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Exhibit 4(c).16
    Directors Adoption:
    
    16 May 2006Expiry Date:
    
    16 May 2016
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The National Grid plc Deferred Share Plan
 Rules
 1
    
    Meaning of words used1.1
    
    In these Rules:Acquiring Company means a person who obtains Control of the Company;ADS means an American depository share representing ordinary shares of the Company;Associated Company means any company which is associated with the Company (within the
meaning of Section 416 of the Income and Corporation Taxes Act 1988);Award Date means the date on which the Committee determines a Bonus Award under Rule 4.1;Bonus Award means an award of cash payable under any annual bonus scheme operated by the
Company and determined by the Committee as linked to this Plan, or a Conditional Award made
to a Participant in accordance with this Plan;Committee means a Committee or Committees duly authorised to operate the Plan and in the
case of directors of the Company shall mean the Remuneration Committee or a duly authorised
committee thereof;Company means National Grid plc;Conditional Award means a conditional right to receive Shares granted under the Plan;Control has the meaning given to it by Section 840 of the Taxes Act;Dealing Restrictions means restrictions imposed by statute, order, regulation or
Government directive, or by the Model Code or any code adopted by the Company based on the
Model Code;Employee means any executive director or employee of the Company or any Subsidiary who is
an executive director or employee on the Award Date;Group Company means:
 
    
    the Company; and
    
    its Subsidiaries from time to time; and
    
    any Associated Company;
 Participant means a person who has been selected to participate in the Plan under Rule 2.2
(or his personal representatives);Plan means this plan known as The National Grid plc Deferred Share Plan;Rules means these rules as amended from time to time;Shares means fully paid ordinary shares in the capital of the Company or where the context
requires ADSs;Subsidiary means any company which is a subsidiary of the Company within the meaning of
Section 736 of the Companies Act 1985;
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Vesting means a Participant becoming entitled to have the Shares comprised in his
Conditional Award transferred to him subject to these Rules, which will normally be three
years after the Award Date unless the Committee decides otherwise and Vest shall be
construed accordingly;Vesting Period means the period between the Award Date and Vesting.2
    
    Operation of the Plan2.1
    
    Timing of OperationThe Committee may operate the Plan at any time between the date on which the Committee
adopts the Plan and the 10th anniversary of that date.2.2
    
    Selection of ParticipantsIn relation to any operation of the Plan the Committee may select any Employees to
participate in the Plan.2.3
    
    ConditionsThe making of Bonus Awards may be subject to the satisfaction of any conditions set by
the Committee. Those conditions may be amended or waived by the Committee in its discretion.2.4
    
    Award over ADSsThe Committee may determine that a Conditional Award will be made in respect of ADSs
and references in these Rules to Shares and Conditional Awards shall be construed
accordingly.3
    
    Leaving employment before the Award DateIf a Participant ceases to be an Employee before the Award Date, a Conditional Award
will not be made to the Participant.4
    
    Bonus Awards4.1
    
    Determining Bonus AwardsThe Committee will, as soon as practicable following the end of a financial year in
which the Plan is operated, determine:
 4.1.1
    
    the amount of the Bonus Award in respect of each Participant; and4.1.2
    
    the proportion of the Bonus Award which will be in the form of a
Conditional Award.
 The determination under this Rule 4.1 will be the Award Date.4.2
    
    Grant of Conditional Awards
 4.2.1
    
    The Committee will grant a Conditional Award on the Award Date to such
Employees as it, in its sole discretion, considers appropriate.4.2.2
    
    A Conditional Award will be in respect of such number of Shares that can be
acquired on the Award Date with the proportion of the Bonus Award (on a gross
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basis) which is determined to be in the form of a Conditional Award in accordance
with Rule 4.1.2. Any fractional amounts shall be rounded down.4.2.3
    
    Each Participant will receive a certificate setting out the terms of the
Conditional Award as soon as practicable after the Award Date. The certificate may be
the deed referred to in Rule 5.1 (Terms of Conditional Awards) or any other document.
If any certificate is lost or damaged, the Company may replace it on such terms as it
decides.4.2.4
    
    A Participant is not required to pay for the grant of a Conditional Award.
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    Conditional Awards5.1
    
    Terms of Conditional AwardsConditional Awards are subject to the Rules of the Plan and must be granted by deed.
The terms of the Award, as determined by the Committee, must be specified in the deed and
must include:
 5.1.1
    
    the Award Date;5.1.2
    
    the number of Shares subject to the Conditional Award;5.1.3
    
    the date of Vesting; and5.1.4
    
    whether the Participant is entitled to receive any cash or shares under
Rule 6.4 (Dividend equivalent).
 5.2
    
