<PAGE>

                            FORM 10-Q


               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549


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

          FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                               OR

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

                  COMMISSION FILE NUMBER 1-3571


                  LONG ISLAND LIGHTING COMPANY

       INCORPORATED PURSUANT TO THE LAWS OF NEW YORK STATE


INTERNAL REVENUE SERVICE - EMPLOYER IDENTIFICATION NO. 11-1019782


      175 EAST OLD COUNTRY ROAD, HICKSVILLE, NEW YORK 11801
                         (516) 755-6650

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,  $5 PAR  VALUE,
OUTSTANDING ON SEPTEMBER 30, 1996, WAS 120,512,382.




<PAGE>




                    LONG ISLAND LIGHTING COMPANY






                                                                     PAGE NO.
                                                                     --------

PART I - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

                   STATEMENTS OF INCOME                                  3

                   BALANCE SHEET                                         5

                   STATEMENT OF CASH FLOWS                               7

                   NOTES TO FINANCIAL STATEMENTS                         8

     ITEM 2.   MANAGEMENT'S DISCUSSION AND
               ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS                                    11


PART II - OTHER INFORMATION

     ITEM 1.  LEGAL PROCEEDINGS                                         23

     ITEM 2.  CHANGES IN SECURITIES                                     23

     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>



                          LONG ISLAND LIGHTING COMPANY
                               STATEMENT OF INCOME
                                   (UNAUDITED)
                (Thousands of Dollars - except per share amounts)
<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                             SEPTEMBER 30
                                                             ------------
                                                          1996          1995                                                 
                                                          ----          ----                                         
                                                                                                           
    <S>                                                 <C>          <C>
    REVENUES
    Electric                                            $780,158     $815,342
    Gas                                                   69,617       60,452
                                                        --------     --------
    Total Revenues                                       849,775      875,794
                                                        --------     --------

    EXPENSES
    Operations - fuel and purchased power                203,305      177,934
    Operations - other                                    98,547       88,595
    Maintenance                                           27,173       25,896
    Depreciation and amortization                         38,305       36,577
    Base financial component amortization                 25,243       25,243
    Rate moderation component amortization                (7,992)      28,126
    Regulatory liability component amortization          (22,143)     (22,143)
    Other regulatory amortization                         49,301       74,636
    Operating taxes                                      121,550      119,268
    Federal income tax - current                           8,292        4,081
    Federal income tax - deferred and other               72,792       78,020
                                                        --------     --------
    Total Expenses                                       614,373      636,233
                                                        --------     --------
    Operating Income                                     235,402      239,561
                                                        --------     --------

    OTHER INCOME AND (DEDUCTIONS)
    Rate moderation component carrying charges             6,513        5,989
    Class Settlement                                      (4,930)      (5,466)
    Other income and deductions, net                         372        5,295
    Allowance for other funds used during construction       798          757
    Federal income tax credit - deferred and other           856        1,866
                                                        --------     --------
    Total Other Income and (Deductions)                    3,609        8,441
                                                        --------     --------
    Income Before Interest Charges                       239,011      248,002
                                                        --------     --------

    INTEREST CHARGES AND (CREDITS)
    Interest on long-term debt                            92,892      103,072
    Other interest                                        17,098       14,727
    Allowance for borrowed funds used
     during construction                                  (1,002)      (1,018)
                                                        --------     --------
    Total Interest Charges and (Credits)                 108,988      116,781
                                                        --------     --------

    Net Income                                           130,023      131,221
    Preferred stock dividend requirements                 13,051       13,152
                                                        --------     --------
    Earnings for Common Stock                           $116,972     $118,069
                                                        ========     ========
    Average Common Shares Outstanding (000)              120,495      119,370
    Earnings per Common Share                              $0.97        $0.99

    Dividends Declared per Common Share                   $0.445       $0.445

</TABLE>

        SEE NOTES TO FINANCIAL STATEMENTS.

                                   

<PAGE>



                          LONG ISLAND LIGHTING COMPANY
                               STATEMENT OF INCOME
                                   (UNAUDITED)
                (Thousands of Dollars - except per share amounts)
<TABLE>
<CAPTION>

                                                          Nine Months Ended
                                                             SEPTEMBER 30
                                                             ------------
                                                          1996         1995
                                                          ----         ----
    <S>                                               <C>          <C>
    REVENUES
    Electric                                          $1,916,389   $1,922,514
    Gas                                                  492,203      398,292
                                                      ----------   ----------
    Total Revenues                                     2,408,592    2,320,806
                                                      ----------   ----------

    EXPENSES
    Operations - fuel and purchased power                717,465      610,236
    Operations - other                                   292,395      281,267
    Maintenance                                           87,612       95,799
    Depreciation and amortization                        113,822      108,401
    Base financial component amortization                 75,728       75,728
    Rate moderation component amortization               (33,922)      17,369
    Regulatory liability component amortization          (66,429)     (66,429)
    Other regulatory amortization                        134,503      134,986
    Operating taxes                                      352,873      336,017
    Federal income tax - current                          31,292       10,309
    Federal income tax - deferred and other              136,361      153,440
                                                      ----------   ----------
    Total Expenses                                     1,841,700    1,757,123
                                                      ----------   ----------
    Operating Income                                     566,892      563,683
                                                      ----------   ----------

    OTHER INCOME AND (DEDUCTIONS)
    Rate moderation component carrying charges            18,688       19,461
    Class Settlement                                     (15,311)     (16,366)
    Other income and deductions, net                      16,478       26,084
    Allowance for other funds used during construction     2,134        2,146
    Federal income tax credit - deferred and other         1,208        1,807
                                                      ----------   ----------
    Total Other Income and (Deductions)                   23,197       33,132
                                                      ----------   ----------
    Income Before Interest Charges                       590,089      596,815
                                                      ----------   ----------

    INTEREST CHARGES AND (CREDITS)
    Interest on long-term debt                           291,174      309,709
    Other interest                                        49,370       47,145
    Allowance for borrowed funds used
     during construction                                  (2,759)      (2,951)
                                                      ----------   ----------
    Total Interest Charges and (Credits)                 337,785      353,903
                                                      ----------   ----------

    Net Income                                           252,304      242,912
    Preferred stock dividend requirements                 39,194       39,495
                                                      ----------   ----------
    Earnings for Common Stock                           $213,110     $203,417
                                                      ==========   ==========
    Average Common Shares Outstanding (000)              120,220      119,042
    Earnings per Common Share                              $1.77        $1.71

    Dividends Declared per Common Share                   $1.335       $1.335

</TABLE>

        SEE NOTES TO FINANCIAL STATEMENTS.

