EXHIBIT 10

EMPLOYMENT
AGREEMENT

AGREEMENT, by and between
Public Service Enterprise Group Incorporated, a New Jersey Corporation
(Enterprise) and  Ralph Izzo (the
Executive), dated as of  October 18,
2003.

WHEREAS, the Executive is
to be employed as President of Public Service Electric and Gas Company
(PSE&G), a New Jersey Corporation, and a wholly-owned subsidiary of
Enterprise (Enterprise and its subsidiaries and affiliates being collectively
hereinafter  referred to as the
Company), and has been elected President of PSE&G effective October 18,
2003; and

WHEREAS, in consideration
of the substantial benefits to be provided by the Company pursuant to this
Agreement, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth; and

WHEREAS, the parties
desire to enter into this Agreement setting forth the terms and conditions for
the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined):

NOW, THEREFORE, IN
CONSIDERATION of the mutual premises, covenants and agreements set forth below,
it is hereby agreed as follows:

1.     General.

(a)    Employment.  The Company agrees to employ the Executive,
and the Executive agrees to be employed by the Company, in accordance with the
terms and provisions of this Agreement during the Employment Period.

(b)    Term.  The term of the Executives employment under
this Agreement (the Employment Period) shall commence as of the date hereof
(the Effective Date) and shall continue until October 18, 2008.  In the event a Change in Control occurs
during the Employment Period, the term of the Executives employment shall
(unless terminated earlier pursuant to Section 4 hereof) automatically continue
until the later of the last day of the Employment Period or the second
anniversary of the Change in Control. 
In the event this Agreement is extended as provided in the preceding
sentence, the Employment Period shall be the period from the Effective Date to
the second anniversary of the Change in Control.

2.     Position and
Attention to Duties.

(a)    Position.  During the Employment Period, the Executive
shall serve as  President and Chief
Operating Officer of PSE&G or in another senior executive

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position or positions for the Company, as determined
by the Chief Executive Officer (CEO) and Board of Directors (Board) of
Enterprise.

(b)    Attention.  During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full attention and time during normal business hours
to the business and affairs of the Company and to use his reasonable best
efforts to perform such responsibilities in a professional manner.  It shall not be a violation of this
Agreement for the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) manage personal investments, so
long as such activities do not interfere with the performance of the
Executives responsibilities as an officer and director of the Company in
accordance with this Agreement.

3.     Compensation.

Except as modified by
this Agreement, the Executives compensation shall be provided in accordance
with the Companys standard compensation and payroll practices as in effect
from time to time.  The aggregate of
Base Salary, Annual Incentive Compensation and Long-Term Incentives in paragraphs
(a), (b) and (c) below shall be determined based upon competitive practices for
companies of comparable size and standing.

(a)    Base
Salary.  The annual rate of base
salary payable to the Executive during the Employment Period (the Annual Base
Salary) shall be established by the Organization and Compensation Committee of
the Board (the Compensation Committee). 
During the Employment Period, the Annual Base Salary shall be reviewed
by the Compensation Committee for possible increase at least annually.  Annual Base Salary shall not be reduced, and
after any such increase and the term Annual Base Salary shall thereafter
refer to the Annual Base Salary as so increased.

(b)    Annual
Incentive Compensation.  The Board
has established and intends to continue an annual incentive compensation plan
for the benefit of the officers and other key employees of the Company,
including the Executive, based on competitive practices for companies of
comparable size and standing.  The
performance objectives for the Executive in respect of such incentive will be
determined by the Compensation Committee in accordance with past practices.

(c)    Long-Term
Incentives.  The Board has
established and intends to continue a long-term incentive plan or plans for the
benefit of the officers and other key employees of the Company, including the
Executive, based on competitive practices for companies of comparable size and
standing.  Such plan may, in the
judgment of the Compensation Committee, provide for stock options, stock
appreciation rights, restricted stock or stock units, performance stock or
units and/or other type of long-term incentive awards.  The type and amount of equity and any other
long-term incentive grants will be

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determined by the Compensation Committee from time to
time, and awards thereunder shall be payable to the Executive in accordance
with the long-term incentive plan or plans in effect from time to time.

(d)    Option Award.

