PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED



                                       and


                      FIRST UNION NATIONAL BANK, as Trustee


                          FIRST SUPPLEMENTAL INDENTURE


                            Dated as of June 1, 1998


                                       to


                                    INDENTURE


                           Dated as of January 1, 1998




       Floating Rate Deferrable Interest Subordinated Debentures, Series B

<PAGE>
                                TABLE OF CONTENTS
                                -----------------




                                                                          Page
                                                                          ----
ARTICLE 1.
                  DEFINITIONS...............................................2
                  SECTION 1.01  Definitions.................................2

ARTICLE 2.
                  THE SERIES B DEBENTURES...................................2
                  SECTION 2.01 Terms and Form of the Series B Debentures....2

ARTICLE 3.
                  REDEMPTION................................................5
                  SECTION 3.01  Redemption; Notice to Trustee...............5

ARTICLE 4.
                  COVENANT..................................................5
                  SECTION 4.01  Payment of Expenses of Trust II.............5

ARTICLE 5.
                  MISCELLANEOUS.............................................5
                  SECTION 5.01  Confirmation of Indenture...................5
                  SECTION 5.02  Notices.....................................5
                  SECTION 5.03  Severability Clause.........................6
                  SECTION 5.04  No Recourse Against Others..................6
                  SECTION 5.05  Successors..................................7
                  SECTION 5.06  Multiple Original Copies of this Indenture..7
                  SECTION 5.07  Table of Contents; Headings, Etc............7

<PAGE>


     FIRST  SUPPLEMENTAL  INDENTURE,  dated as of June 1, 1998,  by and  between
Public Service Enterprise Group  Incorporated,  a corporation duly organized and
existing  under the laws of the State of New Jersey  (the  "Company")  and First
Union National Bank, a national banking association organized and existing under
the laws of the United States of America,  as trustee (the "Trustee")  under the
Indenture dated as of January 1, 1998 between the Company and the Trustee.

     WHEREAS,  the Company  executed and  delivered  the  Indenture  dated as of
January 1, 1998 to the  Trustee to provide for the  issuance  of its  deferrable
interest subordinated  debentures (the "Debentures") in series from time to time
as might be  determined  by the Company and  pursuant  thereto,  the Company has
issued its 7.44% Deferrable Interest Subordinated Debentures, Series A.

     WHEREAS,  pursuant to an Amended and Restated Trust  Agreement  dated as of
June 26, 1998 (the "Trust II Agreement"), among the Company, as depositor, First
Union  National  Bank, as Property  Trustee (the  "Property  Trustee  II"),  the
Delaware  Trustee named therein and the  Administrative  Trustees named therein,
there has been declared and established  Enterprise Capital Trust II, a Delaware
business trust ("Trust II").

     WHEREAS,  Trust II intends to issue its Trust Securities (as defined in the
Trust II Agreement),  including its Floating Rate Capital Securities,  Series B,
representing undivided beneficial interests in the assets of Trust II and having
a liquidation amount of $1,000 per security (the "Series B Capital Securities").

     WHEREAS,  the Company has authorized the issuance of a series of additional
debentures  pursuant to Section 2.04 of the  Indenture to be  designated  as the
Company's Floating Rate Deferrable Interest  Subordinated  Debentures,  Series B
(the "Series B Debentures") to be purchased by Trust II with the proceeds of the
Trust Securities,  and to provide therefor,  the Company has duly authorized the
execution and delivery of this First Supplemental Indenture.

     WHEREAS,  all things  necessary to make the Series B  Debentures  when duly
issued and executed by the Company and  authenticated  and delivered  hereunder,
the  valid  obligations  of the  Company,  and to make this  First  Supplemental
Indenture a valid and binding  agreement of the Company,  in accordance with its
terms, have been done.

                                 NOW THEREFORE:

     Each of the Company and the Trustee,  intending to be legally bound hereby,
agrees as  follows  for the  benefit  of the  other  party and for the equal and
ratable  benefit  of the  holders  of the  Debentures,  including  the  Series B
Debentures:

<PAGE>
                                   ARTICLE 1.
                                   DEFINITIONS

SECTION 1.01  Definitions

     The following  terms used in this First  Supplemental  Indenture shall have
the following meanings:

     "Debentureholder"  or  "Holder"  means a Person  in  whose  name a Series B
Debenture is registered on the Registrar's books.

     "Series B Debentures"  means any of the Company's  Floating Rate Deferrable
Interest Subordinated Debentures,  Series B issued under this First Supplemental
Indenture.

