----

----

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

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

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

| Large accelerated filer | o                                                    | Accelerated filer         | o |
|-----------------------------------|------------------------------------------------------|---------------------------|---|
| Non-accelerated filer             | x (Do not check if a smaller reporting company) | Smaller reporting company | o |

----

----

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Table of Contents

TABLE OF CONTENTS

|       |                                                                                  | Page No. |
|------------|---------------------------------------------------------------------------------------|----------|
|       |                                                                                  |     |
| PART I     | FINANCIAL INFORMATION                                                                 | 3        |
|       |                                                                                  |     |
| Item 1.    | Financial Statements                                                                  | 3        |
|       |                                                                                  |     |
| Item 2.    | Management's Discussion and Analysis of Financial Condition and Results of Operations | 16       |
|       |                                                                                  |     |
| Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 23       |
|       |                                                                                  |     |
| Item 4.    | Controls and Procedures                                                               | 24       |
|       |                                                                                  |     |
| PART II    | OTHER INFORMATION                                                                     | 24       |
|       |                                                                                  |     |
| Item 1.    | Legal Proceedings                                                                     | 24       |
|       |                                                                                  |     |
| Item 1A.   | Risk Factors                                                                          | 24       |
|       |                                                                                  |     |
| Item 6.    | Exhibits                                                                              | 24       |
|       |                                                                                  |     |
| Signatures | 25                                                                                    |

----

Table of Contents

|                                   |   | Three Months EndedSeptember 30, |   |
|----------------------------------------|--------|---------------------------------|--------|
|                                   |   | 2010                            |   |   | 2009 |   |
|                                   |   |                            |   |   |   |   |
|                                   |   |                            |   |   |   |   |
| Operating Revenues                     |   | $                               | 57,140 |   |   | $ | 56,305 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Operating Expenses:                    |   |                            |   |   |   |   |   |   |
| Cost of Sales (Excluding depreciation) |   |                            | 28,834 |   |   |   | 31,726 |   |
| Operations                             |   |                            | 15,071 |   |   |   | 13,839 |   |
| Maintenance                            |   |                            | 2,847  |   |   |   | 2,301 |   |
| Depreciation                           |   |                            | 7,676  |   |   |   | 6,791 |   |
| Energy and Other Taxes                 |   |                            | 1,377  |   |   |   | 1,416 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Total Operating Expenses               |   |                            | 55,805 |   |   |   | 56,073 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Operating Income                       |   |                            | 1,335  |   |   |   | 232 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Other Income and Expense               |   |                            | (671   | ) |   |   | 107 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Interest Charges                       |   |                            | (4,775 | ) |   |   | (4,085 | ) |
|                                   |   |                            |   |   |   |   |   |   |
| Loss Before Income Taxes               |   |                            | (4,111 | ) |   |   | (3,746 | ) |
|                                   |   |                            |   |   |   |   |   |   |
| Income Taxes                           |   |                            | 2,132  |   |   |   | 1,666 |   |
|                                   |   |                            |   |   |   |   |   |   |
| Net Loss                               |   | $                               | (1,979 | ) |   | $ | (2,080 | ) |

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Table of Contents

SOUTH

|                                   |   | Nine Months EndedSeptember 30, |    |
|----------------------------------------|--------|--------------------------------|---------|
|                                   |   | 2010                           |    |   | 2009 |   |
|                                   |   |                           |    |   |   |   |
|                                   |   |                           |    |   |   |   |
| Operating Revenues                     |   | $                              | 315,200 |   |   | $ | 364,253 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Operating Expenses:                    |   |                           |    |   |   |   |   |   |
| Cost of Sales (Excluding depreciation) |   |                           | 169,650 |   |   |   | 227,608 |   |
| Operations                             |   |                           | 49,363  |   |   |   | 47,206 |   |
| Maintenance                            |   |                           | 8,448   |   |   |   | 6,162 |   |
| Depreciation                           |   |                           | 22,074  |   |   |   | 19,973 |   |
| Energy and Other Taxes                 |   |                           | 7,315   |   |   |   | 7,783 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Total Operating Expenses               |   |                           | 256,850 |   |   |   | 308,732 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Operating Income                       |   |                           | 58,350  |   |   |   | 55,521 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Other Income and Expense               |   |                           | (198    | ) |   |   | 789 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Interest Charges                       |   |                           | (12,953 | ) |   |   | (12,334 | ) |
|                                   |   |                           |    |   |   |   |   |   |
| Income Before Income Taxes             |   |                           | 45,199  |   |   |   | 43,976 |   |
|                                   |   |                           |    |   |   |   |   |   |
| Income Taxes                           |   |                           | (18,132 | ) |   |   | (18,051 | ) |
|                                   |   |                           |    |   |   |   |   |   |
| Net Income                             |   | $                              | 27,067  |   |   | $ | 25,925 |   |

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Table of Contents

|                                                                    |   | Three Months EndedSeptember 30, |   |
|-------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                    |   | 2010                            |   |   | 2009 |   |
|                                                                    |   |                            |   |   |   |   |
|                                                                    |   |                            |   |   |   |   |
|                                                                    |   |                            |   |   |   |   |
| Net Loss                                                                |   | $                               | (1,979 | ) |   | $ | (2,080 | ) |
|                                                                    |   |                            |   |   |   |   |   |   |
| Other Comprehensive Income  - Net of Tax:                     |   |                            |   |   |   |   |   |   |
|                                                                    |   |                            |   |   |   |   |   |   |
|   Unrealized Gain on Available-for-Sale Securities            |   |                            | 283    |   |   |   | 344 |   |
|   Unrealized Gain on Derivatives - Other                      |   |                            | 7      |   |   |   | 7 |   |
|                                                                    |   |                            |   |   |   |   |   |   |
|      Other Comprehensive Income - Net of Tax * |   |                            | 290    |   |   |   | 351 |   |
|                                                                    |   |                            |   |   |   |   |   |   |
| Comprehensive Loss                                                      |   | $                               | (1,689 | ) |   | $ | (1,729 | ) |