    RightsA Participant shall not be entitled to vote, to receive dividends or to have any other
rights of a shareholder in respect of Shares subject to a Conditional Award until the Shares
are issued or transferred to the Participant.5.3
    
    TransferA Participant may not transfer, assign or otherwise dispose of a Conditional Award or
any rights in respect of it. This rule 5.3 does not apply:
 5.3.1
    
    to the transmission of a Conditional Award on the death of a Participant to
his personal representatives; or5.3.2
    
    to the assignment of a Conditional Award, with the prior consent of the
Committee, subject to any terms and conditions the Committee imposes.
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    Vesting of Conditional Awards6.1
    
    Timing of VestingSubject to Rules 7 (Leaving the Group before Vesting) and 9 (Takeovers and
restructurings) a Conditional Award Vests on the date of Vesting set by the Committee on the
grant of the Conditional Award or, if on that date a Dealing Restriction applies, the first
date on which it ceases to apply.
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6.2
    
    LapseIf a Conditional Award lapses under the Plan it cannot Vest and a Participant has no
rights in respect of it.6.3
    
    Consequences of VestingAs soon as practicable after Vesting, the Committee will arrange (subject to rule 11.2
(Withholding)) for the transfer to or to the order of the Participant of the number of
Shares in respect of which the Conditional Award has Vested.6.4
    
    Dividend equivalentA Conditional Award will, unless the Committee otherwise decides, include the right to
receive an amount equal in value to the dividends which were payable on the number of Vested
Shares during the Vesting Period (dividend equivalents), subject to rule 11.2
(Withholding). This amount may be paid in cash or Shares (as determined from time to time by
the Committee). Dividend equivalents will be paid to any relevant Participant as soon as
practicable after Vesting.6.5
    
    Cash alternativeThe Committee may decide to satisfy a Conditional Award by paying an equivalent amount
in cash (subject to rule 11.2 (Withholding)).7
    
    Leaving the Group before Vesting7.1
    
    General rule on leaving employmentUnless rule 7.2 applies, a Conditional Award will Vest on the date the Participant
ceases to be an employee or director of a Member of the Group.7.2
    
    Leaving for gross misconductIf a Participant ceases to be an employee or director of a Member of the Group as a
result of gross misconduct, then his Conditional Awards will immediately lapse.7.3
    
    Meaning of ceasing to be an employee or directorFor the purposes of this rule 7, a Participant will not be treated as ceasing to be an
employee or director of a Member of the Group until he ceases to be an employee or director
of all Members of the Group or if he recommences employment with or becomes a director of a
Member of the Group within 7 days of employment ceasing.8
    
    Variations in share capital, demergers and special distributions8.1
    
    Adjustment of Conditional AwardsIf there is:
 8.1.1
    
    a variation in the equity share capital of the Company, including a
capitalisation or rights issue, sub-division, consolidation or reduction of share
capital; or8.1.2
    
    a demerger (in whatever form) or exempt distribution by virtue of Section
213 of the Income and Corporation Taxes Act 1988; or8.1.3
    
    a special dividend or distribution
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the Committee may adjust the number or class of Shares or securities comprised in a
Conditional Award on such basis as it, in its sole discretion, considers appropriate.8.2
    
    NoticeThe Company will notify Participants of any adjustment made under this rule 8.9
    
    Takeovers and restructurings9.1
    
    Takeovers
 9.1.1
    
    Where a person (or a group of persons acting in concert) obtains Control of
the Company as a result of making an offer to acquire Shares, unless the Committee
decides otherwise, each Conditional Award Vests, subject to rule 9.1.2, on the date the
person obtains Control.9.1.2
    
    A Conditional Award will not Vest under rule 9.1.1 but will be exchanged
under rule 10 (Exchange of Conditional Awards) to the extent that:
 (i)
    
    an offer to exchange the Conditional Award is made and accepted
by a Participant; or(ii)
    
    the Committee, with the consent of the Acquiring Company,
decides before the person obtains Control that the Conditional Award will be
automatically exchanged.
 9.2
    
    Schemes of arrangement
 9.2.1
    
    When a court sanctions a compromise or arrangement in connection with the
acquisition of Shares, unless the Committee decides otherwise, a Conditional Award
Vests, subject to rule 9.2.2 on the date of court sanction. This rule applies to a
court sanction under Section 425 of the Companies Act 1985 or equivalent procedure
under local legislation.9.2.2
    
    A Conditional Award will not Vest under rule 9.2.1 but will be exchanged
under rule 10 (Exchange of Conditional Awards) to the extent that:
 (i)
    
    an offer to exchange the Conditional Award is made and accepted
by a Participant; or(ii)
    
    the Committee, with the consent of the Acquiring Company,
decides before the person obtains Control that the Conditional Award will be
automatically exchanged.
 9.3
    