     "Series B  Guarantee  Agreement"  means that  certain  Guarantee  Agreement
issued by the Company with respect to the Series B Capital Securities,  in which
the Company irrevocably and unconditionally agrees to pay the Guarantee Payments
(as defined in the  Guarantee  Agreement) to the holders of the Series B Capital
Securities.

     "Series B Capital Securities" means the undivided  beneficial  interests in
the assets of Trust II, having a liquidation  amount of $1,000 and having rights
provided therefor in the Trust II Agreement.

     "Trust II" means  Enterprise  Capital Trust II, a Delaware  business  trust
created by the Trust II Agreement.

     "Trust II Agreement"  means the Amended and Restated Trust  Agreement dated
as of June 26, 1998,  among the Company,  as Depositor,  Fidelity Union National
Bank,  as  Property  Trustee,   the  Delaware  Trustee  named  therein  and  the
Administrative  Trustees named therein,  as the same may be amended and modified
from time to time.

     Each of the other terms used in this First  Supplemental  Indenture that is
defined in the Indenture and not defined herein shall have the meaning  assigned
to it in the Indenture.

                                   ARTICLE 2.
                             THE SERIES B DEBENTURES

SECTION 2.01 Terms and Form of the Series B Debentures

     (a) The Series B Debentures shall be designated  "Public Service Enterprise
Group Incorporated  Floating Rate Deferrable Interest  Subordinated  Debentures,
Series  B."  The  Series  B  Debentures   and  the  Trustee's   Certificate   of
Authentication  shall be substantially in the form of Exhibit A attached hereto.
The  Series B  Debentures  shall  initially  be issued as global  Debentures  in
accordance  with  the  provisions  of  Section  2.12 of the  Indenture  with The
Depository  Trust Company as Depositary.  The terms and provisions  contained in
the Series B Debentures shall constitute,  and are hereby expressly made, a part
of this First  Supplemental  Indenture.  The Company and the  Trustee,  by their
execution and delivery of this First Supplemental Indenture,  expressly agree to
such terms and provisions and to be bound thereby.
<PAGE>
     (b) The aggregate  principal  amount of Series B Debentures  outstanding at
any time may not exceed  $154,640,000  except as provided in Section 2.09 of the
Indenture.  The Series B Debentures  shall be  authenticated  and delivered from
time to time upon  delivery  to the  Trustee of the items  specified  in Section
2.04(d) of the Indenture.

     (c) The Stated Maturity Date of the Series B Debentures is June 30, 2028.

     (d) The interest  rate of the Series B Debentures  will be a floating  rate
per annum  determined  quarterly by reference to 3-Month  LIBOR,  determined  as
described herein, plus a margin of 1.22%.

     "3-Month  LIBOR" means the London  interbank  offered rate for  three-month
U.S.  dollar deposits and with respect to any Interest Period (as defined below)
will be  calculated by First Union  National Bank or any successor  appointed by
the  Company as  Calculation  Agent,  as  permitted  by this First  Supplemental
Indenture (the "Calculation Agent") as follows:

     i. On the second Market Day (as defined below)  preceding the  commencement
of such Interest Period (each, a  "Determination  Date"),  3-Month LIBOR will be
determined  on the basis of the offered  rate for deposits of not less than U.S.
$1,000,000  for a period of three months (the "Index  Maturity"),  commencing on
such Market Day, which appears on the display designated as Page 3750 on the Dow
Jones  Markets  Limited  (or such  other page as may  replace  Page 3750 on that
service  (or  any  successor  service)  for the  purpose  of  displaying  London
interbank offered rates of major banks) ("Telerate Page 3750") as of 11:00 a.m.,
London time on such Market Day. If no such offered rate  appears,  3-Month LIBOR
with respect to such  Interest  Period will be  determined  as described in (ii)
below.

     The term "Interest  Period" means each period  beginning on, and including,
the date of original  issuance and ending on, but excluding,  the first Interest
Payment Date (as defined below) , and each successive period, so beginning on an
Interest  Payment  Date and so ending  on,  but  excluding  the next  successive
Interest Payment Date.

     ii. With  respect to a  Determination  Date on which no such  offered  rate
appears on Telerate Page 3750 as described in (i) above,  3-Month LIBOR shall be
the  arithmetic  mean,  expressed  as a  percentage,  of the  offered  rates for
deposits in U.S.  dollars for the Index  Maturity  which  appears on the display
designated  as "LIBO" on the Reuter  Monitor Money Market Rates Service (or such
other  page as may  replace  the LIBO  page on that  service  (or any  successor
service) for the purpose of displaying  London interbank  offered rates of major
banks)  ("Reuters  Screen  LIBO Page") as of 11:00 a.m.,  London  time,  on such
Market Day. If, in turn,  such rate is not displayed on the Reuters  Screen LIBO
Page at such time, the Calculation Agent will obtain from each of four reference
banks in London selected by the Calculation  Agent (the "Reference  Banks") such
bank's  offered   quotation   (expressed  as  a  percentage  per  annum)  as  of

