----

----

**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 |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

**September 30,      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**

----

----

**Item      1.  Financial Statements – See Pages 3 through      15**

| **SOUTH                JERSEY GAS                COMPANY**                                                       |   |
|------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   |   |   |   |   |   |
| **CONDENSED                STATEMENTS OF INCOME (UNAUDITED)**                                                    |   |
| (In                Thousands)                                                                                    |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   | Three                Months Ended |   |
|                                                                                                             |   | September                30, |   |
|                                                                                                             |   | 2007 |   |   | 2006 |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |
| **Operating                Revenues**                                                                            |   | $ | 84,420 |   |   | $ | 87,715 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Operating                Expenses:**                                                                           |   |   |   |   |   |   |   |   |
|    Cost                of Sales (Excluding depreciation)                                          |   |   | 62,223 |   |   |   | 65,014 |   |
|    Operations                                                                                     |   |   | 10,968 |   |   |   | 11,088 |   |
|    Maintenance                                                                                    |   |   | 1,544 |   |   |   | 1,454 |   |
|    Depreciation                                                                                   |   |   | 6,188 |   |   |   | 5,916 |   |
|    Energy                and Other Taxes                                                          |   |   | 1,307 |   |   |   | 1,336 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|       Total                Operating Expenses                                      |   |   | 82,230 |   |   |   | 84,808 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Operating                Income**                                                                              |   |   | 2,190 |   |   |   | 2,907 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Other                Income and Expense**                                                                      |   |   | 157 |   |   |   | 232 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Interest                Charges**                                                                              |   |   | (5,371 | ) |   |   | (5,736 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Loss                Before Income Taxes**                                                                      |   |   | (3,024 | ) |   |   | (2,597 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Income                Tax Benefit**                                                                            |   |   | 1,278 |   |   |   | 1,062 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Net                Loss**                                                                                      |   | $ | (1,746 | ) |   | $ | (1,535 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the condensed financial                statements. |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |

| **SOUTH                JERSEY GAS COMPANY**                                                                           |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                  |   |   |   |   |   |   |
| **CONDENSED                STATEMENTS OF INCOME (UNAUDITED)**                                                         |   |
| (In                Thousands)                                                                                         |   |
|                                                                                                                  |   |   |   |   |   |   |
|                                                                                                                  |   | Nine                Months Ended |   |
|                                                                                                                  |   | September                30, |   |
|                                                                                                                  |   | 2007 |   |   | 2006 |   |
|                                                                                                                  |   |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |   |
| **       Operating                Revenues**                                       |   | $ | 458,280 |   |   | $ | 469,802 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Operating                Expenses:**                                      |   |   |   |   |   |   |   |   |
|           Cost                of Sales (Excluding depreciation)     |   |   | 331,615 |   |   |   | 349,675 |   |
|           Operations                                                |   |   | 36,423 |   |   |   | 35,439 |   |
|           Maintenance                                               |   |   | 4,446 |   |   |   | 4,224 |   |
|           Depreciation                                              |   |   | 18,356 |   |   |   | 17,522 |   |
|           Energy                and Other Taxes                     |   |   | 7,803 |   |   |   | 7,295 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
|              Total                Operating Expenses |   |   | 398,643 |   |   |   | 414,155 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Operating                Income**                                         |   |   | 59,637 |   |   |   | 55,647 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Other                Income and Expense**                                 |   |   | 613 |   |   |   | 370 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Interest                Charges**                                         |   |   | (15,403 | ) |   |   | (16,069 | ) |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Income                Before Income Taxes**                               |   |   | 44,847 |   |   |   | 39,948 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Income                Taxes**                                             |   |   | (18,431 | ) |   |   | (16,406 | ) |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| **       Net                Income**                                               |   | $ | 26,416 |   |   | $ | 23,542 |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the financial                statements.                |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |

| **SOUTH                JERSEY GAS COMPANY**                                                                      |   |
|------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   |   |   |   |   |   |
| **CONDENSED                STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)**                                      |   |
| (In                Thousands)                                                                                    |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   | Three                Months Ended |   |
|                                                                                                             |   | September                30, |   |
|                                                                                                             |   | 2007 |   |   | 2006 |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |
| **Net                Loss**                                                                                      |   | $ | (1,746 | ) |   | $ | (1,535 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Loss - Net of Tax:**                                                        |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|   Unrealized                Gain on Equity Investments                                                 |   |   | 41 |   |   |   | 110 |   |
|   Unrealized                Loss on Derivatives - Other                                                |   |   | (487 | ) |   |   | (674 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
|      Other                Comprehensive Loss - Net of Tax                               |   |   | (446 | ) |   |   | (564 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Comprehensive                Loss**                                                                            |   | $ | (2,192 | ) |   | $ | (2,099 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   | Nine                Months Ended |   |
|                                                                                                             |   | September                30, |   |
|                                                                                                             |   | 2007 |   |   | 2006 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Net                Income**                                                                                    |   | $ | 26,416 |   |   | $ | 23,542 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Income - Net of Tax:**                                                      |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|   Unrealized                Gain on Equity Investments                                                 |   |   | 221 |   |   |   | 199 |   |
|   Unrealized                Gain on Derivatives - Other                                                |   |   | 192 |   |   |   | 279 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|      Other                Comprehensive Income - Net of Tax                             |   |   | 413 |   |   |   | 478 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| **Comprehensive                Income**                                                                          |   | $ | 26,829 |   |   | $ | 24,020 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the condensed financial                statements. |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |   |

