  dismissed  the  plaintiffs'
second amended complaint in its entirety.  The plaintiffs have filed a notice of
appeal of that decision.  At this time we are unable to determine the outcome of
this appeal.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
(a)        Exhibits

(27)*     Financial Data Schedule on Schedule U-T for the quarter ended
          June 30, 2000.
(b)       Reports on Form 8-K

          In our  report on Form 8-K dated  July 12,  2000,  we filed  pro-forma
          financial  information  for the periods  ended  December  31, 1999 and
          March 31, 2000.

           In our report on Form 8-K dated July 26, 2000, we filed as an exhibit
           thereto,  a press release  discussing  earnings for the quarter ended
           June 30, 2000.

           In our  report  on Form 8-K dated  October  6,  2000,  we filed as an
           exhibit thereto, certain historical financial information of Eastern.

-------------------------
*Filed Herewith












                                       37

<PAGE>


                      KEYSPAN CORPORATION AND SUBSIDIARIES
                                    SIGNATURE

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

                               KEYSPAN CORPORATION
                                  (Registrant)







Date: October 31, 2000                         /s/ Gerald Luterman
                                               ---------------------------------
                                                   Gerald Luterman
                                                   Senior Vice President and
                                                   Chief Financial Officer


Date: October 31, 2000                         /s/ Ronald S. Jendras
                                               --------------------------------
                                                   Ronald S. Jendras
                                                   Vice President, Controller
                                                   and Chief Accounting Officer





                                       38