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                                  FORM 10-Q

                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION 
                          Washington, D. C.  20549 

/X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1995

                     Commission file number 1-9120

              Public Service Enterprise Group Incorporated
           ------------------------------------------------------        
           (Exact name of registrant as specified in its charter)

          New Jersey                                       22-2625848 
-------------------------------                        -------------------
(State or other jurisdiction of                        (I.R.S. Employer 
incorporation or organization)                         Identification No.) 

80 Park Plaza, P. O. Box 1171, Newark, New Jersey              07101-1171
-------------------------------------------------             ------------
   (Address of principal executive offices)                    (Zip Code)
 
Registrant's telephone number, including area code: 201 430-7000 
                                                    ------------
                   Commission file number 1-973

               Public Service Electric and Gas Company 
       ------------------------------------------------------
       (Exact name of registrant as specified in its charter)

          New Jersey                                        22-1212800 
-------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer 
incorporation or organization)                         Identification No.) 
 
80 Park Plaza, P. O. Box 570, Newark, New Jersey               07101-0570
------------------------------------------------              ------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: 201 430-7000 
                                                    ------------
     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.  
                                              Yes  x        No     
                                                  ----        ----
The number of shares outstanding of Public Service Enterprise Group
Incorporated's sole class of common stock, as of the latest practicable
date, was as follows: 
             Class                        Outstanding at October 31, 1995
             -----                        -------------------------------
   Common Stock, without par value                  244,697,930
 
     As of October 31, 1995, Public Service Electric and Gas Company had
issued and outstanding 132,450,344 shares of Common Stock, without nominal
or par value, all of which were privately held, beneficially and of record
by Public Service Enterprise Group Incorporated. 
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                           TABLE OF CONTENTS
                           -----------------
                                                                     Page 
                                                                     ----
PART I.  FINANCIAL INFORMATION 

  Item 1.  Financial Statements

   Public Service Enterprise Group Incorporated (Enterprise):

     Consolidated Statements of Income for the Three, Nine and 
     Twelve Months Ended September 30, 1995 and 1994 ...............  1

     Consolidated Balance Sheets as of September 30, 1995, 1994 
     and December 31, 1994 .........................................  2

     Consolidated Statements of Cash Flows for the Nine and 
     Twelve Months Ended September 30, 1995 and 1994 ...............  4

     Consolidated Statements of Retained Earnings for the Three, 
     Nine and Twelve Months Ended September 30, 1995 and 1994........ 5

   Public Service Electric and Gas Company (PSE&G):

     Consolidated Statements of Income for the Three, Nine and 
     Twelve Months Ended September 30, 1995 and 1994 ...............  6

     Consolidated Balance Sheets as of September 30, 1995, 
     1994 and December 31, 1994 ....................................  7

     Consolidated Statements of Cash Flows for the Nine and 
     Twelve Months Ended September 30, 1995 and 1994 ...............  9

     Consolidated Statements of Retained Earnings for the Three, 
     Nine and Twelve Months Ended September 30, 1995 and 1994 ...... 10

  Notes to Consolidated Financial Statements - Enterprise........... 11

  Notes to Consolidated Financial Statements - PSE&G................ 19


  Item 2.  Management's Discussion and Analysis of Financial 
           Condition and Results of Operations
                Enterprise ......................................... 20
                PSE&G .............................................. 30

                                      i
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                           TABLE OF CONTENTS
                           -----------------

                                                                     Page 
                                                                     ----
PART II.  OTHER INFORMATION 

  Item 5.  Other Information ........................................ 31

  Item 6.  Exhibits and Reports on Form 8-K ......................... 37

  Signatures - Public Service Enterprise Group Incorporated ......... 38

  Signatures - Public Service Electric and Gas Company .............. 38





























                                      ii
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                                GLOSSARY OF TERMS

 The following is a glossary of frequently used abbreviations or acronyms
that are found in this report:


<TABLE>
<CAPTION>
           TERM                             MEANING
 -----------------------  ----------------------------------------------
 <S>                      <C>
 AFDC...................    Allowance for Funds used During Construction
 BPU....................    New Jersey Board of Public Utilities
 Capital................    PSEG Capital Corporation
 CEA....................    Community Energy Alternatives Incorporated
 DSM....................    Demand Side Management
 DSM Plan...............    DSM Incentive Resource Plan
 EBIT...................    Earnings before interest and taxes
 EDC....................    Energy Development Corporation
 EDHI...................    Enterprise Diversified Holdings Incorporated
 EGDC...................    Enterprise Group Development Corporation
 Enterprise.............    Public Service Enterprise Group Incorporated
 EPA....................    United States Environmental Protection Agency
 EPACT..................    Energy Policy Act
 FERC...................    Federal Energy Regulatory Commission
 Fuelco.................    PSE&G Fuel Corporation
 Funding................    Enterprise Capital Funding Corporation
 IRP....................    Integrated Electric Resource Plan
 Hope Creek.............    Hope Creek Nuclear Generating Station
 KWH....................    Kilowatthours
 LEAC...................    Electric Levelized Energy Adjustment Clause
 LGAC...................    Levelized Gas Adjustment Charge
 LGIC................... Levelized Gas Incentive Clause
 MD&A...................    Management's Discussion and Analysis of
                            Financial Condition and Results of Operations
 MIPS...................    Monthly Income Preferred Securities
 Mortgage...............    First and Refunding Mortgage of PSE&G
 MTNs...................    Medium-Term Notes
 MUNI................... Municipal Utility
 MW.....................    Megawatts
 MWH....................    Megawatthours

</TABLE>



                                      iii   
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
           TERM                             MEANING
-----------------------  ----------------------------------------------
 <S>                      <C>

 NEIL..................     Nuclear Electric Insurance Limited
 NJDEP.................     New Jersey Department of Environmental
                            Protection
 NJGRT.................     New Jersey Gross Receipts and Franchise Tax
 NOPR...................    Notice of Proposed Rulemaking
 NPS....................    The BPU's nuclear performance standard          
                            established for nuclear generating stations
                            owned by New Jersey electric utilities
 NRC....................    Nuclear Regulatory Commission
 Partnership............    Public Service Electric and Gas Capital, L.P.
 Peach Bottom...........    Peach Bottom Atomic Power Station, Units 2 
                         and 3
 PECO...................    PECO Energy, Inc.
 Price Anderson.........    Price-Anderson liability provisions of the
                            Atomic Energy Act of 1954, as amended
 PSE&G..................    Public Service Electric and Gas Company
 PSCRC..................    Public Service Conservation Resources
                            Corporation
 PSRC...................    Public Service Resources Corporation
 RAC....................    Remediation Adjustment Clause
 Remediation Program....    PSE&G Manufactured Gas Plant Remediation
                            Program
 Salem..................    Salem Nuclear Generating Station, Units 1 and 2
 SEC....................    Securities and Exchange Commission
 Ventures...............    Enterprise Ventures and Service Corporation
</TABLE>










                                       iv
<PAGE>
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<TABLE>

                                PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

     The financial statements included herein as of September 30, 1995 and 1994 and for the periods then
ended are unaudited but, in the opinion of Enterprise's management, reflect all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation.

                                                     CONSOLIDATED STATEMENTS OF INCOME 
                                                           (Thousands of Dollars)
<CAPTION>
                                  Three Months Ended         Nine Months Ended         Twelve Months Ended
                                     September 30,             September 30,              September 30,
                               ------------------------  ------------------------  ------------------------
                                  1995         1994          1995         1994         1995         1994
                               -----------  -----------  -----------  -----------  -----------  -----------
<S>                            <C>          <C>          <C>          <C>          <C>          <C>
OPERATING REVENUES                     
 Electric......................$ 1,179,373  $ 1,075,694  $ 3,090,656  $ 2,868,384  $ 3,961,985  $ 3,701,807
 Gas...........................    201,631      208,481    1,105,299    1,289,670    1,594,157    1,803,859
 Nonutility Activities.........    111,126       92,024      301,228      293,190      412,240      409,583
                               -----------  -----------  -----------  -----------  -----------  -----------
     Total Operating Revenues..  1,492,130    1,376,199    4,497,183    4,451,244    5,968,382    5,915,249
                               -----------  -----------  -----------  -----------  -----------  -----------
OPERATING EXPENSES
 Operation
   Fuel for Electric 
     Generation and 
     Interchanged Power........    264,599      189,384      682,923      514,835      863,851      674,594
    Gas Purchased and Materials 
      for Gas Produced.........    115,336      124,723      625,540      749,265      900,231    1,039,706
    Other......................    283,742      264,883      803,313      772,395    1,149,441    1,049,247
 Maintenance...................     76,205       70,647      208,288      222,559      293,809      324,810
 Depreciation and Amortization     168,360      160,674      501,902      474,845      661,085      627,609
 Property Impairments..........      --           --           --           --           --          77,637
 Taxes:
    Federal Income Taxes.......    111,075       96,783      273,506      285,081      300,976      316,685
    New Jersey Gross Receipts 
      Taxes....................    139,363      136,436      455,426      453,139      585,454      605,992
    Other......................     21,922       20,749       67,182       65,532       83,932       82,477
                               -----------  -----------  -----------  -----------  -----------  -----------
     Total Operating Expenses..  1,180,602    1,064,279    3,618,080    3,537,651    4,838,779    4,798,757
                               -----------  -----------  -----------  -----------  -----------  -----------
OPERATING INCOME...............    311,528      311,920      879,103      913,593    1,129,603    1,116,492
                               -----------  -----------  -----------  -----------  -----------  -----------
OTHER INCOME 
  Allowance for Funds Used 
    During Construction - 
    Equity.....................      1,329        1,824        4,598        5,486       11,901       10,256
  Miscellaneous - net..........      3,047        2,174        6,603        4,677        8,356       (1,972)
                               -----------  -----------  -----------  -----------  -----------  -----------
       Total Other Income......      4,376        3,998       11,201       10,163       20,257        8,284 
                               -----------  -----------  -----------  -----------  -----------  -----------
INCOME BEFORE INTEREST CHARGES 
  AND DIVIDENDS ON PREFERRED 
  SECURITIES...................    315,904      315,918      890,304      923,756    1,149,860    1,124,776
                               -----------  -----------  -----------  -----------  -----------  -----------
INTEREST CHARGES 
  Long-Term Debt...............    106,196      115,919      328,993      343,978      444,173      458,691
  Short-Term Debt..............     10,814        7,067       23,233       16,987       30,208       20,653
  Other........................      8,825        3,275       22,658        7,750       27,713       13,292
                               -----------  -----------  -----------  -----------  -----------  -----------
       Total Interest Charges..    125,835      126,261      374,884      368,715      502,094      492,636
Allowance for Funds Used During 
 Construction - Debt and 
 Capitalized Interest..........     (8,946)      (7,665)     (31,248)     (22,717)     (42,324)     (28,888)
                               -----------  -----------  -----------  -----------  -----------  -----------
Net Interest Charges...........    116,889      118,596      343,636      345,998      459,770      463,748
                               -----------  -----------  -----------  -----------  -----------  -----------
Preferred Securities Dividend 
  Requirements.................     12,233       10,144       36,627       30,568       48,206       40,336
                               -----------  -----------  -----------  -----------  -----------  -----------
NET INCOME.....................$   186,782  $   187,178  $   510,041  $   547,190  $   641,884  $   620,692
                               ===========  ===========  ===========  ===========  ===========  ===========
SHARES OF COMMON STOCK 
OUTSTANDING  
 End of Period ................244,697,930  244,697,930  244,697,930  244,697,930  244,697,930  244,697,930
 Average for Period ...........244,697,930  244,697,930  244,697,930  244,394,250  244,697,930  244,004,619

EARNINGS PER AVERAGE SHARE OF 
COMMON STOCK...................       $.76         $.76        $2.08        $2.24       $2.62         $2.54
                               ===========  ===========  ===========  ===========  ===========  ===========
DIVIDENDS PAID PER SHARE OF 
 COMMON STOCK .................       $.54         $.54        $1.62        $1.62       $2.16         $2.16
                               ===========  ===========  ===========  ===========  ==========   ===========
<FN>
     See Notes to Consolidated Financial Statements. 
</TABLE>
<PAGE>
<PAGE>