| **SOUTH                  JERSEY GAS COMPANY**                                                                             |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                      |   |   |   |   |   |   |
| **CONDENSED                  STATEMENTS OF CASH FLOWS (UNAUDITED)**                                                       |   |
| (In                  Thousands)                                                                                           |   |
|                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                      |   | Nine                  Months Ended |   |
|                                                                                                                      |   | September                  30, |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
|                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |
| **Net                  Cash Provided by Operating Activities**                                                            |   | $ | 67,824 |   |   | $ | 34,145 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities:**                                                                |   |   |   |   |   |   |   |   |
|   Capital                  Expenditures                                                                         |   |   | (34,386 | ) |   |   | (47,326 | ) |
|   Net                  Proceeds from Sale of (Purchase of) Restricted Investments                               |   |   | 4,172 |   |   |   | (14,486 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|         Net                  Cash Used in Investing Activities                    |   |   | (30,214 | ) |   |   | (61,812 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities:**                                                                |   |   |   |   |   |   |   |   |
|   Net                  (Repayments of) Borrowings from Lines of Credit                                          |   |   | (25,700 | ) |   |   | 17,100 |   |
|   Proceeds                  from Issuance of Long-Term Debt                                                     |   |   | - |   |   |   | 25,000 |   |
|   Principal                  Repayments of Long-Term Debt                                                       |   |   | (2,290 | ) |   |   | (2,335 | ) |
|   Dividends                  on Common Stock                                                                    |   |   | (9,366 | ) |   |   | (9,951 | ) |
|   Payments                  for Issuance of Long-Term Debt                                                      |   |   | - |   |   |   | (971 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|         Net                  Cash (Used in) Provided by Financing Activities |   |   | (37,356 | ) |   |   | 28,843 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**                                                            |   |   | 254 |   |   |   | 1,176 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**                                                     |   |   | 1,967 |   |   |   | 2,551 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                  and Cash Equivalents at End of Period**                                                           |   | $ | 2,221 |   |   | $ | 3,727 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Supplemental                  Disclosures of Noncash Investing Activities:**                                            |   |   |   |   |   |   |   |   |
|   Capital                  Property and Equipment acquired on account but not                                   |   |   |   |   |   |   |   |   |
|    paid                  at quarter-end.                                                                   |   | $ | 5,345 |   |   | $ | 4,201 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements.      |   |   |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |

