EXHIBIT 10A


                     MANAGEMENT INCENTIVE COMPENSATION PLAN

                   PUBLIC SERVICE ELECTRIC AND GAS COMPANY

























                                                     Amended December 17, 1996

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                   PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                     MANAGEMENT INCENTIVE COMPENSATION PLAN


1.   Purposes

     The purposes of this Plan are to foster  attainment  of the  financial  and
operating  objectives  of the  Company  which are  important  to  customers  and
stockholders  by providing  incentive to members of management who contribute to
attainment of these  objectives;  to supplement the Company's salary and benefit
programs so as to provide  overall  compensation  for such  executives  which is
competitive with  corporations with which the Company must compete for executive
talent; and to assist the Company in attracting and retaining executives who are
important to its continued success.

2.   Definitions

     As used in this  Plan,  the  following  words and  phrases  shall  have the
meanings indicated:

            (a)   "Account" - an Account established pursuant to Paragraph
      8(a) of this Plan.

            (b) "Award" - the amount of final  Incentive Award for a Participant
      approved by the Committee pursuant to Paragraphs 5 and 7 of the Plan.

            (c) "Award Year" - a Plan Year in which Incentive  Awards are earned
      by Participants in the Plan.

            (d)   "Committee" - the Organization and Compensation Committee
      of the Board of Directors of Enterprise.

            (e)   "Company" - Public Service Electric and Gas Company.

            (f)   "Disability" - any physical or mental condition which renders
      a Participant incapable of performing further work for the Company and
      that results in termination of employment.

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            (g)   "Distribution Date" - for each Award Year, the first
      business day of January.

            (h)   "Enterprise" - Public Service Enterprise Group Incorporated.

            (i)   "Executive Officer Group" or "EOG" - those persons
      designated from time-to-time by the Chief Executive Officer of the
      Company.

            (j)  "Incentive  Award" - the  amount  earned  by a  Participant  in
      accordance with Paragraph 7.

            (k) "Participant" - each officer or other employee of the Company as
      may be designated by the Committee pursuant to Paragraph 3 of the Plan.

            (l)   "Plan" - the Public Service Electric and Gas Company
      Management Incentive Compensation Plan.

            (m)   "Plan Year" - the calendar year.

            (n)   "Primary Award" - the amount determined under Paragraph
      7(a)(1).

            (o)  "Retirement" - termination of service with the Company with the
      right to an  immediately  payable  periodic  normal  or  early  retirement
      benefit under the Pension Plan of Public Service  Electric and Gas Company
      or the Cash  Balance  Pension  Plan of  Public  Service  Electric  and Gas
      Company.  Retirement  shall not include  termination  of service  with the
      right to a deferred retirement benefits under either said plan.

            (p)  "Target Incentive Award" - the amount determined under
      paragraph 6.

3.   Eligibility

            (a)  The  Committee  may  select  such   employees  of  the  Company
      (individually  or by  position)  for  participation  in the Plan upon such
      terms as it deems appropriate,  due to the employee's responsibilities and
      his opportunity to contribute substantially to the attainment of financial
      and operating  objectives of the Company. A determination of participation
      for a Plan Year  shall be made no later  than the  beginning  of that Plan
      Year. Provided,  however, that employees whose duties and responsibilities
      change  significantly  during a Plan  Year may be  added or  deleted  as a
      Participant by the Committee.  Provided further, the Committee may prorate
      the Incentive  Award of any Participant if appropriate to reflect any such
      change in employee responsibilities during a Plan Year.

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            (b)  Participation  in the Plan in one Plan Year shall not guarantee
      participation in another Plan Year.

            (c) The  Committee  shall  have sole  discretion  as to  whether  to
      suspend operation of the Plan for any period of time.

4.    Administration

            (a) The Plan shall be administered by the Committee.  Subject to the
      provisions of the Plan, the Committee  shall have full and final authority
      to select  Participants,  to designate the Target Incentive Award for each
      Participant, and to determine the performance objectives and the amount of
      all  Incentive  Awards.  The  Committee  shall also  have,  subject to the
      provisions of the Plan, full and final authority to interpret the Plan, to
      establish and revise rules,  regulations  and guides relating to the Plan,
      and to make  any  other  determinations  that  it  believes  necessary  or
      advisable for the  administration  of the Plan. The Committee may delegate
      such  responsibilities,  other than final approval of Awards or appeals of
      alleged  adverse  determinations  under the Plan,  to the Chief  Executive
      Officer of the Company or to any other officer of the Company.

            (b) All decisions and determinations by the Committee shall be final
      and binding upon all parties, including stockholders,  Participants, legal
      representatives and other employees.

5.   Determination of Award Year

     Not later than 120 days after the close of each Plan  Year,  the  Committee
shall,  in its sole  discretion,  determine  whether any  Participants  shall be
eligible to earn Incentive Awards with respect to such Plan Year. The discretion
of the Committee with respect to this final approval of Awards shall be total.

