Document:

Exhibit 10.4
                                                         Agenda Date:  6/22/05
                                                              Agenda Item:  2G

                  [THE GREAT SEAL OF THE STATE OF NEW JERSEY]
                           Board of Public Utilities
                               2 Gateway Center
                               Newark, NJ 07102
                              www.bpu.state.nj.us

IN THE MATTER OF THE PETITION OF PUBLIC
SERVICE ELECTRIC AND GAS COMPANY FOR A               )
BONDABLE STRANDED COSTS RATE ORDER IN                )
ACCORDANCE WITH N.J.S.A. 48:3-49 ET SEQ.; TO         )
AUTHORIZE THE RECOVERY OF ITS "YEAR 4" BASIC         )
GENERATION SERVICE ("BGS") TRANSITION COSTS          )
(INCLUDING FEDERAL, STATE AND LOCAL TAX              )
LIABILITIES ASSOCIATED THEREWITH); TO                )          OFFICE OF THE
AUTHORIZE THE IMPOSITION OF A NON-                   )           ECONOMIST
BYPASSABLE BGS TRANSITION BOND CHARGE; TO            )
AUTHORIZE THE ISSUANCE AND SALE OF NOT               )       BONDABLE STRANDED
MORE THAN $150 MILLION AGGREGATE PRINCIPAL           )        COSTS RATE ORDER
AMOUNT OF BGS TRANSITION BONDS IN ONE OR             )
MORE SERIES WITH A SCHEDULED AMORTIZATION            )         BPU DOCKET NO.
UPON ISSUANCE OF UP TO FIFTEEN (15) YEARS; TO        )           EF03070532
APPROVE THE USE OF TRANSITION BOND                   )
PROCEEDS TO REFINANCE OR RETIRE                      )
OUTSTANDING DEBT AND/OR EQUITY AND TO                )
APPROVE THE FORMULA FOR THE CALCULATION              )
AND ADJUSTMENT OF THE BGS TRANSITION                 )
BOND CHARGE AND THE BGS MARKET TRANSITION            )
CHARGE-TAX RELATED THERETO.                          )

                            (SERVICE LIST ATTACHED)

BY THE BOARD:

On July 9, 2003, Public Service Electric and Gas Company ("Petitioner" or
"PSE&G") filed a Petition with the Board of Public Utilities ("Board" or
"BPU"), pursuant to the Electric Discount and Energy Competition Act, N.J.S.A.
48:3-49 et seq., ("EDECA"), requesting that the BPU issue an irrevocable
Bondable Stranded Costs Rate Order ("BSCRO") for recovery of PSE&G's Basic
Generation Service ("BGS") Transition Costs incurred during the period ("Year
4") from August 1, 2002 through July 31, 2003 ("Year 4 Deferred BGS Balance"),
as well as related tax liabilities, and other related costs. Specifically,
Petitioner requested that the BPU authorize: (i) the imposition of a
non-bypassable Transition Bond Charge ("TBC"), as provided in N.J.S.A.

<PAGE>

48:3-67, and the collection of such charge (the "BGS Transition Bond Charge"
or "BGS TBC") by PSE&G or another entity approved by the Board; (ii) the
imposition of a non-bypassable BGS Market Transition Charge-Tax ("BGS
MTC-Tax") to recover the federal, state and local tax liabilities associated
with the receipt of revenue from billing the BGS Transition Bond Charge; (iii)
the sale of BGS Bondable Transition Property (as defined below) to an approved
financing entity; (iv) the issuance and sale of not more than $150 million
aggregate principal amount of transition bonds ("BGS Transition Bonds" or
"transition bonds") by the financing entity to recover PSE&G's net-of-tax Year
4 Deferred BGS Balance, as recorded on its books as of the end of the month
preceding the issuance of the BGS Transition Bonds, together with Upfront
Transaction Costs (as defined below) associated therewith; and (v) the formula
for the calculation and adjustment of the BGS TBC and BGS MTC-Tax to provide
for the recovery of the principal and interest on the BGS Transition Bonds and
related tax liabilities.

Petitioner asserts that the proceeds of the BGS Transition Bonds (net of
Upfront Transaction Costs as defined below) will be used by or on behalf of
PSE&G solely for the purpose of recovering its unamortized BGS Transition
Costs, through the refinancing or retirement of its debt or equity, or both,
including transactions completed prior to the date of and in anticipation of
the issuance of the BSCRO.

I. BACKGROUND AND PROCEDURAL HISTORY

Basic Generation Service is a regulated electric generation service provided,
pursuant to N.J.S.A. 48:3-57, to any electric utility customer that has not
chosen an alternative power supplier. N.J.S.A. 48:3-51. Since August 1, 1999,
the state's four electric public utilities ("electric distribution companies"
or "EDCs") have been responsible for the provision of BGS. BGS Transition
Costs are the amounts by which the payments by an EDC for the procurement of
BGS supply and related ancillary and administrative costs exceeded the net
revenues from the BGS charges established by the Board, pursuant to EDECA,
during the four-year Transition Period from August 1, 1999 through July 31,
2003 ("Transition Period"). Such payments include payments to suppliers made
by an EDC pursuant to a competitive procurement process for BGS supply during
the Transition Period and related administrative costs.

The Board's 1999 Summary and Final Restructuring Orders as to PSE&G(1)
(collectively, "Restructuring Orders") provided, among other things, that for
the first three years of the Transition Period, PSE&G would obtain its BGS
supply from the affiliated entity to whom it was transferring its generating
units at the pre-established BGS prices reflected in rates. The Restructuring
Orders further provided that PSEG's BGS supply for the fourth and final year
of the Transition Period (August 1, 2002-July 31, 2003) would be procured via
a competitive bidding process, and to the extent that its prudently incurred
BGS supply costs exceeded the pre-established BGS prices reflected in rates,
such costs would be subject to deferral and subsequent recovery with interest
at a Board-approved rate at the end of the Transition Period.

By Order dated June 6, 2001, the Board directed PSE&G and the other three New
Jersey EDCs to each file, by June 29, 2001, specific proposals to implement a
Request for Proposals ("RFP") process for Year 4 of the Transition Period.(2)
On June 29, 2001, the four EDCs filed a generic

__________________________

1 I/M/O Public Service Electric and Gas Company's Rate Unbundling, Stranded
Costs and Restructuring Filings, BPU Dkt. Nos. EO97090461 et seq. (July 24,
1999, August 24, 1999).

2 I/M/O the Provision of Basic Generation Service pursuant to the Electric
Discount and Energy Competition Act, N.J.S.A. 48:3-49 et seq. BPU Docket Nos.
EX01050303, EO01100654, EO01100655, EO01100656, and EO001100657 (June 6,
2001).

                                      2
<PAGE>

proposal, with individual company-specific addenda, recommending that BGS
supply be secured by means of a simultaneous, multi-round, descending clock
auction. By Order dated December 11, 2001, the Board approved a State-wide
auction process for obtaining BGS supply for Year 4 and directed New Jersey's
four EDCs, including PSE&G, to make compliance filings in response thereto. On
December 12, 2001, PSE&G made its compliance filing, which included, among
other things, a request for approval of its proposed accounting and cost
recovery for its Year 4 BGS costs, including, but not limited to, a
determination that: (i) the difference between its BGS revenue and BGS costs
would be deferred; (ii) interest on this deferral would be accrued pending
recovery at a rate equal to the yield on seven (7) year constant-maturity U.S.
Treasury notes plus 60 basis points; and (iii) there existed a presumption of
prudence with respect to the reasonableness of its Year 4 BGS supply costs. By
Letter Order dated December 14, 2001, the Board approved PSE&G's compliance
filing, including a presumption of prudence and reasonableness of its Year 4
BGS supply costs.

The Year 4 BGS auction was held in February 2002. By Order dated February 15,
2002, the Board certified the final results of the BGS auction in their
entirety and approved the closing price for each EDC, including PSE&G.

On August 28, 2002, PSE&G filed a petition to recover its deferred balances
("deferred balances case"), Docket No. ER02080604. In its petition, among
other things, PSE&G sought the recovery of its Year 4 Deferred BGS Balance.
PSE&G's deferred balances case was transmitted by the Board to the Office of
Administrative Law ("OAL"), and was consolidated with its petition for an
increase in its base rates for distribution service and other charges ("base
rate case"), Docket No. ER02050303, which had previously been transmitted to
the OAL for hearings. The Board retained independent auditors ("Auditors") to
perform an audit to verify the amount of PSE&G's deferred balances, including
its Year 4 Deferred BGS Balance. The Audit was to be performed in two phases,
the first phase covering the first three years of the Transition Period, and
the second phase (the "Phase II Audit") covering Year 4.

On September 9, 2002, amendments to EDECA were enacted (P.L. 2002, c.84),
which granted the Board the authority to permit the issuance of transition
bonds for the recovery of up to the full amount of an EDC's reasonably and
prudently incurred BGS Transition Costs, as defined in N.J.S.A. 48:3-51,
subject to certain criteria being met.

Public hearings in PSE&G's deferred balances case were held on December 10,
11, and 16, 2002. Evidentiary hearings were held on March 3, 5, and 6, 2003.
On June 6, 2003, the Administrative Law Judge ("ALJ") rendered an Initial
Decision for the Board's consideration, in which he adopted the terms of a
joint position among PSE&G and certain parties to the deferred balances case,
the base rate case and other proceedings that had been consolidated with these
cases ("June 6th Settlement Proposal"), which proposed to resolve all matters
in the consolidated dockets, including the deferred balances case. Exceptions
and Reply Exceptions to the Initial Decision were filed with the Board.

By Summary Order in Docket Nos. ER02050303 et al., dated July 31, 2003
("Summary Order"), the Board adopted, with significant modifications, the
Initial Decision and the non-unanimous June 6th Settlement Proposal. Among
other things, the Summary Order authorized PSE&G to recover through its
Non-Utility Generation Market Transition Charge ("NTC"), on an interim basis,
its projected Year 4 deferred BGS balance of $241.5 million, at an annual
amount of $28.1 million, subject to a true-up to reflect Petitioner's actual
Year 4 deferred BGS balance as of July 31, 2003, and to reflect the findings
of the Phase II Audit and a recalculation of interest, on a net-of-tax basis,
necessitated by such adjustments. If the deferred BGS balance was not

                                      3
<PAGE>

securitized by May 1, 2004, the interest rate for the interim period was to be
adjusted to reflect the two-year Treasury rate as of August 1, 2003, plus 60
basis points.

The Board issued a more detailed Final Decision and Order in the consolidated
dockets on April 22, 2004 ("Final Order"). The Final Order, which superseded
the Board's Summary Order, provided a fuller discussion of the issues, as well
as the reasoning in support of the Board's determinations.

After PSE&G filed the instant petition to securitize its Year 4 Deferred BGS
Balance, the Board issued an RFP, to secure a financial advisor to assist the
Board and its Staff in analyzing the petition, and fulfilling its statutory
responsibilities under EDECA with respect to the potential issuance of BGS
Transition Bonds. .After reviewing the submissions that were received, the
Board, at its April 2, 2004 public agenda meeting, chose Saber Partners, LLC
as its financial advisor ("Financial Advisor" or "FA"). To ensure that the
issuance of BGS Transition Bonds would produce maximum benefits for PSE&G's
customers, including the lowest transition bond charges consistent with market
conditions and the terms of this Bondable Stranded Costs Rate Order, the Board
determined that its Financial Advisor, under the supervision of Board Staff,
should participate directly and in advance with PSE&G and its underwriters in
all discussions and negotiations regarding the structuring, marketing, and
pricing of the BGS Transition Bonds. Notwithstanding the above, the Board,
acting through its designee pursuant to N.J.S.A. 48:3-62(c), retains ultimate
and final authority to approve or disapprove the proposed structuring,
marketing, and pricing of the BGS Transition Bonds and related transactions.

At a prehearing conference convened by Commissioner Frederick F. Butler, in
January 2005, the parties, PSE&G, Board Staff and the Division of the
Ratepayer Advocate ("Ratepayer Advocate" or "RPA") (collectively, "the
Parties"), agreed to a procedural schedule in this matter which was
memorialized in a January 18, 2005 letter from the Board's advising attorney,
Senior Deputy Attorney General Helene S. Wallenstein. By consent of the
parties, the procedural schedule was subsequently modified. PSE&G and the RPA
prefiled simultaneous direct testimony on March 15, 2005. PSE&G prefiled the
direct testimony of Morton A. Plawner, from PSE&G, and Wayne Olson, from
Credit Suisse First Boston LLC, the underwriter of the proposed bonds
(Exhibits PS-128 and PS-130, respectively). The Ratepayer Advocate prefiled
the direct testimony of its independent consultant Matthew I. Kahal. (Exhibit
RA-1).

On March 11, 2005, Petitioner published notice of the filing and of a public
hearing to be held on April 1, 2005 in Newark in newspapers circulated within
its electric service territory (Exhibit PS-126). Also on March 11, 2005,
Petitioner mailed copies of the newspaper notice to the clerks of the
municipalities, the clerks of the boards of chosen freeholders and the County
Executives in PSE&G's electric service territory (Exhibit PS-127).

A combined public and evidentiary hearing was conducted before Commissioner
Butler on April 1, 2005. No members of the public appeared at the public
hearing. At the hearing, Messrs. Plawner, Olson and Kahal testified. In
addition, Mr. Joseph Fichera of Saber Partners, LLC, the Financial Advisor to
the Board and its Staff in this matter, made a brief statement explaining the
role of the FA. (T79) An opportunity for cross-examination of the
above-referenced witnesses was provided. In addition, at the hearing, the
Board received into evidence all of the responses to requests for information
from Board Staff and the Ratepayer Advocate (Exhibits PS-1 to PS-123). At the
hearing, Commissioner Butler granted a request to reserve Exhibit PS-131 in
evidence for an update by PSE&G of its actual Year 4 BGS deferral balance as
of March 2005, which also was to be filed in its Quarterly 10-Q to the
Securities and Exchange Commission ("SEC") for the first quarter of 2005.

                                      4
<PAGE>

On or about April 12, 2006, PSE&G and the Ratepayer Advocate filed initial
comments. On April 25, 2005, PSE&G filed reply comments. On May 6, 2005, PSE&G
filed the reserved Exhibit PS-131, which was the updated response to data
request S-PSEG-INF-4 REVISED 5/5/05, containing the monthly accumulated Year 4
BGS deferred balances with actual data through March 2005 and estimated data
through June 2005. Based on Exhibit PS-131, it appears that PSE&G's net of tax
balance on an actual basis through March 31, 2005 was approximately $115
million which was also the amount reported to the SEC in PSE&G's Quarterly
Form 10-Q Report for the quarter ended March 31, 2005. To the above-mentioned
$115 million deferred balance, PSE&G added estimated Upfront Transaction Costs
of $2.7 million and requested authority to issue up to $118 million of
securitization bonds.

II. THE PROPOSED TRANSITION BOND TRANSACTION

     a. Proposed Structure-Overview

A general description of the Transition Bond Transaction structure, as
proposed by PSE&G in its Petition and Testimony follows. This proposed
structure is subject to modification, subject to the terms and conditions of
this Order, and depending on the requirements of tax authorities, input from
the Board's Financial Advisor, input from underwriters in conjunction with the
marketing of the Transition Bonds, and input from the rating agencies selected
to assign credit ratings to the Transition Bonds. Pricing of the Transition
Bonds will be determined by PSE&G in consultation with the underwriters and
the Financial Advisor subject to ultimate and final approval by the Designee
of the Board (the "Designee"), pursuant to the requirements of EDECA. The
structure and terms of the Transition Bond Transaction will be fixed based on
such approved pricing.

Pursuant to N.J.S.A. 48:3-62(a), N.J.S.A. 48:3-62(c) and N.J.S.A. 62(g),
Petitioner seeks the issuance of a BSCRO, authorizing it to securitize the
unamortized balance of its Year 4 Deferred BGS Balance, net of tax, together
with its reasonable costs incurred in issuing the BGS Transition Bonds,
including the Financial Advisor's fees ("Upfront Transaction Costs").
Petitioner requests that the BSCRO provide, among other things, for: (I) the
imposition of BGS Transition Bond Charges by Petitioner or another entity
approved by the Board; (2) the imposition of related BGS MTC-Tax charges to
recover federal, state and local tax liabilities associated with the revenue
received from billing the BGS Transition Bond Charges; (3) the sale of BGS
Bondable Transition Property (as defined below), together with related rights,
to a bankruptcy-remote, special purpose financing entity ("SPE"); (4) the
issuance and sale of BGS Transition Bonds by the SPE, in the amount approved
by the Board, the proceeds of which are to be applied to the recovery of the
unamortized balance of Petitioner's net-of-tax Year 4 BGS deferred balance,
together with Upfront Transaction Costs associated therewith; and (5) approval
of the formula for the calculation and adjustment of BGS Transition Bond and
the BGS MTC-Tax charges to assure recovery of the principal and interest on
the BGS Transition Bonds and related tax liabilities. Petitioner requests that
adjustments to the BGS MTC-Tax be made in the same manner and at the same time
as the BGS TBC is adjusted.

N.J.S.A. 48:3-62(c)(3) provides that the Board may authorize the issuance of
transition bonds for the recovery of up to the full amount of an EDC's
reasonably and prudently incurred BGS Transition Costs based on the criteria
that such amount will produce benefits to ratepayers, including the
achievement of the lowest BGS transition bond charges consistent with market
conditions and the terms of the BSCRO. The net proceeds of the transition
bonds must be used by or on behalf of the EDC solely for the purpose of
reducing the amount of BGS Transition

                                      5
<PAGE>

Costs through the refinancing or retirement of electric public utility debt or
equity or both. N.J.S.A. 48:3-62(a).

N.J.S.A. 48:3-62(g) provides that an EDC may make a filing to request the
Board to authorize the issuance of BGS Transition Bonds and to issue a BSCRO
for the recovery of BGS Transition Costs. After notice and the opportunity for
hearing, the Board may render a determination authorizing the issuance of BGS
Transition Bonds if the statutory criteria are met. Prior to such bonds being
issued, after the structure and pricing of the bonds are known, the Board's
Designee must certify that the structure and pricing of the BGS Transition
Bonds assure the lowest transition bond charges consistent with market
conditions and the terms of the BSCRO. Such certification, when made by the
Board's Designee after the pricing of the bonds, is final and uncontestable as
of its date. Id.

On September 17, 1999, the Board issued an Order in Docket No. EF99060390 (the
"1999 BSCRO"), authorizing PSE&G to recover a portion of its stranded
generation costs, pursuant to N.J.S.A. 48:3-62(b) and (c), through the
issuance and sale of up to $2.525 billion aggregate principal amount of
Transition Bonds by a special purpose financing subsidiary of Petitioner. The
1999 BSCRO also authorized the sale of Bondable Transition Property, as
defined by EDECA, and the imposition of a non-bypassable TBC and MTC-Tax, and
approved a formula for the calculation and adjustment thereof. On January 31,
2001, Petitioner sold its right, title and interest in the Bondable Transition
Property to PSE&G Transition Funding, LLC ("Transition Funding"), a special
purpose, bankruptcy remote subsidiary of Petitioner formed for such purpose,
and Transition Funding issued and sold $2.525 billion of its Transition Bonds,
Series 2001-1 in payment therefore (the "1999 Transition Bond Transaction").
PSE&G asserts that the structure and terms and conditions for which approval
is requested in this Petition are substantially similar to those approved by
the Board in the 1999 BSCRO. The Board emphasizes, however, that its
experience with BSCROs has been evolving since 1999, and that numerous BSCROs
have been issued for other EDCs in the interim period. Thus, the Board's
review of this Petition is a de novo review, and its Order in this matter will
address the specifics of this Petition, as spelled out and discussed in this
Order, and the record developed in this case, without reference to, or
reliance upon, the 1999 BSCRO.

PSE&G asserts that the entire amount of the net proceeds received from the
issuance of the BGS Transition Bonds shall be used to refinance or retire its
outstanding debt or equity or both. Petitioner will account to the Board for
the use of the net proceeds, so as to assure that the entire savings from the
bond issuance is passed on to Petitioner's electric customers, in accordance
with N.J.S.A. 48:3-62(a).

     b. Proposed Structure of the Transition Bonds Transaction

PSE&G asserts that the structure of the BGS Transition Bonds proposed in its
Petition is subject to modification, depending upon the requirements of the
taxing authorities, and input from underwriters in connection with the
marketing of the BGS Transition Bonds and credit rating agencies selected by
Petitioner to assign ratings to the BGS Transition Bonds. This proposed
structure is also subject to modification, depending upon input from the
Board's Financial Advisor, and subject to the terms and conditions of this
Order. Petitioner asserts that the proposed structure is intended to minimize
debt service costs and correspondingly maximize ratepayer savings by obtaining
the best possible rating for the BGS Transition Bonds as asset-backed
securities ("ABS").

