UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549FORM 10-Q

|(Mark One)                                                        |  |                                             |  |  |  | 
|----------------------------------------------------------------- |  | ------------------------------------------- |  |  |  | 
|[X]                                                               |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR  |  | 
|15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                     
|For the quarterly period ended March 31, 2008                    
|                                                                 
|OR                                                               
|                                                                 
|[   ]                                                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR |  | 
|15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                     
|For the transition period from _______________ to _______________

|Commission  | Registrant, State of Incorporation,    | I.R.S. Employer   
|----------- | -------------------------------------- | ------------------
|File Number | Address, and Telephone Number          | Identification No.
|333-127545  | PSE&G Transition Funding II LLC        | 55-0628725        
|            | (A Delaware limited liability company) |                   
|            | 80 Park Plaza – T4D                    |                   
|            | P.O. Box 1171                          |                   
|            | Newark, New Jersey 07101-1171          |                   
|            | 973 297-2227                           |                   
|            | http://www.pseg.com                    |                   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesXNo _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.) (Check one):

|Large accelerated filer _____ | Accelerated filer _____ | Non-accelerated filerX
|----------------------------- | ----------------------- | ----------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes _____     NoX

Registrant is a wholly owned subsidiary of Public Service Electric and Gas Company.

Registrant meets the conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure format authorized by General Instruction
H.

---



|TABLE OF CONTENTS                                                                            
|---------------------------------------------------------------------------------------------
|                                                                                             
|FORWARD-LOOKING STATEMENTS                                                                   
|                                                                                             
|PART I. FINANCIAL INFORMATION                                                                
|                                                                                             
|Item 1. Condensed Financial Statements                                                       
|Notes to Condensed Financial Statements                                                      
|Note 1. Organization and Basis of Presentation                                               
|Note 2. The Bonds                                                                            
|Note 3. Significant Agreements and Related Party Transactions                                
|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Results of Operations                                                                        
|Liquidity and Capital Resources                                                              
|                                                                                             
|Item 3. Qualitative and Quantitative Disclosures About Market Risk                           
|                                                                                             
|Item 4. Controls and Procedures                                                              
|                                                                                             
|PART II. OTHER INFORMATION                                                                   
|                                                                                             
|Item 1. Legal Proceedings                                                                    
|                                                                                             
|Item 6. Exhibits                                                                             
|                                                                                             
|Signature                                                                                    

i

---



FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, certain of the matters discussed in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated. Such statements are based on managements beliefs as well as assumptions made by and
information currently available to management. When used herein, the words, anticipate, intend, estimate, believe, expect, plan, potential, variations
of such words and similar expressions are intended to identify forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following review of factors should not be construed as exhaustive.

In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following: state and federal legal or regulatory developments; national or regional economic conditions; market demand and prices for energy; customer conservation; distributed generation
technology; weather variations affecting customer energy usage; the effect of continued electric industry restructuring; operating performance of Public Service Electric and Gas Companys facilities and third party suppliers; and the payment
patterns of customers including the rate of delinquencies.

ii

---



PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSPSE&G TRANSITION FUNDING II LLCCONDENSED STATEMENT OF OPERATIONS(Thousands of Dollars)
(Unaudited)

|                                             |  | For the Quarters Ended
|-------------------------------------------- |  | ----------------------
|                                             |  | March 31,             
|                                             |  | 2008                  
|OPERATING REVENUES                           |  | $                     
|OPERATING EXPENSES                           |  |                       
|Amortization of Bondable Transition Property |  |                       
|Servicing and Administrative Fees            |  |                       
|Total Operating Expenses                     |  |                       
|OPERATING INCOME                             |  |                       
|Interest Income                              |  |                       
|Interest Expense                             |  |                       
|NET INCOME                                   |  | $                     