<TABLE>
                             PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                                       CONSOLIDATED BALANCE SHEETS
                                         (Thousands of Dollars)
<CAPTION>
                                                          September 30,     September 30,     December 31,
ASSETS                                                         1995              1994            1994
------                                                     ------------     ------------     ------------
<S>                                                        <C>              <C>              <C>
UTILITY PLANT - Original cost
  Electric ..............................................  $ 12,983,167     $ 12,218,603     $ 12,345,919
  Gas ...................................................     2,413,673        2,266,750        2,318,233
  Common ................................................       531,024          530,143          545,131
                                                           ------------     ------------     ------------
       Total ............................................    15,927,864       15,015,496       15,209,283
  Less: accumulated depreciation and amortization........     5,324,903        5,059,839        5,147,105
                                                           ------------     ------------     ------------
       Net ..............................................    10,602,961        9,955,657       10,062,178
  Nuclear Fuel in Service, net of accumulated 
   amortization - $345,412, $297,426 and 
   $302,906, respectively ...............................       162,776          199,886          205,273
                                                           ------------     ------------     ------------
       Net Utility Plant in Service .....................    10,765,737       10,155,543       10,267,451
  Construction Work in Progress, including Nuclear 
   Fuel in Process - $122,368, $56,983 and 
   $65,429, respectively ................................       367,567          752,260          806,934
  Plant Held for Future Use .............................        23,965           20,532           23,860
                                                           ------------     ------------     ------------
       Net Utility Plant ................................    11,157,269       10,928,335       11,098,245
                                                           ------------     ------------     ------------
INVESTMENTS AND OTHER PROPERTY
  Long-Term Investments, net of amortization -$5,187, 
     $2,068 and $2,365, and net valuation allowances - 
     $17,105, $15,892 and $17,104 respectively ..........     1,772,205        1,664,193        1,625,952
  Oil and Gas Property, Plant and Equipment, net of 
    accumulated depreciation and amortization - 
    $780,054, $758,196 and $748,245, respectively .......       588,237          560,737          577,913
  Real Estate Property and Equipment, net of accumulated 
    depreciation - $4,549, $13,375 and $14,242, and 
    net of valuation allowance - $8,227, $22,514 and 
    $23,264, respectively ...............................        75,978          105,468          115,210
  Other Property, net of accumulated depreciation
    and amortization - $6,128, $4,442 
    and $4,653, respectively ............................        28,202           35,859           36,063
  Nuclear Decommissioning and Other Special Funds .......       263,974          223,588          233,022
  Other Assets - net ....................................        61,196           79,063           85,478
                                                           ------------     ------------     ------------
       Total Investments and Other Property .............     2,789,792        2,668,908        2,673,638
                                                           ------------     ------------     ------------
CURRENT ASSETS 
  Cash and Cash Equivalents .............................        66,808           76,304           67,866
  Accounts Receivable:
    Customer Accounts Receivable ........................       405,555          380,539          434,207
    Other Accounts Receivable ...........................       204,560          172,464          211,779
    Less:  Allowance for Doubtful Accounts ..............        38,578           27,075           40,915
  Unbilled Revenues .....................................       127,590          104,522          204,056
  Fuel, at average cost .................................       311,776          302,676          268,927
  Materials and Supplies, net of inventory valuation
    reserves - $18,200,$8,525 and $18,200, respectively..       144,990          163,824          148,285
  Prepaid Gross Receipts Taxes ..........................       165,342          131,985            --
  Deferred Income Taxes .................................        27,489           15,387           25,311
  Miscellaneous Current Assets ..........................        49,018           56,502           37,356
                                                           ------------     ------------     ------------
       Total Current Assets .............................     1,464,550        1,377,128        1,356,872
                                                           ------------     ------------     ------------
DEFERRED DEBITS 
  Property Abandonments - net ...........................        74,742           92,667           88,269 
  Oil and Gas Property Write-Down .......................        37,367           42,521           41,232
  Unamortized Debt Expense ..............................       126,275          129,870          134,599
  Deferred OPEB Costs ...................................       174,706          126,658          116,476
  Unrecovered Environmental Costs .......................       132,634          132,169          138,435
  Under Recovered Electric Energy and Gas Costs - net ...       173,270          211,783          172,563
  Unrecovered Plant and Regulatory Study Costs ..........        35,285           36,986           37,128
  Deferred Decontamination and Decommissioning Costs ....        49,742           53,016           53,016
  Unrecovered SFAS 109 Deferred Income Taxes ............       778,642          786,217          791,393
  Other .................................................         9,313           51,974           15,574
                                                           ------------     ------------     ------------
       Total Deferred Debits ............................     1,591,976        1,663,861        1,588,685
                                                           ------------     ------------     ------------
       Total ............................................  $ 17,003,587     $ 16,638,232     $ 16,717,440
                                                           ============     ============     ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
                                    PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
   
                                             CONSOLIDATED BALANCE SHEETS
                                                (Thousands of Dollars)

<CAPTION>
                                                      September 30,    September 30,      December 31,
CAPITALIZATION AND LIABILITIES                            1995             1994              1994
------------------------------                        ------------     ------------     --------------
<S>                                                   <C>              <C>              <C>
CAPITALIZATION 
  Common Equity 
    Common Stock .................................... $  3,801,157     $  3,801,157      $ 3,801,157
    Retained Earnings ...............................    1,623,640        1,511,054        1,510,010
                                                      ------------     ------------      ------------
       Total Common Equity ..........................    5,424,797        5,312,211        5,311,167
Subsidiaries' Securities and Obligations
  Preferred Securities
    Preferred Stock Without Mandatory Redemption.....      384,994          459,994          384,994
    Preferred Stock With Mandatory Redemption .......      150,000          150,000          150,000
    Monthly Income Preferred Securities .............      210,000            --             150,000
  Long-Term Debt ....................................    5,234,516        5,277,722        5,180,657
                                                      ------------     ------------     ------------
       Total Capitalization .........................   11,404,307       11,199,927       11,176,818
                                                      ------------     ------------     ------------
OTHER LONG-TERM LIABILITIES
  Decontamination, Decommissioning, and Low Level
    Radwaste Costs ..................................       55,630           54,308           56,149
  Environmental Costs (note 2) ......................      103,412          105,544          105,684
  Capital Lease Obligations .........................       53,283           52,680           53,770

                                                      ------------     ------------     ------------
       Total Other Long-Term Liabilities.............      212,325          212,532          215,603
                                                      ------------     ------------     ------------
CURRENT LIABILITIES 
  Long-Term Debt due within one year ................      144,639          477,773          499,738
  Commercial Paper and Loans ........................      743,702          562,665          491,586
  Book Overdrafts ...................................       61,655           62,787           86,576
  Accounts Payable ..................................      404,784          332,356          433,471
  Other Taxes Accrued ...............................       63,829           49,842           44,149
  Interest Accrued ..................................      119,736          126,682          107,962
  Estimated Liability for Vacation Pay ..............       32,235           25,062           27,080
  Customer Deposits .................................       32,810           34,682           33,698
  Liability for Injuries and Damages ................       36,090           27,677           29,814
  Miscellaneous Environmental Liabilities ...........       16,652            4,715           15,365
  Other .............................................       65,977           52,874           87,480
                                                      ------------     ------------     ------------
       Total Current Liabilities ....................    1,722,109        1,757,115        1,856,919
                                                      ------------     ------------     ------------
DEFERRED CREDITS
  Accumulated Deferred Income Taxes .................    3,022,548        2,879,733        2,905,390
  Accumulated Deferred Investment Tax Credits .......      397,429          417,627          412,466
  Deferred OPEB Costs ...............................      174,706          126,658          116,476
  Other .............................................       70,163           44,640           33,768
                                                      ------------     ------------     ------------
       Total Deferred Credits .......................    3,664,846        3,468,658        3,468,100
                                                      ------------     ------------     ------------
COMMITMENTS AND CONTINGENCIES (note 2)

       Total ........................................ $ 17,003,587     $ 16,638,232     $ 16,717,440
                                                      ============     ============     ============
</TABLE>

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<TABLE>
                                    PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (Thousands of Dollars)

<CAPTION>
                                                 Nine Months Ended           Twelve Months Ended
                                                   September 30,                 September 30,
                                            --------------------------    --------------------------
                                                1995          1994            1995           1994
                                            ------------   -----------    -----------    ----------- 
<S>                                         <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                  
  Net Income ...............................$    510,041   $   547,190    $   641,884    $   620,692
Adjustments to reconcile net income to 
  net cash flows from operating activities:
  Depreciation and Amortization ............     501,902       474,845        661,085        627,609
  Amortization of Nuclear Fuel .............      62,878        71,892         86,159         93,960
 (Deferral) Recovery of Electric Energy 
    and Gas Costs - net ....................        (707)     (149,749)        38,513       (211,195)
  Loss from Property Impairments ...........        --           --             --            77,637 
  Amortization of Discounts on Property
    Abandonments and Disallowance...........      (4,470)       (5,140)        (6,073)        (6,962)  
  Unrealized Gains on Investments - net.....     (32,117)      (11,488)       (46,958)       (12,893) 
  Provision for Deferred Income Taxes - net.     102,281       146,587         94,613        171,382     
  Investment Tax Credits - net .............     (15,037)      (15,086)       (20,198)       (19,949)
  Allowance for Funds Used During 
    Construction - Debt and Equity and 
    Capitalized Interest....................     (35,846)      (28,203)       (54,225)       (39,144) 
  Proceeds from Leasing Activities - net....       9,859         9,364         28,177         (5,779)  
  Changes in certain current assets 
  and liabilities:
    Net decrease (increase) in Accounts 
      Receivable and Unbilled Revenues......     110,000       263,117        (68,677)       119,778
    Net (increase) decrease in Inventory -
      Fuel and Materials and Supplies.......     (39,554)       (8,119)         9,734         27,238  
    Net (decrease) increase in
      Accounts Payable......................     (28,687)     (186,905)        72,428        (45,512)
    Net change in Prepaid/Accrued Taxes.....    (145,662)     (385,110)       (19,370)      (245,763) 
    Net change in Other Current Assets    
      and liabilities.......................     (11,738)       (2,181)        27,191        (16,915) 
  Other ....................................      64,115        38,485         57,206         21,370
                                             ------------   -----------    -----------   ------------
      Net cash provided by operating 
      activities ...........................   1,047,258       759,499      1,501,489      1,155,554
                                             ------------   -----------    -----------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to Utility Plant, excluding AFDC.   (475,088)     (550,717)      (773,545)      (879,563)
  Additions to Oil and Gas Property, Plant 
    and Equipment, excluding 
    Capitalized Interest ...................     (61,613)     (117,632)       (93,504)      (144,131)
  Net (increase) decrease in Long-Term 
    Investments and Real Estate ............     (49,875)       (8,807)        17,348        118,625
  Increase in Decommissioning and Other 
    Special Funds, excluding interest ......     (22,173)      (28,006)       (29,561)       (28,016)
  Cost of Plant Removal - net ..............     (21,528)      (21,866)       (33,624)       (51,881)
  Other ....................................      (4,925)        3,778         16,511         (7,422)
                                             ------------   -----------    -----------   ------------
      Net cash used in investing 
      activities ...........................    (635,202)     (723,250)      (896,375)      (992,388)
                                             ------------   -----------    -----------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease)in Short-Term Debt.     252,116       (14,971)       181,037         40,338
  Decrease in Book Overdrafts ..............     (24,921)         (205)       (1,132)        (20,396)
  Issuance of Long-Term Debt ...............     100,000       752,245        197,555      1,039,445 
  Redemption of Long-Term Debt .............    (401,240)     (421,135)      (573,895)    (1,040,000)
  Long-Term Debt Issuance and
     Redemption Costs .......................     (2,658)       (8,592)       (23,877)       (27,094)
  Issuance of Preferred Stock ..............        --          75,000           --           75,000
  Redemption of Preferred Stock ............        --         (45,000)       (75,000)       (45,000)
  Issuance of Monthly Income 
    Preferred Securities ...................      60,000          --          210,000           --
  Issuance of Common Stock .................        --          28,495          --            61,154  
  Cash Dividends Paid on Common Stock ......    (396,411)     (395,934)      (528,548)      (527,110)
  Other ....................................      --            (1,220)          (750)        (6,715) 
                                             ------------   -----------    -----------    -----------
      Net cash used in financing activities.    (413,114)      (31,317)      (614,610)      (450,378)
                                             ------------   -----------    -----------    -----------
Net (decrease) increase in Cash and 
  Cash Equivalents .........................      (1,058)        4,932         (9,496)      (287,212)
Cash and Cash Equivalents at Beginning 
  of Period ................................      67,866        71,372         76,304        363,516  
                                             ------------   -----------    -----------    -----------
Cash and Cash Equivalents at 
  End of Period.............................$     66,808   $    76,304    $    66,808    $    76,304 
                                             ============   ===========    ===========    ===========
Income Taxes Paid ..........................$    154,228   $   126,369    $   182,963    $   156,873
Interest Paid ..............................$    323,701   $   306,454    $   450,120    $   433,859 
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>