|                                                |   | Nine Months EndedSeptember 30, |   |
|-----------------------------------------------------|--------|--------------------------------|--------|
|                                                |   | 2010                           |   |   | 2009 |   |
|                                                |   |                           |   |   |   |   |
| Net Income                                          |   | $                              | 27,067 |   |   | $ | 25,925 |   |
|                                                |   |                           |   |   |   |   |   |   |
| Other Comprehensive Income  - Net of Tax: |   |                           |   |   |   |   |   |   |
|                                                |   |                           |   |   |   |   |   |   |
| Unrealized Gain on Available-for-Sale Securities    |   |                           | 163    |   |   |   | 441 |   |
| Unrealized Gain on Derivatives - Other              |   |                           | 20     |   |   |   | 20 |   |
|                                                |   |                           |   |   |   |   |   |   |
| Other Comprehensive Income - Net of Tax *           |   |                           | 183    |   |   |   | 461 |   |
|                                                |   |                           |   |   |   |   |   |   |
| Comprehensive Income                                |   | $                              | 27,250 |   |   | $ | 26,386 |   |

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Table of Contents

|                                                  |   | Nine Months EndedSeptember 30, |    |
|-------------------------------------------------------|--------|--------------------------------|---------|
|                                                  |   | 2010                           |    |   | 2009 |   |
|                                                  |   |                           |    |   |   |   |
|                                                  |   |                           |    |   |   |   |
| Net Cash Provided by Operating Activities             |   | $                              | 73,839  |   |   | $ | 86,313 |   |
|                                                  |   |                           |    |   |   |   |   |   |
| Cash Flows from Investing Activities:                 |   |                           |    |   |   |   |   |   |
|                                                  |   |                           |    |   |   |   |   |   |
| Capital Expenditures                                  |   |                           | (88,992 | ) |   |   | (54,921 | ) |
| Purchase of Restricted Investments in Margin Accounts |   |                           | (4,466  | ) |   |   | - |   |
| Investment in Long-Term Receivables                   |   |                           | (2,009  | ) |   |   | (3,486 | ) |
| Proceeds from Long-Term Receivables                   |   |                           | 1,213   |   |   |   | 3,633 |   |
|                                                  |   |                           |    |   |   |   |   |   |
| Net Cash Used in Investing Activities                 |   |                           | (94,254 | ) |   |   | (54,774 | ) |
|                                                  |   |                           |    |   |   |   |   |   |
| Cash Flows from Financing Activities:                 |   |                           |    |   |   |   |   |   |
| Net Repayments of Lines of Credit                     |   |                           | (4,100  | ) |   |   | (28,050 | ) |
| Principal Repayments of Long-Term Debt                |   |                           | -       |   |   |   | (17 | ) |
| Proceeds from Issuance of Long-Term Debt              |   |                           | 60,000  |   |   |   | - |   |
| Payments for Issuance of Long-Term Debt               |   |                           | (1,016  | ) |   |   | (95 | ) |
| Dividend on Common Stock                              |   |                           | (35,001 | ) |   |   | (5,001 | ) |
|                                                  |   |                           |    |   |   |   |   |   |
| Net Cash Provided by (Used in) Financing Activities   |   |                           | 19,883  |   |   |   | (33,163 | ) |
|                                                  |   |                           |    |   |   |   |   |   |
| Net Decrease in Cash and Cash Equivalents             |   |                           | (532    | ) |   |   | (1,624 | ) |
| Cash and Cash Equivalents at Beginning of Period      |   |                           | 1,993   |   |   |   | 2,228 |   |
|                                                  |   |                           |    |   |   |   |   |   |
| Cash and Cash Equivalents at End of Period            |   | $                              | 1,461   |   |   | $ | 604 |   |

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Table of Contents

|                                         |   | September 30,2010 |      |   | December 31,2009 |   |
|----------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
| Assets                                       |   |              |      |   |             |   |
|                                         |   |              |      |   |             |   |
| Property, Plant and Equipment:               |   |              |      |   |             |   |
| Utility Plant, at original cost              |   | $                 | 1,352,935 |   |             | $      | 1,275,792 |   |
| Accumulated Depreciation                     |   |              | (331,979  | )      |             |   | (314,627 | ) |
|                                         |   |              |      |   |             |   |   |   |
| Property, Plant and Equipment - Net          |   |              | 1,020,956 |   |             |   | 961,165 |   |
|                                         |   |              |      |   |             |   |   |   |
| Investments:                                 |   |              |      |   |             |   |   |   |
| Available-for-Sale Securities                |   |              | 6,280     |   |             |   | 5,941 |   |
| Restricted Investments                       |   |              | 4,598     |   |             |   | 132 |   |
|                                         |   |              |      |   |             |   |   |   |
| Total Investments                            |   |              | 10,878    |   |             |   | 6,073 |   |
|                                         |   |              |      |   |             |   |   |   |
| Current Assets:                              |   |              |      |   |             |   |   |   |
| Cash and Cash Equivalents                    |   |              | 1,461     |   |             |   | 1,993 |   |
| Accounts Receivable                          |   |              | 37,641    |   |             |   | 41,392 |   |
| Accounts Receivable - Related Parties        |   |              | 4,461     |   |             |   | 974 |   |
| Unbilled Revenues                            |   |              | 8,919     |   |             |   | 47,333 |   |
| Provision for Uncollectibles                 |   |              | (5,149    | )      |             |   | (3,915 | ) |
| Natural Gas in Storage, average cost         |   |              | 34,834    |   |             |   | 23,711 |   |
| Materials and Supplies, average cost         |   |              | 3,170     |   |             |   | 4,854 |   |
| Prepaid Taxes                                |   |              | 34,739    |   |             |   | 13,796 |   |
| Derivatives - Energy Related Assets          |   |              | 795       |   |             |   | 797 |   |
| Other Prepayments and Current Assets         |   |              | 2,730     |   |             |   | 2,248 |   |
|                                         |   |              |      |   |             |   |   |   |
| Total Current Assets                         |   |              | 123,601   |   |             |   | 133,183 |   |
|                                         |   |              |      |   |             |   |   |   |
| Regulatory and Other Noncurrent Assets:      |   |              |      |   |             |   |   |   |
| Regulatory Assets                            |   |              | 245,477   |   |             |   | 240,462 |   |
| Unamortized Debt Issuance Costs              |   |              | 6,649     |   |             |   | 5,829 |   |
| Long-Term Receivables                        |   |              | 7,057     |   |             |   | 7,693 |   |
| Derivatives - Energy Related Assets          |   |              | 256       |   |             |   | 333 |   |
| Other                                        |   |              | 2,396     |   |             |   | 2,324 |   |
|                                         |   |              |      |   |             |   |   |   |
| Total Regulatory and Other Noncurrent Assets |   |              | 261,835   |   |             |   | 256,641 |   |
|                                         |   |              |      |   |             |   |   |   |
| Total Assets                                 |   | $                 | 1,417,270 |   |             | $      | 1,357,062 |   |

