Exhibit 10.16

                      DIRECTORS' DEFERRED COMPENSATION PLAN
                                       OF
                               KEYSPAN CORPORATION

1.       Purpose of the Plan

     The purpose of the Directors'  Deferred  Compensation  Plan is to provide a
method for  Directors  who are not  currently  employees of KeySpan to acquire a
proprietary  interest in the  Corporation  and to further align the interests of
the Directors with the Corporation's shareholders.  It is intended that the Plan
will meet the requirements of Rule 16b-3  promulgated under Section 16(b) of the
Securities  Exchange Act of 1934, as amended,  and the Plan shall be interpreted
accordingly.

2.       Definitions

     (a) "Annual  Stock  Grant"  shall mean the number of Stock  Equivalents  of
KeySpan  common stock that may be awarded,  from time to time,  as determined by
the Board, to each Participant and may be deferred into the Participant's  Stock
Equivalent Account under this Plan.

     (b)  "Beneficiary"  shall  mean a person  or  entity  determined  to be the
Participant's beneficiary pursuant to Section 11 hereof.

     (c) "Board of  Directors"  or "Board"  shall mean the Board of Directors of
KeySpan Corporation.

     (d) "Cash  Equivalent  Account"  shall mean a book  account  maintained  by
KeySpan reflecting  Compensation deferred by the Participant into a cash account
which accrues  interest on a monthly basis at a rate equal to the prime interest
rate as set forth by JP Morgan Chase Bank (or any successor  thereto)  effective
as of the first day of each calendar month.

     (e) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (f) "Compensation" shall mean the remuneration, as determined by the Board,
to be paid to a Director in consideration  for his or her service as a Director,
including the annual retainer,  committee chairman retainer and meeting fees, if
any, but not including amounts representing reimbursement of expenses.

     (g) "Corporation" or "KeySpan " shall mean KeySpan Corporation, the sponsor
of this Plan or its successors or assigns.


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     (h) "Director" shall mean any non-employee  director or consulting director
of the Corporation,  or any non-employee  director or consulting director of any
subsidiary of the Corporation  that is authorized by the Board to participate in
this Plan.

     (i) "Election  Form" shall mean the annual election form to be completed by
each Director to elect whether he or she desires to participate in the Plan, and
if so, designate the manner in which his or her Compensation will be deferred. A
Participant  who  elects to defer his or her  Compensation  must  elect to:  (a)
purchase Stock  Equivalents under paragraph  5(a)(i);  (b) purchase shares on an
after-tax basis in the KeySpan Investor Program described in paragraph 5(a)(ii);
(c) contribute cash pursuant to paragraph 6 into a Cash Equivalent  Account,  or
(d) any combination of contributions and allocations  identified in (a), (b) and
(c) in 5% increments.  Any Compensation  that a Director does not elect to defer
will be paid by check to the  Director.  The Election  Form must be delivered to
the  Corporation  no later  than  December  31st of each year for the  following
year's  election  instructions  to become  effective.  All new directors will be
required to make an election upon 30 days of their election as a Director.

     (j)  "Participant"  shall  mean a  Director  of  the  Corporation  (or  any
directors of a subsidiary of the  Corporation  which by action of the Board have
been  authorized to  participate in this Plan) and who is not an employee of the
Corporation or any subsidiary of the Corporation.

     (k) "Plan" shall mean this Directors' Deferred Compensation Plan of KeySpan
Corporation.

     (l) "Prior Deferred Plan" shall mean the Directors'  Deferred  Compensation
Plan of KeySpan Corporation, as amended, which terminated on March 31, 2003.

     (m) "Stock  Equivalent"  shall mean a phantom  stock unit which  tracks the
performance of KeySpan common stock and receives Stock  Equivalent  Dividends in
accordance  with any dividends paid on KeySpan common stock.  Stock  Equivalents
may be  acquired  by  Directors  by  electing  to  defer  any  portion  of their
Compensation into a Stock Equivalent  Account pursuant to Section 5(a)(i) of the
Plan. Stock  Equivalents may also be acquired pursuant to an Annual Stock Option
Grant, if any, as determined by the Board.  Stock Equivalents are to be computed
to three decimal places.