| **SOUTH                  JERSEY GAS COMPANY**                                                                             |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                      |   |   |   |   |   |   |
| **CONDENSED                  BALANCE SHEETS (UNAUDITED)**                                                                 |   |
| (In                  Thousands)                                                                                           |   |
|                                                                                                                      |   |   |   |
|                                                                                                                      |   | September                  30, |   |   | December                  31, |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
| **Assets**                                                                                                                |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |
| **Property,                  Plant and Equipment:**                                                                       |   |   |   |   |   |   |
|    Utility                  Plant, at original cost                                                        |   | $ | 1,112,940 |   |   | $ | 1,079,614 |   |
|      Accumulated                  Depreciation                                                   |   |   | (271,925 | ) |   |   | (257,781 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|           Property,                  Plant and Equipment - Net          |   |   | 841,015 |   |   |   | 821,833 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Investments:**                                                                                                          |   |   |   |   |   |   |   |   |
|    Available-for-Sale                  Securities                                                          |   |   | 6,779 |   |   |   | 6,342 |   |
|    Restricted                  Investments                                                                 |   |   | 4,414 |   |   |   | 8,586 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|           Total                  Investments                            |   |   | 11,193 |   |   |   | 14,928 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Current                  Assets:**                                                                                      |   |   |   |   |   |   |   |   |
|    Cash                  and Cash Equivalents                                                              |   |   | 2,221 |   |   |   | 1,967 |   |
|    Accounts                  Receivable                                                                    |   |   | 36,166 |   |   |   | 47,928 |   |
|    Accounts                  Receivable - Related Parties                                                  |   |   | 1,375 |   |   |   | 3,939 |   |
|    Unbilled                  Revenues                                                                      |   |   | 8,101 |   |   |   | 34,502 |   |
|    Provision                  for Uncollectibles                                                           |   |   | (3,355 | ) |   |   | (2,741 | ) |
|    Natural                  Gas in Storage, average cost                                                   |   |   | 72,297 |   |   |   | 81,039 |   |
|    Materials                  and Supplies, average cost                                                   |   |   | 1,590 |   |   |   | 1,685 |   |
|    Prepaid                  Taxes                                                                          |   |   | 14,592 |   |   |   | 7,774 |   |
|    Derivatives                  - Energy Related Assets                                                    |   |   | 1,095 |   |   |   | 1,692 |   |
|    Other                  Prepayments and Current Assets                                                   |   |   | 2,605 |   |   |   | 2,264 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|           Total                  Current Assets                         |   |   | 136,687 |   |   |   | 180,049 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Regulatory                  and Other Noncurrent Assets:**                                                              |   |   |   |   |   |   |   |   |
|    Regulatory                  Assets                                                                      |   |   | 197,529 |   |   |   | 196,962 |   |
|    Unamortized                  Debt Issuance Costs                                                        |   |   | 6,426 |   |   |   | 6,835 |   |
|    Accounts                  Receivable - Merchandise                                                      |   |   | 5,746 |   |   |   | 5,950 |   |
|    Derivatives                  - Energy Related Assets                                                    |   |   | 67 |   |   |   | 19 |   |
|    Derivatives                  - Other                                                                    |   |   | 438 |   |   |   | 148 |   |
|    Other                                                                                                   |   |   | 2,143 |   |   |   | 1,352 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|           Total                  Regulatory and Other Noncurrent Assets |   |   | 212,349 |   |   |   | 211,266 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|                Total                  Assets   |   | $ | 1,201,244 |   |   | $ | 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)                                                                                        |   |
|                                                                                                                                             |   |                           |      |
|                                                                                                                                             |   | September                  30, |      |   | 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                                                                          |   |                           | (4,016    | )      |                          |   | (4,429    | )      |
|    Retained                  Earnings                                                                                             |   |                           | 170,613   |   |                          |   | 158,617   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|           Total                  Common Equity                                                 |   |                           | 372,762   |   |                          |   | 360,353   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
| **Long-Term                  Debt**                                                                                                              |   |                           | 294,873   |   |                          |   | 294,893   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|           Total                  Capitalization                                                |   |                           | 667,635   |   |                          |   | 655,246   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
| **Current                  Liabilities:**                                                                                                        |   |                           |      |   |                          |   |      |   |
|    Notes                  Payable                                                                                                 |   |                           | 77,800    |   |                          |   | 103,500   |   |
|    Current                  Maturities of Long-Term Debt                                                                          |   |                           | -         |   |                          |   | 2,270     |   |
|    Accounts                  Payable - Commodity                                                                                  |   |                           | 22,063    |   |                          |   | 43,687    |   |
|    Accounts                  Payable - Other                                                                                      |   |                           | 7,993     |   |                          |   | 8,786     |   |
|    Accounts                  Payable - Related Parties                                                                            |   |                           | 11,063    |   |                          |   | 12,134    |   |
|    Derivatives                  - Energy Related Liabilities                                                                      |   |                           | 5,636     |   |                          |   | 18,006    |   |
|    Deferred                  Income Taxes - Net                                                                                   |   |                           | 4,434     |   |                          |   | 4,049     |   |
|    Customer                  Deposits and Credit Balances                                                                         |   |                           | 30,426    |   |                          |   | 23,016    |   |
|    Environmental                  Remediation Costs                                                                               |   |                           | 24,800    |   |                          |   | 26,048    |   |
|    Taxes                  Accrued                                                                                                 |   |                           | 1,810     |   |                          |   | 1,961     |   |
|    Pension                  and Other Postretirement Benefits                                                                     |   |                           | 776       |   |                          |   | 776       |   |
|    Dividends                  Declared                                                                                            |   |                           | 4,683     |   |                          |   | -         |   |
|    Interest                  Accrued                                                                                              |   |                           | 5,169     |   |                          |   | 6,112     |   |
|    Other                  Current Liabilities                                                                                     |   |                           | 3,524     |   |                          |   | 4,904     |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|           Total                  Current Liabilities                                           |   |                           | 200,177   |   |                          |   | 255,249   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
| **Regulatory                  and Other Noncurrent Liabilities:**                                                                                |   |                           |      |   |                          |   |      |   |
|    Regulatory                  Liabilities                                                                                        |   |                           | 53,104    |   |                          |   | 50,797    |   |
|    Deferred                  Income Taxes - Net                                                                                   |   |                           | 165,893   |   |                          |   | 164,797   |   |
|    Environmental                  Remediation Costs                                                                               |   |                           | 53,081    |   |                          |   | 41,746    |   |
|    Asset                  Retirement Obligations                                                                                  |   |                           | 24,265    |   |                          |   | 23,743    |   |
|    Pension                  and Other Postretirement Benefits                                                                     |   |                           | 29,154    |   |                          |   | 29,354    |   |
|    Investment                  Tax Credits                                                                                        |   |                           | 2,230     |   |                          |   | 2,470     |   |
|    Derivatives                  - Energy Related Liabilities                                                                      |   |                           | 183       |   |                          |   | 374       |   |
|    Other                                                                                                                          |   |                           | 5,522     |   |                          |   | 4,300     |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|             Total                  Deferred Credits and Other Noncurrent Liabilities |   |                           | 333,432   |   |                          |   | 317,581   |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|    Commitments                  and Contingencies (Note 9)                                                                        |   |                           |      |   |                          |   |      |   |
|                                                                                                                                             |   |                           |      |   |                          |   |      |   |
|                Total                  Capitalization and Liabilities  |   | $                              | 1,201,244 |   |                          | $      | 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 |   | 8,126       |   | $                25.155   |   | 15.5%      |   | 3.4%                         |
| Jan.                2006 |   | 8,450       |   | $                27.950   |   | 16.9%      |   | 4.5%                         |
| Jan.                2007 |   | 9,581       |   | $                29.210   |   | 18.5%      |   | 4.9%                         |