(i)       In
consideration of the commitment he will assume during the Employment Period,
the Executive shall be granted an award (the Option Award)  of non-qualified options under the
Enterprise Long-Term Incentive Plan (LTIP) to purchase  250,000 shares of the Common Stock without
nominal or par value of Enterprise (Stock). 
Options granted under the Option Award are herein referred to as
Options.  The grant price of the
Options shall be the closing price of the Common Stock on the New York Stock
Exchange (NYSE) on the Effective Date or, if the Effective Date is not a day
on which the NYSE is open, on the next preceding business day it is open.  The Executives right to the Option Award
shall vest and become exercisable in accordance with the following schedule,
provided that the Executive has remained continuously employed by the Company
during the Employment Period through the dates indicated below:

|Date             |  |  | Number of
  Shares | 
|---------------- |  |  | ------------------ | 
|                 |  |  |                    | 
|October 18, 2004 |  |  | 50,000             | 
|October 18, 2005 |  |  | 50,000             | 
|October 18, 2006 |  |  | 50,000             | 
|October 18, 2007 |  |  | 50,000             | 
|October 18, 2008 |  |  | 50,000             | 

If, during the Employment Period (1) there occurs a
Change in Control, the entire Option Award shall vest and become
exercisable.  If, during the Employment
Period, the Company terminates the Executives employment without Cause or the
Executive terminates his employment for Good Reason, or the Executives
Employment terminates by reason of death or Disability, the Executives right
to the entire Option Award shall vest and become exercisable as of the Date of
Termination.  If, during the Employment
Period, the Company terminates the Executives employment for Cause or the
Executive terminates his employment without Good Reason, including Retirement,
the Executive shall forfeit all right to all shares of the Option Award that
are not vested as of the Date of Termination.

(ii)     The Options shall
expire ten (10) years after the Effective Date.

(iii)    Once Options become
exercisable hereunder, the Executive may exercise such Options in any manner
permitted by the LTIP.  All vested
options shall be exercised or shall be forfeited no later than the earlier of
three years after termination of employment or 10 years after the Effective
Date.

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(iv)     Unless specifically
provided by this Agreement, all terms and conditions of the Options granted
hereunder shall be governed by the LTIP.

(v)      The Compensation
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
law or regulation of any governmental authority, whether federal, state or local,
domestic or foreign, to withhold in connection with the Option Award,
including, but not limited to (1) withholding delivery of the certificate for
shares of Stock until the Executive reimburses the Company for the amount it is
required to withhold with respect to such taxes, (2) the canceling of any
number of shares of Stock issuable to the Executive in an amount necessary to
reimburse the Company for the amount it is required to so withhold, or (3)
withholding the amount due from the Executives other compensation.

(e)      Employee
Benefit Programs.  During the
Employment Period, (i) the Executive shall be eligible to participate in all
savings and retirement plans, practices, policies and programs to the same
extent as other senior executives of the Company and (ii) the Executive and/or
the Executives family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company, other than severance plans,
practices, policies and programs but including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life insurance,
group life insurance, accidental death and travel accident insurance plans and
programs, and, upon retirement, all applicable retirement benefit plans to the
same extent and subject to the same terms, conditions, cost-sharing
requirements and the like, as other senior executives of the Company, as such
plans may be amended from time to time, and as supplemented hereby.  Following a Change in Control, no benefit coverage available to
the Executive and/or to his family under any such plan, practice, policy or
program shall be materially reduced without the prior written consent of the
Executive.

(f)      Retirement
Benefit.  During the Employment
Period, the Executive shall participate in Enterprises Pension Plan, and also
in Enterprises Limited Supplemental Benefits Plan, Mid-Career Hire Plan,
Reinstatement Plan and such other supplemental executive retirement plans as
may be adopted and amended by Enterprise from time to time (SERPs), such that
the aggregate value of the retirement benefits that he and his beneficiaries
will receive under all pension benefit plans of the Company (whether qualified
or not) will not be less than the benefits he would have received had he
continued to participate in such plans, as in effect immediately before the
date hereof through the earlier of the end of the Employment Period or
Retirement.   It is agreed that the
Option Award and any dividends or other distributions in respect of the  Option Award shall not be included in any
pension calculation.   The Executives
right to retire shall be governed by the Enterprise Pension Plan
(Retirement).

