Exhibit 4

                              SUPPLEMENTAL MORTGAGE
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                             Supplemental Indenture

                             Dated September 1, 2002

                                   ----------

                                 SUPPLEMENTAL TO
                          FIRST AND REFUNDING MORTGAGE,
                              DATED AUGUST 1, 1924

                                   ----------

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY
                                       TO
                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                     TRUSTEE
                                 21 South Street
                          Morristown, New Jersey 07960
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                           PROVIDING FOR THE ISSUE OF
                $600,000,000 FIRST AND REFUNDING MORTGAGE BONDS,
                           MEDIUM-TERM NOTES SERIES B

                                   ----------

                     RECORD IN MORTGAGE BOOK AND RETURN TO:
                              JAMES T. FORAN, ESQ.
                               80 PARK PLAZA, T5B
                                  P.O. Box 570
                               NEWARK, N.J. 07101

Prepared by

(JAMES T. FORAN, Esq.)


<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                            Page
                                                                            ----

RECITALS....................................................................  1
FORM OF BOND................................................................  4
FORM OF CERTIFICATE OF AUTHENTICATION.......................................  8
GRANTING CLAUSES............................................................  9

                                   ARTICLE I.
                    BONDS OF THE MEDIUM-TERM NOTES SERIES B.

Description of Series ...................................................... 10

                                   ARTICLE II.
               REDEMPTION OF BONDS OF MEDIUM-TERM NOTES SERIES B.

SECTION 2.01.       Redemption--Redemption Price............................ 11
SECTION 2.02.       Redemptions Pursuant to Section 4C of
                    Article Eight of the Indenture.......................... 12
SECTION 2.03.       Interest on Called Bonds to Cease....................... 12
SECTION 2.04.       Bonds Called in Part.................................... 13
SECTION 2.05.       Provisions of Indenture Not Applicable.................. 13

                                  ARTICLE III.
                      CREDITS WITH RESPECT TO BONDS OF THE
                           MEDIUM-TERM NOTES SERIES B.

SECTION 3.01.       Credits................................................. 13
SECTION 3.02.       Certificate of the Company.............................. 13

                                   ARTICLE IV.
                                 MISCELLANEOUS.

SECTION 4.01.       Authentication of Bonds of Medium-Term
                    Notes Series B.......................................... 14
SECTION 4.02.       Additional Restrictions on Authentication of
                    Additional Bonds Under Indenture........................ 14
SECTION 4.03.       Restriction on Dividends................................ 14
SECTION 4.04.       Use of Facsimile Seal and Signatures.................... 15
SECTION 4.05.       Time for Making of Payment.............................. 15
SECTION 4.06.       Effective Period of Supplemental Indenture.............. 15
SECTION 4.07.       Effect of Approval of Board of Public Utilities
                    of the State of New Jersey.............................. 15
SECTION 4.08.       Execution in Counterparts............................... 15
Acknowledgements............................................................ 17
Certificate of Residence.................................................... 18


<PAGE>

      SUPPLEMENTAL  INDENTURE,   dated  the  1st  day  of  September  2002,  for
convenience  of reference and effective  from the time of execution and delivery
hereof, between PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a corporation organized
under the laws of the State of New  Jersey,  hereinafter  called the  "Company",
party of the first part, and WACHOVIA  BANK,  NATIONAL  ASSOCIATION,  a national
banking association organized under the laws of the United States of America, as
Trustee under the indenture dated August 1, 1924, below  mentioned,  hereinafter
called the "Trustee", party of the second part.

      WHEREAS,  on July 25, 1924, the Company executed and delivered to FIDELITY
UNION  TRUST  COMPANY  (now known as WACHOVIA  BANK,  NATIONAL  ASSOCIATION),  a
certain indenture dated August 1, 1924  (hereinafter  called the "Indenture") to
secure and to provide for the issue of First and  Refunding  Mortgage Gold Bonds
of the Company; and

      WHEREAS,  the Indenture has been recorded in the following counties of the
State of New Jersey, in the offices,  and therein in the books and at the pages,
as follows:

<TABLE>
<CAPTION>
                                                                                      Page
County                       Office                   Book Number                    Number
------                       ------                  ------------                    -------
<S>                          <C>               <C>                                <C>
Atlantic                     Clerk's           1955  of Mortgages                     160
Bergen                       Clerk's             94  of Chattel Mortgages           123 etc.
                                                693  of Mortgages                    88 etc.
Burlington                   Clerk's             52  of Chattel Mortgages         Folio 8, etc
                                                                                   Folio 354,
                                                177  of Mortgages                     etc.
Camden                       Register's          45  of Chattel Mortgages           184 etc.
                                                239  of Mortgages                    1 etc.
Cumberland                   Clerk's            786  of Mortgages                   638 & c.
Essex                        Register's         437  of Chattel Mortgages             1-48
                                               T-51  of Mortgages                    341-392
Gloucester                   Clerk's             34  of Chattel Mortgages           123 etc.
                                                142  of Mortgages                    7, etc.
Hudson                       Register's         453  of Chattel Mortgages            9, etc.
                                               1245  of Mortgages                   484, etc.
Hunterdon                    Clerk's            151  of Mortgages                      344
Mercer                       Clerk's             67  of Chattel Mortgages            1 etc.
                                                384  of Mortgages                    1 etc.
Middlesex                    Clerk's            113  of Chattel Mortgages            3 etc.
                                                437  of Mortgages                   294, etc.
Monmouth                     Clerk's            951  of Mortgages                   291, etc.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                                                      Page
County                       Office                   Book Number                    Number
------                       ------                  ------------                    -------
<S>                          <C>                <C>                                 <C>
Morris                       Clerk's             N-3 of Chattel Mortgages           446 etc.
                                                F-10 of Mortgages                   269 etc.
Ocean                        Clerk's            1809 of Mortgages                      40
Passaic                      Register's          M-6 of Chattel Mortgages           178, etc.
                                                R-13 of Mortgages                   268 etc.
Salem                        Clerk's             267 of Mortgages                   249 & c.
Somerset                     Clerk's              46 of Chattel Mortgages           207 etc.
                                                N-10 of Mortgages                    1 etc.
Sussex                       Clerk's             123 of Mortgages                    10 & c.
Union                        Register's          128 of Chattel Mortgages            28 & c.
                                                 664 of Mortgages                   259 etc.
Warren                       Clerk's             124 of Mortgages                   141 etc.
</TABLE>

and

      WHEREAS, the Indenture has also been recorded in the following counties of
the Commonwealth of Pennsylvania,  in the offices,  and therein in the books and
at the pages, as follows:

<TABLE>
<CAPTION>
                                                                                      Page
County                       Office                   Book Number                    Number
------                       ------                  ------------                    -------
<S>                          <C>               <C>                                    <C>
Adams                        Recorder's          22  of Mortgages                      105
Bedford                      Recorder's          90  of Mortgages                      917
Blair                        Recorder's         671  of Mortgages                      430
Cambria                      Recorder's         407  of Mortgages                      352
Cumberland                   Recorder's         500  of Mortgages                      136
Franklin                     Recorder's         285  of Mortgages                      373
Huntingdon                   Recorder's         128  of Mortgages                      47
Indiana                      Recorder's         197  of Mortgages                      281
Montgomery                   Recorder's        5033  of Mortgages                     1,221
Westmoreland                 Recorder's        1281  of Mortgages                      198
York                         Recorder's        31-V  of Mortgages                      446
</TABLE>

and

      WHEREAS,  the  Indenture  granted,   bargained,  sold,  aliened,  remised,
released,  conveyed,  confirmed,  assigned,  transferred  and set over  unto the
Trustee certain  property of the Company,  more fully set forth and described in
the Indenture,  then owned or which might thereafter be acquired by the Company;
and

      WHEREAS, the Company, by various supplemental indentures,  supplemental to
the Indenture, the last of which was dated May 1, 1998, has granted,  bargained,
sold, aliened, remised, released, conveyed, confirmed, assigned, transferred and
set over unto the Trustee certain  property of the Company  acquired by it after
the execution and delivery of the Indenture; and

      WHEREAS,  since the execution and delivery of said supplemental  indenture
dated May 1, 1998, the Company has acquired  property  which, in accordance with
the provisions of the Indenture,  is subject to the lien thereof and the Company
desires to confirm such lien; and

      WHEREAS, the Indenture has been amended or supplemented from time to time;
and

      WHEREAS, it is provided in the Indenture that no bonds other than those of
the 51/2% Series due 1959 therein  authorized may be issued  thereunder unless a
supplemental  indenture  providing for the issue of such additional  bonds shall
have been executed and delivered by the Company to the Trustee; and

      WHEREAS, the Company is making provisions for the issuance and sale of its
Secured  Medium-Term Notes,  Series B (the "Series B Notes"), to be issued under
an  Indenture  of Trust  (the "Note  Indenture")  to be dated as of July 1, 1993
between  the  Company  and  JPMorgan  Chase  Bank  (formerly  known as The Chase
Manhattan Bank (National Association)), as Trustee (the "Note Trustee"); and

<PAGE>

      WHEREAS, such Note Indenture provides,  among other things, for the pledge
and delivery by the Company of a series of First and Refunding Mortgage Bonds of
the  Company to evidence  the  Company's  obligation  to pay the  principal  and
interest with respect to outstanding Series B Notes; and for such purpose and in
order to service and secure  payment of the principal and interest in respect of
the Series B Notes, the Company desires to provide for the issue of $600,000,000
aggregate  principal  amount  of bonds  under  the  Indenture  of a series to be
designated as "First and Refunding  Mortgage Bonds,  Medium-Term Notes Series B"
(hereinafter sometimes called "Bonds of the Medium-Term Notes Series B"); and

