Exhibit 3-4

                                 TRUST AGREEMENT

      This TRUST AGREEMENT,  dated as of July 31, 2002 (this "Trust Agreement"),
among Public Service Enterprise Group Incorporated, a New Jersey corporation, as
"Depositor,"  and  Wachovia  Trust  Company,  National  Association,  a  banking
association  organized  under  the laws of the  United  States,  and  Morton  A.
Plawner,  as trustees (the  "Trustees").  The Depositor and the Trustees  hereby
agree as follows:

            1. The trust  created  hereby shall be known as "PSEG  Funding Trust
III," in which  name the  Trustees,  or the  Depositor  to the  extent  provided
herein, may conduct the business of the Trust, make and execute  contracts,  and
sue and be sued.

            2. The Depositor hereby assigns,  transfers conveys and sets over to
the Trustees the sum of $10. The  Trustees  hereby  acknowledge  receipt of such
amount in trust from the  Depositor,  which amount shall  constitute the initial
trust estate.  The Trustees  hereby declare that they will hold the trust estate
in trust for the  Depositor.  It is the intention of the parties hereto that the
Trust created  hereby  constitutes a business trust under Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. ss. 3801, et seq. (the  "Business  Trust Act"),
and that this document  constitutes the governing  instrument of the Trust.  The
Trustees are hereby authorized and directed to execute and file a certificate of
trust with the Delaware  Secretary of State in accordance with the provisions of
the Business Trust Act.

            3. The  Depositor  and the  Trustees  will enter into an amended and
restated Trust Agreement,  satisfactory to each such party and  substantially in
the form  included  as an exhibit  to the 1933 Act  Registration  Statement  (as
defined below),  to provide for the contemplated  operation of the Trust created
hereby and the issuance of the preferred  securities  and the common  securities
referred to therein.  Prior to the  execution  and  delivery of such amended and
restated  Trust  Agreement,  the Trustees  shall not have any duty or obligation
hereunder or with respect to the trust estate,  except as otherwise  required by
applicable  law or as may be  necessary to obtain  prior to such  execution  and
delivery any  licenses,  consents or  approvals  required by  applicable  law or
otherwise.

            4. The  Depositor and the Trustees  hereby  authorize and direct the
Depositor,  as the depositor of the Trust,  (i) to file with the  Securities and
Exchange  Commission (the  "Commission") and execute,  in each case on behalf of
the Trust, (a) the Registration  Statement on Form S-3 or other appropriate form
(the  "1933  Act  Registration  Statement"),   including  any  pre-effective  or
post-effective  amendments to the 1933 Act Registration Statement (including any
preliminary prospectus,  prospectus or prospectus supplements,  and the exhibits
contained  therein),  relating to the  registration  under the Securities Act of
1933,  as  amended,  of  the  preferred  securities  of  the  Trust  and  (b)  a
Registration  Statement  on Form 8-A or other  appropriate  form (the  "1934 Act
Registration   Statement")   (including  all  pre-effective  and  post-effective
amendments thereto) relating to the registration of the preferred  securities of
the Trust under the  Securities  Exchange Act of 1934, as amended;  (ii) to file
with the New York Stock Exchange or any other national stock exchange or

