BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT

Real Estate Purchase and Sale Agreement

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PSE&G TRANSITION FUNDING II LLC | PUBLIC SERVICE ELECTRIC AND GAS COMPANY

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Title: BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT
Governing Law: New Jersey Date: 8/15/2005

Exhibit 10.1

BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT

between

PSE&G TRANSITION FUNDING II LLC

Issuer

and

PUBLIC SERVICE ELECTRIC AND GAS COMPANY

Seller

Dated as of _____________, 2005

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<TABLE>

TABLE OF CONTENTS

Page

----

ARTICLE I

DEFINITIONS

Section 1.1. Definitions................................................................................... 3

Section 1.2. Other Definitional Provisions................................................................. 3

ARTICLE II

CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY

Section 2.1. Conveyance of Initial Transferred BGS Bondable Transition Property............................ 4

Section 2.2. Conditions to Conveyance of BGS Bondable Transition Property.................................. 5

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 3.1. Organization and Good Standing................................................................ 7

Section 3.2. Due Qualification............................................................................. 7

Section 3.3. Power and Authority........................................................................... 7

Section 3.4. Binding Obligation............................................................................ 7

Section 3.5. No Violation.................................................................................. 7

Section 3.6. No Proceedings................................................................................ 7

Section 3.7. Approvals..................................................................................... 8

Section 3.8. The Transferred BGS Bondable Transition Property.............................................. 8

Section 3.9. Solvency...................................................................................... 11

ARTICLE IV

COVENANTS OF THE SELLER

Section 4.1. Seller's Existence............................................................................ 11

Section 4.2. No Liens or Conveyances....................................................................... 11

Section 4.3. Use of Proceeds............................................................................... 11

Section 4.4. Delivery of Collections....................................................................... 11

Section 4.5. Notice of Liens............................................................................... 12

Section 4.6. Compliance with Law........................................................................... 12

Section 4.7. Covenants Related to Transferred BGS Bondable Transition Property............................. 12

Section 4.8. Protection of Title........................................................................... 13

Section 4.9. Taxes......................................................................................... 14

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ARTICLE V

ADDITIONAL UNDERTAKINGS OF THE SELLER

Section 5.1. Liability of the Seller; Indemnities.......................................................... 14

Section 5.2. Merger or Consolidation of, or Assumption of the Obligations of, the Seller................... 15

Section 5.3. Limitation on Liability of the Seller and Others.............................................. 16

ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 6.1. Amendment..................................................................................... 17

Section 6.2. Notices....................................................................................... 18

Section 6.3. Assignment by Seller.......................................................................... 19

Section 6.4. Assignment to Trustee......................................................................... 19

Section 6.5. Limitations on Rights of Others............................................................... 19

Section 6.6. Severability.................................................................................. 19

Section 6.7. Separate Counterparts......................................................................... 19

Section 6.8. Headings...................................................................................... 19

Section 6.9. Governing Law................................................................................. 19

Section 6.10. Nonpetition Covenant......................................................................... 19

EXHIBIT A - Bill of Sale.................................................................................... A-1

EXHIBIT B - Opinion of Counsel.............................................................................. B-1

EXHIBIT C - Opinion of Counsel.............................................................................. C-1

APPENDIX A - Master Definitions

</TABLE>

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BGS BONDABLE TRANSITION PROPERTY SALE AGREEMENT, dated as of ___________,

2005, by and between PSE&G TRANSITION FUNDING II LLC, a Delaware limited

liability company, as issuer (the "Issuer"), and PUBLIC SERVICE ELECTRIC AND

GAS COMPANY, a New Jersey corporation, as seller hereunder (in such capacity,

the "Seller").

W I T N E S S E T H:

WHEREAS the Issuer desires to purchase from time to time BGS Bondable

Transition Property created pursuant to the Competition Act and the Financing

Order;

WHEREAS the Seller is willing to sell BGS Bondable Transition Property to

the Issuer;

WHEREAS the Issuer, in order to finance the purchase of the Transferred

BGS Bondable Transition Property, will from time to time issue BGS Transition

Bonds under the Indenture; and

WHEREAS the Issuer, to secure its obligations under the BGS Transition

Bonds and the Indenture, will pledge its right, title and interest in, to and

under the Transferred BGS Bondable Transition Property to the Trustee for the

benefit of the BGS Transition Bondholders.

NOW, THEREFORE, in consideration of the premises and the mutual covenants

herein contained and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, and intending to be legally

bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. Capitalized terms used herein and not otherwise

defined herein have the meanings assigned to them in Appendix A hereto.

Section 1.2. Other Definitional Provisions.

(a) "Agreement" means this BGS Bondable Transition Property Sale

Agreement, as the same may be amended, supplemented or otherwise modified from

time to time.

