Exhibit 10.12
                       Supplemental Retirement Agreement

     This  Agreement  (the  "Supplemental  Retirement  Agreement")  dated  as of
January 1, 2002 (the "Effective Date") between KeySpan Corporation ("KeySpan" or
the  "Company")  and  Steven  L.  Zelkowitz  (the  "Executive")  sets  forth the
understanding  and  agreement of the parties as to certain  additional  terms on
which the Executive continues to be employed by KeySpan.


     WHEREAS,  Executive is an Executive Vice  President and General  Counsel of
KeySpan  who became an  employee  of  KeySpan  on October 1, 1998,  and became a
participant  in the Employees  Retirement  Plan of KeySpan Energy (the "ERP") on
January 1, 1999 and the KeySpan Executive Supplemental Pension Plan ("KESPP");

     WHEREAS,  Executive may have limited  pension  benefits due to shorter than
normal  service  at  retirement  and the  Company  desires  to  grant  Executive
additional credited pension service in the calculation of his pension benefit if
he remains employed until his vesting date for qualified plan purposes,  October
1, 2003;

     WHEREAS,  on  October  24,  2001,  KeySpan's  Compensation  and  Nominating
Committee  recommended  and on December  20, 2001  KeySpan's  Board of Directors
authorized  through a Resolution  (the  "Resolution")  that the proper  officers
provide an individual supplemental retirement agreement with Executive;

     NOW THEREFORE,  the Company and Executive  agree that Executive will accrue
additional  pension service through this Supplemental  Retirement  Agreement and
the parties agree as follows;

     1.   Upon Executive's completion of at least five years of service (October
          1, 2003) and his election to retire in accordance  with the provisions
          of the ERP, Executive's pension benefit service time will be increased
          and  Executive  will be paid other retiree  benefits  pursuant to this
          Agreement.

     2.   Executive's  supplemental  retirement  benefit  wil be  determined  as
          follows:

               a. When Executive  retires,  Executive'  pension benefit credited
          service  time will be  matched  by the  Company  by adding one year of
          credited  service  for each year  worked up to a maximum of ten years.
          The aggregate  pension service time,  including the matched time, will
          be utilized to compute  Executive's pension benefit in accordance with
          the ERP's formula and KESPP. The pension benefit will be paid pursuant
          to the retirement  plan annuity option elected by the Executive  under
          the ERP. The matched  service time provided  under this agreement will
          be  applicable  to any survivor  option,  if any, is elected under the
          ERP.



<PAGE>



               b. If Executive  retires  pursuant to the ERP,  after  October 1,
          2003  but  before  the  fifth  anniversary  of  the  adoption  of  the
          Resolution, December 20, 2006, Executive shall receive matched time in
          accordance with the following schedule:



        Retirement before                 Vesting Percentage
        ----------------------------------------------------
        December 19, 2002                         0
        December 19, 2003                         0
        December 19, 2004                         40
        December 19, 2005                         60
        December 19, 2006                         80

When  Executive  retires on or after December 20, 2006, his benefit will be 100%
vested.

     3.   In the event of the  Executive's  death in active  service on or after
          October 1, 2003, a survivor  pension  benefit for the matched  service
          provided  under this  agreement  will be provided  to the  Executive's
          spouse  pursuant  to  the  survivor  provisions  in  the  ERP  and  in
          accordance  with the provisions of paragraph 2 above.  In the event of
          the  Executive's  Disability as defined in the ERP, the  provisions of
          paragraph 2 will be applied to this Agreement.

     4.   In the event Executive's employment is terminated:

               (a) after a "Change  of  Control"  as suc term is  defined in the
          KeySpan Senior Executive Change of Control Plan.

               (b) by the Company for any reason othe than for "Cause"; or

               (c) by the  Participant  after the  occurrence  of Good Reason as
          such  term  is  defined  below  and on or  before  90 days  after  the
          occurrence of Good Reason;

          then the Company agrees that Executive shall  immediately  vest in all
          additional service time earned pursuant to this Agreement. The service
          time provided under this Agreement will be provided in addition to any
          additional  pension service granted Executive  pursuant to the KeySpan
          Senio Executive  Change of Control Plan with such  additional  pension
          service time being matched subject to the ten year maximum  limitation
          set forth in 2a. above.