See Notes to Condensed Financial Statements
1

---



PSE&G TRANSITION FUNDING II LLCCONDENSED BALANCE SHEET(Thousands of Dollars)(Unaudited)

|                                      |  | March
    31, |        | December
    31,
|------------------------------------- |  | ------------- | ------ | ----------------
|                                      |  | 2008          |        | 2007            
|ASSETS                                |  |               |        |                 
|Current Assets:                       |  |               |        |                 
|Cash                                  |  | $             | 64     |                 
|Receivable from Member                |  |               | 2,622  |                 
|Restricted Cash                       |  |               | 3,645  |                 
|Total Current Assets                  |  |               | 6,331  |                 
|                                     
|Noncurrent Assets:                    |  |               |        |                 
|Restricted Cash                       |  |               | 514    |                 
|Bondable Transition Property          |  |               | 80,450 |                 
|Total Noncurrent Assets               |  |               | 80,964 |                 
|TOTAL ASSETS                          |  | $             | 87,295 |                 
|                                     
|LIABILITIES                           |  |               |        |                 
|Current Liabilities:                  |  |               |        |                 
|Current Portion of Long-Term Debt     |  | $             | 9,801  |                 
|Current Portion of Payable to Member  |  |               | 4      |                 
|Accrued Interest                      |  |               | 1,114  |                 
|Total Current Liabilities             |  |               | 10,919 |                 
|                                     
|Long-Term Debt                        |  |               | 75,798 |                 
|                                     
|TOTAL LIABILITIES                     |  |               | 86,717 |                 
|                                     
|MEMBERS EQUITY                       |  |               |        |                 
|Contributed Capital                   |  |               | 514    |                 
|Retained Earnings                     |  |               | 64     |                 
|Total Members Equity                 |  |               | 578    |                 
|TOTAL LIABILITIES AND MEMBERS EQUITY |  | $             | 87,295 |                 

See Notes to Condensed Financial Statements2

---



PSE&G TRANSITION FUNDING II LLCCONDENSED STATEMENT OF CASH FLOWS(Thousands of Dollars)(Unaudited)

|                                                       |  | For the Three Months Ended March
    31,
|------------------------------------------------------ |  | ----------------------------------------
|                                                       |  | 2008                                    
|CASH FLOWS FROM OPERATING ACTIVITIES                   |  |                                         
|Net Income                                             |  | $                                       
|Adjustments to Reconcile Net Income to Net Cash        |  |                                         
|Flows from Operating Activities:                       |  |                                         
|Amortization of Bondable Transition Property           |  |                                         
|Net Changes in Certain Current Assets and Liabilities: |  |                                         
|Receivable from Member                                 |  |                                         
|Restricted Cash                                        |  |                                         
|Accrued Interest                                       |  |                                         
|Net Cash Provided By Operating Activities              |  |                                         
|                                                      
|CASH FLOWS FROM INVESTING ACTIVITIES                   |  |                                         
|                                                      
|CASH FLOWS FROM FINANCING ACTIVITIES                   |  |                                         
|Increase in Cash and Cash Equivalents                  |  |                                         
|Cash and Cash Equivalents at Beginning of Period       |  |                                         
|Cash and Cash Equivalents at End of Period             |  | $                                       
|                                                      
|Interest Paid                                          |  | $                                       

See Notes to Condensed Financial Statements3

---



NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Basis

Organization

Unless the context otherwise
indicates, all references to Transition Funding II, we, us or our herein
mean PSE&G Transition Funding
II LLC, a Delaware limited liability company located at 80 Park Plaza, Newark,
New Jersey 07102.

We were formed under the laws of the State of Delaware on July 18, 2005 and operate pursuant to a limited liability company agreement with Public Service Electric and Gas Company (PSE&G) as
our sole member. PSE&G is an operating electric and gas utility and is a wholly owned subsidiary of Public Service Enterprise Group Incorporated (PSEG). We were organized for the sole purpose of purchasing and owning the BGS bondable transition
property (BTP) of PSE&G, issuing transition bonds (Bonds), pledging our interest in BTP and other collateral to a debt/security trustee (Trustee) to collateralize the Bonds, and performing activities that are necessary, suitable or convenient to
accomplish these purposes.