(b) Non-capitalized terms used herein which are defined in the

Competition Act, as the context requires, have the meanings assigned to such

terms in the Competition Act, but without giving effect to amendments to the

Competition Act after the date hereof which have a material adverse effect on

the Issuer or the BGS Transition Bondholders.

used in any certificate or other document made or delivered pursuant hereto

unless otherwise defined therein.

(d) The words "hereof," "herein," "hereunder" and words of similar import

when used in this Agreement refer to this Agreement as a whole and not to any

particular provision of this Agreement; Section, Schedule and Exhibit

references contained in this Agreement are

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references to Sections, Schedules and Exhibits in or to this Agreement unless

otherwise specified; and the term "including" means "including without

limitation."

(e) The definitions contained in this Agreement are applicable to the

singular as well as the plural forms of such terms.

ARTICLE II

CONVEYANCE OF TRANSFERRED BGS BONDABLE TRANSITION PROPERTY

Section 2.1. Conveyance of Initial Transferred BGS Bondable

Transition Property.

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

(a) In consideration of the Issuer's payment to or upon the order of the

Seller of $________________, net of the underwriting discount, original issue

discount and the financial advisory fee for the BGS Transition Bonds in the

aggregate amount of $__________________, or $__________________ (the "Initial

Purchase Price") by wire transfer of funds immediately available on the date

hereof to Seller's account no. __________________ for further credit to

account no. _____________ at __________________, routing transit ABA#

_____________, subject to the conditions specified in Section 2.2, the Seller

does hereby irrevocably sell, transfer, assign and otherwise convey to the

Issuer, without recourse (subject to the obligations of the Seller herein),

all right, title and interest of the Seller in, to and under the Initial

Transferred BGS Bondable Transition Property identified in the Bill of Sale

delivered pursuant to Section 2.2(a) on or prior to the Initial Transfer Date

(such sale, transfer, assignment and conveyance of the Initial Transferred BGS

Bondable Transition Property to include, to the fullest extent permitted by

the Competition Act, the New Jersey UCC and the Delaware UCC, the assignment

of all revenues, collections, claims, rights, payments, money or proceeds of

or arising from the BGS Transition Bond Charges related to the Initial

Transferred BGS Bondable Transition Property, as the same may be adjusted from

time to time). Such sale, transfer, assignment and conveyance of the Initial

Transferred BGS Bondable Transition Property is hereby expressly stated to be

a sale or other absolute transfer and, pursuant to Section 23.a. of the

Competition Act, shall constitute a sale or other absolute transfer of all of

the Seller's right, title and interest, in, to and under and not a borrowing

secured by, the Initial Transferred BGS Bondable Transition Property. The

preceding sentence is the statement referred to in Section 23.a. of the

Competition Act. The Seller agrees and confirms that upon payment of the

Initial Purchase Price and the execution and delivery of this Agreement and

the related Bill of Sale, the Seller shall have no right, title or interest

in, to or under the Initial Transferred BGS Bondable Transition Property.

(b) Subject to the conditions specified in Section 2.2, the Issuer does

hereby purchase the Initial Transferred BGS Bondable Transition Property from

the Seller for the consideration set forth in paragraph (a) above.

purchase price for the Initial Transferred BGS Bondable Transition Property

sold pursuant to this Agreement is equal to its fair market value at the time

of sale.

(d) The Seller and the Issuer further agree that from time to time the

Seller may offer to sell, and the Issuer may purchase, Subsequent Transferred

BGS Bondable Transition Property

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as of Subsequent Transfer Dates, subject to the conditions specified in Section

2.2, in exchange for consideration to be agreed upon (the "Subsequent Purchase

Price"). The Seller and the Issuer hereby agree that each such sale, transfer,

assignment and conveyance of any Subsequent Transferred BGS Bondable Transition

Property shall include, to the fullest extent permitted by the Competition Act,

the New Jersey UCC and the Delaware UCC, the assignment of all revenues,

collections, claims, rights, payments, money or proceeds of or arising from the

BGS Transition Bond Charges related to the Subsequent Transferred BGS Bondable

Transition Property, as the same may be adjusted from time to time. Such sale,

transfer, assignment and conveyance of the Subsequent Transferred BGS Bondable

Transition Property is hereby expressly stated to be a sale or other absolute

transfer and, pursuant to Section 23.a. of the Competition Act, shall constitute

a sale or other absolute transfer of all of the Seller's right, title and

interest, in, to and under and not a borrowing secured by, the Subsequent

Transferred BGS Bondable Transition Property. The preceding sentence is the

statement referred to in Section 23.a. of the Competition Act. The Seller agrees

and confirms that after giving effect to any sale contemplated by this paragraph

(d) and the execution and delivery of the related Bill of Sale, it shall have no

right, title or interest in, to or under the Subsequent Transferred BGS Bondable

Transition Property.