                                  

<PAGE>



                          LONG ISLAND LIGHTING COMPANY
                                  BALANCE SHEET
                             (Thousands of Dollars)


<TABLE>
<CAPTION>
                                                    September 30    December 31
                                                        1996            1995
    ASSETS                                          (UNAUDITED)      (AUDITED)
    ------                                          -----------      ---------

    <S>                                              <C>            <C>
    UTILITY PLANT
    Electric                                          $3,859,997     $3,786,540
    Gas                                                1,135,350      1,086,145
    Common                                               257,799        244,828
    Construction work in progress                         99,161        100,521
    Nuclear fuel in process and in reactor                25,115         16,456
                                                     -----------    -----------
                                                       5,377,422      5,234,490
                                                     -----------    -----------
    Less - Accumulated depreciation and
      amortization                                     1,712,721      1,639,492
                                                     -----------    -----------
    Total Net Utility Plant                            3,664,701      3,594,998
                                                     -----------    -----------

    REGULATORY ASSETS
    Base financial component (less accumulated
      amortization of $732,039 and $656,311)           3,306,791      3,382,519
    Rate moderation component                            451,683        383,086
    Shoreham post-settlement costs                       987,848        968,999
    Shoreham nuclear fuel                                 69,645         71,244
    Unamortized cost of issuing securities               200,993        222,567
    Postretirement benefits other than pensions          372,440        383,642
    Regulatory tax asset                               1,782,049      1,802,383
    Other                                                184,226        230,663
                                                     -----------    -----------
    Total Regulatory Assets                            7,355,675      7,445,103
                                                     -----------    -----------

    NONUTILITY PROPERTY AND OTHER INVESTMENTS             18,061         16,030
                                                     -----------    -----------

    CURRENT ASSETS
    Cash and cash equivalents                            172,891        351,453
    Special deposits                                      35,902         63,412
    Customer accounts receivable (less allowance
      for doubtful accounts of $24,324 and $24,676)      327,284        282,218
    LRPP receivable                                       20,019         74,238
    Other accounts receivable                             22,786        107,387
    Accrued unbilled revenues                            145,780        184,440
    Materials and supplies at average cost                60,850         63,595
    Fuel oil at average cost                              42,105         32,090
    Gas in storage at average cost                        82,708         53,076
    Deferred tax asset                                   183,000        191,000
    Prepayments and other current assets                  10,049          8,986
                                                     -----------    -----------
    Total Current Assets                               1,103,374      1,411,895
                                                     -----------    -----------

    DEFERRED CHARGES                                      66,753         70,915
                                                     -----------    -----------

    TOTAL ASSETS                                     $12,208,564    $12,538,941
                                                     ===========    ===========

</TABLE>

    SEE NOTES TO FINANCIAL STATEMENTS.



                                  

<PAGE>



                          LONG ISLAND LIGHTING COMPANY
                                  BALANCE SHEET
                             (Thousands of Dollars)

<TABLE>
<CAPTION>

                                                    September 30   December 31
                                                       1996           1995
    CAPITALIZATION AND LIABILITIES                   (UNAUDITED)    (AUDITED)
    ------------------------------                   -----------    ---------

    <S>                                              <C>           <C>
    CAPITALIZATION
    Long-term debt                                    $4,472,675    $4,722,675
    Unamortized discount on debt                         (15,187)      (16,075)
                                                     -----------   -----------
                                                       4,457,488     4,706,600
                                                     -----------   -----------

    Preferred stock - redemption required                638,500       639,550
    Preferred stock - no redemption required              63,677        63,934
                                                     -----------   -----------
                                                         702,177       703,484
                                                     -----------   -----------

    Common stock                                         602,562       598,277
    Premium on capital stock                           1,124,563     1,114,508
    Capital stock expense                                (49,722)      (50,751)
    Retained earnings                                    846,473       790,919
    Treasury stock, at cost                                  (60)           --
                                                     -----------   -----------
    Total Common Shareowners' Equity                   2,523,816     2,452,953
                                                     -----------   -----------

    Total Capitalization                               7,683,481     7,863,037
                                                     -----------   -----------

    REGULATORY LIABILITIES
    Regulatory liability component                       218,238       277,757
    1989 Settlement credits                              129,745       136,655
    Regulatory tax liability                             114,359       116,060
    Other                                                162,829       132,891
                                                     -----------   -----------
    Total Regulatory Liabilities                         625,171       663,363
                                                     -----------   -----------

    CURRENT LIABILITIES
    Current maturities of long-term debt                 250,000       415,000
    Current redemption requirements of
     preferred stock                                       4,800         4,800
    Accounts payable and accrued liabilities             274,546       278,986
    Accrued taxes (including federal income
     tax of $19,978 and $28,736)                          33,368        60,498
    Accrued interest                                     142,311       158,325
    Dividends payable                                     55,307        57,899
    Class Settlement                                      53,333        45,833
    Customer deposits                                     29,439        29,547
                                                     -----------   -----------
    Total Current Liabilities                            843,104     1,050,888
                                                     -----------   -----------

