SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                            AND EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1999

                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                          Commission file number 1-3571

                     LONG ISLAND LIGHTING COMPANY d/b/a LIPA
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                 New York                                       11-1019782
---------------------------------------------               -------------------
(State or other jurisdiction of incorporation                (I.R.S. Employer
             or organization)                               Identification No.)

333 Earle Ovington Boulevard, Suite 403, Uniondale, New York         11553
--------------------------------------------------------------------------------
         (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:              (516) 222-77000

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

The total number of shares of the registrant's Common Stock $1 par value,
outstanding on August 16, 1999, was 1.


<PAGE>

                     Long Island Lighting Company d/b/a LIPA

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

      Item 1 - Financial Statements

                 Statements of Operations                                   2-3

                 Balance Sheet                                              4-5

                 Statement of Cash Flows                                      6

                 Notes to Financial Statements                               13

      Item 2 - Management's Discussion and Analysis of
               Financial Condition and Results of Operations              14-21

      Item 3 - Quantitative and Qualitative Disclosures About
               Market Risk                                                   21

Part II - OTHER INFORMATION

      Item 1 - Legal Proceedings                                             22

      Item 2 - Changes in Securities and Use of Proceeds                     22


      Item 3 - Defaults upon Senior Securities                               23

      Item 4 - Submission of Matters to a Vote of Security Holders           23

      Item 5 - Other Information                                             23

      Item 6 - Exhibits and Reports on Form 8-K                              23

      Signature                                                              24

<PAGE>

                                                                               2

PART I.  FINANCIAL INFORMATION
ITEM I.   Financial Statements
                   Long Island Lighting Company d/b/a LIPA (a
                wholly owned subsidiary of the Long Island Power
                                   Authority)
                             Statement of Operations
                                   (Unaudited)
                (Thousands of Dollars - Except Share Information)

<TABLE>
<CAPTION>

                                                                       LIPA                       LILCO
                                                        --------------------------------      ----------------
                                                         Three Months
                                                            Ended       May 29, 1998 to       April 1, 1998 to
                                                        June 30, 1999    June 30, 1998          May 28, 1998
                                                        -------------    -------------          ------------
<S>                                                      <C>               <C>               <C>
Revenue - Electric                                       $ 509,090         $ 202,739         $    330,011
Expenses
Operations - fuel and purchased power                      170,779            66,787               91,762
Operations and maintenance                                 166,914            34,683               68,993
Depreciation and amortization                               52,832            17,719               22,986
Base financial component amortization                            -                 -               16,014
Rate moderation component amortization                           -                 -              (39,574)
Regulatory liability component amortization                      -                 -              (14,048)
Other regulatory amortization                                    -                 -               14,694
Operating taxes                                             61,331            31,049               60,885
Customer rebates                                                 5                 -                    -
Federal income tax - current                                     -                 -              (79,081)
Federal income tax - deferred and other                          -                 -                1,219
                                                         ---------          ---------        ------------
Total Expenses                                             451,861           150,238              143,850
                                                         ---------          ---------        ------------
Operating Income                                            57,229            52,501              186,161
                                                         ---------          ---------        ------------
Other Income and (Deductions)
Other income and deductions, net                             2,594             5,396              (28,581)
Allowance for other funds used during construction               -                 -                  374
Federal income tax - current                                     -                 -              (67,259)
Federal income tax - deferred and other                          -                 -              (22,094)
                                                         ---------          ---------        ------------
Total Other Income and (Deductions)                          2,594             5,396             (117,560)
                                                         ---------          ---------        ------------
Income from Continuing Operations
   Before Interest Charges                                  59,823            57,897               68,601
                                                         ---------          ---------        ------------
Interest Charges and (Credits)
Interest on long-term debt, net                              1,054            14,082               56,258
Interest on advances from and note payable
   to the Authority                                         72,160            20,563                    -
Other interest                                               9,540               906                9,800
Allowance for borrowed funds used during construction         (632)             (163)                (540)
                                                         ---------          ---------        ------------
Total Interest Charges                                      82,122            35,388               65,518
                                                         ---------          ---------        ------------
Income (loss) from continuing operations                   (22,299)           22,509                3,083
Loss from discontinued operations net of
   taxes of zero, zero and ($1,946), respectively                -                 -               (4,480)
                                                         ---------          ---------        ------------
Net Income (Loss)                                          (22,299)           22,509               (1,397)
Preferred stock dividend requirements                            -                 -                8,037
                                                         ---------          ---------        ------------
Earnings (Loss) for Common Stock                         $ (22,299)        $  22,509         $     (9,434)
                                                         =========         =========         ============
Average Common Shares Outstanding                                1                 1          121,864,647
Basic and Diluted Earnings per Common Share                    N/A               N/A         $      (0.08)
Dividends Declared per Common Share                            N/A               N/A         $       0.30
</TABLE>

    The accompanying notes are an integral part of these financial statements.

<PAGE>

                                                                               3

                   Long Island Lighting Company d/b/a LIPA (a
                wholly owned subsidiary of the Long Island Power
                                   Authority)
                             Statement of Operations
                                   (Unaudited)
                (Thousands of Dollars - Except Share Information)
<TABLE>
<CAPTION>

                                                                       LIPA                       LILCO
                                                        --------------------------------    ------------------
                                                         Six Months
                                                            Ended        May 29, 1998 to    January 1, 1998 to
                                                        June 30, 1999     June 30, 1998         May 28, 1998
                                                        -------------     -------------         ------------
<S>                                                      <C>               <C>               <C>
Revenue - Electric                                       $ 984,698         $ 202,739         $     885,693
Expenses
Operations - fuel and purchased power                      324,892            66,787               257,786
Operations and maintenance                                 334,746            34,683               169,076
Depreciation and amortization                              105,053            17,719                56,490
Base financial component amortization                            -                 -                41,257
Rate moderation component amortization                           -                 -               (82,268)
Regulatory liability component amortization                      -                 -               (36,191)
Other regulatory amortization                                    -                 -                14,418
Operating taxes                                            122,454            31,049               153,288
Customer rebates                                               173                 -                     -
Federal income tax - current                                     -                 -               (75,004)
Federal income tax - deferred and other                          -                 -                44,554
                                                         ---------         ---------         -------------
Total Expenses                                             887,318           150,238               543,406
                                                         ---------         ---------         -------------
Operating Income                                            97,380            52,501               342,287
                                                         ---------         ---------         -------------
Other Income and (Deductions)
Other income and deductions, net                             3,565             5,396               (23,297)
Allowance for other funds used during construction               -                 -                   948
Federal income tax - current                                     -                 -               (67,543)
Federal income tax - deferred and other                          -                 -               (22,442)
                                                         ---------         ---------         -------------
Total Other Income and (Deductions)                          3,565             5,396              (112,334)
                                                         ---------         ---------         -------------
Income from Continuing Operations
   Before Interest Charges                                 100,945            57,897               229,953
                                                         ---------         ---------         -------------
Interest Charges and (Credits)
Interest on long-term debt, net                              2,201            14,082               143,989
Interest on advances from and note payable to
   the Authority                                           143,540            20,563                     -
Other interest                                              16,629               906                23,181
Allowance for borrowed funds used during construction       (1,171)             (163)               (1,625)
                                                         ---------         ---------         -------------
Total Interest Charges                                     161,199            35,388               165,545
                                                         ---------         ---------         -------------
Income (loss) from continuing operations                   (60,254)           22,509                64,408
Income from discontinued operations net of
   taxes of zero, zero and ($20,915), respectively               -                 -                50,134
                                                         ---------         ---------         -------------
Net Income (Loss)                                          (60,254)           22,509               114,542
Preferred stock dividend requirements                            -                 -                20,984
                                                         ---------         ---------         -------------
Earnings (Loss) for Common Stock                         $ (60,254)        $  22,509         $      93,558
                                                         =========         =========         =============
Average Common Shares Outstanding                                1                 1           121,534,827
Basic and Diluted Earnings per Common Share                    N/A               N/A                $ 0.77

Dividends Declared per Common Share                            N/A               N/A                $ 0.74

</TABLE>

    The accompanying notes are an integral part of these financial statements.