|                                                                                                                                                                                     | Shares |     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| Nonvested                Shares Outstanding,                January 1,                2007                                                                                               | 26,738 |     |
|                                                                                                                                                                                     |   |     |   |
| Granted                                                                                                                                                                                  |   | 9,628    |   |
| Vested*                                                                                                                                                                                  |   | (10,352) |   |
|    Forfeited                                                                                                                                                              |   | (1,679)  |   |
|   Transferred                From                Affiliate                                                                                                                     |   | 1,822    |   |
|                                                                                                                                                                                     |   |     |   |
| Nonvested                Shares Outstanding,                September 30,                2007                                                                                            |   | 26,157   |   |
|                                                                                                                                                                                     |   |     |   |
| *                  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**

**:**

|                                                                                  |   |                             |    |   |                            |   |
|---------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|---------------------------------|--------|
|                                                                                  |   | September                30,2007 |    |   | December                31,2006 |   |
| Environmental                Remediation                Costs:                        |   |                             |    |   |                            |   |
| Expended                -                Net                                          |   | $                                | 20,972  |   |                            | $      | 17,743 |   |
| Liability                for Future                Expenditures                       |   |                             | 77,881  |   |                            |   | 67,905 |   |
| Income                Taxes-Flowthrough                Depreciation                   |   |                             | 3,952   |   |                            |   | 4,685 |   |
| Deferred                Asset Retirement                Obligation Costs              |   |                             | 21,482  |   |                            |   | 21,009 |   |
| Deferred                Gas Costs -                Net                                |   |                             | 5,581   |   |                            |   | 19,698 |   |
| Deferred                Pension and Other                Postretirement Benefit Costs |   |                             | 39,075  |   |                            |   | 39,359 |   |
| Temperature                Adjustment Clause                Receivable                |   |                             | 7,958   |   |                            |   | 8,996 |   |
| Conservation                Incentive Program                Receivable               |   |                             | 15,327  |   |                            |   | 7,747 |   |
| Societal                Benefit Costs                Receivable                       |   |                             | 2,414   |   |                            |   | 6,912 |   |
| Premium                for Early Retirement of                Debt                    |   |                             | 1,411   |   |                            |   | 1,532 |   |
| Other                Regulatory                Assets                                 |   |                             | 1,476   |   |                            |   | 1,376 |   |
|                                                                                  |   |                             |    |   |                            |   |   |   |
| Total                Regulatory Assets                                                |   | $                                | 197,529 |   |                            | $      | 196,962 |   |

|                                                       |   | September                30,2007 |   |   | December                31,2006 |   |
|------------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
| Excess                Plant Removal                Costs   |   | $                                | 48,643 |   |                            | $      | 48,377 |   |
| Other                                                      |   |                             | 4,461  |   |                            |   | 2,420 |   |
|                                                       |   |                             |   |   |                            |   |   |   |
| Total                Regulatory                Liabilities |   | $                                | 53,104 |   |                            | $      | 50,797 |   |

**Deferred      Gas Costs and      Revenues - Net**

** **

**4.**

**RELATED      PARTY      TRANSACTIONS**

|                                                                 |   |   | Three                Months                EndedSeptember                30, |   |   |   | Nine                Months                EndedSeptember                30, |
|----------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------|
|                                                                 |   |   | 2007                                                                         |   |   | 2006   |                                                                        |   |   | 2007 |   |   | 2006 |
| Operating                Revenues /                Affiliates:  |   |   |                                                                         |   |   |   |                                                                        |   |   |   |   |   |   |
|  SJRG                                                           |   | $      | 995                                                                          |   | $      | 14,136 |                                                                        |   | $ | 17,041 |   | $ | 31,498 |
|  Other                                                          |   |   | 87                                                                           |   |   | 70     |                                                                        |   |   | 289 |   |   | 209 |
| Total                Operating Revenues /                Affiliates  |   | $      | 1,082                                                                        |   | $      | 14,206 |                                                                        |   | $ | 17,330 |   | $ | 31,707 |