The Electric Discount and Energy Competition Act, enacted in the State of New Jersey in February 1999 and amended in September 2002 (Competition Act), authorizes electric public utilities, such
as PSE&G, to recover, among other costs, basic generation service (BGS) transition costs. BGS transition costs represent the amount by which a public utilitys cost of supplying BGS exceeds the net revenues received by the public utility
for providing such service during a four-year transition period ended July 31, 2003. BGS is a regulated electric generation service provided to any electric utility consumer that has not chosen an alternative power supplier. A public utility may
recover BGS transition costs through an irrevocable non-bypassable charge called a BGS transition bond charge (TBC) that is assessed on all retail electric consumers. The Competition Act permits special purpose entities formed by electric public
utilities to issue debt securities secured by the right to receive revenues arising from the TBC.

BTP represents the irrevocable right of PSE&G, or its successor or assignee, to collect a TBC pursuant to a bondable stranded cost rate order (Finance Order), which was issued on July 12,
2005 by the New Jersey Board of Public Utilities (BPU) in accordance with the Competition Act. These orders are a matter of public record and are available from the BPU. The Finance Order authorizes the TBC to be sufficient to recover the $102.7
million aggregate principal amount of Bonds, plus an amount sufficient to provide for any credit enhancement, to fund any reserves and to pay interest, redemption premiums, if any, servicing fees and other expenses relating to the Bonds.

Our organizational documents require us to operate in a manner so that we should not be consolidated in the bankruptcy estate of PSE&G in the event PSE&G becomes subject to a bankruptcy
proceeding.

Basis of Presentation

The condensed financial statements included herein have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note
disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion
of management, the disclosures are adequate to make the information presented not misleading.  These condensed financial statements and notes to condensed financial statements (Notes) should be read in conjunction with and update and supplement
matters discussed in our 2007 Annual Report on Form 10-K.

The unaudited financial information furnished herein reflects all adjustments, which are, in the opinion of management, necessary to fairly state the results for the interim periods presented.
The year-end condensed balance sheet was derived from the audited financial statements included in our 2007 Annual Report on Form 10-K.

4

---



NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. The Bonds

On September 23, 2005, we issued $102.7 million of Bonds in four classes with maturities ranging from two years to nine years. The net proceeds of the issuance were remitted to PSE&G as
consideration for the BTP.

Under applicable law, the Bonds are not an obligation of PSE&G or secured by the assets of PSE&G, but rather the Bonds are only recourse to us and are collateralized on a pro rata basis
by the BTP and our equity and assets. TBC collections are deposited at least monthly by PSE&G with the Trustee and are used to pay our expenses, to pay our debt service on the Bonds and to fund any credit enhancement for the Bonds. We have also
pledged the capital contributed by PSE&G to secure the debt service requirements of the Bonds. The debt service requirements include a capital subaccount and a reserve subaccount which are available to bond holders. Any amounts collateralizing
the Bonds will be returned to PSE&G upon payment of the Bonds.

The significant terms of the Bonds issued by us, and the amounts
outstanding, as of March 31, 2008 are as follows:

PaymentsInitial
      
      
      
      
      Made On
      
      Current
      
      Noncurrent
      
      Final/
      FinalPrincipal
      
      Interest
      
      Bonds Through
      
      Portion
      
      Portion
      
      Expected
      MaturityBalance
      
      Rate
      
      March 31, 2008
      
      Outstanding
      
      Outstanding
      
      Payment Date
      DateClass A-1
      
      $
      25,200,000
      
      4.18
      %
      
      $
      17,100,310
      
      $
      8,099,690
      
      $
      —
      
      12/15/08
      12/15/10Class A-2
      
      
      35,000,000
      
      4.34
      %
      
      
      —
      
      
      1,701,496
      
      
      33,298,504
      
      6/15/12
      6/16/14Class A-3
      
      
      20,000,000
      
      4.49
      %
      
      
      —
      
      
      —
      
      
      20,000,000
      
      12/16/13
      12/15/15Class A-4
      
      
      22,500,000
      
      4.57
      %
      
      
      —
      
      
      —
      
      
      22,500,000
      
      6/15/15
      6/15/17Total
      
      $
      102,700,000
      
      
      
