INDENTURE Dated as of September 23, 2005 --------------------- Securing BGS Transition Bonds

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Title: INDENTURE Dated as of September 23, 2005 --------------------- Securing BGS Transition Bonds
Governing Law: New Jersey Date: 10/7/2005

Exhibit 4.3.1

PSE&G TRANSITION FUNDING II LLC,

Issuer

and

THE BANK OF NEW YORK,

Trustee

---------------------

INDENTURE

Dated as of September 23, 2005

---------------------

Securing BGS Transition Bonds

Issuable in Series

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ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1. Definitions..................................................................................2

SECTION 1.2. Incorporation by Reference of the Trust Indenture Act........................................2

SECTION 1.3. Rules of Construction........................................................................3

ARTICLE II

THE BGS TRANSITION BONDS

SECTION 2.1. Form.........................................................................................3

SECTION 2.2. Execution, Authentication and Delivery.......................................................4

SECTION 2.3. Denominations; BGS Transition Bonds Issuable in Series.......................................4

SECTION 2.4. Temporary BGS Transition Bonds...............................................................5

SECTION 2.5. Registration; Registration of Transfer and Exchange..........................................6

SECTION 2.6. Mutilated, Destroyed, Lost or Stolen BGS Transition Bonds....................................7

SECTION 2.7. Persons Deemed Owner.........................................................................8

SECTION 2.8. Payment of Principal and Interest; Interest on Overdue Principal; Principal and Interest

Rights Preserved...................................................................8

SECTION 2.9. Cancellation...............................................................................10

SECTION 2.10. Amount; Authentication and Delivery of BGS Transition Bonds................................10

SECTION 2.11. Book-Entry BGS Transition Bonds............................................................15

SECTION 2.12. Notices to Clearing Agency.................................................................16

SECTION 2.13. Definitive BGS Transition Bonds............................................................16

ARTICLE III

COVENANTS

SECTION 3.1. Payment of Principal and Interest...........................................................17

SECTION 3.2. Maintenance of Office or Agency.............................................................17

SECTION 3.3. Money for Payments To Be Held in Trust......................................................17

SECTION 3.4. Existence...................................................................................19

SECTION 3.5. Protection of Collateral....................................................................19

SECTION 3.6. Opinions as to Collateral...................................................................20

SECTION 3.7. Performance of Obligations..................................................................20

SECTION 3.8. Negative Covenants..........................................................................21

SECTION 3.9. Annual Statement as to Compliance...........................................................21

SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms........................................21

SECTION 3.11. Successor or Transferee....................................................................22

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SECTION 3.12. No Other Business..........................................................................23

SECTION 3.13. No Borrowing...............................................................................23

SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities..........................................23

SECTION 3.15. Capital Expenditures.......................................................................23

SECTION 3.16. Restricted Payments........................................................................23

SECTION 3.17. Notice of Events of Default................................................................24

SECTION 3.18. Inspection.................................................................................24

SECTION 3.19. Adjusted Overcollateralization Balance Schedules...........................................24

SECTION 3.20. Sale Agreement, Servicing Agreement and Swap Agreement Covenants...........................24

SECTION 3.21. Taxes......................................................................................27

ARTICLE IV

SATISFACTION AND DISCHARGE; DEFEASANCE

SECTION 4.1. Satisfaction and Discharge of Indenture; Defeasance.........................................28

SECTION 4.2. Conditions to Defeasance....................................................................29

SECTION 4.3. Application of Trust Money..................................................................30

SECTION 4.4. Repayment of Moneys Held by Paying Agent....................................................31

ARTICLE V

REMEDIES

SECTION 5.1. Events of Default...........................................................................31

SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..........................................32

SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.............................33

SECTION 5.4. Remedies....................................................................................35

SECTION 5.5. Optional Preservation of the Collateral.....................................................36

SECTION 5.6. Limitation of Proceedings...................................................................36

SECTION 5.7. Unconditional Rights of BGS Transition Bondholders To Receive Principal and Interest........37

SECTION 5.8. Restoration of Rights and Remedies..........................................................37

SECTION 5.9. Rights and Remedies Cumulative..............................................................38

SECTION 5.10. Delay or Omission Not a Waiver.............................................................38

SECTION 5.11. Control by BGS Transition Bondholders......................................................38

SECTION 5.12. Waiver of Past Defaults....................................................................39

SECTION 5.13. Undertaking for Costs......................................................................39

SECTION 5.14. Waiver of Stay or Extension Laws...........................................................39

SECTION 5.15. Action on BGS Transition Bonds.............................................................40

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ARTICLE VI

THE TRUSTEE

SECTION 6.1. Duties and Liabilities of Trustee...........................................................40

SECTION 6.2. Rights of Trustee...........................................................................41

SECTION 6.3. Individual Rights of Trustee................................................................42

SECTION 6.4. Trustee's Disclaimer........................................................................42

SECTION 6.5. Notice of Defaults..........................................................................42

SECTION 6.6. Reports by Trustee to Holders...............................................................43

SECTION 6.7. Compensation and Indemnity..................................................................44

SECTION 6.8. Replacement of Trustee......................................................................44

SECTION 6.9. Successor Trustee by Merger.................................................................45

SECTION 6.10. Appointment of Co-Trustee or Separate Trustee..............................................46

SECTION 6.11. Eligibility; Disqualification..............................................................47

SECTION 6.12. Preferential Collection of Claims Against Issuer...........................................47

SECTION 6.13. Representations and Warranties of the Trustee..............................................47

ARTICLE VII

BGS TRANSITION BONDHOLDERS' LISTS AND REPORTS

SECTION 7.1. Issuer To Furnish Trustee Names and Addresses of BGS Transition Bondholders.................47

SECTION 7.2. Preservation of Information; Communications to BGS Transition Bondholders...................48

SECTION 7.3. Reports by Issuer...........................................................................48

SECTION 7.4. Reports by Trustee..........................................................................49

SECTION 7.5. Provision of Servicer Reports...............................................................49

ARTICLE VIII

ACCOUNTS, DISBURSEMENTS AND RELEASES

SECTION 8.1. Collection of Money.........................................................................49

SECTION 8.2. Collection Account..........................................................................49

SECTION 8.3. Release of Collateral.......................................................................56

SECTION 8.4. Issuer Opinion of Counsel...................................................................57

SECTION 8.5. Reports by Independent Accountants..........................................................57

iii

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ARTICLE IX

SUPPLEMENTAL INDENTURES

SECTION 9.1. Supplemental Indentures Without Consent of BGS Transition Bondholders.......................57

SECTION 9.2. Supplemental Indentures with Consent of BGS Transition Bondholders..........................59

SECTION 9.3. BPU Condition...............................................................................60

SECTION 9.4. Execution of Supplemental Indentures........................................................62

SECTION 9.5. Effect of Supplemental Indenture............................................................62

SECTION 9.6. Conformity with Trust Indenture Act.........................................................62

SECTION 9.7. Reference in BGS Transition Bonds to Supplemental Indentures................................62

ARTICLE X

[RESERVED]

ARTICLE XI

MISCELLANEOUS

SECTION 11.1. Compliance Certificates and Opinions, etc..................................................63

SECTION 11.2. Form of Documents Delivered to Trustee.....................................................63

SECTION 11.3. Acts of BGS Transition Bondholders.........................................................64

SECTION 11.4. Notices, etc., to Trustee, Issuer and Rating Agencies......................................65

SECTION 11.5. Notices to BGS Transition Bondholders; Waiver..............................................66

SECTION 11.6. [Reserved].................................................................................66

SECTION 11.7. Alternate Payment and Notice Provisions....................................................66

SECTION 11.8. Conflict with Trust Indenture Act..........................................................66

SECTION 11.9. Effect of Headings and Table of Contents...................................................67

SECTION 11.10. Successors and Assigns....................................................................67

SECTION 11.11. Severability..............................................................................67

SECTION 11.12. Benefits of Indenture.....................................................................67

SECTION 11.13. Legal Holidays............................................................................67

SECTION 11.14. GOVERNING LAW.............................................................................67

SECTION 11.15. Counterparts..............................................................................67

SECTION 11.16. Issuer Obligation.........................................................................68

SECTION 11.17. No Petition...............................................................................68

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APPENDIX A.................MASTER DEFINITIONS

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INDENTURE, dated as of September 23, 2005, by and between PSE&G

TRANSITION FUNDING II LLC, a Delaware limited liability company, as Issuer,

and THE BANK OF NEW YORK, a New York banking corporation, in its capacity as

trustee for the benefit of the Holders of the BGS Transition Bonds and as

agent for itself and any Swap Counterparty (collectively, the "Trustee").

The Issuer has duly authorized the execution and delivery of this

Indenture to provide for one or more Series of BGS Transition Bonds, issuable

as provided in this Indenture. Each such Series of BGS Transition Bonds will

be issued only under a separate Series Supplement to this Indenture duly

executed and delivered by the Issuer and the Trustee. The Issuer is entering

into this Indenture, and the Trustee is accepting the trusts created hereby,

each for good and valuable consideration, the receipt and sufficiency of which

are hereby acknowledged and each intending to be legally bound hereby.

GRANTING CLAUSE

The Issuer hereby Grants to the Trustee for the benefit of (i) the

Holders of the BGS Transition Bonds from time to time issued and outstanding,

(ii) the Trustee and (iii) any Swap Counterparty, all of the Issuer's right,

title and interest whether now owned or hereafter acquired, in, to and under:

(a) all BGS Bondable Transition Property, including, without limitation, the

BGS Bondable Transition Property transferred by the Seller to the Issuer from

time to time pursuant to the Sale Agreement and all proceeds thereof; (b) the

Sale Agreement; (c) all Bills of Sale delivered by the Seller pursuant to the

Sale Agreement; (d) the Servicing Agreement; (e) the Administration Agreement;

(f) any Interest Rate Swap Agreement; (g) the Collection Account and all

sub-accounts thereof (including, without limitation, the General Subaccount,

each Series Overcollateralization Subaccount, each Series Capital Subaccount,

the Reserve Subaccount, each Series Subaccount, any Class Subaccount and any

Defeasance Subaccount, but excluding the Capital Reserve Subaccount) and all

cash, securities, instruments, investment property (including without

limitation all security entitlements) or other assets deposited in or credited

to the Collection Account or any subaccount thereof (other than the Capital

Reserve Subaccount) from time to time or purchased with funds therefrom; (h)

all investment property and all other property of whatever kind owned from

time to time by the Issuer other than: (w) any cash released to any Swap

Counterparty by the Trustee from the related Class Subaccount pursuant to

Section 8.2(f), (x) any cash released to the Issuer by the Trustee from any

Series Capital Subaccount pursuant to Section 8.2(g)(x) and (y) the proceeds

from the sale of the BGS Transition Bonds used to pay (1) the costs of

issuance of the BGS Transition Bonds and the Upfront Transaction Costs and

Capital Reduction Costs (as those terms are defined in the Financing Order)

and (2) the purchase price of the BGS Bondable Transition Property paid

pursuant to the Sale Agreement; (i) all present and future claims, demands,

causes and choses in action in respect of any or all of the foregoing; and (j)

all payments on or under and all proceeds of every kind and nature whatsoever

in respect of any or all of the foregoing, including all proceeds of the

conversion, voluntary or involuntary, into cash or other liquid property, all

cash proceeds, accounts, accounts receivable, general intangibles, notes,

drafts, acceptances, chattel paper, checks, deposit accounts, insurance

proceeds, condemnation awards, rights to payment of any and every kind and

other forms of obligations and receivables, instruments and other

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property which at any time constitute all or part of or are included in the

proceeds of any of the foregoing (collectively, the "Collateral").