                                      6
<PAGE>

PSE&G requests authority to securitize its net-of-tax Year 4 Deferred BGS
Balance, as of the end of the most recent quarter for which financial
information is publicly available with the SEC, as well as its Upfront
Transaction Costs, as described more fully in Section (c) below. Petitioner
also seeks to recover in the BGS TBC the principal and interest on the BGS
Transition Bonds, together with the costs of paying, administering and
servicing, credit enhancing and over-collateralizing the BGS Transition Bonds
("Ongoing BGS Transition Bond Costs" as more fully described in Section (d)
below), and in the BGS MTC-Tax, all federal and state tax liabilities
associated with the BGS Transition Costs and the collection of the BGS TBC
(the "Tax Component"), as more fully described herein. Petitioner requests
authority to use the proceeds of the BGS Transition Bonds to recover its BGS
Transition Costs, plus Upfront Transaction Costs. PSE&G proposes that the BGS
Transition Bond Charge be a separate, non-bypassable charge assessed and
collected from all its customers and/or the customers of any successor
distribution company within its service territory as such service territory
exists as of the date of this Petition, except as provided in N.J.S.A.
48:3-77.

Petitioner asserts that the principal asset securing the BGS Transition Bonds
will be the BGS Bondable Transition Property created pursuant to the BSCRO.
Petitioner asserts that pursuant to N.J.S.A. 48:3-65, this BSCRO and the BGS
Transition Bond Charges authorized hereby will become irrevocable upon this
Order becoming effective in accordance with its terms, upon certification by
the Designee, and upon written consent of Petitioner, pursuant to N.J.S.A.
48:3-68, and that after it becomes effective, this BSCRO cannot be rescinded,
altered, repealed, modified or amended by the Board or any other governmental
entity;, nor impaired by the State of New Jersey, pursuant to N.J.S.A.
48:3-66.

Petitioner asserts that it will form a new, non-utility, bankruptcy-remote
special-purpose entity, wholly owned by PSE&G and that it will provide the
initial capitalization of such SPE. Petitioner states that it will sell the
BGS Bondable Transition Property (as herein defined) to the SPE in a
transaction which, under N.J.S.A. 48:3-72, will be a legal true sale and
absolute transfer to such SPE, and that the SPE will constitute a "financing
entity" as defined in N.J.S.A. 48:3-51.

Petitioner proposes that, in order to raise the funds to pay the purchase
price of the BGS Bondable Transition Property to PSE&G, the SPE will issue and
sell BGS Transition Bonds, the net proceeds of which will be remitted to
Petitioner. The SPE will issue and sell, as asset-backed securities, the BGS
Transition Bonds in one of the following ways: 1) as a negotiated fully
underwritten public sale in a fully underwritten limited public offering; 2)
in a private placement; or 3) in a limited public offering under Rule 144A of
the Securities and Exchange Commission. PSE&G asserts that all prior
securitizations of utility stranded costs or BGS Transition Costs in New
Jersey, including its 1999 Transition Bond Transaction, have been or are
proposed to be structured as ABS and sold on a negotiated basis. To the extent
that it may be more effective to market the BGS Transition Bond Transaction as
a private placement or as a limited public offering under Rule 144A of the
SEC, Petitioner indicates that it will do so. Petitioner asserts that the
expertise of an underwriter is critical to the structuring, pricing and
marketing of securities in the ABS market, and, accordingly, that such
underwriter(s) will be engaged to perform these functions, subject to the
approval of the Board, acting through its designated Staff with input from the
Financial Advisor.

Petitioner asserts that all of the assets of the SPE, including, without
limitation, the BGS Bondable Transition Property and the other collateral of
the SPE (the "Other SPE Collateral"), will be pledged as collateral to secure
the BGS Transition Bonds. Petitioner asserts that the Other SPE Collateral may
include (without limitation): (1) the rights of the SPE under the BGS
Transition Bond Transaction documents, including a sale agreement by which the
SPE acquires

                                      7
<PAGE>

the Bondable Transition Property and receives certain indemnification from the
Petitioner; (2) a servicing agreement by which Petitioner or any successor in
that capacity acts as servicer of the Bondable Transition Property and is
responsible for the related billing of the BGS TBC and BGS MTC-Tax (the
"Servicer"); (3) an agreement by which the SPE will be administered; (4)
various trust accounts of the SPE in which pledged funds of the SPE, will be
deposited; (5) any investment earnings on amounts held by the Bond Trustee;
(6) the equity capital of the SPE; and (7) any hedging agreements entered into
in connection with any variable rate bonds.

In its Petition, PSE&G requested that the Board approve the issuance of BGS
Transition Bonds with a scheduled amortization not exceeding 15 years at the
time of issuance, as permitted by N.J.S.A. 48:3-62(d), and with a final legal
maturity beyond such scheduled maturity in order to minimize
overcollateralization requirements and enhance the prospects of securing the
highest possible credit rating for the BGS Transition Bonds. Petitioner
subsequently agreed to a scheduled amortization not to exceed 10 years at the
time of issuance, with final legal maturities of up to 12 years, if required
to obtain the highest possible credit ratings for the BGS Transition Bonds.
Petitioner proposes to assign portions of the bonds different maturities
(called "tranching") to permit investors to select their preferred investment
term. Petitioner asserts that this should result in lower interest costs and
thus provide a benefit to ratepayers. Petitioner further requests that the
duration of the BGS MTC-Tax be identical to the duration of the BGS Transition
Bond Charge.

     c. Recovery of Upfront BGS Transaction Costs

Petitioner asserts that, in order to issue the BGS Transition Bonds and to
produce benefits for its customers, it will incur Upfront Transaction Costs.
Upfront Transaction Costs include, among other items, the underwriting spread,
marketing expenses, advisory fees, rating agency fees, accounting fees, any
SEC registration fees (assuming a registered public offering), printing and
marketing expenses, trustees' fees, legal fees, the servicer set-up fee and
the administrative cost of forming the SPE. Based on a then-estimated offering
of $150 million of BGS Transition Bonds, Petitioner testified at the Friday,
April 1, 2005 hearing that Upfront Transaction Costs of approximately $2.7
million would be incurred, which amount may vary, in part, based on the
factors described below. (Exh. P-65).

Petitioner requests authority to recover the Upfront Transaction Costs from
the proceeds of the sale of the BGS Transition Bonds, as authorized by
N.J.S.A. 48:3-64, and asserts that the right to recover such amounts is
conveyed by the BGS Bondable Transition Property. BGS Transition Bond proceeds
will be set aside by Petitioner to pay Upfront Transaction Costs, exclusive of
underwriters' discount, which will be netted from the proceeds of the bonds.
Petitioner asserts that actual Upfront Transaction Costs will depend upon,
among other variables, whether the bonds are registered with the SEC, how many
credit ratings are obtained, final legal and trustee costs, and final
compensation of the Board's Financial Advisor. Petitioner proposes to credit
back to ratepayers any excess bond proceeds set aside to pay Upfront
Transaction Costs and not applied for such purpose or to the recovery of
PSE&G's Year 4 Deferred BGS Balance within 12 months of the bond issuance
date. To the extent prior payment of such costs is made by Petitioner,
Petitioner will be reimbursed from the proceeds of the BGS Transition Bonds.

     d. Recovery of Ongoing BGS Transition Bond Costs

Petitioner requests recovery of the Ongoing BGS Transition Bond Costs through
the BGS TBC. Petitioner asserts that the primary Ongoing BGS Transition Bond
Costs are the principal and

                                      8
<PAGE>

interest on the BGS Transition Bonds. Other Ongoing BGS Transition Bond Costs
include the servicing fee of .05% of the initial principal amount of the
Transition Bonds (the "Servicing Fee") paid to PSE&G as the Servicer (as
defined below), or such higher fee (of up to 1.25%) as may be payable to a
successor Servicer subject to Board approval(1), and the ongoing cost of any
credit enhancement and overcollateralization authorized in this BSCRO.

Petitioner asserts that there will be a small amount of additional Ongoing BGS
Transition Bond Costs, i.e., an administration fee, legal and accounting fees,
directors' or managers' fees, rating agency fees, and trustee fees, an
accounting of which will be provided to the Board. Ongoing BGS Transition Bond
Costs may also include the net costs of any hedging arrangements entered into
in connection with any variable rate BGS Transition Bonds. Petitioner asserts
that such costs are "bondable stranded costs" pursuant to N.J.S.A. 48:3-51,
and that the right to recover these costs is conveyed by the BGS Bondable
Transition Property. Thus, PSE&G contends that these costs are includable in
the BGS TBC in accordance with N.J.S.A. 48:3-64.

     e.   Approval of Final Terms and Conditions: BGS Transition Bond
          Transaction

Pursuant to the amendments to EDECA, the Board may authorize the issuance of
transition bonds for the recovery of up to the full amount of an EDC's
reasonably and prudently incurred BGS transition costs, based on the criteria
that such amount will produce benefits for customers of the EDC, which include
the lowest transition bond charges consistent with market conditions and the
terms of the BSCRO. N.J.S.A. 48:3-62 (c) (3). After the pricing of the BGS
Transition Bonds, when the final terms and pricing are known, in order for the
transaction to proceed, the Board or its Designee must approve the final terms
and conditions of the BGS Transition Bonds, and must certify that the
structure and pricing of the BGS Transition Bonds assure that PSE&G's
customers will pay the lowest BGS TBC consistent with market conditions and
the terms of the BSCRO. N.J.S.A. 48:3-64(a)(3).

In order to assure that the Board and its Designee have all the information
that they deem necessary to fulfill their statutory mandates, Petitioner will
fully cooperate with and promptly provide any requested information to the
Board's Designee, Board Staff and the Financial Advisor. On the day the BGS
Transition Bonds are priced, Petitioner will file with the Board's Designee a
Pricing Advice Certificate in the form of Appendix D attached to this Order.

Within one business day of the Designee's receipt of the Pricing Advice
Certificate, the Designee will also receive a certification from the Financial
Advisor in a form acceptable to the Designee. In addition, the Designee, upon
the advice of the Financial Advisor, shall receive such certifications from
the underwriters as the Designee, upon the advice of the FA, shall deem
necessary. Petitioner requests that after the Board's Designee has reviewed
the filed Pricing Advice Certificate and other certifications required by the
Designee (at the time of the pricing of the BGS Transition Bonds and as
described herein or at such other time as directed by the Designee), and finds
them to be satisfactory, the Board's Designee file with the Board a
Certification stating that the structure and pricing of the Transition Bonds
assures that Petitioner's customers will pay the lowest BGS Transition Bond
Charges consistent with market conditions and the terms of this Order. The
proposed Certification by the Designee would also approve the terms and
conditions of the BGS Transition Bonds, including scheduled amortizations of
up to 10 years and final legal maturities of up to 12 years, if required to
obtain

____________________

(1) Pursuant to N.J.S.A. 48: 3-71 (f), the Board may, at its discretion,
establish criteria for the selection of any entity that may become a servicer
of bondable transition property upon default or the adverse material change in
financial condition of the electric public utility.

                                      9
<PAGE>

the highest possible credit ratings for the BGS Transition Bonds; semi-annual
or quarterly payments on the BGS Transition Bonds, depending upon input from
rating agencies and the FA, tax considerations and market conditions at the
time of the pricing of BGS Transition Bonds; and the structuring of debt
service on the BGS Transition Bonds upon issuance, so that the sum, for each
annual period, of the Periodic Payment Requirement (as defined below) and the
associated BGS MTC-Tax collections will be substantially equal.

     f. BGS Transition Bond Charge

Upon the issuance of the BGS Transition Bonds, Petitioner will include the BGS
TBC in its charges to ratepayers. Petitioner asserts that the right to recover
the BGS TBC will constitute separate Bondable Transition Property and for
purposes of Petitioner's tariff will be separate and distinct from the
Transition Bond Charge authorized by the Board's 1999 BSCRO. PSE&G proposes
that the TBC from the 1999 BSCRO and the BGS TBC be combined for customer
billing and administrative purposes, but such amounts will be separately
recorded on its books pending payment to the Trustee. Similarly, PSE&G
proposes that the MTC-Tax from the 1999 BSCRO and BGS MTC-Tax be combined for
administrative and billing purposes.

Petitioner asserts that, from time to time, the BGS TBC will be reset by a
formula to a level intended to recover the sum of the Ongoing BGS Transition
Bond Costs, including, without limitation: (i) the principal of (in accordance
with the Expected Amortization Schedule approved by the Designee after the
pricing of the BGS Transition Bonds), and interest on, the BGS Transition
Bonds authorized by the Board pursuant to this Order; (ii) the costs of
administering the SPE; (iii) the costs of servicing the BGS Transition Bonds,
including servicing and trustee fees, expenses and indemnities; (iv) amounts
required to fund or replenish the overcollateralization account in accordance
with overcollateralization schedule approved at pricing of the BGS Transition
Bonds, including the reimbursement of any amounts drawn from the capital
account; and (v) the ongoing expenses of any other credit enhancement
agreement, including any amount or termination payment that might become due
and payable by the SPE as a result of any interest hedging agreement entered
into in connection with floating rate BGS Transition Bonds, if issued. The
required periodic payment of all such amounts, including deficiencies on past
due amounts for any reason, is hereinafter referred to as the "Periodic
Payment Requirement" and the total of such requirements, until paid in full,
the "Total Payment Requirement."

Petitioner proposes that the BGS MTC-Tax be adjusted at the same time and
substantially in the same manner as the BGS TBC, to recover all taxes incurred
in billing the BGS TBC. Petitioner proposes that the formula used to adjust
the BGS TBC and the MTC-Tax consider assumptions as may need to be adjusted
from time to time, including but not limited to energy sales forecasts,
customer payment and charge-off patterns, defaults by third party suppliers
(as described herein), the Periodic Payment Requirement and, with respect to
the MTC-Tax, the applicable state and federal income tax rates in effect from
time to time.

Petitioner requests that the BGS Transition Bond Charges remain in effect
until the owner of the BGS Bondable Transition Property (the SPE) has received
sufficient funds from BGS Transition Bond Charges to discharge the Total
Payment Requirement, and that the BGS-Tax remain in effect until all
associated tax liabilities have been recovered.

Petitioner proposes that the TBC from the 1999 BSCRO and the BGS-TBC, together
with their related MTC-Tax charges, be combined on each non-residential
customer's bill as a single separate line item. For residential customers, the
two TBCs, together with their related MTC-Tax

                                      10
<PAGE>

charges would be combined with the customer's electric distribution charges as
a single item. All bills would, in addition, contain in text or in a footnote
that such combined charges represent Bondable Transition Property sold
pursuant to the 1999 BSCRO and BGS Bondable Transition Property sold pursuant
to this BSCRO, and that such property is being collected by Petitioner on
behalf of the SPEs, as owners of their respective Bondable Transition
Property.

     g. Periodic Adjustments to the BGS Transition Bond Charge and MTC-Tax

N.J.S.A. 48:3-64(b) requires a BSCRO to provide for mandatory periodic
adjustments by the Board of the BGS TBC ("True-Up Mechanism") upon petition of
the affected EDC, its assignee or financing entity, to conform the transition
bond charges to the schedule of payments and principal and interest on the
transition bonds previously approved by the Board or its Designee pursuant to
N.J.S.A. 48:3-64(a). Such periodic formulaic adjustments must be made at least
annually. PSE&G asserts that, as Servicer under the Servicing Agreement, it
will be responsible for filing documentation with the Board for any necessary
periodic adjustments which it may request the Board to authorize pursuant to
this BSCRO. PSE&G as servicer under the Servicing Agreement and any lawful
successor to PSE&G as servicer is hereinafter referred to as the "Servicer."

Although Petitioner expects to file for annual adjustments, it also requests
authorization to file more frequently than annually, i.e., quarterly, if
necessary for credit rating purposes. Under N.J.S.A. 48:3-64(b), the Servicer
shall propose such an adjustment in a filing with the Board made at least 30
days in advance of the date upon which the adjustment is requested to become
effective. Petitioner proposes that any such proposed adjustment shall become
effective on an interim basis on such date and shall become final 60 days
thereafter, absent a Board Order to the contrary finding a manifest error (an
arithmetic error evident on its face).

Petitioner also requests that the Board authorize periodic adjustments of the
BGS MTC-Tax. Such adjustments would be made at least annually to reconcile the
revenue received for income taxes to the income taxes required to be paid on
the taxable net revenue received from billing the BGS Transition Bond Charges.
Petitioner requests that the adjustments be made at the same time and in the
same manner as set forth in the True-Up Mechanism for BGS Transition Bond
Charges, in order to assure receipt of sufficient funds to recover tax
liabilities incurred in billing the BGS Transition Bond Charges. Petitioner
also requests that, upon its petition, the BGS MTC-Tax be adjusted based upon
assumptions described in the formula described herein, as those assumptions
are adjusted from time to time in accordance with the formula described
herein. (See Attachment 3a to Appendix F.) Petitioner asserts that a delay in
the periodic adjustment of the BGS MTC-Tax will not in any way adversely
affect or delay implementation of the periodic adjustment of the BGS
Transition Bond Charge described in the preceding paragraph.

Petitioner also requests authorization to petition the Board for permission to
make "non-routine" adjustments, to accommodate changes to the formula
described herein, if deemed appropriate by Petitioner to remedy a significant
and recurring variance between actual and expected BGS Transition Bond Charge
collections. Petitioner states that any such filing would have to be made at
least 90 days prior to the proposed effective date, and could not be
implemented without prior written Board approval.

Petitioner asserts that it intends to make routine annual and quarterly
true-up filings for the BGS TBC and BGS MTC-Tax. Currently, pursuant to the
1999 BSCRO, Petitioner will file for

                                      11
<PAGE>

adjustments annually through December 1, 2014, and will file quarterly
thereafter commencing March 1, 2015.

     h. Remittance of BGS Transition Bond Charges

Petitioner proposes to remit, in its capacity as Servicer, at least monthly,
to the BGS Transition Bond trustee ("Bond Trustee") the revenue received from
billing BGS Transition Bond Charges, based on the collection methodology
described by Petitioner. Petitioner asserts that this methodology is similar
to that approved in the 1999 BSCRO; however, Petitioner proposes that, in the
instant case, if collections are remitted less frequently than daily,
Petitioner will credit ratepayers, not less frequently than annually, with an
amount equal to the earnings (calculated using the average daily federal funds
rate during the monthly remittance period) on the average daily balances of
such collections to (but not including) the remittance date to the Trustee.
Petitioner asserts that, as Servicer, it will receive the BGS Transition Bond
Charge collections daily and, as authorized by N.J.S.A. 48:3-64(e), it may
commingle BGS Transition Bond Charge collections with the 1999 Transition Bond
Charge collections and with other customer payments until the remittance date
to the Bond Trustee.

Petitioner proposes that BGS Transition Bond Charge collections from each
customer will be applied first to the payment of the New Jersey Sales and Use
Tax, which Petitioner will collect for remittance to the State and not for its
own account or that of the SPE, and which are not "charges" for purposes of
the following allocations, then to charges in arrears, if any, and then to
current charges. With respect to each billing period, partial payments of
charges will be allocated to the Transition Bond Charges for all series of
Transition Bonds, to the MTC-Tax and to the Petitioner's other charges, pro
rata, based on the proportions that the aggregate Transition Bond Charges, the
related MTC-Tax and the Petitioner's other charges bear to the total charges
collected. Partial payments of Transition Bond Charges will be allocated to
the owners of Bondable Transition Property, pro rata, based on the proportions
that the Transition Bond Charge representing the Bondable Transition Property
created under the 1999 BSCRO, the BGS Transition Bond Charges created under
this BSCRO and any Transition Bond Charges created pursuant to other
subsequent financing orders bear to the total Transition Bond Charges
collected.