(e) Notwithstanding the foregoing, in the event that any sale, transfer,

assignment and conveyance of any Transferred BGS Bondable Transition Property

is determined by a court of competent jurisdiction not to be a true and

absolute sale as contemplated by the parties hereto and by the Competition

Act, then such sale, transfer, assignment and conveyance shall be treated as a

pledge of such Transferred BGS Bondable Transition Property and the Seller

shall be deemed to have granted, and does hereby grant, as of the date hereof

a security interest to the Issuer in such Transferred BGS Bondable Transition

Property to secure a payment obligation incurred by the Seller in the amount

paid by the Issuer for the Transferred BGS Bondable Transition Property.

Section 2.2. Conditions to Conveyance of BGS Bondable Transition

Property. The obligation of the Seller to sell, and the obligation of the

Issuer to purchase BGS Bondable Transition Property upon any Transfer Date

shall be subject to and conditioned upon the satisfaction or waiver of each of

the following conditions:

(a) on or prior to the Transfer Date, the Seller shall deliver

to the Issuer a duly executed Bill of Sale identifying the BGS

Bondable Transition Property to be conveyed as of that date,

substantially in the form of Exhibit A hereto;

(b) as of the Transfer Date, no breach by the Seller of its

representations, warranties or covenants in this Agreement shall

exist and the Seller shall have delivered to the Issuer and the

Trustee an Officers' Certificate to such effect and no Servicer

Default shall have occurred and be continuing;

(i) the Issuer shall have sufficient funds available to

pay the purchase price for the Transferred BGS Bondable

Transition Property to be conveyed on such date, and

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(ii) all conditions set forth in the Indenture to the

issuance of one or more Series of BGS Transition Bonds

intended to provide such funds shall have been satisfied or

waived;

(d) on or prior to the Transfer Date, the Seller shall have

taken all actions required under the Competition Act, the Financing

Order, the New Jersey UCC and the Delaware UCC, including, without

limitation, filings under the New Jersey UCC and the Delaware UCC, to

transfer to the Issuer ownership of the Transferred BGS Bondable

Transition Property to be conveyed on such date, free and clear of

all Liens other than Liens created by the Issuer pursuant to the

Indenture and to perfect such transfer and the Issuer shall have

taken any action required for the Issuer to grant to the Trustee a

first priority perfected security interest in the Collateral and

maintain such security interest as of such date, including, without

limitation, filings under the New Jersey UCC and the Delaware UCC;

(e) in the case of any sale of Subsequent Transferred BGS

Bondable Transition Property only, the Seller shall have provided the

Issuer and each Rating Agency with a notice specifying the Subsequent

Transfer Date for the Subsequent Transferred BGS Bondable Transition

Property not later than 10 days prior to the Subsequent Transfer

Date;

(f) the Seller shall have delivered to each Rating Agency and to

the Issuer:

(i) an Opinion of Counsel to the Seller with respect to

the transfer of the Transferred BGS Bondable Transition

Property then being conveyed to the Issuer substantially in

the form of Exhibit B hereto, and

(ii) an Opinion of Counsel to the Seller, substantially

in the form of Exhibit C hereto;

(g) the Seller shall have delivered to the Trustee and the

Issuer an Officers' Certificate confirming the satisfaction of each

condition precedent specified in this Section 2.2;

(h) with respect to any Subsequent Sale, the Seller shall have

taken any action necessary in order for the Rating Agency Condition

to have been satisfied; and

(i) the Seller shall have received the Initial Purchase Price or

the Subsequent Purchase Price, as applicable, in funds immediately

available on the applicable Transfer Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

As of the Transfer Date, the Seller makes the following representations

and warranties on which the Issuer has relied and will rely in acquiring

Transferred BGS Bondable Transition Property. The following representations

and warranties are made under existing law as in effect

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as of the Transfer Date. The Seller shall not be in breach of any representation

or warranty herein as a result of a change in law occurring after the Transfer

Date. The representations and warranties shall survive the sale of Transferred

BGS Bondable Transition Property to the Issuer and the pledge thereof to the

Trustee pursuant to the Indenture.

Section 3.1. Organization and Good Standing. The Seller is a corporation

duly organized and in good standing under the laws of the State of New Jersey,

with corporate power and authority to own its properties and conduct its

business as currently owned or conducted.

Section 3.2. Due Qualification. The Seller is duly qualified to do

business as a foreign corporation in good standing, and has obtained all

necessary licenses and approvals, in all jurisdictions in which the ownership

or lease of property or the conduct of its business requires such

qualifications, licenses or approvals (except where the failure to so qualify

and to obtain such licenses and approvals would not be reasonably likely to

have a material adverse effect on the Seller's business, operations, assets,

revenues, properties or prospects).

