----

----

**UNITED      STATES**

**SECURITIESAND      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 |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

**June      30**

**,**

**      2007**

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

**000-2221**

**1**

**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**

----

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**PART      I — FINANCIAL      INFORMATION**

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

| **SOUTH                  JERSEY GAS                  COMPANY**                                                       |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                 |   |   |   |   |   |   |
| **CONDENSED                  STATEMENTS OF INCOME (UNAUDITED)**                                                      |   |
| (In                  Thousands)                                                                                      |   |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   | Three                  Months Ended |   |
|                                                                                                                 |   | June                  30, |   |
|                                                                                                                 |   | 2007 |   |   | 2006 |   |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |
| **Operating                  Revenues**                                                                              |   | $ | 95,996 |   |   | $ | 105,006 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Operating                  Expenses:**                                                                             |   |   |   |   |   |   |   |   |
|    Cost                  of Sales (Excluding depreciation)                                            |   |   | 63,848 |   |   |   | 76,040 |   |
|    Operations                                                                                         |   |   | 11,554 |   |   |   | 10,520 |   |
|    Maintenance                                                                                        |   |   | 1,430 |   |   |   | 1,365 |   |
|    Depreciation                                                                                       |   |   | 6,115 |   |   |   | 5,848 |   |
|    Energy                  and Other Taxes                                                            |   |   | 1,872 |   |   |   | 1,673 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|       Total                  Operating Expenses                                        |   |   | 84,819 |   |   |   | 95,446 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                |   |   | 11,177 |   |   |   | 9,560 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Other                  Income and Expense**                                                                        |   |   | 356 |   |   |   | 158 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Interest                  Charges**                                                                                |   |   | (4,791 | ) |   |   | (5,181 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Income                  Before Income Taxes**                                                                      |   |   | 6,742 |   |   |   | 4,537 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Income                  Taxes**                                                                                    |   |   | (2,839 | ) |   |   | (1,938 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                      |   | $ | 3,903 |   |   | $ | 2,599 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |

| **SOUTH                  JERSEY GAS COMPANY**                                                                           |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                    |   |   |   |   |   |   |
| **CONDENSED                  STATEMENTS OF INCOME (UNAUDITED)**                                                         |   |
| (In                  Thousands)                                                                                         |   |
|                                                                                                                    |   |   |   |   |   |   |
|                                                                                                                    |   | Six                  Months Ended |   |
|                                                                                                                    |   | June                  30, |   |
|                                                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                                                    |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |
| **       Operating                  Revenues**                                       |   | $ | 373,860 |   |   | $ | 382,087 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Operating                  Expenses:**                                      |   |   |   |   |   |   |   |   |
|           Cost                  of Sales                              |   |   | 269,392 |   |   |   | 284,661 |   |
|           Operations                                                  |   |   | 25,455 |   |   |   | 24,351 |   |
|           Maintenance                                                 |   |   | 2,902 |   |   |   | 2,770 |   |
|           Depreciation                                                |   |   | 12,168 |   |   |   | 11,606 |   |
|           Energy                  and Other Taxes                     |   |   | 6,496 |   |   |   | 5,959 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|              Total                  Operating Expenses |   |   | 316,413 |   |   |   | 329,347 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Operating                  Income**                                         |   |   | 57,447 |   |   |   | 52,740 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Other                  Income and Expense**                                 |   |   | 456 |   |   |   | 138 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Interest                  Charges**                                         |   |   | (10,032 | ) |   |   | (10,333 | ) |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Income                  Before Income Taxes**                               |   |   | 47,871 |   |   |   | 42,545 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Income                  Taxes**                                             |   |   | (19,709 | ) |   |   | (17,468 | ) |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| **       Net                  Income**                                               |   | $ | 28,162 |   |   | $ | 25,077 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| 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 |   |
|                                                                                                                 |   | June                  30, |   |
|                                                                                                                 |   | 2007 |   |   | 2006 |   |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |
| **Net                  Income**                                                                                      |   | $ | 3,903 |   |   | $ | 2,599 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income - Net of Tax:**                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|   Unrealized                  Gain (Loss) on Equity Investments                                            |   |   | 114 |   |   |   | (67 | ) |
|   Unrealized                  Gain on Derivatives - Other                                                  |   |   | 558 |   |   |   | 396 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|      Other                  Comprehensive Income - Net of Tax                               |   |   | 672 |   |   |   | 329 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Comprehensive                  Income**                                                                            |   | $ | 4,575 |   |   | $ | 2,928 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   | Six                  Months Ended |   |
|                                                                                                                 |   | June                  30, |   |
|                                                                                                                 |   | 2007 |   |   | 2006 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                      |   | $ | 28,162 |   |   | $ | 25,077 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income - Net of Tax:**                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|   Unrealized                  Gain on Equity Investments                                                   |   |   | 180 |   |   |   | 90 |   |
|   Unrealized                  Gain on Derivatives - Other                                                  |   |   | 679 |   |   |   | 953 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|      Other                  Comprehensive Income - Net of Tax                               |   |   | 859 |   |   |   | 1,043 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| **Comprehensive                  Income**                                                                            |   | $ | 29,021 |   |   | $ | 26,120 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |

| **SOUTH                    JERSEY GAS COMPANY**                                                                           |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                      |   |   |   |   |   |   |
| **CONDENSED                    STATEMENTS OF CASH FLOWS (UNAUDITED)**                                                     |   |
| (In                    Thousands)                                                                                         |   |
|                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                      |   | Six                    Months Ended |   |
|                                                                                                                      |   | June                    30, |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
|                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |
| **Net                    Cash Provided by Operating Activities**                                                          |   | $ | 75,731 |   |   | $ | 30,019 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                    Flows from Investing Activities:**                                                              |   |   |   |   |   |   |   |   |
|   Capital                    Expenditures                                                                       |   |   | (23,770 | ) |   |   | (34,062 | ) |
|   Net                    Purchase of Restricted Investments                                                     |   |   | (226 | ) |   |   | (14,316 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|         Net                    Cash Used in Investing Activities                  |   |   | (23,996 | ) |   |   | (48,378 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                    Flows from Financing Activities:**                                                              |   |   |   |   |   |   |   |   |
|   Net                    Borrowings from (Repayments of) Lines of Credit                                        |   |   | (44,700 | ) |   |   | 3,900 |   |
|   Proceeds                    from Issuance of Long-Term Debt                                                   |   |   | - |   |   |   | 25,000 |   |
|   Principal                    Repayments of Long-Term Debt                                                     |   |   | (2,270 | ) |   |   | (2,288 | ) |
|   Dividends                    on Common Stock                                                                  |   |   | (4,683 | ) |   |   | (4,975 | ) |
|   Payments                    for Issuance of Long-Term Debt                                                    |   |   | - |   |   |   | (956 | ) |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|         Net                    Cash (Used in) Provided by in Financing Activities |   |   | (51,653 | ) |   |   | 20,681 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Net                    Increase in Cash and Cash Equivalents**                                                          |   |   | 82 |   |   |   | 2,322 |   |
| **Cash                    and Cash Equivalents at Beginning of Period**                                                   |   |   | 1,967 |   |   |   | 2,551 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Cash                    and Cash Equivalents at End of Period**                                                         |   | $ | 2,049 |   |   | $ | 4,873 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| **Supplemental                    Disclosures of Noncash Investing Activities:**                                          |   |   |   |   |   |   |   |   |
|   Capital                    Property and Equipment Acquired on account but not                                 |   |   |   |   |   |   |   |   |
|    paid                    at quarter-end.                                                                 |   | $ | 3,343 |   |   | $ | 4,178 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| The                    accompanying notes are an integral part of the condensed financial                    statements.  |   |   |   |   |   |   |   |   |

