WHOLESALE POWER CONTRACT

     THIS WHOLESALE  POWER CONTRACT  ("Agreement"),  made and entered into as of
this day of, 1999 by and between  PSEG Energy  Resources & Trade LLC, a Delaware
limited  liability  company,  herein  referred to as "ERT",  and Public  Service
Electric  and Gas  Company,  a New Jersey  Corporation,  herein  referred  to as
"PSE&G".

                                   WITNESSETH

     WHEREAS,  on April  21,  1999 the New  Jersey  Board  of  Public  Utilities
("NJBPU")  issued an order  summarizing  the terms of a final order to be issued
("NJBPU  Order")  requiring  PSE&G to  transfer  all of its  nuclear  and fossil
electric  generating  assets  to  one  or  more  separate  affiliated  corporate
entities;

     WHEREAS,  the NJBPU Order directs PSE&G to supply Basic Generation  Service
("BGS") for a period of at least three years to those  retail  customers  served
from its system that choose not to purchase their power supply from  alternative
competitive suppliers;

     WHEREAS,  the NJBPU Order requires that, in order to ensure the reliability
of supply for BGS provided by PSE&G, to remove the risk of price volatility from
the  regulated  utility in providing  such service,  and to further  ensure that
PSE&G can meet its obligations under its Off-Tariff Rate Agreements, PSE&G shall
enter into a full requirements contract with an affiliate for energy,  capacity,
losses and ancillary  services  needed by PSE&G for such  specified  retail load
during the time period  that PSE&G is acting as the BGS  supplier in its service
territory,

     WHEREAS,  ERT and PSE&G are entering into this Agreement for the purpose of
establishing  the terms and  conditions  under  which ERT will  supply such full
requirements  service  to PSE&G  for  energy,  capacity,  losses  and  ancillary
services.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
set forth herein, the Parties hereto agree as follows:

1.0  DEFINITIONS

     For all  purposes of this  Agreement  the  following  terms as used in this
Agreement shall have the following meanings.  Except where the context otherwise
requires,  definitions  and terms  expressed  in the  singular  will include the
plural and vice versa.

     "Adjustment  Interest  Rate" means the prime  interest rate for currency as
published from time to time under "Money Rates" by The Wall Street  Journal,  or
its successor,  as of the payment due date and/or default date,  plus 2%, but in
no event shall the  Adjustment  Interest  Rate exceed the maximum  interest rate
permitted by law.

<PAGE>
     "Aggregate  Retail Load" means the BGS and Off-Tariff Rate Agreement retail
load of PSE&G during the Delivery Term.

     "Agreement" means this Wholesale Power Contract, including attachments, and
any amendments hereto entered into by PSE&G and ERT.

     "Ancillary  Services"  means one or more of those services that are defined
as ancillary  services  under the PJM OATT or under the  applicable  open access
transmission tariff of another  transmission  service provider pursuant to which
ERT is or may be supplying such services.

     "BGS" means the retail electric generation service provided by PSE&G to its
customers in New Jersey in accordance with the New Jersey Electric  Discount and
Energy  Competition  Act of 1999,  the BPU Order and PSE&Gs BGS  tariffs on file
with the BPU;

     "Capacity"  means the capacity  reserves  that ERT agrees to sell and PSE&G
agrees  to  purchase  pursuant  to  this  Agreement  in  order  to  satisfy  the
requirements for capacity  pursuant to the PJM Reliability  Assurance  Agreement
during the Delivery Term.

     "Commission"  means  the  Federal  Energy  Regulatory   Commission  or  any
successor federal agency having regulatory jurisdiction over the Agreement.

     "Energy" means the electric energy that ERT agrees to sell and PSE&G agrees
to purchase pursuant to this Agreement to serve the Aggregate Retail Load during
the Delivery Term.

     "ERT"  means PSEG  Energy  Resources  & Trade LLC, a  subsidiary  of Public
Service Enterprise Group Incorporated, and a limited liability company organized
under the laws of the State of Delaware, its successors or assigns.

     "Delivery Term" means the period commencing on the latest of (a) October 1,
1999,  (b) the date on which all  acceptances  and  approvals  required for this
Agreement to become effective have been obtained, or (c) the date this Agreement
is executed by the Parties at closing, and ending on July 31, 2002, during which
ERT will be obligated  to sell and PSE&G will be  obligated  to purchase  Power,
losses and Ancillary Services for PSE&G's Aggregate Retail Load.

     "Due  Diligence"  means the  exercise  of good  faith  efforts to perform a
required act on a timely basis and in accordance with Prudent Utility  Practice,
using the technical and manpower resources reasonably available.

     "NJBPU" means the New Jersey Board of Public Utilities.

     "NJBPU Order" means the April 21, 1999 Order issued by the NJBPU  ordering,
among other  things,  PSE&G to transfer  all  electric  generating  assets to an
affiliate(s) and to enter into a full  requirements  agreement with an affiliate
for energy,  capacity,  Ancillary Services, and losses for PSE&G's BGS customers
and Off-Tariff Rate Agreement Customers;
<PAGE>
     "Off-Tariff  Rate  Amendments"  Those  agreements  implemented by the NJBPU
prior to the execution of this Agreement whereby PSE&G provides electric service
to  specified  customers.  The list of such  agreements  is  attached  hereto as
Attachment 1.

