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


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 judgement of the
       Committee, renders an Outside Director incapable of
       performing the duties of a member of the Board.

   (h) Effective Date:  January 1, 1996.
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   (i) Eligible Director:  An Outside Director who meets the
       eligibility requirements for stock awards as set forth in
       Article IV hereof.

   (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 first
       Year of Service shall commence upon his election as a
       Director and shall end on the day before the next Annual
       Meeting.


III. SHARES SUBJECT TO THE PLAN.

   Shares of Restricted Stock which may be awarded under the Plan
shall be 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.

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IV.  RESTRICTED STOCK AWARDS.

   A.  After the Effective Date of this Plan, each Outside
       Director shall be granted an award of 300 shares of
       Restricted Stock upon the commencement of each Year of
       Service as a member of the Board. 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. 

   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 vested
       accrued benefit under the Outside Directors' Pension Plan
       would have been had he 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  the years
       he 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 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.

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     (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 the foregoing, if the Company shall
          merge with or into any other corporation and not be
          the surviving entity, this restriction shall  be
          deemed to have lapsed.

     (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 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.
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     (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.

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 Sock 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.
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   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 cancelling 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.

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.

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VIII.  ADJUSTMENT UPON CHANGES 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 nor 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.