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6.   Determination of Target Incentive Awards

     For each Award Year, the Committee shall establish a Target Incentive Award
for each  Participant  based upon the  Participant's  position and potential for
contribution  to  the  attainment  of  the  Company's  financial  and  operating
objectives. The Target Incentive Award shall be expressed as a percentage of the
Participant's  rate of base salary in effect as of the last day of the Plan Year
to which such Target Incentive Award relates.

7.   Determination of Incentive Award

                  (a) To  determine  each  Participant's  Incentive  Award,  the
      Participant's  Target  Incentive  Award shall be  adjusted  based upon the
      following  factors,  provided that the Incentive Award for any Participant
      shall in no event exceed 1.5 times the Target Incentive Award and provided
      further that the  Committee  may  determine,  based upon the financial and
      operating  results of the Company or any other  business  factors  that it
      determines  appropriate,  that no Incentive Award shall be awarded for any
      Plan Year:
                        (1) The Target  Incentive Award shall be multiplied by a
                  factor of between 0 and 1.5 to proportionately reflect (i) for
                  members of the Executive Officer Group, Enterprise's return on
                  capital  and (ii) for all other  Participants,  the  return on
                  capital of the Company,  each for the Plan Year as reported to
                  the Board of  Directors  in  accordance  with  such  rules and
                  procedures  as  are  approved  by  the  Committee;   provided,
                  however,  that if such  return  is below a  minimum  threshold
                  established  by the  Committee  prior to the  beginning of the
                  Plan Year,  no  Incentive  Award shall be earned for such Plan
                  Year. This adjusted amount is the Participant's Primary Award.

                        (2) The Participant's Primary Award shall be adjusted by
                  a factor of between -0.5 and +0.5 to  proportionately  reflect
                  the  relative  annual  increase or  decrease in the  Company's
                  weighted  average of cost per unit of electricity and gas sold
                  in the  Plan  Year  as  compared  with  similar  increases  or
                  decreases  of  other  designated  comparison   utilities,   in
                  accordance  with such rules and  procedures as are approved by
                  the Committee.
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            (3)   The sum of items (1) and (2) above  shall be  multiplied  by a
                  factor of between 0 and 1.5 to reflect the Participant's level
                  of individual  performance,  in accordance with such rules and
                  procedures as are approved by the Committee.

            (b) The Chief Executive  Officer shall recommend to the Committee an
      Award for each  Participant,  except  that the  Committee  shall have full
      responsibility  for  assessing  the  performance  of the  Chief  Executive
      Officer and that the Committee shall make the final  determination  of all
      Awards.

8.   Award Payment

            (a)   For Incentive Awards Relating to Plan Years Ending Prior to
                  1/1/96:

            (i) There shall be established an account for each  Participant  for
      each Plan Year which shall, to the extent not paid to the Participant,  be
      initially  credited with the amount of the Participant's  Incentive Award.
      The Plan shall be unfunded. The Company shall not be required to segregate
      any  amounts  credited  to  any  Participant's  Account,  which  shall  be
      established merely as an accounting  convenience.  Title to and beneficial
      ownership of any amounts credited to a Participant's  Account shall at all
      times remain in the Company, and no Participant or shall have any interest
      whatsoever in any specific assets of the Company.  All amounts credited to
      Participants'  Accounts  shall at all times remain  solely the property of
      the Company  subject to the claims of its general  creditors and available
      for the Company's use for whatever purpose desired.

            (ii) The amount credited to a Participant's Account shall be treated
      for  valuation  purposes as if it had been used to purchase  shares of the
      Common Stock of the Company or Enterprise, whichever is then listed on the
      New York Stock Exchange,  on the date it is credited to the  Participant's
      Account at a price equal to the average of the high and low sale prices of
      such  Common  Stock on such date on the New York Stock  Exchange.  For the
      purpose of  valuing a  Participant's  Account,  the  equivalent  shares so
      credited to a  Participant's  Account  shall be treated as if they were to
      accrue  dividends  the same as actual  shares of  Common  Stock,  and such
      equivalent  dividends  were  used to  purchase  additional  shares of such
      Common  Stock at a price  equal to 95% of the  average of the high and low
      sale  prices of such  Common  Stock on the New York Stock  Exchange on the
      dividend payment date.
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            (iii) When a  distribution  or partial  distribution  is to be made,
      cash in the amount of the  equivalent  number of shares of Common Stock to
      be  distributed  times the average of the high and low sale prices of such
      Common Stock on the New York Stock  Exchange as of the  Distribution  Date
      shall be distributed

            (iv) Distribution of a Participant's  Account attributable to a Plan
      Year  shall  be made in  yearly  payments  over a period  of three  years,
      commencing  with the  second  year  following  the Plan  Year to which the
      Incentive Award relates,  each yearly payment to be determined by dividing
      the value of such Account by the number of payments remaining.

            (b) For  Incentive  Awards  Related  to Plan Years  Beginning  After
      12/31/95:  Participants'  Incentive  Awards  shall be made in one lump sum
      cash payment as soon as practicable after the Determination Date.

9.    Deferral of Awards

            (a)  Effective  January  1, 1997,  receipt  of payment of  Incentive
      Awards earned pursuant to this Plan may no longer be voluntarily  deferred
      pursuant to this Plan.