<PAGE>

                                                                               4

                   Long Island Lighting Company d/b/a LIPA (a
                wholly owned subsidiary of the Long Island Power
                                   Authority)
                                 Balance Sheet
                (Thousands of Dollars - Except Share Information)

                                                       June 30,    December 31,
                                                         1999         1998
                                                     (unaudited)
                                                     -----------   -----------
Assets
Utility Plant
Generation - nuclear                                  $  663,577   $  662,893
Transmission and distribution                          1,430,907    1,385,099
Common                                                     3,166        3,827
Construction work in progress                             49,627       52,897
Nuclear fuel in process and in reactor                     9,160       17,053
                                                      ----------   ----------
                                                       2,156,437    2,121,769
Less- Accumulated depreciation and amortization           82,087       50,287
                                                      ----------   ----------
Total Net Utility Plant                                2,074,350    2,071,482
                                                      ----------   ----------
Current Assets
Customer accounts receivable (less allowance for
  doubtful accounts of $17,500 and $20,211,
  respectively)                                          122,918      119,161
Accrued unbilled revenues                                 91,474       78,414
Other accounts receivable                                  8,332       10,096
Promissory note receivable                                 1,000      398,000
Prepayments and other current assets                      34,229       28,583
                                                      ----------   ----------
Total Current Assets                                     257,953      634,254
                                                      ----------   ----------
Promissory Note Receivable                               646,902      646,902
                                                      ----------   ----------
Designated Funds                                          33,147      194,972
                                                      ----------   ----------
Nonutility Property and Other Investments                 19,821       19,410
                                                      ----------   ----------
Deferred Charges                                          81,555       78,507
                                                      ----------   ----------
Acquisition Adjustment (net of accumulated
  amortization of $127,411 and $68,766,
  respectively)                                        3,968,245    4,026,956
                                                      ----------   ----------
Total Assets                                          $7,081,973   $7,672,483
                                                      ==========   ==========

    The accompanying notes are an integral part of these financial statements.

<PAGE>

                                                                               5

                  Long Island Lighting Company d/b/a LIPA (a
                wholly owned subsidiary of the Long Island Power
                                   Authority)
                                  Balance Sheet
                             (Thousands of Dollars)

                                                      June 30,     December 31,
                                                        1999           1998
                                                    (unaudited)
                                                    -----------     ------------
Capitalization and Liabilities

Capitalization
Long-term debt                                     $   647,784      $   778,075
Note Payable - the Authority                         4,390,409        5,355,085
Due to the Authority                                 1,411,800          855,684
Accumulated deficit                                   (140,235)         (79,981)
                                                   -----------      -----------
Total Capitalization                                 6,309,758        6,908,863
                                                   -----------      -----------

Current Liabilities
Current maturities of long-term debt                   398,278          398,000
Due to the Authority                                   150,895           70,880
Due to KeySpan                                          23,613           75,085
Accounts payable and accrued expenses                   34,533           35,921
Accrued taxes                                           34,815           79,021
Accrued interest                                        30,249           29,851
Customer deposits                                       22,961           23,205
                                                   -----------      -----------
Total Current Liabilities                              695,344          711,963
                                                   -----------      -----------
Deferred Credits                                        62,029           34,059
                                                   -----------      -----------
Claims and Damages                                      14,842           17,598
                                                   -----------      -----------
Commitments and Contingencies
                                                   -----------      -----------
Total Capitalization and Liabilities               $ 7,081,973      $ 7,672,483
                                                   ===========      ===========

    The accompanying notes are an integral part of these financial statements.

<PAGE>

                                                                               6

                   Long Island Lighting Company d/b/a LIPA (a
                wholly owned subsidiary of the Long Island Power
                                   Authority)
                            Statement of Cash Flows
                                  (Unaudited)
                             (Thousands of Dollars)

<TABLE>
<CAPTION>
                                                                          LIPA                        LILCO
                                                          --------------------------------      ------------------
                                                             Six Months
                                                               Ended        May 29, 1998 to     January 1, 1998 to
                                                           June 30, 1999     June 30, 1998         May 28, 1998
                                                           -------------     -------------         ------------
<S>                                                       <C>                 <C>                  <C>
Operating Activities
Net (Loss) Income                                         $     (60,254)      $    22,509          $   114,542
Adjustments to reconcile net (loss) income to net
   cash provided by (used in) operating activities
Depreciation and amortization                                   105,053            17,719               68,326
Base financial component amortization                                 -                 -               41,257
Rate moderation component amortization                                -                 -              (82,268)
Regulatory liability component amortization                           -                 -              (26,977)
Provision for fuel and purchased cost adjustment                 26,603                 -                    -
Other regulatory amortization                                         -                 -               18,208
Rate moderation component carrying charges                            -                 -              (12,200)
Class Settlement                                                      -                 -                5,226
Amortization of cost of issuing and redeeming securities          3,949               351               12,903
Federal income tax - deferred and other                               -                 -              (12,487)
Allowance for other funds used during construction                    -                 -                2,390
Pensions and Other Post Retirement Benefits                           -                 -               23,066
   1989 settlement credits amortization                               -                 -               (9,213)
   Gas Cost Adjustment                                                -                 -                4,119
   Other                                                         11,401            (1,273)              60,433

Changes in operating assets and liabilities
   Accounts receivable, net                                      (1,993)           (2,370)              12,688
   Accrued unbilled revenues                                    (13,060)          (12,846)              68,233
   Materials and supplies, fuel oil and gas in storage                -                 -               39,386
   Accounts payable and accrued expenses                         (1,388)                -              (39,007)
   Due to KeySpan                                               (51,472)          (36,372)                   -
   Pensions and other post retirement benefits                        -                 -             (250,000)
   Accrued taxes                                                (44,206)            2,352               12,615
   Accrued interest                                                 398            19,820              (52,197)
   Class Settlement                                                   -                 -              (19,156)
   Special deposits                                                   -                 -               37,498
   Other                                                        (20,425)            7,452              (67,969)
                                                             ----------       -----------           ----------
Net Cash Provided by (Used in) Operating Activities             (45,394)           17,342              (50,584)
                                                             ----------       -----------           ----------
Investing Activities
Shoreham post settlement costs                                        -                 -              (16,271)
Merger costs, net of cash transferred                                 -           (62,159)                   -
Other                                                                 -                 -               (1,677)
                                                             ----------       -----------           ----------
Net Cash Used in Investing Activities                                 -           (62,159)             (17,948)
                                                             ----------       -----------           ----------
Capital and Related Financing Activities
Construction and nuclear fuel expenditures                      (49,277)           (8,793)            (122,229)
Proceeds from promissory note receivable                        397,000                 -                    -
Proceeds from sale of common stock                                    -                 -                8,738
Acquisition of common stock                                           -        (2,497,500)                   -
Issuance of notes payable                                             -                 -              350,000
Net proceeds from Authority loan                                636,131         4,949,528                    -
Repayment of note payable-Authority                            (964,676)         (180,476)                   -
Redemption of long-term debt                                   (135,609)       (1,186,000)            (100,000)
Issuance of preferred stock                                           -                 -               75,000
Redemption  of preferred stock                                        -          (221,600)            (116,390)
Bond issuance costs                                                   -           (48,627)                   -
Preferred stock dividends paid                                        -                 -              (18,659)
Common stock dividends paid                                           -                 -             (108,179)
Other                                                                 -            (3,989)              (3,080)
                                                             ----------       -----------           ----------
Net Cash Provided by (Used in) Capital
   and Related Financing Activities                            (116,431)          802,543              (34,799)
                                                             ----------       -----------           ----------
Net Increase (Decrease) in Cash and Cash Equivalents           (161,825)          757,726             (103,331)
Cash and cash equivalents at beginning of period                194,972 *          75,000              179,995
                                                             ----------       -----------           ----------
Cash and cash equivalents at end of period                   $   33,147 *     $   832,726 *         $   76,664
                                                             ==========       ===========           ==========
</TABLE>