<PAGE>
approximately  11:00 a.m.,  London time, on such Market Day for deposits in U.S.
dollars for the Index Maturity to prime banks in the London interbank market. If
two or more such  quotations  are provided as requested,  then 3-Month LIBOR for
such Market Day shall be the arithmetic  mean of such  quotations.  If, in turn,
fewer than two such quotations are provided as requested, then 3-Month LIBOR for
such Market Day will be  obtained  from the  preceding  Market Day for which the
Reuters Screen LIBO Page displayed an offered rate for deposits in U.S.  dollars
for the Index Maturity.

     iii. If on any  Determination  Date, the Calculation  Agent is required but
unable to determine  3-Month LIBOR in the manner  provided in paragraphs (i) and
(ii) above,  3-Month  LIBOR for such  Interest  Period shall be 3-Month LIBOR as
determined on the immediately preceding Determination Date.

     The term "Market Day" means any day on which  commercial  banks and foreign
exchange markets are open for business  (including  dealings in foreign exchange
and foreign currency deposits) in The City of New York and The City of London.

     The interest  rate for any  Interest  Period will at no time be higher than
the maximum rate then permitted by applicable law.

     All percentages  resulting from any calculations referred to herein will be
rounded,  if  necessary,  to the  nearest  multiple  of 1/100 of 1% and all U.S.
dollar  amounts used in or resulting from such  calculations  will be rounded to
the nearest cent (with one-half cent or more being rounded upwards).

     The  Calculation  Agent  shall,  as soon as  practicable  after 11:00 a.m.,
London  time,  on each  Determination  Date,  determine  the  interest  rate and
calculate  the amount of  interest  payable in  respect of the  Interest  Period
related to such Determination Date (the "Interest Amount").  The Interest Amount
shall be calculated  by applying the interest  rate to the  principal  amount of
each Series B Debenture  outstanding at the commencement of the Interest Period,
multiplying such amount by the actual number of days in the applicable  Interest
Period  divided by 360 and  rounding  the  resultant  figure to the nearest cent
(with one-half cent or more being rounded  upwards).  The  determination  of the
interest  rate and the  Interest  Amount by the  Calculation  Agent will (in the
absence of willful  default,  bad faith or manifest error) be final,  conclusive
and binding on all concerned.  Neither the Calculation Agent nor the Company (or
any of their respective officers, directors, agents, beneficiaries, employees or
affiliates)  shall have any liability to any person for (i) the selection of any
Reference  Bank or (ii) any  inability  to  retain  major  banks  in the  London
interbank  market,  in the case of the  Calculation  Agent,  which is  caused by
circumstances beyond its reasonable control.
<PAGE>
     All certificates,  communications, opinions, determinations,  calculations,
quotations and decisions given, expressed,  made or obtained for the purposes of
the provisions hereof relating to the payment and calculation of interest on the
Series B  Debentures,  whether  by the  Reference  Banks (or any of them) or the
Calculation  Agent,  will (in the  absence  of  willful  default,  bad  faith or
manifest  error)  be  binding  on  Trust  II,  the  Company,  the  Trustee,  the
Calculation  Agent and all of the  holders  of the  Series B  Debentures  and no
liability will (in the absence of willful default,  bad faith or manifest error)
attach to the Calculation  Agent in connection with the exercise or non-exercise
by it of its powers, duties and discretion.

     (e) The "Interest  Payment Dates" for the Series B Debentures are March 31,
June 30,  September 30 and December 31 of each year,  commencing  September  30,
1998.  In the event that any date on which  interest  is payable on the Series B
Debentures is not a Business Day, then payment of interest  payable on such date
will be made on the next  succeeding day that is a Business Day (and without any
interest  or other  payment in respect of any such  delay),  except that if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately  preceding Business Day, in each case with the same force and
effect  as if made on such  date.  The  Regular  Record  Date for each  Interest
Payment Date for the Series B Debentures shall be the 15th day (whether or not a
Business  Day) of the last month of each  quarter,  provided that if Trust II is
the sole Holder of the Series B Debentures or the Series B Debentures are issued
in book-entry-only  form, the Regular Record Date shall be the close of business
on the Business Day next preceding such Interest Payment Date.