            (b) Also  effective on that date,  all amounts  previously  deferred
      under the voluntary deferral  provisions of this Plan shall be transferred
      (using the last sale price for the Common  Stock on December 31, 1996 as a
      reference for the amount to be transferred)  to the Deferred  Compensation
      Plan for Certain Employees of Public Service Electric and Gas Company,  as
      amended, and be treated in accordance with the terms of that plan.

10.  Termination

            (a) If the  employment of a Participant by the Company is terminated
      by the Participant's death, Disability or Retirement,  the entire value of
      the Participant's Account shall be distributed as soon as practicable.  In
      addition,  the Committee shall, if it determines that Incentive Awards may
      be earned for such year of termination,  prorate an Award for that part of
      the  year  in  which  the  Participant  was  participating  prior  to such
      termination  and the  Company  shall  pay the  prorated  Award  as soon as
      practicable  after  determination,  unless  otherwise  determined  by  the
      Committee.

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            (b) If the  employment of a Participant is terminated for any reason
      other than death,  Disability  or  Retirement,  any  amounts  held for the
      Account of Participant upon any such termination  which have not been paid
      because of the mandatory  deferral  provisions of Paragraph  8(a) shall be
      forfeited,  unless otherwise determined by the Committee,  and the balance
      of the Participant's  Account shall be distributed as soon as practicable.
      In addition,  the Participant  shall not receive an Award for that part of
      the Plan Year in which the  Participant was  participating  at the time of
      termination, unless otherwise determined by the Committee.

            (c) If a Participant  becomes or ceases to be a Participant during a
      Plan Year, any Award to the Participant  shall be  appropriately  prorated
      from the time the  Participant  entered or left the Plan to the end of the
      Plan Year.

            (d) In the case of a  Participant's  death,  payment  of the  entire
      value of the Participant's Account under the Plan and/or any Award related
      to the  Participant's  final  year of  participation  shall be made to the
      Participant's  estate  as a lump  sum as soon  as  practicable  after  the
      Participant's death.

11.  Assignment

     No benefit under the Plan shall in any manner or to any extent be assigned,
alienated,  or  transferred  by any  Participant  or be subject  to  attachment,
garnishment or other legal process.

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12.  Plan Does Not Constitute an Employment Agreement

     This Plan shall not  constitute a contract for the continued  employment of
any  Participant  by the  Company.  The Company  reserves  the right to modify a
Participant's  compensation  at any time and from  time to time as it  considers
appropriate  and to  terminate  his  employment  for  any  reason  at  any  time
notwithstanding  this Plan.  13.  Amendment  or  Termination  of the Plan by the
Company  The Board of  Directors  of the Company  may,  in its sole  discretion,
amend,  modify or terminate this Plan at any time,  provided,  however,  that no
such amendment,  modification or termination  shall materially  adversely affect
the right of a Participant in respect of an Incentive Award previously earned by
him which has not been paid, unless such Participant or his legal representative
shall consent to such change. If this Plan is terminated during any Plan Year in
which Participants have been selected to participate, the Board of Directors may
authorize the Committee to prorate and make  provision for payment of Awards for
such period.

14.  What Constitutes Notice

     Any notice hereunder to a Participant or his legal  representative shall be
given either by  delivering  it, or by  depositing it in the United States mail,
postage prepaid,  addressed to his last-known address. Any notice to the Company
or the Committee hereunder shall be given either by delivering it, or depositing
it in the United States Mail, postage prepaid, to the Secretary,  Public Service
Electric and Gas Company,  80 Park Plaza, T4B, P.O. Box 570, Newark,  New Jersey
07101.

15.  Advance Disclaimer of Any Waiver

     Failure by the Company or the  Committee  to insist upon strict  compliance
with any of the terms,  covenants  or  conditions  hereof  shall not be deemed a
waiver  of any such  term,  covenant  or  condition,  nor  shall  any  waiver or
relinquishment  of any  right or  power  hereunder  at any one or more  times be
deemed a waiver or  relinquishment  of any such right or power at any other time
or times.

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16. Effect of  Invalidity  of Any Part of the Plan

     The invalidity or  unenforceability of any provision hereof shall in no way
affect the validity of enforceability  of any other provision.

17.  Plan Binding on Any  Successor Owner

     Except as otherwise  provided herein,  this Plan shall inure to the benefit
of and be binding upon the Company,  its successors  and assigns,  including but
not limited to any corporation which may acquire all or substantially all of the
Company's  assets  and  business  or with  or  into  which  the  Company  may be
consolidated or merged.

18.  Laws Governing This Plan

     Except to the extent  federal laws applies,  this Plan shall be governed by
the laws of the State of New Jersey.

19.  Miscellaneous

     The masculine pronoun shall also mean the feminine wherever appropriate.

20.  Withholding

     The Company  shall have the right to deduct from any payment any sums to be
withheld by federal,  state, or local tax law. There is no obligation  hereunder
that any  Participant  or other person be advised in advance of the existence of
the tax or the amount so required to be withheld.

21.  Effective Date
     
     This Plan shall be effective as of July 1, 1985.