Petitioner asserts that the Bond Trustee will retain BGS Transition Bond
Charge collections received from Petitioner, as Servicer, until the Bond
Trustee makes scheduled principal and interest payments and all servicing fees
and ongoing expense payments to the appropriate parties. These distributions
are expected to be made on a quarterly or semi-annual basis. Petitioner
further states that the Bond Trustee will hold all BGS Transition Bond Charge
collections received between the remittance date and distribution date in a
collection account, and will invest the funds in the collection account in
investment grade short-term securities that mature on or before the next
distribution date. The investment income earned in the trust accounts held by
the Bond Trustee may be used to satisfy currently scheduled interest and
principal payments on the BGS Transition Bonds and related expenses, to
distribute to the SPE (as a return on equity) an amount equal to interest
earnings on the capital account and to satisfy scheduled overcollateralization
amounts. Any earnings in excess of required amounts in such trust accounts (or
required to be remitted to the SPE as a return on equity) will reduce the BGS
TBC through the True-Up Mechanism.

Petitioner proposes that, upon retirement of all outstanding BGS Transition
Bonds and any related Ongoing BGS Transition Bond Costs, any remaining amounts
held by the Bond Trustee will be released to the SPE. At that time,
Petitioner's equity in the SPE (and any investment

                                      12
<PAGE>

earnings thereon) may be distributed to Petitioner, and Petitioner will credit
an amount equal to any overcollected BGS TBC, less any amount of any unpaid
MTC-Tax, to its customers against their distribution charges, or in such other
manner as determined by the Board.

     i. Credit Enhancement

Petitioner proposes that the BGS Transition Bond documents incorporate the
True-Up Mechanism authorized by N.J.S.A. 48:3-64(b), as described above, and
overcollateralization amounts or other means of credit enhancement as required
by the rating agencies or taxing authorities, as approved by the Board or its
Designee.

Petitioner proposes that the BGS TBC be set to collect an
overcollateralization amount over time in addition to the principal (in
accordance with the expected amortization schedule) and interest payable on
the BGS Transition Bonds and the other Ongoing BGS Transition Bond Costs.
PSE&G proposes that it be permitted to determine the overcollateralization
amount needed to satisfy the rating agencies, with input from the rating
agencies and taxing authorities prior to the time BGS Transition Bonds are
priced, subject to the approval of the Designee. As with other components of
the BGS TBC, the overcollateralization component will be incorporated into
each periodic adjustment to the extent necessary using the True-Up Mechanism.

Petitioner asserts that customers will receive credit against other rates then
in effect equal to the amount of any collateral remaining after satisfaction
of the Total Payment Requirement less any amount of any unpaid MTC-Tax charges
(and after return of Petitioner's equity, together with interest earnings
thereon). As a result, overcollateralization will not reduce customer benefits
from the BGS Transition Bond Transaction.

     j. Formation of the SPE

Petitioner proposes that a new SPE be formed prior to the issuance of the BGS
Transition Bonds as a wholly-owned, non-utility special purpose subsidiary of
PSE&G. The SPE is expected to be a limited liability company.

Petitioner asserts that the fundamental organizational documents of the SPE
will impose significant limitations upon the activities of the SPE and the
ability of Petitioner to take actions as the holder of the equity interest
therein. For example, the SPE will be formed for the limited purpose of
acquiring the BGS Bondable Transition Property and Other SPE Collateral and
issuing and selling the BGS Transition Bonds. It will not be permitted to
engage in any other activities, and will have no assets other than the BGS
Bondable Transition Property (as defined below) and the Other SPE Collateral.
If rating agency criteria permit, there may only be one independent manager of
the SPE.

     k. BGS Bondable Transition Property

Consistent with the definition in N.J.S.A. 48:3-51, Petitioner's bondable BGS
transition property (the "BGS Bondable Transition Property") will consist of:
(1) the irrevocable right to charge, collect and receive, and be paid from
collections of BGS Transition Bond Charges the amount necessary to provide for
the full recovery of the Total Payment Requirement; (2) all rights of
Petitioner under this BSCRO, including without limitation, all rights to
obtain periodic adjustments of the BGS TBC pursuant to the True-Up Mechanism;
and (3) all revenues, collections, payments, money and proceeds arising under,
or with respect to, all of the BGS

                                      13
<PAGE>

Transition Bond Charges. Pursuant to N.J.S.A. 48:3-65 and 48:3-71, upon
receipt of payment for the BGS Bondable Transition Property by the Petitioner
from the SPE, the BGS Bondable Transition Property will constitute a vested,
presently existing property right which will continuously exist as property
for all purposes until the bonds are paid as provided in EDECA and this Order,
whether or not the revenues and proceeds arising with respect thereto have
accrued, and notwithstanding the fact that the value of the property right may
depend upon consumers using electricity or the Servicer performing services;
and the validity of any sale, assignment or other transfer of the BGS Bondable
Transition Property will not be defeated or adversely affected by the
commingling with the other funds of Petitioner the revenues received on
account of the BGS Bondable Transition Property.

     l. Sale of BGS Bondable Transition Property to SPE

Petitioner requests that the Board approve the sale of the BGS Bondable
Transition Property to the SPE in a transaction which, under N.J.S.A. 48:3-72,
will be a legal true sale and absolute transfer to the SPE, notwithstanding
any other characterization for tax, accounting or other purposes. Petitioner
proposes that the SPE will have the right, among others, to exercise, through
Petitioner or its successor electric public utility, any and all rights and
remedies to collect any amounts payable by any customer with respect to the
BGS TBC and related BGS MTC-Tax. For that purpose, the SPE will have the right
to direct PSE&G or any successor utility to shut off electric power to the
extent permitted in accordance with law and any applicable regulations and
Board Orders. The SPE and other third parties, however, will not have any
right to exercise any direct control over the distribution and transmission
system of PSE&G or any successor electric public utility.

The Petitioner notes that the agreement in connection with the sale and
transfer of the BGS Bondable Transition Property to the SPE will include
representations and warranties with respect to, among other things, the
validity of this Order, the BGS Bondable Transition Property and the title
thereto, and will provide specific covenants and indemnities in connection
with such transfer for the benefit of the holders of BGS Transition Bonds.

     m. Issuance of BGS Transition Bonds

Petitioner requests that the Board approve the issuance of BGS Transition
Bonds by the SPE. Petitioner asserts that the holders of the BGS Transition
Bonds will, by the terms of the BGS Transition Bonds, have recourse only to
the SPE's credit and assets, and that the BGS Transition Bonds will be secured
only by a pledge of all of the rights, title and interest of the SPE in its
BGS Bondable Transition Property and Other SPE Collateral. Petitioner notes
that the BGS Transition Bonds may be issued in series and classes with
different terms.

     n. Non-Bypassable BGS Transition Bond Charge

Pursuant to N.J.S.A. 48:3-67, the BGS Transition Bond Charges established by
the Board in this BSCRO will be non-bypassable and will be assessed against
and collected from all customers of PSE&G or any successor electric public
utility, except as provided in N.J.S.A. 48:3-77, within PSE&G's electric
service area (as such service area exists as of the date of this Order), until
the Total Payment Requirement is discharged in full. The BGS Transition Bond
Charge will apply equally to each customer, regardless of class, based on the
amount of electricity delivered to the customer through the transmission and
distribution system of PSE&G or any successor electric public utility that may
take over all or a portion of PSE&G's electric service area, including
electricity sold to customers by any third party supplier ("TPS"), as

                                      14
<PAGE>

described below. With respect to on-site generation, N.J.S.A. 48:3-77(b)
provides that the BGS TBC will not be imposed on the electricity sold solely
to the on-site customer of an on-site generator. However, N.J.S.A. 48:3-77(c)
provides that the BGS-TBC shall be imposed on the generation from on-site
generation facilities to the extent that on-site generation from facilities,
installed subsequent to July 31, 1999, has displaced customer purchases from
an EDC by an amount such that the kilowatt hours distributed by the electric
public utility have been reduced to an amount equal to 92.5 percent of the
1999 kilowatt hours distributed by the EDC.

     o. Third Party Suppliers

Petitioner asserts that the billing, collection and remittance of BGS
Transition Bond Charges by a third party supplier may increase the risk of
shortfalls in the BGS Transition Bond Charge and BGS MTC-Tax collections due
to a potential default, bankruptcy or insolvency of the TPS. It asserts that
this could increase risks to investors, potentially increasing the required
credit enhancement or reducing the credit rating of the BGS Transition Bonds,
thereby potentially increasing the rate of interest on the BGS Transition
Bonds that would be required by investors, and ultimately the BGS Transition
Bond Charge and BGS MTC-Tax. In order to mitigate these alleged risks, satisfy
rating agency concerns and minimize the cost to ratepayers, PSE&G proposes
that all TPSs should be required to comply with the billing, collection and
remittance procedures and information access requirements set forth below.
Petitioner requests that the Board only authorize a TPS to bill and collect
the BGS Transition Bond Charge and associated BGS MTC-Tax with respect to
power sold by it for remittance to the Servicer if: (1) such TPS agrees to
remit the full amount of all charges it bills to customers for services
provided by Petitioner, together with BGS Transition Bond Charges and BGS
MTC-Tax, regardless of whether payments are received from such customers,
within 15 days of Petitioner's (or any successor Servicer's) bill for such
charges; (2) such TPS provides the Servicer with total monthly kWh usage
information for each customer in a timely manner for the Servicer to fulfill
its obligations, as such information is the basis of such remittance; and (3)
the Servicer is entitled, within seven days after a default by the TPS in
remitting any charges payable to Petitioner, including BGS Transition Bond
Charges and BGS MTC-Tax billed, to assume responsibility for billing all
charges for services provided by Petitioner or any Servicer, including the BGS
Transition Bond Charges and BGS MTC-Tax, or to transfer responsibility to a
qualifying third party. In addition, if and so long as, such TPS does not
maintain at least a "Baa2" and "BBB" or the equivalent rating on its long term
unsecured debt from Moody's Investors Service or Standard & Poor's Rating
Services, such TPS should be required to maintain, with the Servicer or as
directed by the Servicer, a cash deposit or comparable security equal to two
months' maximum estimated collections of all charges payable to the
Petitioner, including the BGS Transition Bond Charges and BGS MTC-Tax, as
agreed upon by Petitioner (or any successor Servicer) and the TPS. In the
event of a default in the remittance of any such charges by a TPS, any
shortfall in the BGS Transition Bond Charge or BGS MTC-Tax collections by a
TPS would be included in the periodic adjustment of the BGS Transition Bond
Charge and BGS MTC-Tax.

     p. Servicing

Petitioner requests that, pursuant to N.J.S.A. 48:3-71(f), it be authorized
enter into a servicing agreement ("BGS Servicing Agreement") with the SPE to
perform servicing functions on behalf of the SPE. Details regarding the BGS
Servicing Agreement, including servicing compensation, are substantially as
described in the Petition and will be described in the SEC Filing or in the
offering memorandum relating to the sale of the transition bonds. The
Petitioner states that under the Servicing Agreement, the Servicer is to
receive an annual servicing fee equal to

                                      15
<PAGE>

0.05% of the initial principal amount of the BGS Transition Bonds (the
"Servicing Fee"). The Petitioner also requests that the Board approve a higher
annual Servicing Fee of any successor Servicer of up to 1.25% of the initial
principal balance of all BGS Transition Bonds that the SPE has issued.

     q. MTC-Tax Component Recoveries

Petitioner requests the right to recover the BGS MTC-Tax of the BGS Transition
Bonds until the principal of the transition bonds is repaid in full. The
MTC-Tax will be subject to mandatory periodic adjustments (at the same time
and in the same manner as the BGS Transition Bond Charges) to reconcile the
revenue received for the payment of income taxes from the BGS MTC-Tax
collections with the income taxes required to be paid on the taxable revenue
received from billing the BGS Transition Bond Charges. Petitioner states that
it will maintain separate accounting for the BGS MTC-Tax collections and the
BGS TBC collections. Petitioner asserts that, pursuant to N.J.S.A.
48:3-72(a)(4)(c), its billing of the MTC-Tax will in no way affect or impair
the legal true sale and absolute transfer of the BGS Bondable Transition
Property to the SPE, or otherwise affect the legal rights and attributes of
the BGS Bondable Transition Property under EDECA.

III. PETITION'S ASSERTED RATEPAYER BENEFITS

As set forth in Exhibit A attached to the Petition, PSE&G estimates that the
issuance and sale of the BGS Transition Bonds will produce benefits to its
ratepayers in the form of lower costs than would have been achieved without
the issuance of the BGS Transition Bonds. Specifically, Petitioner asserts
that, in accordance with N.J.S.A. 48:3-62(c)(3), the BGS Transition Bond
Transaction will produce ratepayer benefits by lowering Petitioner's overall
cost of capital and minimizing the rate impact as compared to the immediate
recovery in one year of the then- unamortized Year 4 Deferred BGS Balance. In
addition, Petitioner asserts that the appropriate comparison for determining
ratepayer benefits is to compare the costs of securitization as proposed by
the Petitioner and the costs under standard rate base/rate of return recovery.
Petitioner argues that this comparison properly recognizes the capital
structure boundaries that require the Petitioner to provide equity support to
maintain an adequate credit rating and access to reasonably priced funds.
PSE&G asserts that its proposed securitization transaction, as compared to
standard rate base/rate of return recovery, would result in a benefit of over
$36 million (over $32 million on a net present value basis assuming a discount
rate of 6.52%). (PS-3 at 12.) Petitioner notes that the actual amount of
ratepayer benefit resulting from the BGS Transition Bond Transaction will
depend upon the actual amount of BGS Transition Bonds issued, prevailing
interest rates, market conditions at the time the BGS Transition Bonds are
priced, and the actual amount of Upfront Transaction and Ongoing BGS
Transition Bond Costs. The final structuring, marketing, pricing, and terms
and conditions of the BGS Transition Bonds will be subject to the approval of
the Board and the Designee pursuant to this Order.

IV. USE OF PROCEEDS

Petitioner states that the proceeds, net of underwriting discount, from the
sale of the BGS Transition Bonds will be remitted to PSE&G in consideration of
PSE&G's sale of its BGS Bondable Transition Property. In accordance with
N.J.S.A. 48:3-62(a), Petitioner proposes to use such proceeds, after payment
of Upfront Transaction Costs, to refinance or retire its debt or equity, or
both, including transactions completed prior to the date of and in
anticipation of the issuance of this Order. Petitioner will account to the
Board for the use of the net proceeds, so

                                      16
<PAGE>

as to assure that the entire savings from the bond issuance is passed on to
PSE&G's electric customers, in accordance with N.J.S.A. 48:3-62(a).

V. TESTIMONY OF THE RATEPAYER ADVOCATE

In his March 15, 2005 direct testimony, RPA witness Matthew Kahal addressed
whether the deferred balance should be securitized and under what terms and,
in the alternative, the appropriate carrying charge to be used should
securitization not be approved. Kahal noted that an appropriate amortization
period must be determined for use under either option. Kahal agreed with
Petitioners that securitization is "a reasonable and potentially
cost-effective method for financing the recoverable deferred balance provided
the amount to be financed is large and a reasonably long time period for
securitization is used" and suggested that a 10-year rather than 15-year
maximum amortization period allowed by statute would be most appropriate.
Kahal identified one more caveat: if overrecoveries in other non-BGS accounts
were determined to be large enough to offset a significant amount of deferred
BGS costs so as to make securitization not cost beneficial, then other
alternatives should be used. Kahal proposed use of non-securitized debt at a
higher interest rate but without upfront transaction costs if an amortization
period less than 10 years were used or if the amount to be securitized were
reduced substantially.

Kahal disagreed with Petitioner's position that it was entitled to rate base
treatment of the deferred balance absent securitization. Kahal asserted that
should securitization not occur, the Board's Order and the settlement
agreement did not specify use of rate base/rate of return recovery. Instead,
the Order refers to the settling parties' recommendation "that the appropriate
carrying charge effective August 1, 2003 reflect a cost of capital that is
commensurate with the time frame of amortization authorized by the Board."
Kahal also raised a potential objection to Petitioner's method of calculating
the year-end 2004 BGS balance. Kahal stated that it was not clear, as PSE&G
had suggested, that the language of the Board Order on deferred balances
authorized retroactive interest on the BGS balance. RA-1 at 7-8. RA-1 at
12-13. Kahal concluded that based on his own net present value tests, assuming
a 10-year term and a 7 percent consumer discount rate, "securitization is
preferable in terms of minimizing costs to customers, but only if it is
determined that the deferred balance approximates the Company's estimate of
$200 million," and added that the alternative scenario of using
non-securitized financings could create capital structure effects that could
cost ratepayers in future rate cases. RA-1 at 14-15.

VI. COMMENTS OF THE PARTIES

     a) RATEPAYER ADVOCATE

In its April 12, 2005 comments, the Ratepayer Advocate raised the following
four issues. First, the RPA asserted that there is insufficient data on the
record to conclude that the remaining Year Four BGS deferred balance should be
securitized. The Ratepayer Advocate asserted that a review of the Phase II
Audit Report regarding the Year 4 Deferred BGS Balance is required to support
a decision to securitize that balance. Moreover, the RPA argued that in
PSE&G's most recent deferral case, the Board found that PSE&G had
overrecoveries in certain components of its deferred balances and approved,
with modifications the June 6th Joint Position entered into by some of the
parties, which provided for credits to be given to customers over 29 months
beginning on August 1, 2003. The RPA argued that any remaining overrecoveries
in PSE&G's deferred balances, including those which may still be at issue in
the Phase II Audit Report need to be quantified and should be used to offset
the amount to be securitized in this proceeding.

                                      17
<PAGE>

Second, the RPA argued that the Board should reject PSE&G's proposal to use
its authorized rate of return in its most recent electric base rate case as
the carrying charge for the Year 4 Deferred BGS Balance if the Board rejects
the concept of securitization in this proceeding. The RPA also urged the Board
to find the PSE&G has not shown that securitization will benefit ratepayers.

Third, the RPA asserted that if securitization is approved, all cost savings
that accrue from the use of the proceeds of the transition bonds must be
passed through directly to customers. For instance, the RPA argued that if
long-term debt is retired, then the interest expense and other savings from
the retirement should be credited to ratepayers.

Finally, the RPA asserted that Paragraph 12 of the June 6th Joint Position
which deals with the change in interest rate if securitizations is not
achieved by May 2004 should be interpreted as providing for the two-year
constant maturity treasury rate on or closest to August 1, 2003 plus 60 basis
points to apply prospectively from May 2004, not from August 1, 2003.

     b) PSE&G

On April 8, 2005, PSE&G filed post-hearing comments limited to the interest
accrual issue as discussed at the April 1, 2005 hearing. PSE&G challenged
RPA's questioning of whether the start date of August 1, 2003 for PSE&G's
additional interest accrual of $645,581 through May 1, 2004 was authorized.
PSE&G argued that the term "interim period" used in the June 6 Settlement and
the Board Order in the deferred balances and base rate cases was intended to
reflect the period between August 1, 2003 through the date that the Board
accepted or rejected securitization of the BGS deferral balance. According to
PSE&G, the settlement and Board Order intended to deal with three possible
scenarios in which securitization was either approved and executed by May 1,
2004; or approved and executed after May 1, 2004; or securitization was
rejected by the Board. PSE&G asserted that under each scenario the Board
intended that August 1, 2003 would be the relevant date for determining
carrying costs, but that: a short-term interest rate of one-year Treasury plus
50 basis points should apply if securitization was authorized by May 1, 2004;
a longer-term interest rate if two-year Treasury plus 60 basis points should
apply if securitization were not achieved until after May 1, 2004; and an
overall cost of capital rate should apply if the Board rejected
securitization. PSE&G argued that the instant requested Board authorization of
securitization equates to the second longer-term scenario described above and,
therefore, PSE&G asserted that it appropriately calculated additional accrued
interest charges by using the period beginning August 1, 2003 and interest of
2.45% based on the two-year Treasury plus 60 basis points.

On April 22, 2005, PSE&G filed reply comments in response to the issues the
RPA raised in post-hearing comments. First, PSE&G disagreed with the RPA's
position that any current overrecoveries in non-BGS deferred balances should
be used to offset the BGS deferral balance because the Board has already
approved a joint position in PSE&G's recent deferred balance proceeding that
provided a rate credit to customers to return certain overcollected deferred
balances. PSE&G argued that to now apply overrecoveries against the BGS
deferred balance would controvert the Board's decision in that case and would
require a reversal of the credits causing, in effect, a rate increase.

