Public Service Electric & Gas FMBs Rated 'A' by Fitch

Business Wire, June 22, 2004

NEW YORK -- Fitch Ratings has assigned an 'A' rating to Public Service Electric and Gas Company's (PSE&G) $175 million issue of first and refunding mortgage bonds, floating rate series A maturing June 2006. Proceeds will be used for the repayment of $159 million of first and refunding mortgage bonds that have been called for redemption and to reduce short-term debt. The Rating Outlook is Negative.

The ratings reflect the relatively low business risk and the predictable revenue stream of PSE&G's regulated electric and gas distribution operations, the absence of commodity price exposure and expected financial improvements from a $159 million electric rate increase implemented in August 2003. Credit measures were enhanced by a $170 million capital infusion by parent Public Service Enterprise Group Inc. (PSEG) in 2003 and upstreamed dividends are expected to be limited again in 2004. The Negative Rating Outlook results from rating linkage to the company's corporate parent, Public Service Enterprise Group Inc. ('BBB ' senior unsecured, Negative Outlook) and credit measures that remain weak for the rating category. If ratings of the parent ratings are reduced, PSE&G's ratings are likely to be affected.