    Demergers or other corporate events
 9.3.1
    
    If the Committee becomes aware that the Company is or is expected to be
affected by any demerger, distribution (other than an ordinary dividend) or other
transaction not falling within rules 9.1 (Takeover), or 9.2 (Schemes of arrangement)
which, in the opinion of the Committee would affect the current or future value of any
Conditional Award, the Committee may allow a Conditional Award to Vest but only subject
to any conditions the Committee may decide to impose.9.3.2
    
    The Company will notify any Participant who is affected by the Committee
exercising their discretion under this rule.
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9.4
    
    CommitteeIn this rule, Committee means (a) in relation to directors who participate in the
Plan, those people who were members of the Remuneration Committee immediately before the
change of Control; and (b) in relation to employees (who are not directors) who participate
in the Plan, those people who were members of the Committee immediately before the change of
Control.10
    
    Exchange of Conditional Awards10.1
    
    Timing of exchangeWhere a Conditional Award is to be exchanged under rule 9 (Takeovers and
restructurings) the exchange will take place as soon as practicable after the relevant
event.10.2
    
    Exchange termsWhere a Participant is granted a new award in exchange for an existing Conditional
Award, the new award:
 10.2.1
    
    must confer a right to acquire shares in the Acquiring Company or another
body corporate determined by the Acquiring Company;10.2.2
    
    must be subject to terms which are and have a value which is equivalent,
as far as practicable, to the existing Conditional Award, subject to rule 10.2.4;10.2.3
    
    is treated as having been acquired at the same time as the existing
Conditional Award and, subject to rule 10.2.4, Vests in the same manner and at the same
time;10.2.4
    
    must be in respect of the number of shares which is equivalent to the
number of Shares comprised in the existing Conditional Award which would have Vested
under rule 9.1 or 9.2;10.2.5
    
    is governed by the Plan as if references to Shares were references to the
shares over which the new award is granted and references to the Company were
references to the Acquiring Company or another body corporate determined by the
Acquiring Company.
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    General11.1
    
    Documents sent to ShareholdersThe Company may send to Participants copies of the annual summary of financial
statements and any other documents which the Company is required to send to its
shareholders.11.2
    
    WithholdingThe Company, any employing company or trustee of any employee benefit trust, may
withhold any amounts or make such arrangements as it considers necessary to meet any
liability to taxation or social security contributions or other appropriate levies in
respect of Conditional Awards. These arrangements may include the sale or reduction in
number of Shares unless the Participant discharges the liability himself.
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11.3
    
    Discretionary nature of the Plan
 11.3.1
    
    Nothing in this Plan or the operation of the Plan will form part of the
contract of employment or other relationship with any Group Company of any Employee,
Participant or any other person (Employee). The fact that one or more Bonus Awards
have been made to an Employee does not create any right to, or expectation of,
continued employment.11.3.2
    
    No Employee is entitled to participate in, or be considered for
participation in, the Plan at all or at a particular level. Participation in any Bonus
Award does not imply any right to participate, or to be considered to participate in
any future Bonus Award.11.3.3
    
    The terms of the Plan do not entitle the Employee to the exercise of any
discretion in his favour.11.3.4
    
    No Employee will have any right to compensation or damages or any other
sum or benefit in respect of the Plan, including, without limitation, in relation to:
 (i)
    
    his eligibility to participate, or ceasing to be eligible to
participate, or ceasing to participate in the Plan;(ii)
    
    any exercise of a discretion or a decision taken in relation to
the Plan or the Plans operation (whether or not this disadvantages the
Employee concerned); and(iii)
    
    any loss or reduction of any rights or expectations under the
Plan in any circumstances or for any reason (including lawful or unlawful
termination of employment or the employment relationship).
 11.3.5
    
    Participation in the Plan is permitted only on the basis that any rights
that are not expressly set out in this Plan, or any applicable schedule, are excluded.
Each Participant will be required to waive any such excluded rights in consideration
for, and as a condition to, participating in the Plan.11.3.6
    
    Nothing in this Plan confers any benefit, right or expectation on a person
who is not an Employee. No such third party will have any rights under the Contracts
(Rights of Third Parties) Act 1999 to enforce any term of this Plan. But this does not
affect any other right or remedy of a third party which exists or is available.11.3.7
    
