PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                        STOCK PLAN FOR OUTSIDE DIRECTORS
                            EFFECTIVE JANUARY 1, 1996
                            AMENDED JANUARY 21, 2003

I.    PURPOSE

      The purpose of this Public Service Enterprise Group Incorporated Stock
Plan for Outside Directors is to advance the interests of the Company and its
stockholders by assisting the Company in attracting and retaining individuals of
superior talent, ability and achievement to serve on its Board of Directors.

II.   DEFINITIONS

      The following words and phrases shall have the meanings set forth below
unless a different meaning is required by the context:

      a)    Adjustment Shares: New or additional or different shares of Common
            Stock or other securities (other than rights or warrants to purchase
            securities) received or entitled to be received by an owner of
            Restricted Stock as a result of a change in capitalization of the
            Company as set forth in Article VIII hereof.

      b)    Annual Meeting: The Annual Meeting of Stockholders of the Company.

      c)    Board: The Board of Directors of the Company.

      d)    Committee: Those persons who are members of the Board but who are
            not Outside Directors.

      e)    Common Stock: The Common Stock without nominal or par value of the
            Company.

      f)    Company: Public Service Enterprise Group Incorporated, a corporation
            organized and existing under the laws of the State of New Jersey, or
            its successor or successors.

      g)    Disability: Any physical or mental condition of a permanent nature
            which, in sole reasonable judgment of the Committee, renders an
            Outside Director incapable of performing the duties of a member of
            the Board.

      h)    Effective Date: January 1, 1996.

      i)    Eligible Director: An Outside Director who meets the eligibility
            requirements for stock awards as set forth in Article IV hereof.


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      j)    Exchange Act: The Securities and Exchange Act of 1934, as amended,
            or as it may be amended from time to time.

      k)    NYSE: The New York Stock Exchange, Inc.

      l)    Outside Director: A member of the Board on or after the Effective
            Date who never has been employed by the Company or any of its
            affiliates.

      m)    Outside Directors' Pension Plan: The Public Service Enterprise Group
            Incorporated Pension Plan for Outside Directors Effective January 1,
            1989.

      n)    Plan: This Public Service Enterprise Group Incorporated Stock Plan
            for Outside Directors, as it may be amended from time to time.

      o)    Restricted Stock: Shares of Common Stock subject to restrictions
            awarded pursuant to Article IV hereof.

      p)    Securities Act: The Securities Act of 1933, as amended, or as it may
            be amended from time to time.

      q)    Service: A Director's service as a member of the Board.

      r)    Year of Service: The annual period commencing the day of each Annual
            Meeting and ending on the day before the next Annual Meeting. For
            any person first elected a member of the Board after the date of an
            Annual Meeting, his/her first Year of Service shall commence upon
            his/her election as a Director and shall end on the day before the
            next Annual Meeting.

III.  SHARES SUBJECT TO THE PLAN

      100,000 shares of Common Stock may be awarded as Restricted Stock pursuant
to the terms of this Plan. Such shares may be acquired directly from the Company
or, at the discretion of the Company, purchased on the open market by the
Company or its agent. In the event that any shares of Restricted Stock shall be
forfeited, the shares so forfeited shall again be available for the awarding of
Restricted Stock under the Plan.

IV.   RESTRICTED STOCK AWARDS

      A.    Upon the commencement of each Year of Service as a member of the
            Board, each Outside Director shall be granted an award of of
            Restricted Stock in an amount as shall be eastblish from time to
            time by the Board of Directors. The date of grant shall be the first
            business day of the month following the Annual Meeting or the
            Outside Director's first election as a member of the Board.


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      B.    Upon the Effective Date of this Plan, (i) each Outside Director who
            shall have completed five Years of Service as of December 31, 1995
            shall be granted an award of shares of Restricted Stock equal to the
            present value (assuming commencement of payment at age 70) of what
            his/her vested accrued benefit under the Outside Directors' Pension
            Plan would have been had he/she terminated Service as of December
            31, 1995. The actual number of shares will be determined by dividing
            said Outside Directors' Pension Plan assumed vested accrued benefit
            by the closing price of the Common Stock on the NYSE on December 29,
            1995 and rounding up to the next whole share; (ii) each Outside
            Director who shall not have completed five Years of Service as of
            December 31, 1995 shall be granted an award of shares of Restricted
            Stock equal in number to 300 times the number of years he/she has
            been a member of the Board, all as reflected in Schedule A to the
            Plan.