    DEFERRED CREDITS
    Deferred federal income tax                        2,446,330     2,337,732
    Class Settlement                                     106,125       129,809
    Other                                                 70,136        44,976
                                                     -----------   -----------
    Total Deferred Credits                             2,622,591     2,512,517
                                                     -----------   -----------

    OPERATING RESERVES
    Pension and other postretirements benefits           385,415       396,490
    Claims and damages                                    48,802        52,646
                                                     -----------   -----------
    Total Operating Reserves                             434,217       449,136
                                                     -----------   -----------

    COMMITMENTS AND CONTINGENCIES                             --            --
                                                     -----------   -----------

    TOTAL CAPITALIZATION AND LIABILITIES             $12,208,564   $12,538,941
                                                     ===========   ===========
</TABLE>

    SEE NOTES TO FINANCIAL STATEMENTS.

                                  


<PAGE>

                          LONG ISLAND LIGHTING COMPANY
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                             (Thousands of Dollars)
<TABLE>
<CAPTION>
                                                       Nine Months Ending
                                                           SEPTEMBER 30
                                                           ------------
                                                       1996          1995
                                                       ----          ----
<S>                                                <C>           <C>
OPERATING ACTIVITIES
Net Income                                         $ 252,304     $ 242,912
Adjustments to reconcile net income to net
 cash provided by operating activities
 Provision for doubtful accounts                      18,649        13,420
 Depreciation and amortization                       113,822       108,401
 Base financial component amortization                75,728        75,728
 Rate moderation component amortization              (33,922)       17,369
 Regulatory liability component amortization         (66,429)      (66,429)
 Other regulatory amortization                       134,503       134,986
 Rate moderation component carrying charges          (18,688)      (19,461)
 Class Settlement                                     15,311        16,366
 Amortization of cost of issuing and
  redeeming securities                                26,448        30,078
 Federal income tax - deferred and other             135,153       151,633
 Allowance for other funds used during construction   (2,134)       (2,146)
 Gas Cost Adjustment                                  16,969        14,701
 Other                                                55,502         4,642
Changes in operating assets and liabilities
 Accounts receivable                                  20,887      (109,125)
 Accrued unbilled revenues                            38,660        28,505
 Materials and supplies, fuel oil and
  gas in storage                                     (36,902)        8,381
 Accounts payable and accrued liabilities            (32,412)      (26,543)
 Accrued taxes                                       (27,130)      (11,081)
 Class Settlement                                    (31,495)      (28,785)
 Special deposits                                     27,510       (34,191)
 Prepayments and other current assets                 (1,063)       (5,191)
 Other                                               (39,003)      (30,329)
                                                   ---------     ---------
Net Cash Provided by Operating Activities            642,268       513,841
                                                   ---------     ---------

INVESTING ACTIVITIES
Construction and nuclear fuel expenditures          (176,552)     (170,214)
Shoreham-post settlement costs                       (40,544)      (58,544)
Other                                                 (2,112)        8,625
                                                   ---------     ---------
Net Cash Used in Investing Activities               (219,208)     (220,133)
                                                   ---------     ---------

FINANCING ACTIVITIES
Proceeds from sale of common stock                    14,083        14,572
Proceeds from issuance of long-term debt                  --        49,287
Redemption of long-term debt                        (415,000)     (100,000)
Redemption of preferred stock                         (1,050)       (1,050)
Preferred stock dividends paid                       (39,215)      (39,515)
Common stock dividends paid                         (160,127)     (158,505)
Other                                                   (313)          569
                                                   ---------     ---------
Net Cash Used in Financing Activities               (601,622)     (234,642)
                                                   ---------     ---------
Net (Decrease) Increase in Cash and
Cash Equivalents                                   $(178,562)    $  59,066
                                                   =========     =========
Cash and cash equivalents at January 1             $ 351,453     $ 185,451
Net (decrease) increase in cash and
 cash equivalents                                   (178,562)       59,066
                                                   ---------     ---------
Cash and Cash Equivalents at September 30          $ 172,891     $ 244,517
                                                   =========     =========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

                                  

<PAGE>



                          NOTES TO FINANCIAL STATEMENTS
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996
                                   (UNAUDITED)


NOTE 1. BASIS OF PRESENTATION

These Notes to Financial  Statements  reflect  events  subsequent to February 7,
1996,  the date of the most recent Report of Independent  Auditors,  through the
date of this Quarterly  Report on Form 10-Q for the three months ended September
30, 1996. 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 nine months ended September 30, 1996, the Company's Quarterly
Reports  on Form 10-Q for the three  months  ended  March 31,  1996 and June 30,
1996,  and the Company's  Annual  Report on Form 10-K, as amended,  for the year
ended December 31, 1995, incorporated herein by reference.

The financial  statements  furnished are 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  interim  periods  presented.  Operating  results  for these
interim periods are not necessarily indicative of results to be expected for the
entire year, due to seasonal, operating and other factors.

Certain prior year amounts have been  reclassified to be consistent with current
year presentation.

NOTE 2. RATE MATTERS

ELECTRIC

In 1995, the Company  requested that the Public Service  Commission of the State
of New York (PSC) extend the  provisions  of its July 1995  electric  rate order
through November 30, 1996. As of the date of this report, the PSC has yet to act
upon this request.