Second, PSE&G disagreed with the RPA's argument that, if securitization is
rejected, the Board should not approve PSE&G's after-tax weighted average cost
of capital of 8.18% as the appropriate carrying costs. PSE&G argued that a mix
of debt and equity supports both the

                                      18
<PAGE>

physical and regulatory assets of the company, and thus the overall rate of
return is the appropriate carrying charge to use in the event securitization
is not approved. PSE&G also asserted that the RPA's arguments regarding the
benefits of securitization is contradicted by the testimony of its own
witness, citing the testimony of Mr. Kahal at pages 14 and 15.

Third, PSE&G disputes the RPA's claim that allowing securitization cost
savings to be passed through to ratepayers via PSE&G's next distribution rate
case would contradict the statutory requirement that the entire amount of cost
savings achieved be passed on to ratepayers. PSE&G asserted that it would be
inappropriate to reset rates based on a single input and the alternative would
be a full rate case that is not required. Fourth, PSE&G reiterated its
arguments regarding the use of August 1, 2003 as the correct beginning date
for calculating additional accrued interest on the deferred BGS costs.

VII. DISCUSSION OF ISSUES

In 2002, the Legislature amended EDECA to permit, but not require, the Board
to authorize the issuance of transition bonds to enable the EDCs to recover
deferred BGS Transition Costs, as defined in N.J.S.A. 48:3-51, which were
incurred by the EDCs to satisfy their obligation to provide customers with
Basic Generation Service, provided that certain conditions are met. N.J.S.A.
48:3-62(c)(3) provides that "the board may authorize the issuance of
transition bonds for the recovery of up to the full amount of an electric
public utility's reasonably and prudently incurred basic generation service
transition costs based on the criteria that such amount will produce benefits
for customers of the electric pubic utility which include the lowest
transition bond charges consistent with market conditions and the terms of the
[BSCRO]."

Notwithstanding the RPA's assertion in its comments that the Petitioner has
not shown that securitization will benefit ratepayers, PSE&G and the RPA`s
witness appear to agree that securitization of PSE&G's net-of-tax Year 4
Deferred Balance with a 10-year amortization period would likely minimize
costs to customers as compared to recovery of these balances through alternate
eligible methods of recovery. RPA witness Kahal testified that due to its
triple A status, securitized debt would carry a much lower interest rate than
non-securitized debt, but would be burdened by additional Upfront Transaction
Costs. (RA-1 at 15). Witness Kahal further testified that based on his own net
present value analysis comparing 10-year securitized and non-securitized debt,
the securitized debt "shows a slight [net present value] savings" and
concluded that at this time, "it appears that securitization is preferable in
terms of minimizing costs to customers'" assuming the deferred balance
approximates Petitioner's estimate thereof. (RA-1 at 14-15). Mr. Kahal also
testified that, in the instant case, securitization offers the ancillary
benefit of enhancing PSE&G's financial integrity, because, when assessing
PSE&G credit worthiness, rating agencies tend to exclude the securitized debt
from the capital structure, thereby improving PSE&G's ratio of debt to equity.

Based on the record that has been developed in this proceeding, the Board
believes, that, consistent with N.J.S.A. 48:3-62(c)(3), the BGS Transition
Bond Transaction, after taking into account a reasonable level of Upfront
Transaction Costs, should produce positive benefits to customers, including
the lowest Transition Bond Charges consistent with market conditions and the
terms of this Order. Rates to customers will not increase as a result of the
issuance of the bonds, and may, in fact, decrease, depending on the final
interest rate. Benefits will also include lower costs than would have been
achieved under certain alternative recovery scenarios in the absence of the
issuance of the Transition Bonds. All cost savings achieved as a result of
securitization must be fully and timely passed through to ratepayers, in the
form of reduced rates or mitigated rate increases, consistent with N.J.S.A.
48:3-62(a).

                                      19
<PAGE>

As to the RPA's concern expressed in its April 12th comments that the record
data was insufficient to conclude that the Year 4 Deferred BGS Balance should
be securitized in the absence of a final decision by the Board with respect to
the Phase II Audit Report, the Board notes that at its May 6, 2005 public
agenda meeting, it acknowledged receipt of the Phase II Audit Report and
solicited comments from the parties thereupon, including the RPA. The Phase II
Audit Report indicates no issues with respect to the Year 4 Deferred BGS
Balance. Thus, the RPA's concern with not having seen the Phase II Audit
Report with regard to the BGS deferred balances issue is moot.

Additionally, with regard to the RPA's argument that overrecoveries in non-BGS
deferred balances should be applied to the outstanding Year 4 Deferred BGS
Balance prior to authorizing securitization, the Board notes that pursuant to
the Board's Final Order in the deferred balances/base rate case proceeding,
PSE&G has already implemented credits to customers for those funds and they
are no longer available for application in this proceeding. These credits for
overrecoveries in certain of the Petitioner's deferred balances are being
refunded to customers over a 29-month period, beginning August 1, 2003. Since
these credits are already being used to reduce rates for PSE&G's customers,
having the Board offset the deferred BGS balance with those same
overrecoveries would necessitate a significant and immediate rate increase for
PSE&G's electric customers which the Board does not deem appropriate. If any
additional overrecoveries with respect to other deferred balances are
identified as a result of the Board's final decision on the Phase II Audit, or
in subsequent true-ups of these balances, these will be full and timely passed
through to ratepayers in a manner to be determined by the Board.

Thus, in light of the specific facts of this case, the Board considers it in
the public interest to approve the securitization of the net-of-tax Year 4 BGS
deferred balance hereinafter discussed, pursuant to the relevant provisions of
EDECA, without waiting for final resolution of any outstanding non-BGS Phase
II Audit issues. In this manner, the advantages of securitization can be
achieved while affording customers protection in terms of the review and
consideration of any additional deferred balances which may be subsequently
identified.

With regard to the RPA's concern regarding PSE&G's proposal to use its
established rate of return in its most recent electric base rate case as the
carrying charge of the Year 4 deferred balance if the Board rejects the
concept of securitization, the Board's findings below authorizing the
securitization of Year 4 Deferred BGS Costs render this issue moot.

With regard to the RPA's third concern in its comments that all costs savings
that accrue from the use of the proceeds must be passed through directly to
customers if securitization is approved, the Board accepts PSE&G's
representation that the cost savings associated with this financing will be
passed on to ratepayers by virtue of the fact that PSE&G will be replacing
debt and equity in its capital structure and the right to earn a return in
capital at its overall rate of return with lower cost securitized debt and the
associated right to payment of the transition bond charge. The Board shares
PSE&G's concern that the RPA's position appears to require an immediate
resetting of the rates based on changes in capitalization and raises the issue
of whether rates would also have to be reset for all other costs and revenue
factors, thus suggesting the need for a new base rate case not contemplated
for securitization to avoid single issue ratemaking that is not permissible.

Regarding the RPA's fourth concern that PSE&G used the wrong method to compute
interest on the deferral balance resulting in additional charges of $645,581,
in an effort to have

                                      20
<PAGE>

securitization implemented more expeditiously, the Board will defer its review
and resolution of this issue until Petitioner's next Non-Utility Transition
Charge ("NTC") proceeding. All the Parties agree that the issue of retroactive
interest should be left to another proceeding. PSE&G and the Ratepayer
Advocate shall be deemed to have reserved their rights regarding their
respective positions on this issue for the next NTC proceeding.

Based on its review of the record in this proceeding, including the testimony,
discovery, information developed in hearing, comments and reply comments
filed, the Board FINDS that securitization of Year 4 Deferred BGS Balance as
described herein will result in lower costs to ratepayers than other methods
of recovery and is in the public interest.

VIII. FINDINGS WITH RESPECT TO PETITION

Based on its review of the record of proceedings in this matter, the Board
HEREBY FINDS:

Recovery of Costs

     1. The Board's Restructuring Orders provided, among other things, that
PSE&G's BGS supply for Year 4 of the Transition Period (August 1, 2002-July
31, 2003), would be procured via a competitive bidding process, and to the
extent that its prudently incurred BGS supply costs exceeded the
pre-established BGS prices reflected in rates, such costs would be subject to
deferral and subsequent recovery with interest at a Board-approved rate at the
end of the Transition Period.

     2. By Order dated December 11, 2001, the Board approved a State-wide
auction process for obtaining BGS supply for Year 4 and directed PSE&G to make
a compliance filing in response thereto.

     3. On December 12, 2001, PSE&G made its compliance filing, which
included, among other things, a request for approval of its accounting and
cost recovery proposed for its Year 4 BGS costs, including, but not limited
to, a determination that: (i) the difference between PSE&G's BGS revenue and
BGS costs would be deferred; (ii) interest on this deferral would be accrued
pending recovery at a rate equal to the yield on seven-year constant-maturity
U.S. Treasury notes plus 60 basis points; and (iii) there existed a
presumption of prudence with respect to the reasonableness of PSE&G's Year 4
BGS supply costs. By Letter Order dated December 14, 2001, the Board approved
Petitioner's compliance filing, including the presumption of prudence and the
reasonableness of its Year 4 BGS supply costs.

     4. By Order dated February 15, 2002, the Board certified the final
results of the BGS auction in their entirety and approved the closing prices
resulting therefrom, including those for PSE&G.

     5. On August 28, 2002, PSE&G filed a petition to recover its deferred
balances, including the recovery of its Year 4 Deferred BGS Balance. Shortly
thereafter, the Board retained independent auditors to perform an audit to
verify the amount of Petitioner's deferred balances in two phases, the Phase I
Audit covering the first three years of the Transition Period, and the Phase
II Audit covering Year 4.

     6. By Summary Order dated July 31, 2003, as superseded by Final Decision
and Order dated April 22, 2004, the Board, among other things, authorized
Petitioner to recover

                                      21
<PAGE>

through its Non-Utility Generation Market Transition Charge, on an interim
basis over ten years, its projected Year 4 Deferred BGS Balance of $241.5
million, subject to a true-up to reflect the amount of its actual Year 4
Deferred BGS Balance as of July 31, 2003, and subject to the findings of the
Phase II Audit and a recalculation of interest, on a net-of-tax basis,
necessitated by such adjustments. The Phase II Audit has to date not been
finalized; however, the outstanding issues do not include the prudence of
Petitioner's Year 4 BGS supply costs.

     7. Petitioner seeks to recover the costs reflected in its Year 4 Deferred
BGS Balance through the proceeds of BGS Transition Bonds. These costs
constitute BGS Transition Costs as defined in EDECA, as amended.

     8. As a result of the ongoing amortization of this balance since August
1, 2003, Petitioner's Year 4 Deferred BGS Balance was approximately $115
million, calculated on a net-of-tax basis as of March 31, 2005, and is
projected to be approximately $107.3 million, on a net-of-tax basis as of June
30, 2005, and $102.7 million as of September 30, 2005 (2)

     9. In addition, Petitioner seeks to recover through the proceeds of BGS
Transition Bonds, Upfront Transaction Costs not to exceed $2.7 million.

     10 Pursuant to N.J.S.A. 48:3-62(c)(3), the Board may authorize the
issuance of transition bonds for recovery of up to the full amount of an
electric public utility's reasonable and prudently incurred BGS Transition
Costs, subject to certain conditions.

     11. The amount which PSE&G is authorized to recover through the issuance
of BGS Transition Bonds shall not exceed the lesser of its actual net of tax
Year 4 Deferred BGS Balance at the time of securitization or $100 million,
plus Upfront Transaction Costs of no more than $2.7 million.

     12. The Bondable Stranded Costs associated with the BGS Transition Bonds
(including ongoing principal and interest on the bonds and other Bondable
Stranded Costs discussed in this BSCRO) shall be recovered through the
non-bypassable BGS TBC. Petitioner shall be entitled to recover all tax
liabilities associated with the collection of the BGS TBC (including Federal
Income and State Corporate Business taxes) through a separate TBC-Tax
Component until the BGS Transition Bonds and Bondable Stranded Costs have been
paid in full, and the BGS MTC-Tax related to BGS Transition Bond Transaction
shall be adjusted at the same time and in the same manner as the TBC is
adjusted as addressed in this order.

Benefits for Customers

     13. In accordance with N.J.S.A. 48:3-62(c)(3), the BGS Transition Bond
Transaction, after taking into account the Upfront Transaction Costs will
produce positive benefits to customers, including the lowest Transition Bond
Charges consistent with market conditions and the terms of this Order. Rates
to customers will not increase as a result of the issuance of the bonds, and
may, in fact, decrease, depending on the final interest rate. Benefits will
also include lower costs than would have been achieved under certain
alternative recovery scenarios in the absence of the issuance of the
Transition Bonds. All cost savings shall be fully and timely passed through to
ratepayers, in the form of reduced rates or mitigated rate increases,
consistent with N.J.S.A. 48:3-62(a).

______________________

2 Updated estimates as of June 9, 2005.

                                      22
<PAGE>

     14. The formula used to calculate the initial BGS Transition Bond Charge
and the periodic adjustments thereto as described in Attachments A-2 and A-3
to Appendix F attached hereto, and in Appendix F hereto are reasonable and
adherence thereto will provide assurance that customers will pay the lowest
BGS Transition Bond Charges consistent with market conditions and the terms of
this BSCRO, in compliance with N.J.S.A. 48:3-62(c)(3). The standard for the
Board to use in making periodic adjustments of the BGS Transition Bond Charge
final shall be the absence of a manifest error (i.e., an arithmetic error
evident on the face of the filing) in the application of the BGS Transition
Bond Charge adjustment formula, which standard the Board finds consistent with
N.J.S.A. 48:3-64(b) and the achievement of the lowest possible interest cost
on the BGS Transition Bonds. The estimate of the initial BGS Transition Bond
Charge, determined in accordance with Appendix F attached hereto, and the
assumptions used in calculating the initial BGS Transition Bond Charge, are
reasonable. The request of the Petitioner that it be authorized to make
non-routine adjustments of the BGS Transition Bond Charge formula as described
in paragraph 2(f) hereof, subject to Board approval, is reasonable.

     15. The issue of the propriety of the additional interest charges of
$645,581, as described above, will be considered in Petitioner's next NTC
proceeding. All Parties' rights to assert their respective positions on this
issue are reserved.

Structuring and Pricing

     16. To ensure that the issuance of the BGS Transition Bonds will produce
maximum benefits for Petitioner's customers, including the lowest transition
bond charges consistent with market conditions and the terms of this Bondable
Stranded Costs Rate Order, the Board has determined that its Financial
Advisor, Saber Partners LLC, under the supervision of Board Staff and the
Board's Designee, will participate directly and in advance with Petitioner in
all discussions and negotiations regarding the structuring, marketing, and
pricing of the BGS Transition Bonds.

     17. The Board, acting through its Designee pursuant to N.J.S.A.
48:3-62(c), retains ultimate authority to approve or disapprove the proposed
structuring, marketing, and pricing of the BGS Transition Bonds and related
transactions.

     18. The procedures established in this BSCRO relating to the final
approval of the structuring and pricing of the BGS Transition Bonds assure
that, in accordance with N.J.S.A. 48:3-62(c)(3), Petitioner's customers will
pay the lowest Transition Bond Charges consistent with market conditions and
the terms of this BSCRO. As authorized herein by the Board and in full
satisfaction of the requirements of N.J.S.A. 48:3-62(g) and N.J.S.A.
48:3-64(a)(3), the structuring and pricing of the BGS Transition Bonds will be
conclusively deemed to satisfy the requirements of N.J.S.A. 48:3-62(c)(3), and
the terms and conditions of the BGS Transition Bond financing shall be
conclusively approved if so certified by the Designee upon the pricing of the
BGS Transition Bonds.

     19. In order to assure that the Designee has all the information that he
or she deems necessary to issue its certification, Petitioner shall cooperate
with and timely provide any and all requested information to the Designee,
Board Staff and the Board's Financial Advisor.

     20. The formation of the SPE by Petitioner, the capitalization of the SPE
by Petitioner, the sale by Petitioner to the SPE of its BGS Bondable
Transition Property, the providing of overcollateralization as described
herein and as approved in the Designee

                                      23
<PAGE>

Certification, and the entering into a servicing agreement, subject to our
finding in paragraph 22 below, an administration agreement, a sale agreement,
other agreements and transactions by Petitioner and the SPE, all substantially
as described in the Petition and as will be described in the SEC Filing or
offering memoranda, are reasonable and necessary.

     21. The methodology for the remittance of Transition Bond Charges
described in the Petition will satisfy the requirements of N.J.S.A. 48:3-62
and is a reasonable means of undertaking the remittance of these charges.

     22. Subject to other provisions of this BSCRO, the Servicing Fee to be
paid to the Petitioner in its role as Servicer as described herein appears to
be reasonable. However, if the Servicing Fee is greater than the actual
incremental costs to service the BGS Transition Property, other rates of the
Petitioner shall be adjusted to reflect the difference between actual
servicing costs and the Servicing Fee. The Board finds the higher annual
servicing fee of any successor Servicer of up to 1.25% of the initial
principal balance of all BGS Transition Bonds that the SPE has issued, is
reasonable.(3)

     23. The BGS TBC and MTC-Tax billing, collection and remittance procedures
imposed upon any TPS as set forth in the Petition are reasonable.

     24. The Upfront Transaction Costs, not to exceed $2.7 million in the
aggregate, are reasonable and recoverable by the Petitioner as Bondable
Stranded Costs though the proceeds of the BGS Transition Bonds consistent with
EDECA.

     25. The recovery of Ongoing Transition Bond Costs through the BGS TBC as
described in this BSCRO is reasonable and consistent with EDECA. The
collection of the BGS TBC (and the remittance thereof to the SPE) until
payment in full of the BGS Transition Bonds is reasonable and permitted under
EDECA.

     26. The scheduled amortization upon issuance for the BGS Transition Bonds
of up to 10 years and the stated maturity of the BGS Transition Bonds of up to
two additional years following the scheduled amortization is reasonable and
permitted under EDECA.

     27. The issuance of series and classes of BGS Transition Bonds by the SPE
in an aggregate principal amount not to exceed the sum of the lesser of
Petitioner's actual unamortized net-of-tax Year 4 Deferred BGS Balance on the
date of securitization or $100 million, plus (ii) Upfront Transaction Costs
not to exceed $2.7 million, is reasonable and consistent with EDECA and with
this BSCRO.

     28 The True-Up Mechanism to obtain adjustments to the BGS Transition Bond
Charge and the MTC-Tax described hereinabove and set forth in Appendices C and
F hereof is reasonable.

Use of Proceeds

     29. Petitioner's proposed application of the net proceeds of the BGS
Transition Bonds as described herein is reasonable and consistent with EDECA.

_________________________

(3) The naming of a Successor Servicer which may cause a higher Servicing Fee
up to a maximum 1.25% (125 basis points) applies only in the case of a default
by the original Servicer. It shall not be construed to be triggered by other
changes in corporate structure or function such as the transfer of functions
to sister or subsidiary companies, voluntary outsourcing or merger or
acquisition of the Servicer.

                                      24
<PAGE>

Regulatory Compliance

     30. In light of the specific provisions of EDECA governing the Transition
Bond Transaction, PSE&G's Petition is found to comply with N.J.A.C. 14:1-5.6
and -14:1-5.9, to the extent either regulation might be deemed applicable.

     31. Petitioner's undertaking with respect to amortization of the
discount, if any, on the Transition Bonds shall comply with N.J.A.C.
14:1-5.9A.

Periodic Adjustment of the MTC-Tax

     32. The MTC-Tax will be subject to mandatory periodic adjustment at the
same time and in substantially the same manner as adjustments to the BGS
Transition Bond Charges; provided, however, the Petitioner makes reasonable
efforts to utilize any and all deductions to taxable income for which it may
be eligible with respect to the securitization transaction, now or in the
future, whether or not such deductions are contained in the formula presented
by PSE&G in its Petition, so that the MTC-Tax Component does not result in the
overrecovery or underrecovery of taxes to the Petitioner. The Board finds that
if that the amortization of Upfront Transaction Costs creates one such
deduction, the formula must be modified to incorporate such a determination.

VIII. ORDERS

     Based on the foregoing, the record of proceedings on the Petition, and
the provisions of the Act, the Board HEREBY ORDERS:

     1. Petitioner's request for a BSCRO pursuant to N.J.S.A. 48:3-62 is
approved subject to the terms and conditions stated herein.