                                        2

<PAGE>



          Cause for termination ("Cause") shall mean Employee's:

               (i) continued  material  failure or inability to achieve required
               performance   results,  or  to  perform  in  a  competent  manner
               following written notice and opportunity to improve  performance,
               (ii) conduct that  constitutes  dishonesty or knowing and willful
               breach of fiduciary  duty;  (iii)  insubordination  or refusal to
               perform  assigned  duties or comply with directions of the Board;
               (iv) conviction by a court of competen jurisdiction or entry of a
               plea  of no  contest  for a  crime  involving  any  act of  moral
               turpitude or  unlawful,  dishonest,  or unethical  conduct that a
               reasonable  person would  consider  damaging to the reputation of
               the Company or improper and  unacceptable  conduct by an Employee
               thereof.

     Good Reason shall mean any of the following:

               (A) without Employee's  express written consent,  (i) any action,
               or  failure  to take  action,  by the  Company,  the Board or the
               shareholders  of the  Company by the  Company  that  results in a
               diminution in the Executive's position authority,  titles, duties
               or  responsibilities,  or (ii) if  Employee  is  notified  by the
               Executive's   immediate  supervisor  o  the  Chairman  and  Chief
               Executive Officer that a recommendation will be made to the Board
               of Directors of the Company that  Executive's  employment will be
               terminated after a Change of Control.

                    Any isolated,  insubstantial and inadvertent  action that is
               not taken in bad faith and is remedied  by the  Company  promptly
               after  receipt  of notice  thereof  from the  Executive  does not
               constitute "Good Reason";

               (B) a material breach by the Company of any material provision of
               this  Agreement  which,  if  capable of being  remedied,  remains
               unremedied  for more than 15 days after written notice thereof is
               given by Employee to the company;

               (C) without  Employee's  written  consent the  relocation  of the
               principal  executive offices of the Company to a location outside
               the greater New York area;

     For purposes of this agreement, any good faith determination of Good Reason
     made by the Employee shall be conclusive.

     5.   In addition,  Executive will be eligible to participate in the retiree
          medical and dental benefits  programs provided under the group retiree
          benefit plans.  At the time of Executive's  retirement,  the Executive
          will be  required  to pay the  full  group  rate of this  coverage  to
          participate  in the plans.  The  Company  will pay to  Executive  upon
          completion of enrollment, a monthly supplemental amount grossed up for


                                        3

<PAGE>



          income taxes (less employee  contributions in effect at retirement) to
          pay for such group  retiree  benefits.  This monthly  amount will be a
          fixed amount determined at retirement based upon the then current cost
          of the retiree  medical and dental plans. If Executive is under age 65
          at  retirement,  the amount  will be adjusted at age 65 to reflect the
          cost of medical and dental coverage at age 65. Once the amount of this
          supplement at age 65 is determined, it will remain at this amount as a
          monthly lifetime supplemental payment to the Executive.

          Additionally,  if Executive  retires prior to the fifth anniversary of
          the  adoption of the  Resolution,  Executive  will be eligible for the
          monthly amount by multiplying  such fixed amount  determined  above by
          the percentage in paragraph 2b.

          If the Executive does not enroll in the group plans in accordance with
          this paragraph, no supplemental payment will be made to Executive.

     6.   Any payment due hereunder will be paid from general assets.

     7.   KeySpan  and  Executive  agree that should  such  additional  benefits
          earned or accrued  pursuant  to this  Agreement  be  determined  to be
          subject to Section 280G of the Internal  Revenue Code,  KeySpan agrees
          that such  additional  benefits  will be  eligible  for  "Gross Up" in
          accordance with the provisions of the KeySpan Senior  Executive Change
          of Control Plan.