* Cash and cash equivalents include designated funds

    The accompanying notes are an integral part of these financial statements.

<PAGE>

                                                                               7
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

Note 1.   Basis of Presentation

          As used herein, the term "LILCO" refers to the Long Island Lighting
          Company, the publicly owned gas and electric utility company as it
          existed prior to the LIPA/LILCO Merger, as described in Note 2, and
          the term "LIPA" refers to that company as it exists after the
          LIPA/LILCO Merger as a wholly-owned electric utility subsidiary
          company of the Long Island Power Authority (the "Authority"), doing
          business as LIPA.

          The Authority was established as a corporate municipal instrumentality
          of the State of New York, constituting a political subdivision of the
          State, created by Chapter 517 of the Laws of 1986 (the "LIPA Act"). As
          such, it is a component unit of the State and is included in the
          State's annual financial statements.

          On April 11, 1997, LILCO changed its year-end from December 31 to
          March 31. Subsequent to the LIPA/LILCO Merger, LIPA adopted a calendar
          year-end. Accordingly, unless otherwise indicated, references to June
          30, 1999 and 1998 represent the three or six month periods ended June
          30, 1999 and 1998, respectively. The financial information as of June
          30, 1999, and for the three and six months ended June 30, 1999 and
          1998 is unaudited. However, in the opinion of management, the
          financial statements include all adjustments, consisting of normal
          recurring accruals, necessary for a fair presentation of the financial
          statements for the periods presented. Operating results for any of the
          periods presented are not necessarily indicative of results to be
          expected for the entire year due to the seasonal nature of the
          electric business.

          These Notes to Financial Statements should be read in conjunction with
          Management's Discussion and Analysis of Financial Condition and
          Results of Operations for the three and six months ended June 30, 1999
          and LIPA's Annual Report on Form 10-K for the nine months ended
          December 31, 1998. In addition, please refer to the discussion
          following in Note 2 regarding the change in control of LILCO on May
          28, 1998.

          Recent Accounting Pronouncements
          In July 1999, the Financial Accounting Standards Board issued
          Financial Accounting Statement No. 137, "Accounting for Derivative
          Instruments and Hedging Activities - Deferred as of the Effective Date
          of FAS 133," which deferred the effective date of Financial Accounting
          Statement No. 133, "Accounting for Derivative Instruments and Hedging
          Activities," from fiscal years beginning after June 15, 1999 to fiscal
          years beginning after June 15, 2000. Accordingly, LIPA will defer
          their adoption until the new effective date. LIPA does not expect a
          material effect on the financial position, earnings or cash flows
          resulting from the adoption of this statement.

Note 2.   Merger/Change in Control

          On May 28, 1998, LIPA Acquisition Corp., a wholly-owned subsidiary of
          the Authority, was merged with and into LILCO (the "Merger") pursuant
          to an Agreement and Plan of Merger


<PAGE>

                                                                               8
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

          dated as of June 26, 1997, by and among LILCO, MarketSpan Corporation
          (formerly known as BL Holding Corp., and currently known as KeySpan
          Energy, "KeySpan"), the Authority and LIPA Acquisition Corp., (the
          "Merger Agreement").

          Pursuant to the Merger Agreement, immediately prior to the Merger, all
          of the assets and liabilities of LILCO related to the conduct of its
          gas distribution business and its non-nuclear electric generation
          business, and all common assets used by LILCO in the operation and
          management of its electric transmission and distribution business and
          its gas distribution business and/or its non-nuclear electric
          generation business (the "Transferred Assets") were sold to KeySpan.
          The consideration received by LILCO for the Transferred Assets
          consisted of: (i) 3,440,625 shares of the common stock of KeySpan;
          (ii) 553,000 shares of the Series B Preferred Stock of KeySpan; and
          (iii) 197,000 shares of the Series C Preferred Stock of KeySpan.

          The value of the consideration was determined by KeySpan and LILCO to
          be equal to the net fair market value of the Transferred Assets. The
          transfer of assets and liabilities was effected by a Bill of Sale,
          dated as of May 28, 1998, made and executed by LILCO and acknowledged
          by KeySpan.

          As a result of the Merger, the Authority became the holder of 1 share
          of LILCO's common stock, representing 100% of the outstanding voting
          securities of LILCO. In addition, KeySpan issued promissory notes to
          LIPA of approximately $1.048 billion. The interest rate and timing of
          principal and interest payments on the promissory notes from KeySpan
          are identical to the terms of certain LILCO indebtedness assumed by
          LIPA in the Merger. KeySpan is required to make principal and interest
          payments to LIPA thirty days prior to the corresponding payment due
          dates, and LIPA then transfers those amounts to debtholders in
          accordance with the original debt repayment schedule.

          The former holders of LILCO's common stock, primarily individual
          public shareowners, became entitled to receive a pro-rata share of:
          (i) cash consideration of $2.497 billion; and (ii) 3,440,625 shares of
          the common stock of KeySpan, which were received by LILCO in exchange
          for the Transferred Assets. Pursuant to the Merger Agreement, the
          former holders of LILCO's common stock (other than holders of
          dissenting shares) were deemed to have subscribed for additional
          shares of the common stock of KeySpan, with an aggregate purchase
          price equal to the cash consideration. In order to effect the Merger,
          it was necessary to: (i) retire all shares of LILCO's preferred stock,
          whether by conversion, redemption or cancellation; and (ii) redeem
          certain of LILCO's bonds, at a cost to LIPA of approximately $1.557
          billion. The cash consideration required for the Merger was obtained
          by the Authority from the proceeds of the issuance and sale of its
          Electric System General Revenue Bonds, Series 1998A and Electric
          System Subordinated Revenue Bonds, Series 1 through Series 6. The
          proceeds from the sale of the bonds were then transferred by the
          Authority to LIPA in exchange for a promissory note of approximately
          $4.949 billion. As a result of the Merger, there was a change in
          control of LILCO which effectively resulted in the creation of a new
          reporting entity, LIPA. Accordingly, the accompanying financial
          statements for the periods prior to May 28, 1998 are not comparable to
          the financial

<PAGE>

                                                                               9
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

          statements presented subsequent to May 28, 1998. Therefore, a black
          line has been drawn on the Statements of Operations and the Statement
          of Cash Flows to distinguish between LIPA and LILCO balances and
          activity.