     2. The Board hereby authorizes Petitioner to recover to the lesser of its
then-outstanding net of tax Deferred Year 4 BGS Balance at the date of
Securitization or $100 million, together with Upfront Transaction Costs, not
to exceed $2.7 million, through the issuance of BGS Transition Bonds.

     3. The Board hereby approves the formula for the calculation and
adjustment of the BGS Transition Bond Charges and the MTC-Tax Component, in
accordance with the Board's Findings herein.

     4. The issuance of BGS Transition Bonds in an aggregate principal amount
not to exceed the lesser of its then-outstanding net of tax Deferred Year 4
BGS Balance at the date of Securitization or $100 million, plus Upfront
Transaction Costs not to exceed $2.7 million, is authorized.

Bondable Transition Property and Transition Bond Charges

     5. The sale by the petitioner to the SPE of the BGS Bondable Transition
Property is authorized.

     6. The BGS Transition Bond Charges will be assessed against all existing
and future electric customers of Petitioner or any successor within the
service area of Petitioner (as such service territory exists on the date of
this Order), except as provided in N.J.S.A. 48:3-77,

                                      25
<PAGE>

and will apply equally to each customer of Petitioner, regardless of class,
based on the amount of electricity delivered to the customer (whether
purchased from the Petitioner or a TPS) through the transmission and
distribution system of Petitioner or any successor electric public utility who
may take over all or a portion of the Petitioner's service area. Pursuant to
N.J.S.A. 48:3-77, the TBC shall be imposed on the power produced by on-site
generators only under the circumstances specified therein.

     7. BGS Transition Bond Charges will be set at a level sufficient to
recover the Total Payment Requirements. The MTC-Tax will be set at a level
sufficient to recover the Tax Component. The BGS Transition Bond Charge and
the MTC-Tax will remain in effect until the SPE, as owner of the BGS Bondable
Transition Property, has received BGS Transition Bond Charges sufficient to
recover the Total Payment Requirements and Petitioner has recovered the Tax
Component.

     8. Pursuant to EDECA, there is created and established for the benefit of
Petitioner (or any assignee in accordance herewith) BGS Bondable Transition
Property consisting of the irrevocable right to charge, collect and receive,
and be paid from collections of, the BGS Transition Bond Charges in the amount
necessary to meet the Total Payment Requirements, all rights of Petitioner to
the BGS Bondable Transition Property under this Order with respect to the BGS
Transition Bond Charges, including without limitation, all rights to obtain
periodic adjustments of the BGS Transition Bond Charges pursuant to N.J.S.A.
48:3-64, and all revenues, collections, payments, money and proceeds arising
under, or with respect to, all of the foregoing.

     9. Pursuant to N.J.S.A. 48:3-65, once this Order becomes effective
pursuant to N.J.S.A. 48:3-68, neither the Board nor any other governmental
entity will have the authority, directly or indirectly, legally or equitably,
to rescind, alter, repeal, modify or amend this BSCRO, to revalue, re-evaluate
or revise the amount of BGS Bondable Stranded Costs, to determine that the BGS
Transition Bond Charges or the revenues required to recover BGS Bondable
Stranded Costs are unjust or unreasonable, or in any way to reduce or impair
the value of the BGS Bondable Transition Property, nor shall the amount of
revenues arising with respect thereto be subject to reduction, impairment,
postponement or termination, provided, however, that nothing in this BSCRO
will preclude adjustments of the BGS Transition Bond Charges or the MTC-Tax in
accordance with the provisions hereof and of N.J.S.A. 48:3-64.

     10 Pursuant to N.J.S.A. 48:3-65, and notwithstanding any other provision
of law, thisBSCRO and the Transition Bond Charges authorized herein will
become irrevocable upon this BSCRO's becoming effective pursuant to N.J.S.A.
48:3-68. This BSCRO, the BGS Transition Bond Charges and the BGS Bondable
Transition Property will constitute a vested, presently existing property
right upon the transfer to an assignee and receipt of consideration for such
BGS Bondable Transition Property.

     11. Pursuant to N.J.S.A. 48:3-64, until the Total Payment Requirements
have been fully satisfied, this BSCRO and the authority to meter, charge,
collect and receive the BGS Transition Bond Charges and the MTC-Tax will
remain in effect and Petitioner shall be obligated to provide electricity to
its customers and will have the right to meter, charge, collect and receive
the BGS Transition Bond Charges and MTC-Tax, which rights and obligations may
be assignable solely within the discretion of Petitioner, subject to any Board
approvals which may be statutorily required.

                                      26
<PAGE>

Sale, Pledge and Assignment of Transition Property

     12. In accordance with EDECA and as described in the Petition, Petitioner
is authorized to sell, pledge or assign any or all of its interest in BGS
Bondable Transition Property that arises from this BSCRO directly, or
indirectly through an assignee, to the SPE. The SPE is authorized to acquire
the BGS Bondable Transition Property and is approved and designated as a
"financing entity" (as defined in N.J.S.A. 48:3-51) for such purpose, and for
the purpose of issuing BGS Transition Bonds and pledging the BGS Bondable
Transition Property to the payment of the BGS Transition Bonds.

     13 The SPE will pay the purchase price of the BGS Bondable Transition
Property equal to the net proceeds from the issuance of the BGS Transition
Bonds directly or indirectly to Petitioner, to be applied as described in the
Petition and in Petitioner's Testimony and as modified herein.

     14. Upon the sale by Petitioner of the BGS Bondable Transition Property
to the SPE as described in this BSCRO, the SPE will have all of the rights
originally held by Petitioner with respect to the BGS Bondable Transition
Property, including, without limitation, the right to exercise any and all
rights and remedies, including the right to direct the Petitioner or any
successor electric public utility to shut-off electric power to the extent
permitted by law and any applicable regulations, and to assess and collect any
amounts payable by any customer in respect of such BGS Bondable Transition
Property, notwithstanding any objection or direction to the contrary by the
Servicer.

     15. Upon the sale by Petitioner of BGS Bondable Transition Property to
the SPE, Petitioner or any successor Servicer will not be entitled to recover
the BGS Transition Bond Charges other than for the benefit of the holders of
Transition Bonds in accordance with Petitioner's duties as Servicer of such
BGS Bondable Transition Property as authorized in this BSCRO.

Structure, Terms and Conditions and Marketing of BGS Transition Bonds;
Appointment of Designee

     16. The final structure, pricing, terms and conditions of the BGS
Transition Bonds, to the extent consistent with the provisions of this BSCRO,
may be approved by the Designee pursuant to his or her delegation of authority
from the Board, pursuant to N.J.S.A. 48:3-62(c)(3) 48:3-62(g), and N.J.S.A.
48:3-64(a)(3), respectively, after the BGS Transition Bonds are priced. The
scheduled amortization upon issuance of the BGS Transition Bonds will be up to
10 years, and the final legal maturity will be up to two additional years. The
BGS Transition Bonds may be issued in series and classes with different terms.
Debt service on the BGS Transition Bonds shall be scheduled upon issuance so
that the sum, for each annual period, of (i) the Periodic Payment Requirements
and (ii) the associated MTC-Tax will result in a substantially equal per
kilowatt-hour (kWh) charge. One or more classes of BGS Transition Bonds may be
issued as variable rate instruments, the interest on which will be fixed or
hedged in accordance with the terms of any hedging arrangements consistent
with this BSCRO. The Designee will determine whether to approve or reject the
pricing of the BGS Transition Bonds following the receipt of the Pricing
Advice Certificate in the form of Appendix D attached hereto to be delivered
by Petitioner on the day the BGS Transition Bonds are priced, and as described
herein such additional information as the Designee may deem necessary. The
Pricing Advice Certificate shall demonstrate that, based upon the market
conditions existing at the time of pricing, the proposed structuring,
marketing, and pricing of the BGS Transition Bonds will result in the

                                      27
<PAGE>

lowest BGS Transition Bond Charges consistent with such market conditions and
the terms of this BSCRO. The Financial Advisor shall notify the Petitioner and
the Board not later than the close of one business day after the pricing date
for each series of BGS Transition Bonds whether or not, in its opinion, the
structuring, marketing and pricing of the BGS Transition Bonds complies with
the criteria established in this BSCRO.

     17. The Financial Advisor will: (1) provide advice to the Board and its
Staff on the Petitioner's filing; (2) provide financial advice to the Board,
the Designee, and Board Staff with respect to the structuring, marketing, and
pricing of the BGS Transition Bonds, as authorized by this Order; (3)
participate fully and in advance in all aspects of Petitioner's structuring,
marketing, and pricing of the BGS Transition Bonds on behalf of the Board and
its Staff; (4) advise the Board and its Designee via timely certification to
be filed on the next business day after the Petitioner's Pricing Advice
Certificate is filed, whether or not the Petitioner's proposed structuring,
marketing, and pricing of the BGS Transition Bonds will yield the lowest BGS
Transition Bond Charges consistent with market conditions existing at the time
the BGS Transition Bonds are priced, EDECA, and the terms of this Order; (5)
attend Commissioner briefing sessions and other meetings and hearings as
deemed necessary by Board Staff; and (6) provide a final report to the Board
on the results of the financing process with recommendations to improve future
financings.

     18. In support of his or her Certification, the Designee may conclusively
rely without further investigation (i) on the Findings set forth above in
Findings Paragraph 13 as to the benefit to Petitioner's ratepayers from the
proposed BGS Transaction as required by N.J.S.A. 48:3-62; (ii) upon the advice
and certification of the Board's Financial Advisor as described herein; (iii)
upon the certification of any managing or lead underwriter; and (iv) upon the
certification of the Petitioner. The Designee Certification approving the
terms of the BGS Transition Bonds shall be substantially in the form of
Appendix A hereto, shall constitute a part of this BSCRO, shall constitute a
full and complete record of the determinations and approvals made therein and
full satisfaction of the requirements of N.J.S.A. 48:3-62(c)(3), 48:3-62(g)
and N.J.S.A. 48:3-64(a)(3), and shall be final and uncontestable as of its
date. In furtherance of the foregoing, the Board further orders that:

     (A)  Commissioner Frederick F. Butler be, and he hereby is, designated to
          act as Designee in accordance with the terms of this Order or, in
          his absence or incapacity, each other Commissioner of this Board be,
          and each of them hereby is, designated to act as such Designee; The
          Designee shall act in accordance with the terms of this Order and
          the Designee Guidelines attached hereto as Appendix E;

     (B)  Petitioner is hereby directed to (i) afford Board Staff, the
          Designee and the Financial Advisor the opportunity to participate
          directly, fully, and in advance in all negotiations regarding
          proposed structuring, marketing, and pricing of the BGS Transition
          Bonds; (ii) provide information regarding the proposed offering on a
          timely basis in order to enable each of them to discharge their
          responsibilities to this Board; (iii) promptly advise any person or
          entity interested in participating in the proposed offering as an
          underwriter of the above terms and conditions of this Order; and
          (iv) permit the Financial Advisor, on behalf of the Board and its
          Staff, subject to the supervision of Board Staff, to participate in
          the selection of underwriter(s), trustee(s) and any other credit or
          financial parties required to complete the BGS Transition Bond
          Transaction and to review, comment upon, and recommend approval of,
          the terms of all transaction documents.

                                      28
<PAGE>

     (C)  The Board hereby directs its Financial Advisor to recommend the
          rejection of any aspect of the BGS Transition Bond Transaction that
          does not comply with all of the criteria established in this Order.
          The Board's Financial Advisor shall promptly advise Petitioner and
          Board Staff and the Board's Designee if, in its opinion, any aspect
          of the BGS Transition Bond Transaction including, but not limited to
          the structuring, marketing, and pricing of the BGS Transition Bonds
          is unreasonable or unlikely to result in the lowest BGS Transition
          Bond Charges consistent with market conditions existing at the time
          the BGS Transition Bonds are priced and the terms of this Order.

     (D)  The Designee is hereby directed to deliver, within 24 hours of
          pricing of the BGS Transition Bonds and delivery by Petitioner of
          its Pricing Certificate, its certification substantially in the form
          of Exhibit A attached hereto approving the structuring and pricing
          of the BGS Transition Bonds or a notification to the Petitioner that
          the Designee does not approve the BGS Transition Bond transaction
          and setting forth the reasons supporting its disapproval; and

     (E). No delay or error in any filing by the Designee, or error in any
          such certificate or any information received by the Designee from
          the Petitioner, the Board's Financial Advisor, the underwriter or
          Staff, will affect the validity of this BSCRO, the BGS Bondable
          Transition Property or the BGS Transition Bonds, or the finality or
          incontestability of the Designee's approval of the BGS Transition
          Bonds.

     19. The issuance and sale of the BGS Transition Bonds through negotiation
with underwriters, either through a public offering or a limited public
offering under Rule 144A of the Securities and Exchange Commission, with or
without registration rights, is approved. The delivery by the Designee of his
or her certification in the form of Appendix A shall constitute conclusive
approval of the manner of offering of the BGS Transition Bonds.

     20. The SPE has the express authority to enter into interest rate swap
arrangements in connection with any floating rate class of BGS Transition
Bonds.

Recovery of Bondable Stranded Costs

     21. In accordance with N.J.S.A. 48:3-69, Transition Bonds will be
recourse only to the credit and assets of the SPE. Investment income earned on
the trust accounts held by the Bond Trustee may be used to satisfy current
scheduled interest and principal payments on the Transition Bonds and related
expenses, to distribute to the SPE (as a return on equity) an amount equal to
interest earnings on the capital account, and to satisfy the scheduled
overcollateralization amount. Any earnings in excess of amounts required to be
held in such trust accounts or required to be remitted to the SPE as a return
on equity) will reduce the BGS Transition Bond Charge annually through the
True-up Mechanism.

     22. Upfront Transaction Costs not to exceed $2.7 million are authorized
to be recovered through the issuance of BGS Transition Bonds and Petitioners
shall keep an accounting of all Upfront Transaction Costs. Petitioner is
authorized and directed to pay to the Financial Advisor an initial fee of
$330,000 upon issuance of the BGS Transition Bonds, in immediately available
funds by wire transfer at closing. Petitioner will make further payments, if
any, not to exceed $100,000 in the aggregate, to the Financial Advisor upon
the written instruction of the Board.

                                      29
<PAGE>

     23. The Ongoing Transition Bond Costs as described herein are authorized
to be recovered through the BGS Transition Bond Charge.

Issuance Advice Letter

     24. Pursuant to N.J.S.A. 48:3-64(a)(3), not later than five business days
after issuance and sale of the BGS Transition Bonds, Petitioner will notify
the Secretary of the Board, in an Issuance Advice Letter substantially in the
form of Appendix B hereto, of the initial BGS Transition Bond Charge and
related MTC-Tax (which are hereby approved), the expected amortization
schedule approved in the Designee Certification and related matters. The
Issuance Advice Letter will be automatically effective upon filing with the
Secretary of the Board. No delay or error in such filing will affect the
validity of this BSCRO, the BGS Bondable Transition Property or the BGS
Transition Bonds.

Servicing of Transition Bonds

     25. Petitioner, as Servicer, is authorized to enter into a servicing
agreement with the SPE, substantially as described in the Petition and as will
be described in the SEC filing or the offering memorandum, pursuant to which
PSE&G agrees to continue to operate its distribution system to provide service
to its customers, to impose, charge, collect and receive BGS Transition Bond
Charges with respect to BGS Bondable Transition Property for the benefit and
account of such SPE or its assigns, and to account for and remit these amounts
to or for the account of such SPE or its assigns in the manner described in
the Petition.

     26. The Original TBC and the BGS-TBC, together with their related MTC-Tax
charges, will be combined on each non-residential customer's bill as a single
separate line item. In the case of residential customers, the Original TBC and
the BGS-TBC, together with their related MTC-Tax charges, will be combined
with the customer's electric distribution charges as a single item. All bills
will, in addition, contain in text or in a footnote that such combined charges
represent Bondable Transition Property sold pursuant to the 1999 BSCRO and BGS
Bondable Transition Property sold pursuant to this BSCRO, and that such
charges are being collected by Petitioner on behalf of the SPEs, as owners of
their respective Bondable Transition Property.

     27. Collections from each customer will be applied first to sales taxes
(which Petitioner will collect as trustee for the State and not for its own
account or that of the SPE, and which are not "charges" for purposes of the
following allocations), then to charges in arrears, if any, and then to
current charges. With respect to each billing period, partial payments of
charges will be deemed to constitute the Transition Bond Charge for all series
of Transition Bonds, the MTC-Tax and the Petitioner's other charges, pro rata,
based on the proportions that the aggregate Transition Bond Charge, the
MTC-Tax and the Petitioner's other charges bear to the total of such charges.
Partial payments of Transition Bond Charges will be allocated to the owners of
Bondable Transition Property, pro rata, based on the proportions that the
Transition Bond Charge representing the Bondable Transition Property created
under the Original Financing Order, the BGS Transition Bond Charges as
approved for creation herein and any transition bond charges established
pursuant to other subsequent BSCRO bear to the total transition bond charges
collected.

     28. The conditions with respect to the resignation or replacement of the
Petitioner as Servicer will be described in the SEC Filing or the offering
memorandum. Pursuant to N.J.S.A. 48:3-71(f), in the event of a default by a
Servicer under any Servicing Agreement with respect to

                                      30
<PAGE>

Transition Bonds, upon application of the Bond Trustee, the Board will
designate a successor Servicer for the Bondable Transition Property, who will
promptly assume billing and collection responsibilities for BGS Transition
Bond Charges and the MTC-Tax. The Board will act on an expedited basis to
designate within 30 days such successor Servicer. Such successor Servicer will
assume all rights and obligations of the initial Servicer.

     29. The Board will only permit any successor Servicer to replace
Petitioner as Servicer in any of its servicing functions with respect to the
BGS Transition Bond Charges and the BGS Bondable Transition Property
authorized by this BSCRO upon determining that approving or requiring such
successor Servicer will not cause the then current credit ratings on BGS
Transition Bonds to be withdrawn or downgraded.

     30. In the event that any gross negligence, recklessness, or willful
misconduct by the Petitioner in the performance of its obligations under the
Servicing Agreement results in any loss to Petitioner's customers, the Board
hereby expressly retains the authority to protect ratepayers through
appropriate proceedings and, if justified, the adjustment of other rates of
the Petitioner. As evidenced by its consent to the terms of this order,
Petitioner agrees that it will not assert N.J.S.A. 48:3-65(b) or N.J.S.A.
48:3-74, to prevent such adjustment of other rates in any such subsequent
proceeding.

     31. Any third party supplier ("TPS") that proposes to collect BGS
Transition Bond Charges or the MTC-Tax must (i) meet the creditworthiness
criteria to be established by the Board, and at a minimum, the criteria set
forth and approved below in this BSCRO; and (ii) comply with the billing,
collection and remittance procedures and information access requirements set
forth below.

     32. The Board will only authorize a TPS to bill and collect the BGS
Transition Bond Charge or the MTC-Tax for remittance to the Servicer or the
Petitioner respectively, if (i) such TPS agrees to remit the full amount of
all charges it bills to customers for services provided by the Petitioner or
any successor electric public utility, together with BGS Transition Bond
Charges and the MTC-Tax, regardless of whether payments are received from such
customers, within 15 days of Petitioner's or the Servicer's bill for such
charges, (ii) such TPS will provide the Servicer with total monthly kWh usage
information for each customer in a timely manner for the Servicer to fulfill
its obligations, as such information is the basis of such remittance, and
(iii) the Servicer will be entitled, within seven days after a default by the
TPS in remitting any charges payable to the Petitioner, together with BGS
Transition Bond Charges and the MTC-Tax, to assume responsibility for billing
all charges for services provided by Petitioner or any successor electric
public utility, including the BGS Transition Bond Charges and the MTC-Tax, or
to transfer responsibility to a qualifying third party. In addition, if and so
long as such TPS does not maintain at least a `"Baa2" and "BBB'" (or the
equivalent) long term unsecured credit rating from Moody's Investors Service
or Standard & Poor's Rating Services, respectively, such TPS shall maintain,
with the Servicer or as directed by the Servicer, a cash deposit or comparable
security equal to two months' maximum estimated collections of all charges
payable to the Servicer, including the BGS Transition Bond Charges and the
MTC-Tax, as reasonably estimated by Petitioner (or any such successor electric
public utility or by the Servicer). In the event of a default in the
remittance of any such charges by a TPS, any shortfall in BGS Transition Bond
Charge or MTC-Tax collections will be included in the periodic adjustment of
the BGS Transition Bond Charge and the MTC-Tax as described herein.