During the nine month period ended  September 30, 1996,  the PSC has  instituted
the following initiatives intended to lower electric rates on Long Island:

      An Order to Show  Cause,  issued in  February  1996,  to  examine  various
      opportunities to reduce the Company's electric rates;

      An Order,  issued in April 1996, expanding the scope of the Order to Show
      Cause proceeding,  in an effort to provide  "immediate and  substantial  
      rate relief." This  order  directed  the  Company  to file financial and
      other  information sufficient  to provide a legal  basis for  setting new
      rates for both the single rate year (1997) and the three-year period 1997-
      1999;

      An Order,  issued in July 1996, to institute an expedited  temporary  rate
      phase  in the  Order  to Show  Cause  proceeding  mentioned  above,  to be
      conducted in parallel with the ongoing phase concerning permanent rates.

The  Company  shares the PSC's  concern  regarding  electric  rate levels and is
prepared  to assist the PSC in pursuing  any  reasonable  opportunity  to reduce
electric rates.

<PAGE>

The Commission's July 1996 Order,  referred to above,  requested that interested
parties  file  testimony  and  exhibits  sufficient  to  provide a basis for the
Commission  to  decide  whether  the  Company's  electric  rates  should be made
temporary  and, if so, the proper level of such temporary  rates.  The Company's
filing  demonstrated  that current  electric rate levels were justified and that
there was no basis for reducing  them on a temporary  basis.  The Staff,  in its
filing,  recommended that the Company's rates be reduced on a temporary basis by
4.2% effective October 1, 1996, until the permanent rate case is decided.

Although  evidentiary  hearings on the Company's,  Staff's and other  interested
parties'  submissions were subsequently held on an expedited basis to enable the
PSC to render a decision on the Company's  rates, as of the date of this report,
the PSC has yet to take any action.

In addition to the above filing,  in September 1996, the Company,  completed the
filing of a multi-year rate plan (Plan) in compliance with the April 1996 Order.
Major  elements of the Plan  include:  (i) a base rate freeze for the three year
period  December  1, 1996  through  November  30, 1999 as opposed to a base rate
decrease,  even on a temporary basis; (ii) an allowed return on common equity of
11.0% for the term of the Plan; (iii) an equity earnings cap of 12.66%,  whereby
earnings in excess of the 11.0% allowed  return on common equity up to this cap,
would be fully retained by the shareowner,  with any excess above the 12.66% cap
shared with the ratepayer;  (iv) the  continuation of existing LILCO  Ratemaking
and Performance  Plan (LRPP) revenue and expense  reconciliation  mechanisms and
performance incentive programs; (v) directly crediting all net proceeds from the
Shoreham  property  tax  litigation  and other  sources  to the Rate  Moderation
Component (RMC) to reduce its balance; and (vi) a mechanism to fully recover any
outstanding  RMC balance at the end of the 1999 rate year  through  inclusion in
the Fuel Cost Adjustment (FCA), over a two-year period.

The Company is currently  unable to predict the outcome of either the  temporary
or  permanent  rate  proceedings  and their  effect,  if any,  on the  Company's
financial condition or its results of operations.

For a further  discussion of the rate  proceedings  see the Company's  Quarterly
Reports  on Form 10-Q for the three  months  ended  March 31,  1996 and June 30,
1996,  and Note 3 of Notes to  Financial  Statements  included in the  Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1995.

                                  

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

RESULTS OF OPERATIONS

EARNINGS

Earnings for common stock for the three months ended  September  30, 1996,  were
$117.0  million or $0.97 per common share  compared with $118.1 million or $0.99
per common  share for the same  period  last  year.  For the nine  months  ended
September  30, 1996,  earnings for common  stock  amounted to $213.1  million or
$1.77 per common share,  compared with $203.4  million or $1.71 per common share
for the same period last year.

The  increase in earnings  for the nine months  ended  September  30,  1996,  is
attributable to an increase in earnings for the gas business which resulted from
several positive  developments.  These  developments  include the recognition of
additional  sales  volumes  due to the  continued  growth in the number of space
heating  customers,   colder  than  normal  weather  and  significantly   higher
off-system  sales when compared to the same period last year. Also  contributing
to the increase in gas business  earnings was a 3.2% rate increase  which became
effective December 1, 1995.

The  decrease in  earnings,  for the three  months  ended  September  30,  1996,
resulted primarily from the timing of when revenues and expenses associated with
the growth in the gas business are recognized.  Specifically, the added revenues
associated with such growth are concentrated in the heating season,  whereas the
increased costs necessary for such growth are incurred throughout the year.

REVENUES

Total  revenues  for the three  months ended  September  30,  1996,  were $849.8
million, representing a decrease of $26.0 million or 3%, from total revenues for
the three months ended September 30, 1995.  Electric revenues decreased by $35.2
million  or 4.3% and gas  revenues  increased  by $9.2  million  or 15.2%,  when
compared to the same period in 1995.

For the nine months ended September 30, 1996,  revenues totaled $2.4 billion, an
increase  of $87.8  million or 3.8%  compared  with the same  period  last year.
Electric  revenues  were  lower by $6.1  million or 0.3% and gas  revenues  were
higher by $93.9 million or 23.6%, when compared with the same period in 1995.



<PAGE>



Electric

Electric  revenues  decreased for the three and nine months ended  September 30,
1996,  as  compared  with the same  periods  in 1995.  This  decrease  is due to
decreased  sales volumes during the three months ended  September 30, 1996, when
compared  to the same  period in 1995,  as a result of  variations  in  weather.
However,  these lower  revenues from sales have no effect on earnings due to the
Company's   current   electric   rate   structure   which   includes  a  revenue
reconciliation  mechanism that eliminates the impact on earnings caused by sales
volumes that are above or below adjudicated levels.

Gas

The increase in gas revenues for the three and nine months ended  September  30,
1996,  compared  with the same periods in 1995,  is  primarily  the result of an
increase in the number of gas heating customers,  higher sales volumes resulting
from colder than normal winter weather,  an increase in off-system  sales and in
the commodity cost of natural gas which is recovered from customers  through the
Gas Cost Adjustment Mechanism included in rates. Also contributing to higher gas
revenues was a gas base rate increase of 3.2% which became effective December 1,
1995.