      C.    The award of shares of Restricted Stock, including the restrictions
            thereon, shall be evidenced by a written instrument in such form and
            upon such terms and conditions as the Committee shall determine and
            as are consistent with the following provisions of the Plan:

            i)    Upon the retirement of an Outside Director as a member of the
                  Board at the Annual Meeting next following the Outside
                  Director's 70th birthday, the restrictions on the Restricted
                  Stock shall lapse and the Company shall issue to the Outside
                  Director a certificate for the shares which have been awarded
                  to him/her without any legend or restriction of any kind and
                  the Company shall return to the Outside Director or destroy
                  any and all blank stock powers previously provided to it by
                  such Outside Director.

            ii)   If the service as a member of the Board of an Outside Director
                  who is the recipient of the shares of Restricted Stock
                  terminates for any reason, other than on account of
                  Disability, before the Annual Meeting next following said
                  Outside Director's 70th birthday, such Outside Director shall
                  forfeit any and all rights in and to the shares of Restricted
                  Stock; provided, however, that, the Committee may, for good
                  and valid business reasons, waive such restriction as the
                  Committee deems appropriate. Notwithstanding any other
                  provision of this Plan, upon the occurrence of a termination
                  of Service following a Change in Control (as defined below),
                  all restrictions on the Restricted Stock shall immediately
                  lapse and be of no effect.

      For the purposes of this Plan, "Change in Control" shall mean the
occurrence of any of the following events:

            a)    any "person" (within the meaning of Section 13(d) of the
                  Exchange Act is or becomes the beneficial owner within the
                  meaning of Rule 13d-3 under the Exchange Act (a "Beneficial
                  Owner"), directly or indirectly, of securities of the Company
                  (not including in the securities beneficially


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                  owned by such person any securities acquired directly from the
                  Company or its affiliates) representing 25% or more of the
                  combined voting power of the Company's then outstanding
                  securities, excluding any person who becomes such a Beneficial
                  Owner in connection with a transaction described in clause (1)
                  of paragraph (c) below; or

            b)    the following individuals cease for any reason to constitute a
                  majority of the number of directors then serving: individuals
                  who, on December 15, 1998, constitute the Board of Directors
                  and any new director (other than a director whose initial
                  assumption of office is in connection with an actual or
                  threatened election contest, including but not limited to a
                  consent solicitation. relating to the election of directors of
                  the Company) whose appointment or election by the Board of
                  Directors or nomination for election by the Company's
                  stockholders was approved or recommended by a vote of at least
                  two-thirds (2/3) of the directors then still in office who
                  either were directors on December 15, 1998 or whose
                  appointment, election or nomination for election was
                  previously so approved or recommended: or

            c)    there is consummated a merger or consolidation of the Company
                  or any direct or indirect wholly owned subsidiary of the
                  Company with any other corporation other than (1) a merger or
                  consolidation which would result in the voting securities of
                  the Company outstanding immediately prior to such merger or
                  consolidation continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of
                  the surviving entity or any parent thereof), in combination
                  with the ownership of any trustee or other fiduciary holding
                  securities under an employee benefit plan of the Company or
                  any subsidiary of the Company, at least 75% of the combined
                  voting power of the securities of the Company or such
                  surviving entity or any parent thereof outstanding immediately
                  after such merger or consolidation, or (2) a merger or
                  consolidation effected to implement a recapitalization of the
                  Company (or similar transaction) in which no person is or
                  becomes the Beneficial Owner, directly or indirectly, of
                  securities of the Company representing 25% or more of the
                  combined voting power of the Company's then outstanding
                  securities; or

            d)    the stockholders of the Company approve a plan of complete
                  liquidation or dissolution of the Company or there is
                  consummated an agreement for the sale or disposition by the
                  Company of all or substantially all of the Company's assets,
                  other than a sale or disposition by the Company of all or
                  substantially all of the Company's assets to an entity, at
                  least 75% of the combined voting power of the voting
                  securities of which are owned by stockholders of the Company
                  in substantially the same proportions as their ownership of
                  the Company immediately prior to such sale.

