Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.

An employment agreement entered into in October 2003 with Ralph Izzo as President and Chief Operating Officer of our subsidiary, Public Service Electric and Gas Company, expired on October 18, 2008. On December 16, 2008 we entered into a new severance agreement with Mr. Izzo, now our Chairman, President and Chief Executive Officer, which replicates the material severance provisions of the expired agreement that apply in the event that Mr. Izzo's employment is terminated without cause in other than a change-in-control situation. Under the new agreement, if Mr. Izzo's employment is terminated in such an event, he would be entitled to a payment equal to A) salary through the date of termination, plus B) a prorated portion of his target bonus under our senior management incentive compensation plan, plus C) accrued vacation pay, plus D) an amount equal to two times the sum of his annual base salary plus target bonus. If we were to reduce Mr. Izzo's annual base salary, he would be entitled to elect to terminate his employment and receive the same severance payment. In any qualified termination without cause, Mr. Izzo would be entitled to continue to participate for two years in our medical/dental and other welfare benefit plans at the same levels as prior to the termination and he would be entitled to be reimbursed for up to two years of outplacement services. The agreement also provides that Mr. Izzo will maintain information about us in confidence and comply with certain non-compete and non-solicitation provisions for a period of one year following any such termination of employment.

Also on December 16, 2008 our board of directors designated Mr. Izzo as a participant in our Key Executive Severance Plan, the terms of which will govern Mr. Izzo's severance benefits if his employment is terminated without cause following a change of control. These benefits are substantially the same as those that applied in Mr. Izzo's expired agreement upon termination of employment following a change of control.

A copy of Mr. Izzo's new agreement is furnished as Exhibit 99 to this Form 8-K.