|                                                                                                                      |   | Three                Months                EndedSeptember                30, |   |   | Nine                Months                EndedSeptember                30, |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|
|                                                                                                                      |   | 2007                                                                         |   | 2006   |                                                                        |   | 2007 |   | 2006 |   |
|  Costs                of Sales /                Affiliates  (Excluding                depreciation):  |   |                                                                         |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |
|   SJRG                                                                                                          |   |  $                                                                      | 7,397  |   | $                                                                           | 11,521 |   |   |   | $ | 30,430 |   | $ | 40,809 |   |
|  Total                Cost of Sales /                Affiliates                                                      |   |  $                                                                      | 7,397  |   | $                                                                      | 11,521 |   |   |   | $  | 30,430 |   | $  | 40,809 |   |
|                                                                                                                      |   |                                                                         |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |
|  Operations                Expense /                Affiliates:                                                 |   |                                                                         |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |
|      SJI                                                                                         |   | $                                                                            | 1,007  |   | $                                                                           | 1,135  |   |   |   | $ | 3,785 |   | $ | 5,180 |   |
|      SJIS                                                                                        |   |                                                                         | 1,020  |   |                                                                        | 1,099  |   |   |   |   | 3,175 |   |   | 3,637 |   |
|      Millennium                                                                                  |   |                                                                         | 716    |   |                                                                        | 690    |   |   |   |   | 2,128 |   |   | 2,046 |   |
|      Other                                                                                       |   |                                                                         | 42     |   |                                                                        | (89)   |   |   |   |   | 231 |   |   | (20) |   |
| Total                Operations Expense /                Affiliates                                                       |   | $                                                                            | 2,785  |   | $                                                                           | 2,835  |   |   |   | $ | 9,319 |   | $ | 10,843 |   |
|                                                                                                                      |   |                                                                         |   |   |                                                                        |   |   |   |   |   |   |   |   |   |   |

**5.           RESTRICTED      INVESTMENTS:**

**6.           UNUSED      LINES OF      CREDIT:**

**7.           RETAINED      EARNINGS:**

**8.**

** **

**PENSION      **

**AND**

**      OTHER POSTRETIREMENT      BENEFITS**

|                                                                                                                         |   | Pension                Benefits                                              |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                                                                                         |   | Three                Months                EndedSeptember                30, |   |   | Nine                Months                EndedSeptember                30, |   |
|                                                                                                                         |   | 2007                                                                         |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                         |   |                                                                         |   |   |   |   |   |   |   |   |   |   |
| Service                Cost                                                                                                  |   | $                                                                            | 427    |   |   | $ | 574 |   |   | $ | 1,686 |   |   | $ | 1,723 |   |
| Interest                Cost                                                                                                 |   |                                                                         | 1,028  |   |   |   | 1,471 |   |   |   | 3,982 |   |   |   | 4,411 |   |
| Expected                Return on Plan                Assets                                                                 |   |                                                                         | (1,240 | ) |   |   | (1,880 | ) |   |   | (5,012 | ) |   |   | (5,639 | ) |
| Amortizations:                                                                                                               |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior                Service                Cost                                                                             |   |                                                                         | 36     |   |   |   | 97 |   |   |   | 147 |   |   |   | 291 |   |
|               Actuarial                Loss            |   |                                                                         | 296    |   |   |   | 479 |   |   |   | 1,044 |   |   |   | 1,437 |   |
| Net                Periodic Benefit                Cost                                                                      |   |                                                                         | 547    |   |   |   | 741 |   |   |   | 1,847 |   |   |   | 2,223 |   |
|               Capitalized                Benefit Costs |   |                                                                         | (266   | ) |   |   | (319 | ) |   |   | (900 | ) |   |   | (956 | ) |
| Total                Net Periodic Benefit                Expense                                                             |   | $                                                                            | 281    |   |   | $ | 422 |   |   | $ | 947 |   |   | $ | 1,267 |   |
|                                                                                                                         |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                                                         |   | Other                Postretirement                Benefits                  |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                                                                                         |   | Three                Months                EndedSeptember                30, |   |   | Nine                Months                EndedSeptember                30, |   |
|                                                                                                                         |   | 2007                                                                         |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                         |   |                                                                         |   |   |   |   |   |   |   |   |   |   |
| Service                Cost                                                                                                  |   | $                                                                            | 160    |   |   | $ | 234 |   |   | $ | 575 |   |   | $ | 492 |   |
| Interest                Cost                                                                                                 |   |                                                                         | 438    |   |   |   | 1,095 |   |   |   | 1,579 |   |   |   | 1,709 |   |
| Expected                Return on Plan                Assets                                                                 |   |                                                                         | (342   | ) |   |   | (757 | ) |   |   | (1,232 | ) |   |   | (1,213 | )  |
| Amortizations:                                                                                                               |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior                Service                Credits                                                                          |   |                                                                         | (58    | ) |   |   | (66 | ) |   |   | (209 | )  |   |   | (198 | )  |
|               Actuarial                Loss            |   |                                                                         | 99     |   |   |   | 420 |   |   |   | 357 |   |   |   | 592 |   |
| Net                Periodic Benefit                Cost                                                                      |   |                                                                         | 297    |   |   |   | 926 |   |   |   | 1,070 |   |   |   | 1,382 |   |
|               Capitalized                Benefit Costs |   |                                                                         | (145   | ) |   |   | (398 | ) |   |   | (525 | ) |   |   | (594 | )  |
| Total                Net Periodic Benefit                Expense                                                             |   | $                                                                            | 152    |   |   | $ | 528 |   |   | $ | 545 |   |   | $ | 788 |   |