| **SOUTH                    JERSEY GAS COMPANY**                                                                             |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                        |   |   |   |   |   |   |
| **CONDENSED                    BALANCE SHEETS (UNAUDITED)**                                                                 |   |
| (In                    Thousands)                                                                                           |   |
|                                                                                                                        |   |   |   |
|                                                                                                                        |   | June                    30, |   |   | December                    31, |   |
|                                                                                                                        |   | 2007 |   |   | 2006 |   |
| **Assets**                                                                                                                  |   |   |   |   |   |   |
|                                                                                                                        |   |   |   |   |   |   |
| **Property,                    Plant and Equipment:**                                                                       |   |   |   |   |   |   |
|    Utility                    Plant, at original cost                                                        |   | $ | 1,101,543 |   |   | $ | 1,079,614 |   |
|      Accumulated                    Depreciation                                                   |   |   | (267,173 | ) |   |   | (257,781 | ) |
|                                                                                                                        |   |   |   |   |   |   |   |   |
|           Property,                    Plant and Equipment - Net          |   |   | 834,370 |   |   |   | 821,833 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
| **Investments:**                                                                                                            |   |   |   |   |   |   |   |   |
|    Available-for-Sale                    Securities                                                          |   |   | 6,676 |   |   |   | 6,342 |   |
|    Restricted                    Investments                                                                 |   |   | 8,812 |   |   |   | 8,586 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
|           Total                    Investments                            |   |   | 15,488 |   |   |   | 14,928 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
| **Current                    Assets:**                                                                                      |   |   |   |   |   |   |   |   |
|    Cash                    and Cash Equivalents                                                              |   |   | 2,049 |   |   |   | 1,967 |   |
|    Accounts                    Receivable                                                                    |   |   | 56,033 |   |   |   | 47,928 |   |
|    Accounts                    Receivable - Related Parties                                                  |   |   | 663 |   |   |   | 3,939 |   |
|    Unbilled                    Revenues                                                                      |   |   | 7,802 |   |   |   | 34,502 |   |
|    Provision                    for Uncollectibles                                                           |   |   | (3,127 | ) |   |   | (2,741 | ) |
|    Natural                    Gas in Storage, average cost                                                   |   |   | 49,855 |   |   |   | 81,039 |   |
|    Materials                    and Supplies, average cost                                                   |   |   | 1,629 |   |   |   | 1,685 |   |
|    Prepaid                    Taxes                                                                          |   |   | 16,793 |   |   |   | 7,774 |   |
|    Derivatives                    - Energy Related Assets                                                    |   |   | 1,331 |   |   |   | 1,692 |   |
|    Other                    Prepayments and Current Assets                                                   |   |   | 2,900 |   |   |   | 2,264 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
|           Total                    Current Assets                         |   |   | 135,928 |   |   |   | 180,049 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
| **Regulatory                    and Other Noncurrent Assets:**                                                              |   |   |   |   |   |   |   |   |
|    Regulatory                    Assets                                                                      |   |   | 182,230 |   |   |   | 196,962 |   |
|    Unamortized                    Debt Issuance Costs                                                        |   |   | 6,546 |   |   |   | 6,835 |   |
|    Accounts                    Receivable - Merchandise                                                      |   |   | 5,760 |   |   |   | 5,950 |   |
|    Derivatives                    - Energy Related Assets                                                    |   |   | 28 |   |   |   | 19 |   |
|    Derivatives                    - Other                                                                    |   |   | 1,272 |   |   |   | 148 |   |
|    Other                                                                                                     |   |   | 2,020 |   |   |   | 1,352 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
|           Total                    Regulatory and Other Noncurrent Assets |   |   | 197,856 |   |   |   | 211,266 |   |
|                                                                                                                        |   |   |   |   |   |   |   |   |
|                Total                    Assets   |   | $ | 1,183,642 |   |   | $ | 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)                                                                                        |   |
|                                                                                                                                               |   |   |   |
|                                                                                                                                               |   | June                    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                                                                          |   |   | (3,570 | ) |   |   | (4,429 | ) |
|    Retained                    Earnings                                                                                             |   |   | 177,042 |   |   |   | 158,617 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|           Total                    Common Equity                                                 |   |   | 379,637 |   |   |   | 360,353 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Long-Term                    Debt**                                                                                                              |   |   | 294,893 |   |   |   | 294,893 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|           Total                    Capitalization                                                |   |   | 674,530 |   |   |   | 655,246 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Current                    Liabilities:**                                                                                                        |   |   |   |   |   |   |   |   |
|    Notes                    Payable                                                                                                 |   |   | 58,800 |   |   |   | 103,500 |   |
|    Current                    Maturities of Long-Term Debt                                                                          |   |   | - |   |   |   | 2,270 |   |
|    Accounts                    Payable - Commodity                                                                                  |   |   | 30,539 |   |   |   | 43,687 |   |
|    Accounts                    Payable - Other                                                                                      |   |   | 8,926 |   |   |   | 8,786 |   |
|    Accounts                    Payable - Related Parties                                                                            |   |   | 7,696 |   |   |   | 12,134 |   |
|    Derivatives                    - Energy Related Liabilities                                                                      |   |   | 8,010 |   |   |   | 18,006 |   |
|    Deferred                    Income Taxes - Net                                                                                   |   |   | 4,631 |   |   |   | 4,049 |   |
|    Customer                    Deposits and Credit Balances                                                                         |   |   | 18,583 |   |   |   | 23,016 |   |
|    Environmental                    Remediation Costs                                                                               |   |   | 31,361 |   |   |   | 26,048 |   |
|    Taxes                    Accrued                                                                                                 |   |   | 5,083 |   |   |   | 1,961 |   |
|    Pension                    and Other Postretirement Benefits                                                                     |   |   | 776 |   |   |   | 776 |   |
|    Dividends                    Declared                                                                                            |   |   | 4,683 |   |   |   | - |   |
|    Interest                    Accrued                                                                                              |   |   | 6,029 |   |   |   | 6,112 |   |
|    Other                    Current Liabilities                                                                                     |   |   | 3,221 |   |   |   | 4,904 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|           Total                    Current Liabilities                                           |   |   | 188,338 |   |   |   | 255,249 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
| **Regulatory                    and Other Noncurrent Liabilities:**                                                                                |   |   |   |   |   |   |   |   |
|    Regulatory                    Liabilities                                                                                        |   |   | 56,777 |   |   |   | 50,797 |   |
|    Deferred                    Income Taxes - Net                                                                                   |   |   | 165,287 |   |   |   | 164,797 |   |
|    Environmental                    Remediation Costs                                                                               |   |   | 37,490 |   |   |   | 41,746 |   |
|    Asset                    Retirement Obligations                                                                                  |   |   | 24,280 |   |   |   | 23,743 |   |
|    Pension                    and Other Postretirement Benefits                                                                     |   |   | 29,413 |   |   |   | 29,354 |   |
|    Investment                    Tax Credits                                                                                        |   |   | 2,310 |   |   |   | 2,470 |   |
|    Derivatives                    - Energy Related Liabilities                                                                      |   |   | 121 |   |   |   | 374 |   |
|    Other                                                                                                                            |   |   | 5,096 |   |   |   | 4,300 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|             Total                    Deferred Credits and Other Noncurrent Liabilities |   |   | 320,774 |   |   |   | 317,581 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|    Commitments                    and Contingencies (Note 9)                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |   |   |   |   |   |   |   |
|                Total                    Capitalization and Liabilities  |   | $ | 1,183,642 |   |   | $ | 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 |   | 9,810       |   | $                29.210   |   | 18.5%      |   | 4.9%                         |