          The remaining assets and liabilities of LILCO acquired by LIPA consist
          of: (i) LILCO's electric transmission and distribution system; (ii)
          its net investment in Nine Mile Point Nuclear Power Station, Unit 2;
          (iii) certain regulatory assets and liabilities associated with its
          electric business, (iv) allocated accounts receivable and other assets
          and liabilities; and (v) substantially all of its long-term debt.

          The financial statements of LIPA include the push down of the
          Authority's basis, including costs related to the acquisition of the
          assets acquired and liabilities assumed. Because of the manner in
          which LIPA's rates and charges will be established by the Authority's
          Board of Trustees, the original net book value of the transmission and
          distribution and nuclear generation assets acquired in the Merger is
          considered to be their fair value. The excess of the acquisition costs
          over the fair value of the net assets acquired has been recorded as an
          intangible asset titled "acquisition adjustment" and is being
          amortized over a 35 year period. The acquisition adjustment
          principally arose through the elimination of LILCO's regulatory assets
          and liabilities, totaling $6.3 billion, and net deferred federal
          income tax liability of approximately $2.4 billion. Therefore, the
          amortization of the regulatory assets and liabilities has effectively
          been replaced by the amortization of the acquisition adjustment. In
          addition, as a wholly-owned subsidiary of the Authority, LIPA is
          exempt from Federal, state and local income taxes. Accordingly,
          adjustments were made by LIPA on May 28, 1998 to eliminate deferred
          tax assets and liabilities. The results of operations for the three
          and six months ended June 30, 1999 and for the period May 29, 1998
          through June 30, 1998 do not include a provision for income taxes.

          Effective May 29, 1998, the Authority contracted with KeySpan, through
          certain of its subsidiaries, to provide operations and management
          services for LIPA's transmission and distribution system through a
          management services agreement ("MSA"). Therefore, LIPA pays KeySpan
          directly for their services and KeySpan, in turn, pays the salaries of
          their employees. LIPA has no employees, however LIPA is charged a
          management fee by the Authority to oversee LIPA's operations of which
          the salaries of the Authority's employees is a significant component.
          Through a power supply agreement ("PSA"), LIPA contracts for capacity
          and, to the extent necessary, energy from the fossil fired generating
          plants of KeySpan, formerly owned by LILCO. Energy and fuel are
          purchased by KeySpan on LIPA's behalf through an energy management
          agreement ("EMA") (collectively, the "Operating Agreements").

          The electric transmission and distribution system is located in the
          New York Counties of Nassau and Suffolk (with certain limited
          exceptions) and a small portion of Queens County known as the
          Rockaways. The service area is approximately 1,230 square miles and
          the population of the service area is approximately 2.75 million
          persons, including approximately 98,500 persons who reside in Queens
          County within the City of New York. LIPA receives approximately 49% of
          its revenues from residential sales, 48% from sales to commercial and


<PAGE>

                                                                              10
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

          industrial customers, and the balance from sales to other utilities
          and public authorities.

          Discontinued Operations
          The statement of operations of LILCO for the period January 1, 1998
          through May 28, 1998 and the period April 1, 1998 through May 28, 1998
          have been prepared to present the gas business (as transferred to
          KeySpan subsidiaries pursuant to the Merger Agreement) as a
          discontinued operation, in accordance with the provisions of
          Accounting Principles Board Opinion No. 30.

          Income from discontinued operations includes revenue from the gas
          business of approximately $351.8 million and $79.9 million for the
          period January 1, 1998 through May 28, 1998 and the period April 1,
          1998 through May 28, 1998, respectively.

Note 3.   Capitalization

          On  January 4,  1999,  LIPA  redeemed  $102.6  million of the  NYSERDA
          Electric  Facilities  Revenue  Bonds Series 1993B,  1994A,  and 1995A,
          which were called for redemption prior to December 31, 1998.

          On March 1, 1999,  the variable rate bonds listed below were converted
          to fixed  interest  rates of 5.15% on the  Pollution  Control  Revenue
          Bonds  ("PCRBs"),  and 5.3% on the Electric  Facilities  Revenue Bonds
          ("EFRBs").

                                                                    Balances
                                                    Interest      Subsequent to
                                  Maturity            Rate         Conversion
                                  --------            ----         ----------
          PCRBs
            1985 Series A      March 1, 2016         Variable        $ 58,020
            1985 Series B      March 1, 2016         Variable          50,000

          EFRBs
            1993 Series B      November 1, 2023      Variable          29,600
            1994 Series A      October 1, 2024       Variable           2,600
            1995 Series A      August 1, 2025        Variable          15,200

          Also, on March 1, 1999, LIPA redeemed $30.1 million of the NYSERDA
          Pollution Control Revenue Bonds, 1985 Series A.

Note 4.   Rate Matters

          Under current New York law, the Authority is empowered to set rates
          for electric service in its service area without being required by law
          to obtain the approval of the New York State Public Service Commission
          (the "PSC") or any other state regulatory body. However, the Authority

<PAGE>

                                                                              11
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

          has agreed, in connection with the approval of the Merger by the New
          York State Public Authorities Control Board (the "PACB"), that it will
          not impose any permanent increase, nor extend or reestablish any
          portion of a temporary rate increase, in average customer rates over a
          12 month period in excess of 2.5% without approval of the PSC,
          following a full evidentiary hearing. Another of the PACB conditions
          requires that the Authority reduce average rates within LIPA's service
          area by no less than 14% over a ten year period commencing on the date
          when LIPA began providing electric service, when measured against
          LILCO's base rates in effect on July 16, 1997 (excluding the impact of
          the proposed Shoreham tax settlement, but adjusted to reflect
          emergency conditions and extraordinary unforeseeable events.)

          The LIPA Act requires that any bond resolution of the Authority
          contain a covenant that it will at all times maintain rates, fees or
          charges sufficient to pay the costs of operation and maintenance of
          facilities owned or operated by the Authority; payments in lieu of
          taxes ("PILOT's"); renewals, replacements and capital additions; the
          principal of and interest on any obligations issued pursuant to such
          resolution as the same become due and payable, and to establish or
          maintain any reserves or other funds or accounts required or
          established by or pursuant to the terms of such resolution.

          LIPA's rates include the fuel and purchased power cost adjustment
          ("FPPCA") which adjusts rates to reflect significant changes in the
          cost of fuel, purchased power and related costs. The FPPCA is designed
          to ensure that LIPA will recover from or return to customers any fuel
          costs that fall outside an established base fuel and purchased power
          tolerance band. The tolerance band is equal to one percent above and
          one percent below LIPA's cost of fuel and purchased power costs for
          1999. The tolerance band increases to two percent in 2000 and
          continues to increase in one percent increments annually thereafter.
          Expenses for fuel and purchased power cost in excess of or below this
          level will be recovered from or returned to customers beginning the
          following year. Should fuel and purchased power costs increase in
          excess of five percent cumulatively over the original base cost, the
          FPPCA will recover, from that year forward, all costs in excess of the
          original base cost.

          LIPA's rates are largely based on LILCO's pre-Merger rate design to
          avoid customer confusion and facilitate an efficient transition from
          LILCO billing to LIPA billing. In addition, LIPA's rates include the
          FPPCA, a PILOT recovery rider, a rider providing for the Shoreham
          settlement and a rider providing for the RICO Credits (credits to the
          bills of customers as a result of the settlement by LILCO of a RICO
          action in connection with the construction and completion of nuclear
          generating facilities).