      WHEREAS,  the text of the Bonds of the  Medium-Term  Notes Series B and of
the  certificate of  authentication  to be borne by the Bonds of the Medium-Term
Notes Series B shall be substantially of the following tenor:

                                 (FORM OF BOND)

This Bond is not  transferable  except as provided in the  Indenture  and in the
Indenture  of Trust dated as of July 1, 1993  between  the Company and  JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank (National  Association)),
as Trustee.

REGISTERED                                                            REGISTERED
NUMBER                                                                    AMOUNT
R                                                                   $600,000,000

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY
                       FIRST AND REFUNDING MORTGAGE BOND,
                           MEDIUM-TERM NOTES SERIES B

      Public  Service   Electric  and  Gas  Company   (hereinafter   called  the
"Company"), a corporation of the State of New Jersey, for value received, hereby
promises to pay to JPMorgan  Chase Bank (formerly  known as The Chase  Manhattan
Bank (National  Association)),  as trustee under the Indenture of Trust dated as
of July 1, 1993 between the Company and such trustee,  or registered assigns, on
the  surrender  hereof,  the principal sum of Six Hundred  Million  Dollars,  on
September 1, 2037, and to pay interest thereon from the date hereof, at the rate
of 10% per annum,  and until payment of said  principal sum, such interest to be
payable  March 1 and  September  1 in each  year;  provided,  however,  that the
Company shall receive certain  credits against such  obligations as set forth in
the Supplemental Indenture dated September 1, 2002 referred to below.

      Both  the  principal  hereof  and  interest  hereon  shall  be paid at the
principal corporate trust office of Wachovia Bank, National Association,  in the
City of  Morristown,  State of New Jersey,  or (at the option of the  registered
owner) at the  corporate  trust  office of any  paying  agent  appointed  by the
Company, in such coin or currency of the United States of America as at the time
of payment shall  constitute  legal tender for the payment of public and private
debts; provided, however, that any such payments of principal and interest shall
be subject to receipt of certain credits against such payment obligations as set
forth in the Supplemental Indenture dated September 1, 2002 referred to below.

      This Bond is one of the First and Refunding  Mortgage Bonds of the Company
issued and to be issued under and  pursuant  to, and all equally  secured by, an
indenture of mortgage or deed of trust dated August 1, 1924, as supplemented and
amended by supplemental indentures thereto, including the Supplemental Indenture
dated  September 1, 2002,  each duly executed by the Company and Wachovia  Bank,
National  Association  (formerly  known as  Fidelity  Union  Trust  Company)  as
Trustee.  This Bond is one of the Bonds of the Medium-Term Notes Series B, which
series is limited  to the  aggregate  principal  amount of  $600,000,000  and is
issued  pursuant  to  said  Supplemental  Indenture  dated  September  1,  2002.
Reference is hereby made to said  indenture  and all  supplements  thereto for a
specification  of the  principal  amount  of Bonds  from  time to time  issuable
thereunder,  and for a description of the  properties  mortgaged and conveyed or
assigned  to said  Trustee  or its  successors,  the  nature  and  extent of the
security,  and  the  rights  of the  holders  of  said  Bonds  and  any  coupons
appurtenant thereto, and of the Trustee in respect of such security.

      In and by said indenture, as amended and supplemented, it is provided that
with the written approval of the Company and the Trustee,  any of the provisions
of said  indenture  may from time to time be  eliminated  or modified  and other
provisions  may be added  thereto  provided the change does nor alter the annual
interest rate,  redemption  price or date, date of maturity or amount payable on
maturity of any then  outstanding  Bond or conflict with the Trust Indenture Act
of 1939 as then in effect,  and provided the holders of 85% in principal  amount
of the Bonds secured by said indenture and then outstanding (including,  if such
change  affect the Bonds of one or more  series  but less than all  series  then
outstanding,  a like  percentage  of the then  outstanding  Bonds of each series
affected by such change,  and excluding Bonds owned or controlled by the Company
or by

<PAGE>

the parties owning at least 10% of the outstanding  voting stock of the Company,
as more fully specified in said indenture)  consent in writing  thereto,  all as
more fully set forth in said indenture, as amended and supplemented.

      First and  Refunding  Mortgage  Bonds  issuable  under said  indenture are
issuable  in series,  and the Bonds of any series may be for  varying  principal
amounts and in the form of coupon bonds and of registered bonds without coupons,
and the Bonds of any one series may differ from the Bonds of any other series as
to  date,  maturity,  interest  rate  and  otherwise,  all as in said  indenture
provided and set forth.  The Bonds of the  Medium-Term  Notes Series B, in which
this Bond is included,  are  designated  "First and  Refunding  Mortgage  Bonds,
Medium-Term Notes Series B".