<TABLE>
                                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 

                                 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS 
                                            (Thousands of Dollars)

<CAPTION>
                                 Three Months Ended         Nine Months Ended         Twelve Months Ended
                                    September 30,             September 30,              September 30,
                              ------------------------  ------------------------  ------------------------
                                 1995         1994          1995         1994         1995         1994
                              -----------  -----------  -----------  -----------  -----------  -----------
<S>                           <C>          <C>          <C>          <C>          <C>          <C>

Balance at Beginning of 
  Period......................$ 1,568,995  $ 1,456,025  $ 1,510,010  $ 1,361,018  $ 1,511,054  $ 1,418,805
Add:
  Net Income .................    186,782      187,178      510,041      547,190      641,884      620,692
                              -----------  -----------  -----------  -----------  -----------  -----------
     Total ...................  1,755,777    1,643,203    2,020,051    1,908,208    2,152,938    2,039,497
                              -----------  -----------  -----------  -----------  -----------  -----------

Deduct:
  Cash Dividends on 
    Common Stock .............    132,137      132,137      396,411      395,934      528,548      527,110
  Capital Stock Expenses .....      --              12        --           1,220          750        1,333
                              -----------  -----------  -----------  -----------  -----------  -----------
     Total Deductions ........    132,137      132,149      396,411      397,154      529,298      528,443
                              -----------  -----------  -----------  -----------  -----------  -----------
Balance at End of Period .....$ 1,623,640  $ 1,511,054  $ 1,623,640  $ 1,511,054  $ 1,623,640  $ 1,511,054
                              ===========  ===========  ===========  ===========  ===========  ===========
<FN>

See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>

<TABLE>
                                          PUBLIC SERVICE ELECTRIC AND GAS COMPANY

     The financial statements included herein as of September 30, 1995 and 1994 and for the periods then
ended  are unaudited but, in the opinion of PSE&G's management, reflect all adjustments, consisting only of
normal recurring accruals, necessary for a fair representation.


                                             CONSOLIDATED STATEMENTS OF INCOME
                                                    (Thousands of Dollars)

<CAPTION>
                                Three Months Ended         Nine Months Ended         Twelve Months Ended
                                  September 30,              September 30,               September 30,
                             ------------------------  ------------------------  ------------------------
                                1995         1994          1995         1994         1995         1994
                             -----------  -----------  -----------  -----------  -----------  -----------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>

OPERATING REVENUES
  Electric ..................$ 1,179,373  $ 1,075,694  $ 3,090,656  $ 2,868,384  $ 3,961,985  $ 3,701,807
  Gas .......................    201,631      208,481    1,105,299    1,289,670    1,594,157    1,803,859
                             -----------  -----------  -----------  -----------  -----------  -----------
       Total Operating 
         Revenues ...........  1,381,004    1,284,175    4,195,955    4,158,054    5,556,142    5,505,666
                             -----------  -----------  -----------  -----------  -----------  -----------
OPERATING EXPENSES
  Operation
    Fuel for Electric 
      Generation and Net 
      Interchanged Power ....    264,599      189,384      682,923      514,835      863,851      674,594
    Gas Purchased and 
      Materials for Gas 
      Produced ..............    115,336      128,719      625,540      761,923      900,318    1,057,794
    Other ...................    232,051      222,629      678,652      656,164      982,347      896,129
  Maintenance ...............     76,205       70,647      208,288      222,559      293,809      324,810
  Depreciation and 
    Amortization ............    146,019      138,616      437,887      410,666      578,593      543,236
  Taxes:
    Federal Income Taxes ....    107,677       96,385      263,537      273,693      284,373      323,373
    New Jersey Gross Receipts 
      Taxes .................    139,363      136,436      455,426      453,139      585,454      605,992
    Other ...................     19,229       18,577       60,139       59,055       77,184       72,096 
                             -----------  -----------  -----------  -----------  -----------  -----------

       Total Operating 
         Expenses ...........  1,100,479    1,001,393    3,412,392    3,352,034    4,565,929    4,498,024 
                             -----------  -----------  -----------  -----------  -----------  -----------
OPERATING INCOME ............    280,525      282,782      783,563      806,020      990,213    1,007,642 
                             -----------  -----------  -----------  -----------  -----------  -----------
OTHER INCOME 
  Allowance for Funds Used 
    During Construction - 
    Equity ..................      1,329        1,824        4,598        5,486       11,901       10,256
  Miscellaneous - net .......      2,946        2,104        6,296        4,600        7,929       (2,117)
                             -----------  -----------  -----------  -----------  -----------  -----------
       Total Other Income ...      4,275        3,928       10,894       10,086       19,830        8,139 
                             -----------  -----------  -----------  -----------  -----------  -----------
INCOME BEFORE INTEREST 
  CHARGES AND DIVIDENDS ON 
  PREFERRED SECURITIES.......    284,800      286,710      794,457      816,106    1,010,043    1,015,781 
                             -----------  -----------  -----------  -----------  -----------  -----------
INTEREST CHARGES 
  Long-Term Debt ............     87,844       92,997      270,946      273,838      364,002      362,448
  Short-Term Debt ...........      7,600        5,629       14,383       12,842       19,716       15,187
  Other .....................      8,652        3,173       22,195        5,938       27,113       11,355
                             -----------  -----------  -----------  -----------  -----------  -----------
       Total Interest Charges    104,096      101,799      307,524      292,618      410,831      388,990 

Allowance for Funds Used 
  During Construction - Debt.     (7,725)      (5,467)     (26,724)     (16,442)     (35,601)     (21,179)
                             -----------  -----------  -----------  -----------  -----------  -----------
Net Interest Charges ........     96,371       96,332      280,800      276,176      375,230      367,811 
                             -----------  -----------  -----------  -----------  -----------  -----------
Monthly Income Preferred
 Securities Dividend 
  Requirements ..............      3,551      --            10,583       --           12,263           --
                             -----------  -----------  -----------  -----------  -----------  -----------
NET INCOME ..................    184,878      190,378      503,074      539,930      622,550      647,970
                             -----------  -----------  -----------  -----------  -----------  -----------
Preferred Stock Dividend 
  Requirements ..............      8,682       10,144       26,044       30,568       35,943       40,336 
                             -----------  -----------  -----------  -----------  -----------  -----------
EARNINGS AVAILABLE TO PUBLIC 
  SERVICE ENTERPRISE GROUP 
  INCORPORATED ..............$   176,196  $   180,234  $   477,030  $   509,362  $   586,607  $   607,634
                             ===========  ===========  ===========  ===========  ===========  ===========

     See Notes to Consolidated Financial Statements. 
</TABLE>
<PAGE>
<PAGE>

<TABLE>
                                    PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                                             CONSOLIDATED BALANCE SHEETS
                                                (Thousands of Dollars)

<CAPTION>
                                                            September 30,     September 30,     December 31,
ASSETS                                                           1995              1994            1994  
------                                                       ------------     ------------     -------------
<S>                                                           <C>              <C>              <C> 
UTILITY PLANT - Original cost
  Electric .................................................  $ 12,983,167     $ 12,218,603     $ 12,345,919
  Gas ......................................................     2,413,673        2,266,750        2,318,233
  Common ...................................................       531,024          530,143          545,131
                                                              ------------     ------------     ------------
       Total ...............................................    15,927,864       15,015,496       15,209,283
  Less: accumulated depreciation and amortization...........     5,324,903        5,059,839        5,147,105
                                                              ------------     ------------     ------------
       Net .................................................    10,602,961        9,955,657       10,062,178
  Nuclear Fuel in Service, net of accumulated 
   amortization - $345,412, $297,426 and 
   $302,906, respectively ..................................       162,776          199,886          205,273
                                                              ------------     ------------     ------------
       Net Utility Plant in Service ........................    10,765,737       10,155,543       10,267,451
  Construction Work in Progress, including Nuclear 
   Fuel in Process - $122,368, $56,983 and 
   $65,429, respectively ...................................       367,567          752,260          806,934
  Plant Held for Future Use ................................        23,965           20,532           23,860
                                                              ------------     ------------     ------------
       Net Utility Plant ...................................    11,157,269       10,928,335       11,098,245
                                                              ------------     ------------     ------------
INVESTMENTS AND OTHER PROPERTY
Other Property, net of accumulated depreciation and 
  amortization - $1,882, $1,126 and $1,127, respectively....        24,970           32,865           32,879
Long-Term Investments, net of amortization - $4,585,
  $2,068 and $2,365, respectively ..........................        98,260          150,866           65,886
Nuclear Decommissioning and Other Special Funds ............       263,974          223,588          233,022
                                                              ------------     ------------     ------------
Total Investments and Other Property .......................       387,204          407,319          331,787
                                                              ------------     ------------     ------------
CURRENT ASSETS 
  Cash and Cash Equivalents ................................        30,247           32,139           27,498
  Accounts Receivable:
    Customer Accounts Receivable ...........................       405,555          380,539          434,207
    Other Accounts Receivable ..............................       125,761           92,582          151,684
    Less:  Allowance for Doubtful Accounts .................        38,578           27,075           40,915
  Accounts Receivable - Associated Companies ...............           151            --               --
  Unbilled Revenues ........................................       127,590          104,522          204,056
  Fuel, at average cost ....................................       311,776          302,676          268,927
  Materials and supplies, net of inventory valuation  
    reserves - $18,200, $8,525 and $18,200, respectively ...       143,689          162,252          146,763
  Prepaid Gross Receipts Taxes .............................       165,342          131,985            --
  Deferred Income Taxes ....................................        27,489           15,387           25,311
  Miscellaneous Current Assets .............................        45,109           49,459           30,407
                                                              ------------     ------------     ------------
       Total Current Assets ................................     1,344,131        1,244,466        1,247,938
                                                              ------------     ------------     ------------
DEFERRED DEBITS 
  Property Abandonments - net ..............................        74,742           92,667           88,269
  Oil and Gas Property Write-Down ..........................        37,367           42,521           41,232
  Deferred OPEB Costs ......................................       174,706          126,658          116,476
  Under Recovered Electric Energy and Gas Costs - net ......       173,270          211,783          172,563
  Unamortized Debt Expense .................................       124,308          127,157          132,342
  Unrecovered Environmental Costs (note 2).. ...............       132,634          132,169          138,435
  Unrecovered Plant and Regulatory Study Costs .............        35,285           36,986           37,128
  Deferred Decontamination and Decommissioning Costs........        49,742           53,016           53,016
  Unrecovered SFAS 109 Deferred Income Taxes ...............       778,642          786,217          791,393
  Other ....................................................         9,313           51,974           15,574
                                                              ------------     ------------     ------------
       Total Deferred Debits ...............................     1,590,009        1,661,148        1,586,428
                                                              ------------     ------------     ------------
      Total ................................................  $ 14,478,613     $ 14,241,268     $ 14,264,398
                                                              ============     ============     ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE> 