          The LIPA Act requires LIPA to make PILOTs for certain New York State
          and local revenue taxes which would otherwise have been imposed on
          LILCO. The PILOT recovery rider allows for rate adjustments to
          accommodate the PILOTs.

<PAGE>

                                                                              12
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

Note 5.   Contingencies

          Legal and Environmental Proceedings

          Except as discussed below, no significant changes have occurred with
          respect to legal and environmental contingencies as discussed in Note
          13 of Notes to Financial Statements in LIPA's Annual Report on Form
          10-K for the nine months ended December 31, 1998, as filed on March
          31, 1999.

          With respect to Shoreham Tax Matters, on July 26, 1999, the Appellate
          Division, Second Department overruled the lower court's decision and
          held that the Authority was not prohibited from enforcing any part of
          the judgment relating to real property tax refunds attributable to
          over assessments on the Shoreham Plant after the January 15, 1987
          effective date of the LIPA Act. LIPA expects that Suffolk County will
          seek leave to appeal this decision to the State Court of Appeals
          sometime in August 1999.

          In July 1992, LILCO and the Authority separately commenced proceedings
          in the Supreme Court of the State of New York, County of Suffolk,
          against the Assessor and the Board of Assessment Review for the Town
          of Brookhaven, New York (the "Assessor") challenging the real property
          tax assessment on Shoreham for the 1992-93 tax year. On or about May
          1, 1992, the Assessor had tentatively assessed Shoreham in an amount
          in excess of $156 million for the 1992-93 tax year. On April 22, 1996,
          the two proceedings were consolidated. On May 13, 1999, the Assessor
          moved to dismiss the proceedings on procedural grounds. Oral arguments
          were held on August 5, 1999. No decision has been rendered by the
          court as of the date of this filing.

          With respect to the action brought by the County of Suffolk entitled
          County of Suffolk v. KeySpan et al., this action was voluntarily
          discontinued by plaintiffs without prejudice. The plaintiffs refiled
          their claims related to executive compensation in the federal action
          entitled County of Suffolk et al. v. Long Island Power Authority which
          was filed on September 28, 1998.

          With respect to the Sylvester v. Catacosinos et al. action, the judge
          adopted the magistrate's recommendation that the complaint be
          dismissed with leave to replead for failure to make a demand. All
          discovery has been stayed.

          With respect to the class action brought against LILCO, LILCO's
          Retirement Income Plan and Robert X. Kelleher, the Plan Administrator,
          the court on August 13, 1999, approved the settlement agreement.

Note 6.   Nine Mile Point Nuclear Power Station, Unit 2 ("NMP2")

          In June 1999, two co-tenants of NMP2 representing 57% of the ownership
          interest reached an agreement in principle to sell their interests to
          a single third party. The remaining co-tenants have 180 days to
          exercise their right of first refusal. Such sale is subject to the
          approval of, among

<PAGE>

                                                                              13
Long Island Lighting Company d/b/a LIPA
(a wholly owned subsidiary of the Long Island Power Authority)

Notes to Financial Statements
For the Six Months Ended June 30, 1999
(Unaudited)
--------------------------------------------------------------------------------

          others, the PSC. At this time, LIPA is unable to determine what
          effect, if any, this proposed change in ownership will have on its
          operating and financial results. Any such sale, however, will not
          affect LIPA's right to receive 18% of the plant's output.

Note 7.   Subsequent Events

          New York Power Pool Assessment

          As a member of the New York Power Pool ("NYPP"), LIPA is required to
          maintain generating capacity equal to 118% of its peak load. On July
          6, 1999, LIPA set a new peak load of 4,590 MW, for which LIPA was
          unable to fully meet the NYPP requirement of 5,416 MW (118% of 4,590
          MW). As a result of this deficiency, LIPA is subject to an assessment
          by the NYPP of approximately $5 million in July.

Note 8.   Reclassifications

          Certain prior period amounts have been reclassified in the financial
          statements to conform with the current period presentation.

<PAGE>

                                                                              14

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

          Cautionary Statement Regarding Forward-Looking Statements This report
          contains statements which, to the extent they are not recitations of
          historical fact, constitute "forward-looking statements" within the
          meaning of the Securities Litigation Reform Act of 1996. In this
          respect, the words "estimate," "project," "anticipate," "expect,"
          "intend," "believe" and similar expressions are intended to identify
          forward-looking statements. All such forward-looking statements are
          intended to be subject to the safe harbor protection provided by the
          Reform Act. A number of important factors affecting the Registrant's
          business and financial results could cause actual results to differ
          materially from those stated in the forward-looking statements. Those
          factors include regulatory rate proceedings, competition, and certain
          legal and environmental matters each as discussed herein, in the
          Registrant's Annual Report on Form 10-K filed March 31, 1999, for the
          nine months ended December 31, 1998, or in other reports filed by the
          Registrant with the Securities and Exchange Commission.

          General

          KeySpan Energy ("KeySpan"), through certain of its subsidiaries
          provides operations and management services for LIPA's transmission
          and distribution system through a management services agreement
          ("MSA"). LIPA contracts for capacity and to the extent necessary,
          energy from the fossil fuel fired generating plants formerly owned by
          Long Island Lighting Company ("LILCO") through a power supply
          agreement ("PSA") with KeySpan. Energy is purchased by KeySpan on
          LIPA's behalf through an energy management agreement ("EMA"),
          (collectively; the "Operating Agreements").

          As LIPA is a wholly owned subsidiary of the Authority and not an
          investor owned utility, the PSC does not have jurisdiction with
          respect to the determination of rates and charges. Rates and charges
          for LIPA are approved by the Authority's Board of Trustees. See Note 4
          - Rate Matters of Notes to the Financial Statements.

          The excess of the acquisition cost over the fair value of the net
          assets acquired has been recorded as an intangible asset titled
          "acquisition adjustment" and is being amortized over a 35 year period.
          The acquisition adjustment principally arose through the elimination
          of LILCO's regulatory assets and liabilities, totaling approximately
          $6.3 billion, and net deferred Federal income tax liability of
          approximately $2.4 billion. Therefore, the amortization of the
          regulatory assets and liabilities has effectively been replaced by the
          amortization of the acquisition adjustment. Because of the tax exempt
          status of LIPA, the results of operations for the three and six months
          ended June 30, 1999, and the period May 29, 1998 through June 30,
          1998, do not include a provision for income taxes.

          Results of Operations

          Three and Six Months Ended June 30, 1999 and June 30, 1998

          Earnings

          The net losses for the three and six month periods ended June 30, 1999
          were approximately $22.3 million and $60.3 million, respectively.
          These losses were principally due to the seasonal nature of the
          business, whereby revenues during these periods are significantly less
          than those expected

<PAGE>

                                                                              15

          to be generated during the summer cooling season. This, combined with
          the fact that the majority of LIPA's costs (other than fuel, for which
          there is a separate rate mechanism, see the FPPCA discussed below) are
          either fixed, or charged in accordance with contractual terms
          specified by the MSA and the PSA, resulted in a net loss during these
          periods.

          For the three and six months ended June 30, 1998, earnings were
          enhanced as a result of the change in the method of amortizing the
          Rate Moderation Component ("RMC") to eliminate the effects of
          seasonality on monthly operating income, as more fully discussed in
          the section entitled "Rate Moderation Component".