     (n) "Stock  Equivalent  Account"  shall mean a book account  maintained  by
KeySpan reflecting the accumulated Stock Equivalents  acquired by a Participant,
through any Compensation  deferred into Stock Equivalents,  any Stock Equivalent
Dividends  paid and any Annual Stock Grant awarded in Stock  Equivalents to such
Participant.

     (o)  "Stock   Equivalent   Dividend"   means  the  amount   credited  to  a
Participant's  Stock Equivalent  Account in Stock  Equivalents which is equal to
the amount of any dividend  payable on KeySpan common stock,  from time to time.
Such Stock  Equivalent  Dividend will be determined by the actual  dividend paid
from time to time in respect of KeySpan issued and outstanding common stock.


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3.       Participation

     Directors  of  the   Corporation  or  any  authorized   subsidiary  of  the
Corporation  may  participate  in the Plan.  All future  Directors  may commence
participation  in the  Plan  immediately  upon  becoming  a  Director.  Employee
directors  shall not be eligible to participate in this Plan. The Directors will
be required to make an election on the annual Election Form as to whether or not
he or she desires to participate in the Plan, and if so, designate the manner in
which his or her  Compensation  will be deferred in  accordance  with  Section 5
and/or 6 of the Plan.

4.       Form of Elections

     Each  Participant  shall execute an Election Form for each calendar year in
which  the  Plan is in  force.  Each  Election  Form  shall  state  whether  the
Participant  elects to participate  in the Plan,  and if so, what  percentage of
Compensation  the Participant  elects to defer,  in 5% increments.  The Election
Form  shall  also  state the  manner in which  Participant  elects to defer such
Compensation, either to: (a) purchase Stock Equivalents under paragraph 5(a)(i);
(b) purchase  KeySpan  common stock on an  after-tax  basis  through the KeySpan
Investor Program pursuant to paragraph 5(a)(ii); (c) contribute cash into a Cash
Equivalent  Account  pursuant  to  paragraph  6; and/or (d) any  combination  of
contributions and allocations from (a),(b) and (c).

5.       Deferral Accounts - Stock Equivalent Account and KeySpan Investor
         Program

     (a) Each Participant may invest any percentage of their  Compensation up to
100% of his or her  Compensation  in 5%  increments  to  purchase  either  Stock
Equivalents  under this Plan (which would be tax  deferred) or shares of KeySpan
common  stock  under  the  KeySpan  Investor  Program  (which  would  not be tax
deferred). Additionally, a Participant may receive one hundred percent (100%) of
any Annual Stock Grant in Stock  Equivalents  under this Plan,  as determined by
the Board of Directors from time to time.

          (i)  Participant   contributions   shall  be  credited  to  the  Stock
     Equivalent  Account in the name of such  Participant on a quarterly  basis.
     Each stock equivalent shall be in the form of an unfunded bookkeeping entry
     and shall represent one full or fractional share of the common stock of the
     Corporation. No actual shares of common stock or certificates thereof shall
     be purchased or held under the Plan.

          (ii) If a Participant  elects to receive shares,  Participant  will be
     enrolled in the KeySpan  Investor  Program and will be subject to all terms
     and conditions of that Program.  Compensation  invested in shares under the
     Program is not tax deferred.


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     (b) The  number of Stock  Equivalents  or shares of common  stock  credited
pursuant to Section 5(a) shall be  determined  by  utilizing  the average of the
high and low price per share of KeySpan common stock on the first trading day of
the quarter following the quarter in which contributions are received, except in
the case of quarterly retainer payments.  In the case of contributions  received
from quarterly  retainer  payments,  such  contributions will be credited on the
first  day of the  quarter  in which  they are paid and shall be  determined  by
utilizing  the  average  of the high and low price per share of  KeySpan  common
stock on the first  trading day of such  quarter.  For  instance,  a January 1st
retainer payment will be credited in the Participant's  Stock Equivalent Account
or in the KeySpan  Investor  Program,  as the case may be, on January 1st. Other
contributions  received  from  Compensation  related  to  meeting  fees  will be
credited on the first day of the quarter following the quarter in which they are
earned. For instance,  Compensation  received from attending a committee meeting
held on January 15th,  will be credited in the  Participant's  Stock  Equivalent
Account or in the KeySpan  Investor  Program,  as the case may be, on April 1st.
Quarterly  investments  are  made on the  first  trading  day of the  months  of
January, April, July and October.