**9.**

**COMMITMENTS      **

**AND**

**      CONTINGENCIES**

**Contractual      Cash      Obligations**

**Environmental      Remediation      Costs**

**10.**

**      SUBSEQUENT      EVENT**

**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:**

|                                                         |   | Three                Months                Ended |   |   | Nine                Months                Ended |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                         |   | September                30,                     |   |   | September                30,                    |   |
|                                                         |   | 2007                                             |   |   | 2006                                            |   |   | 2007 |   |   | 2006 |   |
| Throughput–                dth:                        |   |                                             |   |   |                                            |   |   |   |   |   |   |   |
| Firm                Sales                -                   |   |                                             |   |   |                                            |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 1,556  |   |                                            |   | 1,414 |   |   |   | 16,069 |   |   |   | 14,140 |   |
| Commercial                                                   |   |                                             | 637    |   |                                            |   | 851 |   |   |   | 4,497 |   |   |   | 5,209 |   |
| Industrial                                                   |   |                                             | 17     |   |                                            |   | 14 |   |   |   | 138 |   |   |   | 148 |   |
| Cogeneration&Electric                Generation          |   |                                             | 791    |   |                                            |   | 810 |   |   |   | 953 |   |   |   | 1,064 |   |
| Firm                Transportation                -          |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 129    |   |                                            |   | 86 |   |   |   | 1,273 |   |   |   | 552 |   |
| Commercial                                                   |   |                                             | 607    |   |                                            |   | 567 |   |   |   | 4,271 |   |   |   | 3,005 |   |
| Industrial                                                   |   |                                             | 2,835  |   |                                            |   | 3,923 |   |   |   | 8,903 |   |   |   | 10,830 |   |
| Cogeneration&Electric                Generation          |   |                                             | 1,288  |   |                                            |   | 236 |   |   |   | 2,415 |   |   |   | 248 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Total                Firm                Throughput          |   |                                             | 7,860  |   |                                            |   | 7,901 |   |   |   | 38,519 |   |   |   | 35,196 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible                Sales                           |   |                                             | 1      |   |                                            |   | 6 |   |   |   | 39 |   |   |   | 72 |   |
| Interruptible                Transportation                  |   |                                             | 722    |   |                                            |   | 774 |   |   |   | 2,101 |   |   |   | 2,633 |   |
| Off-System                                                   |   |                                             | 3,505  |   |                                            |   | 4,111 |   |   |   | 13,419 |   |   |   | 13,110 |   |
| Capacity                Release &                Storage |   |                                             | 23,738 |   |                                            |   | 20,736 |   |   |   | 55,217 |   |   |   | 53,241 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Total                Throughput                              |   |                                             | 35,826 |   |                                            |   | 33,528 |   |   |   | 109,295 |   |   |   | 104,252 |   |

|                                                         |   | Three                Months                Ended |   |   | Nine                Months                Ended |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                         |   | September                30,                     |   |   | September                30,                    |   |
|                                                         |   | 2007                                             |   |   | 2006                                            |   |   | 2007 |   |   | 2006 |   |
| Operating                Revenues:                           |   |                                             |   |   |                                            |   |   |   |   |   |   |   |
| Firm                Sales                -                   |   |                                             |   |   |                                            |   |   |   |   |   |   |   |
| Residential                                                  |   | $                                                | 33,386 |   |                                            | $      | 28,209 |   |   | $ | 247,641 |   |   | $ | 241,593 |   |
| Commercial                                                   |   |                                             | 10,113 |   |                                            |   | 11,496 |   |   |   | 57,760 |   |   |   | 75,749 |   |
| Industrial                                                   |   |                                             | 1,013  |   |                                            |   | 665 |   |   |   | 6,419 |   |   |   | 3,627 |   |
| Cogeneration&Electric                Generation          |   |                                             | 6,202  |   |                                            |   | 6,457 |   |   |   | 8,269 |   |   |   | 9,817 |   |
| Firm                Transportation                -          |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 1,136  |   |                                            |   | 647 |   |   |   | 5,924 |   |   |   | 2,790 |   |
| Commercial                                                   |   |                                             | 2,293  |   |                                            |   | 1,683 |   |   |   | 11,917 |   |   |   | 8,156 |   |
| Industrial                                                   |   |                                             | 3,497  |   |                                            |   | 3,027 |   |   |   | 9,230 |   |   |   | 9,289 |   |
| Cogeneration&Electric                Generation          |   |                                             | 657    |   |                                            |   | 175 |   |   |   | 1,603 |   |   |   | 186 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Total                Firm                Revenues            |   |                                             | 58,297 |   |                                            |   | 52,359 |   |   |   | 348,763 |   |   |   | 351,207 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible                Sales                           |   |                                             | 14     |   |                                            |   | 95 |   |   |   | 450 |   |   |   | 864 |   |
| Interruptible                Transportation                  |   |                                             | 451    |   |                                            |   | 332 |   |   |   | 1,389 |   |   |   | 1,324 |   |
| Off-System                                                   |   |                                             | 22,008 |   |                                            |   | 32,816 |   |   |   | 98,304 |   |   |   | 107,560 |   |
| Capacity                Release &                Storage |   |                                             | 3,324  |   |                                            |   | 1,796 |   |   |   | 8,406 |   |   |   | 7,797 |   |
| Other                                                        |   |                                             | 326    |   |                                            |   | 317 |   |   |   | 968 |   |   |   | 1,050 |   |
|                                                         |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Total                Operating                Revenues       |   | $                                                | 84,420 |   |                                            | $      | 87,715 |   |   | $ | 458,280 |   |   | $ | 469,802 |   |