          Electric Revenues

          The decrease in revenues of approximately $23.6 million and $103.7
          million for the three and six months ended June 30, 1999,
          respectively, when compared to the same period in 1998, was
          principally the result of the rate reduction (approximately 20%), for
          virtually all customers, effective May 29, 1998. Partially offsetting
          the reduction in revenues was an increase in sales to existing
          customers which is attributable to a strong and growing economy and
          price elasticity reflecting the effect of LIPA's 20% rate reduction.
          In addition, there has been a slight increase in the number of
          customers relative to the same period last year.

          Fuel and Purchased Power

          Fuel and purchased power expense for the three and six months ended
          June 30, 1999 and 1998, were as follows:

                              Three Months Ended           Six Months Ended
                                   June 30,                     June 30,
                             1999          1998           1999          1998
                         (in millions) (in millions) (in millions) (in millions)
                         ------------- ------------ -------------  -------------
          Oil              $     25      $    27      $     67      $      70
          Gas                    56           43            76             75
          Nuclear                 2            2             4              4
          Purchased power        76           87           151            176
                           --------      -------      --------       --------
                                159          159           298            325
          FPPCA                  12            -            27              -
                           --------      -------      --------       --------
                 Total     $    171      $   159      $    325       $    325
                           ========      =======      ========       ========

          Electric Energy Available

          The percentage of total electric energy available, by type of fuel,
          for electric operations for the three and six months ended June 30,
          1999 and 1998 were as follows:

<PAGE>

                                                                              16
<TABLE>
<CAPTION>

                                    Three Months Ended                        Six Months Ended
                                          June 30,                               June 30,
                                 1999                 1998                1999                1998
                             ------------         ------------        ------------        ------------
(Mwh = Megawatt hours)
                              Mwh       %          Mwh       %         Mwh       %         Mwh       %
                              ---       -          ---       -         ---       -         ---       -
<S>                          <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>
Oil                            870      19          812      19       2,652      30       2,017     24
Gas                          1,944      43        1,512      36       2,729      30       2,357     28
Nuclear                        327       7          136       3         771       9         530      6
Purchased                    1,414      31        1,738      42       2,828      31       3,499     42
                             -----     ---        -----     ---       -----     ---       -----    ---
      Total                  4,555     100        4,198     100       8,980     100       8,403    100
                             =====     ===        =====     ===       =====     ===       =====    ===

</TABLE>

          Variations in the fuel mix used to satisfy energy requirements on
          LIPA's system are primarily the result of changes in the cost of each
          particular commodity relative to the other commodities and the
          availability of import capacity on LIPA's transmission
          interconnections. In May of this year, LIPA's import capacity was
          reduced by approximately 1/3 as a result of a transformer failure on
          one of its interconnections. The interconnection is expected to be
          back at full capacity prior to the cooling season of 2000. As a
          result, LIPA was required to satisfy its requirements with more
          expensive on-island generation from fossil fired power plants on Long
          Island, formerly owned by LILCO. For the three months ended June 30,
          1999, the decreasing price of gas and the reduced import capability
          resulted in a larger percentage of LIPA's requirements being satisfied
          with gas generated energy when compared to the same period last year.
          For the six months ended June 30, 1999, generation with oil increased
          over the same period last year as oil was more economical than other
          fuels, and as a result of the reduced import capacity.

          Variations in fuel and purchased power expenses have a minimal impact
          on operating results as LIPA's current rate structure includes a
          mechanism (the FPPCA mechanism) which requires LIPA to return to
          customers or allows LIPA to recover from customers, actual fuel costs
          which fall outside of the fuel cost tolerance band, which is defined
          as 1% higher and 1% lower than the base cost of fuel collected through
          rates. These percentages increase to two percent in 2000 and continue
          to increase in one percent increments annually thereafter. To insure
          that LIPA's customers will receive the lowest cost energy available,
          the operating agreements provide KeySpan with incentives to support
          that goal, and penalties when such goals are not satisfied.

          Fuel expense for the three months ended June 30, 1999 increased when
          compared to the same period of the prior year, principally as a result
          of a 6% increase in sales, increased on-island generation, incentives
          recognized and fees paid to KeySpan to manage the fuel and purchased
          power supplies in accordance with the EMA, and the recognition of a
          $12 million expense associated with the FPPCA mechanism. This increase
          was minimized by lower oil prices relative to the same period in 1998.

          Fuel expense for the six months ended June 30, 1999 was equal to that
          of the same period of the prior year, despite a 5% increase in sales
          and increased on-island generation, primarily as a result of lower oil
          and gas prices relative to the same period last year. The lower oil
          and gas prices were offset by incentives recognized and fees paid to
          KeySpan to manage the fuel and purchased power supplies in accordance
          with the EMA, and the recognition of $27 million of expense associated
          with the FPPCA mechanism.

<PAGE>

                                                                              17
          Operations and Maintenance

          Operations and Maintenance ("O&M") expenses, excluding fuel and
          purchased power, increased approximately $63.2 million and $131.0
          million during the three and six month periods ended June 30, 1999,
          respectively, when compared to the same periods in 1998. The increase
          is primarily due to the fact that LILCO classified expenses such as
          depreciation and amortization, property taxes and other operating
          taxes separately. These costs are incurred by LIPA as part of the
          costs of contracts with KeySpan for the management of LIPA's assets
          and are classified as O&M expense by LIPA. In addition, there were
          charges incurred by LIPA related to the overhead expenses of the
          Authority.

          Depreciation and Amortization

          Depreciation and amortization expense increased approximately $12.1
          million and $30.8 million during the three and six month periods ended
          June 30, 1999, respectively, when compared to the same period of the
          prior year. These increases were primarily due to the amortization of
          the acquisition adjustment which totals approximately $10 million per
          month and were partially offset by the absence of depreciation expense
          on LILCO's non-nuclear generating assets, which is included in O&M as
          a component of the PSA billings.

          Operating Taxes

          Operating taxes decreased approximately $30.6 million and $61.9
          million during the three and six months ended June 30, 1999,
          respectively, when compared to the same period in 1998, principally as
          a result of the decrease in revenue taxes resulting from lower
          revenues primarily due to the 20% rate reduction, a decrease in the
          gross income tax rate, and the absence of property and payroll taxes
          related to the operation of the non-nuclear generating facilities of
          LILCO. These decreases were partially offset by PILOTs on the Shoreham
          Nuclear Power Station (LILCO was able to capitalize these PILOTs under
          its electric rate structure).

          Regulatory Amortization

          For the three and six months period ended June 30, 1999, the
          amortization of various regulatory assets and liabilities were not
          recorded as a result of the adjustments made on May 29, 1998, to
          eliminate the related regulatory assets and liabilities.

          Rate Moderation Component ("RMC")

          The RMC represented the difference between LILCO's revenue
          requirements under conventional ratemaking and the revenues provided
          under LILCO's electric rate structure. In addition, the RMC was
          adjusted for the operation of LILCO's Fuel Moderation Component
          ("FMC") mechanism and the difference between LILCO's share of actual
          operating costs at Nine Mile Point Nuclear Power Station, Unit 2
          ("NMP2") and amounts provided for in electric rates.