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The Nasdaq Stock Market (each, an "Exchange") and execute on behalf of the Trust
one or  more  listing  applications  and  all  other  applications,  statements,
certificates,  agreements  and  other  instruments  as  shall  be  necessary  or
desirable to cause the preferred  securities of the Trust to be listed on any of
the  Exchanges;  (iii)  to  file  and  execute  on  behalf  of  the  Trust  such
applications,  reports,  surety bonds,  irrevocable  consents,  appointments  of
attorney  for  service of process  and other  papers and  documents  as shall be
necessary or desirable to register the  preferred  securities of the Trust under
the securities or "Blue Sky" laws of such  jurisdictions  as the  Depositor,  on
behalf of the Trust,  may deem  necessary  or  desirable;  (iv) to  execute  and
deliver  letters or documents to, or  instruments  for filing with, a depository
relating to the preferred  securities of the Trust; and (v) to execute on behalf
of the Trust that  certain  Underwriting  Agreement  relating  to the  preferred
securities  of the  Trust,  among  the  Trust,  the  Depositor  and the  several
Underwriters named therein,  substantially in the form included as an exhibit to
the 1933 Act Registration Statement. In the event that any filing referred to in
clauses (i),  (ii) and (iii) above is required by the rules and  regulations  of
the Commission, an Exchange or state securities or blue sky laws, to be executed
on  behalf  of the  Trust by any of the  Trustees,  Morton  A.  Plawner,  in his
capacity as a trustee of the Trust, is hereby authorized and directed to join in
any such  filing  and to  execute  on  behalf  of the  Trust  any and all of the
foregoing.  In  connection  with  all of the  foregoing,  the  Depositor  hereby
constitutes   and   appoints   Morton  A.   Plawner   as  its  true  and  lawful
attorney-in-fact  and agent, with full power of substitution and resubstitution,
for the Depositor or in the  Depositor's  name,  place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to the 1933 Act Registration  Statement and the 1934 Act Registration  Statement
and to file  the  same,  with all  exhibits  thereto,  and  other  documents  in
connection therewith,  with the Commission,  granting unto said attorney-in-fact
and agent  full power and  authority  to do and  perform  each and every act and
thing  requisite and necessary to be done in connection  therewith,  as fully to
all intents and purposes as the  Depositor  might or could to in person,  hereby
ratifying  and  confirming  all that said  attorney-in-fact  and  agent,  or his
respective substitute, shall do or cause to be done by virtue hereof.

            5. This Trust Agreement may be executed in one or more counterparts.

            6. The number of Trustees  initially shall be two (2) and thereafter
the number of Trustees  shall be such number as shall be fixed from time to time
by a written  instrument  signed by the Depositor which may increase or decrease
the number of Trustees;  provided,  however,  that to the extent required by the
Business  Trust  Act,  one  Trustee  shall  either be a natural  person who is a
resident of the State of Delaware or, if not a natural  person,  an entity which
has its principal place of business in the State of Delaware and otherwise meets
the  requirements  of applicable  Delaware law.  Subject to the  foregoing,  the
Depositor  is  entitled  to appoint or remove  without  cause any Trustee at any
time.  The  Trustees  may resign  upon  thirty  (30) days'  prior  notice to the
Depositor.

            7. The Depositor hereby agrees to (i) reimburse the Trustees for all
reasonable expenses actually incurred (including reasonable fees and expenses of
counsel and other  experts),  and (ii)  indemnify,  defend and hold harmless the
Trustees  and  any of the  officers,  directors,  employees  and  agents  of the
Trustees  (the  "Indemnified  Persons")  from and  against  any and all  losses,
damages,  liabilities,  claims, actions,  suits, costs, expenses,  disbursements
(including the reasonable fees and expenses of counsel),  taxes and penalties of
any kind and nature whatsoever actually incurred (collectively,  "Expenses"), to
the extent that such  Expenses  arise out of or are

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imposed  upon or asserted at any time  against  such  Indemnified  Persons  with
respect to the performance of this Trust Agreement,  the creation,  operation or
termination  of the Trust or the  transactions  contemplated  hereby;  provided,
however,  that the Depositor  shall not be required to indemnify any Indemnified
Person for any Expenses which are a result of the willful misconduct,  bad faith
or gross negligence of such Indemnified Person.

            8. The Depositor may, in its sole discretion, dissolve and terminate
the Trust.

            9. This Trust  Agreement  shall be  governed  by, and  construed  in
accordance  with, the laws of the State of Delaware  (without regard to conflict
of laws principles).

      IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the day and year first above written.

                                         PUBLIC SERVICE ENTERPRISE GROUP
                                         INCORPORATED, as Depositor

                                         By: /s/ MORTON A. PLAWNER
                                             -----------------------------------
                                         Name:  Morton A. Plawner
                                         Title: Treasurer

                                         WACHOVIA TRUST COMPANY, NATIONAL
                                         ASSOCIATION, as Trustee

                                         By: /s/ AMY L. MARTIN
                                             -----------------------------------
                                         Name:  Amy L. Martin
                                         Title: Assistant Vice President

                                         MORTON A. PLAWNER, as Trustee

                                         /s/ MORTON A. PLAWNER
                                         ---------------------------------------
                                         Morton A. Plawner