     "Parties"  means ERT and PSE&G or the  assignee or  successor of rights and
obligations to this Agreement. Party means one of the Parties.

     "PJM" means PJM  Interconnection,  LLC, the independent system operator for
the PJM control  area  organized  and  operating  pursuant to the PJM  Operating
Agreement.

     "PJM  Operating  Agreement  " means  the  Amended  and  Restated  Operating
Agreement of PJM Interconnection,  LLC, dated June 2, 1997 and effective January
1, 1998, as such agreement may be amended from time to time.

     "PJM OATT" means the PJM Open Access  Transmission  Tariff  administered by
PJM, as such Tariff may be amended from time to time.

     "Point of  Delivery"  means a point on the  electric  transmission  system,
where Power is to be made available to PSE&G under this Agreement.  The Point of
Delivery shall be the PSE&G Zone within PJM.

     "Power" means Capacity and Energy.

     "Physically Firm" means that (1) Capacity to meet the Aggregate Retail Load
shall be provided  throughout  the Delivery Term and (2) that either Party shall
be  relieved  of its  obligations  to deliver or receive  Energy (but not of its
obligation  to make  payment  then due and  becoming  due with respect to Energy
delivered) only to the extent that, and for the period during which, performance
is prevented by Force Majeure.

     "Prudent Utility  Practice" means any of the practices,  methods,  and acts
required  or approved  by PJM acting  pursuant to the PJM OATT or PJM  Operating
Agreement,  or engaged in or approved by a  significant  portion of the electric
utility  industry  during the  relevant  time period,  or any of the  practices,
methods,  and acts which, in the exercise of reasonable judgment in light of the
facts  known at the time the  decision  was made,  could have been  expected  to
accomplish the desired result at the lowest reasonable cost consistent with good
business  practices,   reliability,  safety,  and  expedition.  Prudent  Utility
Practice is not intended to be limited to the optimum practice,  method, or act,
but rather to be a spectrum of acceptable practices, methods, or acts.

     "Relevant  Control Area" means an electric  power system or  combination of
electric power systems to which a common automatic  generation control scheme is
applied in order to:

                (i)   match, at all times,  the power output of  the  generators
within the electric   power   system(s) and  Capacity  and/or Energy   purchased
from entities outside the electric  power  system(s), with the  load  within the
electric power system(s);
<PAGE>
                (ii)  maintain, within the  limits in  accordance  with  Prudent
Utility Practice, scheduled interchange with other relevant  control areas;

                (iii) maintain  the frequency  of the  electric  power system(s)
within  reasonable  limits  in  accordance  with  Prudent  Utility Practice; and

                (iv)  provide  sufficient  generating   capacity   to   maintain
operating reserves in accordance with Prudent Utility Practice.

     "Scheduling  Coordination Services " means those services other than Power,
losses,   and  Ancillary  Services  that  ERT  provides  under  this  Agreement.
Scheduling Coordination Services include forecasting Aggregate Retail Load, load
following,  load  scheduling,  load balancing,  tracking the installed  capacity
obligations  for Aggregate  Retail Load within the Relevant  Control  Area,  and
acting as PSE&G's  agent for the  purposes of  scheduling  transmission  service
using PSE&G's PJM network Transmission Service or other Transmission Service and
managing  PSE&G's  fixed  transmission   rights  and  providing  other  notices,
elections and reports as may be necessary to comply with other Relevant  Control
Area  requirements.  Scheduling  Coordination  Services  shall not  include  any
obligation  to provide or arrange  for retail  distribution  services  after the
Point of Delivery.

     "Transmission  Service" means the delivery of Power and Ancillary  Services
pursuant to the PJM OATT or pursuant to another open access  transmission tariff
or transmission agreement on file with the Commission.

2.0  COMMITMENTS AND AVAILABILITY

     (a)  ERT agrees to provide  and PSE&G  agrees to receive  Power,  Ancillary
          Services and losses to meet the full  requirements of PSE&Gs Aggregate
          Retail Load during the Delivery Term.

     (b)  ERT agrees to provide Scheduling  Coordination Services, in accordance
          with the terms and conditions of this Agreement,  to PSE&G for PSE&G's
          Aggregate Retail Load during the Delivery Term.

     (c)  Energy will be  delivered  and  provided  in the form of  three-phase,
          sixty (60) Hertz, alternating current, with reasonable % variations of
          frequency  and  voltage   allowed   consistent  with  Prudent  Utility
          Practices.

     (d)  ERT shall have the sole discretion to select Power supply resources to
          provide  sufficient   quantities  of  Capacity,   Energy,  losses  and
          Ancillary  Services to PSE&G to meet Aggregate Retail Load;  provided,
          however,  that ERT shall  comply  with all  federal and state laws and
          regulations   that   require   PSE&G  or  ERT  to  have  a   specified
          environmental mix of power or to disclose the sources of Power used to
          supply Capacity and Energy during the Delivery Term.
<PAGE>
3.0  POINT OF DELIVERY

     3.1 Title to Capacity, Energy, losses and Ancillary Services made available
in accordance with this Agreement shall pass to PSE&G at the Points of Delivery.

     3.2 ERT shall be responsible  for  arranging,  supplying and paying for any
and all transformer, transmission,  subtransmission,  and/or distribution losses
with respect to  transformation  and delivery of Capacity,  Energy and Ancillary
Services.