     (c) Each  Participant  account will be credited (as of the pertinent  date)
with a Stock Equivalent  Dividend,  which represents an amount equivalent to the
amount of any dividend payable on KeySpan common stock for each Stock Equivalent
or fraction of an Stock Equivalent in the Participant's Stock Equivalent Account
as of such date

     (d) Stock Equivalent Dividends as described in paragraph (c) above shall be
credited  to the  Participant's  Stock  Equivalent  Account  as of the  dividend
payment  date in the  form of as many  additional  Stock  Equivalents  (and  any
fractions of a Stock  Equivalent  computed to three decimal  points) as could be
purchased with such Stock  Equivalent  Dividend based on the average of the high
and low price per share of KeySpan  common stock on such  dividend  payment date
or, if no trading  occurs on such stock on the  dividend  payment  date,  on the
trading day immediately succeeding such date.

     (e) In the event that the number of  outstanding  shares of KeySpan  common
stock   shall  be   changed   by  reason  of  stock   split-ups,   combinations,
recapitalization,  mergers,  consolidations,  spin- offs or the like,  the Board
shall  make such  adjustments  as it deems  appropriate  in the  number of Stock
Equivalents credited to the Stock Equivalent Accounts hereunder.

6.       Cash Equivalent Account, Interest

     (a)  Deferral  amounts  elected  to be  deferred  into the Cash  Equivalent
Account  shall be accrued by  KeySpan  to a  bookkeeping  account as of the date
payment  of  such  amounts  would  have  been  made  by  the  Corporation.   The
establishment of such Cash Equivalent Account is solely for bookkeeping purposes
and shall not represent  amounts held in trust or a segregation of the assets of
the  Corporation  or any form of  funding  of the  deferred  compensation.  Each
Participant shall receive periodic reports setting forth the amounts credited to
his or her Cash Equivalent Account.


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     (b) An amount representing  interest into the Cash Equivalent Account shall
be accrued monthly at a rate equal to the prime interest rate as set forth by JP
Morgan Chase Bank (or any  successor  thereto)  effective as of the first day of
such calendar  month.  Such amount shall be credited to the  Participant's  Cash
Equivalent Account.

7.       Transfer Between Cash Equivalent Account and Stock Equivalent Account

     Prior to the first day of each  calendar  year,  a  Participant,  by giving
written  notice to the  Corporation,  may  transfer  all or any  portion  of the
balance in his or her Cash Equivalent  Account into his or her Stock  Equivalent
Account  using the price for the  Corporation's  common stock  determined  under
Section 5(b).

8.       Prior Deferred Plan

     Each  Participant  who was a participant in the Prior Deferred Plan had the
option to have his or her  contributions in such Prior Deferred Plan rolled over
to this Plan.

9.       Form and Timing of Payment

     (a) No payments  under this Plan shall be made to a  Participant  hereunder
prior to retirement, death or termination of service as a Director.

     (b) Upon  retirement,  death or  termination  of service as a Director (the
"Distribution   Event")  all  Stock  Equivalents  in  the  Participant's   Stock
Equivalent  Account will be converted to cash based on the closing  price of the
Corporation's  common  stock on the last  trading  day of the month in which the
Distribution  Event occurs.  This  converted  amount will be  transferred to the
Participant's  Cash Equivalent  Account and will be aggregated with any existing
balance  in  the  Participant's  Cash  Equivalent  Account  (collectively,   the
"Distribution  Account").  The  Distribution  Account will be paid in accordance
with  the  Participant's  form  of  election  pursuant  to the  payment  options
described in subparagraph (c) below.