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(g)      Expenses.  The Executive is authorized to incur
reasonable expenses in carrying out his duties and responsibilities under this
Agreement.  The Company shall promptly
reimburse him for all such expenses in accordance with the policies of the
Company in effect from time to time for reimbursement of expenses for senior
executives, and subject to documentation provided by the Executive in
accordance with such Company policies.

(h)      Fringe
Benefits.  During the Employment
Period, the Executive shall participate in all fringe benefits and perquisites
available to senior executives of the Company, including provision of an
automobile, on terms and conditions that are commensurate with his positions
and responsibilities at the Company.

(i)      Vacation.  During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with Company policy for its
most senior executives as in effect from time to time.

(j)      Deferred
Compensation.  The Executive will
retain all of his rights in any compensation deferred prior to the date hereof
in accordance with the Deferred Compensation Plan, including earnings thereon,
and following the date hereof the obligations of  the Company to pay such deferred compensation at the times and in
the manner specified in the Deferred Compensation Plan will continue.

4.       Termination
of Employment.

(a)      Death
or Disability.  The Executives
employment shall terminate automatically upon the Executives death during the
Employment Period.  If the Company
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in accordance with
Section 4(b) of this Agreement of its intention to terminate the Executives
employment.  In such event, the
Executives employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the Disability Effective
Date), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executives
duties.  For purposes of this Agreement,
Disability means that (i) the Executive has been unable, for the period, if
any, specified in the Companys disability plan for senior executives, but not
less than a period of 180 consecutive days, to perform the Executives duties
under this Agreement and (ii) a physician selected by the Company or its
insurers, and acceptable to the Executive or the Executives legal
representative, has determined that the Executive is disabled within the
meaning of the applicable disability plan for senior executives.

(b)      By
the Company.

(i)      The
Company may terminate the Executives employment during the Employment Period
for Cause or without Cause.  For
purposes of this

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Agreement, Cause shall mean (A) willful and
continued failure by the Executive to substantially perform his duties under
this Agreement, (B) the willful engaging by the Executive in gross misconduct
which is materially and demonstrably injurious to the Company, (C) the
conviction of the Executive of a felony, or (D) willful conduct by the
Executive in violation of the Companys Standards of Integrity.  No act or failure to act on the part of the
Executive shall be considered willful unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executives action or omission was in the best interests of the Company.  Any act or failure to act that is based upon
authority given pursuant to a resolution duly adopted by the Board of Directors
of the Company, or the advice of counsel for the Company, shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company.

(ii)     A
termination of the Executives employment for Cause shall be effected in
accordance with the following procedures. 
The Company shall give the Executive written notice (Notice of
Termination for Cause) of its intention to terminate the Executives
employment for Cause, setting forth in reasonable detail the specific conduct
of the Executive that it considers to constitute Cause and the specific
provision(s) of this Agreement on which it relies.  Such notice shall be given no later than 60 days after the act or
failure (or the last in a series of acts or failures) that the Company alleges
to constitute Cause.  The Executive
shall have 30 days after receiving the Notice of Termination for Cause in which
to cure such act or failure, to the extent such cure is possible.  In the case of a termination under Section
4(b)(i)(A), Section 4(b)(i)(B), or Section 4(b)(i)(D), if the Executive fails
to cure such act or failure to the reasonable satisfaction of the  Company, the Company shall give the
Executive a second written notice stating that in the good faith opinion of the
Board, the Executive is guilty of the conduct described in the Notice of
Termination for Cause and that such conduct constitutes Cause under this
Agreement.

(c)      Good
Reason.

(i)      The
Executive may terminate his employment during the Employment Period for Good
Reason or without Good Reason.  For
purpose of this Agreement, Good Reason shall mean:

(A)      prior
to the occurrence of a Change in Control, any reduction in the Executives
Annual Base Salary;

(B)      following
a Change in Control:

(1)      any
  reduction in the Executives Annual Base Salary or Retirement benefit,
  or any reductions in target annual bonus or target long-

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term
  incentive other than reductions that are applied to all similarly situated executives;

(2)      any
adverse change in the Executives title, authority, duties, responsibilities
and reporting lines or the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with those customarily associated
with the position of  the Executive
immediately prior to the Change in Control;

(3)      any
purported termination of the Executives employment by the Company for a reason
or in a manner not expressly permitted by this Agreement;

(4)      any
failure by Enterprise to comply with Section 10(c) of this Agreement; or

(5)      any
other material breach of this Agreement by the Company that either is not taken
in good faith or, even if taken in good faith, is not remedied by the Company
promptly after receipt of notice thereof from the Executive.

