----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-Q**

| [X] | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

**March      31, 2007**

| [                  ] | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|

**000-22211**

**SOUTH      JERSEY GAS COMPANY**

| **New                Jersey**                 | **21-0398330**                              |
|-----------------------------------------------|--------------------------------------------------|
|  (State                of incorporation) | (IRS                employer identification no.) |

**1      South Jersey Plaza, Folsom, NJ 08037**

**(609)      561-9000**

----

----

**PART      I — FINANCIAL INFORMATION**

**Item      1. Financial Statements — See Pages 2 through 13**

----

| **SOUTH                  JERSEY GAS COMPANY**                                                                        |   |   |                                |   |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|
|                                                                                                                 |   |   |                                |   |   |
| **CONDENSED                  STATEMENTS OF INCOME (UNAUDITED)**                                                      |   |   |                                |   |   |
| (In                  Thousands)                                                                                      |   |   |                                |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   | Three                  Months Ended |   |
|                                                                                                                      |   |   | March                  31,          |   |
|                                                                                                                 |   |   | 2007                                |   |   | 2006 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Operating                  Revenues**                                                                              |   | $      | 277,864                             |   | $      | 277,081 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Operating                  Expenses:**                                                                             |   |   |                                |   |   |   |   |
| Cost                  of Sales (Excluding depreciation)                                                              |   |   | 205,544                             |   |   | 208,621 |   |
| Operations                                                                                                           |   |   | 13,901                              |   |   | 13,831 |   |
| Maintenance                                                                                                          |   |   | 1,472                               |   |   | 1,405 |   |
| Depreciation                                                                                                         |   |   | 6,053                               |   |   | 5,758 |   |
| Energy                  and Other Taxes                                                                              |   |   | 4,624                               |   |   | 4,286 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| Total                  Operating Expenses                                                                            |   |   | 231,594                             |   |   | 233,901 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Operating                  Income**                                                                                |   |   | 46,270                              |   |   | 43,180 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Other                  Income and Expense**                                                                        |   |   | 100                                 |   |   | (20 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Interest                  Charges**                                                                                |   |   | (5,241                              | )      |   | (5,152 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Income                  Before Income Taxes**                                                                      |   |   | 41,129                              |   |   | 38,008 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Income                  Taxes**                                                                                    |   |   | (16,870                             | )      |   | (15,530 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Net                  Income**                                                                                      |   | $      | 24,259                              |   | $      | 22,478 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |

----

| **SOUTH                  JERSEY GAS COMPANY**                                                                        |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                 |   |    |   |   |   |
| **CONDENSED                  STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)**                                        |   |
| (In                  Thousands)                                                                                      |   |
|                                                                                                                 |   |    |   |   |   |
|                                                                                                                 |   | Three                  Months Ended  |
|                                                                                                                 |   | March                  31,  |
|                                                                                                                 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                      |   | $ | 24,259 |   | $ | 22,478 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income - Net of Tax:**                                                        |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Unrealized                  Gain on Equity Investments                                                               |   |   | 66 |   |   | 157 |   |
| Unrealized                  Gain on Derivatives                                                                      |   |   | 121 |   |   | 557 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Other                  Comprehensive Income - Net of Tax                                                             |   |   | 187 |   |   | 714 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Comprehensive                  Income**                                                                            |   | $ | 24,446 |   | $ | 23,192 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |

----

| **SOUTH                  JERSEY GAS COMPANY**                                                                        |   |   |                                |   |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|
|                                                                                                                 |   |   |                                |   |   |
| **CONDENSED                  STATEMENTS OF CASH FLOWS (UNAUDITED)**                                                  |   |   |                                |   |   |
| (In                  Thousands)                                                                                      |   |   |                                |   |   |
|                                                                                                                 |   |   |                                |   |   |
|                                                                                                                      |   |   | Three                  Months Ended |   |
|                                                                                                                      |   |   | March                  31,          |   |
|                                                                                                                 |   |   | 2007                                |   |   | 2006 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Net                  Cash Provided by Operating Activities**                                                       |   | $      | 77,074                              |   | $      | 35,045 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Cash                  Flows from Investing Activities:**                                                           |   |   |                                |   |   |   |   |
| Capital                  Expenditures                                                                                |   |   | (10,553                             | )      |   | (17,409 | ) |
| Net                  Purchase of Restricted Investments                                                              |   |   | (120                                | )      |   | - |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| Net                  Cash Used in Investing Activities                                                               |   |   | (10,673                             | )      |   | (17,409 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Cash                  Flows from Financing Activities:**                                                           |   |   |                                |   |   |   |   |
| Net                  Repayments of Lines of Credit                                                                   |   |   | (61,300                             | )      |   | (12,200 | ) |
| Principal                  Repayments of Long-Term Debt                                                              |   |   | -                                   |   |   | (15 | ) |
| Payments                  for Issuance of Long-Term Debt                                                             |   |   | -                                   |   |   | (88 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| Net                  Cash Used in Financing Activities                                                               |   |   | (61,300                             | )      |   | (12,303 | ) |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**                                                       |   |   | 5,101                               |   |   | 5,333 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**                                                |   |   | 1,967                               |   |   | 2,551 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Cash                  and Cash Equivalents at End of Period**                                                      |   | $      | 7,068                               |   | $      | 7,884 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| **Supplemental                  Disclosures of Noncash Investing Activities:**                                       |   |   |                                |   |   |   |   |
| Capital                  Property and Equipment Acquired on account but not                                          |   |   |                                |   |   |   |   |
|                    paid at quarter-end.                                                                         |   | $      | 3,815                               |   | $      | 2,819 |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |                                |   |   |   |   |
|                                                                                                                 |   |   |                                |   |   |   |   |

----

| **SOUTH                    JERSEY GAS COMPANY**                                                                          |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |    |   |   |   |
| **CONDENSED                    BALANCE SHEETS (UNAUDITED)**                                                              |   |
| (In                    Thousands)                                                                                        |   |
|                                                                                                                     |   |    |   |
|                                                                                                                     |   |  March                    31, |   | December                    31, |   |
|                                                                                                                     |   |  2007 |   | 2006 |   |
| **Assets**                                                                                                               |   |    |   |   |   |
|                                                                                                                     |   |    |   |   |   |
| **Property,                    Plant and Equipment:**                                                                    |   |   |   |   |   |   |   |
| Utility                    Plant, at original cost                                                                       |   | $ | 1,090,273 |   | $ | 1,079,614 |   |
| Accumulated                    Depreciation                                                                              |   |   | (262,750 | ) |   | (257,781 | ) |
|                                                                                                                     |   |   |  |   |   |  |   |
| Property,                    Plant and Equipment - Net                                                                   |   |   | 827,523 |   |   | 821,833 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Investments:**                                                                                                         |   |   |  |   |   |  |   |
| Available-for-Sale                    Securities                                                                         |   |   | 6,453 |   |   | 6,342 |   |
| Restricted                    Investments                                                                                |   |   | 8,706 |   |   | 8,586 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| Total                    Investments                                                                                     |   |   | 15,159 |   |   | 14,928 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Current                    Assets:**                                                                                   |   |   |   |   |   |   |   |
| Cash                    and Cash Equivalents                                                                             |   |   | 7,068 |   |   | 1,967 |   |
| Accounts                    Receivable                                                                                   |   |   | 92,611 |   |   | 47,928 |   |
| Accounts                    Receivable - Related Parties                                                                 |   |   | 6,061 |   |   | 3,939 |   |
| Unbilled                    Revenues                                                                                     |   |   | 33,157 |   |   | 34,502 |   |
| Provision                    for Uncollectibles                                                                          |   |   | (3,606 | ) |   | (2,741 | ) |
| Natural                    Gas in Storage, average cost                                                                  |   |   | 22,407 |   |   | 81,039 |   |
| Materials                    and Supplies, average cost                                                                  |   |   | 1,654 |   |   | 1,685 |   |
| Prepaid                    Taxes                                                                                         |   |   | - |   |   | 7,774 |   |
| Derivatives                    - Energy Related Assets                                                                   |   |   | 2,916 |   |   | 1,692 |   |
| Other                    Prepayments and Current Assets                                                                  |   |   | 2,105 |   |   | 2,264 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Current Assets                                                                                  |   |   | 164,373 |   |   | 180,049 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Regulatory                    and Other Noncurrent Assets:**                                                           |   |   |   |   |   |   |   |
| Regulatory                    Assets                                                                                     |   |   | 178,170 |   |   | 196,962 |   |
| Unamortized                    Debt Issuance Costs                                                                       |   |   | 6,665 |   |   | 6,835 |   |
| Accounts                    Receivable - Merchandise                                                                     |   |   | 5,296 |   |   | 5,950 |   |
| Derivatives                    - Energy Related Assets                                                                   |   |   | 85 |   |   | 19 |   |
| Derivatives                    - Other                                                                                   |   |   | 341 |   |   | 148 |   |
| Other                                                                                                                    |   |   | 2,045 |   |   | 1,352 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Regulatory and Other Noncurrent Assets                                                          |   |   | 192,602 |   |   | 211,266 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Assets                                                                                          |   | $ | 1,199,657 |   | $ | 1,228,076 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| The                    accompanying notes are an integral part of the condensed financial                    statements. |   |   |   |   |   |   |   |