Such Grants are made to the Trustee to have and to hold in trust to

secure the payment of principal of, and interest on, and any other amounts

owing in respect of, the BGS Transition Bonds and all fees, expenses, counsel

fees and other amounts due and owing to the Trustee and, if and to the extent

provided in any Series Supplement, any amounts due and owing to any Swap

Counterparty (collectively, the "Secured Obligations"), equally and ratably

without prejudice, preference, priority or distinction, except as expressly

provided in this Indenture and to secure performance by the Issuer of all of

the Issuer's obligations under this Indenture with respect to the BGS

Transition Bonds, all as provided in this Indenture.

The Trustee, as trustee on behalf of the Holders of the BGS

Transition Bonds, acknowledges such Grant, accepts the trusts hereunder in

accordance with the provisions hereof and agrees to perform its duties herein

required.

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1. Definitions. Capitalized terms used but not otherwise

defined in this Indenture have the respective meanings set forth in Appendix A

hereto unless the context otherwise requires. Non-capitalized terms used

herein which are defined in the New Jersey UCC, as the context requires, have

the meanings assigned to such terms in the New Jersey UCC, but without giving

effect to any amendments to the New Jersey UCC after the date hereof which

have a material adverse effect on the Issuer or the BGS Transition

Bondholders.

SECTION 1.2. Incorporation by Reference of the Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is

incorporated by reference in and made a part of this Indenture. Each of the

following TIA terms used in this Indenture has the following meaning:

"Commission" means the Securities and Exchange Commission.

"indenture securities" means the BGS Transition Bonds.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Trustee.

All other TIA terms used in this Indenture that are defined by the

TIA, defined by TIA reference to another statute or defined by Commission rule

have the meaning assigned to them by such definitions.

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SECTION 1.3. Rules of Construction.

(a) An accounting term not otherwise defined has the meaning assigned

to it in accordance with generally accepted accounting principles as in effect

from time to time;

(b) "including" means including without limitation;

singular include the plural and words in the plural include the singular;

(d) unless otherwise specified, references herein to Sections or

Articles are to Sections or Articles of this Indenture; and

(e) the words "herein," "hereof," "hereunder" and other words of

similar import refer to this Indenture as a whole and not to any particular

Article, Section or other subdivision.

ARTICLE II

THE BGS TRANSITION BONDS

SECTION 2.1. Form.

(a) The BGS Transition Bonds and the Trustee's certificate of

authentication shall be in substantially the forms set forth in Exhibit A to

the related Series Supplement, with such appropriate insertions, omissions,

substitutions and other variations as are required or permitted by this

Indenture or by the related Series Supplement and may have such letters,

numbers or other marks of identification and such legends or endorsements

placed thereon as may, consistently herewith, be determined by the Managers of

the Issuer executing such BGS Transition Bonds, as evidenced by their

execution of such BGS Transition Bonds. Any portion of the text of any BGS

Transition Bond may be set forth on the reverse thereof, with an appropriate

reference thereto on the face of the BGS Transition Bond. Each BGS Transition

Bond shall be dated the date of its authentication.

(b) The BGS Transition Bonds shall be typewritten, printed,

lithographed or engraved or produced by any combination of these methods (with

or without steel engraved borders), all as determined by the Managers of the

Issuer executing such BGS Transition Bonds, as evidenced by their execution of

such BGS Transition Bonds.

so selected for the Series and Class, if any, to which it belongs. The terms

of all BGS Transition Bonds of the same Series shall be the same, unless such

Series is comprised of one or more Classes, in which case the terms of all BGS

Transition Bonds of the same Class shall be the same.

(d) Each BGS Transition Bond shall state that the Competition Act

provides that the State of New Jersey pledges and agrees with the holders of

the BGS Transition Bonds that "the State will not limit, alter or impair any

bondable transition property or other rights vested in an

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electric public utility or an assignee or pledgee thereof or a financing

entity or vested in the holders of any transition bonds pursuant to a bondable

stranded costs rate order until such transition bonds, together with the

interest thereon, are fully paid and discharged or until such agreements are

fully performed on the part of the electric public utility, any assignee or

pledgee thereof or the financing entity or in any way limit, alter, impair or

reduce the value or amount of the bondable transition property approved by a

bondable stranded costs rate order."

SECTION 2.2. Execution, Authentication and Delivery.

(a) The BGS Transition Bonds shall be executed on behalf of the

Issuer by a Manager. The signature of any such Manager on the BGS Transition

Bonds may be manual or facsimile.

(b) BGS Transition Bonds bearing the manual or facsimile signature of

individuals who were at any time Managers shall bind the Issuer,

notwithstanding that such individuals or any of them have ceased to hold such

offices prior to the authentication and delivery of such BGS Transition Bonds.

delivery of this Indenture, the Issuer may deliver BGS Transition Bonds

executed on behalf of the Issuer to the Trustee pursuant to an Issuer Order

for authentication; and the Trustee shall authenticate and deliver such BGS

Transition Bond as in this Indenture provided and not otherwise.

(d) No BGS Transition Bond shall be entitled to any benefit under

this Indenture or be valid or obligatory for any purpose, unless there appears

on such BGS Transition Bond a certificate of authentication substantially in

the form provided for herein executed by the Trustee by the manual signature

of one of its authorized signatories, and such certificate upon any BGS

Transition Bond shall be conclusive evidence, and the only evidence, that such

BGS Transition Bond has been duly authenticated and delivered hereunder.

SECTION 2.3. Denominations; BGS Transition Bonds Issuable in Series.

(a) The BGS Transition Bonds of each Series shall be issuable as

registered BGS Transition Bonds in the Authorized Denominations specified in

the Series Supplement therefor.

(b) The BGS Transition Bonds may, at the election of and as

authorized by a Manager and set forth in a Series Supplement, be issued in one

or more Series (each of which may be comprised of one or more Classes), and

shall be designated generally as the "BGS Transition Bonds" of the Issuer,

with such further particular designations added or incorporated in such title

for the BGS Transition Bonds of any particular Series or Class as a Manager of

the Issuer may determine and be set forth in the Series Supplement therefor.

Supplement authorized by a Manager and establishing the terms and provisions

of such Series and, if applicable, any Classes thereof. The several Series and

any Classes thereof may differ as between Series and Classes, in respect of

any of the following matters:

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(i) designation of the Series and each Class thereof;

(ii) the aggregate initial principal amount of the BGS

Transition Bonds of the Series and each Class thereof;

(iii) the Interest Rate of the Series and each Class thereof

or the formula, if any, used to calculate the applicable Interest

Rate or Interest Rates for the Series and each Class thereof;

(iv) the Payment Dates of the Series and each Class thereof;

(v) the Expected Final Payment Date of the Series and each

Class thereof;

(vi) the Final Maturity Date of the Series and each Class

thereof;

(vii) the place or places for payments with respect to the

Series and each Class thereof;

(viii) the Authorized Denominations for the Series and each

Class thereof;

(ix) [reserved];

(x) the Expected Sinking Fund Amortization Schedule for the

Series and each Class thereof;

(xi) the Overcollateralization Amount (such amount may be

zero) with respect to the Series;

(xii) the Required Capital Amount with respect to the

Series;

(xiii) the Calculation Dates and Adjustment Dates for the

Series;

(xiv) the credit enhancement, if any, applicable to the

Series and each Class thereof; and

(xv) any other terms of the Series or each Class that are

not inconsistent with the provisions of this Indenture.

SECTION 2.4. Temporary BGS Transition Bonds.

(a) Pending the preparation of definitive BGS Transition Bonds

pursuant to Section 2.13 or, in the case of BGS Transition Bonds held in a

book-entry only system by a Clearing Agency, a Manager on behalf of the Issuer

may execute, and upon receipt of an Issuer Order the Trustee shall

authenticate and deliver, temporary BGS Transition Bonds which are printed,

lithographed, typewritten, mimeographed or otherwise produced, of the tenor of

the definitive BGS Transition Bonds in lieu of which they are issued and with

such variations not

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inconsistent with the terms of this Indenture as the Manager executing such

BGS Transition Bonds may determine, as evidenced by their execution of such

BGS Transition Bonds.

(b) If temporary BGS Transition Bonds are issued, the Issuer will

cause definitive BGS Transition Bonds to be prepared without unreasonable

delay except where temporary BGS Transition Bonds are held by a Clearing

Agency. After the preparation of definitive BGS Transition Bonds, the

temporary BGS Transition Bonds shall be exchangeable for definitive BGS

Transition Bonds upon surrender of the temporary BGS Transition Bonds at the

office or agency of the Issuer to be maintained as provided in Section 3.2,

without charge to any Holder. Upon surrender for cancellation of any one or

more temporary BGS Transition Bonds, a Manager on behalf of the Issuer shall

execute and the Trustee shall authenticate and deliver in exchange therefor a

like Series (and if applicable, Class) and aggregate initial principal amount

of definitive BGS Transition Bonds in Authorized Denominations. Until so

exchanged, the temporary BGS Transition Bonds shall in all respects be

entitled to the same benefits under this Indenture as definitive BGS

Transition Bonds.

SECTION 2.5. Registration; Registration of Transfer and Exchange.

(a) The Issuer shall cause to be kept a register (the "BGS Transition

Bond Register") in which, subject to such reasonable regulations as it may

prescribe, the Issuer shall provide for the registration of BGS Transition

Bonds and the registration of transfers of BGS Transition Bonds. The Trustee

shall be the registrar (the Trustee or any successor thereof in such capacity,

the "BGS Transition Bond Registrar") for the purpose of registering BGS

Transition Bonds and transfers of BGS Transition Bonds as herein provided.

Upon any resignation of any BGS Transition Bond Registrar, the Issuer shall

promptly appoint a successor or, if it elects not to make such an appointment,

assume the duties of BGS Transition Bond Registrar.