     3.3 Power  shall be  delivered  to the  Points of  Delivery  using  PSE&G's
network  Transmission  Service acquired under the PJM OATT or other Transmission
Service  acquired to serve the Aggregate Retail Load. It is anticipated that PJM
will issue one bill for network  Transmission  Service during the Delivery Term.
To the extent that one PJM transmission  bill is issued,  the Parties agree that
ERT will be  responsible  for  payment  and receipt of credits set forth on that
portion of the PJM transmission  bill associated with the PJM accounts listed in
Attachment 2. PSE&G shall be responsible for payment of the remaining portion of
the PJM bill  associated  with network  Transmission  Service for the  Aggregate
Retail Load.

     3.4 Except as provided  in 3.2,  PSE&G is  responsible  for  arranging  and
paying for all distribution services at and from the Point of Delivery.

4.0  SCHEDULING

     4.1 ERT shall schedule with PJM all Capacity, Energy and Ancillary Services
sold under this Agreement.

5.0  SCHEDULING COORDINATION SERVICES

     5.1 General.

     ERT shall be PSE&G's  exclusive  provider  of Power,  losses and  Ancillary
Services for PSE&G's  Aggregate  Retail Load during the Delivery Term, and PSE&G
agrees that it will not generate,  purchase or otherwise obtain Power, losses or
Ancillary Services for use by its Aggregate Retail Load during the Delivery Term
unless otherwise agreed to in writing by ERT.
<PAGE>
     5.2 Responsibilities of PSE&G.

     PSE&G will be responsible during the Delivery Term for:

     (a)  providing ERT with timely and accurate  information  regarding the BGS
          and  Off-Tariff  Rate  Agreement  retail load being  served under this
          Agreement in order to permit ERT to properly forecast and schedule for
          PSE&G's Aggregate Retail Load and bill PSE&G. The information provided
          to ERT by  PSE&G  will be of a  comparable  type  and in a  comparable
          format to the  information  PSE&G would provide to any licensed retail
          supplier serving load in PSE&G's distribution  territory.  PSE&G shall
          provide to ERT the details of its Aggregate  Retail Load to the degree
          necessary for ERT to properly and timely  forecast,  schedule and bill
          PSE&G for such load. In addition, PSE&G shall provide timely notice to
          ERT of any changes,  either additions or deletions  (including loss of
          or addition of customers and any anticipated  change in customer usage
          or usage patterns),  to the retail load being served by PSE&G;

     (b)  making  and  maintaining   all   arrangements,   including   necessary
          contractual  arrangements,  with PJM to ensure that  adequate  network
          Transmission  Service  has been  obtained to serve  PSE&G's  Aggregate
          Retail Load during the Delivery Term;

     (c)  all retail sales of Power to its customers,  including but not limited
          to  distribution  of Power to retail  customers  and all  billing  and
          collection  services  associated  with  providing  service  to  retail
          customers;

     (d)  coordinating all forecasting, scheduling and billing with ERT; and

     (e)  providing ERT all authorizations or other  demonstrations of authority
          required  for  ERT to gain  access  to  PSE&G's  PJM  account  for the
          provision of Scheduling Coordination Services, to the extent permitted
          by PJM rules.

     (f)  Paying any load imbalance  charges,  penalties,  costs associated with
          acquiring or selling  supplies due to a shortage or excess of Capacity
          or Energy,  or any other costs  attributable  to a failure by PSE&G to
          fulfill its obligations hereunder.

     5.3 Responsibilities of ERT.

     ERT shall be responsible during the Delivery Term for:

     (a)  preparation of load forecasts for the Aggregate Retail Load based upon
          the information supplied by PSE&G;

     (b)  making available sufficient quantities of Power and Ancillary Services
          to meet the needs of the forecasted Aggregate Retail Load;

     (c)  arranging for transmission using PSE&G's network  Transmission Service
          or other  transmission  Service and  Ancillary  Services  necessary to
          deliver sufficient  quantities of Power to the Point of Delivery;

     (d)  scheduling  and  coordinating  with PJM the  delivery of Energy to the
          Points of Delivery; and

     (e)  complying with all environmental  disclosure requirements as described
          in Section 2(d).

     5.4 No Retail Service

     By the provision of  Scheduling  Coordination  Services,  ERT in no respect
agrees to sell energy or capacity  directly to any retail customers or engage in
any other retail functions;
<PAGE>
6.0  AUTHORITY TO ACT AS AGENT

     6.1 In accordance with the NJBPU Order,  PSE&G hereby  transfers to ERT and
authorizes  ERT to act as its  agent for the  purpose  of  scheduling,  electing
and/or using all rights,  including fixed transmission rights and their credits,
associated with the provision of service for PSE&G's Aggregate Retail Load under
this  Agreement.  ERT shall be responsible  for costs related to such scheduling
activities to the same degree that it would be  responsible  for those costs for
other load serving entities.

     6.2 During the Delivery  Term,  ERT shall have the  authority to direct the
administration  of PSE&Gs Active Load Management  ("ALM")  services that are not
otherwise  ordered by PJM. ERT will cooperate and coordinate all such activities
with  PSE&G.  ERT  will be  responsible  to  provide  adequate  notice  to PSE&G
regarding the  commencement  and cessation of ALM activities,  and PSE&G will be
responsible to provide subsequent notice to ALM customers.