      In case of the  happening  of an event of  default  as  specified  in said
indenture and said supplemental indenture dated March 1, 1942, the principal sum
of the Bonds of this  series  may be  declared  or may  become  due and  payable
forthwith, in the manner and with the effect in said indenture provided.

      The Bonds of this  series are  subject to  redemption  as  provided in the
Supplemental Indenture dated September 1, 2002.

      This Bond is transferable,  but only as provided in said indenture and the
Indenture  of Trust dated as of July 1, 1993  between  the Company and  JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank (National  Association)),
as trustee,  upon  surrender  hereof,  by the  registered  owner in person or by
attorney  duly  authorized  in  writing,  at  either of said  offices  where the
principal  hereof and interest hereon are payable;  upon any such transfer a new
fully registered Bond similar hereto will be issued to the transferee. This Bond
may in like manner be exchanged  for one or more new fully  registered  Bonds of
the same  series of other  authorized  denominations  but of the same  aggregate
principal  amount.  No service  charge  shall he made for any such  transfer  or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other  governmental  charge that may be imposed in relation thereto.  The
Company and the Trustee  hereunder  and any paying  agent may deem and treat the
person in whose name this Bond is  registered  as the absolute  owner hereof for
the purpose of receiving  payment of or on account of the  principal  hereof and
the interest hereon and for all other purposes;  and neither the Company nor the
Trustee  hereunder  nor any paying  agent shall be affected by any notice to the
contrary.

      The Bonds of this series are issuable  only in fully  registered  form, in
any denomination authorized by the Company.

      No recourse under or upon any obligation,  covenant or agreement contained
in said  indenture  or in any  indenture  supplemental  thereto,  or in any Bond
issued thereunder,  or because of any indebtedness arising thereunder,  shall be
had  against  any  incorporator,   or  against  any  past,   present  or  future
stockholder,  officer, or director,  as such, of the Company or of any successor
corporation,   either   directly  or  through  the  Company  or  any   successor
corporation,  under any rule of law, statute or  constitutional  provision or by
the  enforcement  of any  assessment or by any legal or equitable  proceeding or
otherwise,  it being expressly  agreed and understood  that said indenture,  any
indenture supplemental thereto and the obligations issued thereunder, are solely
corporate obligations,  and that no personal liability whatever shall attach to,
or be incurred by, such incorporators,  stockholders,  officers or directors, as
such, of the Company, or of any successor  corporation,  or any of them, because
of the incurring of the indebtedness  thereby authorized,  or under or by reason
of any of the obligations, covenants or agreements contained in the indenture or
in any indenture  supplemental thereto or in any of the Bonds issued thereunder,
or implied therefrom.

      This Bond shall not be  entitled  to any  security  or benefit  under said
indenture, as amended and supplemented, and shall not become valid or obligatory
for any purpose, until the certificate of authentication, hereon endorsed, shall
have been signed by Wachovia Bank,  National  Association as Trustee,  or by its
successor in trust under said indenture.


<PAGE>

      IN WITNESS  WHEREOF,  the Company has caused this Bond to be duly executed
by its proper officers under its corporate seal.

Dated

                                               PUBLIC SERVICE ELECTRIC AND
                                                 GAS COMPANY

                                               By ______________________________
                                                        (Vice) President

(Seal)

Attest:

  ___________________________________
           (Assistant) Secretary


                     (FORM OF CERTIFICATE OF AUTHENTICATION)
                          CERTIFICATE OF AUTHENTICATION

      This Bond is one of the Bonds of the series  designated  therein  which is
described in the  within-mentioned  indenture and  supplemental  indenture dated
September 1, 2002, as secured thereby.

                                               WACHOVIA BANK, NATIONAL
                                                 ASSOCIATION, TRUSTEE

                                               By ______________________________
                                                       Authorized Officer


<PAGE>

      WHEREAS,  the execution and delivery of this  supplemental  indenture have
been duly authorized by the Board of Directors of the Company; and

      WHEREAS, the Company represents that all things necessary to make the bond
of the series hereinafter described,  when duly authenticated by the Trustee and
issued by the Company, a valid, binding and legal obligation of the Company, and
to make this supplemental  indenture a valid and binding agreement  supplemental
to the Indenture, have been done and performed:

      NOW, THEREFORE,  THIS SUPPLEMENTAL  INDENTURE WITNESSETH that the Company,
in  consideration  of the premises and the execution and delivery by the Trustee
of this supplemental indenture, and in pursuance of the covenants and agreements
contained in the  Indenture and for other good and valuable  consideration,  the
receipt of which is hereby acknowledged,  has granted, bargained, sold, aliened,
remised, released, conveyed, confirmed,  assigned, transferred and set over, and
by these presents does grant,  bargain,  sell, alien, remise,  release,  convey,
confirm,  assign,  transfer and set over unto the Trustee,  its  successors  and
assigns, forever, all the right, title and interest of the Company in and to all
property  of  every  kind and  description  (except  cash,  accounts  and  bills
receivable and all  merchandise  bought,  sold or  manufactured  for sale in the
ordinary  course of the Company's  business,  stocks,  bonds or other  corporate
obligations  or  securities,  other than such as are  described in Part V of the
Granting  Clauses of the  Indenture,  not  acquired  with the  proceeds of bonds
secured by the  Indenture,  and except as in the Indenture and herein  otherwise
expressly  excluded) acquired by the Company since the execution and delivery of
the  supplemental  indenture  dated May 1,  1998,  subsequent  to the  Indenture
(except any such property duly released from, or disposed of, free from the lien
of the  Indenture,  in  accordance  with the  provisions  thereof)  and all such
property which at any time hereafter may be acquired by the Company;

      All of which  property it is intended  shall be included in and granted by
this  supplemental  indenture  and  covered  by the  lien  of the  Indenture  as
heretofore and hereby amended and supplemented;

      UNDER AND SUBJECT to any  encumbrances  or mortgages  existing on property
acquired  by the  Company  at the time of such  acquisition  and not  heretofore
discharged of record; and

      SUBJECT  also,  to the  exceptions,  reservations  and  provisions  in the
Indenture  and in  this  supplemental  indenture  recited,  and  to  the  liens,
reservations, exceptions, limitations, conditions and restrictions imposed by or
contained  in the several  deeds,  grants,  franchises  and  contracts  or other
instruments  through which the Company acquired or claims title to the aforesaid
property;  and Subject,  also, to the existing leases,  to liens on easements or
rights of way, to liens for taxes,  assessments and governmental  charges not in
default or the payment of which is deferred,  pending appeal or other contest by
legal  proceedings,  pursuant to Section 4 of Article Five of the indenture,  or
the payment of which is  deferred  pending  billing,  transfer of title or final
determination of amount, to easements for alleys, streets,  highways,  rights of
way and  railroads  that may run across or encroach upon the said  property,  to
joint pole and similar  agreements,  to undetermined liens and charges,  if any,
incidental to construction, and other encumbrances permitted by the indenture as
heretofore and hereby amended and supplemented;

      TO HAVE AND TO HOLD the property hereby conveyed or assigned,  or intended
to be conveyed or assigned,  unto the Trustee,  its successor or successors  and
assigns, forever;

      IN TRUST, NEVERTHELESS, upon the terms, conditions and trusts set forth in
the Indenture as heretofore and hereby amended and supplemented, to the end that
the said  property  shall be subject to the lien of the  Indenture as heretofore
and hereby  amended and  supplemented,  with the same force and effect as though
said property had been included in the Granting  Clauses of the Indenture at the
time of the execution and delivery thereof;

      AND  THIS  SUPPLEMENTAL   INDENTURE   FURTHER   WITNESSETH  that  for  the
considerations  aforesaid,  it is hereby covenanted  between the Company and the
Trustee as follows:


<PAGE>

                                   ARTICLE I.

                    BONDS OF THE MEDIUM-TERM NOTES SERIES B.

      The series of bonds authorized by this supplemental indenture to be issued
under and secured by the  Indenture  shall be  designated  "First and  Refunding
Mortgage Bonds,  Medium-Term  Notes Series B"; shall be limited to the aggregate
principal amount of $600,000,000;  shall be issued initially to the Note Trustee
and shall  mature and bear  interest  as set forth in the form of bond set forth
herein;  provided,  however,  that the Company  shall  receive  certain  credits
against principal and interest as set forth in Section 3.01 hereof.  The date of
each Bond of the Medium-Term  Notes Series B shall be the interest  payment date
next preceding the date of authentication, unless such date of authentication be
an  interest  payment  date,  in  which  case  the  date  shall  be the  date of
authentication,  or  unless  such date of  authentication  be prior to the first
semi-annual  interest payment date, in which case the date shall be September 1,
2002.

      Bonds of the Medium-Term Notes Series B shall be issuable only in the form
of  fully  registered  bonds  in any  denomination  authorized  by the  Company.
Interest  on the  Bonds of the  Medium-Term  Notes  Series  B shall  be  payable
semi-annually  in  arrears  on March 1 and  September  1 of each  year,  payable
initially  on March 1, 2003,  subject to  receipt  of  certain  credits  against
principal  and interest as set forth in Section 3.01 hereof and shall be payable
as to both  principal and interest in such coin or currency of the United States
of America  as at the time of  payment  shall  constitute  legal  tender for the
payment of public and private debts, at the principal  corporate trust office of
the Trustee, or at the corporate trust office of any paying agent appointed.

