  The physical conditions near the optical continuum peak (``hot spot'') in the
inner narrow line region (NLR) of the Seyfert 2 galaxy, NGC 1068. Spectra were
taken with HST/STIS through the 0.1X52 arcsec slit, covering the full STIS 1200
to 10000 Angstrom waveband, and are from a region that includes the hot spot,
extending 0.2, or ~ 14 pc (for H= 75 km/sec/Mpc). Perhaps the most striking
feature of these spectra is the presence of strong coronal emission lines,
including [S XII] 7611 which has hitherto only been identified in spectra of
the solar corona. There is an apparent correlation between ionization energy
and velocity of the emission lines with respect to the systemic velocity of the
host galaxy, with the coronal lines blueshifted, most other high excitation
lines near systemic, and some of the low ionization lines redshifted. From the
results of our modeling, we find that the emission-line gas consists of three
principal components: 1) one in which most of the strong emission-lines, such
as [O III] 5007, [Ne V] 3426, C IV 1550, arise, 2) a more tenuous, highly
ionized component, which is the source of the coronal-line emission, and 3) a
component, which is not co-planar with the other two, in which the low
ionization and neutral lines, such as [N II] 6548 and [O I] 6300, are formed.
The first two components are directly ionized by the EUV-Xray continuum emitted
by the central source, while the low ionization gas is ionized by a combination
of highly absorbed continuum radiation and a small fraction of unabsorbed
continuum scattered by free electrons associated with the hot spot. The
combination of covering factor and Thomson optical depth of the high ionization
components is insufficient to scatter the observed fraction of continuum
radiation into our line-of-sight.