7.0  BILLING AND PAYMENT

     7.1 Billing Period

     As soon as  practicable  after  the end of each  billing  period,  ERT will
render to PSE&G an invoice for Capacity,  Energy and Ancillary Services provided
during the preceding billing period.

     7.2 Timeliness of Payment

     All bills for service  shall be due and payable,  unless  otherwise  agreed
upon, in accordance with ERT's invoice instructions five (5) calendar days after
receipt of the billing  statement.  The invoice  will be sent via  facsimile  or
other means agreed to by the Parties. PSE&G will make payments by wire transfer,
or by other mutually agreeable method(s), to the account of ERT as designated by
ERT. Any amounts,  both principal and interest,  remaining  unpaid after the due
date  will be deemed  delinquent  and will  accrue  interest  at the  Adjustment
Interest Rate,  such interest to be calculated from the due date to the date the
unpaid amount is paid in full.

     7.3 Disputed Bills

     PSE&G may, in good faith,  challenge the  correctness  of any bill rendered
under the Agreement no later than twelve (12) months after the date the bill was
rendered.  In the  event  a bill or  portion  thereof,  or any  other  claim  or
adjustment  arising hereunder,  is challenged,  PSE&G shall nevertheless pay the
entire amount of the statement  when due, with notice of the objection  given to
ERT at that time. Any billing  challenge shall be in writing and shall state the
specific basis for the  challenge.  If it is  subsequently  determined or agreed
that an adjustment to the bill is appropriate,  a revised bill shall be prepared
by ERT. A bill  rendered  under the  Agreement  shall be binding on PSE&G twelve
(12) months  after the bill is  rendered,  except to the extent of any  specific
challenge to the bill made by the PSE&G prior to such time.
<PAGE>
     7.4 Billing Adjustments

     ERT shall have the right to adjust any bill  rendered  under the  Agreement
for any  errors in  arithmetic,  computation,  meter  readings,  estimating,  or
otherwise no later than twelve (12) months after the date the bill was rendered.
Any billing  adjustment  shall be in writing and shall state the specific  basis
for the adjustment.  A billing  adjustment  shall  constitute a new bill for the
purposes of this  Section.  An adjusted bill shall be binding on ERT twelve (12)
months after the bill is rendered.

     Over-payments  or  underpayments  resulting  from a billing  adjustment  or
billing  challenge  shall bear interest  calculated at the  Adjustment  Interest
Rate. In the case of an underpayment, interest shall accrue from the due date of
the bill to which the adjustment or challenge relates to the date the additional
charge is paid. In the case of an  overpayment,  interest  shall accrue from the
date the amount  being  refunded  was  received by ERT to the date the refund is
made.

     7.5 New Taxes

     ERT shall pay for all excise, severance,  production, sales, occupation and
other taxes of like nature  levied in respect to the  Capacity or Energy,  their
sale, and the handling  thereof prior to the Point of Delivery.  PSE&G shall pay
for all such taxes  levied on such  Capacity  or Energy at and from the Point of
Delivery.  At ERT's request,  PSE&G shall provide  evidence of its wholesale tax
exempt status in a form  satisfactory to ERT. Absent such  documentation,  PSE&G
shall be responsible for such applicable tax.

     7.6 Creditworthiness

     ERT may request  reasonable  assurances,  in a form satisfactory to ERT, of
PSE&G's continuing ability to pay for Power delivered pursuant to this Agreement
at any time during the Term if all of PSE&G's  ratings by nationally  recognized
rating agencies fall below investment grade.

8.0  PRICE

     8.1 Price for  Energy,  Capacity  and  Ancillary  Services  for PSE&G's BGS
Customers.  The price that PSE&G will pay ERT for Energy, Capacity and Ancillary
Services  provided  to PSE&G for its  retail BGS  customers  shall be the amount
computed  for each billing  period  equal to the full amount  charged for BGS to
PSE&G's retail  customers  pursuant to PSE&G's retail tariffs,  on file with the
BPU, less any sales and use tax during the Delivery  Term.  Such amount shall be
taken  directly from portions of PSE&G's  retail tariff for electric  service on
file with the BPU.

     8.2  Price  for  Energy,   Capacity  and  Ancillary  Services  for  PSE&G's
Off-Tariff  Rate  Agreement  Customers.  The price  that  PSE&G will pay ERT for
Energy,  Capacity and Ancillary  Services  provided to PSE&G for its  Off-Tariff
Rate Agreement  customers  shall be the amount  computed for each billing period
equal to  PSE&G's  retail  delivery  to  Off-Tariff  Rate  Agreement  customers,
multiplied by the  comparable  BGS rate for such  customers  pursuant to PSE&G's
retail tariffs, on file with the BPU, less sales and use tax during the Delivery
Term. Such amount shall be taken directly from portions of PSE&G's retail tariff
for electric service on file with the BPU.
<PAGE>
     8.3 Price  Stability  Charge.  The price for services  provided  under this
Agreement shall also include a price stability  charge. In exchange for ensuring
the  reliability  of PSE&G's  BGS  service  and for  removing  the risk of price
volatility  from PSE&G,  and to further  ensure that PSE&G is capable of meeting
its contractual  obligations in its Off-Tariff Rate Agreements,  the BPU ordered
that PSE&G pay ERT an additional  charge  associated with the price stability of
ERT's  affiliate's  combustion  turbine  assets,  which  shall  be  based on the
installed  capacity of those  assets.  The  additional  charge will be an amount
computed for each billing  period equal to the full actual  amount  collected by
PSE&G for its unsecuritized generation stranded costs in accordance with the BPU
Order through its Market Transition Charge (MTC) and other means during the Term
of this Agreement.