     Each Series B Debenture shall bear interest from its Issue Date or from the
most  recent  Interest  Payment  Date to which  interest  has been  paid or duly
provided for with respect to such Series B  Debenture;  except that,  so long as
there is no  existing  Defaulted  Interest or  Extension  Period on the Series B
Debentures,  any Series B Debenture  authenticated  by the  Trustee  between the
Regular Record Date for any Interest Payment Date and such Interest Payment Date
shall bear interest from such Interest Payment Date.

     Overdue  principal of, and interest on, any Series B Debenture and interest
which has been deferred  pursuant to Section 4.01(b) of the Indenture shall bear
interest  (to the  extent  that the  payment of such  interest  shall be legally
enforceable) at a rate per annum equal to the interest rate per annum payable on
such Series B Debenture.

     The Calculation  Agent will cause the interest rate, the Interest Amount in
respect  of each  Series B  Debenture  and the  interest  payment  date for each
Interest Period to be given to the Trustee, the Property Trustee and the Company
as soon as  practicable  after the  determination  thereof but in no event later
than the second Business Day of the applicable Interest Period.

     (f) The Series B  Debentures  shall be  issuable  only in  registered  form
without coupons and only in  denominations  of $1,000 and any integral  multiple
thereof.
<PAGE>
     (g) The maximum  Extension  Period for the Series B Debentures  shall be 20
consecutive quarters.

     (h) First Union  National Bank shall  initially be the Paying Agent for the
Series B Debentures.

     (i) First Union National Bank shall initially be the Calculation  Agent for
the  Series B  Debenture.  In the event of the  resignation  or removal of First
Union National Bank as the Calculation  Agent, the Company will promptly appoint
a  successor  Calculation  Agent and such  successor  Calculation  Agent  shall,
without  any  further  act,  deed or  conveyance  become  vested with all of the
authority, rights, duties and obligations of the Calculation Agent with the like
effect as if originally appointed as Calculation Agent.

                                   ARTICLE 3.
                                   REDEMPTION

SECTION 3.01  Redemption; Notice to Trustee

     (a) The Series B Debentures are subject to redemption  prior to maturity as
provided therein.

     (b) Any redemption of the Series B Debentures  shall be made in the manner,
upon the terms and with the effect,  all as provided in Sections 3.01(c),  3.02,
3.03, 3.04, 3.05 and 3.06 of the Indenture.

                                   ARTICLE 4.
                                    COVENANT

SECTION 4.01.  Payment of Expenses of Trust II.

     The  Company  covenants  for the  benefit  of the  Holders  of the Series B
Debentures to pay all of the costs and expenses of Trust II in  accordance  with
Section  2.03(b) of the Trust II  Agreement  and to pay the taxes of Trust II in
accordance  with  Section  2.03(c) of the Trust II  Agreement in order to permit
Trust II to make  distributions  on and  redemptions  of the  Series  B  Capital
Securities in accordance with Article IV of the Trust II Agreement.

                                   ARTICLE 5.
                                  MISCELLANEOUS

SECTION 5.01  Confirmation of Indenture

     As amended  and  supplemented  by this First  Supplemental  Indenture,  the
Indenture is in all respects  ratified and  confirmed and the Indenture and this
First  Supplemental  Indenture shall be read, taken and construed as one and the
same instrument.

SECTION 5.02  Notices

     Any notice,  request or other  communication  required or  permitted  to be
given  hereunder  shall be in writing  and  delivered,  telecopied  or mailed by
first-class mail, postage prepaid, addressed as follows:

<PAGE>
     if to the Company:

         Public Service Enterprise Group Incorporated
         80 Park Plaza, T6B
         P.O. Box 570
         Newark, New Jersey  07101
         Facsimile No. (973) 242-1651
         Attention:  Treasurer

     if to the Trustee:

         First Union National Bank
         765 Broad Street
         Newark, New Jersey  07101
         Facsimile No. (973) 430-2117
         Attention:  Corporate Trust Department

     The Company or the Trustee,  by giving  notice to the other,  may designate
additional or different addresses for subsequent notices of communications.  The
Company  shall  notify the holder,  if any, of Senior  Indebtedness  of any such
additional or different  addresses of which the Company receives notice from the
Trustee.

     Any notice or communication given to a Debentureholder  other than Trust II
shall be mailed to the  Debentureholder at the  Debentureholder's  address as it
appears on the  Register of the  Registrar  and shall be  sufficiently  given if
mailed within the time prescribed.