Following a Change in Control, the Executives
determination that an act or failure to act constitutes Good Reason shall be
conclusively presumed to be valid unless such determination is decided to be
unreasonable by an arbitrator pursuant to Section 9.

(ii)     A
termination of  employment by the
Executive for Good Reason shall be effectuated by giving the Company written
notice (Notice of Termination for Good Reason) of the termination, setting
forth in reasonable detail the specific acts or omissions of the Company that
constitute Good Reason and the specific provision(s) of this Agreement on which
the Executive relies.  Unless the CEO
determines otherwise, a Notice of Termination for Good Reason by the Executive
must be made within 60 days after the Executive first has actual knowledge of
the act or omission (or the last in a series of acts or omissions) that the
Executive alleges to constitute Good Reason, and the Company shall have 30 days
from the receipt of such Notice of Termination for Good Reason to cure the
conduct cited therein.  A termination of
employment by the Executive for Good Reason shall be effective on the final day
of such 30-day cure period unless prior to such time the Company has cured the
specific conduct asserted by the Executive to constitute Good Reason to the
reasonable satisfaction of the Executive.

(iii)     A
termination of the Executives employment by the Executive without Good Reason,
including Retirement, shall be effected by giving the

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Company at least 30 days written notice specifying
the effective date of termination.

(d)      Date
of Termination.  The Date of
Termination means the date of the Executives death, the Disability Effective
Date, or the date on which the termination of the Executives employment by the
Company for Cause or without Cause or by the Executive for Good Reason or
without Good Reason, including Retirement, is effective, as the case may be.

5.       Obligations
of the Company upon Termination.

(a)     Good
Reason; Other Than for Cause.  If,
during the Employment Period, the Company shall terminate the Executives
employment other than for Cause, death or Disability, or the Executive shall
terminate his employment for Good Reason:

(i)      the
Company shall pay to the Executive in a lump sum in cash, within 15 days after
the Date of Termination, the aggregate of the amounts set forth in clauses A
and B below:

A.      The sum of:

(1)

the Executives Annual
Base Salary through the Date of Termination;

(2)

the product of (x) the
target annual bonus under Section 3(b) (the Target Bonus) and (y) a
fraction, the numerator of which is the number of days in the current calendar
year through the Date of Termination, and the denominator of which is 365; and

(3)

any accrued vacation pay;

in each case to the extent not theretofore paid (the
sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter
referred to as the Accrued Obligations); and

B.       the amount equal to
the product of (1) two and (2) the sum of (x) the Executives Annual Base
Salary and (y) the Target Bonus.

(ii)      the
Option Award shall vest in accordance with Section 3(d)(i);

(iii)     any
stock awards, stock options, other than the Option Award, stock appreciation
rights or other equity-based awards that were outstanding immediately prior to
the Date of Termination (Prior Equity Awards) shall vest

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and/or become exercisable in accordance with the
underlying plan for such Prior Equity Award;

(iv)     for
two years after the Executives Date of Termination or such longer period as
may be provided by the terms of the appropriate plan, program, practice or
policy, the Company shall continue benefits to the Executive and/or the
Executives family at least equal to those which would have been provided to
them in accordance with the welfare plans, programs, practices and policies
described in Section 3(e) of this Agreement if the Executives employment had
not been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families, provided however, that
if the Executive becomes reemployed with another employer and is eligible to
receive medical or dental benefits under another employer provided plan, the
medical and dental benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility;

(v)      any
compensation previously deferred (other than pursuant to a tax-qualified plan)
by or on behalf of the Executive (together with any accrued interest or
earnings thereon), whether or not then vested, shall become vested on the Date
of Termination and shall be paid in accordance with the terms of the plan,
policy or practice under which it was deferred;

(vi)     the
Company shall, at its sole expense as incurred, provide the Executive with
outplacement services suitable to the Executives position for a period not to
exceed two years with a nationally recognized outplacement firm; and,

(vii)     to
the extent not theretofore paid or provided, the Company shall pay or provide
to the Executive any other amounts or benefits required to be paid or provided
or which the Executive is entitled to receive under any plan, program, policy,
practice, contract or agreement of the Company and its affiliated companies
(other than medical or dental benefits if the Executive is eligible for such
benefits to be provided by a subsequent employer), including earned but unpaid
stock and similar compensation but excluding any severance plan or policy (such
other amounts and benefits shall be hereinafter referred to as the Other
Benefits).