     33. Customers will continue to be responsible for payment to the Servicer
of the BGS Transition Bond Charge and the MTC-Tax billed by a TPS, to the
extent such customer has not

                                      31
<PAGE>

paid Transition Bond Charges or MTC-Tax billed to it. In the event of a
failure of any customer to pay the Transition Bond Charge or MTC-Tax, the
Petitioner is authorized to shut-off power, or a successor Servicer is
authorized to direct the electric public utility to shut-off power, to such
customer subject to applicable law, including Board Orders and regulations.

     34. The Servicer will be entitled to an annual servicing fee equal to
..05% (five basis points) of the initial principal balance of the BGS
Transition Bonds (the "Servicing Fee"). The Board approves the Servicing Fee
as described herein. The Board also approves, in the event of a default by the
Servicer(4), a higher annual Servicing Fee of any successor Servicer of up to
1.25 % of the initial principal balance of the BGS Transition Bonds. If the
Servicing Fee paid to Petitioner is greater than the actual incremental costs
to service the BGS Transition Property, other rates of the Petitioner shall be
adjusted to reflect the difference between actual servicing costs and the
Servicing Fee.

     35. In the event that the Servicer remits BGS TBC collections less
frequently than daily, Petitioner will credit ratepayers through an adjustment
to the distribution charges, not less frequently than annually, with an amount
equal to the earnings (calculated at the average daily federal funds rate
during the remittance period) on the average balances of such collections to
(but not including) the remittance date to the Trustee.

The Transition Bond Charge: Establishment and Adjustment

     36. The formula used to calculate the BGS Transition Bond Charge and to
periodically adjust the Transition Bond Charge, as set forth on Appendix F
hereto, is approved.

     37. Pursuant to N.J.S.A. 48:3-64, the initial BGS Transition Bond Charge
and MTC-Tax will be filed by Petitioner with the Secretary of the Board in the
Issuance Advice Letter and will be effective upon such filing, to be adjusted
up or down, as necessary, by the True-Up Mechanism.

     38. In accordance with N.J.S.A. 48:3-64, the Servicer, on behalf of
Petitioner and the pledgees or transferees of the BGS Bondable Transition
Property, is authorized and required to file with the Secretary of this Board
periodic formula-based BGS Transition Bond Charge adjustments, at least
annually but not more frequently than quarterly, to the extent necessary to
assure the full and timely recovery of an amount equal to the Periodic Payment
Requirements. If adjustments are required to be made on an annual basis, the
Servicer will be required to make an estimate of the adequacy of forecasted
revenues once during the year and to seek a mid-year adjustment of the BGS
Transition Bond Charge to address any projected deficiency during such year.
Each adjustment of the BGS Transition Bond Charge shall be formula-based,
shall be in the amount required to ensure receipt of revenues sufficient to
provide for the full and timely recovery of BGS Transition Costs (as defined
in EDECA), including, without limitation, the timely payment of principal of,
and interest and acquisition or redemption premium on, the BGS Transition
Bonds issued to finance such BGS Transition Costs. The periodic adjustments
will be filed in substantially the form attached to this BSCRO as Appendix C.

__________________________

(4) The naming of a Successor Servicer which may cause a higher Servicing Fee
up to a maximum 1.25% (125 basis points) applies only in the case of a default
by the original Servicer. It shall not be construed to be triggered by other
changes in corporate structure or function such as the transfer of functions
to sister or subsidiary companies, voluntary outsourcing or merger or
acquisition of the Servicer.

                                      32
<PAGE>

     39. Each periodic adjustment of the BGS Transition Bond Charges will
become effective 30 days after filing with the Secretary of the Board, absent
a determination by the Board of manifest error (i.e., an arithmetic error
evident on the face of the filing) in the application of the formula approved
herein. Petitioner will propose such adjustments in a filing with the
Secretary of this Board at least 30 days in advance of the date upon which it
is requested to be effective. The proposed adjustment will become effective on
an interim basis on such date and, in the absence of a Board order to the
contrary correcting such manifest error, will become final 60 days after the
filing.

     40. If necessary to ensure the timely recovery of the Periodic Payment
Requirements and the MTC-Tax, the Board will approve adjustments to the
methodology as proposed by Petitioner in "non-routine" true-up filings as
discussed hereinabove.

Use of Transition Bond Proceeds

     41. Petitioner will use the proceeds of the BGS Transition Bonds, net of
transaction costs and any costs of credit enhancement for the BGS Transition
Bonds paid from the proceeds, to reduce its BGS Transition Costs through the
retirement of Petitioner's debt or equity, or both (including any transactions
completed prior the date of this Order). No failure to apply the proceeds in
accordance with this BSCRO shall affect the sale of the BGS Bondable
Transition Property or the right to collect the BGS Transition Bond Charges.

Approval of Servicing Agreement, Administration Agreement, Sale Agreement,
and Other Agreements or Transactions

     42. Subject to the terms and conditions set forth herein, Petitioner's
entering into a servicing agreement, an administration agreement, a sale
agreement, and other Transition Bond Transaction documents with the SPE
consistent with the terms of this Order and/or substantially as described in
the SEC Filing or offering memorandum and such other related transaction
documents and other dealings between Petitioner and the SPE as contemplated
therein and herein are authorized subject to review and approval by the
Designee with input from the Financial Advisor and Board Staff. The Designee's
approval shall be conclusively evidenced by the execution of the Designee
Certification attached hereto as Appendix A. The Board, acting through its
authorized legal representative, may enforce the Petitioner's obligations
under the financing documents for the benefit of ratepayers.

Accounting for Certain Benefits

     43. Pursuant to N.J.S.A. 48:3-64, any amount of the Transition Bond
Charges held by the Bond Trustee in excess of those amounts necessary to fully
recover the Periodic Payment Requirements will be applied as a credit to
reduce BGS Transition Bond Charges through the True-Up Mechanism, as described
in the Petition, except that if more than one issue of BGS Transition Bonds is
sold, all such requirements with respect to such BGS Transition Bonds will be
aggregated for purposes of determining whether or not the total transition
bond charges collected exceed the total of such requirements for all such BGS
Transition Bonds.

     44. Upon retirement of all outstanding BGS Transition Bonds and any
related Ongoing Transition Bond Costs, any remaining amounts held by the Bond
Trustee (including amounts in the capital account) will be released to the SPE
and distributed to Petitioner. Petitioner will, in turn, credit to its
electric customers against their distribution charges an amount equal to any
remaining BGS Transition Bond Charges, less any amount of any unpaid

                                      33
<PAGE>

MTC-Tax charges and any amount that was withdrawn and not replenished to the
capital account (the Petitioner's equity), together with an amount equal to
investment earnings on the capital account. Any overcollected MTC-Tax charges
shall also be credited to Petitioner's electric customers against Petitioner's
distribution charges. Petitioner shall be entitled to retain its equity
contribution distributed to it by the SPE.

Records

     45. Pursuant to N.J.S.A. 48:3-70, the Petitioner and any successor
Servicer on its behalf shall maintain or cause to be maintained records of BGS
Transition Bond Charges and associated MTC-Tax collections which have been
assessed and collected by Petitioner or its successor, as Servicer, under this
BSCRO. Such records, and any records of a financing entity, will be made
available by Petitioner for inspection and examination within a reasonable
time upon demand therefore by the Board, Board Staff, or the related financing
entity.

MTC-Tax Adjustments

     46. Pursuant to this Order, Petitioner is authorized to file with the
Board proposals for mandatory periodic adjustments of the MTC-Tax. Such
adjustments shall be formula-based and shall initially be based on the BGS TBC
Formula attached hereto as Exhibit F. Such adjustments shall be made
substantially in the same manner and at the same time as the True-Up Mechanism
for the BGS Transition Bond Charges in order to insure receipt of revenues
sufficient to recover the MTC-Tax Component. Unless the Petitioner or the
Board proposes an adjustment to the formula used to calculate the MTC-Tax, any
proposed adjustment to the MTC-Tax will become effective 30 days after filing
absent manifest error and, in the absence of a Board Order to the contrary,
will become final 60 days after filing. The initial amount of the MTC-Tax will
be filed with the Board as part of the Issuance Advice Letter and become
effective upon such filing in the same manner and at the same time as the
related initial Transition Bond Charge. The periodic adjustments will be filed
in substantially the form attached hereto to this BSCRO as Appendix C.

     47. It is the express intention of the Board that the Petitioner shall
not overrecover or underrecover the MTC-Tax Component. Accordingly, Petitioner
shall adjust the formula used to calculate the MTC-Tax to reflect changes in
federal income tax or State corporate business tax rates (or local tax rates,
if applicable) and any other changes to the application or interpretation of
such laws, provided such changes are either "generic" (affect all taxpayers
such as a prospective change in the tax rate) or are securitization-related,
including the effect of any deductions reflecting the amortization of the
Up-Front Transaction Costs.

     48. Any proposed adjustment to the TBC formula by the Petitioner shall be
submitted to the Secretary of the Board no less than 60 days prior to its
proposed effective date and shall become effective on the proposed effective
date absent a Board Order to the contrary; provided, however, that the
existing TBC Formula shall remain effective in the interim.

     49. As provided in N.J.S.A. 48:3-72(a)(4), Petitioner's right to recover
the MTC-Tax Component shall in no way affect or impair the legal true sale and
absolute transfer of the BGS Bondable Transition Property to the SPE, or
otherwise affect the legal rights and attributes of the BGS Bondable
Transition Property under the EDECA or under this BSCRO.

                                      34
<PAGE>

Miscellaneous

     50. Pursuant to N.J.S.A. 48:3-68, this BSCRO will be effective only in
accordance with the terms hereof and upon the written consent of Petitioner to
all such terms.

     51. Pursuant to N.J.S.A. 48:3-74, the consideration or approval by the
Board of a petition by Petitioner under EDECA, including this BSCRO and the
periodic adjustment provided in N.J.S.A. 48:3-64, will be wholly separate
from, and will not be utilized in the Board's consideration of, any other
ratemaking or other proceeding involving Petitioner, except as otherwise
provided herein and in EDECA.

     52. Any holder of a BGS Transition Bond and the Transition Bond Trustee,
for the benefit of such holders, are entitled to the benefit of the pledges
and agreements of the State of New Jersey set forth in EDECA and each of the
Petitioner, the SPE and the Transition Bond Trustee is authorized to include
such representations, pledges and agreements in any registration statement, or
offering memorandum related to the BGS Transition Bonds or in any contract
with the holders of the BGS Transition Bonds, the Transition Bond Trustee or
with any assignees.

     53. This BSCRO is issued subject to the following provisions, failure of
compliance with any or all of which shall not affect the validity of this
BSCRO, the BGS Bondable Transition Property or the BGS Transition Bonds, or
the finality or incontestability of the Designee's approval of the BGS
Transition Bonds:

     (1)  Petitioner shall promptly furnish the Secretary of the Board with
          copies of all documents as executed and filed with other regulatory
          agencies relating to the BGS Transition Bonds.

     (2)  Petitioner shall file with this Board an annual statement setting
          forth details with respect to the disbursement of net proceeds of
          the BGS Transition Bonds and their use in retiring debt or equity or
          both;

     (3)  Petitioner shall file with this Board annually a statement setting
          forth details with respect to interest earning accruals on BGS TBC
          remittances retained by the Petitioner, as servicer, and the
          proposed manner by which such accruals will be credited back to the
          Petitioner's electric customers as required by Ordering Paragraph 35
          hereof;

     (4)  Not later than nine months following issuance of the BGS Transition
          Bonds, the Petitioner will file a statement reconciling (a) the
          actual Upfront Transaction Costs incurred by Petitioner and (b) the
          amount of Upfront Transaction Costs recovered from the proceeds of
          the BGS Transition Bonds. If the actual prudently incurred Upfront
          Transaction Costs exceeds the amount so recovered, such excess shall
          be eligible for recovery by Petitioner in a subsequent proceeding,
          or from any excess bond proceeds not applied to recover the actual
          Deferred Balance as provided in paragraph (5) below. If the actual
          Upfront Costs are less than the aggregate amount financed, such
          difference shall be credited against the Petitioner's NTC-BGS Charge
          to the benefit of Petitioner's electric customers, or may be used to
          recover any Deferred Balance which is not recovered from bond
          proceeds, as described in paragraph (5) below.

                                      35
<PAGE>

     (5)  As part of the filing made pursuant to paragraph (4) above,
          Petitioner will file with the Board a statement reconciling (a) the
          actual net-of-tax Year 4 Deferred Balance outstanding as of the end
          of the month preceding the month of issuance of the BGS Transition
          Bonds; and (b) the amount of the net-of-tax Year 4 Deferred Balances
          recovered from the proceeds of the BGS Transition Bonds. If the
          actual Year 4 Deferred Balance exceeds the amount so recovered, such
          excess shall be eligible for recovery by Petitioner in a subsequent
          proceeding, or if so ordered by the Board from any excess bond
          proceeds not applied to pay Upfront Transaction Costs, as provided
          in paragraph (4) above. This BSCRO will not be construed as a
          certification that the BGS Transition Bonds will be secured by
          tangible or intangible assets of commensurate value or investment
          costs.

     (6)  As provided herein, the certification of the Designee, in accordance
          with N.J.S.A. 48:3-62(c), 48:3-62(g) and N.J.S.A. 48:3-64(a)(3) and
          the BSCRO, is final and uncontestable as of its date. Such
          certification will not preclude independent legal challenge against
          any party described herein that provides a certificate or
          representation upon which the Designee relies. The validity and
          irrevocability of this BSCRO shall not be affected by any action
          under law that may be taken by the State or this Board against any
          person making a representation or certification to the Designee or
          this Board hereunder.

DATED: 7/12/05                                       BOARD OF PUBLIC UTILITIES
                                                     BY:

                           /s/ JEANNE M. FOX
                           ------------------------
                                 JEANNE M. FOX
                                   PRESIDENT

/s/ FREDERICK F. BUTLER                              /s/ CONNIE O. HUGHES
-----------------------                              --------------------------
FREDERICK F. BUTLER                                  CONNIE O. HUGHES
COMMISSIONER                                         COMMISSIONER

                           /s/ JACK ALTER
                           ------------------------
                                  JACK ALTER
                                 COMMISSIONER

ATTEST:   /s/ KRISTI IZZO
          ---------------------------
          KRISTI IZZO
          SECRETARY

                                      36
<PAGE>

                             CONSENT OF PETITIONER

     Pursuant to N.J.S.A. 48:3-68, Petitioner hereby consents to all of the
terms of this Bondable Stranded Costs Rate Order this 19th day of
July, 2005.

                                                PUBLIC SERVICE ELECTRIC AND GAS
                                                COMPANY
                                                BY:

                                                /s/ MORTON A. PLAWNER
                                                -------------------------------
                                                MORTON A. PLAWNER
                                                VICE PRESIDENT

                                      37
<PAGE>

                                                                    Appendix A

                  [THE GREAT HALL OF THE STATE OF NEW JERSEY]
                              STATE OF NEW JESEY
                           Board of Public Utilities
                               2 Gateway Center
                               Newark, NJ 07102
                              www.bpu.state.nj.us

                                 CERTIFICATION

     (to be filed with the Secretary of the Board within one business day
                  following pricing of the transition bonds)

BOARD OF PUBLIC UTILITIES (THE "BOARD") OF THE STATE OF NEW JERSEY

SUBJECT: Certification for Transition Bonds ("Transition Bonds")

Pursuant to the Order of the Board dated June ___, 2005, BPU DOCKET NO.
EF0307053 (the "BGS BSCRO")

I, _____________________________ (the "Designee"), in accordance with N.J.S.A.
48:3-62(b) and N.J.S.A. 48:3-62(a)(3) of the Electric Discount and Energy
Competition Act, Chapter 23 of the Laws of 1999, as amended ("EDECA"), for the
purpose of (a) establishing that the structuring and pricing of the BGS
Transition Bonds assures that the Petitioner's customers pay the lowest BGS
Transition Bond Charges consistent with market conditions and the terms of the
BGS BSCRO and (b) approving at the time of pricing of the BGS Transition
Bonds, the terms and conditions of the BGS Transition Bonds, servicing fees,
if any, with respect to the collection of such BGS Transition Bond Charges and
the pledging, assignment and sale of BGS Bondable Transition Property in
connection with the initial BGS Transition Bond Charge, HEREBY CERTIFY as
follows:

          1. I have received and reviewed in accordance with BGS BSCRO a copy
          of the Pricing Advice Certificate, a copy of which is attached
          hereto, and find that such certificate is in proper form as
          evidenced by such Order. I have also reviewed other information as I
          have deemed necessary to provide this certification. Any capitalized
          terms not defined herein shall have the meanings ascribed thereto in
          the BGS BSCRO.

          2. The following are the terms of the BGS Transition Bonds:

          Name of BGS Transition Bonds:_________
          SPE:___________
          Closing Date: _________

          Amount Issued: _________
          Interest Rates and Expected Amortization Schedule: See Attachment 1

                                     A-1
<PAGE>

          Distributions to Investors (quarterly or semi-annually): ________
          Weighted Average Coupon Rate(1): ________
          Annualized Weighted Average Yield(2):_________
          Capital Amount: ________
          Overcollateralization Amount:_______
          Overcollateralization Schedule:  See Attachment 1
          New Jersey Statutory Corporate Business Tax Rate:  __________
          New Jersey Sales Tax Rate:________
          Federal Statutory Corporate Income Tax Rate: __________

          3. All such items are within the parameters established in the BGS
          BSCRO and in the Designee Guidelines in Appendix E to the BGS BSCRO.
          Accordingly, (a) the structuring and pricing of the BGS Transition
          Bonds assures that Petitioner's customers will pay the lowest BGS
          Transition Bond Charges consistent with market conditions and the
          terms of the BSCRO and (b) the terms and conditions of the BGS
          Transition Bonds and the schedule of payments of principal and
          interest on the BGS Transition Bonds and the capitalization and
          overcollateralization requirements are approved.

Dated:

                                            -----------------------------------
                                            Designee

_________________________

1 Weighted by modified duration and principal amount.
2 Weighted by modified duration and principal amount.

                                     A-2
<PAGE>

                                 ATTACHMENT 1
                        EXPECTED AMORTIZATION SCHEDULE

               (with coupons, prices, classes, if any, expected
                       amortization schedule and stated
                   maturities, call features, and scheduled
                      overcollateralization requirements)

A. General Terms
<TABLE>
<CAPTION>
<S>        <C>          <C>         <C>               <C>          <C>          <C>

  Class        Price      Coupon     Fixed/Floating    Avg. Life     Stated     Call Features
_________  ___________  _________   ________________  ___________   Maturity       If Any
                                                                   __________  _______________

</TABLE>

B. Scheduled Amortization Requirement
<TABLE>
<CAPTION>
<S>                   <C>               <C>               <C>               <C>

    Date              [Class]           [Class]           [Class]           [Class]
______________  _________________  ________________  ________________  _______________

</TABLE>

C. Schedule of Overcollateralization Requirement

             Date                   Required Overcollateralization Level
        ________________________   ______________________________________

                                     A-3
<PAGE>

                                                                    Appendix B

                            ISSUANCE ADVICE LETTER
                              [PSE&G Letterhead]

              [To be filed with the Board of Public Utilities or
                its successor not later than five business days
                    following sale and issuance of the BGS
                               Transition Bonds]

[DATE]

Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

Re: Bondable Stranded Costs Rate Order; Docket No. EF03070532

Dear Ms. Izzo:

Pursuant to your Honorable Board's Order in the

above-captioned Docket ("BSCRO"), Public Service Electric and Gas Company
("Company") hereby transmits for filing this Issuance Advice Letter. Any
capitalized terms not defined herein shall have the meanings ascribed thereto
in the BSCRO.

In the BSCRO, the Board directed the Company to file an Issuance Advice Letter
when pricing terms for a series of BGS Transition Bonds have been established.
This Issuance Advice Letter filing applies the methodology approved by the
Board in the BSCRO to establish the initial BGS Transition Bond Charge and
initial MTC-Tax. The terms of issuance are as follows:

    1.  BGS Transition Bond Name:_________
    2.  SPE Name:______________
    3.  Trustee: _________
    4.  Closing Date: _________
    5.  Principal Amount of Transition Bonds Issued: _________
    6.  Deferred Balance Securitized:
    7.  Upfront Transaction Costs: _______
    8.  Interest Rates and Expected Amortization Schedule: See Attachment 1
    9.  Distributions to Investors (quarterly or semi-annually): ________
    10. Annual Servicing Fee as a percent of the initial principal balance: ____
    11. Overcollateralization amount: _______________
    12. Overcollateralization Schedule: See Attachment 1_______
    13. Initial Balance of Capital Subaccount: ________

Table I below shows the current assumptions for each of the variables used in
the BGS Transition Bond Charge and MTC-Tax calculation.