     8.   Executive  agrees not to  disclose  the terms and  conditions  of this
          Supplemental Retirement Agreement or any confidential information made
          available to or learned by him in the course of the performance of his
          duties at KeySpan  and with  respect to the  business  of KeySpan  and
          described in KeySpan's Statement on Ethical Business Conduct.  Any and
          all  confidentiality  agreements and all other agreements  executed by
          Executive that contained  provisions not to disclose any  confidential
          information   are   incorporated   into  this   Agreement.   The  term
          "confidential"  means  information  disclosed  to  Executive or known,
          learned,  created or observed by him as a  consequence  of, or through
          his  employment  by KeySpan  concerning  KeySpan or any  subsidiary or
          affiliated  company which is presently existing or which may be formed
          in  the  future,  which  is  confidential,  secret  or  otherwise  not
          generally known in the industry,  and pertains  directly or indirectly
          to the business activities, products, services, customers or processes
          of  KeySpan  or any  of  its  subsidiaries  or  affiliated  companies,
          including,  but not limited to, information  concerning mailing lists,
          publicity,   data,   research,   copyrights,   other  printed  matter,
          photographs, films, reproductions, finances, processes, trade secrets,
          business plans, customer lists and records,  potential customer lists,
          customer billing and other related information.

          Executive shall not take any original or copy of any document or other
          papers, computer diskettes,  methods,  procedures, etc., containing or


                                        4

<PAGE>



          disclosing  such  confidential  information  or documents or summaries
          containing   the  substance  of  any  part  thereof.   Any  record  of
          confidential  information prepared by Executive or which came into his
          possession during the period of employment with KeySpan are and remain
          the  property  of  KeySpan  and  upon   termination   of   Executive's
          employment,  all such records and copies  thereof shall either be left
          with or returned to KeySpan.

     9.   Executive  agrees that the  restrictions  contained  in Paragraph 8 of
          this  Agreement are  necessary  for the  protection of KeySpan and any
          breach  thereof  will  cause  KeySpan  damage  for  which  there is no
          adequate  remedy  at  law  and  he  consents  to  the  issuance  of an
          injunction  in  favor of  KeySpan  and its  subsidiaries,  affiliates,
          successors   and  assigns   enjoining  the  breach  of  the  aforesaid
          restrictions by any court of competent jurisdiction.  Executive agrees
          that the  rights of KeySpan  to obtain an  injunction  granted by this
          Paragraph  of the  Agreement  shall not be  considered a waiver of the
          rights of KeySpan to assert any other remedies they may have at law or
          in equity.

     10.  Executive  recognizes and acknowledges that while employed by KeySpan,
          he  had  access  to  certain  confidential  and  proprietary  business
          information  for KeySpan,  including,  but not limited to,  client and
          customer   information  and  customer  lists,  all  of  which  are  of
          substantial  value  to  KeySpan  in its  business.  Executive  further
          acknowledges  that  disclosure of this  information to a competitor of
          KeySpan may result in damage to KeySpan's  business and a loss of good
          will.

          In consideration  thereof,  Executive agrees that from January 1, 2002
          through the second  anniversary of his retirement,  neither  Executive
          nor any corporation,  partnership or other entity controlled by, under
          common  control with, or presently  controlling  Executive will (a) in
          the New York City  metropolitan  area and in any area  outside the New
          York City Metropolitan area wherein KeySpan owns and operates lines of
          business  including  Texas;  New Hampshire,  New Jersey;  Connecticut;
          Rhode  Island;  Massachusetts;  Ohio;  Canada;  Northern  Ireland  and
          Mexico,  travel,  canvas or advertise for, or otherwise assist, render
          services to, become  employed by, be a consultant to, or invest in any
          business  entity or with any individual  engage in, or engage directly
          or  indirectly  in,  any  line or  lines  of  business  carried  on or
          contemplated  which,  directly  or  indirectly,  is  a  competitor  of
          KeySpan,  its  subsidiaries,   affiliated  companies,   successors  or
          assigns,  (b) in the New York City Metropolitan  area, and in any area
          outside the New York City  Metropolitan  area wherein KeySpan owns and
          operates lines of business  including Texas; New Jersey;  Connecticut;
          Rhode  Island;  Massachusetts;  Ohio;  Canada;  Northern  Ireland  and
          Mexico,  travel,  canvas or advertise for, or otherwise assist, render
          services to,  become  employed by, be a consultant to or invest in any
          business  entity or with any individual  engage in, or engage directly
          or indirectly in, any business  entity or with any individual  engaged
          in,    the   same   or   similar    business    as   KeySpan   ,   its


