SUBJECT TO COMPLETION, DATED DECEMBER 13, 2006
PRELIMINARY PRICING SUPPLEMENT TO PROSPECTUS SUPPLEMENT DATED
AUGUST 16, 2004 AND PROSPECTUS DATED JUNE 21, 2004
Pricing Supplement dated December __, 2006
(To Prospectus Supplement dated August 16, 2004
and Prospectus dated June 21, 2004)
PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G)
Secured Medium-Term Notes, Series D
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CUSIP: 74456QAQ9 These Notes are DTC Eligible and
Trade Date: December , 2006 will be issued in Book-entry form
Original Issue Date: December , 2006
Principal Amount: $250,000,000 Agents:
Price to Public: % of Principal [ ] Banc of America Securities LLC
Amount, plus accrued interest from the [ ] Barclays Capital Inc.
Original Issue Date if settlement [ ] BNP Paribas Securities Corp.
occurs after that date [ ] Citigroup Global Markets Inc.
Agents' Commission: $ [ ] Deutsche Bank Securities Inc.
Net Proceeds to Company: $ [ ] Jackson Securities, LLC
Interest Rate: % per annum [ ] J.P. Morgan Securities Inc.
Interest Accrual Date: December , 2006 [ ] M.R. Beal & Company
Interest Payment Dates: June 1 and [ ] Scotia Capital (USA) Inc.
December 1, commencing June 1, 2007 [ ] Toussaint Capital Partners, LLC
Regular Record Dates: May 15 and [ ] UBS Securities LLC
November 15 [ ] The Williams Capital Group, L.P.
Maturity Date: December 1, 2036 Agents' Capacity: Agent of PSE&G
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Redemption Provisions:
The Secured Medium-Term Notes, Series D offered hereby (the "Secured
Medium-Term Notes") will be subject to redemption as described in the prospectus
and prospectus supplement.
Additionally, the Secured Medium-Term Notes will be subject to redemption
at any time prior to the Maturity Date on not less than 30 days prior written
notice to holders, either as a whole or in part, at the option of PSE&G, at a
redemption price equal to the greater of (i) 100% of the principal amount of the
Secured Medium-Term Notes to be redeemed and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest thereon (exclusive
of accrued interest to the redemption date) discounted to the redemption date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus basis points, plus, in either case, accrued interest
thereon to the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Secured Medium-Term Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Secured Medium-Term Notes to be redeemed.
"Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of three Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest of five Reference
Treasury Dealer Quotations, or (ii) if the Trustee is unable to obtain five
Reference Treasury Dealer Quotations, the average of all Reference Treasury
Dealer Quotations so obtained.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by PSE&G and acceptable to the Trustee.
"Reference Treasury Dealer" means a primary U.S. Government Securities
Dealer in the United States (a "Primary Treasury Dealer") selected by PSE&G and
acceptable to the Trustee.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed, in each case, as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at or before 5:00 p.m.,
New York City time, on the third business day preceding such redemption date.
Use of Proceeds:
The net proceeds from the sale of the Secured Medium-Term Notes will be
added to the general funds of PSE&G and will be used to reduce its short-term
debt consisting of commercial paper.