     Failure  to mail a notice  or  communication  to a  Debentureholder  or any
defect  in  it  shall  not  affect  its   sufficiency   with  respect  to  other
Debentureholders.  If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressees.

     If the Company mails a notice or communication to the Debentureholders,  it
shall  mail  a  copy  to  the  Trustee  and  each  Registrar,  Paying  Agent  or
co-Registrar.

SECTION 5.03  Severability Clause

     If any provision in this  Indenture or in the Series B Debentures  shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 5.04  No Recourse Against Others.

     No director,  officer,  employee or  stockholder,  as such,  of the Company
shall have any liability for any  obligations  of the Company under the Series B
Debentures  or this First  Supplemental  Indenture or for any claim based on, in
respect of or by reason of such  obligations or their  creation.  By accepting a
Series B  Debenture,  each  Debentureholder  shall  waive and  release  all such
liability.  The waiver and release shall be a part of the  consideration for the
issue of the Series B Debentures.

SECTION 5.05  Successors.

     All agreements of the Company in this First Supplemental  Indenture and the
Series B Debentures shall bind its successors and assigns. All agreements of the
Trustee in this First  Supplemental  Indenture  shall  bind its  successors  and
assigns.

SECTION 5.06  Multiple Original Copies of this Indenture

     The  parties  may sign any  number  of copies  of this  First  Supplemental
Indenture.  Each  signed  copy shall be an  original,  but all of them  together
represent the same agreement.  Any signed copy shall be sufficient proof of this
First Supplemental Indenture.

SECTION 5.07  Table of Contents; Headings, Etc

     The Table of Contents,  Cross-Reference  Table and headings of the Articles
and  Sections  of this  First  Supplemental  Indenture  have been  inserted  for
convenience of reference only, are not to be considered a part hereof, and shall
in no way modify or restrict any of the terms or provisions hereof.


                                   SIGNATURES

     IN WITNESS WHEREOF, the undersigned,  being duly authorized,  have executed
this First Supplemental  Indenture on behalf of the respective parties hereto as
of the date first above written.

               PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED


               By: MORTON A. PLAWNER
                   -----------------
               Name: Morton A. Plawner
               Title: Treasurer

               FIRST UNION NATIONAL BANK, as Trustee

               By: FRANK GALLAGHER
                   ---------------
               Name: Frank Gallagher
               Title: Vice President


<PAGE>


Exhibit A

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

Floating Rate Deferrable Interest Subordinated Debenture, Series B


No. R-1


     Public Service Enterprise Group Incorporated, a New Jersey corporation (the
"Company",  which term  includes any successor  corporation  under the Indenture
hereinafter  referred  to),  for  value  received,  hereby  promises  to  pay to
Enterprise  Capital  Trust II or  registered  assigns,  the principal sum of One
Hundred Fifty-Four Million Six Hundred Forty Thousand Dollars  ($154,640,000) on
June 30, 2028,  and to pay interest on said  principal sum from June 26, 1998 or
from the most recent Interest  Payment Date (as defined below) to which interest
has been paid or duly provided for,  quarterly in arrears and reset on March 31,
June 30,  September 30 and December 31 commencing  September 30, 1998 (each,  an
"Interest  Payment  Date") at floating  rate per annum  determined  quarterly by
reference to 3-Month  LIBOR,  determined  as provided in the  Indenture,  plus a
margin of 1.22% until the  principal  hereof  shall have become due and payable,
and on any overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue  installment of interest at the
same rate per annum. The amount of interest payable on any Interest Payment Date
shall be  calculated  by applying  the  interest  rate to the  principal  amount
outstanding at the commencement of the Interest Period,  multiplying such amount
by the actual number of days in the  applicable  Interest  Period divided by 360
and rounding the  resultant  figure to the nearest cent (with  one-half  cent or
more being rounded upwards).  In the event that any Interest Payment Date is not
a Business Day, then interest will be payable on the next  succeeding  day which
is a Business Day (and  without any interest or other  payment in respect of any
such  delay),  except  that,  if such  Business  Day is in the  next  succeeding
calendar year, such payment shall be made on the immediately  preceding Business
Day,  in each case with the same force and  effect as if made on such date.  The
interest  installment so payable,  and  punctually  paid or duly provided for as
provided  in the  Indenture,  shall be paid to the  Person  in whose  name  this
Debenture is registered at the close of business on the Regular  Record Date for
such  interest  installment,  which  shall  be the 15th  day  (whether  or not a
Business  Day) of the last month of each  quarter,  provided  that if all of the
Series B Debentures (as defined below) are then held by Enterprise Capital Trust
II (the "Trust") or the Series B Debentures  are held in  book-entry-only  form,
the Regular  Record Date shall be the close of business on the Business Day next
preceding  such  Interest  Payment  Date.  Any  such  interest  installment  not
punctually  paid or duly provided for shall forthwith cease to be payable to the
Holders on such Regular Record Date, and may be paid to the Person in whose name
this  Debenture is registered at the close of business on a Special  Record Date
to be fixed by the Trustee (as defined  below) for the payment of such defaulted
interest,  notice  whereof  shall  be  given  to the  Holders  of the  Series  B
Debentures not less than 7 days prior to such Special Record Date, as more fully
provided in the Indenture.
<PAGE>
     Payment of the principal of and interest on this  Debenture will be made in
such coin or currency of the United  States of America as at the time of payment
is legal tender for payment of public and private debts. Payments of interest on
an Interest  Payment Date will be made by check  mailed to the Holder  hereof at
the address  shown in the  Register or, at the option of the Holder  hereof,  to
such  other  place in the  United  States  of  America  as Holder  hereof  shall
designate  to the  Trustee in  writing.  At the  request of a Holder of at least
$10,000,000 aggregate principal amount of Series B Debentures,  interest on such
Debentures will be payable by wire transfer within the continental United States
in immediately  available funds to the bank account number  specified in writing
by such Holder to the Registrar prior to the Regular Record Date.