----

| **SOUTH                    JERSEY GAS COMPANY**                                                                          |
|--------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                     |   |   |   |   |   |   |   |
| **CONDENSED                    BALANCE SHEETS (UNAUDITED)**                                                              |
| (In                    Thousands, except per share amounts)                                                              |
|                                                                                                                     |   |    |
|                                                                                                                          |   |   |  March                    31, |   |   | December                    31, |   |
|                                                                                                                     |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Capitalization                    and Liabilities**                                                                    |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Common                    Equity:**                                                                                    |   |   |   |   |   |   |   |
| Common                    Stock, Par Value $2.50 per share:                                                              |   |   |   |   |   |   |   |
| Authorized                    - 4,000,000 shares                                                                         |   |   |   |   |   |   |   |
| Outstanding                    - 2,339,139 shares                                                                        |   | $ | 5,848 |   | $ | 5,848 |   |
| Other                    Paid-In Capital and Premium on Common Stock                                                     |   |   | 200,317 |   |   | 200,317 |   |
| Accumulated                    Other Comprehensive Loss                                                                  |   |   | (4,242 | ) |   | (4,429 | ) |
| Retained                    Earnings                                                                                     |   |   | 177,822 |   |   | 158,617 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Common Equity                                                                                   |   |   | 379,745 |   |   | 360,353 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Long-Term                    Debt**                                                                                    |   |   | 294,893 |   |   | 294,893 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Capitalization                                                                                  |   |   | 674,638 |   |   | 655,246 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Current                    Liabilities:**                                                                              |   |   |   |   |   |   |   |
| Notes                    Payable                                                                                         |   |   | 42,200 |   |   | 103,500 |   |
| Current                    Maturities of Long-Term Debt                                                                  |   |   | 2,270 |   |   | 2,270 |   |
| Accounts                    Payable - Commodity                                                                          |   |   | 36,919 |   |   | 43,687 |   |
| Accounts                    Payable - Other                                                                              |   |   | 10,301 |   |   | 8,786 |   |
| Accounts                    Payable - Related Parties                                                                    |   |   | 12,690 |   |   | 12,134 |   |
| Derivatives                    - Energy Related Liabilities                                                              |   |   | 4,937 |   |   | 18,006 |   |
| Deferred                    Income Taxes - Net                                                                           |   |   | 4,139 |   |   | 4,049 |   |
| Customer                    Deposits and Credit Balances                                                                 |   |   | 14,961 |   |   | 23,016 |   |
| Environmental                    Remediation Costs                                                                       |   |   | 22,865 |   |   | 26,048 |   |
| Taxes                    Accrued                                                                                         |   |   | 23,076 |   |   | 1,961 |   |
| Pension                    and Other Postretirement Benefits                                                             |   |   | 776 |   |   | 776 |   |
| Dividends                    Declared                                                                                    |   |   | 4,683 |   |   | - |   |
| Interest                    Accrued                                                                                      |   |   | 4,528 |   |   | 6,112 |   |
| Other                    Current Liabilities                                                                             |   |   | 4,775 |   |   | 4,904 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Current Liabilities                                                                             |   |   | 189,120 |   |   | 255,249 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| **Regulatory                    and Other Noncurrent Liabilities:**                                                      |   |   |   |   |   |   |   |
| Regulatory                    Liabilities                                                                                |   |   | 65,895 |   |   | 50,797 |   |
| Deferred                    Income Taxes - Net                                                                           |   |   | 166,787 |   |   | 164,797 |   |
| Environmental                    Remediation Costs                                                                       |   |   | 42,806 |   |   | 41,746 |   |
| Asset                    Retirement Obligations                                                                          |   |   | 24,032 |   |   | 23,743 |   |
| Pension                    and Other Postretirement Benefits                                                             |   |   | 29,588 |   |   | 29,354 |   |
| Investment                    Tax Credits                                                                                |   |   | 2,390 |   |   | 2,470 |   |
| Derivatives                    - Energy Related Liabilities                                                              |   |   | 62 |   |   | 374 |   |
| Other                                                                                                                    |   |   | 4,339 |   |   | 4,300 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Total                    Deferred Credits and Other Noncurrent Liabilities                                               |   |   | 335,899 |   |   | 317,581 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| Commitments                    and Contingencies (Note 9)                                                                |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| Total                    Capitalization and Liabilities                                                                  |   | $ | 1,199,657 |   | $ | 1,228,076 |   |
|                                                                                                                     |   |   |  |   |   |  |   |
| The                    accompanying notes are an integral part of the condensed financial                    statements. |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |

----

**NOTES      TO CONDENSED FINANCIAL STATEMENTS**

**1.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**
**:**

**The      Entity**

**Revenue      Based Taxes**
**      - **

**Capitalized      Interest**

**Derivative      Instruments**

**Stock-Based      Compensation Plans**

| Grant                    |   | Shares      |   | Fair                Value |   | Expected   |   | Risk-Free                    |
|--------------------------|--------|-------------|--------|---------------------------|--------|------------|--------|------------------------------|
| Date                     |   | Outstanding |   | Per                Share  |   | Volatility |   | Interest                Rate |
|                     |   |        |   |                      |   |       |   |                         |
| Jan.                2005 |   | 8,342       |   | $                25.155   |   | 15.5%      |   | 3.4%                         |
| Jan.                2006 |   | 8,044       |   | $                27.950   |   | 16.9%      |   | 4.5%                         |
| Jan.                2007 |   | 9,628       |   | $                29.210   |   | 18.5%      |   | 4.9%                         |

----

|                                                                                                                                                                                              |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Nonvested                Shares Outstanding, January 1, 2007                                                                                                                                      |   | 26,738 |   |
|                                                                                                                                                                                              |   |   |   |   |
| Granted                                                                                                                                                                                           |   |   | 9,628  |   |
| Vested*                                                                                                                                                                                           |   |   | 10,352 |   |
|                                                                                                                                                                                              |   |   |   |   |
| Nonvested                Shares Outstanding, March 31, 2007                                                                                                                                       |   |   | 26,014 |   |
|                                                                                                                                                                                              |   |   |   |   |
| *                Actual shares awarded upon vesting, including dividend equivalents                and                adjustments for performance measures, totaled 17,143                shares. |

**New      Accounting Pronouncements**

----

**2.      **
**RATES      AND REGULATORY ACTIONS**

**3.**
**REGULATORY      ASSETS AND LIABILITIES**
**:**

| Regulatory                Assets consisted of the following items at (in thousands): |   |
|--------------------------------------------------------------------------------------|--------|
|                                                                                 |   |   |   |    |   |
|                                                                                 |   | March                31, 2007 |   | December                31, 2006 |   |
| Environmental                Remediation Costs:                                      |   |   |   |   |   |
| Expended                - Net                                                        |   |  $ | 19,965 |   |  $ | 17,743 |   |
| Liability                for Future Expenditures                                     |   |   | 65,671 |   |   | 67,905 |   |
| Income                Taxes-Flowthrough Depreciation                                 |   |   | 4,441 |   |   | 4,685 |   |
| Deferred                Asset Retirement Obligation Costs                            |   |   | 21,284 |   |   | 21,009 |   |
| Deferred                Gas Costs - Net                                              |   |   | - |   |   | 19,698 |   |
| Deferred                Pension and Other Postretirement Benefit Costs               |   |   | 39,264 |   |   | 39,359 |   |
| Temperature                Adjustment Clause Receivable                              |   |   | 8,347 |   |   | 8,996 |   |
| Conservation                Incentive Program Receivable                             |   |   | 13,027 |   |   | 7,747 |   |
| Societal                Benefit Costs Receivable                                     |   |   | 3,303 |   |   | 6,912 |   |
| Premium                for Early Retirement of Debt                                  |   |   | 1,492 |   |   | 1,532 |   |
| Other                Regulatory Assets                                               |   |   | 1,376 |   |   | 1,376 |   |
|                                                                                 |   | $ | 178,170 |   | $ | 196,962 |   |

|                                        |   | March                31, 2007 |   | December                31, 2006 |   |
|---------------------------------------------|--------|-------------------------------|--------|----------------------------------|--------|
| Excess                Plant Removal Costs   |   | $                             | 48,566 |                             | $      | 48,377 |   |
| Deferred                Gas Revenues - Net  |   |                          | 13,785 |                             |   | - |   |
| Other                                       |   |                          | 3,544  |                             |   | 2,420 |   |
|                                        |   |                          |   |                             |   |   |   |
| Total                Regulatory Liabilities |   | $                             | 65,895 |                             | $      | 50,797 |   |