(b)       Cause;
Other than for Good Reason.  If the
Executives employment shall be terminated for Cause during the Employment
Period, or if the Executive voluntarily terminates employment during the
Employment Period, excluding a resignation for Good  Reason, the Company shall have no further payment obligations to
the Executive other than for amounts described in Sections 5(a)(i)(A)(1) and
5(a)(i)(A)(3) and the timely payment or provision of Other Benefits.  In such case, all such amounts shall be paid
to the Executive in a lump sum within 30 days of the Date of Termination.

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Any unvested portion of the Option Award shall be
forfeited in accordance with Section 3(d)(i).

(c)       Death.  If the Executives employment terminates by
reason of the Executives death during the Employment Period, all Accrued
Obligations as of the time of death shall be paid to the Executives estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination and the Executives estate or beneficiary shall be entitled to any
Other Benefits in accordance with their terms. 
In addition, the Option Award shall vest in accordance with Section
3(d)(i).  Any Prior Equity Awards shall
vest and/or become exercisable, as the case may be, as of the Date of
Termination and the Executives estate or beneficiary, as the case may be,
shall have the right to exercise any such stock option, stock appreciation
right or other exercisable equity-based award until the earlier of (A) one year
from the Date of Termination (or such longer period as may be provided under
the terms of any such stock option, stock appreciation right or other
equity-based award) and (B) the normal expiration date of such stock option,
stock appreciation right or other equity-based award.

(d)       Disability.  If the Executives employment is terminated
by reason of Disability during the Employment Period, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination, and the Executive shall be entitled to any Other Benefits in
accordance with their terms.  In
addition, the Option Award shall vest in accordance with Section 3(d)(i).  Any Prior Equity Awards shall vest
immediately and/or become exercisable, as the case may be, and the Executive
shall have the right to exercise any such stock option, stock appreciation
right or other exercisable equity-based award until the earlier of (A) one year
from the Date of Termination (or such longer period as may be provided under
the terms of any such stock option, stock appreciation right or other
equity-based award) and (B) the normal expiration date of such stock option,
stock appreciation right or other equity-based award.

(e)     Retirement.  If the Executives employment terminates as
a result of Retirement, the Executive shall be paid the Accrued Obligations in
a lump sum in cash within 30 days of the Date of Termination and the Executive
shall be entitled to any Other Benefits in accordance with their terms.  Any remaining portion of the Option Award
shall vest or be forfeited in accordance with Section 3(d)(i).

6.       Change
in Control.

(a)      Benefits
Upon a Change in Control.  The
Executives rights upon a termination of employment that occurs within two
years following a Change in Control shall be as specified in Section 5
generally for termination of employment, except (i) the amount payable under
5(a)(i)(B) shall be three times the sum of (x) the Executives Annual Base
Salary and (y) the Target Bonus; (ii) the benefits under Section 5(a)(iv) shall
be provided for three years after the Date of Termination and the Executives
eligibility (but not the time of commencement of such benefits) for retiree
benefits pursuant to such

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plans, practices, programs and policies shall be
determined as if the Executive had remained employed until three years after
the Date of Termination and to have retired on the last day of such period;
(iii) the Option Award shall have vested in accordance with Section 3(d)(i);
and (iv) the Executive shall be paid within 15 days after the Date of
Termination, an amount equal to the excess of