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Table of Contents

|                                              |   | September 30,2010 |      |   | December 31,2009 |   |
|---------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
|                                              |   |              |      |   |             |   |
| 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 |   |              | 200,716   |   |             |   | 200,716 |   |
| Accumulated Other Comprehensive Loss              |   |              | (6,147    | )      |             |   | (6,330 | ) |
| Retained Earnings                                 |   |              | 218,237   |   |             |   | 231,296 |   |
|                                              |   |              |      |   |             |   |   |   |
| Total Common Equity                               |   |              | 418,654   |   |             |   | 431,530 |   |
|                                              |   |              |      |   |             |   |   |   |
| Long-Term Debt                                    |   |              | 285,000   |   |             |   | 250,000 |   |
|                                              |   |              |      |   |             |   |   |   |
| Total Capitalization                              |   |              | 703,654   |   |             |   | 681,530 |   |
|                                              |   |              |      |   |             |   |   |   |
| Current Liabilities:                              |   |              |      |   |             |   |   |   |
| Notes Payable                                     |   |              | 105,300   |   |             |   | 109,400 |   |
| Current Portion of Long-Term Debt                 |   |              | 60,000    |   |             |   | 35,000 |   |
| Accounts Payable - Commodity                      |   |              | 12,211    |   |             |   | 19,630 |   |
| Accounts Payable - Other                          |   |              | 16,811    |   |             |   | 21,947 |   |
| Accounts Payable - Related Parties                |   |              | 9,593     |   |             |   | 12,120 |   |
| Derivatives - Energy Related Liabilities          |   |              | 20,484    |   |             |   | 9,799 |   |
| Deferred Income Taxes - Net                       |   |              | 5,583     |   |             |   | 11,642 |   |
| Customer Deposits and Credit Balances             |   |              | 20,787    |   |             |   | 13,542 |   |
| Environmental Remediation Costs                   |   |              | 21,959    |   |             |   | 22,499 |   |
| Taxes Accrued                                     |   |              | 1,621     |   |             |   | 8,548 |   |
| Pension Benefits                                  |   |              | 1,066     |   |             |   | 1,066 |   |
| Interest Accrued                                  |   |              | 4,859     |   |             |   | 5,979 |   |
| Dividends Declared                                |   |              | 5,125     |   |             |   | - |   |
| Other Current Liabilities                         |   |              | 3,703     |   |             |   | 7,839 |   |
|                                              |   |              |      |   |             |   |   |   |
| Total Current Liabilities                         |   |              | 289,102   |   |             |   | 279,011 |   |
|                                              |   |              |      |   |             |   |   |   |
| Regulatory and Other Noncurrent Liabilities:      |   |              |      |   |             |   |   |   |
| Regulatory Liabilities                            |   |              | 51,013    |   |             |   | 50,193 |   |
| Deferred Income Taxes - Net                       |   |              | 237,021   |   |             |   | 210,925 |   |
| Environmental Remediation Costs                   |   |              | 46,095    |   |             |   | 46,557 |   |
| Asset Retirement Obligations                      |   |              | 23,379    |   |             |   | 22,960 |   |
| Pension and Other Postretirement Benefits         |   |              | 54,054    |   |             |   | 57,699 |   |
| Investment Tax Credits                            |   |              | 1,285     |   |             |   | 1,517 |   |
| Derivatives - Energy Related Liabilities          |   |              | 1,583     |   |             |   | 504 |   |
| Derivatives - Other                               |   |              | 5,740     |   |             |   | 1,956 |   |
| Other                                             |   |              | 4,344     |   |             |   | 4,210 |   |
|                                              |   |              |      |   |             |   |   |   |
| Total Regulatory and Other Noncurrent Liabilities |   |              | 424,514   |   |             |   | 396,521 |   |
|                                              |   |              |      |   |             |   |   |   |
| Commitments and Contingencies (Note 9)            |   |              |      |   |             |   |   |   |
|                                              |   |              |      |   |             |   |   |   |
| Total Capitalization and Liabilities              |   | $                 | 1,417,270 |   |             | $      | 1,357,062 |   |

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Table of Contents

| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
|----|---------------------------------------------|