Section 3.3. Power and Authority. The Seller has the corporate power and

authority to execute and deliver this Agreement and to carry out its terms;

the Seller has full corporate power and authority to own the BGS Bondable

Transition Property and sell and assign the Transferred BGS Bondable

Transition Property to the Issuer, and the Seller has duly authorized such

sale and assignment to the Issuer by all necessary corporate action; and the

execution, delivery and performance of this Agreement has been duly authorized

by the Seller by all necessary corporate action.

Section 3.4. Binding Obligation. This Agreement constitutes a legal,

valid and binding obligation of the Seller enforceable against the Seller in

accordance with its terms subject to bankruptcy, receivership, insolvency,

reorganization, moratorium or other laws affecting creditors' rights generally

from time to time in effect and to general principles of equity (regardless of

whether considered in a proceeding in equity or at law).

Section 3.5. No Violation. The consummation of the transactions

contemplated by this Agreement and the fulfillment of the terms hereof do not

conflict with, result in any breach of any of the terms and provisions of, or

constitute (with or without notice or lapse of time) a default under, the

articles of incorporation or by-laws of the Seller, or any indenture,

agreement or other instrument to which the Seller is a party or by which it is

bound; nor result in the creation or imposition of any Lien upon any of its

properties pursuant to the terms of any such indenture, agreement or other

instrument (except as contemplated by the Basic Documents and as set forth in

Section 2.1(e) hereof); nor violate any law or any order, rule or regulation

applicable to the Seller of any court or of any federal or State regulatory

body, administrative agency or other governmental instrumentality having

jurisdiction over the Seller or its properties. The BGS Bondable Transition

Property is not subject to any Lien thereon created by the indenture, dated

August 1, 1924 (as amended and supplemented by 95 supplemental indentures), of

Public Service Electric and Gas Company to Fidelity Union Trust Company, as

successor trustee.

Section 3.6. No Proceedings. Except as disclosed in writing by the Seller

to the Issuer, there are no proceedings or investigations pending or, to the

Seller's best knowledge, threatened,

<PAGE>

before any court, federal or State regulatory body, administrative agency or

other governmental instrumentality having jurisdiction over the Seller or its

properties:

(a) asserting the invalidity of the Basic Documents, the BGS

Transition Bonds, the Competition Act or the Financing Order;

(b) seeking to prevent the issuance of the BGS Transition Bonds

or the consummation of any of the transactions contemplated by the

Basic Documents or the BGS Transition Bonds;

Bonds as debt of the Seller for federal and State income, gross

receipts or franchise tax purposes; or

(d) seeking any determination or ruling that could reasonably be

expected to materially and adversely affect the performance by the

Seller of its obligations under, or the validity or enforceability

of, the Basic Documents or the BGS Transition Bonds.

Section 3.7. Approvals. Except for the filing of financing statements and

continuation statements under the New Jersey UCC and the Delaware UCC, no

approval, authorization, consent, order or other action of, or filing with,

any court, federal or State regulatory body, administrative agency or other

governmental instrumentality is required in connection with the execution and

delivery by the Seller of this Agreement, the performance by the Seller of the

transactions contemplated hereby or the fulfillment by the Seller of the terms

hereof, except those that have been obtained or made. The Pricing Advice

Certificate (as defined in the Financing Order) has been filed in accordance

with the Financing Order and is final and incontestable in accordance with its

terms.

Section 3.8. The Transferred BGS Bondable Transition Property.

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

(a) Information. All information provided by the Seller to the Issuer

with respect to the Transferred BGS Bondable Transition Property is correct in

all material respects.

(b) Effect of Transfer. Each sale, transfer, assignment and conveyance

herein contemplated constitutes a sale or other absolute transfer, of all

right, title and interest of the Seller in, to and under the Transferred BGS

Bondable Transition Property from the Seller to the Issuer; upon execution and

delivery of this Agreement and the related Bill of Sale, the Seller will have

no right, title or interest in, to or under the Transferred BGS Bondable

Transition Property; and the Transferred BGS Bondable Transition Property

would not be part of the estate of the Seller as debtor in the event of the

filing of a bankruptcy petition by or against the Seller under any bankruptcy

law.

Bondable Transition Property sold to the Issuer on the Transfer Date; and the

Transferred BGS Bondable Transition Property will have been validly sold,

assigned, transferred and conveyed to the Issuer free and clear of all Liens

other than Liens created by the Issuer pursuant to the Indenture. All actions

or filings, including filings with the New Jersey Division of Revenue/Office

of Commercial Recording under the New Jersey UCC and the Delaware UCC

necessary in any jurisdiction to give the Issuer a valid first priority

perfected ownership interest in the Transferred

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BGS Bondable Transition Property and to grant to the Trustee a first priority

perfected sec

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