9.0  EVENTS OF DEFAULT

     "Events of Default"  with  respect to a Party  ("Defaulting  Party") to the
Agreement shall mean:

     (a)  the failure by the  Defaulting  Party to make,  when due,  any payment
          under the  Agreement  if such failure is not remedied on or before the
          third  (3rd)  business  day  after  notice of such  failure  to pay is
          received by the Party;

     (b)  the  failure  by the  Defaulting  Party to  observe  and  perform  its
          material obligations in accordance with this Agreement;

     (c)  the Defaulting  Party or any entity  guaranteeing  the  obligations of
          that Party (i) is  generally  not paying its debts as they become due;
          (ii) files or consents by answer or otherwise to the filing against it
          of any  petition or case seeking  relief  under any Federal,  State or
          foreign   bankruptcy.   insolvency   or  similar  law   (collectively,
          "Bankruptcy  Laws");  (iii) makes a general assignment for the benefit
          of its creditors; (iv) applies for or consents to the appointment of a
          custodian,  receiver,  trustee,  conservator  or  other  officer  with
          similar  powers over it or over any  substantial  part of its property
          ("Custodian"); or (v) takes corporate action for the purpose of any of
          the foregoing; (vi) is dissolved; (vii) becomes insolvent or is unable
          or admits in  writing  its  inability  generally  to pay debts as they
          become due; (viii) or is unable to provide adequate  assurances to the
          other Party of its continued  ability to perform;  provided,  however,
          that  any  such  assurances  required  to be  given  with  respect  to
          creditworthiness, shall be governed by Section 7.6 above.

     (d)  a court or governmental authority. agency, instrumentality or official
          of  competent  jurisdiction  enters or issues an order or decree  with
          respect to the  Defaulting  Party (i)  appointing  a  Custodian;  (ii)
          constituting  an order for relief  under,  or  approving a petition or
          case for relief or  reorganization  or any other  petition  or case to
          take  advantage  of,  any  Bankruptcy  Laws;  or  (iii)  ordering  its
          dissolution, winding-up or liquidation.
<PAGE>
     In the Event of Default under paragraph (b), the Defaulting Party will have
one (1) day to cure the default  following receipt of a "Notice of Default" from
the  Non-Defaulting  Party. If the default is not cured within said one (1) day,
the  Non-Defaulting  Party will have the right to obtain adequate  assurances as
described  in Section 7.6  effective  immediately  from  default date or to seek
appropriate legal or equitable remedies.

 10.0 INTERRUPTIONS AND CURTAILMENTS

     10.1 The Power sold to PSE&G pursuant to this Agreement shall be Physically
Firm, provided,  however, that ERT shall not be responsible for any deficiencies
in power  quality of the supply,  if such  deficiency  is without  negligence on
ERT's part. In the event of an interruption or curtailment by a Party, the Party
interrupting  the service  shall,  as promptly as reasonably  practicable,  give
notice of such interruption or curtailment to the other Party.

     In the event  that ERT is  prevented  from  delivering  Power or  Ancillary
Services to the Point of Delivery,  ERT shall use Prudent  Utility  Practices to
restore such delivery as soon as possible.

     10.2 Duty to Mitigate

     Each Party agrees that it has a duty to mitigate damages and covenants that
it will use commercially reasonable efforts to minimize any damages it may incur
as a  result  of the  other  Party's  performance  or  non-performance  of  this
Agreement.

11.0 INDEMNIFICATION

     PSE&G shall  indemnify,  defend and hold ERT harmless  from and against all
loss, cost and expense,  including court costs and reasonable attorney fees, for
any claims,  suits,  judgments,  demands,  actions or liabilities  (collectively
"injuries") growing out of the operations conducted or performance  hereunder by
PSE&G except for any such  injuries  caused by the gross  negligence  or willful
misconduct of ERT. ERT shall indemnify,  defend and hold PSE&G harmless from and
against  all loss,  cost and  expense,  including  court  costs  and  reasonable
attorney fees, for any claims, suits, judgments, demands, actions or liabilities
(collectively "injuries") growing out of the operations conducted or performance
hereunder by ERT, except for any such injuries caused by the gross negligence or
willful misconduct of PSE&G.

12.0 LIMITATION OF LIABILITY

     For  breach of any  provision  for which an  express  remedy or  measure of
damages is provided in this  Agreement,  the liability of the  defaulting  Party
shall be  limited  as set  forth in such  provision,  and all other  damages  or
remedies  are hereby  waived.  If no remedy or  measure of damages is  expressly
provided,  the  liability  of the  defaulting  Party  shall be limited to direct
damages only and all other damages and remedies are hereby  waived.  In no event
shall either Party be liable to the other Party for  consequential,  incidental,
punitive, exemplary or indirect damages in tort, for contract or otherwise.