          In April 1998, the PSC authorized a revision to LILCO's method for
          recording its monthly RMC amortization. Prior to this revision, the
          amortization of the annual level of RMC was recorded monthly on a
          straight-line, levelized basis over LILCO's rate year which ran from
          December 1 to November 30. However, revenue requirements fluctuated
          from month to month based upon consumption, which is greatly impacted
          by the effects of weather. Under the revised method, effective
          December 1, 1997, the monthly amortization of the annual RMC level
          varied based upon each month's forecasted revenue requirements, which
          more closely aligned such amortization with LILCO's cost of service.
          As a result of this change, for the three and six months ended June
          30, 1998, LILCO recorded approximately $51.5 million and $103.0
          million

<PAGE>

                                                                              18

          more, respectively, of non-cash RMC credits to income than it would
          have under the previous method.

          Federal Income Tax

          The decrease in Federal income tax expense for the three and six
          months ended June 30, 1999, when compared to the same period in 1998,
          is due to the fact that LIPA is exempt from Federal income taxes.

          Other Income and Deductions

          Other income and deductions contributed to income approximately $25.8
          million and approximately $21.4 million more for the three and six
          months ended June 30, 1999, respectively, when compared to the same
          period in 1998, primarily due to merger related expenses recognized by
          LILCO in May 1998, partially offset by the absence, in 1999, of
          carrying charges on regulatory assets.

          Interest Expense

          Interest expense decreased for the three and six months ended June 30,
          1999, by approximately $18.8 million and $39.7 million, respectively,
          compared to the same periods in 1998. These decreases are principally
          attributable to the lower borrowing rates of LIPA relative to the
          borrowing rates of LILCO. The decrease in interest expense was
          partially offset by the higher levels of debt that LIPA had
          outstanding during these periods, when compared to LILCO during the
          same periods in 1998. The increase in the level of debt is due to the
          fact that LIPA's entire capital structure is debt, where LILCO's
          capitalization structure was composed of debt, common stock and
          preferred stock. As a result, the entire cost of LIPA's capital is
          reflected in interest expense, where LILCO's cost of capital was
          reflected in interest expense and common and preferred stock
          dividends.

          Liquidity and Capital Resources

          Liquidity

          Since May 29, 1998, LIPA has received approximately $6.7 billion from
          the Authority to finance the Merger, as more fully discussed in Note 7
          of Notes to Financial Statements included in LIPA's Annual Report on
          Form 10-K for the nine months ended December 31, 1998, in exchange for
          a promissory note. All cash from customer payments and other sources
          is collected by the Authority. All of LIPA's obligations are paid by
          the Authority on LIPA's behalf. Accordingly, all operating cash
          amounts are held at the Authority. Cash collections and disbursements
          by the Authority on LIPA's behalf increase or decrease amounts due the
          Authority by LIPA. LIPA has repaid approximately $744.6 million of its
          debt to the Authority because cash collected by the Authority from
          customers and other sources since May 29, 1998 has exceeded cash paid
          on LIPA's behalf by the Authority.

          Pursuant to the Authority's Electric System General Revenue Bond
          Resolution dated May 13, 1998, all amounts to be paid by the Authority
          to LIPA in respect of the debt obligations of LIPA are subordinated in
          right of payment to the payment of amounts due on the debt obligations
          of the Authority. As a result, all debt assumed from LILCO is
          structurally subordinated in right of payment to the Authority's debt
          obligations.

          During the six months ended June 30, 1999, LIPA retired prior to
          maturity, with cash on hand, $132.7 million of outstanding NYSERDA
          bonds which were assumed from LILCO as part of the

<PAGE>

                                                                              19
          Merger.

          At June 30, 1999, the Authority's and LIPA's cash and cash equivalents
          amounted to approximately $851.1 million. In addition, LIPA has
          designated funds aggregating $33.1 million on hand, $9.6 million of
          which are available to fund capital expenditures. LIPA estimates that
          capital expenditures will total approximately $70 million for the
          remainder of 1999. Funding for such expenditures will be provided by
          the Authority which intends to issue new debt in 1999 that will be
          designated by the Board of Trustees to replenish the capital
          expenditures fund.

          LIPA believes that cash from operations for 1999 will be sufficient to
          meet its operating, capital and debt service requirements; however, as
          noted above, LIPA will access the capital markets in 1999 in order to
          finance its capital expenditures. In addition, LIPA will refinance
          higher cost debt if conditions prove favorable.

          LIPA estimates that for the remainder of 1999 debt maturities will
          total approximately $469 million. Of the $469 million, $397 million
          was received in June by LIPA from KeySpan in accordance with the terms
          of the promissory note (LIPA subsequently made the $397 million
          payment to the bondholders on July 15, 1999). The Authority will use
          cash generated from operations to satisfy $71 million of the remaining
          maturities. An additional $1 million is due from KeySpan in order to
          satisfy LIPA's sinking fund requirement later this year.

          The Authority also expects to use cash from operations to make
          optional redemptions of debt in 1999. Such actions are consistent with
          the Authority's plan to retire in 16 years, the approximately $4
          billion it borrowed to purchase the Shoreham regulatory assets from
          LILCO.

          On May 29, 1998, LIPA began issuing credits to the bills of customers
          arising from the proposed settlement of the Shoreham Property Tax
          Litigation. Credits will be issued over the five years after May 29,
          1998, in the total amount of $106.3 million for Suffolk County
          customers and $208 million for Nassau County and Rockaway customers.
          The Authority has issued $145.7 million of bonds and has proposed to
          issue additional bonds over the next four years to finance the cost of
          the proposed settlement. Beginning in May 2004, a surcharge will be
          levied upon the Suffolk County customers in order to repay the bonds.
          See Note 13 of Notes to Financial Statements - Shoreham Tax Matters,
          included in LIPA's Annual Report on Form 10-K for the nine months
          ended December 31, 1998.

          Capital Requirements

          Capital expenditures are expected to be made by LIPA in the ordinary
          course of business for purposes of the normal upgrading and expansion
          of the T&D System. LIPA considers the T&D System to be adequate and in
          good condition. The actual amount and timing of future financing will
          depend upon actual capital expenditures, the timeliness and adequacy
          of rate increases, the availability and cost of capital and the
          ability to meet interest and fixed charge coverage requirements. The
          Authority believes that the amount of capital expenditures budgeted to
          be made in 1999 is adequate to maintain system reliability and insures
          customer and employee safety.

          Impact of Year 2000

          The Authority recently purchased new computer software to support
          certain activities of LIPA and believes that these systems are Year
          2000 compliant. Management also believes that, based on available
          information, it will be able to manage its Year 2000 transition for
          systems and

<PAGE>

                                                                              20

          infrastructure, without any material adverse effect on its business
          operations or financial position. However, there can be no assurance
          that failure to resolve any issue relating to such transition would
          not have a material adverse effect on LIPA. LIPA has had discussions
          with their largest vendor, KeySpan, which is responsible for the
          management and operation of LIPA's transmission and distribution
          system, and KeySpan has indicated that it has completed the testing
          and remediation of critical systems to ensure no disruptions in
          service or the supply of electricity to LIPA's customers. KeySpan's
          computer applications are generally based on two digits and have
          required some additional programming to recognize the start of the new
          millennium. A corporate-wide program has been established by KeySpan
          to review all software, hardware, embedded systems and associated
          compliance plans of KeySpan and its subsidiaries. The program includes
          both information technology (IT) and non-IT systems. The critical
          non-IT systems are generally in the areas of electric production,
          distribution, transmission, gas distribution and communications. The
          readiness of suppliers and vendor systems is also under review. The
          project is under the direction of the Year 2000 Program Office,
          chaired by the Vice President, Technology Operations and Corporate Y2K
          Officer. The critical areas of operations are being addressed through
          a business process review methodology. Each of KeySpan's critical
          business and service processes is being reviewed to: identify and
          inventory sub-components; assess for Year 2000 compliance; establish
          repair plans as necessary; and test in a Year 2000 environment. As of
          July 1, 1999, inventory, assessment, repair, testing and the
          development of contingency plans for these service critical processes
          have been completed. Remediation of other business critical systems,
          which includes metering, and certain financial and accounting systems
          is 96% complete, and testing is 90% complete. Testing of the last of
          these systems will be complete by November 1, 1999.

