PUBLIC SERVICE ELECTRIC AND GAS COMPANY


                                       and


                      FIRST UNION NATIONAL BANK, as Trustee


                          FIRST SUPPLEMENTAL INDENTURE


                          Dated as of February 1, 1997


                                       to


                                    INDENTURE


                            Dated as of June 1, 1996




          8.125% 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...............  3

ARTICLE 3.
                                          REDEMPTION.........................  4
        SECTION 3.01  Redemption; Notice to Trustee..........................  4

ARTICLE 4.
                                           COVENANT..........................  4

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.............................................  6
        SECTION 5.06  Multiple Original Copies of this Indenture.............  6
        SECTION 5.07  Table of Contents; Headings, Etc.......................  6



<PAGE>


                  FIRST SUPPLEMENTAL INDENTURE,  dated as of February 1, 1997 by
and  between  Public  Service  Electric  and Gas  Company,  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 June 1, 1996 between the Company and
the Trustee.

                  WHEREAS,  the Company  executed and  delivered  the  Indenture
dated as of June 1, 1996 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 8.625%  Deferrable  Interest  Subordinated  Debentures,
Series A.

                  WHEREAS,  pursuant to an Amended and Restated Trust  Agreement
dated as of February 7, 1997 (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  PSE&G  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 8.125%  Cumulative  Quarterly
Income  Preferred  Securities,   Series  B,  representing  undivided  beneficial
interests in the assets of Trust II and having a  liquidation  amount of $25 per
security (the "Series B Preferred 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 8.125% 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  8.125%
Deferrable  Interest  Subordinated  Debentures,   Series  B  issued  under  this
Indenture.

                  "Series B Guarantee  Agreement"  means that certain  Guarantee
Agreement  issued  by the  Company  with  respect  to  the  Series  B  Preferred
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 Preferred Securities.

                  "Series B Preferred Securities" means the undivided beneficial
interests  in the  assets of Trust II,  having a  liquidation  amount of $25 and
having rights provided therefor in the Trust II Agreement.

                  "Trust  II"  means  the PSE&G  Capital  Trust  II, a  Delaware
business trust created by the Trust Agreement.

                  "Trust II  Agreement"  means the  Amended and  Restated  Trust
Agreement dated as of February 7, 1997, among the Company,  as Depositor,  First
Union National Bank, as Property Trustee, the Delaware Trustee named therein and
the  Administrative  Trustee  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 1.02 Terms and Form of the Series B Debentures

                  (a) The  Series  B  Debentures  shall  be  designated  "Public
Service  Electric  and  Gas  Company  8.125%  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.

<PAGE>

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  Indenture,
expressly agree to such terms and provisions and to be bound thereby.

                  (b) The  aggregate  principal  amount of  Series B  Debentures
outstanding at any time may not exceed $97,938,150 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
February 7, 2046.

                  (d) The interest rate of the Series B Debentures is 8.125% per
annum. The Interest Payment Dates for the Series B Debentures are March 31, June
30, September 30 and December 31 of each year, commencing March 31, 1997. 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 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 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.  Interest on the Series B Debentures
shall be computed on the basis of a 360-day  year  consisting  of twelve  30-day
months.

                  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.

                  (e)  The  Series  B  Debentures  shall  be  issuable  only  in
registered  form  without  coupons  and  only  in  denominations  of $25 and any
integral multiple thereof.
<PAGE>

                  (f)  The maximum Extension Period for the Series B Debentures
shall be 20 consecutive quarters.

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


                                   ARTICLE 3.
                                   REDEMPTION

SECTION 1.03 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 Preferred 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 Electric and Gas Company
                           80 Park Plaza, T6B
                           P.O. Box 570
                           Newark, New Jersey  07101
                           Facsimile No.
                           Attention:  Treasurer

                           if to the Trustee:

                           First Union National Bank
                           765 Broad Street
                           Newark, New Jersey  07101
                           Facsimile No.
                           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  the   Partnership   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 addresses.