<PAGE>


FUELS AND PURCHASED POWER

Fuels and purchased power expenses for the three and nine months ended September
30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>

                                    Three Months Ended         Nine Months Ended
                                    9/30/96    9/30/95         9/30/96   9/30/95
                                    -------    -------         -------   -------
                                       (In Millions)             (In Millions)

      <S>                            <C>          <C>           <C>         <C>
      ELECTRIC SYSTEM
        Oil                          $ 35         $ 25          $127        $ 82
        Gas                            50           43            94         106
        Nuclear                         4            4            12          10
        Purchased Power                85           82           248         233
                                     ----         ----          ----        ----
      Total Electric Fuel Costs       174          154           481         431

      GAS SYSTEM                       29           24           236         179
                                     ----         ----          ----        ----
      Total                          $203         $178          $717        $610
                                     ====         ====          ====        ====
</TABLE>

For the three and nine months ended September 30, 1996, electric fuel costs were
higher when  compared to the same period last year  primarily  due to higher per
unit  prices  for oil,  gas and  purchased  power.  The total fuel  expense  was
partially  offset by a decrease in demand due to weather and profits realized by
the electric  business unit from the off-system gas sales which were credited to
the total fuel expense, discussed below.

Fuel  costs for  operating  the gas  business  increased  for the three and nine
months ended September 30, 1996, when compared to the same periods last year due
to higher gas prices coupled with the increase in sales volumes  associated with
the colder than normal winter weather.

The percentages of total electric energy  available by type of fuel for electric
operations for the three and nine months ended  September 30, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>

                                      Three Months Ended      Nine Months Ended
                                      9/30/96    9/30/95      9/30/96   9/30/95
                                      -------    -------      -------   -------

      <S>                             <C>          <C>         <C>       <C>
      Oil                              18%          16%         25%       20%
      Gas                              33           41          24        34
      Nuclear                           9            7          10         6
      Purchases                        40           36          41        40
                                      ----         ----        ----      ---
      Total                           100%         100%        100%      100%
                                      ====         ====        ====      ====

</TABLE>

For the three months ended  September 30, 1996, the Company  utilized  purchased
power to displace more costly  generation.  For the nine months ended  September
30, 1996,  electricity  generated with gas decreased compared to the same period
in 1995,  as the high demand for gas resulting  from the  unusually  cold winter
experienced  in the  northeast  caused an increase  in gas  prices.  During this
period,  the electric business unit sold portions of its gas supply for electric
generation to off-system  entities.  Profits  realized by the electric  business
unit from these sales,  which total $5 million,  were used to offset the cost of
fuel for electric generation,  thereby providing electric energy to customers at
the lowest possible cost.

<PAGE>

OPERATIONS AND MAINTENANCE EXPENSES

For the three months ended September 30, 1996,  operations and maintenance (O&M)
expenses  increased over the same period in 1995 primarily as a result of higher
accruals for doubtful accounts and due to the timing of certain employee benefit
expenses.  For the nine months ended  September 30, 1996 O&M increased  over the
same period in 1996 as a result of higher minor storm costs (storms in which the
total costs  incurred  are less than $1 million)  higher  accruals  for doubtful
accounts and due to the timing of certain other  expenses.  These increases were
mitigated by the Company's  continuing  efforts to control  costs.  Although O&M
expenses for the nine months ended  September 30, 1996 are higher than for 1995,
the Company expects that the total O&M expenses for the year ended December 1996
will be lower than those incurred in 1995.

RATE MODERATION COMPONENT

The  Rate  Moderation  Component  (RMC)  reflects  the  difference  between  the
Company's revenue  requirements under  conventional  ratemaking and the revenues
resulting from the  implementation  of the rate  moderation plan provided in the
Rate Moderation Agreement (RMA) and subsequent rate case decisions.

Presently,  the Company has an electric fuel  adjustment  clause  mechanism that
collects the higher of: a) the actual cost of fuel; or b) the amount included in
base rates. When fuel costs are below the amount of revenues collected for fuel,
this difference,  called the Fuel Moderation Component (FMC), is credited to the
RMC to reduce its balance and mitigate the need for future rate increases.  When
fuel expenses are greater than the amount reflected in base rates for fuel, this
difference,  called the Fuel Cost  Adjustment  (FCA) is collected from customers
over the following three-month period.

The operation of the FMC has been a significant  contributor to the reduction of
the RMC balance since 1989.  However,  recent  increases in the cost of fuel and
purchased power, have resulted in a reduction of the FMC credit to a level below
that which the Company had experienced during the past several years.

Based on the  Company's  current  electric  rate  structure,  the RMC balance is
expected to increase  above the December 31, 1995 balance  resulting in non-cash
credits to income in 1996.  For the three and nine months  ended  September  30,
1996, the Company  recorded  non-cash  credits to income of  approximately  $8.0
million and $33.9 million,  respectively,  representing  amounts, net of offsets
generated  principally by the FMC mechanism,  by which adjudicated revenues were
below revenues that would have been collected under conventional ratemaking.

For the three and nine months ended September 30, 1995, primarily as a result of
amounts  credited to the RMC balance  through the operation of the Company's FMC
mechanism,  the Company  amortized  the RMC  balance,  resulting  in a charge to
income of approximately $28.1 million and $17.4 million, respectively.

For a further  discussion  of the RMC, RMA, FMC and FCA, see Notes 1, 2 and 3 of
Notes to Financial  Statements  included in the Company's  Annual Report on Form
10-K, as amended, for the year ended December 31, 1995.

OTHER REGULATORY AMORTIZATION

Charges or credits to other regulatory  amortization  have no impact on earnings
as the Company  recovers  from or returns to customers an  equivalent  amount of
revenue through various mechanisms contained in its current rate structure.