<PAGE>
13.0 FORCE MAJEURE

     As used in this  Agreement,  "Force  Majeure"  means any cause  beyond  the
reasonable  control  of,  and  without  the fault or  negligence  of,  the Party
claiming Force Majeure. It shall include, without limitation,  sabotage, strikes
or other labor  difficulties,  riots or civil  disturbance,  acts of God, act of
public enemy, drought, earthquake, flood, explosion, fire, lightning, landslide,
or similarly cataclysmic occurrence, or appropriation, diversion or interruption
of  Power by PJM or any  court or  governmental  authority  having  jurisdiction
thereof,  or  any  other  cause,  whether  of the  kind  herein  enumerated,  or
otherwise,  not within the control of the Party claiming suspension and which by
the  exercise  of Due  Diligence  such Party is unable to  prevent or  overcome.
Economic  hardship of either Party shall not  constitute a Force  Majeure  under
this  Agreement,  including  (i) the loss of the  PSE&G's  markets or  inability
economically  to use or  resell  Capacity  and/or  Energy,  and (ii) the loss or
failure of ERT's  ability to sell  Capacity  and/or Energy to a market at a more
advantageous price.

     If either Party to this  Agreement is rendered  wholly or partly  unable to
perform its  obligations  thereunder  because of Force Majeure as defined above,
that Party shall be excused from whatever  performance  is affected by the Force
Majeure to the extent so affected, provided that:

     (i)  the  non-performing  Party promptly,  but in no case longer than three
          (3) business days after the occurrence of the Force Majeure, gives the
          other  Party  written  notice   describing  the   particulars  of  the
          occurrence;

     (ii) the suspension of  performance  shall be of no greater scope and of no
          longer duration than is reasonably required by the Force Majeure, and

     (iii)the  non-performing  Party used Due  Diligence to remedy its inability
          to perform.

Neither  Party  to  this  Agreement  will be required by the foregoing to settle
a strike  affecting  it except  when,  according  to its best  judgment,  such a
settlement  seems  advisable.  Nothing in this  Section  will excuse  PSE&G from
making payment for services provided under this Agreement.

14.0 TERM

     The  Term of  this  Agreement  shall  be the  period  commencing  with  the
beginning of the Delivery Term and ending on July 31. 2003.
<PAGE>
15.0 MISCELLANEOUS

     15.1 Withdrawal.

     If the  Commission,  or any court or agency having  jurisdiction  over this
Agreement,  finds any term or  condition to be unjust,  unreasonable,  otherwise
unlawful,  or incompatible  with regulatory  policy,  the Parties shall mutually
withdraw all or any portion of this  Agreement  and enter into  negotiations  of
such changes as are reasonably  required to conform to the  requirements of law;
provided  that the  Parties  may  choose  to  terminate  this  Agreement  if the
Commission,  or any  court or agency  having  jurisdiction  over this  Agreement
requires a material change hereto that either Party deems to be unacceptable.

     15.2 Assignment.

     Neither Party shall assign this  Agreement or any part thereof  without the
prior  written  consent of the other  Party  (which  such  consent  shall not be
unreasonably  withheld),  except  that either  Party may assign  this  Agreement
without the consent of the other Party to an affiliate  or to any company  which
shall succeed by purchase,  merger or consolidation  to the electric  properties
substantially  as an entirety of a Party.  Any Party's transfer or assignment in
violation of this section shall be void.

     15.3 Applicable Laws, Regulations, Orders, Approvals, and Permits.

     This  Agreement  is made  subject  to all  existing  or  future  applicable
federal,  state,  and local laws and to all existing or future duly  promulgated
orders or other duly  authorized  actions  of  governmental  authorities  having
jurisdiction over the matters contained in Agreement.

     15.4 Choice of Law and Jurisdiction.

     The interpretation and performance of this Agreement shall be in accordance
with the laws of the State of New Jersey,  excluding conflicts of law principles
that would require the application of the laws of a different jurisdiction.  Any
dispute  arising out of or related to this  Agreement  shall be  litigated  in a
court  of  the  State  of  New  Jersey.  Each  Party  expressly  submits  to the
jurisdiction  of the Courts of the State of New Jersey,  and the federal  courts
situated in Newark and to service of process by certified mail.

     15.5 Counterparts to this Agreement.

     This Agreement may be executed in any number of counterparts  each of which
shall be an original,  but all of which  together  shall  constitute one and the
same instrument.
<PAGE>
     15.6 Notices.

     Unless otherwise provided in this Agreement,  any notice,  consent or other
communication  required to be made under this Agreement  shall be in writing and
shall be delivered in person, by certified mail (postage prepaid, return receipt
requested) or by nationally  recognized overnight courier (charges prepaid),  in
each case properly  addressed to such Party as shown below, or sent by facsimile
transmission to the facsimile number indicated below:

         ERT:

         Manager - Electric Trading Operations
         PSEG Energy Resources & Trade LLC
         80 Park Plaza
         Newark, NJ 07101


         PSE&G:

         Manager - BGS Service
         PSE&G
         80 Park Plaza
         Newark, NJ 07101

Either  Party  may  from  time to time  change  its  address for  the purpose of
notices or other  communications  to that Party by a similar notice specifying a
new address, but no such change shall be effective until it is actually received
by the Party  sought to be  charged  with its  contents  All  notices  and other
communications  required or permitted under this Agreement that are addressed as
provided in this Section shall be deemed to have been given (i) upon delivery if
given by overnight courier or regular mail or (ii) upon automatically  generated
confirmation if given by facsimile.
<PAGE>
     15.7 Confidentiality.