|                                                                                                 |   | Three                Months                Ended |   |   | Nine                Months                Ended |   |
|------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                                                                 |   | September                30,                     |   |   | September                30,                    |   |
|                                                                                                 |   | 2007                                             |   |   | 2006                                            |   |   | 2007 |   |   | 2006 |   |
| Net                Operating                Revenues:                                                |   |                                             |   |   |                                            |   |   |   |   |   |   |   |
| Residential                                                                                          |   | $                                                | 34,522 |   |                                            | $      | 28,856 |   |   | $ | 253,565 |   |   | $ | 244,383 |   |
| Commercial                and                Industrial                                              |   |                                             | 16,916 |   |                                            |   | 16,871 |   |   |   | 85,326 |   |   |   | 96,821 |   |
| Cogeneration                and Electric                Generation                                   |   |                                             | 6,859  |   |                                            |   | 6,632 |   |   |   | 9,872 |   |   |   | 10,003 |   |
| Interruptible                                                                                        |   |                                             | 465    |   |                                            |   | 427 |   |   |   | 1,839 |   |   |   | 2,188 |   |
| Off-system,                Capacity Release &                Storage                             |   |                                             | 25,332 |   |                                            |   | 34,612 |   |   |   | 106,710 |   |   |   | 115,357 |   |
| Other                Revenues                                                                        |   |                                             | 326    |   |                                            |   | 317 |   |   |   | 968 |   |   |   | 1,050 |   |
| Total                Utility Operating                Revenues                                       |   | $                                                | 84,420 |   |                                            | $      | 87,715 |   |   | $ | 458,280 |   |   | $ | 469,802 |   |
|                                                                                                 |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of                Sales                                                          |   | $                                                | 62,223 |   |                                            | $      | 65,014 |   |   | $ | 331,615 |   |   | $ | 349,675 |   |
| Conservation                Recoveries                                                               |   |                                             | 633    |   |                                            |   | 1,075 |   |   |   | 2,888 |   |   |   | 5,043 |   |
| RAC                Recoveries                                                                        |   |                                             | 472    |   |                                            |   | 447 |   |   |   | 1,417 |   |   |   | 1,342 |   |
| Revenue                Taxes                                                                         |   |                                             | 883    |   |                                            |   | 851 |   |   |   | 6,316 |   |   |   | 5,612 |   |
| Net                Operating Revenues                (Margin)                                        |   | $                                                | 20,209 |   |                                            | $      | 20,328 |   |   | $ | 116,044 |   |   | $ | 108,130 |   |
|                                                                                                 |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Margin                (pre-tax):                                                                     |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                          |   | $                                                | 11,841 |   |                                            | $      | 11,319 |   |   | $ | 73,593 |   |   | $ | 65,113 |   |
| Commercial                and                Industrial                                              |   |                                             | 6,360  |   |                                            |   | 6,440 |   |   |   | 29,345 |   |   |   | 27,360 |   |
| Cogeneration                and Electric                Generation                                   |   |                                             | 793    |   |                                            |   | 686 |   |   |   | 1,772 |   |   |   | 1,731 |   |
| Interruptible                                                                                        |   |                                             | 31     |   |                                            |   | 32 |   |   |   | 129 |   |   |   | 174 |   |
| Off-system,                Capacity Release &                Storage                             |   |                                             | 596    |   |                                            |   | 1,125 |   |   |   | 2,186 |   |   |   | 3,882 |   |
| Other                Revenues                                                                        |   |                                             | 603    |   |                                            |   | 485 |   |   |   | 1,429 |   |   |   | 1,359 |   |
|    Margin                Before                Weather Normalization & Decoupling |   |                                             | 20,224 |   |                                            |   | 20,087 |   |   |   | 108,454 |   |   |   | 99,619 |   |
|    TAC                Mechanism                                                       |   |                                             | -      |   |                                            |   | 241 |   |   |   | - |   |   |   | 8,511 |   |
|    CIP                Mechanism                                                       |   |                                             | (15)   |   |                                            |   | - |   |   |   | 7,590 |   |   |   | - |   |
| Utility                Net Operating Revenues                (Margin)                                |   | $                                                | 20,209 |   |                                            | $      | 20,328 |   |   | $ | 116,044 |   |   | $ | 108,130 |   |
|                                                                                                 |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|  Degree                Days                                                                     |   |                                             | 21     |   |                                            |   | 35 |   |   |   | 2,986 |   |   |   | 2,599 |   |