----

Table of Contents

| 2. | STOCK-BASED COMPENSATION PLANS: |
|----|---------------------------------|

| Grant Date |   | Shares Outstanding |   |   | Fair Value Per Share |   |   | Expected Volatility |   |   | Risk-Free Interest Rate |   |
|------------|--------|--------------------|--------|--------|----------------------|--------|--------|---------------------|--------|--------|-------------------------|--------|
|       |   |               |   |   |                 |   |   |                |   |   |                    |   |
| Jan. 2008  |   |               | 9,238  |   |                 | $      | 34.030 |                |   |   | 21.7                    | %      |   |   | 2.90 | % |
| Jan. 2009  |   |               | 8,318  |   |                 | $      | 39.350 |                |   |   | 28.6                    | %      |   |   | 1.20 | % |
| Jan. 2010  |   |               | 10,024 |   |                 | $      | 39.020 |                |   |   | 29.0                    | %      |   |   | 1.65 | % |

|                                             |   | Shares |   |   | Weighted Average Grant Date Fair Value |   |
|--------------------------------------------------|--------|--------|--------|--------|----------------------------------------|--------|
| Nonvested Shares Outstanding, January 1, 2010    |   |   | 17,556 |   |                                   | $      | 36.551 |   |
|                                             |   |   |   |   |                                   |   |   |   |
| Granted                                          |   |   | 10,024 |   |                                   | $      | 39.020 |   |
|                                             |   |   |   |   |                                   |   |   |   |
| Nonvested Shares Outstanding, September 30, 2010 |   |   | 27,580 |   |                                   | $      | 37.448 |   |

| 3. | RATES AND REGULATORY ACTIONS: |
|----|-------------------------------|

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Table of Contents

| 4. | REGULATORY ASSETS AND LIABILITIES: |
|----|------------------------------------|

|                                                    |   | September 30, |    |   | December 31, |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                    |   | 2010               |    |   | 2009              |   |
| Environmental Remediation Costs:                        |   |               |    |   |              |   |   |   |
| Expended - Net                                          |   | $                  | 39,142  |   |              | $      | 42,924 |   |
| Liability for Future Expenditures                       |   |               | 68,054  |   |              |   | 69,056 |   |
| Income Taxes - Flowthrough Depreciation                 |   |               | 1,018   |   |              |   | 1,752 |   |
| Deferred Asset Retirement Obligation Costs              |   |               | 22,715  |   |              |   | 22,438 |   |
| Deferred Pension and Other Postretirement Benefit Costs |   |               | 70,049  |   |              |   | 71,192 |   |
| Deferred Gas Costs - Net                                |   |               | 7,645   |   |              |   | 6,519 |   |
| Conservation Incentive Program Receivable               |   |               | 19,557  |   |              |   | 16,672 |   |
| Societal Benefit Costs Receivable                       |   |               | 3,090   |   |              |   | 1,872 |   |
| Premium for Early Retirement of Debt                    |   |               | 740     |   |              |   | 1,046 |   |
| Other Regulatory Assets                                 |   |               | 13,467  |   |              |   | 6,991 |   |
|                                                    |   |               |    |   |              |   |   |   |
| Total Regulatory Assets                                 |   | $                  | 245,477 |   |              | $      | 240,462 |   |

|                         |   | September 30, |   |   | December 31, |   |
|------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                         |   | 2010               |   |   | 2009              |   |
| Excess Plant Removal Costs   |   | $                  | 48,758 |   |              | $      | 48,715 |   |
| Other Regulatory Liabilities |   |               | 2,255  |   |              |   | 1,478 |   |
|                         |   |               |   |   |              |   |   |   |
| Total Regulatory Liabilities |   | $                  | 51,013 |   |              | $      | 50,193 |   |

| 5. | FINANCIAL INSTRUMENTS: |
|----|------------------------|

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Table of Contents

| 6. | RELATED PARTY TRANSACTIONS: |
|----|-----------------------------|

|                               |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                               |   | 2010                                      |   |   | 2009                                     |   |   | 2010 |   |   | 2009 |   |
| Operating Revenues/Affiliates:     |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| SJRG                               |   | $                                         | 232    |   |                                     | $      | 285 |   |   | $ | 877 |   |   | $ | 3,490 |   |
| Other                              |   |                                      | 103    |   |                                     |   | 93 |   |   |   | 338 |   |   |   | 338 |   |
| Total Operating Revenue/Affiliates |   | $                                         | 335    |   |                                     | $      | 378 |   |   | $ | 1,215 |   |   | $ | 3,828 |   |

|                            |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|---------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                            |   | 2010                                      |   |   | 2009                                     |   |   | 2010 |   |   | 2009 |   |
| Costs of Sales/Affiliates:      |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| SJRG                            |   | $                                         | 20     |   |                                     | $      | 1,860 |   |   | $ | 14,602 |   |   | $ | 33,321 |   |
| Total Cost of Sales/Affiliates: |   | $                                         | 20     |   |                                     | $      | 1,860 |   |   | $ | 14,602 |   |   | $ | 33,321 |   |

| Derivative Losses (Gains) (See Note 1): * |   |   |   |   |   |   |   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| SJRG                                      |   | $      | 5,461  |   |   | $      | 12,478 |   |   | $ | 17,757 |   |   | $ | 44,290 |   |

| Operations Expense/Affiliates       |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| SJI                                 |   | $      | 1,766  |   |   | $      | 1,655  |   |   | $      | 6,147  |   |   | $ | 5,832 |   |
| SJIS                                |   |   | 1,258  |   |   |   | 1,261  |   |   |   | 3,720  |   |   |   | 3,596 |   |
| Millennium                          |   |   | 771    |   |   |   | 737    |   |   |   | 2,223  |   |   |   | 2,178 |   |
| Other                               |   |   | (65    | )      |   |   | (70    | )      |   |   | (183   | )      |   |   | (228 | ) |
| Total Operations Expense/Affiliates |   | $      | 3,730  |   |   | $      | 3,583  |   |   | $      | 11,907 |   |   | $ | 11,378 |   |

| 7. | UNUSED LINES OF CREDIT: |
|----|-------------------------|

|                      |   | Total Facility |    |   | Usage  |   |    | Available Liquidity |   | Expiration Date |
|---------------------------|--------|----------------|---------|--------|--------|--------|---------|---------------------|--------|-----------------|
|                      |   |           |    |   |   |   |    |                |   |            |
| Revolving Credit Facility |   | $              | 100,000 |   |   | $      | 88,500  |                |   | $               | 11,500 |   | August 2011 |
| Line of Credit            |   |           | 40,000  |   |   |   | — |                |   |            | 40,000 |   | August 2011 |
| Uncommitted Bank Lines    |   |           | 40,000  |   |   |   | 16,800  |                |   |            | 23,200 |   | Various |
|                      |   |           |    |   |   |   |    |                |   |            |   |   |   |
| Total                     |   | $              | 180,000 |   |   | $      | 105,300 |                |   | $               | 74,700 |   |   |