----

**Deferred      Gas Costs and Revenues - Net**
** **

**4.**
**RELATED      PARTY TRANSACTIONS**

|                                                                                          |   | 2007         |   | 2006         |   |
|-----------------------------------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
|                                                                                          |   |    |   |    |   |
| Operating                Revenues:                                                       |   |         |        |         |   |  |   |
|  SJRG                                                                                    |   | $            | 12,503 |         | $      | 7,501 |   |
|  Other                                                                                   |   |         | 92     |         |   | 100 |   |
|          Total                Operating Revenues |   | $            | 12,595 |         | $      | 7,601 |   |

|                                                                |   | 2007   |   |  2006 |   |
|---------------------------------------------------------------------|--------|--------|--------|------------|--------|
|  Costs                of Sales (Excluding depreciation):  |   |   |   |       |   |
|   SJRG                                                    |   | $      | 18,088 |       | $      | 18,435 |   |
|  Total                Cost of Sales                            |   | $      | 18,088 |       | $      | 18,435 |   |
|                                                                |   |   |   |       |   |  |   |
| Operations Expense                                             |   |   |        |       |   |  |   |
|  SJI                                                      |   | $      | 1,363  |       | $      | 2,779 |   |
|  SJIS                                                          |   |   | 1,082  |       |   | 1,367 |   |
|  Millennium                                                    |   |   | 700    |       |   | 672 |   |
| Other                                                               |   |   | (114   | )          |   | (160 | ) |
|  Total                Operations Expense                  |   | $      | 3,031  |       | $      | 4,658 |   |

**5.      **
**RESTRICTED      INVESTMENTS**
**:**

----

**6.**
**UNUSED      LINES OF CREDIT**
**:      **

**7.      **
**RETAINED      EARNINGS**
**:      **

**8.**
** **
**PENSION      AND OTHER POSTRETIREMENT BENEFITS**

|                                              |   |  Pension                Benefits |   | OtherPostretirementBenefits |   |
|---------------------------------------------------|--------|---------------------------------------|--------|-----------------------------|--------|
|                                              |   |  2007                            |   |  2006                  |   | 2007 |   |  2006 |   |
| Service                Cost                       |   | $                                     | 652    |                        | $      | 678 |   | $ | 191 |   | $ | 129 |   |
| Interest                Cost                      |   |                                  | 1,683  |                        |   | 1,416 |   |   | 664 |   |   | 307 |   |
| Expected                Return on Plan Assets     |   |                                  | (2,069 | )                           |   | (1,795 | ) |   | (476 | ) |   | (228 | ) |
| Amortizations:                                    |   |                                  |        |                        |   |  |   |   |  |   |   |  |   |
| Prior                Service Cost (Credits)       |   |                                  | 60     |                        |   | 97 |   |   | (66 | ) |   | (66 | ) |
| Actuarial                Loss                     |   |                                  | 423    |                        |   | 532 |   |   | 162 |   |   | 86 |   |
| Net                Periodic Benefit Cost          |   |                                  | 749    |                        |   | 928 |   |   | 475 |   |   | 228 |   |
| Capitalized                Benefit Costs          |   |                                  | (367   | )                           |   | (399 | ) |   | (233 | ) |   | (98 | ) |
| Total                Net Periodic Benefit Expense |   | $                                     | 382    |                        | $      | 529 |   | $ | 242 |   | $ | 130 |   |

**9.**
**COMMITMENTS      AND CONTINGENCIES**

**Contractual      Cash Obligations**

----

**Environmental      Remediation Costs**

----

**Item      2. Management’s Discussion and Analysis of Financial      Condition**

**and      Results of Operations (Unaudited)**

**OVERVIEW:**

**Organization**

**Forward-Looking      Statements and Risk Factors**
** **

**Critical      Accounting Policies**
**Estimates      and Assumptions**

**New      Accounting Pronouncements**
**      - **

**Rates      and Regulation**
**:      **

----

**Environmental      Remediation**

**Competition**
**      - **

**Customer      Choice Legislation**
**      - **
*Electric      Discount and Energy Competition Act of 1999*
*unbundling*

