Amend: Fitch Rates LIPA's $200MM Electric System 2006C Revs 'A-'; Outlook Stable.

NEW YORK -- This is an amendment to a message dated June 29, 2006. Due to a favorable change in market conditions, LIPA was able to refund $310 million of outstanding senior lien bonds with the Series 2006D electric system general revenue bonds. These bonds, along with the 2006C bonds which are already rated by Fitch, rank on parity with LIPA's outstanding $5.8 billion of senior lien electric system general revenue bonds.

Fitch Ratings has assigned an 'A-' rating to the Long Island Power Authority's (LIPA) series 2006 C electric system general revenue bonds. Fitch also affirms LIPA's outstanding $5.8 billion electric system general revenue bonds at 'A-'. The Rating Outlook is Stable. The electric system general revenue bonds, including series 2006C, are secured by a pledge of net revenues that is senior to LIPA's $1 billion of subordinated revenue bonds. Proceeds from the 2006C bonds will fund capital projects. The bonds are scheduled to price the week of July 10, 2006 with Morgan Stanley as lead underwriter.

Listed below are LIPA's primary credit strengths and concerns. For additional information, see Fitch's March 9, 2006 credit report, available on the Fitch Ratings web site at www.fitchratings.com.

LIPA's credit strengths:

--Stable financial performance;

--Reasonable plan to procure future power supply;

--Favorable and growing customer base;

--Ability to pass through rising fuel and purchased power costs on a timely basis;

--Effective risk management policies and practices; and,

--High level of service reliability.

Primary concerns for LIPA:

--Significant exposure to volatile fuel and natural gas commodity costs (over 90% of energy sources);

--High retail rates for the northeast region; and,

--Above average leverage.

Over the next one-to-three years, Fitch believes that key drivers for LIPA's credit include:

--Maintaining its financial profile while trying to keep retail rates flat through 2007: Fitch views LIPA's fuel adjustment charge a favorable factor in its credit profile as it allows for a timely cost recovery mechanism of volatile fuel and purchase power prices. Earlier this year, LIPA pledged to keep retail rates flat through 2007 absent an event or crisis impacting supply. Limiting the utilization of this mechanism for the next 18 months reduces LIPA's ability to recover potentially increasing costs. Fitch however believes this risk is partially mitigated due to LIPA's existing hedging program, its increased levels of operating margins projected in the future and the planned increase in its fuel reserve fund of $100 million that will be created after the effective date of the new agreements with KeySpan. Thus far, LIPA's cash flow has been able to meet operating costs. Fitch will continue to look for stable finances from LIPA through 2007.

--Maintaining a stable political environment. LIPA operates in a highly politicized environment. Nevertheless, Fitch recognizes that LIPA has effectively managed ongoing political issues, especially as it relates to cost recovery. Fitch's concern relates to any direct or indirect pressure that would impair LIPA's future use of the fuel adjustment surcharge. Recently, four customer filed lawsuits taking issue with LIPA's calculation and use of its fuel surcharge. Although the New York Public Service Commission (PSC) does not have ratemaking authority over LIPA, LIPA voluntarily sought to have the PSC review its rate methodology to review its practices regarding its fuel clause and the cost recovered under that clause. Recently, the PSC recently issued a ruling stating it permits utilities to use automatic adjustment clauses to recover a range of costs not limited to fuel costs. The PSC however declined to review LIPA's rate methodology. As a result, LIPA plans to use an independent consultant. Fitch notes that most municipal electric systems do not have to go to such lengths to justify its rate methodology.

--Maintaining progress on power supply plan: LIPA's power supply derives primarily from various power purchase contracts, many of which must be derived from generating units located on Long Island for reliability purposes. In 2004, LIPA outlined its long term plans for future power supply procurement to meet its needs through 2015. Successful implementation of this plan is a key credit factor for LIPA. Thus far, the power supply and necessary transmission and distribution projects are progressing as expected.

Fitch also notes that earlier this year, National Grid plc announced the acquisition of KeySpan Corp. LIPA has entered into several operating agreements with KeySpan for much of LIPA's operations. Given the substantial incentives for both parties to have a mutually beneficial working relationship, Fitch views the potential acquisition as a neutral credit factor. LIPA has the option to terminate its agreements upon a change of control at Keyspan, although Fitch believes finding a replacement for KeySpan would pose a challenge for LIPA.

With over $3.3 billion of operating revenues and 1.1 million customers, LIPA is one of the largest municipal retail systems in the country. LIPA owns and operates an electric transmission and distribution system providing service on Long Island, New York including most of Nassau and Suffolk counties and the Far Rockaway section of Queens.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.