(A)     the
actuarial equivalent of the benefit under the Companys applicable qualified
defined benefit retirement plan in which the Executive is participating
immediately prior to his Date of Termination (the Retirement Plan) (utilizing
the rate used to determine lump sums and, to the extent applicable, other
actuarial assumptions no less favorable to the Executive than those in effect
under the Retirement Plan immediately prior to the Date of this Agreement), any
SERPs in which the Executive participates and, to the extent applicable, any
other defined benefit retirement arrangement between the Executive and the
Company (Other Pension Benefits) which the Executive would receive if the
Executives employment continued for three additional years beyond the Date of
Termination, assuming for this purpose that all accrued benefits are fully
vested, and, assuming that the Executives compensation for such deemed
additional period was the Executives Annual Base Salary as in effect
immediately prior to the Date of Termination and assuming a bonus in each year
during such deemed additional period equal to the Target Bonus, over

(B)     the
actuarial equivalent of the Executives actual benefit (paid or payable), if
any, under the Retirement Plan, the SERPs and Other Pension Benefits as of the
Date of Termination (utilizing the rate used to determine lump sums and, to the
extent applicable, other actuarial assumptions no less favorable to the
Executive than those in effect under the Retirement Plan immediately prior to
the date of this Agreement).

(b)      Definition.  For purposes of this Agreement, a Change in
Control shall mean the occurrence of any of the following events after the
date of this Agreement:

(i)      any
person (within the meaning of Section 13(d) of the Securities Exchange Act of
1934, as amended (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 Enterprise (not including in the
securities beneficially owned by such person any securities acquired directly
from Enterprise or its affiliates) representing 25% or more of the combined
voting power of Enterprises then outstanding securities, excluding any person
who becomes such a Beneficial Owner in connection with a transaction described
in clause (A) of paragraph (iii) below; or

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(ii)      the
following individuals cease for any reason to constitute a majority of the
number of directors of Enterprise then serving:  individuals who, on the date of this Agreement, constitute the
Board 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 Enterprise) whose appointment or election by the Board or
nomination for election by Enterprise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 the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or

(iii)     there
is consummated a merger or consolidation of Enterprise or any direct or
indirect wholly-owned subsidiary of Enterprise with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of Enterprise 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 Enterprise or any
subsidiary of Enterprise, at least 75% of the combined voting power of the
securities of Enterprise or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of Enterprise (or
similar transaction) in which no person is or becomes the Beneficial Owner,
directly or indirectly, of securities of Enterprise representing 25% or more of
the combined voting power of Enterprises then outstanding securities; or

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

Notwithstanding the foregoing, 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 Enterprise 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 Enterprise immediately following such transaction or series of
transactions.

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7.       Confidential
Information; No Competition.

(a)      The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
confidential information, knowledge or data (defined below) relating to the
Company or any of its affiliates or subsidiaries, and their respective
businesses, which shall have been obtained by the Executive during the Executives
employment by the Company or any of its affiliated companies and which shall
not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).  Upon Termination of the Executives
employment, he shall return to the Company all Company information.  After termination of the Executives
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it, except (x) otherwise publicly
available information, or (y) as may be necessary to enforce his rights under
this Agreement or necessary to defend himself against a claim asserted directly
or indirectly by the Company or its affiliates.  Unless and until a determination has been made in accordance with
Section 7(d) or Section 9 hereof that the Executive has violated this Section
7, an asserted violation of the provisions of this Section 7 shall not
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.

(b)      As
used herein, the term confidential information, knowledge or data means all
trade secrets, proprietary and confidential business information belonging to,
used by, or in the possession of the Company or any of its affiliates and
subsidiaries, including but not limited to information, knowledge or data
related to business strategies, plans and financial information, mergers,
acquisitions or consolidations, purchase or sale of property, leasing, pricing,
sales programs or tactics, actual or past sellers, purchasers, lessees, lessors
or customers, those with whom the Company or its affiliates and subsidiaries
has begun negotiations for new business, costs, employee compensation,
marketing and development plans, inventions and technology, whether such
confidential information, knowledge or data is oral, written or electronically
recorded or stored, except information in the public domain, information known
by the Executive prior to employment with the Company, and information received
by the Executive from sources other than the Company or its affiliates and
subsidiaries, without obligation of confidentiality.