(b) If a Person other than the Trustee is appointed by the Issuer as

BGS Transition Bond Registrar, the Issuer shall give the Trustee and any

transfer, paying or listing agent of the Issuer appointed pursuant to Section

3.2(b) prompt written notice of the appointment of such BGS Transition Bond

Registrar and of the location, and any change in the location, of the BGS

Transition Bond Register; the Trustee and any such agent shall have the right

to inspect the BGS Transition Bond Register at all reasonable times and to

obtain copies thereof; and the Trustee and any such agent shall have the right

to rely upon a certificate executed on behalf of the BGS Transition Bond

Registrar by a duly authorized officer thereof as to the names and addresses

of the Holders of the BGS Transition Bonds and the original and Outstanding

principal amounts and number of such BGS Transition Bonds (separately stated

by Series and, if applicable, Class).

Bond at the office or agency of the Issuer to be maintained as provided in

Section 3.2, a Manager on behalf of the Issuer shall execute, and the Trustee

shall authenticate and the BGS Transition Bondholder shall obtain from the

Trustee, in the name of the designated transferee or transferees, one or more

new BGS Transition Bonds in any Authorized Denominations, of a like Series

(and, if applicable, Class) and aggregate initial principal amount.

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(d) At the option of the Holder, BGS Transition Bonds may be

exchanged for other BGS Transition Bonds of a like Series (and, if applicable,

Class) and aggregate initial principal amount in Authorized Denominations,

upon surrender of the BGS Transition Bonds to be exchanged at such office or

agency as provided in Section 3.2. Whenever any BGS Transition Bonds are so

surrendered for exchange, a Manager on behalf of the Issuer shall execute, and

the Trustee shall authenticate and the BGS Transition Bondholder shall obtain

from the Trustee, the BGS Transition Bonds which the BGS Transition Bondholder

making the exchange is entitled to receive.

(e) All BGS Transition Bonds issued upon any registration of transfer

or exchange of BGS Transition Bonds shall be the valid obligations of the

Issuer, evidencing the same debt, and entitled to the same benefits under this

Indenture, as the BGS Transition Bonds surrendered upon such registration of

transfer or exchange.

(f) Every BGS Transition Bond presented or surrendered for

registration of transfer or exchange shall be duly endorsed by, or be

accompanied by a written instrument of transfer in form satisfactory to the

Trustee duly executed by the Holder thereof or such Holder's attorney duly

authorized in writing, with such signature guaranteed by an Eligible Guarantor

Institution in the form set forth in such BGS Transition Bond.

(g) No service charge shall be made to a Holder for any registration

of transfer or exchange of BGS Transition Bonds, but, other than in respect of

exchanges pursuant to Sections 2.4 or 2.6 not involving any transfer, the

Issuer may require payment by such Holder of a sum sufficient to cover any tax

or other governmental charge that may be imposed in connection with any

registration of transfer or exchange of BGS Transition Bonds, including the

fees and expenses of the Trustee.

(h) The preceding provisions of this Section 2.5 notwithstanding, the

Issuer shall not be required to make, and the BGS Transition Bond Registrar

need not register, transfers or exchanges of BGS Transition Bonds selected for

transfers or exchanges of any BGS Transition Bond for a period of fifteen (15)

days preceding the date on which final payment of principal is to be made with

respect to such BGS Transition Bond.

SECTION 2.6. Mutilated, Destroyed, Lost or Stolen BGS Transition

Bonds.

(a) If (i) any mutilated BGS Transition Bond is surrendered to the

Trustee, or the Trustee receives evidence to its satisfaction of the

destruction, loss or theft of any BGS Transition Bond, and (ii) there is

delivered to the Trustee such security or indemnity as may be required by it

to hold the Issuer and the Trustee harmless, then, in the absence of notice to

the Issuer, the BGS Transition Bond Registrar or the Trustee that such BGS

Transition Bond has been acquired by a protected purchaser, a Manager on

behalf of the Issuer shall execute, and upon a Manager's request the Trustee

shall authenticate and deliver, in exchange for or in lieu of any such

mutilated, destroyed, lost or stolen BGS Transition Bond, a replacement BGS

Transition Bond of like Series (and, if applicable, Class), tenor and initial

principal amount in Authorized Denominations, bearing a number not

contemporaneously outstanding; provided,

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however, that if any such destroyed, lost or stolen BGS Transition Bond, but

not a mutilated BGS Transition Bond, shall have become or within seven days

shall be due and payable, instead of issuing a replacement BGS Transition

Bond, the Issuer may pay such destroyed, lost or stolen BGS Transition Bond

when so due or payable without surrender thereof. If, after the delivery of

such replacement BGS Transition Bond or payment of a destroyed, lost or stolen

BGS Transition Bond pursuant to the proviso to the preceding sentence, a

protected purchaser of the original BGS Transition Bond in lieu of which such

replacement BGS Transition Bond was issued presents for payment such original

BGS Transition Bond, the Issuer and the Trustee shall be entitled to recover

such replacement BGS Transition Bond (or such payment) from the Person to whom

it was delivered or any Person taking such replacement BGS Transition Bond

from such Person to whom such replacement BGS Transition Bond was delivered or

any assignee of such Person, except a protected purchaser, and shall be

entitled to recover upon the security or indemnity provided therefor to the

extent of any loss, damage, cost or expense incurred by the Issuer or the

Trustee in connection therewith.

(b) Every replacement BGS Transition Bond issued pursuant to this

Section 2.6 in replacement of any mutilated, destroyed, lost or stolen BGS

Transition Bond shall constitute an original additional contractual obligation

of the Issuer, whether or not the mutilated, destroyed, lost or stolen BGS

Transition Bond shall be at any time enforceable by anyone, and shall be

entitled to all the benefits of this Indenture equally and proportionately

with any and all other BGS Transition Bonds duly issued hereunder.

preclude (to the extent lawful) all other rights and remedies with respect to

the replacement or payment of mutilated, destroyed, lost or stolen BGS

Transition Bonds.

SECTION 2.7. Persons Deemed Owner. Prior to due presentment for

registration of transfer of any BGS Transition Bond, the Issuer, the Trustee

and any agent of the Issuer or the Trustee may treat the Person in whose name

any BGS Transition Bond is registered (as of the day of determination) as the

owner of such BGS Transition Bond for the purpose of receiving payments of

principal of and interest on such BGS Transition Bond and for all other

purposes whatsoever, whether or not such BGS Transition Bond be overdue, and

neither the Issuer, the Trustee nor any agent of the Issuer or the Trustee

shall be affected by notice to the contrary.

SECTION 2.8. Payment of Principal and Interest; Interest on Overdue

Principal; Principal and Interest Rights Preserved.

(a) The BGS Transition Bonds shall accrue interest as provided in the

form of BGS Transition Bond attached to the Series Supplement for such BGS

Transition Bonds, at the applicable Interest Rate specified therein, and such

interest shall be payable on each Payment Date as specified therein. Any

installment of interest or principal payable on any BGS Transition Bond which

is punctually paid or duly provided for by the Issuer on the applicable

Payment Date shall be paid to the Person in whose name such BGS Transition

Bond (or one or more Predecessor BGS Transition Bonds) is registered on the

Record Date for such Payment Date, in the manner specified in the related

Series Supplement, and if not specified therein, either

<PAGE>

(i) by check mailed first-class, postage prepaid to such Person's address as

it appears on the BGS Transition Bond Register on such Record Date or (ii)

with respect to BGS Transition Bonds registered on a Record Date in the name

of the nominee of the Clearing Agency (initially, such nominee to be Cede &

Co.), payments will be made by wire transfer in immediately available funds to

the account designated by such nominee, except for the final installment of

principal payable with respect to such BGS Transition Bond on a Payment Date,

which shall be payable as provided in clause (b) below. The funds represented

by any such checks or other amounts returned undelivered shall be held in

accordance with Section 3.3.

(b) The principal of each BGS Transition Bond of each Series (and, if

applicable, Class) shall be payable in installments on each Payment Date

specified in the Expected Sinking Fund Amortization Schedule included in the

form of BGS Transition Bond attached to the Series Supplement for such BGS

Transition Bonds, but only to the extent that moneys are available for such

payment pursuant to Section 8.2; provided that installments of principal not

paid when scheduled to be paid shall be paid upon receipt of moneys available

for such purpose, in the sequential order set forth in the applicable Expected

Sinking Fund Amortization Schedule. Failure to pay in accordance with such

Expected Sinking Fund Amortization Schedule because moneys are not so

available pursuant to Section 8.2 to make such payments shall not constitute a

Default or Event of Default under this Indenture. Notwithstanding the

foregoing, the entire Outstanding principal amount of the BGS Transition Bonds

of any Series or Class shall be due and payable, if not previously paid,

either: (i) on the Final Maturity Date therefor, (ii) on the date on which the

BGS Transition Bonds of all Series have been declared immediately due and

payable in accordance with Section 5.2, if any, therefor. The Trustee shall

notify the Person in whose name a BGS Transition Bond is registered, and any

other Person required under the relevant Series Supplement, at the close of

business on the second Record Date preceding the Payment Date on which the

Issuer expects that the final installment of principal of and interest on such

BGS Transition Bond will be paid. Such notice shall be mailed no later than

five (5) days prior to such final Payment Date and shall specify that such

final installment of principal will be payable only upon presentation and

surrender of such BGS Transition Bond and shall specify the place where such

BGS Transition Bond may be presented and surrendered for payment of such

installment. The Trustee shall also arrange for such notice to be published in

an Authorized Newspaper, not later than the fifth day of the month of the

expected payment of such final installment.

Transition Bonds of any Series, or in a default of any amount payable to any

Swap Counterparty, the Issuer shall pay defaulted interest, plus interest on

such defaulted interest at the applicable Interest Rate in any lawful manner

(subject to the availability of such amounts in the related Class Subaccount,

in the case of interest owed with respect to any BGS Transition Bonds which

have a floating rate of interest). The Issuer may pay such defaulted interest

to the Persons who are BGS Transition Bondholders and to any Swap

Counterparty, as applicable, at the rate specified in the related Series

Supplement or any Interest Rate Swap Agreement, respectively, on a subsequent

special record date, which date shall be at least five Business Days prior to

the payment date. The Issuer shall fix or cause to be fixed any such special

record date and payment date, and, at least fifteen (15) days before any such

special record date, the Issuer shall mail to each affected BGS

<PAGE>

Transition Bondholder a notice that states the special record date, the

payment date and the amount of defaulted interest to be paid.

SECTION 2.9. Cancellation. All BGS Transition Bonds surrendered for

payment, registration of transfer or exchange shall, if surrendered to any

Person other than the Trustee, be delivered to the Trustee and shall be

promptly canceled by the Trustee. The Issuer may at any time deliver to the

Trustee for cancellation any BGS Transition Bonds previously authenticated and

delivered hereunder which the Issuer may have acquired in any manner

whatsoever, and all BGS Transition Bonds so delivered shall be promptly

canceled by the Trustee. No BGS Transition Bonds shall be authenticated in

lieu of or in exchange for any BGS Transition Bonds canceled as provided in

this Section 2.9, except as expressly permitted by this Indenture. All

canceled BGS Transition Bonds may be held or disposed of by the Trustee in

accordance with its standard retention or disposal policy as in effect at the

time unless the Issuer shall direct by an Issuer Order that they be destroyed

or returned to it; provided that such Issuer Order is timely and the BGS

Transition Bonds have not been previously disposed of by the Trustee.