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| 8. | PENSION AND OTHER POSTRETIREMENT BENEFITS: |
|----|--------------------------------------------|

|                               | Pension Benefits |                                      |
|------------------------------------|------------------|-------------------------------------------|
|                               |             | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|                               |             | 2010                                      |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Service Cost                       |             | $                                         | 663 |   |   | $ | 622 |   |   | $ | 1,989 |   |   | $ | 1,866 |   |
| Interest Cost                      |             |                                      | 1,780 |   |   |   | 1,676 |   |   |   | 5,339 |   |   |   | 5,029 |   |
| Expected Return on Plan Assets     |             |                                      | (1,626 | ) |   |   | (1,457 | ) |   |   | (4,877 | ) |   |   | (4,370 | ) |
| Amortizations:                     |             |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior Service Cost                 |             |                                      | 54 |   |   |   | 54 |   |   |   | 162 |   |   |   | 161 |   |
| Actuarial Loss                     |             |                                      | 919 |   |   |   | 1,043 |   |   |   | 2,757 |   |   |   | 3,127 |   |
| Net Periodic Benefit Cost          |             |                                      | 1,790 |   |   |   | 1,938 |   |   |   | 5,370 |   |   |   | 5,813 |   |
| Capitalized Benefit Costs          |             |                                      | (877 | ) |   |   | (949 | ) |   |   | (2,631 | ) |   |   | (2,848 | ) |
| Total Net Periodic Benefit Expense |             | $                                         | 913 |   |   | $ | 989 |   |   | $ | 2,739 |   |   | $ | 2,965 |   |

|                               | Other Postretirement Benefits |                                      |
|------------------------------------|-------------------------------|-------------------------------------------|
|                               |                          | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|                               |                          | 2010                                      |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Service Cost                       |                          | $                                         | 183 |   |   | $ | 155 |   |   | $ | 548 |   |   | $ | 466 |   |
| Interest Cost                      |                          |                                      | 648 |   |   |   | 678 |   |   |   | 1,945 |   |   |   | 2,034 |   |
| Expected Return on Plan Assets     |                          |                                      | (385 | ) |   |   | (351 | ) |   |   | (1,154 | ) |   |   | (1,054 | ) |
| Amortizations:                     |                          |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior Service Credits              |                          |                                      | (70 | ) |   |   | (63 | ) |   |   | (211 | ) |   |   | (190 | ) |
| Actuarial Loss                     |                          |                                      | 297 |   |   |   | 562 |   |   |   | 890 |   |   |   | 1,310 |   |
| Net Periodic Benefit Cost          |                          |                                      | 673 |   |   |   | 981 |   |   |   | 2,018 |   |   |   | 2,566 |   |
| Capitalized Benefit Costs          |                          |                                      | (330 | ) |   |   | (480 | ) |   |   | (989 | ) |   |   | (1,257 | ) |
| Total Net Periodic Benefit Expense |                          | $                                         | 343 |   |   | $ | 501 |   |   | $ | 1,029 |   |   | $ | 1,309 |   |

| 9. | COMMITMENTS AND CONTINGENCIES: |
|----|--------------------------------|

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Table of Contents

| 10. | FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES: |
|-----|-----------------------------------------------------------|

|   | · | Level 1:  Observable inputs such as quoted prices in active markets for identical assets or liabilities. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2:  Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3:  Unobservable inputs that reflect the reporting entity’s own assumptions. |
|--------|--------|----------------------------------------------------------------------------------------------------|

|                                               |   | Total  |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|----------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| Assets -                                           |   |   |   |   |    |   |   |    |   |   |    |   |
|                                               |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Available-for-Sale Securities (A)                  |   | $      | 6,280  |   |    | $      | 6,280  |    |   | $      | -       |   |   | $ | - |   |
| Derivatives – Energy Related Assets (B)      |   |   | 1,051  |   |    |   | 462    |    |   |   | 589     |   |   |   | - |   |
|                                               |   | $      | 7,331  |   |    | $      | 6,742  |    |   | $      | 589     |   |   | $ | - |   |
|                                               |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Liabilities -                                      |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
|                                               |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Derivatives – Energy Related Liabilities (B) |   | $      | 22,067 |   |    | $      | 18,459 |    |   | $      | 3,608   |   |   | $ | - |   |
| Derivatives – Other (C)                      |   |   | 5,740  |   |    |   | -      |    |   |   | 5,740   |   |   |   | - |   |
|                                               |   | $      | 27,807 |   |    | $      | 18,459 |    |   | $      | 9,348   |   |   | $ | - |   |

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Table of Contents

| 11. | AVAILABLE–FOR–SALE SECURITIES: |
|-----|--------------------------------------------|

|                         |   | Less than 12 Months |   |   | Greater Than 12 Months |   |   | Total      |   |
|------------------------------|--------|---------------------|--------|--------|------------------------|--------|--------|------------|--------|
|                         |   |                |   |   |                   |   |   |       |   |   |   |   |   |   |   |   |   |   |
|                         |   | Fair Value          |   |   | Unrealized Losses      |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
| Marketable Equity Securities |   | $                   | -      |   |                   | $      | -      |       |   | $ | 3,086 |   |   | $ | 482 |   |   | $ | 3,086 |   |   | $ | 482 |   |