     (c) A Participant  may request a distribution of the  Distribution  Account
described in paragraph (b) by electing on their annual  Election Form any of the
following distribution options described in (i), (ii) or (iii) below:

          (i)  a lump sum in cash to the Participant as soon as administratively
               feasible  after  the  Distribution   Event  that  determines  the
               Participant's right to receive payment;

          (ii) deferral of the Distribution  Account for up to 5 years after the
               Distribution   Event.  During  the  additional  deferral  period,
               interest shall be credited on the Distribution  Account,  accrued
               monthly,  at a rate  equal  to the  prime  rate as set  forth  by
               JPMorgan  Chase Bank (or any successor  bank)effective  as of the
               first  day  of  such   calendar   quarter  and  credited  to  the
               Participant's  Distribution Account. At the end of the additional
               deferral period, the Distribution Account balance will be paid in
               a lump sum in cash to the Participant on or about January 31st of
               the year following the Distribution Event;


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          (iii)the Participant may elect to receive payment of the  Distribution
               Account in equal annual  installments,  the number of which shall
               be  specified  in writing by the  Participant  by the date stated
               above,  but in no event  shall such number  exceed ten.  Interest
               shall be  credited  on the unpaid  Distribution  Account  accrued
               monthly  at a rate  equal  to the  prime  rate  as set  forth  by
               JPMorgan Chase Bank (or any successor  bank)  effective as of the
               calendar quarter and credited to the Distribution Account.  first
               day of such Installment payments will be paid on or about January
               31st of each year following the Distribution Event.

     (d)  The  Participant  must  elect  a  distribution   option  described  in
subparagraph  (c) above on his/her annual  Election Form which must be delivered
to the  Corporation  no  later  than  December  31st of the  year  prior  to the
Distribution Event.

10.      No Forfeitures

     Each Participant's benefits hereunder shall be non-forfeitable.

11.      Beneficiary

     Each Participant  shall have the right to designate in writing from time to
time a  Beneficiary  or  Beneficiaries  by  filing  a  written  notice  of  such
designation with the Corporation.  In the event a Beneficiary  designated by the
Participant  does not survive the  Participant  and no successor  Beneficiary is
selected, or in the event no valid designation has been made, such Participant's
Beneficiary shall be such  Participant's  estate. In the event the Participant's
Beneficiary  is the  Participant's  estate,  no payment shall be made unless the
Corporation  shall have been furnished with such evidence as the Corporation may
deem necessary to establish the validity of the payment.

12.      Funding of the Plan

     The Plan in unfunded,  and the amounts credited to each Participant's Stock
Equivalent  Account,  Cash Equivalent  Account and Distribution  Account and the
benefits  payable  in  respect  thereof  represent  merely  unfunded,  unsecured
promises of KeySpan to pay a sum of money to the Participant in the future.

13.      Alienation of Benefits Prohibited

     No transfer  (other than a transfer  made by will or by the laws of descent
and  distribution)  by a  Participant  of any  right to any  payment  hereunder,
whether voluntary or involuntary,  by operation of law or otherwise, and whether
by means of alienation by anticipation, sale, transfer, assignment,  bankruptcy,


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pledge,  attachments,  charge,  or  encumbrance  of any  kind,  shall  vest  the
transferee  with any  interest  or right and any attempt to so  alienate,  sell,
transfer, assign, pledge, attach, charge, or otherwise encumber any such amount,
whether  presently  or  thereafter  payable,  shall  be void  and of no force or
effect.

14.      Counterparts

     Any election to defer amounts  associated with this Plan may be executed in
two or more  counterparts,  any one of which shall be deemed an original without
reference to the others.

15.      Termination or Amendment

     The Plan may be terminated at any time by the Board of Directors.  The Plan
may be  amended  by the Board of  Directors  from  time to time in any  respect;
provided,  however,  except to the extent any  amendment  is necessary to assure
continued  exemption  under  Rule  16b-3  promulgated  under  Section  16 of the
Exchange  Act and that each of the  Participants  remain an  "outside  director"
within the meaning of Section  162(m) of the Code, no such  amendment may reduce
the  amounts  accrued  to any  Participant's  Stock  Equivalent  Account or Cash
Equivalent Account without the affected Participant's prior written consent.

     Subject to the preceding paragraph,  the Board may delegate to the officers
of the Corporation the right to amend the Plan for the purposes of clarifying or
finalizing  the Plan and such  amendments  shall be  effective  without  further
action of the Board.

16.      Choice of Law

     The Plan and all rights  hereunder  shall be subject to and  interpreted in
accordance  with the laws of the State of New  York,  without  reference  to the
principles of conflicts of law.


Adopted by the Board of  Directors  on March 5, 2003 with an  effective  date of
April 1, 2003.


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