**Volumes**

**Operating      Revenues**

**Margin      (pre-tax)**

**      - **

**Operating      Expenses**

|                                                 |   | Three                MonthsEnded                September                30, |   |    | Nine                MonthsEnded                September                30, |   |
|------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|---------|-----------------------------------------------------------------------------|--------|
|                                                 |   | 2007                vs.                2006                                  |   |    | 2007                vs.                2006                                 |   |
| Operations                                           |   | $                                                                            | (120   | )  |                                                                        | $      | 984 |   |
| Maintenance                                          |   |                                                                         | 90     |    |                                                                        |   | 222 |   |
| Depreciation                                         |   |                                                                         | 272    |    |                                                                        |   | 834 |   |
| Energy                and Other                Taxes |   |                                                                         | (29    | )  |                                                                        |   | 508 |   |

**Operations**

**Depreciation**

**Energy      and Other      Taxes**

**Interest      Charges**

**LIQUIDITY**

**AND**

**      CAPITAL      RESOURCES**

**Cash      Flows from Operating      Activities**

**Cash      Flows from Investing      Activities**

**Cash      Flows from Financing      Activities**

|                           |   | As                ofSeptember                30,                2007 |   |   | As                ofDecember                31,                2006 |   |
|--------------------------------|--------|----------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                           |   |                                                                 |   |   |                                                                |   |
| Common Equity             |   |                                                                 | 50.0   | %      |                                                                |   | 47.4 | % |
| Long-Term                Debt  |   |                                                                 | 39.6   |   |                                                                |   | 39.0 |   |
| Short-Term                Debt |   |                                                                 | 10.4   |   |                                                                |   | 13.6 |   |
|                           |   |                                                                 |   |   |                                                                |   |   |   |
| Total                          |   |                                                                 | 100.0  | %      |                                                                |   | 100.0 | % |

**COMMITMENTSAND      CONTINGENCIES:**

**Contractual      Cash      Obligations**

**      -**

**Off-Balance      Sheet      Arrangements**

**      - **

**Pending      Litigation**

**Ratio      of Earnings to Fixed      Charges**

**      - **

| Twelve                MonthsEnded                September                30, |   |   | Year                Ended December                31, |   |
|-------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|
|                                                                          |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2007                                                                          |   |   | 2006                                                  |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |   | 2002 |   |
|                                                                          |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | 4.1x   |   |                                                  |   | 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                                                    |   | $                         | 1,095  |   |                       | $      | 67     |   |   | $ | 1,162 |   |
|                                                 |                                                     |   |                      |   |   |                       |   |   |   |   |   |   |   |
| Liabilities:                                         |                                                     |   | Maturity                  |   |   | Maturity                   |   |   |   |   |   |
|                                                 |  Source                of Fair                Value |   | <1                Year |   |   | 1                - 3 Years |   |   | Total  |   |
|                                                 |                                                     |   |                      |   |   |                       |   |   |   |   |   |   |   |
| Prices                Actively                Quoted | NYMEX                                                    |   | $                         | 5,636  |   |                       | $      | 183    |   |   | $ | 5,819 |   |

| Net                Derivatives — Energy Related                Liability, January 1,                2007      |   |  $ | (16,669 | )       |
|---------------------------------------------------------------------------------------------------------------------|--------|---------|---------|---------|
| Contracts                Settled During the Nine                Months ended September 30,                2007, Net |   |    | 12,871  |    |
| Other                Changes in Fair Value from                Continuing and New Contracts, Net                    |   |    | (859    | )  |
| Net                Derivatives — Energy Related                Liability, September                30, 2007   |   | $       | (4,657  | )       |

**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:November                9,                2007 | By:/s/                Edward J.                Graham                                                            |
|------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|
|                                                 |                      Edward J. Graham                                                   |
|                                                 |                      President & Chief Executive Officer                            |
|                                                 |                                                                                                             |
|                                                 |                                                                                                             |
|                                                 |                                                                                                             |
| Dated:November                9,                2007 | By:/s/                David A.                Kindlick                                                           |
|                                                 |                      David A. Kindlick                                                  |
|                                                 |                      Senior Vice President & Chief Financial                Officer |