     The principal amount hereof and interest due on the Stated Maturity Date or
a Redemption  Date (other than an Interest  Payment Date) will be paid only upon
surrender of this  Debenture at the  principal  corporate  trust office of First
Union National  Bank,  Paying Agent,  in Newark,  NJ, or at such other office or
agency of the Paying Agent as the Company shall  designate by written  notice to
the Holder of this Debenture.

     The indebtedness  evidenced by this Debenture is, to the extent provided in
the Indenture,  subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness,  and this Debenture is issued subject to the
provisions of the Indenture with respect thereto.  The Holder of this Debenture,
by accepting the same, (a) agrees to and shall be bound by such provisions,  (b)
authorizes  and  directs the Trustee on his behalf to take such action as may be
necessary or  appropriate to  acknowledge  or effectuate  the  subordination  so
provided and (c) appoints the Trustee his  attorney-in-fact for any and all such
purposes. The Holder of this Debenture,  by his acceptance hereof, hereby waives
all notice of the acceptance of the  subordination  provisions  contained herein
and in the  Indenture  by  each  holder  of  Senior  Indebtedness,  whether  now
outstanding or hereafter incurred,  and waives reliance by each such holder upon
said provisions.

     This  Debenture is one of a duly  authorized  series of  Debentures  of the
Company (herein sometimes  referred to as the "Series B Debentures"),  specified
in  the  Indenture,  limited  in  aggregate  principal  amount  to  One  Hundred
Fifty-Four  Million,  Six Hundred Forty Thousand Dollars  ($154,640,000)  issued
under and  pursuant to an  Indenture  dated as of January 1, 1998  executed  and
delivered  between the Company and First Union  National  Bank,  as trustee (the
"Trustee"), as supplemented by the First Supplemental Indenture dated as of June
1, 1998 between the Company and the Trustee (said  Indenture as so  supplemented
being hereinafter  referred to as the "Indenture").  The Series B Debentures are
initially  being  issued to the Trust,  to be held on behalf of the Trust by its
property trustee (the "Property Trustee"). Concurrently with the issuance of the
Series B  Debentures,  the Trust is issuing its trust  securities,  representing
<PAGE>
undivided  beneficial  interests  in the  assets  of the  Trust  and  having  an
aggregate  liquidation  amount  equal to the  principal  amount of the  Series B
Debentures,  including the Trust's  Floating Rate Capital  Securities,  Series B
(the  "Preferred  Securities").  By the terms of the  Indenture,  Debentures are
issuable  in  series  which may vary as to  amount,  date of  maturity,  rate of
interest and in other respects as provided in the  Indenture.  Reference is made
to the Indenture and all  indentures  supplemental  thereto for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Debentures. Each term used in
this  Debenture  which is defined in the Indenture and not defined  herein shall
have the meaning assigned to it in the Indenture.

     The following redemption provisions shall apply to the Series B Debentures:

                             Regular Redemption

     The Series B  Debentures  may be redeemed in whole or part at the option of
the Company at any time on or after June 30, 2003 at a redemption price equal to
100% of the  principal  amount  thereof plus accrued and unpaid  interest to the
redemption date.

