Preliminary analysis of the X-ray spectrum of NGC 1068 obtained by the RGS spectrometer on board XMM-Newton is presented. A physically consistent model is developed in order to quantitatively describe the reprocessing of the central AGN continuum source into the discrete X-ray emission observed in Seyfert 2 galaxies. All the important atomic processes are taken into account, including photoexcitation, which has been neglected in some previous models. The model fits the high resolution NGC 1068 data very well, which implies that the contribution of hot collisional gas to the X-ray spectrum of NGC 1068 is negligible.
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