<TABLE>
                                    PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                                             CONSOLIDATED BALANCE SHEETS
                                                (Thousands of Dollars)
<CAPTION>
                                                             September 30,   September 30,     December 31,
CAPITALIZATION AND LIABILITIES                                    1995            1994              1994
------------------------------                                ------------     ------------     ------------ 
<S>                                                           <C>              <C>              <C>
CAPITALIZATION  
  Common Equity 
    Common Stock ...........................................  $  2,563,003     $  2,563,003     $  2,563,003
    Contributed Capital by Enterprise ......................       534,395          534,395          534,395
    Retained Earnings ......................................     1,387,931        1,310,074        1,292,201
                                                              ------------     ------------     ------------
       Total Common Equity .................................     4,485,329        4,407,472        4,389,599

Preferred Stock without mandatory redemption ...............       384,994          459,994          384,994
Preferred Stock with mandatory redemption ..................       150,000          150,000          150,000
Monthly Income Preferred Securities of Subsidiary ..........       210,000            --             150,000
Long-Term Debt .............................................     4,585,543        4,486,371        4,486,787 
                                                              ------------     ------------     ------------
       Total Capitalization ................................     9,815,866        9,503,837        9,561,380
                                                              ------------     ------------     ------------
OTHER LONG-TERM LIABILITIES
  Decontamination, Decommissioning, and Low Level
     Radwaste Costs ........................................        55,630           54,308           56,149
  Environmental Costs (note 2)..............................       103,412          105,544          105,684
  Capital Lease Obligations ................................        53,283           52,680           53,770
                                                              ------------     ------------     ------------
       Total Other Long-Term Liabilities ...................       212,325          212,532          215,603 
                                                              ------------     ------------     ------------
CURRENT LIABILITIES 
  Long-Term Debt due within one year .......................         2,000          310,200          310,200
  Commercial Paper and Loans ...............................       633,283          562,665          401,759
  Book Overdrafts ..........................................        61,655           62,787           86,576
  Accounts Payable .........................................       320,212          300,996          370,005
  Accounts Payable - Associated Companies ..................        --                1,324           16,677
  Other Taxes Accrued ......................................        38,235           36,853           36,030
  Interest Accrued .........................................        93,709           98,972           95,721
  Estimated Liability for Vacation Pay .....................        32,235           25,062           27,080
  Customer Deposits ........................................        32,810           34,682           33,698
  Liability for Injuries and Damages .......................        36,090           27,677           29,814
  Miscellaneous Environmental Liabilities ..................        16,652            4,715           15,365
  Other ....................................................        42,136           13,605           50,778
                                                              ------------     ------------     ------------
       Total Current Liabilities ...........................     1,309,017        1,479,538        1,473,703
                                                              ------------     ------------     ------------
DEFERRED CREDITS
  Accumulated Deferred Income Taxes ........................     2,526,135        2,484,400        2,478,539
  Accumulated Deferred Investment Tax Credits ..............       375,458          394,623          389,721
  Deferred OPEB Costs ......................................       174,706          126,658          116,476
  Other ....................................................        65,106           39,680           28,976
                                                              ------------     ------------     ------------
       Total Deferred Credits ..............................     3,141,405        3,045,361        3,013,712
                                                              ------------     ------------     ------------
COMMITMENTS AND CONTINGENCIES (note 2) 

     Total .................................................  $ 14,478,613     $ 14,241,268     $ 14,264,398
                                                              ============     ============     ============

</TABLE>
<PAGE>
<PAGE>
<TABLE>
                                    PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Thousands of Dollars)
<CAPTION>
                                                Nine Months Ended           Twelve Months Ended
                                                  September 30,                 September 30,
                                           ---------------------------   ---------------------------
                                               1995           1994           1995           1994
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES: 
  Net Income ............................. $    503,074   $   539,930   $    622,550   $    647,970
  Adjustments to reconcile net income 
    to net cash flows from operating activities:
    Depreciation and Amortization ........      437,887       410,666        578,593        543,236
    Amortization of Nuclear Fuel .........       62,878        71,892         86,159         93,960
   (Deferral) Recovery of Electric 
      Energy and Gas Costs - net .........         (707)     (149,749)        38,513       (211,195)
    Amortization of Discounts on Property 
      Abandonments and Disallowance ......       (4,470)       (5,140)        (6,073)        (6,962)
    Provision for Deferred Income 
      Taxes - net ........................       60,347       119,200         49,310        169,862
    Investment Tax Credits - net .........      (14,263)      (14,306)       (19,165)       (18,908)
    Allowance for Funds Used During 
      Construction - Debt and Equity .....      (31,322)      (21,928)       (47,502)       (31,435)
    Changes in certain current assets 
        and liabilities:
      Net decrease (increase) in Accounts 
        Receivable and Unbilled Revenues .      128,553       273,355        (69,911)       130,986
      Net increase (decrease) in Inventory - 
        Fuel and Materials and Supplies...      (39,775)       (8,075)         9,463         27,167 
      Net (decrease) increase in
        Accounts Payable .................      (66,470)     (184,150)        17,892        (68,496) 
      Net change in Prepaid/Accrued Taxes.     (163,137)     (392,199)       (31,975)      (242,112)
      Net change in Other Current Assets 
        and Liabilities ..................      (15,704)      (20,626)        41,167        (27,616)
    Other ................................       55,546        (3,583)        88,635        (17,457)
                                           ------------   -----------    -----------   ------------
        Net cash provided by operating 
        activities .......................      912,437       615,287      1,357,656        989,000
                                           ------------   -----------    -----------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to Utility Plant, 
    excluding AFDC .......................     (475,088)     (550,717)      (773,545)      (879,563)
  Net (increase) decrease in 
    Long-Term Investments ................      (39,595)      (34,312)        45,385        (53,279)
  Increase in Decommissioning and
    Other Special Funds, 
    excluding interest ...................      (22,173)      (28,006)       (29,561)       (28,016)
  Cost of Plant Removal - net ............      (21,528)      (21,866)       (33,624)       (51,881)
  Other ..................................          865           (90)         2,647         (4,981)
                                           ------------   -----------    -----------   ------------
        Net cash used in investing 
        activities .......................     (557,519)     (634,991)      (788,698)    (1,017,720)
                                           ------------   -----------    -----------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in Short-Term Debt ........      231,524        29,937         70,618         89,943
  Decrease in Book Overdrafts ............      (24,921)         (205)        (1,132)       (20,396)
  Issuance of Long-Term Debt .............      100,000       752,245        197,555        961,445
  Redemption of Long-Term Debt............     (309,444)     (381,811)      (406,583)      (741,513)
  Long-Term Debt Issuance and
    Redemption Costs .....................       (1,984)      (10,100)       (21,615)       (26,421)
  Issuance of Preferred Stock ............        --           75,000           --           75,000
  Redemption of Preferred Stock ..........        --          (45,000)       (75,000)       (45,000)
  Issuance of Monthly Income
    Preferred Securities .................       60,000          --          210,000          --  
  Cash Dividends Paid ....................     (407,344)     (409,168)      (543,943)      (541,936)
  Other ..................................        --           (1,220)          (750)        (1,331)
                                           ------------   -----------    -----------   ------------
        Net cash (used in) provided by
          financing activities ...........     (352,169)        9,678       (570,850)      (250,209)
                                           ------------   -----------    -----------   ------------
Net increase (decrease) in Cash and 
  Cash Equivalents .......................        2,749       (10,026)        (1,892)      (278,929)
Cash and Cash Equivalents at Beginning 
  of Period ..............................       27,498        42,165         32,139        311,068 
                                           ------------   -----------    -----------   ------------
Cash and Cash Equivalents at End 
  of Period .............................. $     30,247        32,139    $    30,247   $     32,139 
                                           ============   ===========    ===========   ============
Income Taxes Paid ........................ $    242,365   $   178,584    $   272,977   $    207,684
Interest Paid ............................ $    275,210   $   255,350    $   365,727   $    343,660 
<FN>

See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
                                       PUBLIC SERVICE ELECTRIC AND GAS COMPANY 

                                     CONSOLIDATED STATEMENTS OF RETAINED EARNINGS 
                                                   (Thousands of Dollars) 

<CAPTION>
                                Three Months Ended         Nine Months Ended         Twelve Months Ended
                                   September 30,              September 30,             September 30,
                             ------------------------  ------------------------  ------------------------
                                1995         1994          1995         1994         1995         1994
                             -----------  -----------  -----------  -----------  -----------  -----------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>
Balance at Beginning of 
  Period ....................$ 1,337,284  $ 1,254,553  $ 1,292,201  $ 1,180,532  $ 1,310,074  $ 1,205,373
Add:
  Net Income ................    184,878      190,378      503,074      539,930      622,550      647,970
                             -----------  -----------  -----------  -----------  -----------  -----------
     Total ..................  1,522,162    1,444,931    1,795,275    1,720,462    1,932,624    1,853,343
                             -----------  -----------  -----------  -----------  -----------  -----------
Deduct Cash Dividends:
  Preferred Stock, at 
    required rates ..........      8,682       10,144       26,044       30,568       35,943       40,336
  Common Stock ..............    125,550      124,700      381,300      378,600      508,000      501,600
Capital Stock Expenses ......         (1)          13        --           1,220          750        1,333
                             -----------  -----------  -----------  -----------  -----------  -----------
     Total Deductions .......    134,231      134,857      407,344      410,388      544,693      543,269
                             -----------  -----------  -----------  -----------  -----------  -----------
                                                                  
Balance at End of Period ....$ 1,387,931  $ 1,310,074  $ 1,387,931  $ 1,310,074  $ 1,387,931  $ 1,310,074
                             ===========  ===========  ===========  ===========  ===========  ===========
</TABLE>

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  RATE MATTERS

Levelized Gas Adjustment Charge

    On October 2, 1995, Public Service Electric and Gas Company
(PSE&G) petitioned the New Jersey Board of Public Utilities (BPU) for
modifications to its Levelized Gas Adjustment Charge (LGAC).  PSE&G
is requesting that:

    (a)  The LGAC be renamed to the Levelized Gas Incentive Clause
         (LGIC);

    (b)  A benchmark be established for certain gas delivered from
         the Gulf Coast, and any difference between PSE&G's actual
         gas purchase costs and the benchmark price, either positive
         or negative, be shared 50/50 between PSE&G's customers and
         its sole shareholder;

    (c)  The current annual LGAC rate be converted to a monthly rate
         for firm commercial and industrial customers; and

    (d)  A fixed annual margin would be credited to LGAC for certain
         interruptible rate schedules, while actual margins from
         such sales will be retained by PSE&G.  Any differences,
         positive or negative, will be absorbed by PSE&G.

Levelized Energy Adjustment Clause

    On May 5, 1995, the BPU approved PSE&G's Levelized Energy
Adjustment Clause (LEAC).  Such Order also required that a hearing be
convened regarding the April 1994 Salem 1 shutdown, to determine
whether PSE&G should be allowed to recover replacement power costs of
approximately $8 million which have been deferred.  On October 18,
1995, this matter was ordered to be transmitted to the Office of
Administrative Law (OAL) for hearing.  PSE&G cannot predict the
outcome of this proceeding.

Other Rate Matters

    On July 21, 1995, the BPU initiated a generic proceeding to
expeditiously adopt specific standards to guide utility "off-tariff"
negotiated rate agreement programs, which proceeding would consider
minimum prices, confidentiality, maximum contract duration, filing
requirements and such other standards as necessary for compliance with
the law.  A Written Summary Decision and Order (Order) was issued on

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  RATE MATTERS - (CONCLUDED)


October 27, 1995, which ordered each New Jersey electric utility,
including PSE&G, to file initial minimum tariffs, consistent with the
terms of the Order, and further, indicated that the Order will be
supplemented by a Final Decision and Order to fully discuss and
explain the rationale for the BPU's overall decision.  PSE&G cannot
predict what impact, if any, the generic tariff may have on its
electric revenues and earnings.

NOTE 2.  COMMITMENTS AND CONTINGENCIES

Nuclear Performance Standard
 
    The BPU has established a nuclear performance standard (NPS) for
nuclear generating stations owned by New Jersey electric utilities,
including the five nuclear units in which PSE&G has an ownership
interest:  Salem -- 42.59%; Hope Creek -- 95%; and Peach Bottom --
42.49%. PSE&G operates Salem and Hope Creek, while Peach Bottom is
operated by PECO Energy, Inc. (PECO).
 