SECTION 2.10. Amount; Authentication and Delivery of BGS Transition

Bonds.

(a) The aggregate principal amount of BGS Transition Bonds that may

be authenticated and delivered under this Indenture shall not exceed

$102,700,000.

(b) BGS Transition Bonds of a new Series may from time to time be

executed by a Manager on behalf of the Issuer and delivered to the Trustee for

authentication and thereupon the same shall be authenticated and delivered by

the Trustee upon Issuer Request and upon delivery by the Issuer, at the

Issuer's expense, to the Trustee of the following:

(i) Trust Action. An Issuer Order authorizing and directing

the authentication and delivery of the BGS Transition Bonds by the

Trustee and specifying the principal amount of BGS Transition Bonds

to be authenticated.

(ii) Authorizing Certificate. A certified resolution of the

Managers authorizing the execution and delivery of the Series

Supplement for the BGS Transition Bonds applied for and the

execution, authentication and delivery of such BGS Transition Bonds.

(iii) Series Supplement. A Series Supplement for the Series

of BGS Transition Bonds being issued, which shall set forth the

provisions and form of the BGS Transition Bonds of such Series (and,

if applicable, each Class thereof).

(iv) Certificates of the Issuer and the Seller.

(A) An Issuer Officer's Certificate dated as of the

Series Issuance Date, stating:

<PAGE>

(1) that no Default has occurred and is

continuing under this Indenture and that the

issuance of the BGS Transition Bonds being issued

will not result in any Default;

(2) that the Issuer has not assigned any

interest or participation in the Collateral except

for the Grant contained in this Indenture; that the

Issuer has the power and authority to Grant the

Collateral to the Trustee as security hereunder;

and that the Issuer, subject to the terms of this

Indenture, has Granted to the Trustee a perfected

security interest in all right, title and interest

in, to and under the Collateral free and clear of

any Lien, except the Lien of this Indenture;

(3) that the Issuer has appointed the firm

of independent certified public accountants as

contemplated in Section 8.5;

(4) that attached thereto are duly

executed, true and complete copies of the Sale

Agreement and the Servicing Agreement;

(5) that all financing statements with

respect to the Collateral which are required to be

filed under the New Jersey UCC or the uniform

commercial code of any other jurisdiction by the

terms of the Sale Agreement, the Servicing

Agreement or this Indenture will be filed as

required; and

(6) that all conditions precedent provided

in this Indenture relating to the authentication

and delivery of the BGS Transition Bonds have been

complied with.

(B) An Officer's Certificate from the Seller, dated

as of the Series Issuance Date, to the effect that, in the

case of the BGS Bondable Transition Property to be

transferred to the Issuer on such date, immediately prior to

the conveyance thereof to the Issuer pursuant to the Sale

Agreement:

(1) the Seller was the sole owner of such

BGS Bondable Transition Property and such ownership

interest was perfected; such BGS Bondable

Transition Property will be validly transferred and

sold to the Issuer free and clear of all Liens

(other than Liens created by the Issuer pursuant to

this Indenture) and such transfer will be

perfected; the Seller has the power and authority

to own, sell and assign such BGS Bondable

Transition Property to the Issuer; the Seller has

duly authorized such sale and assignment to the

Issuer; and the Seller has its chief executive

office in the State of New Jersey; and

(2) the attached copy of the Financing

Order creating such BGS Bondable Transition

Property is true and correct and is in full force

and effect; and

<PAGE>

(v) Issuer Opinion of Counsel. An Issuer Opinion of Counsel,

portions of which may be delivered by counsel for the Issuer and

portions of which may be delivered by counsel for the Seller and/or

the Servicer, dated as of the Series Issuance Date, subject to

customary qualifications, in the form set forth in the Underwriting

Agreement to the collective effect that:

(A) the Issuer has the power and authority to

execute and deliver the Series Supplement and this Indenture

and to issue the BGS Transition Bonds being issued, each of

the Series Supplement and this Indenture and such BGS

Transition Bonds have been duly authorized, executed and

delivered, and the Issuer is duly organized, is validly

existing as a limited liability company and in good standing

under the laws of the jurisdiction of its organization and

is in good standing in any jurisdiction where it is required

to be qualified;

(B) no authorization, approval or consent of any

governmental body is required for the valid issuance,

authentication or delivery of such BGS Transition Bonds,

except for any such authorization, approval or consent as

has already been obtained and such registrations as are

required under the Blue Sky and securities laws of any

State;

executed and authenticated in accordance with the provisions

of this Indenture and delivered, will constitute valid and

binding obligations of the Issuer entitled to the benefits

of this Indenture and the related Series Supplement;

(D) the Financing Order is final and

non-appealable;

(E) this Indenture (including the related Series

Supplement), the Sale Agreement and the Servicing Agreement

are valid and binding agreements of the Issuer, enforceable

against the Issuer in accordance with their respective terms

except as such enforceability may be subject to bankruptcy,

insolvency, reorganization and other similar laws affecting

the rights of creditors generally and general principles of

equity (regardless of whether such enforceability is

considered in a proceeding in equity or at law);

(F) the Sale Agreement is a valid and binding

agreement of the Seller, enforceable against the Seller in

accordance with its terms except as such enforceability may

be subject to bankruptcy, insolvency, reorganization and

other similar laws affecting the rights of creditors

generally and general principles of equity (regardless of

whether such enforcement is considered in a proceeding in

equity or at law);

(G) the Servicing Agreement is a valid and binding

agreement of the Servicer, enforceable against the Servicer

in accordance with its terms except as such enforceability

may be subject to bankruptcy, insolvency, reorganization and

<PAGE>

other similar laws affecting the rights of creditors

generally and general principles of equity (regardless of

whether such enforcement is considered in a proceeding in

equity or at law);

(H) upon giving value by the Issuer to the Seller

with respect to the BGS Bondable Transition Property;

(1) the provisions of the Sale Agreement

together with the Bill of Sale are effective to

create, in favor of the Issuer, a valid security

interest (as such term is defined in Section 1-201

of the New Jersey UCC) in the Seller's rights in

the BGS Bondable Transition Property described in

the Bill of Sale (the "Transferred BGS Bondable

Transition Property"), which security interest if

characterized as a transfer for security will

secure the amount paid by the Issuer for such

Transferred BGS Bondable Transition Property; it

being noted that the term "security interest"

includes both a sale and a transfer for security of

an account and no opinion is expressed as to the

proper characterization of the transfer of the

Transferred BGS Bondable Transition Property by the

Seller to the Issuer;

(2) the security interest in favor of the

Issuer in the Transferred BGS Bondable Transition

Property has been perfected; and

(3) no other security interest of any

other creditor of the Seller is equal or prior to

the security interest of the Issuer in the

Transferred BGS Bondable Transition Property;

(I) upon the giving of value by the Trustee to the

Issuer with respect to the Collateral,

(1) this Indenture creates in favor of the

Trustee, to secure payment of the BGS Transition

Bonds, a valid security interest in the rights of

the Issuer in, to and under that portion of the

Collateral subject to Article 9 of the New Jersey

UCC, including the BGS Bondable Transition Property

(the "Article 9 Collateral"),

(2) upon filing of the related financing

statements in accordance with the New Jersey UCC

and Delaware UCC, such security interest will be

perfected, and

(3) based solely on a review of the UCC

Search Reports, no other security interest of any

other creditor of the Issuer is equal or prior to

the security interest of the Trustee for the

benefit of the BGS Transition Bondholders in the

Article 9 Collateral;

(J) this Indenture has been duly qualified under

the Trust Indenture Act and either the Series Supplement for

the BGS Transition Bonds applied for

<PAGE>

has been duly qualified under the Trust Indenture Act or no

such qualification of such Series Supplement is necessary;

(K) either

(1) the registration statement covering

the BGS Transition Bonds is effective under the

Securities Act of 1933 and, to the best of such

counsel's knowledge and information, no stop order

suspending the effectiveness of such registration

statement has been issued under the Securities Act

of 1933 nor have proceedings therefor been

instituted or threatened by the Commission or

(2) the BGS Transition Bonds are exempt

from the registration requirements under the

Securities Act of 1933;

(L) this Indenture (including the related Series

Supplement) has been duly authorized, executed and delivered

by the Issuer and constitutes the legal, valid and binding

obligation of the Issuer, enforceable against the Issuer in

accordance with its terms;

(M) the Sale Agreement and the Servicing Agreement

have been duly authorized, executed and delivered by each of

the parties thereto; and

(N) the Issuer is not now and, following the

issuance of the BGS Transition Bonds will not be, required

to be registered under the Investment Company Act of 1940,

as amended.

(vi) Accountant's Certificate or Opinion. A letter addressed

to the Issuer and the Trustee complying with the requirements of

Section 11.1, of a firm of Independent certified public accountants

of recognized national reputation to the effect that (A) such

accountants are Independent with respect to the Issuer within the

meaning of this Indenture, and are independent public accountants

within the meaning of the standards of The American Institute of

Certified Public Accountants, and (B) with respect to the Collateral,

they have made certain specified recalculations of calculations and

information provided by the Issuer for the purpose of determining

that, based on certain specified assumptions used in calculating the

BGS Transition Bond Charge with respect to the related Transferred

BGS Bondable Transition Property, as of the Series Issuance Date for

such Series, the BGS Transition Bond Charge will be sufficient to pay

(1) assumed Operating Expenses when incurred, plus (2) any amounts

due under any Interest Rate Swap Agreement when due, plus (3) the

Overcollateralization Amount (such amount may be zero) for such

Series set forth in the Final Prospectus (as such term is defined in

the Series Supplement), plus (4) interest on the BGS Transition Bonds

at their respective Interest Rates when due as set forth in the Final

Prospectus, plus (5) principal of the BGS Transition Bonds in

accordance with the Expected Sinking Fund

<PAGE>

Amortization Schedule set forth in the Final Prospectus, and found

such calculations to be mathematically correct.

(vii) Required Capital Amount. Evidence satisfactory to the

Trustee that the Required Capital Amount for such Series has been

credited to the Capital Subaccount for such Series, provided that in

the case of the initial Series of BGS Transition Bonds, $100,000 of

the Required Capital Amount for such Series shall have been deposited

to the credit of the Capital Reserve Subaccount.

(viii) Rating Agency Approval. Written notice from each

Rating Agency that such action will not result in a reduction or

withdrawal of the then current rating by such Rating Agency of any

Outstanding Series or Class of BGS Transition Bonds.