(c)      The
Executive agrees that the knowledge and information, including, but not limited
to, Confidential Information as defined in the previous paragraph, gained in
the performance of his duties hereunder may be valuable to those who are now,
or might become, competitors of PSEG or its affiliates and subsidiaries.  Accordingly, the Executive agrees that
during his employment and for a period of one year after the termination of his
employment, he will not, directly or indirectly, own, manage, operate, join,
control, become employed (whether as an employee or a consultant) by or
participate in the ownership, management, or control of, or become connected
with, any business which is in direct or indirect competition with PSEG and/or

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its affiliates and subsidiaries in New Jersey, New
York, Pennsylvania, Maryland,  Delaware,
Connecticut, Indiana or Ohio, or any other geographic area in which during his
employment, PSEG or its affiliates are doing business or can reasonably expect
to do business in the foreseeable future, without the prior written consent of
PSEG.  Further, the Executive agrees
that, for two years following any termination of his employment, he will not,
directly or indirectly, solicit or hire, or encourage the solicitation or
hiring of any person who was an employee of the Company at any time during his
employment for any position as an employee, independent contractor, consultant
or otherwise.  The foregoing agreement
shall not apply to any person after 6 months have elapsed subsequent to the
date on which such persons employment by the Company has terminated.  Further, the Executive shall not be entitled
to post-employment payments, as provided herein (including any unexercised
options under the Option Award) from and after the date of commencement of any
such prohibited subsequent activity in violation of this Agreement.

(d)      In
the event of a breach by the Executive of any of the agreements set forth in
Paragraphs (a), (b) or (c) above, it is agreed that the Company shall suffer
irreparable harm for which money damages are not an adequate remedy, and that,
in the event of such breach, the Company shall be entitled to obtain an order
of a court of competent jurisdiction for equitable relief from such breach,
including, but not limited to, temporary restraining orders and preliminary
and/or permanent injunctions against the breach of such agreements by the
Executive.  In the event that the
Company should initiate any legal action for the breach or enforcement of any
of the provisions contained in this Section 7 and the Company does not prevail
in such action, the Company shall promptly reimburse the Executive the full
amount of any court costs, filing fees, attorneys fees which the Executive
incurs in defending such action, and any loss of income during the period of
such litigation.

8.        Full
Settlement.

(a)      No
Duty to Mitigate; No Reduction. 
Except as provided in Section 7(c), and except to the extent that a
Court under Section 7(d) or an arbitrator appointed under Section 9 shall
determine to permit an offset in respect of a violation by the Executive of his
obligations under Section 7, the Companys obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.  In no event shall
the Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except as specifically provided in Section
5(a)(iv) and Section 5(a)(vii) with respect to certain medical and dental
benefits, such amounts shall not be reduced whether or not the Executive
obtains other employment.

(b)      Non-exclusivity
of Rights.  Except as provided in
Section 7(c), nothing in the Agreement shall prevent or limit the Executives
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of

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its affiliated companies for which the Executive may
qualify.  Vested benefits and other
amounts that the Executive is otherwise entitled to receive under the incentive
compensation plans referred to in Section 3(c), the SERPs, or any other plan,
policy, practice of program of the Company or any of its affiliated companies
on or after the Date of Termination shall be payable in accordance with the
terms of each such plan, policy, practice or program, as the case may be,
except as explicitly modified by this Agreement.

9.       Disputes

Except with respect to
equitable relief provided for in Section 7(d), any dispute about the validity,
interpretation, effect or alleged violation of this Agreement shall be resolved
by confidential binding arbitration before one arbitrator to be held in Newark,
New Jersey in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association and the United States Arbitration Act.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereover.  All costs and expenses incurred by the
Company or the Executive or the Executives beneficiaries in connection with
any such controversy or dispute, including without limitation reasonable
attorneys fees, shall be borne by the Company as incurred, except that the
Executive shall be responsible for any such costs and expenses incurred in
connection with any claim determined by the arbitrator to have been without
reasonable basis or to have been brought in bad faith.  The Executive shall be entitled to interest
at the applicable Federal rate provided for in Section 7872 (f) (2)(A) of the
Internal Revenue Code of 1986, as amended (the Code), on any delayed payment
which the arbitrator determine he was entitled to under this Agreement.

10.     Successors.

(a)     No
Assignment by Executive.  This
Agreement is personal to the Executive and without the prior written consent of
Enterprise shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. 
This Agreement shall inure to the benefit of and be enforceable by the
Executives legal representatives.

(b)     Successors
to Enterprise.  This Agreement shall
inure to the benefit of and be binding upon Enterprise and its successors and
assigns.