      Bonds  of the  Medium-Term  Notes  Series  B  shall  be  transferable  and
exchangeable, but only as provided in the Indenture and the Note Indenture, upon
surrender  thereof  for  cancellation  by the  registered  owner in person or by
attorney  duly  authorized  in writing at either of said  offices.  The  Company
hereby  waives any right to make a charge for any  transfer or exchange of Bonds
of the Medium-Term  Notes Series B, but the Company may require payment of a sum
sufficient to cover any tax or any other governmental charge that may be imposed
in relation thereto.

                                   ARTICLE II.

               REDEMPTION OF BONDS OF MEDIUM-TERM NOTES SERIES B.

      SECTION 2.01. Redemption--Redemption Price. Bonds of the Medium-Term Notes
Series B shall be subject to redemption  prior to maturity under the conditions,
and upon payment of the amounts as may be specified in the following conditions:

            (a) at any  time in whole or in part at the  option  of the  Company
      upon receipt by the Trustee of written certification of the Company and of
      the Note  Trustee  that the  principal  amount of the  Series B Notes then
      outstanding  under the Note  Indenture is not in excess of such  principal
      amount  of the Bonds of the  Medium-Term  Notes  Series B as shall  remain
      pledged to the Note Trustee after giving effect to such redemption; or (b)
      at any time by the  application  of any  proceeds of released  property or
      other  money  held by the  Trustee  and which,  pursuant  to Section 4C of
      Article Eight of the Indenture,  as amended and supplemented,  are applied
      to the redemption of Bonds of the Medium-Term Notes Series B, upon payment
      of 100% of the principal amount thereof, together with interest accrued to
      the  redemption  date,  provided that any such payment shall be subject to
      receipt by the Company of certain credits against such  obligations as set
      forth in Section 3.01 hereof.

      SECTION 2.02.  Redemptions  Pursuant to Section 4C of Article Eight of the
Indenture.  If,  pursuant to Section 4C of Article  Eight of the  Indenture,  as
amended and supplemented,  any proceeds of released property or other money then
held by the  Trustee  shall be  applied  to the  redemption  of the Bonds of the
Medium-Term  Notes  Series  B, the  Trustee  shall  give at least 45 days  prior
written  notice of such  redemption  to the Note  Trustee  whereupon on the date
fixed for redemption such principal  amount thereof as is equal to such proceeds
shall be redeemed;  provided  that no such  redemption  shall be made unless the
Trustee  shall be in receipt of a written  certification  of the Company and the
Note  Trustee  that a like  principal  amount of Series B Notes  shall have been
theretofore  redeemed in accordance  with the provisions of the Note  Indenture.
For purposes of determining which of the Company's First and Refunding  Mortgage
Bonds are subject to such  mandatory  redemption,  the  Mortgage  Trustee  shall
consider the 10% stated  annual  interest  rate of the Bonds of the  Medium-Term
Notes Series B, not the weighted average  interest rate of outstanding  Series B
Notes. Bonds of said series so redeemed shall be cancelled.


<PAGE>

      SECTION  2.03.  Interest  on  Called  Bonds  to  Cease.  Each  Bond of the
Medium-Term  Notes  Series B or  portion  thereof  called for  redemption  under
Section 2.02 hereof shall be due and payable at the office of the Note  Trustee,
as  paying  agent  hereunder,  at its  redemption  price  and  on the  specified
redemption   date,   anything   herein   or  in  such   Bond  to  the   contrary
notwithstanding. From and after the date when each Bond of the Medium-Term Notes
Series B or portion  thereof shall be due and payable as aforesaid  (unless upon
said date the full amount due thereon shall not be held by the Note Trustee,  as
paying agent hereunder,  and be immediately available for payment),  all further
interest shall cease to accrue on such bond or on such portion  thereof,  as the
case may be.

      SECTION  2.04.  Bonds Called in Part. If only a portion of any Bond of the
Medium-Term  Notes Series B shall be called for  redemption  pursuant to Section
2.02  hereof,  upon  payment of the portion so called for  redemption,  the Note
Trustee shall make an appropriate notation upon the Bond of the principal amount
so redeemed.

      SECTION 2.05.  Provisions of Indenture Not  Applicable.  The provisions of
Article Four of the Indenture,  as amended and supplemented,  shall not apply to
the  procedure  for the  exercise  of any right of  redemption  reserved  by the
Company, or to any mandatory redemption provided,  in this Article in respect of
the Bonds of the Medium-Term  Notes Series B. There shall be no sinking fund for
the Bonds of the Medium-Term Notes Series B.