(ix) Bill of Sale. If the issuance of an additional Series

of BGS Transition Bonds is a Financing Issuance, the Bill of Sale

delivered to the Issuer under the Sale Agreement with respect to the

BGS Bondable Transition Property being purchased with the proceeds of

such Financing Issuance.

SECTION 2.11. Book-Entry BGS Transition Bonds. Unless otherwise

specified in the related Series Supplement, each Series of BGS Transition

Bonds, upon original issuance, will be issued in the form of a typewritten BGS

Transition Bond or BGS Transition Bonds representing the Book-Entry BGS

Transition Bonds, to be delivered to The Depository Trust Company, the initial

Clearing Agency, by, or on behalf of, the Issuer. Such BGS Transition Bond

shall initially be registered on the BGS Transition Bond Register in the name

of Cede & Co., the nominee of the initial Clearing Agency, and no BGS

Transition Bond Owner will receive a definitive BGS Transition Bond

representing such BGS Transition Bond Owner's interest in such BGS Transition

Bond, except as provided in Section 2.13. Unless and until definitive, fully

registered BGS Transition Bonds (the "Definitive Transition Bonds") have been

issued to BGS Transition Bondholders pursuant to Section 2.13:

(a) the provisions of this Section 2.11 shall be in full

force and effect;

(b) the BGS Transition Bond Registrar and the Trustee shall

be entitled to deal with the Clearing Agency for all purposes of this

Indenture (including the payment of principal of and interest on the

BGS Transition Bonds and the giving of instructions or directions

hereunder) as the sole Holder of the BGS Transition Bonds, and shall

have no obligation to the BGS Transition Bond Owners;

conflict with any other provisions of this Indenture, the provisions

of this Section shall control;

(d) the rights of BGS Transition Bond Owners shall be

exercised only through the Clearing Agency and shall be limited to

those established by law and agreements between such BGS Transition

Bond Owners and the Clearing Agency or the Clearing Agency

Participants. Pursuant to the DTC Agreement, unless and until

Definitive BGS Transition Bonds are issued pursuant to Section 2.13,

the initial Clearing Agency will

<PAGE>

make book-entry transfers among the Clearing Agency Participants and

receive and transmit payments of principal of and interest on the BGS

Transition Bonds to such Clearing Agency Participants; and

(e) whenever this Indenture requires or permits actions to

be taken based upon instructions or directions of Holders of BGS

Transition Bonds evidencing a specified percentage of the Outstanding

Amount of the BGS Transition Bonds or a Series or Class thereof, the

Clearing Agency shall be deemed to represent such percentage only to

the extent that it has received instructions to such effect from BGS

Transition Bond Owners or Clearing Agency Participants owning or

representing, respectively, such required percentage of the

beneficial interest in the BGS Transition Bonds or such Series or

Class and has delivered such instructions to the Trustee.

SECTION 2.12. Notices to Clearing Agency. Whenever a notice or other

communication to the BGS Transition Bondholders is required under this

Indenture, unless and until Definitive BGS Transition Bonds shall have been

issued to BGS Transition Bond Owners pursuant to Section 2.13, the Trustee

shall give all such notices and communications specified herein to be given to

BGS Transition Bondholders to the Clearing Agency, and shall have no

obligation to the BGS Transition Bond Owners.

SECTION 2.13. Definitive BGS Transition Bonds.

(a) If (i) the Issuer advises the Trustee in writing that the

Clearing Agency is no longer willing or able to properly discharge its

responsibilities as depository with respect to any Series or Class of BGS

Transition Bonds and the Issuer is unable to locate a qualified successor,

(ii) the Issuer, at its option, advises the Trustee in writing that it elects

to terminate the book-entry system through the Clearing Agency with respect to

any Series or Class of BGS Transition Bonds or (iii) after the occurrence of

an Event of Default, BGS Transition Bond Owners representing beneficial

interests aggregating at least a majority of the Outstanding Amount of the BGS

Transition Bonds of all Series advise the Trustee through the Clearing Agency

in writing that the continuation of a book-entry system through the Clearing

Agency is no longer in the best interests of the BGS Transition Bond Owners,

then the Clearing Agency shall notify all affected BGS Transition Bond Owners

and the Trustee of the occurrence of any such event and of the availability of

Definitive BGS Transition Bonds to affected BGS Transition Bond Owners

requesting the same. Upon surrender to the Trustee of the typewritten BGS

Transition Bond or BGS Transition Bonds representing the Book-Entry BGS

Transition Bonds by the Clearing Agency, accompanied by registration

instructions, a Manager on behalf of the Issuer shall execute and the Trustee

shall authenticate the Definitive BGS Transition Bonds in accordance with the

instructions of the Clearing Agency. None of the Issuer, the BGS Transition

Bond Registrar or the Trustee shall be liable for any delay in delivery of

such instructions and may conclusively rely on, and shall be protected in

relying on, such instructions. Upon the issuance of Definitive BGS Transition

Bonds, the Trustee shall recognize the Holders of the Definitive BGS

Transition Bonds as BGS Transition Bondholders.

<PAGE>

(b) Definitive BGS Transition Bonds will be transferable and

exchangeable at the offices of the BGS Transition Bond Registrar. With respect

to any transfer of such listed BGS Transition Bonds, the new Definitive BGS

Transition Bonds registered in the names specified by the transferee and the

original transferor shall be available at the offices of such transfer agent.

ARTICLE III

COVENANTS

SECTION 3.1. Payment of Principal and Interest. The Issuer will duly

and punctually pay the principal of and interest on the BGS Transition Bonds

in accordance with the terms of the BGS Transition Bonds and this Indenture;

provided that except on the Final Maturity Date for a Series or Class of BGS

Transition Bonds or upon the acceleration of the BGS Transition Bonds pursuant

to Section 5.2, the Issuer shall only be obligated to pay the principal of

such BGS Transition Bonds on each Payment Date therefor to the extent moneys

are available for such payment pursuant to Section 8.2. Amounts properly

withheld under the Code by any Person from a payment to any BGS Transition

Bondholder of interest or principal shall be considered as having been paid by

the Issuer to such BGS Transition Bondholder for all purposes of this

Indenture.

SECTION 3.2. Maintenance of Office or Agency.

(a) The Issuer will maintain in the Borough of Manhattan, the City of

New York, an office or agency where BGS Transition Bonds may be surrendered

for registration of transfer or exchange, and where notices and demands to or

upon the Issuer in respect of the BGS Transition Bonds and this Indenture may

be served. The Issuer hereby initially appoints the Trustee to serve as its

agent for the foregoing purposes. The Issuer will give prompt written notice

to the Trustee and any agent appointed pursuant to clause (b) below of the

location and identity, and of any change in the location or identity, of any

such office or agency. If at any time the Issuer shall fail to maintain any

such office or agency or shall fail to furnish the Trustee and each such agent

with the address thereof, such surrenders, notices and demands may be made or

served at the Corporate Trust Office, and the Issuer hereby appoints the

Trustee as its agent to receive all such surrenders, notices and demands.

(b) [reserved]

SECTION 3.3. Money for Payments To Be Held in Trust.

(a) As provided in Section 8.2(a), all payments of principal of and

interest on the BGS Transition Bonds that are to be made from amounts

withdrawn from the Collection Account pursuant to Section 8.2(g), or Section

4.3 shall be made on behalf of the Issuer by the Trustee or by another Paying

Agent, and no amounts so withdrawn from the Collection Account for payments of

BGS Transition Bonds shall be paid over to the Issuer except as provided in

this Section 3.3 and in Section 8.2.

<PAGE>

(b) The Issuer shall cause each Paying Agent other than the Trustee

to execute and deliver to the Trustee an instrument in which such Paying Agent

shall agree with the Trustee (and if the Trustee acts as Paying Agent, it

hereby so agrees), subject to the provisions of this Section 3.3, that such

Paying Agent will:

(i) hold all sums held by it for the payment of principal of

or interest on the BGS Transition Bonds in trust for the benefit of

the Persons entitled thereto until such sums shall be paid to such

Persons or otherwise disposed of as herein provided and pay such sums

to such Persons as herein provided;

(ii) give the Trustee and the BPU notice of any Default by

the Issuer (or any other obligor upon the BGS Transition Bonds) of

which the Paying Agent has actual knowledge in the making of any

payment required to be made with respect to the BGS Transition Bonds;

(iii) at any time during the continuance of any such

Default, upon the written request of the Trustee, forthwith pay to

the Trustee all sums so held in trust by such Paying Agent;

(iv) immediately resign as a Paying Agent and forthwith pay

to the Trustee all sums held by the Paying Agent in trust for the

payment of BGS Transition Bonds if at any time the Paying Agent

ceases to meet the standards required to be met by a Paying Agent at

the time of its appointment; and

(v) comply with all requirements of the Code with respect to

the withholding from any payments made by it on any BGS Transition

Bonds of any applicable withholding taxes imposed thereon and with

respect to any applicable reporting requirements in connection

therewith.

satisfaction and discharge of this Indenture or for any other purpose, by

Issuer Order direct any Paying Agent to pay to the Trustee all sums held in

trust by such Paying Agent, such sums to be held by the Trustee upon the same

trusts as those upon which the sums were held by such Paying Agent; and upon

such payment by any Paying Agent to the Trustee, such Paying Agent shall be

released from all further liability with respect to such money.

(d) Subject to applicable laws with respect to escheat of funds, any

money held by the Trustee or any Paying Agent in trust for the payment of any

amount of principal of or interest on any BGS Transition Bond and remaining

unclaimed for two years after such amount has become due and payable shall be

discharged from such trust and be paid to the Issuer; and the Holder of such

BGS Transition Bond shall thereafter, as an unsecured general creditor, look

only to the Issuer for payment thereof (but only to the extent of the amounts

so paid to the Issuer), and all liability of the Trustee or such Paying Agent

with respect to such trust money shall thereupon cease; provided, however,

that the Trustee or such Paying Agent, before being required to make any such

repayment, may at the expense of the Issuer cause to be published once, in a

newspaper

<PAGE>

published in the English language, customarily published on each Business Day

and of general circulation in the City of New York, and in an Authorized

Newspaper, notice that such money remains unclaimed and that, after a date

specified therein, which shall not be less than thirty (30) days from the date

of such publication, any unclaimed balance of such money then remaining will

be repaid to the Issuer. The Trustee may also adopt and employ, at the expense

of the Issuer, any other reasonable means of notification of such repayment

(including mailing notice of such repayment to Holders whose BGS Transition

Bonds have been called but have not been surrendered for redemption or whose

right to or interest in moneys due and payable but not claimed is determinable

from the records of the Trustee or of any Paying Agent, at the last address of

record for each such Holder).

SECTION 3.4. Existence. Subject to Section 3.10, the Issuer shall

keep in full effect its existence, rights and franchises as a statutory

limited liability company under the laws of the State of Delaware (unless it

becomes, or any successor Issuer hereunder is or becomes, organized under the

laws of any other State or of the United States of America, in which case the

Issuer will keep in full effect its existence, rights and franchises under the

laws of such other jurisdiction) and will obtain and preserve its

qualification to do business in each jurisdiction in which such qualification

is or shall be necessary to protect the validity and enforceability of this

Indenture, the BGS Transition Bonds, the Collateral and each other instrument

or agreement included therein.