    For the avoidance of doubt, this Rule will apply:
 (i)
    
    throughout any Employees employment;(ii)
    
    where an Employee has given or received notice to terminate his
employment (whether such termination is lawful or unlawful); and(iii)
    
    following the termination of his employment.
 11.4
    
    Committees decisions final and bindingThe decision of the Committee in connection with any interpretation of the Plan Rules
or in any dispute relating to any matter relating to the Plan will be final and conclusive.11.5
    
    CostsThe costs of introducing and administering the Plan will be borne by the Company.
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11.6
    
    RegulationsThe Committee will have power from time to time to make or vary regulations for the
administration and operation of the Plan provided that the same are not inconsistent with
these Rules.11.7
    
    Bonus Awards non-pensionableExcept for US participants, Bonus Awards will not form part of a Participants
remuneration for the purpose of determining entitlement to any benefit of employment
including any pension or retirement benefit, life assurance, permanent health insurance or
other similar benefit, whether existing or subsequently introduced.11.8
    
    Employee trustThe Company and any Subsidiary may provide money to the trustee of any trust or any
other person to enable them or him to acquire Shares to be held for the purposes of the
Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted
by Section 153 of the Companies Act 1985.11.9
    
    ConsentsAll allotments and transfers of Shares will be subject to any necessary consents under
any relevant enactments or regulations for the time being in force in the United Kingdom or
elsewhere, and it will be the individuals responsibility to comply with any requirements to
be fulfilled in order to obtain or obviate the necessity for any such consent.11.10
    
    Articles of AssociationAny Shares acquired or to be acquired under the Plan will be subject to the Articles of
Association of the Company from time to time in force.11.11
    
    NoticesAny notice or other document which has to be given to an Employee or Participant under
or in connection with the Plan may be:
 (i)
    
    delivered or sent by post to him at his home address according to the records
of his employing company; or(ii)
    
    sent by e-mail or fax to any e-mail address or fax number which according to
the records of his employing company is used by him;
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11.12
    
    Data protectionBy participating in the Plan each Participant consents to the holding and processing of
personal data provided by such Participant to the Company, any Group Company and any other
persons or entities for all purposes relating to the operation of the Plan. These include,
but are not limited to:
 11.12.1
    
    administering and maintaining Participants records;11.12.2
    
    providing information to trustees of any employee benefit trust,
registrars, brokers or third party administrators of the Plan;11.12.3
    
    providing information to future purchasers of the Company or the business
in which the Participant works; and11.12.4
    
    transferring information about the Participant to a country or territory
outside the European Economic Area.
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    Amendments and Termination12.1
    
    Committees powers of amendmentThe Committee may at any time alter, vary or add to the provisions of the Plan in any
respect.12.2
    
    Employees share schemesNo amendment or operation of the Plan will be effective to the extent that the Plan
would cease to be an employees share scheme as defined in Section 743 of the Companies
Act 1985.12.3
    
    NoticeAs soon as reasonably practicable after making any alteration to the Plan, the
Committee may give written notice to any Participant.12.4
    
    Termination of the PlanThe Committee may terminate the Plan at any time, and it will terminate on 16 May 2016.
The termination of the Plan will not affect existing Bonus Awards.13
    
    Governing LawThe Plan will be governed by and construed in accordance with English law. Any Group
Company and all Participants shall submit to the non-exclusive jurisdiction of the English
Courts as regards any matter arising under the Plan.
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SCHEDULE 1
 USA
 1
    
    The rules of this Schedule are made under and amend and supplement the terms of The
National Grid Plc Deferred Share Plan (the Plan). The rules of this Schedule are intended
to comply with the provisions of Section 409A of the U.S. Internal Revenue Code of 1986, as
amended (IRC), and apply to those Participants subject to U.S. taxation (U.S.
Participants).2
    
    With respect to U.S. Participants, the definition of Control under Rule 1.1 and 9 of
the Plan are amended and restated as follows:
 Control
 3
    
    With respect to U.S. Participants, Rule 6.3 of the Plan is amended and restated as
follows:
  4
    
    With respect to U.S. Participants, Rule 7.3 of the Plan is amended and restated as
follows:
 i.e.
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    With respect to U.S. Participants, Rule 9.2.1 of the Plan is amended and restated as
follows:
  6
    
    With respect to U.S. Participants, Rule 9.3 of the Plan is deleted.
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7
    
    Deferral of Awards into the Deferred Compensation PlanThe transfer of Shares in satisfaction of a Conditional Award may be deferred to a date
later than the date of Vesting (the Deferral Period) by a Participant in the National Grid
Deferred Compensation Plan (the DCP), consistent with an election made under, and pursuant
to the terms of, the DCP. The DCP shall provide that in lieu of receiving Shares at the end
of the Deferral Period, the number of Shares that would have been received at that time may
be deferred under the DCP.
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