    The penalty/reward under the NPS is a percentage of replacement
power costs. (See table below.)

<TABLE>
<CAPTION>
             CAPACITY FACTOR RANGE                  REWARD    PENALTY
--------------------------------------------------  ------    -------
<S>                                                    <C>       <C>
Equal to or greater than 75%.........................    30%       --
Equal to or greater than 65% and less than 75%.......   None      None
Equal to or greater than 55% and less than 65%.......   --         30%
Equal to or greater than 45% and less than 55%.......   --         40%
Equal to or greater than 40% and less than 45%.......   --         50%
Below 40%............................................   BPU Intervenes
</TABLE>

      Under the NPS, the capacity factor is calculated annually using
maximum dependable capability of the five nuclear units in which PSE&G
owns an interest. This method takes into account actual operating
conditions of the units.

     While the NPS does not specifically have a gross negligence
provision, the BPU has indicated that it would consider allegations

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)

of gross negligence brought upon a sufficient factual basis. A finding
of gross negligence could result in penalties other than those
prescribed under the NPS. During 1994, the five nuclear units in which 
PSE&G has an ownership interest aggregated a 74% combined capacity 
factor.  PSE&G currently estimates that the aggregate combined
capacity factor for 1995 will range from 62% to 63%, based on the
planned operation for the remainder of the year of the Hope Creek and
Peach Bottom units, which would result in a penalty for 1995 in the
range of $2 to $4 million.  Both Salem units are presently out of
service for the remainder of 1995.

Nuclear Insurance Coverages and Assessments
 
    PSE&G's insurance coverages and maximum retrospective assessments
for its nuclear operations are as follows:

<TABLE>
<CAPTION>
                                                       PSE&G MAXIMUM
                                          TOTAL        ASSESSMENTS
                                          SITE         FOR A SINGLE
 TYPE AND SOURCE OF COVERAGES           COVERAGES      INCIDENT
-------------------------------------   ---------      -------------
                                             (MILLIONS OF DOLLARS)
<S>                                     <C>            <C>
Public Liability:
 American Nuclear Insurers...........   $  200.0         $  --
 Indemnity(A)........................    8,720.3           210.2
                                        --------         --------
                                        $8,920.3 (B)     $ 210.2
                                        --------         --------
Nuclear Worker Liability: 
 American Nuclear Insurers(C)........   $  200.0         $   8.1
                                        --------         --------
Property Damage:    
 Nuclear Mutual Limited..............   $  500.0         $   8.1
 Nuclear Electric Insurance 
  Ltd. (NEIL II).....................    1,400.0 (D)         8.2(E)
 Nuclear Electric Insurance 
  Ltd. (NEIL III)....................      850.0             6.7
                                        --------         --------
                                        $2,750.0         $  23.0
                                        --------         --------
Replacement Power:
 Nuclear Electric Insurance 
  Ltd (NEIL I).......................   $    3.5 (F)     $  11.4
</TABLE>
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)


(A) Retrospective premium program under the Price-Anderson liability
    provisions of the Atomic Energy Act of 1954, as amended (Price-
    Anderson). Subject to retrospective assessment with respect to
    loss from an incident at any licensed nuclear reactor in the
    United States. Assessment adjusted for inflation effective
    August 20, 1993.
 
(B) Limit of liability for each nuclear incident under Price-
    Anderson.

(C) Industry aggregate limit representing the potential liability
    from workers claiming exposure to the hazard of nuclear
    radiation. This policy includes automatic reinstatements up to
    an aggregate of $200 million, thereby providing total coverage
    of $400 million. This policy does not increase PSE&G's
    obligation under Price-Anderson.

(D) Includes up to $250 million for premature decommissioning costs.

(E) In the event of a second industry loss triggering NEIL II -
    coverage, the maximum retrospective premium assessment can
    increase to $17.5 million.
 
(F) Weekly indemnity for 52 weeks which commences after the first 21
    weeks of an outage. Beyond the first 52 weeks of coverage,
    indemnity of $2.8 million per week for 104 weeks is afforded.
    Total coverage amounts to $473.2 million over three years.

    Price-Anderson sets the "limit of liability" for claims that
could arise from an incident involving any licensed nuclear facility
in the nation. The "limit of liability" is based on the number of
licensed nuclear reactors and is adjusted at least every five years
based on the Consumer Price Index. The current "limit of liability"
is $8.9 billion. All utilities owning a nuclear reactor, including
PSE&G, have provided for this exposure through a combination of
private insurance and mandatory participation in a financial
protection pool as established by Price-Anderson. Under Price-
Anderson, each party with an ownership interest in a nuclear reactor
can be assessed its share of $79.3 million per reactor per incident,
payable at $10 million per reactor per incident per year. If the
damages exceed the "limit of liability," the President is to submit
to Congress a plan for providing additional compensation to the
injured parties. Congress could impose further revenue raising
measures on the nuclear industry to pay claims. PSE&G's maximum
aggregate assessment per incident is $210.2 million (based on PSE&G's
ownership interests in Hope Creek, Peach Bottom and Salem) and its
maximum aggregate annual assessment per incident is $26.5 million.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)

    Further, a recent decision by the U.S. Court of Appeals for the
Third Circuit, not involving PSE&G, held that the Price Anderson Act
did not preclude awards based on state law claims for punitive damage.

    PSE&G purchases property insurance, including decontamination
expense coverage and premature decommissioning coverage, with respect
to loss or damage to its nuclear facilities, see Property Damage in
table above. PECO has advised PSE&G that it maintains similar
insurance coverage with respect to Peach Bottom. Certain of the
policies also provide that the insurer may suspend coverage with
respect to all nuclear units on a site without notice if the Nuclear
Regulatory Commission (NRC) suspends or revokes the operating license
for any unit on a site, issues a shutdown order with respect to such
unit or issues a confirmatory order keeping such unit shut down.

    PSE&G is a member of an industry mutual insurance company,
Nuclear Electric Insurance Limited (NEIL), which provides replacement
power cost coverage in the event of a major accidental outage at a
nuclear station.  The premium for this coverage is subject to
retrospective assessment for adverse loss experience, see table and
associated notes above.

Construction and Fuel Supplies

    PSE&G has substantial commitments as part of its ongoing
construction program which include capital requirements for nuclear
fuel. PSE&G's construction program is continuously reviewed and
periodically revised as a result of changes in economic conditions,
revised load forecasts, changes in the scheduled retirement dates of
existing facilities, changes in business plans, site changes, cost
escalations under construction contracts, requirements of regulatory
authorities and laws, the timing of and amount of electric and gas
rate changes and the ability of PSE&G to raise necessary capital.
Pursuant to an integrated electric resource plan (IRP), PSE&G
periodically reevaluates its forecasts of future customers, load and
peak growth, sources of electric generating capacity and demand side
management (DSM) to meet such projected growth, including the need to
construct new electric generating capacity.  The IRP takes into
account assumptions concerning future demands of customers,
effectiveness of conservation and load management activities, the

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)

long-term condition of PSE&G's plants, capacity available from
electric utilities and other suppliers and the amounts of
co-generation and other non-utility capacity projected to be
available.

    Based on PSE&G's construction program, construction expenditures
are expected to aggregate approximately $3.2 billion, which includes
$484 million for nuclear fuel and $78 million of Allowance for Funds
used During Construction (AFDC) during the years 1995 through 1999.
The estimate of construction requirements is based on expected project
completion dates and includes anticipated escalation due to inflation
of approximately 3%, annually. Therefore, construction delays or
higher inflation levels could cause significant increases in these
amounts. PSE&G expects to generate internally the funds necessary to
satisfy its construction expenditures over the next five years,
assuming adequate and timely recovery of costs, as to which no
assurances can be given.  In addition, PSE&G does not presently
anticipate any difficulties in obtaining sufficient sources of fuel
for electric generation or adequate gas supplies during the years 1995
through 1999.

Bergen Station Repowering

    PSE&G has completed the repowering of the Bergen Station
(Station), which was re-synchronized to the electric grid on June 1,
1995 for a period of final testing.  The repowering results in a
slight increase in capacity from 629 MW to 669 MW, improves
operational reliability and efficiency and significantly improves the
environmental effects of operating the Station.  The Station was
declared to be in commercial operation effective September 1, 1995. 
Cost in service for the project was $338 million, excluding AFDC of
$37 million.  PSE&G does not currently expect to seek recovery of such
costs through a traditional rate base rate-of-return filing.  However,
pursuant to recently adopted legislation (see MD&A-Competition), PSE&G
expects to file an alternative economic regulatory proposal, such as
a rate cap pricing plan, later this year that is intended to provide
it the continuing opportunity to recover all its costs including the
costs of the Bergen repowering project.

    Pursuant to an agreement with the BPU, PSE&G will not seek
implementation of any rate treatment plan for the Station for a
minimum of 90 days from the date of filing of such plan.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)


Hazardous Waste

    Certain Federal and State laws authorize the United States
Environmental Protection Agency (EPA) and the New Jersey Department
of Environmental Protection (NJDEP), among other agencies, to issue
orders and bring enforcement actions to compel responsible parties to
take investigative and remedial actions at any site that is determined
to present an imminent and substantial danger to the public or the
environment because of an actual or threatened release of one or more
hazardous substances. Because of the nature of PSE&G's business,
including the production of electricity, the distribution of gas and,
formerly, the manufacture of gas, various by-products and substances
are or were produced or handled which contain constituents classified
as hazardous. PSE&G generally provides for the disposal or processing
of such substances through licensed independent contractors.  However,
these statutory provisions impose joint and several responsibility
without regard to fault on all responsible parties, including the
generators of the hazardous substances, for certain investigative and
remediation costs at sites where these substances were disposed of or
processed. PSE&G has been notified with respect to a number of such
sites and the remediation of these potentially hazardous sites is
receiving greater attention from the government agencies involved. 
Generally, actions directed at funding such site investigations and
remediation include all suspected or known responsible parties. PSE&G
does not expect its expenditures for any such site to have a material
effect on its financial position, results of operations or net cash
flows.

PSE&G Manufactured Gas Plant Remediation Program


    In 1988, NJDEP notified PSE&G that it had identified the need for
PSE&G, pursuant to a formal arrangement, to systematically investigate
and, if necessary, resolve environmental concerns extant at PSE&G's
former manufactured gas plant sites. To date, NJDEP and PSE&G have
identified 38 former gas plant sites. PSE&G is currently working with
NJDEP under a program to assess, investigate and, if necessary,
remediate environmental concerns at these sites (Remediation Program).
The Remediation Program is periodically reviewed and revised by PSE&G
based on regulatory requirements, experience with the Remediation
Program and available technologies. The cost of the Remediation
Program cannot be reasonably estimated, but experience to date
indicates that costs of at least $20 million per year could be
incurred over a period of more than 30 years and that the overall cost
could be material to PSE&G's financial position, results of operations
or net cash flows.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)

NOTE 2.  COMMITMENTS AND CONTINGENCIES - (CONCLUDED)

    Costs incurred through September 30, 1995 for the Remediation
Program amounted to $57.4 million, net of certain insurance proceeds. 
In addition, at September 30, 1995, PSE&G's estimated liability for
estimated remediation costs aggregated $103.4 million.

    In accordance with a Stipulation approved by the BPU in January
1992, PSE&G is recovering over a six-year period $32 million of its
actual remediation costs to reflect costs incurred through September
30, 1992.  As of September 30, 1995, PSE&G has recovered $26 million
of the $32 million of actual remediation costs through its LGAC. 
PSE&G is expected to recover the balance of $6 million in its
currently filed LGAC period ending in 1996.