      
      $
      17,100,310
      
      $
      9,801,186
      
      $
      75,798,504


Note 3. Significant Agreements and Related Party Transactions

Under the servicing agreement entered into by PSE&G and us, concurrently with the issuance of the Bonds, PSE&G, as servicer, is required to manage and administer our BTP and to collect
the TBC on our behalf. Under the Finance Order, PSE&G withholds from the TBC collections an annual servicing fee equal to 0.05% of the initial balance of Bonds issued. In addition we pay miscellaneous operating expenses to PSE&G up to
$100 thousand per quarter, administration fees up to $31 thousand per quarter and trustee fees up to $4 thousand per quarter. Servicing and administrative fees were approximately $13 thousand for the quarters ended March 31, 2008 and
2007.

As of March 31, 2008 and December 31, 2007, we had a receivable from our sole member, PSE&G, of approximately $2,622 thousand and $2,706 thousand, respectively, relating to TBC
billings.

5

---



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise indicates, all references to Transition Funding II, we, us or our herein mean PSE&G Transition Funding
II LLC, a Delaware limited liability company located at 80 Park Plaza, Newark, New Jersey 07102.

Following are the significant changes in or additions to information reported in our 2007 Annual Report on Form 10–K affecting the financial condition and the results of our operations.
This discussion refers to our condensed financial statements (Statements) and related notes to condensed financial statements (Notes) and should be read in conjunction with such Statements and Notes. The following analysis of the financial condition
and our results of operations is in an abbreviated format pursuant to General Instruction H of Form 10-Q.

On September 23, 2005, we issued $102.7 million of transition bonds in four classes with maturities ranging from two years to nine years. The net proceeds of the issuance were utilized to
acquire Public Service Electric and Gas Companys (PSE&G) property right in the BGS transition bond charge (TBC). We use collections of the TBC to make scheduled principal and interest payments on the transition bonds and to cover any
additional administrative costs.

RESULTS OF OPERATIONSOperating Revenues

TBC revenues increased approximately $6 thousand for the quarter ended March 31, 2008, as compared to the same period in 2007, primarily due to a 1% increase in sales volumes.

Operating Expenses

Amortization of Bondable Transition Property (BTP)

As a regulated entity, our amortization expense fluctuates with changes in revenue and interest expense. Amortization of BTP increased approximately $98 thousand or 5% for the quarter ended
March 31, 2008, as compared to the same period in 2007, due to increased revenues and decreased interest expense.

Interest Income

Interest Income decreased approximately $7 thousand or 28% for the quarter ended March 31, 2008, as compared to the same period in 2007 primarily due to a reduction in interest rates. The
average return on investments decreased to approximately 3.3% for the quarter ended March 31, 2008 compared to approximately 5.4% for the quarter ended March 31, 2007.

6

---



Interest Expense

Interest expense decreased approximately $97 thousand or 9% for the quarter ended March 31, 2008, as compared to the same period in 2007, due primarily to a reduction in the total amount of
debt outstanding.

LIQUIDITY AND CAPITAL RESOURCES

The principal amount of the Bonds, interest and fees are being recovered through the TBC. As part of PSE&Gs responsibility as Servicer under the Servicing Agreement, PSE&G remits
the TBC collections to the Trustee to make scheduled payments on the Bonds.