                                  ARTICLE III.

        CREDITS WITH RESPECT TO BONDS OF THE MEDIUM-TERM NOTES SERIES B.

      SECTION  3.01.  Credits.  In  addition  to any other  credit,  payment  or
satisfaction  to which the Company is entitled  with respect to the Bonds of the
Medium-Term  Notes  Series B, the Company  shall be entitled to credits  against
amounts  otherwise  payable  in respect  of the Bonds of the  Medium-Term  Notes
Series B in an amount  corresponding  to (i) the principal  amount of any of the
Company's Series B Notes issued under the Note Indenture surrendered to the Note
Trustee by the Company, or purchased by the Note Trustee, for cancellation, (ii)
the amount of money held by the Note Trustee and  available and  designated  for
the payment of  principal or  redemption  price  (exclusive  of any premium) of,
and/or  interest on, the Series B Notes,  regardless of the source of payment to
the Note  Trustee of such moneys and (iii) the amount by which  principal of and
interest due on the Bonds of the Medium-Term Notes Series B exceeds principal of
and interest due on the Series B Notes.  The Note Trustee shall make notation on
such Bonds authorized hereby of any such credit.

      SECTION 3.02.  Certificate  of the Company.  A certificate  of the Company
signed by the President or any Vice President,  and attested to by the Secretary
or any Assistant Secretary,  and consented to by the Note Trustee,  stating that
the Company is entitled to a credit  under  Section 3.01 hereof or that Bonds of
the Medium-Term Notes Series B have been cancelled,  and setting forth the basis
therefor in reasonable detail, shall be conclusive evidence of such entitlement,
and the Trustee shall accept such  certificate as such evidence  without further
investigation or verification of the matters stated therein.

                                   ARTICLE IV.

                                 MISCELLANEOUS.

      SECTION 4.01.  Authentication of Bonds of Medium-Term Notes Series B. None
of the Bonds of the  Medium-Term  Notes Series B, the issue of which is provided
for by this  supplemental  indenture,  shall be authenticated by or on behalf of
the Trustee  except in  accordance  with the  provisions  of the  Indenture,  as
amended and supplemented,  and this supplemental indenture,  and upon compliance
with the conditions in that behalf therein contained.

      SECTION 4.02.  Additional  Restrictions  on  Authentication  of Additional
Bonds Under  Indenture.  The Company  covenants  that from and after the date of
execution  of this  supplemental  indenture no  additional  bonds (as defined in
Section 1 of Article Two of the Indenture) shall be authenticated  and delivered
by the Trustee  under  Subdivision A of Section 4 of said Article Two on account
of additions or improvements to the mortgaged property;

            (1) unless the net  earnings of the Company for the period  required
      by Subdivision C of Section 6 of said Article Two shall have been at least
      twice the fixed  charges  (in lieu of 13/4 times such  fixed  charges,  as
      required by said Subdivision C); and for the purpose of this condition (a)
      such  fixed  charges  shall in each  case  include  interest  on the bonds
      applied for,  notwithstanding  the  parenthetical  provision  contained in
      clause (4) of said  Subdivision  C, and (b) in computing such net earnings
      there shall be included in expenses of operation  (under  paragraph (c) of
      said  Subdivision  C)  all  charges  against  earnings  for  depreciation,
      renewals  or  replacements,  and  all  certificates  with  respect  to net
      earnings delivered to the Trustee in connection with any authentication of
      additional  bonds under said Article Two shall so state; and (2) except to
      the extent of 60% (in lieu of 75% as permitted by Subdivision A of Section
      7 of said  Article  Two) of the cost or fair  value to the  Company of the
      additions or  improvements  forming the basis for such  authentication  of
      additional bonds.


<PAGE>

      SECTION 4.03.  Restriction  on Dividends.  The Company will not declare or
pay any dividend on any shares of its common stock (other than dividends payable
in  shares of its  common  stock)  or make any  other  distribution  on any such
shares, or purchase or otherwise acquire any such shares (except shares acquired
without  cost to the  Company)  whenever  such  action  would  reduce the earned
surplus of the Company to an amount less than  $10,000,000 or such lesser amount
as may remain after deducting from said $10,000,000 all amounts appearing in the
books of account of the Company on December  31, 1948,  which shall  thereafter,
pursuant to any order or rule of any regulatory body entered after said date, be
required  to be removed,  in whole or in part,  from the books of account of the
Company by charges to earned surplus.

      SECTION  4.04.  Use of  Facsimile  Seal  and  Signatures.  The seal of the
Company and any or all signatures of the officers of the Company upon any of the
Bonds of the Medium-Term Notes Series B may be facsimiles.