                                     B-1
<PAGE>

                                    TABLE I
        INPUT VALUES FOR INITIAL BGS TRANSITION BOND CHARGE AND MTC-TAX

Forecasted annual kWh sales (month-by-month, residential, commercial and
industrial)

<TABLE>
<CAPTION>
<S>                                                                  <C>               <C>              <C>
                                                                     Residential       Commercial       Industrial
                                                                        (__%)             (__%)            (__%)
                                                                    _____________     _____________    ____________

Percent of billed amounts collected in current month:
Percent of billed amounts collected in second month after
     billing:
Percent of billed amounts collected in third month after
     billing:
Percent of billed amounts collected in fourth month after
     billing:
Percent of billed amounts collected in fifth month after
     billing:
Percent of billed amounts collected in sixth month after
     billing:
Percent of billed amounts expected to be charged-off:
Forecasted annual Ongoing BGS Transition Bond Costs:
     ________
Required annual overcollateralization amount: ________
Current BGS Transition Bonds outstanding balance: ________
Scheduled BGS Transition Bond outstanding
     balance as of ___/____/_________
New Jersey Statutory Corporate Business Tax Rate:  __________
New Jersey Sales Tax Rate

Federal Statutory Corporate Income Tax Rate: __________

</TABLE>

Based on the approved formula, the initial BGS Transition Bond Charge is
______ (cent)/kWh and the initial MTC-Tax is ______ (cent)/kWh

                                     B-2
<PAGE>

In accordance with the BSCRO, the BGS Transition Bond Charge and MTC-Tax shall
be automatically effective when filed and will continue to be effective until
the Total Payment Requirement for the Transition Bonds is discharged in full.

                                              Respectfully submitted,

                                              General Corporate Counsel

Attachments

                                     B-3
<PAGE>

                                 ATTACHMENT 1
                        EXPECTED AMORTIZATION SCHEDULE

               (with coupons, prices, classes, if any, expected
                       amortization schedule and stated
                   maturities, call features, and scheduled
                      overcollateralization requirements)

A. General Terms
<TABLE>
<CAPTION>
<S>        <C>          <C>         <C>               <C>          <C>          <C>

  Class        Price      Coupon     Fixed/Floating    Avg. Life     Stated     Call Features
_________  ___________  _________   ________________  ___________   Maturity       If Any
                                                                   __________  _______________

</TABLE>

B. Scheduled Amortization Requirement
<TABLE>
<CAPTION>
<S>                   <C>               <C>               <C>               <C>

    Date              [Class]           [Class]           [Class]           [Class]
______________  _________________  ________________  ________________  _______________

</TABLE>

C. Schedule of Overcollateralization Requirement

             Date                   Required Overcollateralization Level
        ________________________   ______________________________________

                                     B-4
<PAGE>
                                                                    Appendix C

                                TRUE-UP LETTER

                              [PSE&G Letterhead]

                                                                         [date]

Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

     Re: Docket No.: EF03070532

Dear Ms. Izzo:

Pursuant to your Honorable Board's order in the above-captioned Docket ("BGS
BSCRO"), Public Service Electric and Gas Company ("Company") as Servicer of
the BGS Transition Bonds or any successor Servicer and on behalf of the
trustee as assignee of the SPE shall apply at least annually for mandatory
periodic adjustment to the BGS Transition Bond Charge and related MTC-Tax
charge. Any capitalized terms not defined herein shall have the meanings
ascribed thereto in the BGS BSCRO.

Each such adjustment shall be proposed in a filing ("True-Up Letter") with the
Board at least 30 days in advance of the date upon which it is requested to be
effective (which effective date hereunder is _________________). The proposed
adjustment to the BGS Transition Bond Charge shall become effective on an
interim basis on such date and, in the absence of a Board order to the
contrary finding manifest error in the calculation, shall become final 60 days
after the filing. The proposed adjustment to the MTC-Tax charge, absent a
proposed change in the formula, shall become effective on an interim basis on
such date and, in the absence of a Board order to the contrary finding
manifest error in the calculation, shall become final 60 days after the
filing.

Using the formula approved by the Board in the BGS BSCRO (or in effect
pursuant to the True-Up Letter dated _______), this filing modifies the
variables used in the BGS Transition Bond Charge and MTC-Tax calculation and
provides the resulting modified BGS Transition Bond Charge and MTC-Tax charge.
Table I shows the revised assumptions for each of the variables used in
calculating the BGS Transition Bond Charge and MTC-Tax charge. The assumptions
underlying the current BGS Transition Bond Charge and MTC-Tax charge were
filed by the Company in an Issuance Advice/True-Up Letter dated ______________.

                                     C-1
<PAGE>

Based on the approved formula, the proposed BGS Transition Bond Charge is
______ (cent)/kWh and the resulting MTC-Tax is ______ (cent)/kWh.

                                                   Respectfully submitted,

                                                   General Corporate Counsel

Attachment

                                     C-2
<PAGE>

                                    TABLE I
        INPUT VALUES FOR INITIAL BGS TRANSITION BOND CHARGE AND MTC-TAX

Forecasted annual kWh sales (month-by-month, residential, commercial and
industrial)

<TABLE>
<CAPTION>
<S>                                                                  <C>               <C>              <C>
                                                                     Residential       Commercial       Industrial
                                                                        (__%)             (__%)            (__%)
                                                                    _____________     _____________    ____________

Percent of billed amounts collected in current month:
Percent of billed amounts collected in second month after
     billing:
Percent of billed amounts collected in third month after
     billing:
Percent of billed amounts collected in fourth month after
     billing:
Percent of billed amounts collected in fifth month after
     billing:
Percent of billed amounts collected in sixth month after
     billing:
Percent of billed amounts expected to be charged-off:

</TABLE>

1.    Under-collection of prior principal amount _______
2.    Upcoming collection of current principal amount _______
3.    Under-collection of prior interest amount ____
4.    Upcoming collection of current interest amount _______
5.    Under-collection of prior over-collateralization amount _______
6.    Upcoming collection of current over-collateralization amount _______
7.    Under-collection of prior tax component amount _______
8.    Upcoming collection of current tax component amount _______
9.    Deficiency in required capital amount _______
10.   Amount in reserve account ________
11.   Upcoming period servicing and administration fees  _______
12.   N.J. Statutory Corporate Business Tax Rate ___________
13.   N.J. Sales Tax Rate __________
14.   Federal Statutory Corporate Income Tax Rate___________

                                     C-3
<PAGE>

                                                                    Appendix D

                          PRICING ADVICE CERTIFICATE
                              [PSE&G Letterhead]

 [To be filed not later than the date of pricing of the BGS Transition Bonds]
                                    [DATE]

Kristi Izzo, Secretary
State of New Jersey
Board of Public Utilities
Two Gateway Center
Newark, New Jersey 07102

Re:  Bondable Stranded Costs Rate Order; Docket No. EF03070532

Dear Ms. Izzo:

Pursuant to your Honorable Board's Order in the above-captioned Docket ("BGS
BSCRO"), Public Service Electric and Gas Company ("Company") hereby transmits
for filing this Pricing Advice Certificate. Any capitalized terms not defined
herein shall have the meanings ascribed thereto in the BGS BSCRO.

In the BGS BSCRO, the Board requires the Company to file a Pricing Advice
Certificate when pricing terms for a series of BGS Transition Bonds have been
approved by the Company. The proposed terms of pricing and issuance of the
Transition Bonds are as follows:

      Name of BGS Transition Bonds:_________
      Name of SPE:___________
      Name of Trustee:_______
      Closing Date: _________
      Principal Amount of BGS Transition Bonds Issued: _________
      Amount of Year 4 Deferred Balance
      outstanding on Petitioner's books as of  ________, 20__: ___________
               Net-of-Tax Amount of Year 4 Deferred Balance securitized: _______
               New Jersey Statutory Corporate Business Tax Rate: ___________
      New Jersey Sales Tax Rate:_____
               Federal Statutory Corporate Income Tax Rate: ______________
               Amount of Upfront Transaction Costs securitized:  ______________
      Interest Rates and Expected Amortization Schedule: See Attachment 1
      Distributions to Investors (quarterly or semi-annually): ________
      Annual Servicing Fee as a percent of initial principal balance: _______
      Weighted Average Coupon Rate(1): ________
      Annualized Weighted Average Yield(2):_________
      Initial Balance of Capital Subaccount: ________
      New Jersey Sales Tax Rate: ___________
      Federal Statutory Corporate Income Tax Rate: ______________

_________________

1 Weighted by modified duration and principal amount.
2 Weighted by modified duration and principal amount.

                                     D-1
<PAGE>

      Overcollateralization Amount: _______
      Overcollateralization Schedule:_______

The Company hereby certifies that to the best knowledge, information and
belief of the Company, its officers, agents and employees after reasonable
inquiry, the selection of a negotiated sale of the Transition Bonds, through
[a public offering]/[ or a limited public offering under Rule 144A of the
SEC], has resulted in the highest possible bond ratings and the lowest
possible interest and transaction costs consistent with market conditions and
the terms of the BGS BSCRO.

The Company hereby certifies that: (i) all proposed terms of pricing and
issuance of the BGS Transition Bonds are within the parameters established in
the BGS BSCRO and the Designee's Guidelines attached as Appendix E to the
BSCRO, and (ii) to the best knowledge, information and belief of the Company,
its officers, agents and employees after reasonable inquiry, the structuring,
marketing and pricing of BGS Transition Bonds, as described in this Pricing
Advice Certificate, has resulted in the lowest BGS Transition Bond Charges
consistent with market conditions and the terms of the BGS BSCRO.

                                           Respectfully submitted,

                                           Public Service Electric & Gas Company
                                           by Chief Financial Officer

                                     D-2
<PAGE>

                                 ATTACHMENT 1
                        EXPECTED AMORTIZATION SCHEDULE

               (with coupons, prices, classes, if any, expected
                       amortization schedule and stated
                   maturities, call features, and scheduled
                      overcollateralization requirements)

A. General Terms
<TABLE>
<CAPTION>
<S>        <C>          <C>         <C>               <C>          <C>          <C>

  Class        Price      Coupon     Fixed/Floating    Avg. Life     Stated     Call Features
_________  ___________  _________   ________________  ___________   Maturity       If Any
                                                                   __________  _______________

</TABLE>

B. Scheduled Amortization Requirement
<TABLE>
<CAPTION>
<S>                   <C>               <C>               <C>               <C>

    Date              [Class]           [Class]           [Class]           [Class]
______________  _________________  ________________  ________________  _______________

</TABLE>

C. Schedule of Overcollateralization Requirement

             Date                   Required Overcollateralization Level
        ________________________   ______________________________________

                                     D-3
<PAGE>

                                                                     Appendix E

                              Designee Guidelines

                             Docket No. EF03070532

     The Designee is empowered to agree to the terms and conditions of the BGS
Transition Bonds to be issued to recover a portion of the Basic Generation
Service Transition Costs of Public Service Electric and Gas Company (the
"Company"), and to certify that the structuring and pricing of the BGS
Transition Bonds assure that the ratepayers will pay the lowest Transition
Bond Charges consistent with market conditions and the terms of the BGS BSCRO;
provided, however, that the Designee cannot approve the terms and conditions
or deliver such certification if the terms and conditions of the structuring
and pricing of the BGS Transition Bonds fall outside the parameters set forth
below:

Bond Size       The Board hereby authorizes Petitioner to recover to the
                lesser of its then-outstanding net of tax Deferred Year 4 BGS
                Balance at the date of securitization or $100 million together
                with Upfront Transaction Costs, not to exceed $2.7 million,
                through the issuance of BGS Transition Bonds.

Bond Maturity   The scheduled amortization upon issuance of the BGS Transition
                Bonds will be up to 10 years, and the final legal maturity
                will be up to two additional years.

Amortization    Set to provide substantially equal forecasted kilowatt-hour
                charges (including the BGS Transition Bond Charge and MTC-Tax).

Payment Dates   The first payment of principal and interest shall be scheduled
                to occur within 11 months of issuance and payments of principal
                and interest otherwise shall be no less frequent than semi-
                annually.

Capital Account The Company shall capitalize the SPE at no less than .50% of
and Over        the initial principal amount of the BGS Transition Bonds. The
Collaterali-    BGS Transition Bond Charge shall include over-collateralization
zation          in amount sufficient to build up to no more than 0.50% of the
                initial principal amount of the BGS Transition Bonds.\

Underwriting    Either public underwriting or limited public offering under
                Rule 144A, by way of a negotiated sale. Use of customary
                practices in the syndication and underwriting process for the
                execution of an asset-backed securitization of this size and
                credit quality.

Floating Rate   If the company proposes to cause the issuer to issue floating
Hedging         rate bonds which are swapped to a fixed rate then any such swap
Arrangement     shall be competitively bid among no less than three (3)
                qualified swap counterparties and the issuer shall accept the
                lowest responsible bid taking into account the trading value of
                the counterparties. A swap counterparty shall be deemed a
                qualified swap

                                     E-1
<PAGE>

                counterparty if the rating of the counterparty is at least
                AA-/Aa3.

Hedging         The Designee may authorize a Hedging Arrangement if (i) the
Arrangement     Company notifies the Designee and the Board's Financial Advisor
                that it proposes to enter into a Hedging Arrangement, (ii) the
                Company provides an analysis to the Designee and the
                Financial Advisor comparing the estimated present value savings
                using the hedging Arrangement and the estimated present value
                savings assuming the Transition Bonds were issued on the same
                date, (iii) the difference between the estimated present value
                savings using the Hedging Arrangement and the estimated present
                value savings ssuming the Transition Bonds were issued on the
                same date is less than $500,000 and (iv) the Financial Advisor
                concurs with the analysis.

Capitalized terms used herein and not otherwise defined shall have the
meanings set for in the BGS BSCRO.

The terms and conditions described therein are hereby approved with such
modifications and amendments as are acceptable to the Designee relying upon
the written advice and recommendations of the Board's financial advisor
(collectively, the "Designee Guidelines").

                                     E-2
<PAGE>

                                                                     Appendix F

Attachment A1 - BGS Debt Design
($ 000s)

Debt Design Variables

Original Principal                                       -
Over-collateralization                   0.50%           -
Issuance Costs                                           -
SPE Equity                               0.50%           -
Federal Income Tax Rate                                 35%
State Income Tax Rate                                    9%
Trustee & Other Fees Plus Amortization                   -
  of Excess Hedge
Servicing fees (Annual)                                0.05%
Interest Rate                                         tranched

                         Sold BGS Transition Property

<TABLE>
<CAPTION>

                 1               2            3            4            5            6            7            8

                                          BGS - TBC    BGS - TBC
         BGS - TBC Charge                  Charge       Charge
              Billed                       Billed      Collected
         (Including Sales    Sales Tax   (excluding   (excluding                                           Servicing
 Year          Tax)           Billed     sales tax)   sales tax)    Interest     Principal    Admin Fee       Fee
-----   -----------------   -----------  ----------   ----------    --------     ---------    ---------    --------
<S>     <C>                  <C>         <C>          <C>           <C>          <C>          <C>          <C>
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

</TABLE>

<TABLE>
<CAPTION>
                                    Tax MTC

                   11           12           13           14           15           16           17           18

                Aggregate
                Customer     BGS -TBC
               Charge for      Sold
                Sold BGS    Transition
               Transition    Property       BGS -
               Property &      (see        MTC-Tax                  Total Tax    Total Tax
                 MTC-Tax      above)       Billed                    Billed      Collected
               (including   (including   (including    Sales Tax   (excluding   (excluding     Federal       State
    Year       sales tax)   sales tax)   sales tax)     Billed     sales tax)   sales tax)   Income Tax   Income Tax
<S>            <C>          <C>          <C>           <C>         <C>          <C>          <C>          <C>

2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

</TABLE>

                                     F-1
<PAGE>

Attachment A-2 - BGS - TBC-Sold Transition Property: Charge Development and
 True-up ($000s) [Dates and amounts need to be updated.]

<TABLE>
<CAPTION>

                                                               MONTH OF ISSUANCE
                                                           ---------------------------    ----------------------
<S>                                                        <C>                            <C>
     Principal
     Interest
     Administration Fees
     Servicing Fees
     Over-collateralization
A    Transition Bond Periodic Payment Requirement
B    Less BGS - TBC-Sold Transition Property Billed and
     expected to be collected during the upcoming period                                    N/A
C    BGS Transition Bond Debt Service to be billed and
     collected during the period
D    True-up Adjustment for Under/(Over) collections of
     prior period                                            See Note
E    Total TBC-Sold Transition Property to be billed and
     collected during the period
F    Projected kwh's to be delivered, billed and cash
     collected during the period (in millions)
G    BGS - TBC-Sold BGS Transition Property before Sales
     Tax (cents per kwh)
H    BGS - TBC-Sold BGS Transition Property including
     Sales Tax (cents per kwh)

</TABLE>

Note - Amount for the first year is the overcollection built into the charge
     rate to account for the time lag between the issuance of the BGS
     Transition bonds. Month of issuance _____ and the commencement of the BGS
     - TBS change _____, 2005. This amount is refunded to customers in 200_ as
     reduction of BGS - TBC charge for that year.

A     =   Total Annual BGS Transition Bond Debt Service Requirement and
          Fees Related to Debt Service (See Attachment A-1)
B     =   TBC-Sold Transition Property revenues billed in the prior period
          and expected to be collected in the current period. (prior period G
          times kwh's billed during the prior period less actual prior period
          collections and expected uncollectable accounts)
C     =   Amount of total Debt Service required to be funded through BGS
          - TBC collections during the period. (A minus B)
D     =   Amount of Under or (Over) collection of the prior period BGS -
          TBC-Sold BGS Transition Property as computed under the methodology
          described in Attachment A-3.
E     =   Total amount required to be collected during the upcoming period
          through the BGS - TBC-Sold BGS Transition Property. (C plus D).
F     =   Projected kwh's that will be sold, delivered, billed and
          collected during the upcoming period. This amount is computed
          by multiplying forecasted kwh sales on a monthly basis times a
          percentage expected to be collected in cash each month
          subsequent to the sale. The collection percentage is developed
          based on historical collection experience. This methodology
          takes into account the collection lag and uncollectable
          experience inherent in PSE&G's electric sales. See Attachment
          A-4.
G     =   BGS - TBC-Sold BGS Transition Property before statutory addition
          of sales tax. (E divided by F)
H     =   BGS - TBC-Sold BGS Transition Property including statutory
          addition of sales tax. (G times 1.06)

Page 1 of 3

                                     F-2
<PAGE>

Attachment A-2 - BGS - MTC - Tax: Charge Development and True-up
($ 000s)

<TABLE>
<CAPTION>

                                                                             MONTH OF ISSUANCE __,
                                                                           -------------------------  -------------------------
<S>                                                                        <C>                        <C>
    Tax Computation:

A   Forecasted BGS - TBC-Sold BGS Transition Property Billed (excluding
    sales tax) (BGS - TBC-Sold BGS Transition Property Charge Rate times
    forecasted kwh sales)

B   Forecasted BGS - MTC-Tax Charges Billed (excluding sales tax) (BGS -
    MTC-Tax Charge Rate times forecasted kwh sales)                        _________________________  ___________________

C   Total Taxable Revenue

    Deductible Expenses/Income Inclusions:
    Interest accrued on Transition Bonds
    Amortization of BGS Transition Bond Issuance Costs

    Uncollectable Accounts
    Administration and Servicing Fees                                      _________________________  ___________________

D   Total Deductions                                                       _________________________  ___________________

E   New Jersey Taxable Income                                              _________________________  ___________________

F   New Jersey Tax Rate

G   New Jersey Tax

H   Federal Taxable Income

I   Federal Income Tax Rate

J   Federal Income Tax

K   Total Tax Obligation                                                   _________________________  ___________________

L   Less BGS - TBC-Sold BGS Transition Property Billed and                 N/A
    expected to be collected during the upcoming period

M   Tax Obligation to be Billed and collected during the upcoming
    period                                                                 _________________________  ___________________

N   True-up Adjustment for Under and (Over) collections of the             N/A
    prior period

O   Total BGS - MTC-Tax to be billed and collected during the
    period                                                                 _________________________  ___________________

P   Projected kwh's to be delivered, billed and cash collected
    during the period (in millions)

Q   BGS - MTC - Tax Charge before sales tax (cents per kwh)

R   BGS - MTC - Tax Charge including sales tax (cents per kwh)

</TABLE>

Page 2 of 3

                                     F-3
<PAGE>

A     =   Total forecasted taxable revenue from the BGS - TBC-Sold BGS
          Transition Property equal to the BGS - TBC-Sold BGS Transition
          Property rate (excluding sales tax) Multiplied by forecasted kwh
          sales for the period.