          Vendors and business partners needed to support the critical processes
          of KeySpan are also being reviewed for their Year 2000 readiness. At
          this time, none of these vendors have indicated to KeySpan that they
          will be materially affected by the Year 2000 issue. However, many
          vendors and business partners have not responded to repeated requests
          for their year 2000 readiness status. Included in the company's
          overall contingency plans, are contingency plans that address vendor
          and business partners year 2000 risk.

          Risk Scenarios and Contingency Plans

          KeySpan has analyzed each of the critical processes to identify
          possible Year 2000 risks. Each critical process will be certified by
          the responsible corporate officer as being Year 2000 ready. However,
          the most reasonable likely worst case scenarios have been identified.
          Operating procedures are being reviewed to ensure that risks are
          minimized when entering the Year 2000 and other high risk dates.
          Contingency plans have been developed to address possible failure
          points in each critical process. Testing of these contingency plans
          will be performed internally, as well as with neighboring utilities
          and business partners.

          While KeySpan must plan for the following possible worst case
          scenarios, management believes that these events are improbable:

          Loss of generating flexibility:

          KeySpan's generation subsidiary receives gas delivery from multiple
          national and international pipelines and, therefore the effects of a
          loss in any one pipeline can be mitigated through the use of other
          pipelines. Complete loss of all the supply lines is not considered a
          reasonable scenario. Nevertheless, the impact of the loss of any one
          pipeline is dependent on temperature and vaporization rate. The
          partial loss of gas supply will not affect KeySpan's ability to supply

<PAGE>

                                                                              21

          electricity since many of the plants have the ability to operate on
          oil.

          Loss of electric grid interconnections/KeySpan operated electric
          distribution facilities: Electric utilities are physically connected
          on a regional basis to manage electric load. This is often referred to
          as the regional grid. Presently, KeySpan is working, on behalf of LIPA
          with other regional utilities to develop a coordinated operating plan.
          Should there be an instability in the grid, KeySpan has the ability to
          remove LIPA and operate independently.

          Certain electric system components such as individual generating
          units, transmission and distribution system facilities, and the
          electric energy management system have the potential to be affected by
          the Year 2000 issue. KeySpan has inventoried electric system
          components and developed a plan to certify mission critical process as
          Year 2000 ready. Contingency plans have been developed, where
          appropriate, for loss of critical system elements.

          Loss of telecommunications:

          KeySpan has a substantial dependency on many telecommunication systems
          and services for both internal and external communication providers.
          External communications with the public and the ability of customers
          to contact KeySpan in cases of emergency response, are essential.
          KeySpan intends to coordinate its emergency response efforts with the
          offices of emergency management of the various local governments
          within its service territory. Internally, there are a number of
          critical processes in both the gas and electric operating areas that
          rely on external communication providers. Contingency plans address
          methods for manually monitoring these functions and/or utilizing
          alternative communication methods.

          In addition to the above, KeySpan is also planning for the following
          scenarios: short term reduction in system power generating capability;
          limitation of fuel oil operations; reduction in quality of power
          output; loss of automated meter reading; loss of ability to read
          customer meters, prepare bills and collect and process customer
          payments; and loss of the purchasing/materials management system.

          KeySpan believes that, with modifications to existing software and
          conversions to new hardware and software, the Year 2000 issue will not
          pose significant operational problems for its computer systems.
          However, if such modifications and conversions do not perform as
          expected, and contingency plans fail the Year 2000 issue could have a
          material adverse impact on the operations of LIPA.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

          No material changes have occurred in this section as of  June 30, 1999
          from the information provided in LIPA's Annual Report on Form 10-K for
          the nine months ended December 31, 1998, as filed on March 31, 1999.

<PAGE>

                                                                              22

Part II. OTHER INFORMATION

Item 1.   Legal proceedings

          Except as discussed below, no significant changes have occurred with
          respect to legal proceedings as discussed in Item 1. Business -
          Shoreham Tax Matters and Item 3. Legal Proceedings in LIPA's Annual
          Report on Form 10-K for the nine months ended December 31, 1998, as
          filed on March 31, 1999.

          With respect to Shoreham Tax Matters, on July 26, 1999, the Appellate
          Division, Second Department overruled the lower court's decision and
          held that the Authority was not prohibited from enforcing any part of
          the judgment relating to real property tax refunds attributable to
          over assessments on the Shoreham plant after the January 15, 1987
          effective date of the LIPA Act. LIPA expects that Suffolk County will
          seek leave to appeal this decision to the State Court of Appeals
          sometime in August 1999.

          In July 1992, LILCO and the Authority separately commenced proceedings
          in the Supreme Court of the State of New York, County of Suffolk,
          against the Assessor and the Board of Assessment Review for the Town
          of Brookhaven, New York (the "Assessor") challenging the real property
          tax assessment on Shoreham for the 1992-93 tax year. On or about May
          1, 1992, the Assessor had tentatively assessed Shoreham in an amount
          in excess of $156 million for the 1992-93 tax year. On April 22, 1996,
          the two proceedings were consolidated. On May 13, 1999, the Assessor
          moved to dismiss the proceedings on procedural grounds. Oral arguments
          were held on August 5, 1999. No decision has been rendered by the
          court as of the date of this filing.

          With respect to the action brought by the County of Suffolk entitled
          County of Suffolk v. KeySpan et al., this action was voluntarily
          discontinued by plaintiffs without prejudice. The plaintiffs refiled
          their claims related to executive compensation in the federal action
          entitled County of Suffolk et al. v. Long Island Power Authority which
          was filed on September 28, 1998.

          With respect to the Sylvester v. Catacosinos et al. action, the judge
          adopted the magistrate's recommendation that the complaint be
          dismissed with leave to replead for failure to make a demand. All
          discovery has been stayed.

          With respect to the class action brought against LILCO, LILCO's
          Retirement Income Plan and Robert X. Kelleher, the Plan Administrator,
          the court on August 13, 1999, approved the settlement agreement.


Item 2.   Changes in securities and use of proceeds

          None

<PAGE>

                                                                              23
Item 3.  Defaults upon senior securities

         None

Item 4.  Submission of matters to a vote of security holders

         None

Item 5.  Other information

         None

Item 6.  Exhibits and reports on form 8-K

         (A)   Exhibits

         27    Financial Data Schedule.

         (B)   Reports on Form 8-K

               No reports on Form 8-K were filed during the six months
               ended June 30, 1999.

<PAGE>

                                                                              24
                                    SIGNATURE

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



Date:  August 16, 1999              LONG ISLAND LIGHTING COMPANY d/b/a LIPA
                                    (Registrant)



                                    /s/ David P. Warren
                                    -----------------------
                                    David P. Warren
                                    Chief Financial Officer