National Grid and KeySpan Corp. have reached agreement with the staff of the New York State Department of Public Service and other parties on National Grid’s acquisition of KeySpan.

“This agreement is a major step forward in completing the merger and bringing significant benefits of the combined companies to our customers and other stakeholders throughout New York,” said Steve Holliday, chief executive of National Grid.

Robert B. Catell, chairman and chief executive officer of KeySpan, praised the agreement for holding down the cost of energy delivery for KeySpan customers through 2012.

“The savings that come from merging with National Grid, which are captured in this settlement, provide rate stability for the future,” Catell said. “Without the merger settlement, KeySpan customers were facing significant rate increases due to rising costs. “

In addition, the agreement presents National Grid with the option to enter into a long-term, fixed-price contract for all output from the 2450-MW Ravenswood Generating Station in Queens, New York. National Grid will have up to three years to complete that option or divest the station.

In addition to the staff of the New York Department of Public Service and the companies, other parties participating in the agreement are New York State Consumer Protection Board, City of New York, Public Utility Law Project, and the International Brotherhood of Electrical Workers Locals 1049, 1381 and 97.

The settlement is subject to review by the administrative law judges overseeing the merger case and the review and approval of the New York State Public Service Commission.

The current schedule for the regulatory process calls for the proposal to be considered at the Aug. 22 New York Public Service Commission meeting.

Approval by the New York Public Service Commission is one of the last remaining reviews required in the merger, which was announced on Feb. 27, 2006. Approval of a settlement with the staff of the New Hampshire Public Utilities Commission and other New Hampshire parties is pending. All other major approvals and clearances for the merger have been received.