     Each Party agrees that it will treat in strictest confidence all documents,
materials and other information  marked  "Confidential"  or" Proprietary" by the
disclosing  Party  ("Confidential  Information"),  which it shall have  obtained
regarding the other Party during the course of the negotiations  leading to, and
its performance of, this Agreement (whether obtained before or after the date of
this Agreement). Confidential Information shall not be communicated to any third
person (other than to its  affiliates,  counsel,  accountants,  financial or tax
advisors,  or  insurance  consultants  or in  connection  with  its  financing);
provided that in the event the receiving Party is required by law, regulation or
court order to disclose any Confidential  Information,  the receiving Party will
promptly  notify  the  disclosing  Party in  writing  prior to  making  any such
disclosure in order to facilitate  the disclosing  Party's  seeking a protective
order or other appropriate remedy from the proper authority and further provided
that the receiving Party further agrees that if the disclosing  Party ultimately
discloses such  Confidential  Information to the requesting  legal body, it will
furnish  only that  portion  of the  Confidential  Information  which is legally
required and will exercise all reasonable efforts to obtain reliable  assurances
that confidential treatment will be accorded the Confidential  Information.  The
obligations of  nondisclosure  and restricted  use of  Confidential  Information
shall  survive the  Closing  and the  expiration  or other  termination  of this
Agreement  until such  obligations  expire in accordance  with their  respective
terms.

     15.8 Partial Invalidity.

     Wherever  possible,  each  provision  hereof shall be  interpreted  in such
manner as to be effective and valid under applicable law, but in case any one or
more of the provisions  contained  herein shall,  for any reason,  be held to be
invalid,  illegal or  unenforceable  in any  respect,  such  provision  shall be
ineffective  to  the  extent,  but  only  to the  extent,  of  such  invalidity,
illegality  or  unenforceability  without  invalidating  the  remainder  of such
invalid,   illegal  or  unenforceable  provision  or  provisions  or  any  other
provisions  hereof,  unless such a construction  would be  unreasonable.  In the
event that such a construction would be unreasonable or would deprive a Party of
a material  benefit under this  Agreement,  the Parties shall seek to amend this
Agreement  to remove the invalid  provision  and  otherwise  provide the benefit
unless prohibited by law.

     15.9 Waivers.

     The failure of either Party hereto to enforce at any time any  provision of
this Agreement shall not be construed to be a waiver of such  provision,  nor in
any way to affect the validity of this Agreement or any part hereof or the right
of a Party  thereafter to enforce each and every such provision.  A waiver under
this  Agreement  must be in writing and state that it is a waiver.  No waiver of
any breach of this  Agreement  shall be held to constitute a waiver of any other
or subsequent breach.

     15.10 Entire Agreement and Amendments.

     This  Agreement  supersedes all previous  representations,  understandings,
negotiations and agreements either written or oral between the Parties hereto or
their  representatives with respect to the subject matter hereof and constitutes
the entire  agreement of the Parties with respect to the subject  matter hereof.
No  amendments  or changes to this  Agreement  shall be binding  unless  made in
writing  and duly  executed  by both  Parties  and  accepted  or approved by the
Commission.

     15.11 No Third-Party Beneficiaries.

     Nothing in this  Agreement,  whether  express or  implied,  is  intended to
confer  any  rights or  remedies  under or by reason  of this  Agreement  on any
persons other than the Parties and their  respective  permitted  successors  and
assigns,  nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third  persons to either  Party,  nor to give any
third persons any right of subrogation or action against either Party.

     15.12 Further Assurances.

     If either Party  determines in its reasonable  discretion  that any further
instruments,  assurances or other things are necessary or desirable to carry out
the terms of this  Agreement,  the other Party will execute and deliver all such
instruments and assurances and do all things  reasonably  necessary or desirable
to carry out the terms of this Agreement.
<PAGE>
     15.13 Headings.

     The headings  contained in this Agreement arc solely for the convenience of
the  Parties  and  should  not be  used or  relied  upon  in any  manner  in the
construction or interpretation of this Agreement.

     15.14 Sections.

     Unless  otherwise  specified  references  in  this  Agreement  to  numbered
Sections and Subsections shall be to Sections and Subsections of this Agreement.

     15.15 Commission Review.

     In connection with any Commission review of the Agreement, in the event the
Commission modifies any term or condition,  alters any charge(s),  or in any way
conditions its acceptance of the Agreement,  and either Party determines that it
is  adversely  affected  in a  material  way by such  Commission  action  and/or
decision,  the Parties hereby agree to promptly negotiate,  in good faith, in an
effort to reach  agreement  on terms and  conditions  mutually  agreeable to the
Parties  relative to the subject  matter of the  Agreement.  If no  agreement is
reached  within sixty (60) days after such  Commission  action  and/or  decision
either party shall have the right to terminate or cancel the Agreement by filing
written notice of termination or cancellation  with the Commission and serving a
copy thereof on the other Party.  Any such notice must be filed and served after
such sixty (60) day period but no later than  seventy-five  (75) days after such
Commission  decision is final and not subject to any further  administrative  or
judicial review; provided, however, that neither Party is obligated to seek such
further review.