| 12. | DERIVATIVE INSTRUMENTS: |
|-----|-------------------------|

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Table of Contents

| Derivatives not designated as hedging instruments under GAAP       |   | September 30, 2010 |   |   | December 31, 2009 |   |
|--------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                               |   | Assets                  |   |   | Liabilities            |   |   | Assets |   |   | Liabilities |   |
| Energy related commodity contracts:                                |   |                    |   |   |                   |   |   |   |   |   |   |   |
|                                                               |   |                    |   |   |                   |   |   |   |   |   |   |   |
| Derivatives – Energy Related – Current                 |   | $                       | 795    |   |                   | $      | 20,484 |   |   | $ | 797 |   |   | $ | 9,799 |   |
|                                                               |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Derivatives – Energy Related – Non-Current             |   |                    | 256    |   |                   |   | 1,583 |   |   |   | 333 |   |   |   | 504 |   |
|                                                               |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate contracts:                                           |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Derivatives – Other                                          |   |                    | -      |   |                   |   | 5,740 |   |   |   | - |   |   |   | 1,956 |   |
|                                                               |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total derivatives not designated as hedging instruments under GAAP |   | $                       | 1,051  |   |                   | $      | 27,807 |   |   |   | 1,130 |   |   |   | 12,259 |   |

|                                                                    |   | Three months endedSeptember 30, |   | Nine months endedSeptember 30, |   |
|-------------------------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------|--------|
| Derivatives in Cash Flow Hedging Relationships Interest Rate Contracts: |   | 2010                                      |   |                                     | 2009   |   | 2010 |   | 2009 |   |
|                                                                    |   |                                      |   |                                     |   |   |   |   |   |   |   |   |
| Losses reclassified from accumulated OCI into income (a)                |   | $                                         | (12    | )                                        |   | $ | (12 | ) |   | $ | (36 | ) |   | $ | (36 | ) |

Item 2. Management’s Discussion and Analysis

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Table of Contents

|                                   |   | Three Months Ended |   |   | Nine Months Ended |   |
|----------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                                   |   | September 30,                |   |   | September 30,               |   |
|                                   |   | 2010                         |   |   | 2009                        |   |   | 2010 |   |   | 2009 |   |
| Utility Throughput – dth:        |   |                         |   |   |                        |   |   |   |   |   |   |   |
| Firm Sales -                           |   |                         |   |   |                        |   |   |   |   |   |   |   |
| Residential                            |   |                         | 1,506  |   |                        |   | 1,706 |   |   |   | 15,246 |   |   |   | 16,070 |   |
| Commercial                             |   |                         | 627    |   |                        |   | 673 |   |   |   | 3,955 |   |   |   | 4,319 |   |
| Industrial                             |   |                         | 28     |   |                        |   | 26 |   |   |   | 200 |   |   |   | 231 |   |
| Cogeneration & Electric Generation |   |                         | 701    |   |                        |   | 176 |   |   |   | 1,101 |   |   |   | 278 |   |
| Firm Transportation -                  |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Residential                            |   |                         | 136    |   |                        |   | 139 |   |   |   | 1,325 |   |   |   | 1,410 |   |
| Commercial                             |   |                         | 617    |   |                        |   | 647 |   |   |   | 4,067 |   |   |   | 4,132 |   |
| Industrial                             |   |                         | 3,036  |   |                        |   | 2,906 |   |   |   | 9,379 |   |   |   | 8,875 |   |
| Cogeneration & Electric Generation |   |                         | 1,638  |   |                        |   | 799 |   |   |   | 4,634 |   |   |   | 1,518 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Firm Throughput                  |   |                         | 8,289  |   |                        |   | 7,072 |   |   |   | 39,907 |   |   |   | 36,833 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible Sales                    |   |                         | 8      |   |                        |   | - |   |   |   | 51 |   |   |   | 4 |   |
| Interruptible Transportation           |   |                         | 402    |   |                        |   | 492 |   |   |   | 1,256 |   |   |   | 1,700 |   |
| Off-System                             |   |                         | 969    |   |                        |   | 544 |   |   |   | 4,006 |   |   |   | 4,309 |   |
| Capacity Release                       |   |                         | 12,337 |   |                        |   | 10,560 |   |   |   | 31,729 |   |   |   | 28,023 |   |
|                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Throughput - Utility             |   |                         | 22,005 |   |                        |   | 18,668 |   |   |   | 76,949 |   |   |   | 70,869 |   |

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Table of Contents

|                                   |   | Three Months Ended |   |   | Nine Months Ended |   |
|----------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                   |   | September 30,      |   |   | September 30,     |   |
|                                   |   | 2010               |   |   | 2009              |   |   | 2010 |   |   | 2009 |   |
| Utility Operating Revenues:            |   |               |   |   |              |   |   |   |   |   |   |   |
| Firm Sales -                           |   |               |   |   |              |   |   |   |   |   |   |   |
| Residential                            |   | $                  | 28,745 |   |              | $      | 33,929 |   |   | $ | 198,105 |   |   | $ | 243,212 |   |
| Commercial                             |   |               | 8,743  |   |              |   | 9,129 |   |   |   | 45,228 |   |   |   | 53,663 |   |
| Industrial                             |   |               | 435    |   |              |   | 309 |   |   |   | 2,436 |   |   |   | 2,637 |   |
| Cogeneration & Electric Generation |   |               | 4,480  |   |              |   | 1,267 |   |   |   | 7,164 |   |   |   | 2,312 |   |
| Firm Transportation -                  |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Residential                            |   |               | 1,212  |   |              |   | 1,090 |   |   |   | 7,168 |   |   |   | 7,413 |   |
| Commercial                             |   |               | 2,662  |   |              |   | 2,449 |   |   |   | 14,505 |   |   |   | 13,435 |   |
| Industrial                             |   |               | 4,155  |   |              |   | 3,638 |   |   |   | 12,806 |   |   |   | 10,841 |   |
| Cogeneration & Electric Generation |   |               | 1,098  |   |              |   | 681 |   |   |   | 3,816 |   |   |   | 1,474 |   |
|                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total Firm Revenues                    |   |               | 51,530 |   |              |   | 52,492 |   |   |   | 291,228 |   |   |   | 334,987 |   |
|                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible Sales                    |   |               | 118    |   |              |   | (16 | ) |   |   | 756 |   |   |   | 79 |   |
| Interruptible Transportation           |   |               | 410    |   |              |   | 465 |   |   |   | 1,308 |   |   |   | 1,551 |   |
| Off-System                             |   |               | 4,525  |   |              |   | 1,904 |   |   |   | 20,071 |   |   |   | 23,154 |   |
| Capacity Release                       |   |               | 358    |   |              |   | 1,171 |   |   |   | 1,088 |   |   |   | 3,594 |   |
| Other                                  |   |               | 199    |   |              |   | 289 |   |   |   | 749 |   |   |   | 888 |   |
|                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total Utility Operating Revenues       |   |               | 57,140 |   |              |   | 56,305 |   |   |   | 315,200 |   |   |   | 364,253 |   |
|                                   |   |               |   |   |              |   |   |   |   |   |   |   |
| Less:                                  |   |               |   |   |              |   |   |   |   |   |   |   |
| Cost of Sales                          |   |               | 28,834 |   |              |   | 31,726 |   |   |   | 169,650 |   |   |   | 227,608 |   |
| Conservation Recoveries*               |   |               | 1,025  |   |              |   | 1,247 |   |   |   | 5,398 |   |   |   | 6,636 |   |
| RAC Recoveries*                        |   |               | 1,741  |   |              |   | 1,210 |   |   |   | 5,222 |   |   |   | 3,627 |   |
| EET Recoveries*                        |   |               | 426    |   |              |   | 81 |   |   |   | 964 |   |   |   | 81 |   |
| Revenue Taxes                          |   |               | 863    |   |              |   | 921 |   |   |   | 5,709 |   |   |   | 6,263 |   |
| Utility Margin                         |   | $                  | 24,251 |   |              | $      | 21,120 |   |   | $ | 128,257 |   |   | $ | 120,038 |   |