                             Special Event Redemption

     If a Tax Event or an Investment Company Event (each, a "Special Event") has
occurred and is continuing,  the Company may redeem the Series B Debentures,  in
whole but not in part, at a price equal to 100% of the principal  amount thereof
plus accrued and unpaid interest to the redemption date within 90 days following
the occurrence of such Special Event.

     "Tax  Event"  means  that the  Company  shall have  received  an opinion of
counsel (which may be counsel to the Company or an affiliate but not an employee
thereof and which must be acceptable  to the Property  Trustee)  experienced  in
such  matters to the effect  that,  as a result of any  amendment  to, or change
(including any announced  prospective  change) in, the laws (or any  regulations
thereunder)  of  the  United  States  or any  political  subdivision  or  taxing
authority thereof or therein affecting taxation,  or as a result of any official
administrative  pronouncement or judicial decision interpreting or applying such
laws  or   regulations,   which   amendment  or  change  is  effective  or  such
pronouncement or decision is announced on or after the date of original issuance
of the Series B Capital  Securities,  there is more than an  insubstantial  risk
that (i) the Trust is, or will be, subject to federal income tax with respect to
interest on the Series B Debentures, (ii) interest payable by the Company on the
Series B  Debentures  is not,  or will not be,  deductible  by the  Company  for
federal  income tax purposes or (iii) the Trust is, or will be,  subject to more
than  a  de  minimis  amount  of  other  taxes,  duties,  assessments  or  other
governmental charges.
<PAGE>
     "Investment  Company  Event"  means  the  occurrence  of a change in law or
regulation or a change in  interpretation or application of law or regulation by
any legislative  body,  court,  governmental  agency or regulatory  authority (a
"Change in 1940 Act Law") to the effect that the Trust is or will be  considered
an "investment  company" that is required to be registered  under the Investment
Company Act of 1940, as amended,  which Change in 1940 Act Law becomes effective
on or after the date of original issuance of the Series B Capital Securities.

     At least 30 days but not more than 60 days before the Redemption  Date, the
Trustee shall mail or caused to be mailed a notice of redemption by  first-class
mail, postage prepaid, to each Holder of Series B Debentures to be redeemed.

     In the event of redemption  of this  Debenture in part only, a new Series B
Debenture or Debentures for the unredeemed  portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

     In case an Event of Default with respect to the Series B Debentures  occurs
and is  continuing,  the  principal  of and  interest  on  all of the  Series  B
Debentures may (and, in certain circumstances shall) be declared,  and upon such
declaration shall become,  due and payable,  in the manner,  with the effect and
subject to the conditions provided in the Indenture.

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness  of this  Debenture  upon  compliance  by the Company  with certain
conditions set forth therein.

     Subject to certain exceptions in the Indenture which require the consent of
every  Holder,  the Company and the Trustee may amend the Indenture or may waive
future  compliance by the Company with any  provisions of the Indenture with the
consent of the Holders of at least a majority in aggregate  principal  amount of
the  Debentures of each series  affected  thereby  provided that if the Series B
Debentures  are held by the Trust,  no such  amendment or waiver that  adversely
affects the holders of the Preferred  Securities shall be effective  without the
prior  consent of the  holders of at least a majority in  aggregate  liquidation
amount of the outstanding Preferred Securities issued under the Indenture at the
time outstanding.  Subject to certain  exceptions in the Indenture,  without the
consent of any Holder of the Debentures issued under the Indenture,  the Company
and the  Trustee  may  amend  the  Indenture  to cure any  ambiguity,  defect or
inconsistency,  to bind a successor  to the  obligations  of the  Indenture,  to
provide for uncertificated Debentures in addition to certificated Debentures, to
comply with any  requirements  of the Debentures and the Securities and Exchange
Commission in connection with the  qualification of the Indenture under the TIA,
or to make any change that, in the reasonable judgment of the Company,  does not
adversely affect the rights of any Holder of the Debentures. Amendments bind all
Holders and subsequent Holders of Debentures.
<PAGE>

     No reference  herein to the Indenture and no provision of this Debenture or
the  Indenture  shall alter or impair the  obligation  of the Company,  which is
absolute  and  unconditional,  to pay  the  principal  of and  interest  on this
Debenture  at the  time  and  place  and at the  rate  and in the  money  herein
prescribed.