     15.16 Changes.

     This  Agreement  shall be changed solely by written  amendment  executed by
both Parties.  It is the intent of the Parties that this Agreement  shall not be
subject to change  pursuant to Section 206 of the Federal Power Act except where
the Commission  determines  pursuant to Section 206 that such change is required
by the public interest.

     15.17 Amendments Included.

         Reference to, and the definition of, any document (including this
Agreement) shall be deemed a reference to such document as it may be amended,
amended and restated, supplemented or modified from time to time.
<PAGE>
     15.18 Successors Included.

     Reference to any individual,  corporation or other entity shall be deemed a
reference to such  individual,  corporation  or other entity,  together with its
successors and permitted assigns from time to time.

     15.19 Number, Gender and Inclusion.

     Defined terms in the singular shall include the plural and vice versa,  and
the masculine, feminine or neuter gender shall include all genders. Whenever the
words "include," "includes," or "including" are used in this Agreement, they are
not  limiting  and  have  the  meaning  as if  followed  by the  words  "without
limitation."

<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date set forth at the beginning of this Agreement.

PSEG Energy Resources & Trade LLC


By:__________________________________



Public Service Electric and Gas Company


By:__________________________________

<PAGE>
                                  ATTACHMENT I
                           OFF-TARIFF RATE AGREEMENTS
                     APPROVED OR PENDING AS OF MARCH 3,1999

APPROVED

PSE&G OTRA 96-1                           Circuit Foil

PSE&G OTRA 96-2                           Ford

PSE&G OTRA 96-3                           Merck

PSE&G OTRA 97-1                           Ball Plastic

PSE&G OTRA 97-2                           Aluminum Shapes

PSE&G OTRA 97-3                           BASF

PSE&G OTRA 97-4                           Camden Iron

PSE&G OTRA 97-5                           Amerada Hess

PSE&G OTRA 97-6                           Passaic Valley Sewerage Commission

PSE&G OTRA 97-7                           Johnson & Johnson

PSE&G OTRA 97-8                           Union Carbide

PSE&G OTRA 97-9                           Port Authority Transit Corporation

PSE&G OTRA 98-1                           Nabisco

PSE&G OTRA 98-2                           Passaic Valley Sewerage Commission
                                          One year extension of OTRA 97-6

PENDING

PSE&G OTRA 98-3                           Marcal

PSE&G OTRA 99-1                           Garwood Paper

PSE&G OTRA 99-2                           Daily News

PSE&G OTRA 99-3                           Huntsman

                                    (Page 1)

<PAGE>

                                  ATTACHMENT 2
                             PJM CHARGES AND CREDITS
                           TO BE PAID/RECEIVED BY ERT

Schedule 1, 3.2.1             Spot Market Energy charges

Schedule 1, 3.2.2             Regulation charges

Schedule 1, 3.2.3             Operating Reserves charges

Schedule 1, 3.2.4, 3.4.1      Transmission Congestion charges

Schedule 1, 3.4.2             Transmission Losses charges

Schedule 1, 3.2.6, 3.2.4      Emergency Energy charges

Schedule 1.3.6                Meter Error Correction charges

Schedule 11                   Capacity Credit Market charges

Schedule 1, 3.3.1             Spot Market Energy credits

Schedule 1, 3.3.2             Regulation credits

Schedule 1 , 3.3.3            Operating Reserves credits

Schedule 1, 3.2.4, 3.4.1      Transmission Congestion credits with respect
                              to fixed transmission rights

Schedule 1, 3.2.5             Transmission Losses credits

Schedule 1, 3.2.6, 3.2.4      Emergency Energy credits

Schedule 11                   Capacity Credit Market credits

Schedule IA                   RTO Scheduling, System Control and Dispatch
                              Service Charges

Schedule 2                    Reactive Supply and Voltage Control from
                              Generation Sources Service charge

Schedule 3                    Regulation and Frequency, Response Service
                              charges

Schedule 4                    Energy Imbalance Service charges

Schedule 5                    Operating Reserves - Spinning Reserve and
                              Supplemental Reserve Service charges

Schedule 7                    Long-Term - Yearly Delivery

Schedule 7                    Short-Term - Monthly Delivery

                                   (Page 2-a)


<PAGE>

                                  ATTACHMENT 2
                             PJM CHARGES AND CREDITS
                           TO BE PAID/RECEIVED BY ERT


Schedule 7                    Short-Term - Weekly Deliver

Schedule 7                    Short-Term - Daily Delivery

Schedule 7                    Congestion and Losses

Schedule 7                    Long-Term - Other Supporting Facilitates and Taxes

Schedule 7                    Short-Term - Other Supporting Facilities and Taxes

Schedule 8                    Monthly Delivery

Schedule 8                    Weekly Delivery

Schedule 8                    Daily Delivery

Schedule 8                    Hourly Delivery

Schedule 8                    Congestion and Losses

Schedule 8                    Other Supporting Facilities and Taxes

Schedule 2                    Reactive Supply and Voltage Control from
                              Generation Sources Service credits

Schedule 4                    Energy Imbalance Service credits

Section 27a                   Non-Finn Point-to-Point Transmission Service
                              credits

                                   (Page 2-b)