For the  three  months  ended  September  30,  1996 and 1995,  other  regulatory
amortization was a non-cash charge to income of approximately  $49.3 million and
$74.6  million,  respectively.  This  decrease  is  primarily  the  result of an
electric  ratemaking  mechanism  which  eliminates  the  impact on  earnings  of
experiencing  sales  that are  above  (or  below)  adjudicated  levels.  Despite
decreased  revenues,  primarily  attributable  to variations in weather,  actual
revenues net of fuel and gross receipts taxes (net electric revenue) continue to
exceed  adjudicated  levels.  For the three months ended  September 30, 1996 and
1995, the Company,  in accordance with mechanisms  contained in the current rate
structure,  eliminated  the impact on earnings of these higher than  adjudicated
net electric  revenues by recording  non-cash charges to income of $19.9 million
and $47.7 million, respectively. The remaining variance is the net result of the
increased  amortization  of the LILCO  Ratemaking  and  Performance  Plan (LRPP)
deferrals of prior rate years, higher non-cash charges resulting from gas excess
earnings and lower non-cash charges related to electric excess earnings.

<PAGE>

OPERATING TAXES

For the three months ended  September 30, 1996,  operating  taxes totaled $121.6
million,  an increase of $2.3  million or 1.9% over the  comparable  period last
year.  For the nine months ended  September  30, 1996,  these taxes  amounted to
$352.9  million,  an increase  of $16.9  million or 5.0% over the same period in
1995. The increase in operating  taxes was  attributable  to higher property and
revenue taxes.

FEDERAL INCOME TAX

The current  portion of the Company's  federal  income tax expense for the three
and nine month  periods  ended  September  30, 1996,  was $8.3 million and $31.3
million,  respectively.  This  represents  an increase of $4.2 million and $21.0
million in the Company's  current  federal income tax expense over the three and
nine month periods ended September 30, 1995,  respectively.  These increases are
primarily  attributable  to the  full  utilization  in  1996  of  the  Company's
Alternative Minimum Tax (AMT) net operating loss (NOL) carryforward.

The Company  forecasts  that its current  federal  income tax  payments,  net of
investment tax credit  carryforwards,  for the year ended December 31, 1996 will
amount to approximately $46 million.

OTHER INCOME AND DEDUCTIONS, NET

Other income net of deductions,  for the three months ended  September 30, 1996,
was $.4 million,  a decrease of $4.9 million when compared to the same period in
1995. This decrease resulted from a reduction in interest income from short term
investments, lower non-cash carrying charge income and the settlement of a claim
against the Company.  For the nine months ended September 30, 1996, other income
net of deductions,  was $16.5 million,  a decrease of $9.6 million compared with
the same period in 1995. This decrease  resulted from reduced non-cash  carrying
charge  income  and the  recognition  in 1995 of  approximately  $7  million  of
litigation proceeds related to the construction of Shoreham, partially offset by
higher short term interest income for the period.

INTEREST EXPENSE

Interest  expense for the three months  ended  September  30,  1996,  was $110.0
million,  a decrease of $7.8 million or 6.6% when compared to the same period of
1995. For the nine months ended September 30, 1996, interest expense amounted to
$340.5  million,  a decrease  of $16.3  million or 4.6%  compared  with the same
period last year.  These  decreases are due to lower debt levels  resulting from
the retirement of maturing debt by using cash generated from operations.


                                

<PAGE>


FINANCIAL CONDITION

LIQUIDITY

At September  30, 1996,  the  Company's  cash and cash  equivalents  amounted to
approximately  $172.9 million,  compared to $351.5 million at December 31, 1995.
The decrease in the cash balance at September 30, 1996,  primarily  reflects the
utilization  of cash on hand and cash  previously  deposited with the Trustee of
the General and Refunding (G&R) Mortgage to satisfy the mandatory  redemption of
$415 million of the Company's G&R Bonds on May 1, 1996.

Primarily, as a result of the above redemption, the Company's debt ratio dropped
from 61.8% at December 31, 1995, to 59.3% at September 30, 1996. The use of cash
to satisfy  maturing  debt is part of the  Company's  commitment  to improve its
capital structure.

In January 1996,  the Company  received $81 million,  including  interest,  from
Suffolk County pursuant to a judgment that found that the Shoreham  property was
overvalued for property tax purposes between 1976 and 1983 (excluding 1979 which
had been previously settled). Depending upon the outcome of the current electric
rate proceedings, the Company may be required to return all or a portion of this
recovery, net of legal expenses, to its electric ratepayers instead of crediting
the RMC balance as  requested by the Company.  For a further  discussion  of the
first  phase  of  this  tax  certiorari  proceeding  see  Item  7:  Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  and
Note 3 of Notes to Financial  Statements included in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1995.

In February 1997 and April 1998,  the Company has maturing debt  obligations  of
$250 million and $100  million,  respectively.  The Company  intends to use cash
generated  from  operations to the maximum  extent  practicable to satisfy these
obligations.

The  Company  has no current  plans for  accessing  the public  markets to raise
capital for the next several years. However, the Company would access the public
markets to refinance  existing debt or preferred stock should market  conditions
prove  favorable.  The  Company  would  also take  advantage  of any  tax-exempt
financing made available by the New York State Energy  Research and  Development
Authority.

The Company has available for its use a revolving line of credit through October
1, 1997,  provided by its 1989 Revolving Credit Agreement.  In July 1996, at the
Company's  request,  the  amount  committed  by the banks  participating  in the
facility  was reduced from $300 million to $250  million.  The Company  believes
this action is appropriate  given the levels of cash on hand,  projected  future
cash generated from  operations and modest debt and preferred  stock  maturities
through 1998.  This line of credit is secured by a first lien upon the Company's
accounts receivable and fuel oil inventories.