    PSE&G has reached a final settlement concluding the litigation
against certain of its insurers to recover the costs associated with
addressing and resolving environmental issues of the Remediation
Program.  This settlement, which is subject to a confidentiality
agreement, is not expected to have a material effect upon the
financial position, results of operations or net cash flows of PSE&G
or Enterprise.
<PAGE>
<PAGE>

                    PUBLIC SERVICE ELECTRIC AND GAS COMPANY 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PSE&G

    The Notes to Consolidated Financial Statements of Enterprise are
incorporated herein by reference insofar as they relate to PSE&G and
its subsidiaries:

          Note 1.  Rate Matters
          Note 2.  Commitments and Contingencies

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS

    Following are the significant changes in or additions to
information  reported in Enterprise's Annual Report to the Securities
and Exchange Commission (SEC) on Form 10-K for 1994, and Quarterly
Report on Form 10-Q for March 1995 and June 1995, affecting the
consolidated financial condition and the results of operations of
Enterprise and its subsidiaries.  This discussion refers to the
Consolidated Financial Statements and related Notes to Consolidated
Financial Statements (Notes) of Enterprise and should be read in
conjunction with such statements and notes.

COMPETITION

    Ongoing initiatives affecting PSE&G's electric and gas utility
businesses associated with the continuing transition to a competitive
market environment will continue to have an increasingly significant
impact on Enterprise and PSE&G.  Federal legislation, including the
Energy Policy Act (EPACT), as well as regulatory initiatives at both
the federal and state levels that are designed to promote competition
and lessen regulation of the energy supply industry can be expected
to result in additional pressures on customer retention due to energy
prices, especially with respect to larger industrial and commercial
customers.  Growth potential of traditional gas and electric sales is
limited in PSE&G's mature service territory.

    The Federal Energy Regulatory Commission's (FERC) recent Notice
of Proposed Rulemaking (NOPR) on open access would fundamentally
change the electric utility industry by providing wholesale customers
with competitive open access to the interstate transmission system. 
However, in the NOPR, FERC states its position that utilities should
be entitled to full recovery of legitimate and verifiable stranded
costs at the federal and state levels.   Competition is forcing
utilities, including PSE&G, to operate more cost effective and
efficient plants, particularly in light of the technological
advantages available to new entrants.  Recovery of related costs by
utilities, including PSE&G, will depend upon the decisions of the
regulators, which cannot be predicted, and the ability to sell the
electricity generated by such plants in the emerging competitive
electric power market.  For discussion of PSE&G's project at Bergen,
see Note 2 - Commitments and Contingencies of Notes.  Competition may
also have an adverse impact upon the economics of certain regulatory-
created incentives such as demand side management (DSM).
    <PAGE>
<PAGE>
                PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                      AND RESULTS OF OPERATIONS (Continued)

    In the wholesale market, other competitive pressures, such as
municipalization, may also have an impact on utilities in the evolving
electric power industry.  Municipalization involves the condemnation
and operation of existing investor-owned facilities or the
construction and operation of duplicate, parallel facilities by a
municipal utility (MUNI) within a municipal boundary.  As a result,
utilities, such as PSE&G, could lose revenues from the former
customers (residential, commercial and industrial) in the municipality
that are served by the Muni, as well as the loss of the municipality
itself as a customer.

    The BPU presented its final, first phase of the New Jersey Energy
Master Plan to Governor Whitman March 8, 1995, which acknowledged the
need for regulatory flexibility as competition unfolds and called for
legislation that would allow New Jersey utilities to propose, subject
to BPU approval, alternatives to existing rate base/rate of return
pricing, allow for pricing flexibility under certain standards for
customers with competitive options and equalize the impact of tax
policies, such as New Jersey Gross Receipts and Franchise Tax (NJGRT)
currently assessed on retail energy utility sales, upon all energy
producers.  On July 20, 1995, Governor Whitman signed into law
legislation which provides utilities the flexibility to propose
alternative regulatory pricing and to offer negotiated off-tariff
agreements.  PSE&G is currently evaluating its available options
including the submission of an alternative economic regulatory
proposal, such as a rate cap pricing plan, and presently anticipates
making a submission later this year.

    On June 1, 1995, the BPU issued its Order initiating a formal
Phase II Proceeding to the New Jersey Energy Master Plan. This
proceeding is intended to investigate and consider the future long
term structure of the electric power industry in New Jersey.  The
proceeding will address wholesale and retail competition.  A Phase II
report proposing policy restructuring is expected by March 1996.


<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)


<TABLE>

ENTERPRISE EARNINGS

     Earnings per share of Enterprise Common Stock were $.76, $2.08, and $2.62 for the three, nine and twelve
months ended September 30, 1995 compared to $.76, $2.24 and $2.54 for the comparable 1994 periods.  (See
Liquidity and Capital Resources - External Financing.)  The changes are summarized as follows:


<CAPTION>
                                                       Increase or (Decrease)
                                       ----------------------------------------------------------------
                                          Three Months Ended    Nine Months Ended    Twelve Months Ended
                                           September 30,        September 30,         September 30,
                                          1995    vs.   1994    1995  vs.  1994     1995    vs.    1994 
                                       --------------------   --------------------  --------------------
                                                     Per                   Per                   Per
                                        Amount      Share     Amount      Share     Amount      Share
                                       --------   --------   --------   --------   --------   --------
                                                 (Millions, except Per Share Data)
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>
PSE&G
  Revenues (net of fuel costs and
    gross receipts taxes) ............ $   32     $  0.13    $    4     $ 0.02     $  39     $ 0.16
  Other operation expenses ...........    (10)      (0.04)      (22)     (0.09)      (86)     (0.35)
  Maintenance expenses ...............     (6)      (0.02)       14       0.05        31       0.12
  Depreciation and amortization 
    expenses .........................     (7)      (0.03)      (27)     (0.11)      (35)     (0.15)
  Federal income taxes ...............    (11)      (0.04)       10       0.04        39       0.16
  Interest charges ...................     (2)      (0.01)      (15)     (0.06)      (22)     (0.09) 
  Allowance for Funds used During
    Construction (AFDC)...............      2        0.01         9       0.03        16       0.07
  Preferred Securities Dividend 
    Requirements .....................     (2)      (0.01)       (6)     (0.02)       (8)     (0.03)
  Other income and expenses...........     --        --           1       --           5       0.02
                                      --------   --------   --------   --------   --------   --------

  Earnings Available to Enterprise ...     (4)      (0.01)      (32)     (0.14)      (21)     (0.09)
                                      --------   --------   --------   --------   --------   --------
EDHI
  EDC ................................     --         --        (10)     (0.04)      (17)     (0.07)
  CEA.................................      1         --         --       --           1        --
  PSRC ...............................      3        0.01         4       0.02         6       0.02
  EGDC................................     --         --          1       --          52       0.22(A)
                                      --------   --------   --------   --------   --------   --------
  Subtotal ...........................      4       0.01         (5)     (0.02)       42       0.17
                                      --------   --------   --------   --------   --------   --------
  Net Income ......................... $   --         --      $ (37)     (0.16)     $ 21       0.08
                                      ========   --------   ========   --------   ========   --------

(A)  Includes the impact of an impairment of assets of $51 Million, after tax, by EGDC in December 1993.
     (See EDHI, below.)

</TABLE>
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS - (Continued)

ENTERPRISE EARNINGS - (Continued)

   PSE&G

    Earnings available to Enterprise decreased $4 million for the
quarter ended September 30, 1995 from the quarter ended September 30,
1994, notwithstanding that net revenues (revenues, net of fuel costs
and gross receipt taxes) increased $32 million due to higher electric
residential, commercial, industrial and capacity sales.  The increase
in firm sales is attributable to a growth in the economy coupled with
high weather related sales for the quarter.  Higher Allowance for
Funds Used During Construction (AFDC) also contributed to earnings due
to an increase in the AFDC rate.  The increases in revenues were
offset by higher other operation expenses principally due to increased
expenses at Salem due to the current outage.  Also negatively
impacting earnings were higher maintenance expenses primarily at Salem
due to the current outage, higher depreciation and amortization
expenses due to more plant in service, higher income taxes due to
higher pre-tax operating income, higher interest charges on
miscellaneous liabilities and higher dividend requirements resulting
from the issuance of Monthly Income Preferred Securities (See External
Financings).

    Earnings available to Enterprise decreased by $32 million for the
nine-month period ended September 30, 1995 compared to the same period
ended September 30, 1994, notwithstanding that net revenues increased
$4 million due to improved electric sales resulting from growth in the
economy and an increase in the customer base, partially offset by
lower gas revenue resulting from a decrease in sales due to the mild
winter.  Also contributing to earnings were lower maintenance
expenses, higher AFDC income and lower taxes resulting from lower pre-
tax operating income.  Maintenance expenses were lower due to reduced
fossil production expenses primarily attributable to the 1994 outage
at Mercer Generating Station (Mercer) and reduced nuclear production
expenses due to the 1994 refueling outage at Hope Creek, partially
offset by higher maintenance expense for Salem resulting from the
current outage.  Earnings were offset by higher depreciation and
amortization expenses due to more plant in service, higher interest
expenses due to more short term debt outstanding and higher interest
charges on miscellaneous liabilities, and higher dividend requirements
resulting from the issuance of Monthly Income Preferred Securities. 
Earnings were also negatively impacted by increased other operation
expenses principally due to increased expenses at the Salem Plant and
higher administrative and general expenses.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS (Continued)

ENTERPRISE EARNINGS - (Continued)
 
    Earnings available to Enterprise decreased $21 million for the
twelve months ended September 30, 1995 compared to the same period
ended September 30, 1994, notwithstanding that net revenues increased
$39 million, principally due to higher electric residential and
commercial sales due to a growth in the economy and warm summer
weather, as well as higher capacity sales to wholesale customers and
other utilities.  The increase in electric revenues was offset by
lower gas revenues due to lower sales as a result of the mild winter
weather, higher other operation expenses resulting from higher
expenses at the Salem plant due to the current outage and higher
administrative and general expenses.  Earnings were also negatively
affected by higher depreciation and amortization expense due to more
plant in service, higher interest charges due to more short-term debt
outstanding and higher interest on miscellaneous liabilities, and
higher dividend requirements due to the issuance of Monthly Income
Preferred Securities.  The increase in expenses were partially offset
by lower 1995 maintenance expenses resulting from the 1994 refueling
outage at Hope Creek and the 1994 outage at Mercer and decreased labor
and overtime for fossil production, gas and electric distribution,
lower federal income taxes resulting from lower pre-tax operating
income, and increased AFDC income due to an increase in the rate and
a retroactive adjustment.

  EDHI

    Net income of EDHI was $11 million for the quarter ended
September 30, 1995, an increase of $4 million from the quarter ended
September 30, 1994.  EDHI's earnings increased due to higher income
from Public Service Resources Corporation (PSRC) and Community Energy
Alternatives (CEA) partnership investments.

    Net income of EDHI was $33 million for the nine-month period
ended September 30, 1995, a decrease of $5 million from the nine-month
period ended September 30, 1994.  EDHI's earnings decreased due to
Energy Development Corporation's (EDC) lower gas prices and volumes,
partially offset by higher income from PSRC partnership investments.

    Net income of EDHI was $55 million for the twelve-month period
ended September 30, 1995, an increase of $42 million over the twelve-
month period ended September 30, 1994.  Excluding the impact of an
impairment of assets of $51 million, after tax, by EGDC in December
1993, EDHI's earnings decreased by $8 million.  Lower EDC earnings
resulting from lower gas prices and volumes were partially offset by
higher PSRC earnings due to higher income from partnerships and lower
interest expense.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS (Continued)

ENTERPRISE EARNINGS - (Concluded)

    To the extent that the prices at which EDC is able to sell gas
remain low, EDHI's earnings may continue to be negatively impacted.

DIVIDENDS

    Since 1992, Enterprise has maintained a constant rate of common
stock dividends which has had the result of reducing its dividend
payout ratio.  Management believes that reducing the payout ratio is
a prudent policy which needs to be continued.

LIQUIDITY AND CAPITAL RESOURCES

    Enterprise's liquidity is affected by maturing debt, investment
and acquisition activities, the capital requirements of PSE&G's and
EDHI's construction programs, permitted regulatory recovery of
expenses and collection of revenues.  Capital resources available to
meet such requirements depend upon general and regional economic
conditions, PSE&G's customer retention and growth, the ability of
PSE&G and EDHI to meet competitive pressures and to contain costs, the
adequacy and timeliness of rate relief, cost recovery and necessary
regulatory approvals, the ability to continue to operate and maintain
nuclear programs in accordance with NRC and BPU requirements, the
impact of environmental regulations, continued access to the capital
markets and continued favorable regulatory treatment of consolidated
tax benefits.  (For additional information see the discussion of
Competition above and Note 2, Commitments and Contingencies of the
Notes.)