                  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.
<PAGE>

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 ELECTRIC AND GAS COMPANY


               By:    FRED F. SAUNDERS
                      ---------------- 
               Name:  Fred F. Saunders 

               Title: Assistant Treasurer

               FIRST UNION NATIONAL BANK, as Trustee


               By:    F. GALLAGHER 
                      ---------------
               Name:  Frank Gallagher

               Title: Vice President



<PAGE>

                                    Exhibit A

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY

           8.125% Deferrable Interest Subordinated Debenture, Series B
No. 1

                  Public  Service  Electric  and  Gas  Company,   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 PSE&G  Capital  Trust II or  registered  assigns,  the  principal  sum of
$97,938,150  on February 7, 2046, and to pay interest on said principal sum from
February  7, 1997 or from the most  recent  Interest  Payment  Date (as  defined
below)  to which  interest  has been paid or duly  provided  for,  quarterly  in
arrears on March 31, June 30,  September 30 and December 31 commencing March 31,
1997 (each,  an "Interest  Payment  Date") at the rate of 8.125% per annum 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
computed on the basis of a 360-day year of twelve  30-day  months.  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  in the  Indenture,  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 calendar quarter, provided that
if all of the  Series B  Debentures  (as  defined  below) are then held by PSE&G
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  immediately  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 calendar  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 any 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,  New Jersey, 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  $97,938,150  issued under and  pursuant to an Indenture  dated as of June 1,
1996 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  February  1,  1997  between  the  Company  and the  Trustee  (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  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 8.125%  Cumulative  Quarterly Income
Preferred Securities, Series B (the "Preferred Securities"). By the terms of the
Indenture,  Debentures are issuable in series which may vary as to amount,  date

<PAGE>

of  maturity,  rate  of  interest  and in  other  respects  as in the  Indenture
provided.  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.

                  At the  option of the  Company,  the Series B  Debentures  are
redeemable  prior to maturity (i) at any time on or after  February 7, 2002,  in
whole or in part, and (ii) if a Special Event shall occur and be continuing,  in
whole (but not in part),  in each case at 100% of the principal  amount  thereof
plus  accrued  interest to the  Redemption  Date.  A "Special  Event" shall mean
either a "Tax Event" or an  "Investment  Company  Event." "Tax Event" shall mean
that the Company shall have received an opinion of counsel (which may be regular
counsel to the Company or an  Affiliate,  but not an employee  thereof and which
must be acceptable  to the Property  Trustee of the Trust)  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
interpretation  or  pronouncement  is announced on or after the date of original
issuance of Preferred Securities,  there is more than an insubstantial risk that
(i) the Trust is subject to United  States  Federal  income tax with  respect to
interest received on the Debentures, (ii) interest payable by the Company to the
Trust on the  Series B  Debentures  will not be  deductible  for  United  States
Federal  income  tax  purposes  or (iii) the Trust is  subject to more than a de
minimis  amount  of other  taxes,  duties,  assessments  or  other  governmental
charges. "Investment Company Event" shall mean 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 Preferred 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.
<PAGE>
                  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. Subject to
certain  exceptions  in the  Indenture,  without  the  consent of any  Debenture
Holder,  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 Debenture
Holder. Amendments bind all Holders and subsequent Holders.

                  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 no Event of  Default  with  respect to the Series B
Debentures has 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  for the  Series  B  Debentures,
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  Extension  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 Extension Period and upon the payment of all amounts
then due, the Company may elect to begin a new Extension Period,  subject to the
foregoing restrictions.
<PAGE>
                  Series B  Debentures  are  issuable  only in  registered  form
without coupons in denominations of $25 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.

                  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 any  principal of
or 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 its  duly  authorized  officer  and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.

                            PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                            By:    FRED F. SAUNDERS
                                   ----------------
[SEAL]                      Name:  Fred F. Saunders

                            Title: Assistant Treasurer

Attest: JOHN A. ANDERSON, JR.
-----------------------------
[Assistant] Secretary



<PAGE>


                     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:       F. GALLAGHER
          ---------------
Name:     Frank Gallagher


Authorized Signatory

Dated: February 7, 1997



<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:___________________