SECTION 3.5. Protection of Collateral.

(a) The Issuer shall from time to time execute and deliver all such

supplements and amendments hereto and all such filings, financing statements,

continuation statements, instruments of further assurance and other

instruments, and shall take such other action necessary or advisable to:

(i) maintain and preserve the Grant, Lien and security

interest (and the priority thereof) of this Indenture or carry out

more effectively the purposes hereof;

(ii) perfect, publish notice of or protect the validity of

any Grant made or to be made by this Indenture;

(iii) enforce any of the Collateral, including any Interest

Rate Swap Agreement;

(iv) preserve and defend title to the Collateral and the

rights of the Trustee and the BGS Transition Bondholders in the

Collateral against the claims of all Persons and parties; or

(v) pay any and all taxes levied or assessed upon all or any

part of the Collateral.

<PAGE>

(b) The Issuer hereby designates the Trustee its agent and

attorney-in-fact to execute any filing with the BPU, financing

statement, continuation statement or other instrument required by the

Trustee pursuant to this Section 3.5.

SECTION 3.6. Opinions as to Collateral.

(a) On or before March 31 in each calendar year, while any Series is

outstanding, commencing March 31, 2006, the Issuer shall furnish to the

Trustee an Issuer Opinion of Counsel either stating that, in the opinion of

such counsel, such action has been taken with respect to the execution and

filing of any filings pursuant to the New Jersey UCC and Delaware UCC of

financing statements and continuation statements as is necessary to maintain

the Lien and security interest, and the first priority thereof, created by

this Indenture and reciting the details of such action or stating that in the

opinion of such counsel no such action is necessary to maintain such Grant,

Lien and security interest, and the first priority thereof. Such Issuer

Opinion of Counsel shall also describe the execution and filing of any filings

pursuant to the New Jersey UCC and Delaware UCC of financing statements and

continuation statements that will, in the opinion of such counsel, be required

to maintain the Grant, Lien and security interest of this Indenture until

March 31 in the following calendar year.

(b) Prior to the effectiveness of any amendment to the Sale Agreement

or the Servicing Agreement, the Issuer shall furnish to the Trustee an Issuer

Opinion of Counsel either (i) stating that, in the opinion of such counsel,

all filings, including filings pursuant to the New Jersey UCC and Delaware

UCC, have been executed and filed that are necessary fully to preserve and

protect the interest of the Issuer and the Trustee in the Transferred BGS

Bondable Transition Property and the proceeds thereof, and reciting the

details of such filings or referring to prior Opinions of Counsel in which

such details are given, or (ii) stating that, in the opinion of such counsel,

no such action shall be necessary to preserve and protect such interest.

SECTION 3.7. Performance of Obligations.

(a) The Issuer (i) shall diligently pursue any and all actions to

enforce its rights under each instrument or agreement included in the

Collateral and (ii) shall not take any action and will use its best efforts

not to permit any action to be taken by others that would release any Person

from any of such Person's covenants or obligations under any such instrument

or agreement or that would result in the amendment, hypothecation,

subordination, termination or discharge of, or impair the validity or

effectiveness of, any such instrument or agreement, except, in each case, as

expressly provided in this Indenture, the Sale Agreement, the Servicing

Agreement, any Interest Rate Swap Agreement or any other Basic Document.

(b) The Issuer may contract with other Persons to assist it in

performing its duties under this Indenture, and any performance of such duties

by a Person identified to the Trustee in an Issuer Officer's Certificate of

the Issuer shall be deemed to be action taken by the Issuer. Initially, the

Issuer has contracted with the Administrator to assist the Issuer in

performing its duties under this Indenture.

<PAGE>

obligations and agreements contained in the Sale Agreement, the Servicing

Agreement, any Interest Rate Swap Agreement and in all other instruments and

agreements included in the Collateral.

SECTION 3.8. Negative Covenants. The Issuer shall not:

(a) except as expressly permitted by this Indenture, the

Sale Agreement, the Servicing Agreement, any Interest Rate Swap

Agreement or any other Basic Document, sell, transfer, exchange or

otherwise dispose of any of the Collateral, unless directed to do so

by the Trustee in accordance with Article V;

(b) claim any credit on, or make any deduction from the

principal or interest payable in respect of, the BGS Transition Bonds

(other than amounts properly withheld from such payments under the

Code or pursuant to any Interest Rate Swap Agreement) or assert any

claim against any present or former BGS Transition Bondholder by

reason of the payment of taxes levied or assessed upon the Issuer or

any part of the Collateral; or

Indenture to be impaired, or permit the Lien of this Indenture to be

amended, hypothecated, subordinated, terminated or discharged, or

permit any Person to be released from any covenants or obligations

with respect to the BGS Transition Bonds under this Indenture except

as may be expressly permitted hereby, (ii) permit any Lien (other

than the Lien created by this Indenture) to be created on or extend

to or otherwise arise upon or burden the Collateral or any part

thereof, any interest therein or the proceeds thereof or (iii) permit

the Lien of this Indenture not to constitute a continuing valid first

priority security interest in the Collateral.

SECTION 3.9. Annual Statement as to Compliance.

(a) The Issuer will deliver to the Trustee and the BPU, within 120

days after the end of each fiscal year of the Issuer (commencing with the

fiscal year 2005), an Issuer Officer's Certificate stating, as to the Manager

signing such Issuer Officer's Certificate, that a review of the activities of

the Issuer during such year (or relevant portion thereof) and of performance

under this Indenture has been made under such Manager's supervision; and

(b) to the best of such Manager's knowledge, based on such review,

the Issuer has complied with all conditions and covenants under this Indenture

throughout such calendar year (or relevant portion thereof), or, if there has

been a default in complying with any such condition or covenant, describing

each such default and the nature and status thereof.

SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.

The Issuer shall not consolidate or merge with or into any other Person or

sell substantially all of its assets to any other Person or dissolve, unless:

(a) the Person (if other than the Issuer) formed by or

surviving such consolidation or merger or to whom substantially all

of such assets are sold shall be a

<PAGE>

Person organized and existing under the laws of the United States of

America or any State and shall expressly assume by an indenture

supplemental hereto, executed and delivered to the Trustee, in form

satisfactory to the Trustee, the due and punctual payment of the

principal of and interest on all BGS Transition Bonds and the

performance or observance of every agreement and covenant of this

Indenture on the part of the Issuer to be performed or observed, all

as provided herein and in the applicable Series Supplement or Series

Supplements;

(b) the Person (if other than the Issuer) formed by or

surviving such consolidation or merger or to whom substantially all

of such assets are sold shall expressly assume all obligations and

succeed to all rights of the Issuer under the Sale Agreement, the

Administration Agreement, the Servicing Agreement and any Interest

Rate Swap Agreement pursuant to an assignment and assumption

agreement executed and delivered to the Trustee, in form satisfactory

to the Trustee;

merger or sale, no Default or Event of Default shall have occurred

and be continuing;

(d) the Rating Agency Condition shall have been satisfied

with the respect to such consolidation or merger or sale;

(e) the Issuer shall have received an Issuer Opinion of

Counsel (and shall have delivered copies thereof to the Trustee) to

the effect that such consolidation, merger or sale (i) will not have

any material adverse tax consequence to the Issuer or any BGS

Transition Bondholder, (ii) complies with this Indenture and all of

the conditions precedent herein relating to such transaction and

(iii) will result in the Trustee maintaining a continuing valid first

priority perfected security interest in the Collateral;

(f) neither the BGS Bondable Transition Property nor the

Financing Order nor the rights of the Seller, the Servicer or the

Issuer under the Competition Act or the Financing Order shall be

impaired thereby; and

(g) any action as is necessary to maintain the Lien created

by this Indenture shall have been taken.

SECTION 3.11. Successor or Transferee.

(a) Upon any consolidation or merger of the Issuer in accordance with

Section 3.10, the Person formed by or surviving such consolidation or merger

(if other than the Issuer) shall succeed to, and be substituted for, and may

exercise every right and power of, the Issuer under this Indenture with the

same effect as if such Person had been named as the Issuer herein.

(b) Upon any sale by the Issuer of substantially all of its assets in

a sale which complies with Section 3.10, PSE&G Transition Funding II LLC will

be released from every covenant and agreement of this Indenture to be observed

or performed on the part of the Issuer with respect to the BGS Transition

Bonds and from every covenant and agreement of the Sale

<PAGE>

Agreement, the Administration Agreement, the Servicing Agreement and any

Interest Rate Swap Agreement to be observed or performed on the part of the

Issuer.

SECTION 3.12. No Other Business. The Issuer shall not engage in any

business other than purchasing and owning BGS Bondable Transition Property,

issuing BGS Transition Bonds from time to time, pledging its interest in the

Collateral to the Trustee under this Indenture in order to secure the BGS

Transition Bonds, entering into the Basic Documents relating to the BGS

Transition Bonds and performing its obligations thereunder and performing

activities that are necessary, suitable or convenient to accomplish these

purposes or are incidental thereto and other than as contemplated by the Basic

Documents.

SECTION 3.13. No Borrowing. The Issuer shall not issue, incur,

assume, guarantee or otherwise become liable, directly or indirectly, for any

indebtedness except for the BGS Transition Bonds and except as contemplated by

the Basic Documents.

SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities.

Except as contemplated by the Basic Documents, Issuer shall not make any loan

or advance or credit to, or guarantee (directly or indirectly or by an

instrument having the effect of assuring another's payment or performance on

any obligation or capability of so doing or otherwise), endorse or otherwise

become contingently liable, directly or indirectly, in connection with the

obligations, stocks or dividends of, or own, purchase, repurchase or acquire

(or agree contingently to do so) any stock, obligations, assets or securities

of, or any other interest in, or make any capital contribution to, any other

Person, other than any Eligible Investments.

SECTION 3.15. Capital Expenditures. The Issuer shall not make any

expenditure (by long-term or operating lease or otherwise) for capital assets

(either realty or personalty) other than BGS Bondable Transition Property

purchased from the Seller pursuant to, and in accordance with, the Sale

Agreement.