----

**RESULTS      OF OPERATIONS:**

|                                                        |   | 2007   |   | 2006   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                        |   |   |        |   |   |  |   |
| Throughput                - dth:                            |   |   |   |   |   |  |   |
| Firm                Sales -                                 |   |   |   |   |   |  |   |
|  Residential                                           |   |   | 11,281 |   |   | 9,774 |   |
|  Commercial                                            |   |   | 2,929  |   |   | 3,279 |   |
|  Industrial                                            |   |   | 106    |   |   | 100 |   |
|  Cogeneration                & Electric Generation |   |   | 31     |   |   | 29 |   |
| Firm                Transportation -                        |   |   |   |   |   |   |   |
|  Residential                                           |   |   | 871    |   |   | 312 |   |
|  Commercial                                            |   |   | 2,610  |   |   | 1,594 |   |
|  Industrial                                            |   |   | 3,111  |   |   | 3,360 |   |
|  Cogeneration                & Electric Generation |   |   | 414    |   |   | 2 |   |
|                                                        |   |   |   |   |   |  |   |
|  Total                Firm Throughput                  |   |   | 21,353 |   |   | 18,450 |   |
|                                                        |   |   |   |   |   |  |   |
| Interruptible                                               |   |   | 10     |   |   | 31 |   |
| Interruptible                Transportation                 |   |   | 651    |   |   | 972 |   |
| Off-System                                                  |   |   | 6,835  |   |   | 4,118 |   |
| Capacity                Release & Storage               |   |   | 8,814  |   |   | 15,105 |   |
|                                                        |   |   |   |   |   |  |   |
|  Total                Throughput                       |   |   | 37,663 |   |   | 38,676 |   |
|                                                        |   |   |        |   |   |  |   |
|                                                        |   |   |   |   |   |   |   |

|                                                        |   |  2007 |    |  2006 |   |
|-------------------------------------------------------------|--------|------------|---------|------------|--------|
|                                                        |   |       |    |       |   |
| Operating                Revenues:                          |   |       |         |       |   |  |   |
| Firm                Sales -                                 |   |       |         |       |   |  |   |
|  Residential                                           |   | $          | 168,072 |       | $      | 166,436 |   |
|  Commercial                                            |   |       | 36,578  |       |   | 51,409 |   |
|  Industrial                                            |   |       | 3,983   |       |   | 2,364 |   |
|  Cogeneration                & Electric Generation |   |       | 449     |       |   | 707 |   |
| Firm                Transportation -                        |   |       |    |       |   |   |   |
|  Residential                                           |   |       | 3,574   |       |   | 1,362 |   |
|  Commercial                                            |   |       | 7,028   |       |   | 4,221 |   |
|  Industrial                                            |   |       | 3,090   |       |   | 3,270 |   |
|  Cogeneration                & Electric Generation |   |       | 394     |       |   | - |   |
|                                                        |   |       |    |       |   |  |   |
|  Total                Firm Revenues                    |   |       | 223,168 |       |   | 229,769 |   |
|                                                        |   |       |    |       |   |  |   |
| Interruptible                                               |   |       | 140     |       |   | 399 |   |
| Interruptible                Transportation                 |   |       | 463     |       |   | 634 |   |
| Off-System                                                  |   |       | 52,066  |       |   | 41,643 |   |
| Capacity                Release & Storage               |   |       | 1,744   |       |   | 4,302 |   |
| Other                                                       |   |       | 283     |       |   | 334 |   |
|                                                        |   |       |    |       |   |  |   |
|  Total                Operating Revenues               |   | $          | 277,864 |       | $      | 277,081 |   |