<PAGE>

CAPITAL REQUIREMENTS AND CAPITAL PROVIDED

Capital  requirements  and capital  provided for the three and nine months ended
September 30, 1996, were as follows:
<TABLE>
<CAPTION>

                                                        (In Millions of Dollars)
--------------------------------------------------------------------------------
                                         Three Months Ended    Nine Months Ended
                                         September 30, 1996   September 30, 1996
--------------------------------------------------------------------------------
<S>                                            <C>                      <C>
CAPITAL REQUIREMENTS

Construction                                   $ 70                     $177
--------------------------------------------------------------------------------
Redemptions and Dividends
Long-term debt                                    -                      415
Preferred stock                                   1                        1
Preferred stock dividends                        13                       39
Common stock dividends                           53                      160
--------------------------------------------------------------------------------
Total Redemptions and Dividends                  67                      615
--------------------------------------------------------------------------------
Shoreham post-settlement costs                   11                       41
--------------------------------------------------------------------------------
Total Capital Requirements                     $148                     $833
================================================================================

CAPITAL PROVIDED

Cash generation from operations                $236                     $642
(Increase) decrease in cash                     (92)                     179
Common stock issued                               5                       14
Other investing and financing
  activities                                     (1)                      (2)
--------------------------------------------------------------------------------
Total Capital Provided                         $148                     $833
================================================================================
</TABLE>

For further information, see the Statement of Cash Flows.


Given the  Company's  current  electric load  forecast and the  availability  of
electric  energy  provided  by the  Company's  generating  facilities  and  firm
purchases from others,  the Company  believes it will need additional  capacity,
which it plans to satisfy through firm purchase  contracts of approximately  100
megawatts  (MW) in 1998,  and 150 MW starting in 1999.  The Company  anticipates
that Long  Island  will need  additional  generating  capability  by 2001.  This
facility will most likely be  approximately  140 MW and constructed on behalf of
the  Company  by an  outside  party  and as such,  will not be  financed  by the
Company.

The Company  estimates that cash generated from operations will be sufficient to
meet total capital expenditures for the remainder of 1996.

INVESTMENT RATING

The Company's  securities  are rated by Standard and Poor's  Corporation  (S&P),
Moody's Investors Service (Moody's),  Fitch Investors  Service,  L.P.(Fitch) and
Duff and Phelps, Inc. (D&P).

On November 11, 1996,  Moody's revised its outlook on the Company's  General and
Refunding  Bonds,  Debentures and Preferred Stock from negative to stable,  as a
result of a New York State Supreme Court,  Suffolk County ruling,  that the Town
of Brookhaven  over assessed the Shoreham  Nuclear Power Station  (Shoreham) for
the years  1984-1992.  For a  discussion  of this  ruling  see Part  II.,  Other
Information, Item 1. Legal Proceedings.

For a further  discussion of the Company's credit ratings see Investment  Rating
in the Company's Quarterly Reports on Form 10-Q for the three months ended March
31, 1996 and June 30, 1996, and Item 7: Management's  Discussion and Analysis of
Financial  Condition and Results of Operations  included in the Company's Annual
Report on Form 10-K, as amended, for the year ended December 31, 1995.

RATE MATTERS

For a discussion  of rate matters,  see Note 2 of Notes to Financial  Statements
and Note 3 of Notes to Financial  Statements  included in the  Company's  Annual
Report on Form 10-K, as amended, for the year ended December 31, 1995.

<PAGE>


COMPETITIVE OPPORTUNITIES

New York State Competitive Opportunities Proceeding

On May 20, 1996,  the Public  Service  Commission of the State of New York (PSC)
issued its "Opinion and Order Regarding  Competitive  Opportunities for Electric
Service,"  discussed in greater  detail in the Company's Form 10-Q for the three
months  ended June 30,  1996,  in which the PSC  announced  its "vision" for the
future of the  electric  industry  in New York  State.  Certain  aspects  of the
restructuring   envisioned  by  the  PSC  --  particularly  the  PSC's  apparent
determinations  that it can deny a  reasonable  opportunity  to recover  prudent
investments  made on  behalf  of the  public,  order  retail  wheeling,  require
divestiture of generation  assets and deregulate  certain  sectors of the energy
market -- could, if implemented, have a negative impact on the operations of New
York's  investor-owned  electric utilities,  including the Company.  The Company
therefore joined in a lawsuit filed by the Energy  Association of New York State
and the State's other electric  utilities against the PSC on September 18, 1996,
in the New York Supreme Court for Albany  County.  The utilities  have requested
that the Court declare that the May 20 Order is unlawful or, in the alternative,
that the Court  clarify that the May 20 Order can be given no binding  effect by
the PSC.  The  litigation  is ongoing  and the Company is unable at this time to
predict  the  likelihood  of  success  or the  impact of the  litigation  on the
Company's operations.

Also in response to the PSC's May 20 Order, filings were made on October 1, 1996
by the five  utilities  who were  directed  therein to submit  proposed rate and
restructuring  plans addressing a transition to competition:  Central Hudson Gas
and Electric  Corporation;  Consolidated  Edison Company of New York,  Inc.; New
York State Electric and Gas Corporation; Orange and Rockland Utilities, Inc. and
Rochester  Gas  and  Electric  Corporation.  The  PSC  has  commenced  separate,
company-specific  proceedings to address these  submittals,  and the Company has
sought permission to intervene in each.

