March 11, 2002

Mr. Richard M. Kessel
Chairman
Long Island Power Authority
333 Earle Ovington Boulevard
Uniondale, NY 11553

Re:  Agreement In Principle  Regarding  Extension of Generation  Purchase  Right
     Agreement

Dear Mr. Kessel:

         This letter memorializes our agreement in principle to extend, for a
period of thirty (30) months, the time in which the Long Island Power Authority
("LIPA") may exercise its right (the "Right") under the Generation Purchase
Right Agreement between LIPA and KeySpan Corporation ("KeySpan") to purchase all
of KeySpan's interests in KeySpan Generation, LLC ("Genco"). Under the agreement
in principle, the Right would be exercisable during a period beginning on
November 29, 2004 and ending on May 28, 2005, provided that if the Right is
exercised during that period, any election by LIPA to operate the generating
facilities itself or by an affiliate would not be effective prior to May 28,
2005.

         LIPA and KeySpan have also agreed in principle that:

1.       The Management Services Agreement between LIPA and KeySpan will be
         extended for a period of thirty (30) months, and will expire on
         November 30, 2008.

2.        KeySpan and LIPA will  discuss in good faith such other issues as each
          party deems material to its  interests,  with the  understanding  that
          both parties,  consistent with their respective economic interests and
          public service obligations,  have an interest in enhancing competition
          in  the   electric   generating   industry   on  Long   Island  in  an
          environmentally  responsible manner. In that regard,  KeySpan and LIPA
          will promptly undertake an evaluation of specific measures designed to
          enhance  competition within the electric  generating  industry on Long
          Island and reduce  retail  electricity  rates.  The  evaluation  shall
          include analyses of (i) repowering  existing generating assets on Long
          Island to improve their  efficiency  and to lower costs and emissions;
          (ii) sale of all or part of  certain  generating  assets to LIPA or to
          third  parties to enhance  competition  on Long  Island;  (iii)  joint
          development

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          of new  generating  capacity on Long Island,  including such alternate
          energy sources as renewables,  efficiency technologies and distributed
          generation, and (iv) such other issues as may be appropriate under the
          circumstances.


         The parties acknowledge that these are agreements in principle subject
to further discussions, and agree that such discussions shall proceed
expeditiously and in good faith with the objective of having amended contracts
reflecting these agreements in principle ready for submission for the approval
of the Board of Trustees of LIPA and the Board of Directors of KeySpan not later
than March 26, 2002. The parties understand that the proposed amendments may be
subject to certain governmental approvals . The parties agree that they will
address the issues related to the approval process in the definitive agreements

         If I have properly set forth our agreements in principle, please
acknowledge by signing in the space provided below.

         We look forward to working  with you toward a  definitive  agreement on
the subjects addressed herein.


                                                              Very truly yours,


                                                              Robert B. Catell
                                                              Chairman and CEO

Acknowledged and Agreed