  PSE&G

    Construction expenditures were related to improvements in PSE&G's
existing power plants, transmission and distribution system, gas
system and common facilities.  PSE&G expects that it will internally
generate all of its capital requirements including construction
expenditures over the next five years and significantly reduce its
debt outstanding, assuming adequate and timely recovery of costs, as
to which no assurances can be given.

<PAGE>
<PAGE> 
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                    AND RESULTS OF OPERATIONS (Continued)

EDHI

    For the nine-month period ended September 30, 1995, EDC had
additions to oil and gas property, plant and equipment, excluding
capitalized interest, of $62 million, a decrease of $56 million from
the corresponding period in 1994.  For the twelve-month period ended
September 30, 1995, EDC had additions to oil and gas property, plant,
and equipment, excluding capitalized interest, of $94 million, a
decrease of $51 million compared to the corresponding period in 1994.

    PSRC is a limited partner in various limited partnerships and is
committed to make investments from time to time, upon the request of
the respective general partners.  At September 30, 1995, $68 million
remained as PSRC's aggregate unfunded commitment subject to call.

    EDHI and each of its subsidiaries are subject to restrictive
business and financial covenants contained in existing debt agreements
and are required to not exceed various debt to equity ratios which
range from 3:1 to 1.75:1. EDHI is also required to maintain a twelve
month earnings before interest and taxes to interest (EBIT) coverage
ratio of at least 1.35:1.  As of September 30, 1995 and 1994, EDHI had
consolidated debt to equity ratios, including contingent obligations,
of 1.04:1 and 1.15:1 and, for the twelve months ended September 30,
1995 and 1994, EBIT coverage ratios, as defined to exclude the effects
of EGDC, of 1.93:1 and 2.01:1, respectively.  Compliance with
applicable financial covenants will depend upon future levels of
earnings, among other things, as to which no assurance can be given.

  LONG TERM INVESTMENTS AND REAL ESTATE

    Long-Term Investments and Real Estate increased $50 million for
the nine-month period ended September 30, 1995, primarily due to an
increase in Public Service Conservation Resources Corporation's
(PSCRC) investments in conservation projects of $35 million, in PSRC's
investments of $53 million due to KKR LBO Fund capital calls and in
CEA's $13 million increase in partnership investments, partially
offset by EGDC's reduced investments of $53 million due to property
sales.  For the nine-month period ended September 30, 1994, Long-Term
Investments and Real Estate increased $9 million, primarily due to an
increase in PSCRC's investments in conservation projects of $20
million and an increase in PSE&G's investment in an insurance contract
of $15 million, substantially offset by returns of capital from PSRC
and CEA partnership investments of $27 million.
<PAGE>
<PAGE> 
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                    AND RESULTS OF OPERATIONS (Continued)

  LONG TERM INVESTMENTS AND REAL ESTATE - (CONCLUDED)

    Long-Term Investments and Real Estate decreased $17 million for
the twelve-month period ended September 30, 1995 primarily due to a
net decrease in PSE&G's investment in an insurance contract of $95
million and EGDC's reduced investments of $49 million due to property
sales, partially offset by PSCRC's increase in investments in
conservation projects of $43 million, PSRC's investments which
increased $60 million due to KKR LBO Fund capital calls, and CEA's $22
million increase in partnership investments.  For the twelve-month
period ended September 30, 1994, a $119 million decrease was primarily
due to a $153 million decrease in PSRC investments due to security
sales, partially offset by a net increase in PSE&G's investment in an
insurance contract of $26 million and an increase in PSCRC's
investments in conservation projects of $20 million.
    
  INTERNAL GENERATION OF CASH FROM OPERATIONS
 
     Enterprise's cash provided by operating activities for the nine
months ended September 30, 1995 increased $288 million to $1.047
billion when compared to the corresponding period in 1994.  This
increase was primarily due to a greater recovery of electric energy
and gas costs through PSE&G's LEAC and LGAC of $149 million, a smaller
decrease in accounts payable of $158 million, and a net decrease in
prepaid/accrued taxes of $239 million (primarily the result of lower
gross receipts taxes). Partially offsetting these cash inflows were
a decrease in net income of $37 million, a smaller increase in
deferred income taxes of $44 million, a smaller decrease in accounts
receivable of $153 million, and an increase in inventory - fuel and
materials and supplies of $31 million. (For additional information see
Enterprise Earnings.)

     Enterprise's cash provided by operating activities for the twelve
months ended September 30, 1995 increased $346 million to $1.501
billion when compared to the corresponding period in 1994.  This
increase was primarily due to a higher recovery of electric energy and
<PAGE>
<PAGE> 
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                    AND RESULTS OF OPERATIONS (Continued)
    
  INTERNAL GENERATION OF CASH FROM OPERATIONS - (CONCLUDED)

gas costs through PSE&G's LEAC and LGAC of $250 million, a net
decrease in prepaid/accrued taxes of $226 million (primarily the
result of lower gross receipts taxes), an increase in accounts payable
of $118 million, a positive net change in certain other current assets
and liabilities of $44 million, and a positive net change in certain
noncurrent assets and liabilities, primarily deferred amounts, of $36
million.  Partially offsetting these cash inflows were a loss from
property impairments of $78 million in 1993, a smaller increase in
deferred income taxes of $77 million and an increase in accounts
receivable of $188 million.  (For additional information see
Enterprise Earnings.)

  EXTERNAL FINANCING ACTIVITIES

    Book value per share was $22.17 at September 30, 1995, compared
to $21.71 at September 30, 1994.

    In October 1995, PSE&G issued a total of $56,320,000 of its
mortgage bonds to redeem a like principal amount, including sinking
fund retirements, of its higher cost bonds.  The BPU has authorized
PSE&G to issue approximately $215 million of additional First and
Refunding Mortgage Bonds (Bonds)/Medium-Term Notes (MTNs) through 1996
for refunding purposes.

    In September, 1995, Public Service Electric and Gas Capital, L.P.
issued $60 million of Monthly Income Preferred Securities, the
proceeds of which were loaned to PSE&G, evidenced by PSE&G's
subordinated debentures, and used to redeem $60 million of PSE&G
Preferred Stock in October 1995.  The BPU has authorized PSE&G to
issue an additional $120 million of Preferred Stock through 1995.

    The BPU has authorized PSE&G to issue and have outstanding at any
one time not more than $1 billion of its short-term obligations,
consisting of commercial paper and other unsecured borrowings from
banks and other lenders through January 1, 1997.  On September 30,
1995, PSE&G had $509 million of short-term debt outstanding.

    To provide liquidity for its commercial paper program, PSE&G has
a $500 million one year revolving credit agreement and a $500 million
five year revolving credit agreement with a group of commercial banks,
each of which provides for borrowing up to one year. On September 30,
1995, there were no borrowings outstanding under these credit
agreements.
<PAGE>
<PAGE> 
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                    AND RESULTS OF OPERATIONS (Continued)

  EXTERNAL FINANCING ACTIVITIES - (CONCLUDED)

    On October 24, 1995, PSE&G petitioned the BPU for authority to
issue (a) up to $4.725 billion aggregate principal amount of long-term 
debt to refund up to $4.575 billion aggregate principal amount (plus
premium and expenses) of its outstanding long-term debt and (b) up to
$685 million of preferred stock or tax deferred preferred securities
to refund a like principal amount of its outstanding preferred stock.

    PSCRC has a $30 million revolving credit facility supported by
a PSE&G subscription agreement in an aggregate amount of $30 million
which terminates on March 6, 1996.  As of September 30, 1995, PSCRC
had $30 million outstanding under this facility.

    PSE&G Fuel Corporation (Fuelco) has a $150 million commercial
paper program to finance a 42.49% share of Peach Bottom nuclear fuel,
supported by a $150 million revolving credit facility with a group of
banks, which expires on June 28, 1996. PSE&G has guaranteed repayment
of Fuelco's respective obligations.  As of September 30, 1995, Fuelco
had commercial paper of $94 million outstanding under such program.

    Enterprise Capital Funding Corporation (Funding) has a commercial
paper program, supported by a commercial bank letter of credit and
credit facility, in the amount of $225 million expiring March 1998. 
As of September 30, 1995, Funding had $111 million of borrowings
outstanding under this commercial paper program.

    Additionally, Funding has a $225 million revolving credit
facility expiring March 1998.  As of September 30, 1995, Funding had
no borrowings outstanding under this facility.

    PSEG Capital Corporation's (Capital) MTN program has previously
provided for an aggregate principal amount of up to $750 million of
MTNs so that its total debt outstanding at any time, including MTNs,
would not exceed such amount.  Effective January 31, 1995, Capital
will not have more than $650 million of debt outstanding at any time. 
At September 30, 1995, Capital had total debt outstanding of $575
million, including $427 million of MTNs.
<PAGE>
<PAGE>
                  PUBLIC SERVICE ELECTRIC AND GAS COMPANY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                      AND RESULTS OF OPERATIONS (Continued)

    Following are changes in or additions to the significant factors
reported in PSE&G's Annual Report to the SEC on Form 10-K for 1994 and
Quarterly Reports on Form 10-Q for periods ended March 31, 1995 and
June 30, 1995, affecting the consolidated financial condition of PSE&G
and its subsidiaries as reflected in their consolidated results of
operations.  This discussion refers to the consolidated financial
statements and related notes herein of PSE&G and should be read in
conjunction with such statements and notes.

    Except as modified below, the information required by this item
is incorporated herein by reference to the following portions of
Enterprise's MD&A, insofar as they relate to PSE&G and its
subsidiaries: Competition; Enterprise Earnings - PSE&G; Dividends;
Liquidity and Capital Resources - PSE&G, Long Term Investments and
Real Estate and External Financings Activities. 

LIQUIDITY AND CAPITAL RESOURCES

  INTERNAL GENERATION OF CASH FROM OPERATIONS

    PSE&G's cash provided by operating activities for the nine months
ended September 30, 1995 increased $297 million to $912 million when
compared to the corresponding period in 1994.  This increase was
primarily due to a net decrease in prepaid/accrued taxes of $229
million (primarily the result of  lower gross receipts taxes), a
greater recovery of electric energy and gas costs through PSE&G's LEAC
and LGAC of $149 million, a smaller decrease in accounts payable of
$118 million, and a positive net change in certain noncurrent assets
and liabilities, primarily deferred amounts, of $59 million. Partially
offsetting these cash inflows were a decrease in net income of $37
million, a smaller increase in deferred income taxes of $59 million,
and a smaller decrease in accounts receivable of $145 million.  (For
additional information see Enterprise Earnings.)

     PSE&G's cash provided by operating activities for the twelve
months ended September 30, 1995 increased $369 million to $1.358
billion when compared to the corresponding period in 1994.  This
increase was primarily due to a higher recovery of electric energy and
gas costs through PSE&G's LEAC and LGAC of $250 million, a net
decrease in prepaid/accrued taxes of $210 million (primarily the
result of lower gross receipts taxes), an increase in accounts payable
of $86 million,   a positive net change in certain other current
assets and liabilities of $69 million, and a positive net change in
certain noncurrent assets and liabilities, primarily deferred amounts,
of $106 million.  Partially offsetting these cash inflows were a
smaller increase in deferred income taxes of $121 million and an
increase in accounts receivable of $201 million.  (For additional
information see Enterprise Earnings.)
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 

                       PART II.  OTHER INFORMATION

Item 5.  Other Information
------    -----------------

    Certain information reported under Item 1 - Business of Part I
of Enterprise's  and PSE&G's Annual Reports to the SEC on Form 10-K
for 1994 (Form 10-K) and Item 5 of Part II of Enterprise's and PSE&G's
Quarterly Reports to the SEC on Form 10-Q for the periods ended March
31, 1995 (March 10-Q) and June 30, 1995 (June 10-Q) is updated herein
at the respective pages indicated.  References are to the related
pages and paragraph(s) of the Form 10-K, March 10-Q and June 10-Q.