     So long as an Event of Default with respect to the Series B Debentures  has
not occurred and is continuing, the Company shall have the right at any time and
from  time to time to  extend  the  interest  payment  period  of the  Series  B
Debentures for up to 20 consecutive quarters (the "Extension Period"),  provided
that no  Extension  Period  shall  extend  beyond  the Stated  Maturity  Date or
Redemption Date of any Series B Debenture.  At the end of the Extension  Period,
the  Company  shall pay all  interest  then  accrued and unpaid  (together  with
interest  thereon at the rate  specified  on a quarterly  basis for the Series B
Debentures,  as described in the Indenture,  compounded quarterly, to the extent
that payment of such interest is enforceable  under applicable law). During such
Extension  Period,  the Company may not declare or pay any dividend on,  redeem,
purchase,  acquire or make a  liquidation  payment  with  respect to, any of its
capital  stock.  Prior to the  termination  of any such  Extension  Period,  the
Company may further  extend such Extension  Period,  provided that such Extended
Interest  Payment Period together with all such previous and further  extensions
thereof shall not exceed 20 consecutive quarters and shall not extend beyond the
Stated  Maturity  Date or  Redemption  Date of any  Series B  Debenture.  At the
termination of any such Extended Interest Payment Period and upon the payment of
all amounts  then due,  the Company may elect to begin a new  Extended  Interest
Payment Period, subject to the foregoing restrictions.

     Series B Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral  multiple  thereof.  As provided in the
Indenture and subject to certain  limitations  therein set forth, this Debenture
is exchangeable for a like aggregate  principal amount of Series B Debentures of
a different authorized denomination, as requested by the Holder surrendering the
same.

     As provided in the Indenture and subject to certain limitations therein set
forth,  this  Debenture is  transferable  by the Holder hereof upon surrender of
this  Debenture  for  registration  of  transfer  at the office or agency of the
Registrar accompanied by a written instrument or instruments of transfer in form
satisfactory to the Registrar duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Series B Debentures of
authorized  denominations  and for the same aggregate  principal  amount will be
issued to the designated  transferee or  transferees.  No service charge will be
made for any  such  transfer,  but the  Company  may  require  payment  of a sum
sufficient  to cover any tax or other  governmental  charge  payable in relation
thereto.
<PAGE>

     Prior to presentment for  registration  of transfer of this Debenture,  the
Company,  the Trustee, any Paying Agent and any Registrar may deem and treat the
Holder hereof as the absolute owner hereof  (whether or not this Debenture shall
be overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Registrar)  for the purpose of receiving  payment of or on
account  of the  principal  hereof  and  interest  due  hereon and for all other
purposes,  and neither the Company nor the Trustee nor any Paying  Agent nor any
Registrar shall be affected by any notice to the contrary.

     No  recourse  shall  be had  for the  payment  of the  principal  of or the
interest on this  Debenture,  or for any claim based  hereon,  or  otherwise  in
respect  hereof,  or  based  on or in  respect  of the  Indenture,  against  any
incorporator,  stockholder,  officer or director,  past,  present or future,  as
such, of the Company or of any predecessor or successor corporation,  whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise,  all such liability being, by the acceptance
hereof  and as part of the  consideration  for the  issuance  hereof,  expressly
waived and released.

     This  Debenture  shall not be valid until an  authorized  signatory  of the
Trustee  manually signs and dates the Trustee's  Certificate  of  Authentication
below.


     IN WITNESS  WHEREOF,  the Company has caused  this  Debenture  to be signed
manually or by  facsimile  by a duly  authorized  officer and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.

                     PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                    By: MORTON A. PLAWNER
                        -----------------
[SEAL]              Name: Morton A. Plawner
                    Title: Treasurer

Attest: PATRICK M. BURKE
--------------------------------
[Assistant] Secretary


TRUSTEE'S CERTIFICATE OF AUTHENTICATION


This is one of the  Debentures,  of the series  designated,  referred  to in the
within-mentioned First Supplemental Indenture.

FIRST UNION NATIONAL BANK, as Trustee


By: FRANK GALLAGHER 
    ---------------
Name:Frank Gallagher

Authorized Signatory

Dated: June 26, 1998
       -------------

<PAGE>


                                 ASSIGNMENT FORM


     To assign this  Debenture,  fill in the form below:  (I) or (we) assign and
transfer this Debenture to:

     ______________________________________________________
     (Insert assignee's social security or tax I.D. number)


     ______________________________________________________
     (Print or type assignee's name, address and zip code)

     and  irrevocably  appoint  _____________________________  agent to transfer
this Debenture on the books of the Register. The agent may substitute another to
act for him.

Dated:__________________________ Signature:_________________________________
                                          (Sign  exactly as your name appears
                                           on the other side of this Debenture)


Signature Guaranty:___________________