SECTION 3.16. Restricted Payments. The Issuer shall not, directly or

indirectly, pay any dividend or make any distribution (by reduction of capital

or otherwise), whether in cash, property, securities or a combination thereof,

to any owner of a beneficial interest in the Issuer or otherwise with respect

to any ownership or equity interest in, or ownership security of, the Issuer,

redeem, purchase, retire or otherwise acquire for value any such ownership or

equity interest or security or set aside or otherwise segregate any amounts

for any such purpose; provided, however, that if no Event of Default shall

have occurred and be continuing or would otherwise result from such payment,

the Issuer may make, or cause to be made, any such distributions to any owner

of a beneficial interest in the Issuer or otherwise with respect to any

ownership or equity interest or security in or of the Issuer using funds

either distributed to the Issuer pursuant to Section 8.2(g) or which are not

otherwise subject to the Lien of this Indenture, to the extent that such

distributions would not cause the book value of the remaining equity in the

Issuer to decline below 0.5% of the original principal amount of all Series of

BGS Transition Bonds which remain outstanding. The Issuer will not, directly

or indirectly, make payments to or distributions from the Collection Account

except in accordance with this Indenture and the Basic Documents.

<PAGE>

SECTION 3.17. Notice of Events of Default. The Issuer agrees to

deliver to the Trustee, the BPU, and the Rating Agencies written notice in the

form of an Issuer Officer's Certificate of any Default or Event of Default

hereunder or under any of the Basic Documents, its status and what action the

Issuer is taking or proposes to take with respect thereto within five Business

Days after the occurrence thereof.

SECTION 3.18. Inspection. The Issuer agrees that, on reasonable prior

notice, it will permit any representative of the Trustee and any

representative of the BPU, during the Issuer's normal business hours, to

examine all the books of account, records, reports and other papers of the

Issuer, to make copies and extracts therefrom, to cause such books to be

audited annually by Independent certified public accountants, and to discuss

the Issuer's affairs, finances and accounts with the Issuer's officers,

employees and Independent certified public accountants, all at such reasonable

times and as often as may be reasonably requested. The Trustee and the BPU

shall and shall cause their respective representatives to hold in confidence

all such information except to the extent disclosure may be required by law

(and all reasonable applications for confidential treatment are unavailing)

and except to the extent that the Trustee and the BPU may reasonably determine

that such disclosure is consistent with its obligations hereunder.

SECTION 3.19. Adjusted Overcollatera1ization Balance Schedules. Not

later than the date on which a new Series of BGS Transition Bonds is issued or

any outstanding Series of BGS Transition Bonds is defeased, the Issuer shall

deliver to the Trustee and to the BPU a schedule of the adjusted

overcollateralization balance, adjusted to reflect such issuance or defeasance

and setting forth the Scheduled Overcollateralization Level for each Payment

Date with respect to each Series(the "Adjusted Overcollateralization Balance

Schedule"), if the Overcollateralization Amount is greater than zero.

SECTION 3.20. Sale Agreement, Servicing Agreement and Swap Agreement

Covenants. The Issuer agrees to take all such lawful actions to enforce its

rights under the Sale Agreement, the Servicing Agreement and any Interest Rate

Swap Agreement and to compel or secure the performance and observance by the

Seller, the Servicer and any Swap Counterparty, of each of their obligations

to the Issuer under or in connection with the Sale Agreement, the Servicing

Agreement and any Interest Rate Swap Agreement, respectively, in accordance

with the terms thereof. So long as no Event of Default occurs and is

continuing, but subject to Section 3.20(f), the Issuer may exercise any and

all rights, remedies, powers and privileges lawfully available to the Issuer

under or in connection with the Sale Agreement, the Servicing Agreement and

any Interest Rate Swap Agreement.

(i) If an Event of Default occurs and is continuing, the

Trustee may, and, at the direction (which direction shall be in

writing or by telephone (confirmed in writing promptly thereafter))

of with respect to the Sale Agreement or the Servicing Agreement, the

Holders of a majority of the Outstanding Amount of the BGS Transition

Bonds of all Series or with respect to any Interest Rate Swap

Agreement, the Holders of that percentage of the Outstanding Amount

of the BGS Transition Bonds of the related Class specified in the

related Series Supplement, shall, exercise all right, remedies,

powers, privileges and claims of the Issuer against the Seller, the

Servicer or any Swap

<PAGE>

Counterparty under or in connection with the Sale Agreement, the

Servicing Agreement and any Interest Rate Swap Agreement,

respectively, including the right or power to take any action to

compel or secure performance or observance by the Seller, the

Servicer or any Swap Counterparty of each of their obligations to the

Issuer thereunder and to give any consent, request, notice,

direction, approval, extension or waiver under the Sale Agreement,

the Servicing Agreement and any Interest Rate Swap Agreement, and any

right of the Issuer to take such action shall be suspended.

(b) With the consent of the Trustee, the Sale Agreement and the

Servicing Agreement may be amended in accordance with the terms thereof, so

long as the Rating Agency Condition is satisfied in connection therewith, at

any time and from time to time, without the consent of the BGS Transition

Bondholders, or the counterparty under any Interest Rate Swap Agreement.

However, such amendment may not adversely affect in any material respect the

interest of any BGS Transition Bondholder or any counterparty under any

Interest Rate Swap Agreement without the consent of the Holders of a majority

of the Outstanding Amount of the BGS Transition Bonds of each Series or Class,

and each such counterparty, materially and adversely affected thereby.

Further, with the consent of the Trustee and the related counterparty under

any Interest Rate Swap Agreement, any Interest Rate Swap Agreement may be

amended, at any time and from time to time, so long as the Rating Agency

Condition is satisfied in connection therewith. However, such amendment may

not adversely affect in any material respect the interest of any BGS

Transition Bondholder or counterparty under any Interest Rate Swap Agreement

without the consent of sixty-six and two-thirds percent (66-2/3%) of the

Holders of the Outstanding Amount of the BGS Transition Bonds of each Series

or Class and each such other counterparty materially and adversely affected

thereby.

modify, waive, supplement, terminate or surrender, or agree to any amendment,

modification, waiver, supplement, termination, or surrender of, the terms of

the Sale Agreement, the Servicing Agreement or any Interest Rate Swap

Agreement, or waive timely performance or observance thereunder by the Seller,

the Servicer or any Swap Counterparty, respectively, in each case in such a

way as would materially and adversely affect the interests of any Class of any

Series of BGS Transition Bondholders or the counterparty under any Interest

Rate Swap Agreement, the Issuer shall first notify the Rating Agencies of the

proposed amendment, modification, termination or surrender. Upon receiving

notification regarding whether the Rating Agency Condition has been satisfied,

the Issuer shall notify the Trustee, and the Trustee shall notify the BGS

Transition Bondholders and each counterparty under any Interest Rate Swap

Agreement, of the proposal and whether the Rating Agency Condition has been

satisfied with respect thereto. With respect to any such proposed action

related to the Sale Agreement and the Servicing Agreement, the Trustee shall

consent to such proposed action only (i) with the consent of the Holders of a

majority of the Outstanding Amount of the BGS Transition Bonds of each Class

of each Series, and each counterparty under any Interest Rate Swap Agreement,

materially and adversely affected thereby and (ii) upon satisfaction of the

Rating Agency Condition. With respect to any such proposed action related to

any Interest Rate Swap Agreement, the Trustee shall consent to such proposed

action only (y) with the consent of the Holders representing sixty-six and

two-thirds percent (66-2/3%) of the Outstanding Amount of the BGS Transition

Bonds of

<PAGE>

the related Class, and each counterparty under any Interest Rate Swap

Agreement, materially and adversely affected thereby and (z) upon satisfaction

of the Rating Agency Condition. If any such amendment, modification,

supplement or waiver shall be so consented to by the Trustee or such Holders,

the Issuer agrees to execute and deliver, in its own name and at its own

expense, such agreements, instruments, consents and other documents as shall

be necessary or appropriate in the circumstances.

(d) If the Issuer or the Servicer proposes to amend, modify, waive,

supplement, terminate or surrender in any material respect, or to agree to any

material amendment, modification, waiver, supplement, termination or surrender

of, the BGS Transition Bond Charge Adjustment Process, the Issuer shall notify

the Trustee and the Trustee shall notify BGS Transition Bondholders of such

proposal and the Trustee shall consent thereto only with the consent of the

Holders a majority of the Outstanding Amount of the BGS Transition Bonds of

each Series materially and adversely affected thereby and only if the Rating

Agency Condition has been satisfied with respect thereto.

(e) Promptly following a default by either the Seller, the Servicer

or any Swap Counterparty under the Sale Agreement, the Servicing Agreement or

any Interest Rate Swap Agreement, respectively, and at the Issuer's expense,

the Issuer agrees to take all such lawful actions as the Trustee may request

to compel or secure the performance and observance by the Seller, the Servicer

or any Swap Counterparty, as applicable, of each of their obligations to the

Issuer under or in connection with the Sale Agreement, the Servicing Agreement

or any Interest Rate Swap Agreement in accordance with the terms thereof, and

to exercise any and all rights, remedies, powers and privileges lawfully

available to the Issuer under or in connection with the Sale Agreement, the

Servicing Agreement or any Interest Rate Swap Agreement, respectively, to the

extent and in the manner directed by the Trustee, including the transmission

of notices of default on the part of the Seller, the Servicer or any Swap

Counterparty thereunder and the institution of legal or administrative actions

or proceedings to compel or secure performance by the Seller, the Servicer or

any Swap Counterparty of each of their respective obligations under the Sale

Agreement, the Servicing Agreement and any Interest Rate Swap Agreement.

(f) If the Issuer shall have knowledge of the occurrence of a

Servicer Default under the Servicing Agreement or an event of default,

termination event or downgrade event under any Interest Rate Swap Agreement,

the Issuer shall promptly give written notice thereof to the Trustee and the

Rating Agencies, and shall specify in such notice the action, if any, the

Issuer is taking with respect to such default or event.

(g) If a Servicer Default shall arise from the failure of the

Servicer to perform any of its duties or obligations under the Servicing

Agreement with respect to the BGS Bondable Transition Property or the BGS

Transition Bond Charge, the Issuer shall take all reasonable steps available

to it to remedy such failure. The Issuer shall not take any action to

terminate the Servicer's rights and powers under the Servicing Agreement

following a Servicer Default without the prior written consent of the Trustee

and of the Holders of a majority of the Outstanding Amount of the BGS

Transition Bonds of all Series.

<PAGE>

(h) As promptly as possible after the giving of notice of termination

to the Servicer and the Rating Agencies of the Servicer's rights and powers

pursuant to Section 6.1 of the Servicing Agreement, the Trustee, with the

consent of the Holders of BGS Transition Bonds evidencing not less than a

majority of the Outstanding Amount of the BGS Transition Bonds of all Series,

may appoint a successor Servicer (the "Successor Servicer"), and such

Successor Servicer shall accept its appointment by a written assumption in a

form acceptable to the Issuer and the Trustee. A person shall qualify as a

Successor Servicer only if such Person satisfies the requirements of Section

6.4 of the Servicing Agreement. In connection with any such appointment, the

Issuer may make such arrangements for the compensation of such Successor

Servicer as it and such Successor Servicer shall agree, subject to the

limitations set forth below and in the Servicing Agreement, and in accordance

with Section 6.4 of the Servicing Agreement, the Issuer shall enter into an

agreement with such Successor Servicer for the servicing of the BGS Bondable

Transition Property (such agreement to be in form and substance satisfactory

to the Trustee).