B     =   Total forecasted taxable revenue from the BGS - MTC-Tax Charge
          equal to the BGS - MTC-Tax Charge rate (excluding sales tax)
          times forecasted kwh sales for the period. Note that this
          computation is circular since this amount is used in
          developing the BGS - TBC-Tax Charge rate.  Therefore the
          amount of the BGS - MTC-Tax Charge Rate and forecasted taxable
          revenue must be solved simultaneously in an iterative
          computation.

C     =   Total taxable revenue associated with the transition bonds. (A
          plus B) (See Attachment A-1)

D     =   All deductible expenses or adjustments associated with the BGS
          transition bonds. (See Attachment A-1) Amortization of BGS
          Transition Bond Issuance costs equals issuance costs divided
          by term of the BGS transition bonds (10 years). Deduction for
          uncollectable accounts is estimated based on historical
          collection experience. The treatment of transaction, use of
          proceeds and hedge costs in computing the MTC-Tax are
          dependent upon whether such amounts are treated as pre-tax or
          after-tax amounts. See Attachment A-3 for complete discussion.

E     =   New Jersey Taxable Income (C minus D)

F     =   New Jersey statutory Corporate Income/Corporate Business Tax
          Rate (currently 9%)

G     =   New Jersey Corporate Income/Corporate Business Tax obligation
          associated with transition bond recovery ( E times F )

H     =   Federal Taxable Income (E minus G)

I     =   Federal statutory Corporate Income Tax Rate (currently 35%)

J     =   Federal Corporate Income Tax obligation associated with
          transition bond recovery (H times I)

K     =   Total Income Tax obligation (J plus G)

L     =   BGS - MTC - Tax Charge revenues billed in the prior period and
          expected to be collected in the current period. (prior period Q
          times kwhs billed during the prior period less actual prior period
          collections and expected uncollectable accounts) M = Amount of total
          Tax Obligation required to be funded through BGS - MTC collections
          during the period. (K minus L)

N     =   Amount of Under or (Over) collection of the prior period BGS - MTC
          - Tax Charge as computed under the methodology described in
          Attachment.

O     =   Total amount required to be collected during the upcoming
          period through the BGS - MTC - Tax Charge. (M plus N)

P     =   Projected kwh's that will be sold, delivered, billed and
          collected during the upcoming period. The amount is computed
          by multiplying forecasted kwh sales on a monthly basis times a
          percentage expected to be collected in cash each month
          subsequent to the sale. The collection percentage is developed
          based on historical collection experience. This methodology
          takes into account the collection lag and uncollectable
          experience inherent in PSE&G's electric sales. See Attachment
          A-4.

Q     =   BGS - MTC - Tax Charge before statutory addition of sales tax. (O
          divided by P)

R     =   BGS - MTC - Tax Charge including statutory addition of sales tax.
          (Q times 1.06)

Page 3 of 3

                                     F-4
<PAGE>

                                Attachment A-3

  Development of the BGS Transition Bond Charge, Tax MTC and True-up Formula

The BGS Transition Bond Charge (TBC) is designed to insure full and timely
recovery of all Bondable Stranded Costs including finance charges and related
costs. A separate Tax MTC (hereinafter referred to as MTC-Tax) is designed to
recover all income taxes associated with the TBC and MTC revenues. First, the
TBC charge designed to service Transition Bonds (TBC-Sold Transition Property)
is computed. Next, the Tax MTC, designed to recover the tax gross-up (MTC-Tax)
is developed taking into account projected transition bond charges billed,
projected Transition Bond interest expense accrued, the current statutory
Federal Income or New Jersey Income tax rates and projected collections of the
Tax MTC. The detailed mechanics of this procedure are described below:

Phase 1 - Development Transition Bond Charge: TBC-Sold Transition Property-
Attachment A-2, Page 1

TBC-Sold Transition Property rate development: The TBC-Sold Transition
Property rate is developed as follows: Subtract any expected collections of
TBC-Sold Transition Property charges billed in the prior period from the
scheduled debt service for the upcoming period (note that in developing the
initial charge there are no prior period billed charges). Debt service
includes principal, interest, administrative and servicing fees,
overcollateralization, [straight-line amortization of unsecuritized hedge
payments/receipts to/from third-party counterparty, if any, including interest
accrued on the unrecovered balance at the weighted average yield on the
transition bonds (note this amount may be reflected on a pre-tax or after-tax
basis depending upon the methodology selected)] and any true-up amount
computed below (note that there would be no true-up adjustment used in
developing the initial charge) . This results in TBC-Sold Transition Property
amount required to be billed and collected during the upcoming period. That
result is then divided by projected KWH's of electric distribution throughout
expected to be billed to customers and collected from customers during the
next period. These collected KWH's are computed by multiplying monthly KWH's
metered and billed by a collection curve which estimates the percent of
customer payments received in each month following a billed sale. The result
is a charge per KWH that will generate the expected collections necessary to
pay required debt service and account for prior period shortfalls or excesses.
The resulting TBC-Sold Transition Property charge is multiplied by 1-plus the
New Jersey state sales tax rate to appropriately include sales tax in the
charge.

Phase 2 - Tax Gross-up Adjustment: Tax MTC - Attachment A-2, Page 2 & 3

Tax Gross-up on Net Transition Bond Charges: The first step of the process is
to compute the income tax due on the net projected TBC-Sold Transition
Property and MTC-Tax revenue (excluding sales tax). This computation is made
as follows: Add projected TBC-Sold Transition Property and MTC-Tax charges to
be billed to customers during the upcoming period to determine Total accruable
Taxable Revenue. (Note that this requires an iterative computation since the
MTC-Tax charges billed are an input into the equation and also a function of
the resulting MTC-Tax charge rate.) From Total Taxable Revenue, subtract
projected accrued interest on the Transition Bonds for the period, any
accruable fees for administrative or servicing services to be provided to the
SPE, any tax deductible amortization of Transition Bond issuance costs
(limited, in aggregate, to the amount recoverable through TBC charges), and
any projected allowable deduction for uncollectable accounts. Treatment of
transaction costs, use of proceeds costs and hedging costs is dependent upon
whether such amounts are reflected in

                                     F-5
<PAGE>

the securitization and TBC charge development on a pre-tax or after-tax basis.
If an after-tax methodology is employed, no deduction is subtracted related to
debt retirement and use of proceeds costs since these amounts were bonded on
an after-tax basis and accordingly require a full tax gross-up. [If the amount
paid/received for the hedge to/from a third party counterparty is
taxable/deductible when made, such payment will be securitized net of tax and
as such, no deduction/inclusion will be made in the MTC-Tax related to such
payment. If however, such amount is not taxable/deductible when made, then the
pre-tax amount will be securitized and an annual deduction/inclusion will be
reflected in the MTC-Tax calculation equal to the amount deductible/includable
for income tax purposes.] If the pre-tax methodology is employed, a deduction
will be subtracted in computing the MTC-Tax, to the extent permitted by the
tax law, for all debt retirement and use of proceeds costs. In addition, a
deduction/inclusion will be reflected in the MTC-Tax calculation equal to the
amount of hedge payment/receipt to/from the third party counterparty to the
extent deductible/includable for income tax purposes. The result is New Jersey
(NJ) state taxable income from net the combined charges. Multiply this amount
by the NJ state income/CBT tax rate in effect for the period, currently 9%.
This results in NJ tax associated with Net combined charges. Subtract the NJ
tax so computed from NJ state taxable income to derive federal taxable income
from net combined charges. Multiply this result by the statutory regular
federal income tax rate in effect for the period, currently 35%, and the
result is federal income tax from associated with Net combined charges. Add
computed federal and NJ income tax amounts together to derive total income tax
associated with Net combined charges.

MTC-Tax charges billed in the prior year but expected to be collected in the
upcoming year are subtracted from the estimated total income tax liability
associated with the Net combined charges to derive the expected tax liability
required to be billed and collected during the subsequent year (note that this
step is not applicable in developing the initial charge). To that result any
true-up adjustment computed below is added or subtracted (not applicable for
initial charge). The result is then divided by projected KWH's of electric
distribution through-put expected to be billed to customers and collected from
customers during the next period as developed in Phase 1. The result is a
charge per KWH that will generate the expected collections necessary to pay
the forecasted tax liability resulting from net combined charge revenues in
the upcoming period. The resulting MTC-Tax charge is multiplied by 1+ the New
Jersey state sales tax rate to appropriately add sales tax to the charge.

Computing True-up Adjustments

True-up adjustments are designed to adjust the charges to ensure that the cost
of Transition Bonds, related fees and taxes are fully and timely recovered
from customers and that customers pay no more than is required to satisfy
these costs. As in the case of the development of the TBC and MTC-Tax charges,
the true-up adjustments are completed in two steps - Step one for the TBC-Sold
Transition Property charge and Step two for the MTC-Tax charge.

Step 1: TBC - Sold True-up Adjustment

The Transition Bond Charge (TBC) is to be adjusted at least annually to ensure
full and timely recovery of all Bondable Stranded Costs, finance charges and
related costs. The adjustment is computed as follows:

1.   TBC Shortfalls: TBC-Sold Transition Property collections are remitted to
     the trustee and used to service the Transition Bonds and pay related
     expenses. To the extent TBC collections are insufficient to fund required
     debt service, the trustee will fund the shortfall

                                     F-6
<PAGE>

     first with any excess collection from a prior period, then
     over-collateralization pool funds held by the trustee and then with
     equity capital of the SPE. If these two additional amounts are not
     sufficient to fund debt service, the trustee will pay interest on the
     Bonds first and then principal to the extent of remaining funds. To the
     extent over-collateralization or equity funds are used to service debt,
     these amounts will be added as a true-up adjustment to be factored in to
     the subsequent periods TBC charge to fully replenish those accounts to
     their scheduled amounts within the next period months. In addition, any
     principal shortfall will be added to the subsequent years TBC charge via
     the true-up.

2.   TBC Over-collections: To the extent, TBC charges collected are in excess
     of the amount needed for current debt service requirements, the excess is
     first applied to reduce any shortfalls from prior periods computed under
     (1) above. TBC excess is next applied to restore the SPE capital account
     to its scheduled balance. Excesses are then applied to restore the
     over-collateralization pool to its scheduled level. Any remaining excess
     is retained in a Reserve account maintained by the trustee. These amounts
     are invested by the trustee in eligible investments and are retained by
     the trustee until they are required to service debt, replenish accounts
     to their scheduled levels or until the next periodic true-up which ever
     comes first. Any balance in the Reserve account including interest on
     hand at the time of periodic true-up is subtracted as a true-up
     adjustment in determining the subsequent period's TBC charge.

3.   Investment Earnings on the trust accounts held by the bond trustee (other
     than the Capital Account) will be used to service debt or fund or
     replenish the trust accounts to their required levels and if not needed
     for that purpose will be retained in the Reserve Account and will be
     subtracted as a true-up adjustment as of the next true-up date.

4.   Periodic True-up: On at least an annual basis, any true-up adjustment,
     addition or subtraction, computed above will be used to develop a new
     TBC-Sold Transition Property rate for the up-coming year. This amount
     will be added or subtracted to the amount of required debt service used
     in developing the TBC-Sold Transition Property charge for the subsequent
     period described in Phase One above.

Step 2 - MTC-Tax True-up Adjustment

1.   Using the methodology described in Phase 2 above, compute the income tax
     associated with Net combined charges for the prior period by substituting
     actual amounts for the prior period for the projected amounts.

2.   Compute Tax True-up amount: Subtract: Subtract the tax liability computed
     in (1) above from the actual MTC-Tax collections for the same period to
     derive the shortfall or over-collection with respect to taxes. Interest
     (consistent with the methodology outlined on page 116, item 6 of the
     Restructuring Order) will be added to any over or under collection to
     ensure that no party is economically harmed by any such over or under
     collection. The net adjustment plus accrued interest will be added or
     subtracted to the projected amount of total income tax associated with
     Net combined charges used in developing the MTC-Tax charge for the
     subsequent period described in Phase 2 above.

                                     F-7

<PAGE>

Attachment A-4

Computation of KWHs Billed and Collected

<TABLE>
<CAPTION>

                                Billing    Second      Third     Fourth      Fifth      Sixth    Seventh
Residential                      Month      Month      Month      Month      Month      Month     Month    Uncollectable
                               --------  ----------  ---------  ---------  ---------  ---------  --------  -------------
<S>                             <C>      <C>         <C>        <C>        <C>        <C>        <C>       <C>

Collection Curve Data:
Percent of Billed Sales
    Collected by Month              %          %          %          %          %          %         %          %

</TABLE>

<TABLE>
<CAPTION>

   Month Billed                           Total KWHs
                                           Billed &
                       KWHs Billed         Collected
      Year 1            (millions)        (millions)          KWH Billings Collected by Month in Millions of KWHs
----------------    -----------------  ----------------    ---------------------------------------------------------
<S>                  <C>               <C>                 <C>

January
February
March
April
May
June
July
August
September
October
November
December             _______________   ________________    __________________________________________________

Total                ===============   ================    ==================================================

      Year 2
-----------------
January
February
March
April
May
June
July
August
September
October
November
December            _______________   ________________    __________________________________________________

Total               ===============   ================    ==================================================

</TABLE>

Page 1 of 3

                                     F-8
<PAGE>

Attachment A-4

Computation of KWHs Billed and Collected

<TABLE>
<CAPTION>

                                Billing    Second      Third     Fourth      Fifth      Sixth    Seventh
Commercial                       Month      Month      Month      Month      Month      Month     Month    Uncollectable
                                -------- ---------   ---------  ---------  ---------  ---------  --------  -------------
<S>                             <C>      <C>         <C>        <C>        <C>        <C>        <C>       <C>
Percent of Billed Sales
    Collected by Month              %          %          %          %          %          %         %          %

</TABLE>

<TABLE>
<CAPTION>

   Month Billed                           Total KWHs
                                           Billed &
                       KWHs Billed         Collected
      Year 1            (millions)        (millions)          KWH Billings Collected by Month in Millions of KWHs
-----------------    ---------------   ---------------     -------------------------------------------------------
<S>                  <C>               <C>                 <C>
January
February
March
April
May
June
July
August
September
October
November
December             _______________   ________________    __________________________________________________

Total                ===============   ================    ==================================================

      Year 2
------------------
January
February
March
April
May
June
July
August
September
October
November
December            _______________   ________________    __________________________________________________

Total               ===============   ================    ==================================================

</TABLE>

Page 2 of 3

                                     F-9
<PAGE>

Attachment A-4

Computation of KWHs Billed and Collected

<TABLE>
<CAPTION>

                                Billing    Second      Third     Fourth      Fifth      Sixth    Seventh
Industrial                       Month      Month      Month      Month      Month      Month     Month    Uncollectable
                                -------  ---------   ---------  ---------  ---------  ---------  --------  -------------
<S>                             <C>      <C>         <C>        <C>        <C>        <C>        <C>       <C>

Percent of Billed Sales
    Collected by Month              %          %          %          %          %          %         %          %

</TABLE>

<TABLE>
<CAPTION>

   Month Billed                           Total KWHs
                                           Billed &
                       KWHs Billed         Collected
      Year 1            (millions)        (millions)          KWH Billings Collected by Month in Millions of KWHs
-----------------    ---------------   ----------------    ---------------------------------------------------------
<S>                  <C>               <C>                 <C>

January
February
March
April
May
June
July
August
September
October
November
December             _______________   ________________    __________________________________________________

Total                ===============   ================    ==================================================

      Year 2
------------------
January
February
March
April
May
June
July
August
September
October
November
December            _______________   ________________    __________________________________________________

Total               ===============   ================    ==================================================

</TABLE>

                                                   Year 1        Year 2
                                                ------------- --------------

                                Residential
                                Commercial
                                Industrial      _____________ ______________

                                Total           ============= ==============

Page 3 of 3

                                     F-10Professionals Direct, Inc. Exhibit 4.1 to Form 10-QSB - 08-12-05

EXHIBIT 4.1

COMMON SECURITY CERTIFICATE

          THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

          EXCEPT AS SET FORTH IN SECTION 8.1 (b) OF THE DECLARATION (AS DEFINED BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED.

	
Certificate Number    [C-001]
	
Number of Common Securities: 93

Certificate Evidencing Common Securities

of

Professionals Direct Statutory Trust II

          Professionals Direct Statutory Trust II, a statutory trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Professionals Direct, Inc. (the "Holder") is the registered owner of 93 common securities of the Trust representing undivided beneficial interests in the assets of the Trust (liquidation amount $1,000 per Common Security)(the "Common Securities"). The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 30, 2005, among Stephen M. Tuuk and Stephen M. Westfield, as Administrators, Chase Bank USA, National Association, as Delaware Trustee, JPMorgan Chase Bank, National Association, as Institutional Trustee, the Holder, as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

          As set forth in the Declaration, when an Event of Default has occurred and is continuing, the rights of Holder of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of holders of the Capital Securities.

          By acceptance of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder.

          By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures.

          This Certificate and the Common Securities evidenced hereby are governed by, and shall be construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.

-2-

          IN WITNESS WHEREOF, the Trust has executed this Certificate June 30, 2005.

	 	
Professionals Direct Statutory Trust II

	 	 
	 	 
	 	
By:
	 

	 	
     Name:
	 

	 	
     Title:
	
Administrator

-3-

[REVERSE OF SECURITY]

          Distributions payable on each Common Security will be payable at a fixed rate of 7.785% (the "Fixed Rate") per annum from June 30, 2005 until September 15, 2010 (the "Fixed Rate Period") and thereafter at a variable per annum rate of interest, reset quarterly, equal to LIBOR (as defined in the Declaration) plus 3.625% (the "Variable Rate" and together with the Fixed Rate, the "Coupon Rate") of the stated liquidation amount of $1,000 per Common Security, such rate, such Coupon Rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one Distribution Period will bear interest thereon compounded quarterly at the applicable Coupon Rate for each such Distribution Period (to the extent permitted by applicable law). The term "Distributions" as used herein includes cash distributions, any such compounded distributions and any Additional Interest payable on the Debentures unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds legally available in the Property Account therefor.  During the Fixed Rate Period, the amount of Distributions payable for any Distribution Payment Period will be computed on the basis of a 360-day year of twelve 30-day months and the amount payable for any partial period will be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months.  Upon expiration of the Fixed Rate Period, distributions will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution Period.

          Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2005 (each, a "Distribution Payment Date"). Upon submission of Notice, the Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest distribution period for up to 20 consecutive quarterly periods (each such extended interest payment period, together with all previous and future consecutive extensions thereof, is referred to herein as an "Extension Period") at any time and from time to time on the Debentures, subject to the conditions described below and in the Declaration and the Indenture, during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as "Deferred Interest") will accrue at an annual rate equal to the Coupon Rate in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on the Debentures; provided, however, that no Extension Period may extend beyond the Maturity Date, and Redemption Date or Special Redemption Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such Extension Period, provided, that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest (except any Additional

-4-

Interest that may be due and payable) shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date.

          Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds legally available for the payment of such distributions in the Property Account of the Trust. The Trust's funds legally available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

The Common Securities shall be redeemable as provided in the Declaration.

-5-

ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to:

______________________________

______________________________

______________________________

(Insert assignee's social security or tax identification number)

______________________________

______________________________

______________________________

(Insert address and zip code of assignee),

and irrevocably appoints ________ as agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.

                    Date:___________________________

                    Signature:_______________________

          (Sign exactly as your name appears on the other side of this Common Security Certificate)

                    Signature Guarantee:1 __________________

_________________________

	 	1 Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union, meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

-6-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00089-of-00352.parquet"}]]