Form 10-K, Page 7, Paragraph 5, June 10-Q, Page 31, Paragraph 3
---------------------------------------------------------------

    On September 6, 1995, the BPU verbally approved a Stipulation
regarding the Company's proposed Experimental Hourly Energy Pricing
Tariff and the first service agreement thereunder with its second
largest customer.  Under the stipulation, the pricing would result in
a bill reduction for the customer of approximately $7 million or about
27%.  This reduction in revenues would be partially offset by a
decrease of $1.25 million in PSE&G's New Jersey state tax liability.

Form 10-K, Page 11, Paragraph 1, March 10-Q, Page 40, Paragraph 4,  
  June 10-Q, Page 32, Paragraph 1
-------------------------------------------------------------------

PSE&G - Nuclear Operations - Salem

    As previously reported, Salem Unit 1 and Unit 2 were taken out
of service on May 16, 1995 and June 7, 1995, respectively.  PSE&G
subsequently informed the Nuclear Regulatory Commission (NRC) of its
determination to keep the Salem Units shut down pending review and
resolution of certain equipment and management issues, and NRC
agreement that each unit is sufficiently prepared to restart.  On June
9, 1995, the NRC issued a Confirmatory Action Letter documenting these
commitments by PSE&G.

    PSE&G, as previously reported, is engaged in a thorough
assessment of Salem to identify the scope of work necessary to achieve
safe, sustained and reliable operation.  PSE&G has stated that it will
keep the units off line until it is satisfied that they are ready to
return to service and operate reliably over the long term.


<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 

                   PART II.  OTHER INFORMATION (Continued)

Item 5.  Other Information - Continued
------    -----------------------------

    PSE&G has completed its rigorous examination of Salem Unit 1 and
its assessment of Unit 2 is continuing.  Work on the 46 systems
critical to Salem 1 is continuing, including those common with Unit
2, with more than 25% of necessary work activities completed and many
others initiated.  While PSE&G had previously estimated that Salem 1
would return to service in the first quarter 1996, as a result of its
completed assessment, PSE&G now expects Salem 1 to return in the
second quarter of 1996, assuming receipt of required NRC
authorization, as to which no assurance can be given.  

    The work scope assessment for Salem 2 is currently scheduled for
completion in November 1995.  PSE&G expects to present its final work
scope assessment of both Salem units to the NRC in mid-December 1995. 
Since, as previously indicated, some of the work being performed
relates to systems serving both Salem units, the additional time
needed for Salem 1 does not necessarily mean that the current second
quarter 1996 return estimate for Salem 2 will be also extended,
although no assurance can be given.  As previously disclosed, during
these outages Salem 1 will undergo a previously scheduled refueling
outage and Salem 2 will undergo a partial refueling which will
eliminate a full refueling outage for Salem 2 originally scheduled for
1996. 

    PSE&G now estimates that its share of additional 1995 operating
and maintenance expenses associated with Salem restart activities will
amount to approximately $22 million, or a total of $111 million of
operating and maintenance expenses for the year.  The increase in the
estimate results from additional overtime expenses projected through
year-end.  The assessment is still on-going, and the scope of work
that will assure the reliable, long term operation of the Salem units
has not been fully defined.  However, PSE&G's share of the 1996 Salem
incremental operating and maintenance costs is expected to materially
exceed its initial estimate of $2 million made at the start of the
work scope assessment.  A firmer scope, schedule and cost will not be
known until the assessment of Unit 2 is complete, and the restart
plans are completed.  Replacement power costs incurred while the units
are out of service are expected to be approximately $5 million per
month, per unit.  In addition, PSE&G currently anticipates that the
1995 aggregate capacity factor of its five nuclear units will range
from 62% to 63%, below the 65% minimum annual standard established by
the BPU, resulting in a penalty ranging from $2 to $4 million.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 

                   PART II.  OTHER INFORMATION (Continued)

Item 5.  Other Information - Continued
------    -----------------------------
PSE&G - Nuclear Operations - Salem - Concluded

    As previously reported, PSE&G has recently undertaken a number
of nuclear senior management changes.  PSE&G is committed to achieving
high standards of safety and operational performance for its nuclear
program.  PSE&G's objective is to restart and run the Salem plants in
accord with these standards so as to assure long-term reliability and
reduce overall production costs in order to provide customers serviced
by Salem with reliable and economic energy. 

    As previously reported, a Salem NRC enforcement conference was
held on July 28, 1995 related to certain violations of NRC
requirements. The violations included valves that were incorrectly
positioned following a plant modification in May 1993, non-
conservatisms in setpoints for a pressurizer overpressure protection
system and several examples of inadequate root cause determination of
events,  leading to insufficient corrective actions at Salem.  On
October 16, 1995, the NRC proposed cumulative civil penalties of
$600,000 related to these violations.  PSE&G has advised the NRC that
it will not contest the proposed penalties.  

    On October 10, 1995, Enterprise received a letter from a
representative of a purported shareholder demanding that it commence
legal action against certain of its officers and directors with regard
to the current Salem shutdown.  Enterprise is presently considering
the matter.

New Matter
-----------

    On October 5, 1995 plant operators at Salem Unit 1 declared an
alert because the overhead annunciator panels located in the control
room stopped functioning.  On-site facilities and the emergency news
center were staffed and activated during the alert.  Contractors on
site at the time were asked to leave the site. The panels were
declared fully operable after testing later that day, and the alert
was terminated and access to the site was fully restored.  PSE&G and
the NRC are continuing to investigate this event.  PSE&G cannot
predict what action, if any, the NRC may take on this matter.


<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 
                   PART II.  OTHER INFORMATION (Continued)

Item 5.  Other Information - Continued
------    -----------------------------

Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 2
----------------------------------------------------
PSE&G - Nuclear Operations - Hope Creek

    On July 8, 1995, during a manual shutdown of Hope Creek in order
to repair control room ventilation equipment, operators partially
opened a valve for a period of time and inadvertently reduced the
effectiveness of the shutdown cooling system.  Although the impact of
the event to plant safety was minimal, the positioning of the valve
and the resulting temperature change violated plant procedures and
technical specifications.  On July 31, 1995, NRC staff met with plant
management concerning this issue and subsequently determined to assign
a special inspection team to independently evaluate this event as well
as PSE&G s response to it, including PSE&G s procedures and training
for operator handling of abnormal conditions.  The team indicated a
potential for one violation, which could involve a civil penalty.  An
NRC enforcement conference was held on November 6, 1995.  PSE&G cannot
predict what other actions, if any, the NRC may take in this matter. 

New Matter
-----------
    On September 19, 1995, the NRC issued a Notice of Violation for
insufficient control room manning at Hope Creek during a three minute
period in June, 1992.  Two Level IV violations with no civil penalty
were received for this incident; one for the three minute period in
which there was no senior reactor operator present, and the other for
not meeting the reporting requirements for this event.

Form 10-K, Page 12, Paragraph 4
--------------------------------
PSE&G - Nuclear Operations - Peach Bottom

    PSE&G has been advised by PECO that, by letter dated October 18,
1994, the NRC has approved PECO s request to re-rate the authorized
maximum reactor core power levels of both Peach Bottom units by 5% to
3,458 MW from the current limits of 3,293 MW.  The amendment of the
Peach Bottom 2 facility operating license was effective upon the date
of the NRC approval letter and the hardware changes were completed
during the fall 1994 refueling outage.  The amendment of the Peach
Bottom 3 facility operating license became effective when the hardware
changes for Unit 3 were completed during its fall 1995 refueling
outage.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 
                   PART II.  OTHER INFORMATION (Continued)

Item 5.  Other Information - Continued
------    -----------------------------

Form 10-K, Page 12, June 10-Q, Page 35, Paragraph 3
----------------------------------------------------

PSE&G - Nuclear Operations - Peach Bottom

    PSE&G has been advised by PECO that on August 2, 1995, the NRC
held an enforcement conference regarding three alleged violations
identified by the NRC at Peach Bottom.  The NRC s findings included
alleged violations in control and design activities and technical
specification requirements regarding operability of the emergency
diesel generators.  As a result, on August 17, 1995, the NRC issued
PECO a Level III violation with no civil penalty.

Form 10-K, Page 15, Paragraph 5
--------------------------------

    On April 28, 1995, the DOE published its final interpretation on
the nuclear waste acceptance issues which were the subject of its May
1994 Notice of Inquiry. The DOE stated that it had no legal obligation
to begin waste acceptance in 1998, in the absence of a repository or
other storage facility.  PSE&G's  contracts with DOE call for DOE to
begin accepting spent fuel from PSE&G in 1998.  On September 7, 1995,
PSE&G along with 24 other utilities and a combination of 48 States,
State regulatory agencies and municipal power agencies, filed a
lawsuit in the US District Court of Appeals for the District of
Columbia Circuit against the DOE to protect its contractual rights.

Form 10-K, Page 34, Paragraph 2
-------------------------------

    EDC and Columbia Gas Transmission Company (Columbia) were parties
to a long term contract for the sale by EDC of substantial volumes of
natural gas at above 1991 market prices.  In July 1991, Columbia filed
for protection from its creditors under Chapter 11 of the bankruptcy
laws.  Shortly after that filing, Columbia rejected the contract with
EDC and most of its other gas purchase contracts with producers,
leaving EDC and nearly 2000 other gas producers as unsecured creditors
in the bankruptcy proceeding. In April 1995, after extensive
litigation and proceedings involving the value of Columbia's estate
and the amount of each gas producer's claim, Columbia filed a Plan of

<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 
                   PART II.  OTHER INFORMATION (Continued)

Item 5.  Other Information - Concluded
------    -----------------------------

Form 10-K, Page 34, Paragraph 2 - Concluded
--------------------------------------------

Reorganization (Plan), which incudes a claim settlement among
Columbia's largest creditors, including EDC.  Under that settlement
and subject to the confirmation of the Plan, EDC estimates it would
receive approximately $35 million, before Federal income taxes.  The
Plan has been approved by the creditors and is currently awaiting
confirmation by the Bankruptcy Court.  While EDC expects that the Plan
will be confirmed, there is no assurance when or if the funds will be
received by EDC.  No income has been recognized from this anticipated
settlement.
<PAGE>
<PAGE>
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                   PART II.  OTHER INFORMATION (Concluded)

Item 6.   Exhibits and Reports on Form 8-K
------    --------------------------------

(a)  A listing of exhibits being filed with this document is as
follows:

     Exhibit
     Number                           Document
     -------       --------------------------------------------------
    10a(17)        Letter Agreement with Alfred C. Koeppe signed
                   August 23, 1995.

    12             Computation of Ratios of Earnings to Fixed
                   Charges plus Preferred Securities Dividend
                   Requirements (Enterprise).

     12(A)         Computation of Ratios of Earnings to Fixed
                   Charges (PSE&G).

     12(B)         Computation of Ratios of Earnings to Fixed
                   Charges plus Preferred Securities Dividend
                   Requirements (PSE&G).

     27 (A)        Financial Data Schedule (Enterprise).

    27 (B)         Financial Data Schedule (PSE&G).


(b) Reports on Form 8-K.

    Registrant               Date of Report        Item Reported
   --------------          -------------------     ----------------

Enterprise and PSE&G         10/17/95            Item 5. Other
                                                 Events (Nuclear
                                                 Operations -
                                                 Salem)



Enterprise and PSE&G         10/17/95            Item 5. Other
                                                 Events (Nuclear
                                                 Operations -
                                                 Salem)
<PAGE>
<PAGE> 
                 PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED 



                               SIGNATURES
                               ----------


    Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused these reports to be signed on
their respective behalf by the undersigned thereunto duly authorized. 




                          PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                          PUBLIC SERVICE ELECTRIC AND GAS COMPANY
                          --------------------------------------------
                                         (Registrants) 


                            By:           PATRICIA A. RADO
                                --------------------------------------
                                          Patricia A. Rado 
                                    Vice President and Controller
                                   (Principal Accounting Officer)



Date: November 14, 1995