----

|                                                                |   | **2007**       |    | **2006** |   |
|---------------------------------------------------------------------|--------|----------------|---------|----------|--------|
| Net                Operating Revenues:                              |   |           |    |     |   |   |   |   |   |
| Residential                                                         |   | $ 171,646 |    | 61.8%    |   | $ 167,798 |   | 60.5% |   |
| Commercial                and Industrial                            |   | 50,679         |    | 18.2     |   | 61,264 |   | 22.0 |   |
| Cogeneration                and Electric Generation                 |   |           | 843     |     |   | 0.3 |   |   | 707 |   |   | 0.4 |   |
| Interruptible                                                       |   |           | 603     |     |   | 0.2 |   |   | 1,033 |   |   | 0.4 |   |
| Off-system,                Capacity Release & Storage           |   |           | 53,810  |     |   | 19.4 |   |   | 45,945 |   |   | 16.6 |   |
| Other                Revenues                                       |   |           | 283     |     |   | 0.1 |   |   | 334 |   |   | 0.1 |   |
| Total                Utility Operating Revenues                     |   | $              | 277,864 |     |   | 100.0 | % | $ | 277,081 |   |   | 100.0 | % |
|                                                                |   |           |         |     |   |  |   |   |  |   |   |  |   |
| Less:                                                               |   |           |         |     |   |  |   |   |  |   |   |  |   |
| Cost                of Sales                                        |   |           | 205,544 |     |   |  |   |   | 208,621 |   |   |  |   |
| Conservation                Recoveries                              |   |           | 1,213   |     |   |  |   |   | 2,217 |   |   |  |   |
| RAC                Recoveries                                       |   |           | 472     |     |   |  |   |   | 447 |   |   |  |   |
| Revenue                Taxes                                        |   |           | 4,035   |     |   |  |   |   | 3,679 |   |   |  |   |
| Net                Operating Revenues (Margin)                      |   | $              | 66,600  |     |   |  |   | $ | 62,117 |   |   |  |   |
|                                                                |   |           |         |     |   |  |   |   |  |   |   |  |   |
| Margin:                                                             |   |           |         |     |   |  |   |   |  |   |   |  |   |
| Residential                                                         |   | $              | 44,262  |     |   | 66.5 | % | $ | 38,865 |   |   | 62.6 | % |
| Commercial                and Industrial                            |   |           | 15,360  |     |   | 23.1 |   |   | 14,167 |   |   | 22.8 |   |
| Cogeneration                and Electric Generation                 |   |           | 359     |     |   | 0.5 |   |   | 519 |   |   | 0.8 |   |
| Interruptible                                                       |   |           | 57      |     |   | 0.1 |   |   | 70 |   |   | 0.1 |   |
| Off-system,                Capacity Release & Storage           |   |           | 991     |     |   | 1.5 |   |   | 2,157 |   |   | 3.5 |   |
| Other                Revenues                                       |   |           | 282     |     |   | 0.4 |   |   | 333 |   |   | 0.5 |   |
| Margin                Before Weather Normalization & Decoupling |   |           | 61,311  |     |   | 92.1 |   |   | 56,111 |   |   | 90.3 |   |
| TAC                Mechanism                                        |   |           | -       |     |   | 0.0 |   |   | 6,006 |   |   | 9.7 |   |
| CIP                Mechanism                                        |   |           | 5,289   |     |   | 7.9 |   |   | - |   |   | 0.0 |   |
| Utility                Net Operating Revenues (Margin)              |   | $              | 66,600  |     |   | 100.0 | % | $ | 62,117 |   |   | 100.0 | % |
|                                                                |   |           |         |     |   |  |   |   |  |   |   |  |   |
|  Degree                Days                                    |   |           | 2,418   |     |   |   |   |   | 2,163 |   |   |  |   |
|                                                                |   |           |         |     |   |   |   |   |  |   |   |  |   |

**Volumes**

**Operating      Revenues**

----

**Margin      (pre-tax)**
**      - **

**Operating      Expenses**

|                                  | Three                Months Ended                March 31,2007                vs. 2006 |   |
|---------------------------------------|----------------------------------------------------------------------------------------|--------|
|                                  |                                                                                   |   |
| Operations                            |                                                                                   |   | $ | 70 |   |
| Maintenance                           |                                                                                   |        |   | 67 |   |
| Depreciation                          |                                                                                   |        |   | 295 |   |
| Energy                and Other Taxes |                                                                                   |        |   | 338 |   |
|                                  |                                                                                   |        |   |  |   |

**Depreciation**

**Energy      and Other Taxes**

**LIQUIDITY      AND CAPITAL RESOURCES**

**Cash      Flows from Operating Activities**

----

**Cash      Flows from Investing Activities**

**Cash      Flows from Financing Activities**

|                           |   | As                of March                31, 2007 |   | As                of December                31, 2006 |   |
|--------------------------------|--------|----------------------------------------------------|--------|-------------------------------------------------------|--------|
|                           |   |                                               |   |                                                  |   |
| Common Equity             |   |                                               | 52.8   | %                                                     |   | 47.4 | % |
| Long-Term                Debt  |   |                                               | 41.3   |                                                  |   | 39.0 |   |
| Short-Term                Debt |   |                                               | 5.9    |                                                  |   | 13.6 |   |
|                           |   |                                               |        |                                                  |   |  |   |
| Total                          |   |                                               | 100.0  | %                                                     |   | 100.0 | % |

