Exhibit 3-7b

                                 AMENDMENT NO. 1
                TO THE TRUST AGREEMENT OF PSE&G CAPITAL TRUST III

      This  Amendment  No. 1 to the Trust  Agreement of PSE&G  Capital Trust III
(the  "Trust"),  dated as of March 1, 2004 (this  "Amendment"),  is entered into
among Public  Service  Electric and Gas Company,  a New Jersey  corporation,  as
depositor  (the  "Depositor"),  Wachovia  Trust  Company,  National  Association
(formerly known as First Union Trust Company, National Association),  as trustee
(the "Delaware Trustee"), Wachovia Bank, National Association (formerly known as
First Union National  Bank),  as trustee (the "Property  Trustee"),  and Mark G.
Kahrer, an individual, as trustee.

      WHEREAS, the Depositor, the Property Trustee, First Union Bank of Delaware
and Fred F. Saunders entered into a Trust Agreement,  dated as of April 19, 1996
(the "Original Trust Agreement"),  and a Certificate of the Trust was filed with
the Secretary of State of the State of Delaware on April 19, 1996;

      WHEREAS, on December 27, 2001, First Union Bank of Delaware was removed as
trustee of the Trust and First Union Trust  Company,  National  Association  was
appointed as trustee of the Trust;

      WHEREAS,  the  Property  Trustee  has  changed  its name from First  Union
National Bank to Wachovia Bank, National Association;

      WHEREAS,  the Delaware Trustee has changed its name from First Union Trust
Company, National Association to Wachovia Trust Company, National Association;

      WHEREAS,  the Depositor desires to remove Fred F. Saunders as a trustee of
the Trust and to appoint Mark G. Kahrer as an additional trustee of the Trust;

      WHEREAS,  Mark G. Kahrer  desires to become an  additional  trustee of the
Trust; and

      WHEREAS, to reflect the foregoing,  the parties hereto desire to amend the
Original Trust Agreement.

      IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby,
agree as follows:

                                    AMENDMENT

      1. The  undersigned  hereby confirm that (i) First Union National Bank has
changed its name to Wachovia Bank,  National  Association,  and (ii) First Union
Trust  Company,  National  Association  has changed  its name to Wachovia  Trust
Company, National Association.

      2.  Pursuant to Section 6 of the Trust  Agreement,  the  Depositor  hereby
removes Fred F.  Saunders as a trustee of the Trust and hereby  appoints Mark G.
Kahrer as an additional


trustee of the Trust.  Mark G. Kahrer hereby accepts such appointment and agrees
to be a trustee of the Trust pursuant to the Trust Agreement.

      3. Each reference in the Trust  Agreement to "Business Trust Act" shall be
deemed a reference to the "Statutory Trust Act."

                                  MISCELLANEOUS

      1. This  Amendment  shall be binding upon,  and shall enure to the benefit
of, the parties hereto and their respective successors and assigns.

      2. This Amendment may be executed in  counterparts,  all of which together
shall  constitute one agreement  binding on all parties hereto,  notwithstanding
that all such parties are not signatories to the original or same counterpart.

      3. This Amendment  shall be interpreted in accordance with the laws of the
State of Delaware  (without regard to conflict of laws  principles),  all rights
and remedies being governed by such laws.

      4. Except as modified by this Amendment, the Original Trust Agreement will
remain in full force and effect.

                            [SIGNATURE PAGE FOLLOWS]


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      IN WITNESS  WHEREOF,  the parties  hereto have caused this Amendment to be
duly executed as of the date first above written.

                                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as
                                     Depositor

                                     By:  /s/ Morton A. Plawner
                                          --------------------------------------
                                          Name:  Morton A. Plawner
                                          Title:  Vice President and Treasurer

                                     WACHOVIA TRUST COMPANY,
                                     NATIONAL ASSOCIATION,
                                     as Delaware Trustee

                                     By:  /s/ Sterling C. Correia
                                          --------------------------------------
                                          Name:  Sterling C. Correia
                                          Title:  Vice President

                                     WACHOVIA BANK, NATIONAL
                                     ASSOCIATION, as Property Trustee

                                     By:  /s/ Frank Gallagher
                                          --------------------------------------
                                          Name:  Frank Gallagher
                                          Title:  Vice President

                                     /s/ Mark G. Kahrer
                                     -------------------------------------------
                                     Mark G. Kahrer, as Trustee


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