(i) Upon termination of the Servicer's rights and powers pursuant to

the Servicing Agreement, the Trustee shall promptly notify the Issuer, the BGS

Transition Bondholders and the Rating Agencies of such termination. As soon as

a Successor Servicer is appointed, the Issuer shall notify the Trustee, the

BGS Transition Bondholders and the Rating Agencies of such appointment,

specifying in such notice the name and address of such Successor Servicer.

(j) The Issuer shall not take any action to terminate or assign the

Swap Counterparty's rights and powers under any Interest Rate Swap Agreement

or replace any Swap Counterparty following an event of default, termination

event or downgrade event under any Interest Rate Swap Agreement without (i)

the prior written consent of the Trustee and of the Holders of that percentage

of the Outstanding Amount of the BGS Transition Bonds, if any such consent is

required under the related Series Supplement, of the related Series and Class,

if any, specified in the related Series Supplement, and (ii) satisfying any

other requirements set forth in the related Series Supplement and Interest

Rate Swap Agreement.

(k) Upon termination or assignment of any Swap Counterparty's rights

and powers, pursuant to any Interest Rate Swap Agreement, the Issuer shall

notify the Trustee, and the Trustee shall promptly inform the BPU, the BGS

Transition Bondholders of the related Class and the Rating Agencies of such

termination or assignment. As soon as a replacement Swap Counterparty is

appointed, the Issuer shall notify the Trustee, the BPU, the BGS Transition

Bondholders of the related Class and the Rating Agencies of such appointment,

specifying in such notice the name and address of such replacement Swap

Counterparty.

SECTION 3.21. Taxes. So long as any of the BGS Transition Bonds are

outstanding, the Issuer shall pay all material taxes, assessments and

governmental charges imposed upon it or any of its properties or assets or

with respect to any of its franchises, business, income or property before any

penalty accrues thereon if the failure to pay any such taxes, assessments and

governmental charges would, after any applicable grace periods, notices or

other similar requirements, result in a Lien on the Collateral.

<PAGE>

ARTICLE IV

SATISFACTION AND DISCHARGE; DEFEASANCE

SECTION 4.1. Satisfaction and Discharge of Indenture; Defeasance. The

BGS Transition Bonds of any Series, all moneys payable with respect thereto

and this Indenture as it applies to such Series shall cease to be of further

effect and the Lien hereunder shall be released with respect to such Series,

interest shall cease to accrue on the BGS Transition Bonds of such Series and

the Trustee, on demand of and at the expense of the Issuer, shall execute

proper instruments acknowledging satisfaction and discharge of this Indenture

with respect to the BGS Transition Bonds of such Series, when

(i) either

(A) all BGS Transition Bonds of such Series

theretofore authenticated and delivered (other than (1) BGS

Transition Bonds that have been destroyed, lost or stolen

and that have been replaced or paid as provided in Section

2.6 and (2) BGS Transition Bonds for whose payment money has

theretofore been deposited in trust or segregated and held

in trust by the Issuer and thereafter repaid to the Issuer

or discharged from such trust, as provided in Section 3.3)

have been delivered to the Trustee for cancellation; or

(B) the Expected Final Payment Date has occurred

with respect to all BGS Transition Bonds of such Series not

theretofore delivered to the Trustee for cancellation, and

the Issuer has irrevocably deposited or caused to be

irrevocably deposited with the Trustee cash, in trust for

such purpose, in an amount sufficient to pay and discharge

the entire indebtedness on such BGS Transition Bonds not

theretofore delivered to the Trustee on the Expected Final

Payment Date therefor;

(ii) the Issuer has paid or caused to be paid all other sums

payable hereunder by the Issuer with respect to such Series; and

(iii) the Issuer has delivered to the Trustee and to the BPU

an Issuer Officer's Certificate, an Issuer Opinion of Counsel and (if

required by the TIA or the Trustee) an Independent Certificate from a

firm of certified public accountants, each meeting the applicable

requirements of Section 11.1 and each stating that all conditions

precedent herein provided for relating to the satisfaction and

discharge of this Indenture with respect to BGS Transition Bonds of

such Series have been complied with.

(b) Subject to Sections 4.1(c) and 4.2, the Issuer at any time may

terminate (i) all its obligations under this Indenture with respect to the BGS

Transition Bonds of any Series ("Legal Defeasance Option") or (ii) its

obligations under Sections 3.4, 3.5, 3.6 (other than with respect to amounts

in the Defeasance Account), 3.7, 3.8, 3.9, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16,

3.17, 3.18, 3.19 and 3.20 and the operation of Section 5.1(d) ("Covenant

Defeasance Option") with respect to any Series of BGS Transition Bonds. The

Issuer may exercise the Legal Defeasance Option

<PAGE>

with respect to any Series of BGS Transition Bonds notwithstanding its prior

exercise of the Covenant Defeasance Option with respect to such Series.

to any Series, the maturity of the BGS Transition Bonds of such Series may not

be accelerated pursuant to Section 5.2. If the Issuer exercises the Covenant

Defeasance Option with respect to any Series, the maturity of the BGS

Transition Bonds of such Series may not be accelerated because of an Event of

Default specified in Section 5.1(d).

(d) Upon satisfaction of the conditions set forth herein to the

exercise of the Legal Defeasance Option or the Covenant Defeasance Option with

respect to any Series of BGS Transition Bonds, the Trustee, on demand of and

at the expense of the Issuer, shall execute proper instruments acknowledging

satisfaction and discharge of the obligations that are terminated pursuant to

such exercise.

(e) Notwithstanding Sections 4.1(a) and 4.1(b) above, (i) rights of

registration of transfer and exchange, (ii) rights of substitution of

mutilated, destroyed, lost or stolen BGS Transition Bonds, (iii) rights of BGS

Transition Bondholders to receive payments of principal and interest, but only

from the amounts deposited with the Trustee for such payments, (iv) Sections

4.3 and 4.4, (v) the rights, obligations and immunities of the Trustee

hereunder (including the rights of the Trustee under Section 6.7 and the

obligations of the Trustee under Section 4.3) and (vi) the rights of BGS

Transition Bondholders under this Indenture with respect to the property

deposited with the Trustee payable to all or any of them, shall survive until

the BGS Transition Bonds of the Series as to which this Indenture or certain

obligations hereunder have been satisfied and discharged pursuant to Section

4.1(a) or 4.1(b) and have been paid in full. Thereafter, the obligations in

Sections 6.7 and 4.4 with respect to such Series shall survive.

SECTION 4.2. Conditions to Defeasance.

(a) The Issuer may exercise the Legal Defeasance Option or the

Covenant Defeasance Option with respect to any Series of BGS Transition Bonds

only if:

(i) the Issuer irrevocably deposits or causes to be

deposited in trust with the Trustee cash or U.S. Government

Obligations for the payment of principal of and interest on such

Series of BGS Transition Bonds to the Expected Payment Date therefor,

as applicable, such deposit to be made in the Defeasance Subaccount

for such Series of BGS Transition Bonds;

(ii) the Issuer delivers to the Trustee a certificate from a

nationally recognized firm of Independent accountants expressing its

opinion that the payments of principal and interest when due and

without reinvestment on the deposited U.S. Government Obligations

plus any deposited cash without investment will provide cash at such

times and in such amounts (but, in the case of the Legal Defeasance

Option only, not more than such amounts) as will be sufficient to pay

in respect of the BGS Transition Bonds of such

<PAGE>

Series (A) subject to clause (B), principal in accordance with the

Expected Sinking Fund Amortization Schedule therefor and (B) interest

when due;

(iii) in the case of the Legal Defeasance Option,

ninety-five (95) days pass after the deposit is made and during such

ninety-five (95) day period no Default specified in Section 5.1(e) or

5.1(f) occurs which is continuing at the end of the period; provided,

however, that in determining whether a default under Section 5.1(e)

has occurred, the requirement that the decree or order shall remain

unstayed and in effect for ninety (90) days shall be disregarded;

(iv) no Default has occurred and is continuing on the day of

such deposit and after giving effect thereto;

(v) in the case of the Legal Defeasance Option, the Issuer

delivers to the Trustee an Issuer Opinion of Counsel stating that (A)

the Issuer has received from, or there has been published by, the

Internal Revenue Service a ruling, or (B) since the date of execution

of this Indenture, there has been a change in the applicable federal

income tax law, in either case to the effect that, and based thereon

such opinion shall confirm that, the Holders of the BGS Transition

Bonds of such Series will not recognize income, gain or loss for

federal income tax purposes as a result of the exercise of such Legal

Defeasance Option and will be subject to federal income tax on the

same amounts, in the same manner and at the same times as would have

been the case if such legal defeasance had not occurred;

(vi) in the case of the Covenant Defeasance Option, the

Issuer delivers to the Trustee an Issuer Opinion of Counsel to the

effect that the Holders of the BGS Transition Bonds of such Series

will not recognize income, gain or loss for federal income tax

purposes as a result of the exercise of such Covenant Defeasance

Option and will be subject to federal income tax on the same amounts,

in the same manner and at the same times as would have been the case

if such covenant defeasance had not occurred; and

(vii) the Issuer delivers to the Trustee an Issuer Officer's

Certificate and an Issuer Opinion of Counsel, each stating that all

conditions precedent to the satisfaction and discharge of the BGS

Transition Bonds of such Series to the extent contemplated by this

Article IV have been complied with.

(b) [Reserved.]

SECTION 4.3. Application of Trust Money. All moneys or U.S.

Government Obligations deposited with the Trustee pursuant to Sections 4.1 or

4.2 with respect to any Series of BGS Transition Bonds shall be held in trust

in the Defeasance Subaccount for such Series and applied by it, in accordance

with the provisions of the BGS Transition Bonds and this Indenture, to the

payment, either directly or through any Paying Agent, as the Trustee may

determine, to the Holders of the particular BGS Transition Bonds for the

payment or redemption of which such moneys have been deposited with the

Trustee, of all sums due and to become due thereon for

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principal and interest. Such moneys shall be segregated and held apart solely

for paying such BGS Transition Bonds and such BGS Transition Bonds shall not

be entitled to any amounts on deposit in the Collection Account other than

amounts on deposit in the Defeasance Subaccount for such BGS Transition Bonds.

SECTION 4.4. Repayment of Moneys Held by Paying Agent. In connection

with the satisfaction and discharge of this Indenture or the Covenant

Defeasance Option or Legal Defeasance Option with respect to the BGS

Transition Bonds of any Series, all moneys then held by any Paying Agent other

than the Trustee under the provisions of this Indenture with respect to such

BGS Transition Bonds shall, upon demand of the Issuer, be paid to the Trustee

to be held and applied according to Section 3.3 and thereupon such Paying

Agent shall be released from all further liability with respect to such

moneys.

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