**COMMITMENTS      AND CONTINGENCIES:**

----

**Contractual      Cash Obligations**
**      -**

**Off-Balance      Sheet Arrangements**
**      - **

**Pending      Litigation**

**Ratio      of Earnings to Fixed Charges**
**      - **

| Twelve                MonthsEnded                March 31, |   |  Year                Ended December 31, |
|------------------------------------------------------------|--------|----------------------------------------------|
|                                                       |   |                                         |   |   |   |   |   |   |   |   |   |
| 2007                                                       |   | 2006                                         |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                       |   |                                         |   |   |   |   |   |   |   |   |   |
| 3.8x                                                       |   | 3.8x                                         |   | 4.0x |   | 3.9x |   | 3.3x |   | 2.9x |   |

**Item      3. Quantitative and Qualitative Disclosures about Market      Risks**

**MARKET      RISKS:**

**Commodity      Market Risks**

----

| Assets:                               |   |                                      |   | Maturity                        |                      | Maturity                                        |   |                       |     |
|---------------------------------------|--------|-------------------------------------------|--------|---------------------------------|---------------------------|-------------------------------------------------|--------|----------------------------|----------|
|                                  |   | Source                of Fair Value       |   |  <1                Year |                      |  1                -                3 Years |   |  Total                |     |
|                                  |   |                                 |   |                       |                      |                                       |   |                  |     |
| Prices                Actively Quoted |   |                                      | NYMEX  |                            | $                         | 2,916                                           |   | $                          | 85       |   | $ | 3,001 |   |
|                                  |   |                                      |   |                            |                      |                                            |   |                       |     |   |   |   |   |
| Liabilities:                          |   |                                      |   |                            |                      | Maturity                                        |   |                       | Maturity |   |   |   |   |
|                                  |   |  Source                of Fair Value |   |                            | <1                Year |                                            |   | 1                - 3 Years |     |   | Total |   |
|                                  |   |                                      |   |                            |                      |                                            |   |                       |     |   |   |   |   |
| Prices                Actively Quoted |   |                                      | NYMEX  |                            | $                         | 4,937                                           |   | $                          | 62       |   | $ | 4,999 |   |

|                Net                Derivatives — Energy Related Liability, January 1, 2007 |   |  $ | (16,669  |  ) |
|------------------------------------------------------------------------------------------------------|--------|---------|---------------|---------|
| Contracts                Settled During the Three Months ended March 31, 2007, Net                   |   |    | 4,830         |    |
| Other                Changes in Fair Value from Continuing and New Contracts,                Net     |   |    | 9,841         |    |
| Net                Derivatives — Energy Related Liability, March 31, 2007                      |   | $       | (1,998        | )       |

**Interest      Rate Risk**

**Item      4. Controls and Procedures**

***Disclosure      Controls and Procedures***

----

***Changes      in Internal Control Over Financial Reporting***

----

**PART      II — OTHER INFORMATION**

**Item      l. Legal Proceedings**

**Item      6. Exhibits **

| Exhibit                No. |  Description                                                                                                                                                                                                                                                                                                                             |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                                                          |
| 31.1                       | Certification                of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange                Act.                                                                                                                                                                                                                        |
|                       |                                                                                                                                                                                                                                                                                                                                          |
| 31.2                       | Certification                of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange                Act.                                                                                                                                                                                                                        |
|                       |                                                                                                                                                                                                                                                                                                                                          |
| 32.1                       | Certification                of Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange                Act                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,                United                States Code). |
|                       |                                                                                                                                                                                                                                                                                                                                          |
| 32.2                       | Certification                of Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange                Act                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,                United                States Code). |

----

**SIGNATURES**

**SOUTH      JERSEY GAS COMPANY**

| Dated:                May 11, 2007 | By:                /s/                Edward J. Graham                                                           |
|------------------------------------|------------------------------------------------------------------------------------------------------------------|
|                               |                      Edward J. Graham                                                   |
|                               |                      President & Chief Executive Officer                            |
|                               |                                                                                                             |
|                               |                                                                                                             |
|                               |                                                                                                             |
| Dated:                May 11, 2007 | By:                /s/                David A. Kindlick                                                          |
|                               |                      David A. Kindlick                                                  |
|                               |                      Senior Vice President & Chief Financial                Officer |

----