(c)     Performance
by a Successor to Enterprise. 
Enterprise will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of Enterprise to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that
Enterprise would be required to perform it if no such succession had taken
place.  As used in this Agreement,
Enterprise shall mean Enterprise as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.

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11.     Certain
Additional Payments by the Company.

(a)     Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 11) (a Payment) would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the Excise
Tax), then the Executive shall be entitled to receive an additional payment (a
Gross-Up Payment) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income and employment taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.

(b)     Subject
to the provisions of Section 11(c), all determinations required to be made
under this Section 11, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the Companys
independent auditors or such other certified public accounting firm as may be
jointly designated by the Executive and the Company (the Accounting Firm),
which shall provide detailed supporting calculations both to the Company and
the Executive.  All fees and expenses of
the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant
to this Section 11, shall be paid by the Company to the Executive within 15
days of the receipt of the Accounting Firms determination.  Any determination by the Accounting Firm
shall be binding upon the Company and the Executive.  As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (Underpayment), consistent with the
calculations required to be made hereunder. 
In the event that the Company exhausts its remedies pursuant to Section
11(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.

(c)     The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment.  Such
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid.  The
Executive shall not pay such claim prior to

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the expiration of the 30-day period following the date
on which he gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:

(i)     give
the Company any information reasonably requested by the Company relating to
such claim,

(ii)     take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

(iii)    cooperate
with the Company in good faith in order effectively to contest such claim, and

(iv)    permit
the Company to participate in any proceedings relating to such claim;

provided however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section
11(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. 
Furthermore, the Companys control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

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(d)     If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 11(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Companys
complying with the requirements of Section 11(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 11(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.

12.     Miscellaneous.

(a)     Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New
Jersey applicable to agreements executed and performed entirely therein.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.

(b)     Notices.  All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

| | If to the Executive: |  | 80 Park Plaza                                          
| | -------------------- |  | -------------------------------------------------------
| |                      |  | P. O. Box 1171                                         
| |                      |  | Newark, NJ 
  07102                                    
| |                      |  |                                                        
| | If to the Company:   |  | 80 Park Plaza                                          
| |                      |  | P. O. Box 1171                                         
| |                      |  | Newark, NJ 
  07102                                    
| |                      |  | Attention: 
  Senior Vice President and General Counsel

or to such other address as either party shall have furnished
to the other in writing in accordance herewith.  Notice and communications shall be effective when actually
received by the addressee.

(c)     Invalidity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement. 
If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable  and continue in full force and effect to the
fullest extent consistent with law. 
Further, to the extent that a provision is to be held

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invalid or unenforceable, it shall be limited or
construed in a manner that is valid and enforceable and gives maximum
permissible effect to the provision and the intent of this Agreement.

(d)     Tax
Withholding.  Notwithstanding any
other provision of this Agreement, the Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

(e)     Failure
to Assert Rights.  The Executives
or the Companys failure to insist upon strict compliance with any provisions
of, or to assert any right under, this Agreement shall not be deemed to be a
waiver of such provision or right or of any other provision of or right under
this Agreement.

(f)     No
Alienation.  The rights and benefits
of the Executive under this Agreement may not be anticipated, assigned,
alienated or subject to attachment, garnishment, levy, execution or other legal
or equitable process except as required by law.  Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void.  Payments hereunder shall not be considered
assets of the Executive in the event of insolvency or bankruptcy.

(g)     Entire
Agreement.  This Employment
Agreement represents the complete agreement between the Executive and the
Company relating to employment and termination and may not be altered or
changed except by written agreement executed by the parties hereto or their
respective successors or legal representatives.

IN WITNESS WHEREOF, the
Executive and, pursuant to due authorization from its Board of Directors, the
Company have caused this Agreement to be executed as of the day and year first
above written.

| | By:                   /s/ Ralph
        Izzo      
| | --------------------------------------------------
| |                                                   
| | Ralph Izzo                                        
| |                                                   
| | PUBLIC SERVICE ENTERPRISE                         
| | GROUP INCORPORATED                                
| |                                                   
| | By:                   /s/ E.
        James Ferland
| |                                                   
| | E. James Ferland, Chairman of the Board,          
| | President and Chief Executive
  Officer           

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