                                        5

<PAGE>



          subsidiaries,  affiliated  companies and assigns, (c) solicit business
          or otherwise deal directly or indirectly with any customers or persons
          who  were   employees  of   customers  or  vendors  of  KeySpan,   its
          subsidiaries,  affiliated  companies  and  assigns,  at any time,  (d)
          directly or indirectly  divert or attempt to divert from KeySpan , any
          business in which it has been  engaged  during the term of  Executive'
          employment with KeySpan,  or in which it might  reasonably be expected
          to become engaged,  (e) directly or indirectly interfere or attempt to
          interfere with the  relationships  between KeySpan,  its subsidiaries,
          affiliated  companies  and  assigns,  their  customers,  employees  of
          customers or vendors,  (f) directly  interfere or attempt to interfere
          with the relationship of  employer-employee  or principal and agent of
          any person bearing such  relationship  to KeySpan,  its  subsidiaries,
          affiliated  companies and assigns,  nor directly  divert or attempt to
          divert any such person from employment or  representation  of KeySpan,
          its subsidiaries, affiliated companies and assigns; provided, however,
          that Executive  shall not be prohibited by the terms of this Paragraph
          from  investing  in and owning not more than one  percent  (1%) of the
          outstanding  shares of common stock of any corporation,  the shares of
          which are publicly traded  pursuant to the Securities  Exchange Act of
          1934, and/or passively invest as a limited partner in any non-publicly
          traded security.

          Damages  cannot  compensate  KeySpan  in  the  event  of a  breach  or
          violation of this Paragraph and, injunctive relief being essential for
          the protection of KeySpan and its successors and assigns,  in addition
          to other  applicable  remedies,  KeySpan  may obtain  such  injunctive
          relief in the event of any such breach or violation and may assert any
          other remedies it may have at law or in equity.

          Notwithstanding  the above,  if  Executive's  employment is terminated
          pursuant to Section 4a., Section 4b., or Section 4c., then the Company
          agrees that such  provision is not  applicable  to  Executive  and all
          restrictions  pursuant to this provision will be waived by the Company
          with respect to Executive's subsequent employment.


     11.  Executive  understands neither this Supplemental  Retirement Agreement
          nor  participation  in the  ERP or  KESPP  constitute  a  contract  of
          employment,  nor does it impose on the  Executive or the Company,  any
          obligation  for the  Executive  to remain an  employee  or change  the
          status  of  the  Executive=s  employment  or  the  Company=s  policies
          regarding termination of employment.

     12.  This Agreement shall bind any successor of KeySpan,  its assets or its
          businesses   (whether  direct  or  indirect,   by  purchase,   merger,
          consolidation or otherwise), in the same manner and to the same extent
          that KeySpan would be obligated  under this Agreement if no succession
          had taken place.


                                        6

<PAGE>



          In the case of any  transaction in which a successor  would not by the
          foregoing provision or by operation of law be bound by this Agreement,
          KeySpan shall require such successor  expressly and unconditionally to
          assume  and  agree  to  perform   KeySpan=s   obligations  under  this
          Agreement,  in the same  manner and to the same  extent  that  KeySpan
          would be required to perform if no such succession had taken place.

     13.  In the event of any litigation or other proceeding arising out of this
          Agreement after a Change of Control attributable to the subject matter
          of this  Agreement or  enforcement  of rights  asserted in good faith,
          which is initiated by the  Executive,  the  successor to KeySpan shall
          reimburse the  Executive  for all costs and expenses  relating to such
          litigation or other proceeding,  including  reasonable  attorneys fees
          and expenses,  promptly upon receipt of a written demand therefore and
          regardless  of whether such  litigation  results in any  settlement or
          judgment or order in favor of any party.


     14.  This Agreement  shall be governed by and construed in accordance  with
          the  laws of the  State  of New  York  and may be  modified  only by a
          written  instrument  executed by the parties.  This  Agreement  may be
          executed in one or more counterparts, all of which shall be considered
          one and the  same  agreement  and each of which  shall  be  deemed  an
          original.


                                        7

<PAGE>



     IN WITNESS  WHEREOF,  KeySpan has caused this Agreement to be executed by a
duly authorized officer and the Executive has executed this Agreement, all as of
the Effective Date.



                                             KEYSPAN CORPORATION



                                    By:  /s/
                                         ---------------------------------------




                                    By:  /s/
                                         ---------------------------------------
                                                      Steven L. Zelkowitz