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          Notwithstanding the foregoing subparagraphs (a), (b), (c) and (d), a
          "Change in Control" shall not be deemed to have occurred by virtue of
          the consummation of any transaction or series of integrated
          transactions immediately following which the record holders of the
          common stock of the Company immediately prior to such transaction or
          series of transactions continue to have substantially the same
          proportionate ownership in an entity which owns all or substantially
          all of the assets of the Company immediately following such
          transaction or series of transactions.

            (iii) Shares of Restricted Stock may not be sold, assigned,
                  transferred, pledged, hypothecated or otherwise disposed of,
                  except by will or the laws of descent and distribution, for
                  the period specified in or in accordance with Section IV(c)(i)
                  and except in accordance with applicable laws and regulations.
                  Any attempted sale, assignment, transfer, pledge,
                  hypothecation or other disposition in contravention of the
                  foregoing shall be null and void and without effect.

            (iv)  Shares of Restricted Stock will be issued in the name of the
                  Outside Director receiving the award, but will be held by the
                  Company for the account of such Outside Director (together
                  with a blank stock power which such Outside Director shall
                  execute and deliver to the Company), subject to all of the
                  terms and conditions of the Plan, for the period specified in
                  or in accordance with Section IV(c)(i).

            (v)   Except as otherwise provided herein and in the instrument
                  evidencing the award of shares of Restricted Stock, the
                  Outside Director receiving same shall have all rights of a
                  stockholder with respect to shares of Restricted Stock issued
                  in his/her name, including the right to vote and to receive
                  dividends and other distributions.

            (vi)  If an Outside Director dies while serving as a member of the
                  Board, and more than six months after the date on which the
                  shares of Restricted Stock were awarded to him have elapsed,
                  the restriction provided for in Section IV(c)(i) shall be
                  deemed to have lapsed immediately prior to death.

            (vii) If an Outside Director, as owner of shares of Restricted
                  Stock, receives or shall be entitled to receive Adjustment
                  Shares, the certificates representing the Adjustment Shares
                  (together with a blank stock power executed by such Outside
                  Director) shall be delivered to and held by the Company,
                  subject to all of the terms and conditions of the Plan, for
                  the period specified in or in accordance with Section
                  IV(c)(i). Any Adjustment Shares shall be Restricted Stock for
                  all purposes of the Plan, subject to the same restrictions as
                  the shares of Restricted Stock to which they relate. If such
                  Participant shall receive rights or warrants with respect to
                  any shares of Restricted Stock or any Adjustment Shares, such
                  rights or warrants may be held, exercised, sold or otherwise
                  disposed of by such Outside Director, and any shares or other
                  securities acquired by such Outside Director as a result of
                  the exercise of such rights or warrants likewise may be held,
                  sold, or otherwise disposed of by such Outside Director, free
                  and clear of any restrictions.

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V.    FURTHER CONDITIONS

      A.    Unless the shares of Restricted Stock to be awarded under the Plan
            have been registered with the Securities and Exchange Commission
            under the Securities Act prior the issuance of the shares of
            Restricted Stock, the Outside Director receiving such Restricted
            Stock must represent in writing to the Company that such shares of
            Common Stock are being acquired for investment purposes only and not
            with a view towards the further resale or distribution thereof and
            must supply to the Company such other documentation as may be
            required by the Company, unless in the opinion of counsel to the
            Company such representation, agreement or documentation is not
            necessary to comply with the Securities Act.

      B.    The Company shall not be obligated to deliver any shares of Common
            Stock until they have been listed on each securities exchange on
            which the shares of Common Stock may then be listed or until there
            has been qualification under or compliance with such state or
            federal laws, rules or regulations as the Company may deem
            applicable. The Company shall use reasonable efforts to obtain such
            listing, qualification and compliance.