ITEM 3. QUALITATIVE AND QUANTITATIVEDISCLOSURES ABOUT MARKET RISK

We are not subject to risk of fluctuating interest rates as all four classes of Bonds were issued with fixed interest rates.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that are filed or
submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. These disclosure controls and procedures include, without limitation, controls
and procedures designed to provide reasonable assurance that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, by others within the company to allow
timely decisions regarding required disclosure. We have established a disclosure committee which includes several key management employees and which reports directly to the Chief Financial Officer and Chief Executive Officer. The committee monitors
and evaluates the effectiveness of these disclosure controls and procedures. The Chief Financial Officer and Chief Executive Officer have evaluated the effectiveness of the disclosure controls and procedures and, based on this evaluation, have
concluded that the disclosure controls and procedures were effective in achieving their objectives at the reasonable assurance level as of March 31, 2008.

Internal Controls

We  continually  review  our  respective  disclosure  controls  and
procedures  and make  changes,  as  necessary,  to ensure  the  quality of our
financial  reporting.  There  have been no  changes  in  internal  control  over
financial  reporting  that  occurred  during the first quarter of 2008 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

7

---



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Electric Discount and Energy Competition Act (Competition Act)

On April 23, 2007, PSE&G and our affiliate, PSE&G Transition Funding LLC (Transition Funding) were served with a copy of a purported class action complaint (Complaint) challenging the
constitutional validity of certain provisions of New Jerseys Competition Act, seeking injunctive relief against continued collection from PSE&Gs electric customers of the TBC of Transition Funding, as well
as recovery of TBC amounts previously collected. Notice of the filing of the Complaint was also provided to New Jerseys Attorney General. Under New Jersey law, the Competition Act, enacted in 1999, is presumed constitutional. On July 9, 2007,
the same plaintiff filed an amended Complaint to also seek injunctive relief from continued collection of related taxes as well as recovery of such taxes previously collected. On July 30, 2007, PSE&G filed a motion to dismiss the amended
Complaint, or, in the alternative, for summary judgment. On October 10, 2007, PSE&Gs and Transition Fundings motion to dismiss the Amended Complaint was granted. On November 21, 2007, the plaintiff filed a notice of appeal with the
Appellate Division of the New Jersey Superior Court. Briefing of the appeal has been completed.

On July 9, 2007, the same plaintiff also filed a petition with the BPU requesting review and adjustment to PSE&Gs recovery of the same charges. On September 30, 2007, PSE&G filed
a motion with the BPU to dismiss the petition. PSE&Gs motion to dismiss the BPU petition is pending.

ITEM 6. EXHIBITS

A listing of exhibits being filed
with this document is as follows:

|Exhibit Number |  | Document                                                                                                                                                                               
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|31.1           |  | Certification by Thomas M. OFlynn, Chief
        Executive Officer of PSE&G Transition Funding II LLC Pursuant to
    Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934  
|              
|31.2           |  | Certification by Morton A. Plawner, Chief Financial
        Officer of PSE&G Transition Funding II LLC Pursuant to Rules 13a-14
    and 15d-14 of the Securities Exchange Act of 1934  
|              
|32.1           |  | Certification by Thomas M. OFlynn, Chief
        Executive Officer of PSE&G Transition Funding II LLC Pursuant to
    Section 1350 of Chapter 63 of Title 18 of the United States Code
|              
|32.2           |  | Certification by Morton A. Plawner, Chief Financial
        Officer of PSE&G Transition Funding II LLC Pursuant to Section 1350
    of Chapter 63 of Title 18 of the United States Code

8

---



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                  |     | PSE&G TRANSITION
    FUNDING II LLC | 
|----------------- | --- | ----------------------------------- | 
|                  |     | (Registrant)                        | 
|                 
|                  | By: | /s/ Derek M. DiRisio                | 
|                  |     | Derek M. DiRisio                    | 
|                  |     | Controller                          | 
|                  |     | (Principal Accounting Officer)      | 
|                 
|                 
|Date: May 9, 2008 |     |                                     | 
|                  |     |                                     | 

9

---