DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED AND ITS AFFILIATES

(a)

“Account” - the Deferred Compensation Account described in Paragraph 4 of this Plan.

(b)

“Affiliate” – any organization which is a member of a controlled group of corporations (as defined in Code section 414(b), as modified by Code section 415(h)) which includes the Company; or any trades or businesses (whether or not incorporated) which are under common control (as defined in Code section 414(c), as modified by Code section 415(h)) with the Company; or a member of an affiliated service group (as defined in Code section 414(m)) which includes the Company or any other entity required to be aggregated with the Company pursuant to regulations under Code section 414(o). The term affiliate shall also include such entities which shall be specifically designated by the Committee.

(c)

“Assets” - all Compensation and interest that have been credited to a Participant’s Account in accordance with Paragraph 5 of this Plan.

(d)

“Beneficiary” - the individual(s) and/or entity(ies) designated and defined by the Plan.

(e)

“Change in Control” - the occurrence of any of the following events:

(i)

any “person” (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended from time to time (the “Act”)) is or becomes the beneficial owner within the meaning of Rule 13d-3 under the Act (a “Beneficial Owner”), directly or indi­rectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from

the Company or its affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securi­ties, excluding any person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of subparagraph (iii) below; or

(ii)

the following individuals cease for any reason to consti­tute a majority of the number of directors then serving: individuals who, on December 15, 1998, constitute the board of directors of the Company (“Board”) and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, includ­ing but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on December 15, 1998 or whose appointment, election or nomination for election was previously so approved or recom­mended; or

(iii)

there is consummated a merger or consolidation of the Company or any direct or indirect wholly owned subsidiary of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consoli­dation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 75% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities; or

(iv)

the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there

is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 75% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their own­ership of the Company immediately prior to such sale.

(v)

Notwithstanding the foregoing subparagraphs (i), (ii), (iii) and (iv), a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately follow­ing which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of trans­actions.

(f)

“Code” – the Internal Revenue Code of 1986, as amended. A reference to a section of the Code shall also refer to any regulations and other guidance issued under that section.

(g)

“Committee” - the Employee Benefits Policy Committee of the Company.

(h)

“Company” - Public Service Enterprise Group Incorporated.

(i)

“Compensation” - the total remuneration paid to a Participant for services rendered to the Company or a Participating Affiliate, excluding the Company’s or Participating Affiliate’s cost for any public or private employee benefit plan, including this Plan, but including all elective contributions that are made by the Company or Participating Affiliate under Internal Revenue Code Sections 125 or 401(k). Compensation deferrable under this Plan shall specifically include any and all amounts transferred from the deferred compensation accounts of the Company’s Management Incentive Compensation Plan, the Management Incentive Compensation Plan of Public Service Electric and Gas Company and any prior deferred compensation plan of an Affiliate.

(j)

“Deferred Compensation” - the amount of Compensation deferred pursuant to Paragraph 4 of this Plan.

(k)

“Disability” - a Participant will be considered disabled if he/she meets one of the following requirements: (i) he/she is unable to engage in any substantial gainful activity by reason of any medically determinable

physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months; or (ii) he/she is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under a Company or Affiliate sponsored plan.

(l)

“Employer” – the Company and any Participating Affiliate.

(m)

“ ERISA ” - The Employee Retirement Income Security Act of 1974, as amended. A reference to a section of ERISA shall also refer to any regulations and other guidance issued under that section.

(n)

“ERISA Affiliate” - (a) any organization while it is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Company; or (b) any trades or businesses (whether or not incorporated) while they are under common control (as defined in Code Section 414(c)) with the Company.

(o)

“Investment Fund” - the fund or funds selected by the Committee from time to time which shall serve as a means of measuring the increase or decrease of each Participant’s Account. The Committee may, in its discretion, add or discontinue any Investment Fund available under the Plan. The Committee shall provide each affected Participant with the opportunity, without limiting or otherwise impairing any other right of such Participant regarding changes in investment directions, to redirect the allocation of his or her Account invested in any discontinued Investment Fund among the other Investment Funds available under the Plan, including any replacement investment vehicle.

(p)

“Participant” - each employee of the Company or any Participating Affiliate as may be designated by the Chief Executive Officer of the Company.

(q)

“Participating Affiliate” – any Affiliate of the Company which (a) adopts this Plan with the approval of the Company; (b) authorizes the Board of Directors and the Committee to act for it in all matters arising under or with respect to this Plan; and (c) complies with such other terms and conditions relating to this Plan as may be imposed by the Company.

(r)

“Plan” - the Deferred Compensation Plan for Certain Employees of Public Service Enterprise Group Incorporated and its Affiliates (formerly known as the Deferred Compensation Plan for Certain Employees of Public Service Electric and Gas Company).

(s)

“Separation from Service” - Subject to paragraphs (i) and (ii), a Participant’s termination from employment with the Company and all ERISA Affiliates, whether by retirement or resignation from or discharge by the Company or an ERISA Affiliate.

(i)

A Separation from Service shall be deemed to have occurred if a Participant and the Company or any ERISA Affiliate reasonably anticipate, based on the facts and circumstances, that either:

(A)

the Participant will not provide any additional services for the Company or an ERISA Affiliate after a certain date; or

(B)

the level of bona fide services performed by the Participant after a certain date will permanently decrease to no more than 50% of the average level of bona fide services performed by the Participant over the immediately preceding 36 months.

(ii)

If a Participant is absent from employment due to military leave, sick leave, or any other bona fide leave of absence authorized by the Company or an Affiliate and there is a reasonable expectation that the Participant will return to perform services for the Company or an ERISA Affiliate, a Separation from Service will not occur until the latter of:

(A)

the first date immediately following the date that is six months after the date that the Participant was first absent from employment; or

(B)

the date the Participant no longer retains a right to reemployment, to the extent the Participant retains a right to reemployment with the Company or any ERISA Affiliates under applicable law or by contract.

If a Participant fails to return to work upon the expiration of any military leave, sick leave, or other bona fide leave of absence where such leave is for less than six months, the Separation from Service shall occur as of the date of the expiration of such leave.

(t)

“Specified Employee” - An individual who is a key employee (as defined in Code Section 416(i) without regard to Code Section 416