|                                                 |   |   |   |   |   |   |   |   |   |   |    |   |   |   |    |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Margin:                                              |   |   |   |   |   |   |   |   |   |   |    |   |   |   |    |   |
| Residential                                          |   | $      | 12,806 |   |   | $      | 12,699 |   |   | $      | 72,889  |   |   | $      | 74,836  |   |
| Commercial and Industrial                            |   |   | 6,673  |   |   |   | 6,325  |   |   |   | 28,395  |   |   |   | 28,779  |   |
| Cogeneration and Electric Generation                 |   |   | 916    |   |   |   | 875    |   |   |   | 2,304   |   |   |   | 1,750   |   |
| Interruptible                                        |   |   | 25     |   |   |   | 8      |   |   |   | 139     |   |   |   | 96      |   |
| Off-system & Capacity Release                    |   |   | 85     |   |   |   | 208    |   |   |   | 462     |   |   |   | 1,108   |   |
| Other Revenues                                       |   |   | 467    |   |   |   | 859    |   |   |   | 1,458   |   |   |   | 2,075   |   |
| Margin Before Weather Normalization & Decoupling |   |   | 20,972 |   |   |   | 20,974 |   |   |   | 105,647 |   |   |   | 108,644 |   |
| CIRT Mechanism                                       |   |   | 2,505  |   |   |   | 551    |   |   |   | 7,067   |   |   |   | 926     |   |
| CIP Mechanism                                        |   |   | 733    |   |   |   | (409   | )      |   |   | 15,425  |   |   |   | 10,464  |   |
| EET Mechanism                                        |   |   | 41     |   |   |   | 4      |   |   |   | 118     |   |   |   | 4       |   |
| Utility Margin                                       |   | $      | 24,251 |   |   | $      | 21,120 |   |   | $      | 128,257 |   |   | $      | 120,038 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |    |   |   |   |    |   |
| Degree Days:                                         |   |   | 3      |   |   |   | 34     |   |   |   | 2,782   |   |   |   | 3,033   |   |

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Table of Contents

|                                |   | Three Months Ended |   |   | Nine Months Ended |   |
|-------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                |   | September 30,      |   |   | September 30,     |   |
|                                |   | 2010               |   |   | 2009              |   |   | 2010 |   |   | 2009 |   |
| Net Income Benefit:                 |   |               |   |   |              |   |   |   |   |   |   |   |
| CIP – Weather Related         |   | $                  | -      |   |              | $      | - |   |   | $ | 2.3 |   |   | $ | (0.1 | ) |
| CIP – Usage Related           |   |               | 0.4    |   |              |   | (0.2 | ) |   |   | 6.8 |   |   |   | 6.3 |   |
| Total Net Income Benefit            |   | $                  | 0.4    |   |              | $      | (0.2 | ) |   | $ | 9.1 |   |   | $ | 6.2 |   |
|                                |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Weather Compared to 20-Year Average |   | 93.8% warmer       |   |   | 30.5% warmer      |   |   | 8.1% warmer |   |   | 0.2% colder |   |
| Weather Compared to Prior Year      |   | 91.2% warmer       |   |   | 85.3% colder      |   |   | 8.3% warmer |   |   | 10.2% colder |   |

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Table of Contents

|                   |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                   |   | 2010 vs. 2009                             |   |   | 2010 vs. 2009                            |   |
|                   |   |                                      |   |   |                                     |   |
| Operations             |   | $                                         | 1,232  |   |                                     | $      | 2,157 |   |
| Maintenance            |   |                                      | 546    |   |                                     |   | 2,286 |   |
| Depreciation           |   |                                      | 885    |   |                                     |   | 2,101 |   |
| Energy and Other Taxes |   |                                      | (39    | )      |                                     |   | (468 | ) |