      SECTION  4.05.  Time for Making of Payment.  All  payments of principal or
redemption price of, and interest on, the Bonds of the Medium-Term  Notes Series
B shall be made either  prior to the due date thereof or on the due date thereof
in immediately  available  funds. In any case where the date of any such payment
shall be a  Saturday  or Sunday  or a legal  holiday  or a day on which  banking
institutions  in the city of payment are  authorized by law to close,  then such
payment  need not be made on such  date  but may be made on the next  succeeding
business  day with the same force and effect as if made on the due date,  and no
interest on such payment shall accrue for the period after such date.

      SECTION 4.06.  Effective Period of Supplemental  Indenture.  The preceding
provisions of Articles I, II and III of this supplemental indenture shall remain
in effect  only so long as any of the Bonds of the  Medium-Term  Notes  Series B
shall remain outstanding.

      SECTION 4.07.  Effect of Approval of Board of Regulatory  Commissioners of
the State of New Jersey.  The  approval of the Board of Public  Utilities of the
State of New Jersey of the execution  and delivery of these  presents and of the
issue of any Bond of the  Medium-Term  Notes  Series B shall not be construed as
approval of said Board of any other act, matter or thing which requires approval
of said Board under the laws of the State of New Jersey.

      SECTION 4.08.  Execution in Counterparts.  For the purpose of facilitating
the recording hereof,  this supplemental  indenture has been executed in several
counterparts,  each of which shall be and shall be taken to be an original,  and
all collectively but one instrument.


<PAGE>

      IN WITNESS WHEREOF,  Public Service Electric and Gas Company, party hereto
of the first part,  after due corporate and other  proceedings,  has caused this
supplemental  indenture to be signed and acknowledged or proved by its President
or one of its Vice  Presidents and its corporate seal hereunto to be affixed and
to be attested by the signature of its Secretary or an Assistant Secretary;  and
Wachovia  Bank,  National  Association,  as Trustee,  party hereto of the second
part, has caused this  supplemental  indenture to be signed and  acknowledged or
proved by its President or one of its Vice Presidents, and its corporate seal to
be  hereunto  affixed  and to be attested  by the  signature  of its  Secretary,
Assistant Secretary;  Vice President,  or an Assistant Vice President.  Executed
and delivered this 6th day of September, 2002.

                                               PUBLIC SERVICE ELECTRIC AND GAS
                                                 COMPANY,

                                               By ______________________________
                                                           M.A. Plawner
                                                           Vice President

Attest:

  ___________________________________
             E.J. Biggins, Jr.
                 Secretary

                                               WACHOVIA BANK, NATIONAL
                                                 ASSOCIATION

                                               By ______________________________
                                                           F. Gallagher
                                                           Vice President

Attest:

  ___________________________________
                M. Matthews
              Vice President


<PAGE>

STATE OF NEW JERSEY
COUNT OF ESSEX               }     SS:

      BE IT REMEMBERED,  that on this 6th day of September 2002,  before me, the
subscriber, a Notary Public of the State of New Jersey, personally appeared M.A.
Plawner, who, I am satisfied, is a Vice President of PUBLIC SERVICE ELECTRIC AND
GAS COMPANY,  one of the corporations  named in and which executed the foregoing
instrument,  and is the person who signed the said  instrument  as such officer,
for and on behalf of such corporation,  and I having first made known to him the
contents thereof,  he did acknowledge that he signed the said instrument as such
officer,  that the said instrument was made by such  corporation and sealed with
its corporate  seal,  that the said  instrument is the voluntary act and deed of
such corporation,  made by virtue of authority from its Board of Directors,  and
that  said  corporation  the  mortgagor,  has  received  a  true  copy  of  said
instrument.

STATE OF NEW JERSEY
COUNT OF ESSEX               }     SS:

      BE IT REMEMBERED,  that on this 6th day of September 2002,  before me, the
subscriber,  a Notary Public of the State of New Jersey,  personally appeared F.
Gallagher,  who, I am satisfied,  is a Vice President of WACHOVIA BANK, NATIONAL
ASSOCIATION,  one of the corporations  named in and which executed the foregoing
instrument,  and is the person who signed the said  instrument  as such officer,
for and on behalf of such corporation,  and I having first made known to him the
contents thereof,  he did acknowledge that he signed the said instrument as such
officer,  that the said instrument was made by such  corporation and sealed with
its corporate  seal, and that the said  instrument is the voluntary act and deed
of such corporation, made by virtue of authority from its Board of Directors.


<PAGE>

                            CERTIFICATE OF RESIDENCE

      Wachovia Bank, National  Association,  Mortgagee and Trustee within named,
hereby certifies that its precise residence is 21 South Street,  Morristown, New
Jersey 07960.

                                               WACHOVIA BANK, NATIONAL
                                                 ASSOCIATION,

                                               By ______________________________
                                                           F. Gallagher
                                                           Vice President