The Electric Industry - Federal Regulatory Issues

In April 1996, in response to its Notice of Proposed Rulemaking (NOPR) issued in
March 1995, the Federal Energy  Regulatory  Commission  (FERC) issued two orders
relating to the development of competitive wholesale electric markets.
<PAGE>

Order 888, a final rule on open transmission  access and stranded cost recovery,
provides  that the FERC has exclusive  jurisdiction  over  interstate  wholesale
wheeling and that utility  transmission  systems must now be open to  qualifying
sellers and purchasers of power on a non-discriminatory  basis. Order 888 allows
utilities  to  recover   legitimate,   prudent  and  verifiable  stranded  costs
associated with wholesale  transmission,  including the circumstances where full
requirements  customers become wholesale  transmission customers such as where a
municipality  establishes  its own  electric  system.  With  respect  to  retail
wheeling,  the FERC concluded  that it has  jurisdiction  over rates,  terms and
conditions  of  service,  but would  leave the  issue of  recovery  of the costs
stranded by retail wheeling to the states.

Order 888 required  utilities to file open access tariffs under which they would
provide transmission services, comparable to that which they provide themselves,
to third parties on a non-discriminatory basis. Additionally, utilities must use
these same tariffs for their own  wholesale  sales.  The Company  filed its open
access  tariff in July 1996.  On  September  25,  1996,  the FERC  ordered  Rate
Hearings on 28 utility transmission tariffs,  including the Company's. The Order
indicated that, on the basis of a preliminary review, the FERC was not satisfied
that the rates were just and reasonable.

Order 889, a final rule on a transmission pricing bulletin board,  addresses the
rules and technical standards for operation of an electronic bulletin board that
will make available,  on a real-time  basis,  the price,  availability and other
pertinent information  concerning each transmission  utility's services. It also
addresses   standards   of  conduct  to  ensure  that   transmission   utilities
functionally  separate their transmission and wholesale power merchant functions
to prevent discriminatory self-dealing.

With other  members of the  industry,  the Company has  participated  in several
joint petitions for rehearing and/or  clarification of the FERC's Orders 888 and
889.  Among other  issues,  these  petitions  address the FERC's  obligation  to
exercise its jurisdiction to provide for the recovery of strandable  investments
in any retail wheeling situations.  The outcome and timing of the FERC Orders on
rehearing are uncertain.

It is not  possible to predict the amount of stranded  costs,  if any,  that the
Company would be unable to recover in a competitive environment.  The outcome of
the  state  and  federal  regulatory  proceedings  could  adversely  affect  the
Company's  ability to apply Statement of Financial  Accounting  Standards (SFAS)
No. 71,  "Accounting  for the Effects of Certain  Types of  Regulation,"  which,
pursuant to SFAS No. 101, "Accounting for Discontinuation of Application of SFAS
No. 71",  could then require a significant  write-down of assets,  the amount of
which cannot presently be determined.

Notwithstanding the outcome of the state and federal regulatory proceedings,  or
any other state action, the Company believes that, among other obligations,  New
York State has a  contractual  obligation  to allow the  Company to recover  its
Shoreham-related assets.

LONG ISLAND POWER AUTHORITY PROPOSED PLAN

For information  regarding the Long Island Power Authority (LIPA) Proposed Plan,
see the Company's  Form 10-Q for the three months ended March 31, 1996, and Note
10 of Notes to Financial Statements in the Company's Annual Report on Form 10-K,
as amended, for the year ended December 31, 1995.


                                   

<PAGE>



FORWARD-LOOKING STATEMENTS

This three month report on Form 10-Q and the documents incorporated by reference
contain  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 1995 (Reform Act).  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  Company's  business and  financial  results  could cause actual  results to
differ  materially from those stated in the  forward-looking  statements.  Those
factors include state and federal regulatory rate proceedings,  competition, the
LIPA Proposed Plan, certain  environmental matters as well as such other factors
as set forth in the Company's  Annual  Report on Form 10-K, as amended,  for the
year ended  December 31, 1995,  and all  documents  subsequently  filed with the
Securities and Exchange Commission.


                                   

<PAGE>



PART II.  OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

On November 4, 1996, the New York State Supreme  Court,  Suffolk  County,  ruled
that the Town of Brookhaven has over assessed the Shoreham Nuclear Power Station
for  the  years  1984-1992.   According  to  preliminary  estimates  by  Company
officials, the overpayment of taxes is approximately $500 million plus interest.
The  assessments in this ruling should also result in a refund of  approximately
$260 million plus interest for payments-in-lieu-of  taxes (PILOTs) for the years
1992-1996.  Pursuant  to the 1989  Settlement,  the  Company  agreed to fund the
PILOTs  that LIPA is  required  to make to the  municipalities  that impose real
property taxes on Shoreham.

The overpayment of taxes and PILOTs, plus interest,  are expected to be returned
to the Company and such amounts,  excluding  litigation  costs,  will be used to
reduce electric rates in the future.  However,  the court's ruling is subject to
appeal  and,  as a result,  the  Company is unable to  determine  the amount and
timing of receipt of the refunds. For a discussion of the refund received by the
Company in the first phase of this tax certiorari  proceeding  see  Management's
Discussion and Analysis of Financial Condition and Results of Operation herein.

ITEM 2.     CHANGES IN SECURITIES

      None.

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

            Exhibit 27 - Financial  Data Schedule UT for the  nine-month  period
            ended September 30, 1996.

      B.    REPORTS ON FORM 8-K

            None.

                                   

<PAGE>



                                    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.



                                          LONG ISLAND LIGHTING COMPANY
                                          (Registrant)


                                          By  /S/   ANTHONY NOZZOLILLO
                                          ----------------------------
                                                 ANTHONY NOZZOLILLO
                                            Senior Vice President and
                                            Principal Financial Officer


Dated:  November 14, 1996

                                   

<PAGE>


                                 EXHIBIT INDEX
                                 -------------
                                 

                                                                   PAGE NO.
                                                                   --------

Exhibit 27 - Financial Data Schedule UT
for the nine-month period ended September 30, 1996                    26