      C.    The Committee may make such provisions and take such steps as it may
            deem necessary or appropriate for the withholding of any taxes that
            the Company is required by any law or regulation of any governmental
            authority, whether federal, state or local, domestic or foreign, to
            withhold in connection with the award of any Restricted Stock,
            including, but not limited to (i) the withholding of delivery of
            certificates for shares of Common Stock until the Outside Director
            reimburses the Company for the amount the Company is required to
            withhold with respect to such taxes, (ii) the canceling of any
            number of shares of Common Stock issuable in an amount sufficient to
            reimburse the Company for the amount it is required to so withhold
            or (iii) withholding the amount due from any such Outside Director's
            other compensation.

VI.   FORFEITURE OF BENEFITS

      As long as an Outside Director is receiving or is a recipient of a
Restricted Stock Award under the Plan, such Outside Director will not directly
or indirectly enter into or in any manner take part in any business or other
endeavor, as an employee, agent, independent contractor, owner or otherwise,
which in any manner competes or conflicts with the business of the Company or is
detrimental to the best interests of the Company, unless the Company consents
thereto in writing. The failure of an Outside Director to comply with the
provisions of this Article shall result in the forfeiture all Restricted Stock
grants under the Plan. Before any such forfeiture, the Company shall mail notice
to the Outside Director that consideration is being given to forfeiture pursuant
to this Article. On written request of the Outside Director within sixty days
following the mailing by the Company of the notice, the Committee shall afford
the Outside Director an opportunity to demonstrate to the Committee that
forfeiture would not be justified.

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VII.  ADMINISTRATION

      The Plan shall be administered by the Committee, which shall have full and
final authority to interpret the provisions of the Plan and to establish rules
and regulations and otherwise make determinations regarding the administration
and operation of the Plan. All decisions and determinations by the Committee
with respect to the Plan or awards payable thereunder shall be final and binding
upon all parties.

VIII. ADJUSTMENT UPON CHANCES IN CAPITALIZATION

      In the event that the outstanding shares of Common Stock are hereafter
changed by reason of recapitalization, reclassification, stock split,
combination or exchange of shares of Common Stock or the like, or by the
issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Committee in the number of shares of Restricted
Stock outstanding

IX.   TERMINATION, MODIFICATION AND AMENDMENT

      A.    The Board may, at any time, terminate the Plan or, from time to
            time, make such modifications or amendments of the Plan as it may
            deem advisable.

      B.    No termination, modification or amendment of the Plan may adversely
            affect the rights under any outstanding shares of Restricted Stock
            without the consent of the Outside Director to whom such shares of
            Restricted Stock shall have been previously awarded.

X.    NOT A CONTRACT FOR CONTINUED SERVICE

      Nothing contained in the Plan or in any restricted stock agreement
executed pursuant hereto shall be deemed to confer upon any Outside Director to
whom shares of Restricted Stock are or may be awarded hereunder any right to
remain a member of the Board or in any way limit the right of the Board or the
Stockholders to terminate or fail to renominate or reelect any such Outside
Director as a member of the Board.

XI.   MISCELLANEOUS

      A.    The costs and expenses of administering the Plan shall be borne by
            the Company and shall not be charged against any award or to any
            Outside Director receiving an award.

      B.    Any restricted stock agreement may contain, among other things,
            provisions prohibiting the Outside Director from competing with the
            Company or any affiliate in a form or forms acceptable to the
            Committee, in its sole discretion.

      C.    This Plan and actions taken in connection herewith shall be governed
            and construed in accordance with the laws of the State of New
            Jersey.

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      D.    The captions and section numbers appearing in this Plan are inserted
            only as a matter of convenience. They do not define, limit or
            describe the scope or intent of the provisions of this Plan. In this
            Plan, words in the singular number include the plural and in the
            plural include the singular; and words of the masculine gender
            include the feminine and the neuter, and when the sense so
            indicates, words of the neuter gender may refer to any gender.

      E.    Whenever the time for payment or performance hereunder shall fall on
            a weekend or public holiday, such payment or performance shall be
            deemed to be timely if made on the next succeeding business day.