|   | · | Bank fees increased $0.1 million and $0.7 million for the three and nine month periods ended September 30, 2010, respectively, as compared with 2009, to support credit availability and the Company’s variable-rate debt. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expenses associated with increasing SJG’s reserve for uncollectible accounts increased $0.6 million and $0.4 million for the three and nine month periods ended September 30, 2010, respectively, compared to the same periods last year.  Changes in the uncollectible reserve are the result of fluctuations in levels of customer accounts receivable balances. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expense associated with the write-off of uncollectible customer accounts receivable increased $0.5 million for the nine month period ended September 30, 2010, as compared with 2009.  This increase in write-offs resulted from a post-winter season evaluation of delinquent accounts. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Payroll expense increased $0.1 million and $0.6 million for the three and nine month periods ended September 30, 2010, respectively, as compared with 2009, as a result of annual compensation increases and additional overtime required to address the impact of unusually inclement weather on the Company’s distribution system, primarily in the first quarter of 2010. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expenses related to a voluntary separation program offered in the early part of 2010 to its unionized workforce in an effort to reduce future labor costs resulted in an additional expense of $0.2 million for the nine month period ended September 30, 2010, as compared with 2009. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Spending under the New Jersey Clean Energy Program and Energy Efficiency Programs experienced a net increase (decrease) of $0.1 million and $(0.4) million for the three and nine months periods ended September 30, 2010 as compared to 2009.  Such costs are recovered on a dollar-for-dollar basis; therefore, SJG experienced offsetting changes in revenues during the periods. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                      |   | Total Facility |    |   | Usage  |   |    | Available Liquidity |   | Expiration Date |
|---------------------------|--------|----------------|---------|--------|--------|--------|---------|---------------------|--------|-----------------|
|                      |   |           |    |   |   |   |    |                |   |            |
| Revolving Credit Facility |   | $              | 100,000 |   |   | $      | 88,500  |                |   | $               | 11,500 |   | August 2011 |
| Line of Credit            |   |           | 40,000  |   |   |   | — |                |   |            | 40,000 |   | August 2011 |
| Uncommitted Bank Lines    |   |           | 40,000  |   |   |   | 16,800  |                |   |            | 23,200 |   | Various |
|                      |   |           |    |   |   |   |    |                |   |            |   |   |   |
| Total                     |   | $              | 180,000 |   |   | $      | 105,300 |                |   | $               | 74,700 |   |   |

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|            |   | As of September 30, 2010 |   |   | As of December 31, 2009 |   |
|-----------------|--------|-------------------------------|--------|--------|------------------------------|--------|
|            |   |                          |   |   |                         |   |
| Common Equity   |   |                          | 48.2   | %      |                         |   | 52.2 | % |
| Long-Term Debt  |   |                          | 39.7   |   |                         |   | 30.3 |   |
| Short-Term Debt |   |                          | 12.1   |   |                         |   | 17.5 |   |
|            |   |                          |   |   |                         |   |   |   |
| Total           |   |                          | 100.0  | %      |                         |   | 100.0 | % |

| Twelve Months Ended Sept. 30, |   | Year Ended December 31, |   |
|------------------------------------|--------|-------------------------|--------|
| 2010                               |   | 2009                    |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                               |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 4.9x                               |   |                    | 4.9x   |   |   |   | 4.4x |   |   |   | 4.1x |   |   |   | 3.7x |   |   |   | 4.0x |   |

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Item 3. Quantitative and Qualitative Disclosures about Market Risks

| Assets                         |   |                |   |   |                |   |   |   |   |
|--------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
| Source of Fair Value           |   | Maturity< 1 Year |   |   | Maturity1 - 3 Years |   |   | Total  |   |
|                           |   |                |   |   |                |   |   |   |   |
| Prices Actively Quoted (NYMEX) |   | $                   | 441    |   |                | $      | 21     |   |   | $ | 462 |   |
|                           |   |                |   |   |                |   |   |   |   |   |   |   |
| Prices Provided by Other       |   |                | 354    |   |                |   | 235    |   |   |   | 589 |   |
|                           |   |                |   |   |                |   |   |   |   |   |   |   |
| Total                          |   | $                   | 795    |   |                | $      | 256    |   |   | $ | 1,051 |   |

| Liabilities                                       |   |                |   |   |                |   |   |   |   |
|---------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
| Source of Fair Value                              |   | Maturity< 1 Year |   |   | Maturity1 - 3 Years |   |   | Total  |   |
|                                              |   |                |   |   |                |   |   |   |   |
| Prices Actively Quoted (NYMEX)                    |   | $                   | 17,249 |   |                | $      | 1,210  |   |   | $ | 18,459 |   |
|                                              |   |                |   |   |                |   |   |   |   |   |   |   |
| Prices Provided by Other External Sources (Basis) |   |                | 3,235  |   |                |   | 373    |   |   |   | 3,608 |   |
|                                              |   |                |   |   |                |   |   |   |   |   |   |   |
| Total                                             |   | $                   | 20,484 |   |                | $      | 1,583  |   |   | $ | 22,067 |   |

| Net Derivatives — Energy Related Liability, January 1, 2010      |   | $      | (9,173  | )      |
|------------------------------------------------------------------------|--------|--------|---------|--------|
| Contracts Settled During the Nine Months ended September 30, 2010, Net |   |   | 7,681   |   |
| Other Changes in Fair Value from Continuing and New Contracts, Net     |   |   | (19,524 | )      |
| Net Derivatives — Energy Related Liability, September 30, 2010   |   | $      | (21,016 | )      |

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| Amount |       |   | Fixed Interest Rate |   | Start Date |   | Maturity   |   | Type       |
|--------|------------|--------|---------------------|--------|------------|--------|------------|--------|------------|
| $      | 12,500,000 |   |                |   | 3.430      | %      | 12/01/2006 |   | 02/01/2036 |   | Tax-exempt |
| $      | 12,500,000 |   |                |   | 3.430      | %      | 12/01/2006 |   | 02/01/2036 |   | Tax-exempt |

Item 4. Controls and Procedures

PART II — OTHER INFORMATION

Item l. Legal Proceedings

Item 1A. Risk Factors

Item 6. Exhibits

| ExhibitNo. |   | 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). |

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SIGNATURES

| Dated: November 8, 2010 | By:    | /s/ Edward J. Graham                                |
|-------------------------|--------|-----------------------------------------------------|
|                    |   | Edward J. Graham                                    |
|                    |   | President & Chief Executive Officer             |
|                    |   |                                                |
|                    |   |                                                |
| Dated: November 8, 2010 | By:    | /s/ David A. Kindlick                               |
|                    |   | David A. Kindlick                                   |
|                    |   | Senior Vice President & Chief Financial Officer |

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