|                                                                                                                                                                                              |   | Shares |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|
| Nonvested                Shares Outstanding,                January 1,                2007                                                                                                        |   | 26,738 |     |
|                                                                                                                                                                                              |   |   |     |   |
| Granted                                                                                                                                                                                           |   |   | 9,628    |   |
| Vested*                                                                                                                                                                                           |   |   | (10,352) |   |
|    Forfeited                                                                                                                                                                       |   |   | (1,450)  |   |
|   Transferred                From                Affiliate                                                                                                                              |   |   | 1,822    |   |
|                                                                                                                                                                                              |   |   |     |   |
| Nonvested                Shares Outstanding,                June 30,                2007                                                                                                          |   |   | 26,386   |   |
|                                                                                                                                                                                              |   |   |     |   |
| *                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**

**:**

|                                                                                  |   |                        |    |   |                            |   |
|---------------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|---------------------------------|--------|
|                                                                                  |   | June                30,2007 |    |   | December                31,2006 |   |
| Environmental                Remediation                Costs:                        |   |                        |    |   |                            |   |
| Expended                -                Net                                          |   | $                           | 20,915  |   |                            | $      | 17,743 |   |
| Liability                for Future                Expenditures                       |   |                        | 68,851  |   |                            |   | 67,905 |   |
| Income                Taxes-Flowthrough                Depreciation                   |   |                        | 4,196   |   |                            |   | 4,685 |   |
| Deferred                Asset Retirement                Obligation Costs              |   |                        | 21,509  |   |                            |   | 21,009 |   |
| Deferred                Gas Costs -                Net                                |   |                        | -       |   |                            |   | 19,698 |   |
| Deferred                Pension and Other                Postretirement Benefit Costs |   |                        | 39,170  |   |                            |   | 39,359 |   |
| Temperature                Adjustment Clause                Receivable                |   |                        | 8,068   |   |                            |   | 8,996 |   |
| Conservation                Incentive Program                Receivable               |   |                        | 15,342  |   |                            |   | 7,747 |   |
| Societal                Benefit Costs                Receivable                       |   |                        | 1,234   |   |                            |   | 6,912 |   |
| Premium                for Early Retirement of                Debt                    |   |                        | 1,451   |   |                            |   | 1,532 |   |
| Other                Regulatory                Assets                                 |   |                        | 1,494   |   |                            |   | 1,376 |   |
|                                                                                  |   | $                           | 182,230 |   |                            | $      | 196,962 |   |

|                                                       |   | June                30,2007 |   |   | December                31,2006 |   |
|------------------------------------------------------------|--------|-----------------------------|--------|--------|---------------------------------|--------|
| Excess                Plant Removal                Costs   |   | $                           | 48,532 |   |                            | $      | 48,377 |   |
| Deferred                Gas Revenues -                Net  |   |                        | 4,233  |   |                            |   | - |   |
| Other                                                      |   |                        | 4,012  |   |                            |   | 2,420 |   |
|                                                       |   |                        |   |   |                            |   |   |   |
| Total                Regulatory                Liabilities |   | $                           | 56,777 |   |                            | $      | 50,797 |   |

**Deferred      Gas Costs and      Revenues - Net**

** **

**4.**

**RELATED      PARTY TRANSACTIONS**

|                                                   |   | Three                Months                EndedJune                30, |   |   |   | Six                Months EndedJune                30, |   |
|--------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------|--------|
|                                                   |   |                                                                    |   |   |   |
|                                                   |   | 2007                                                                    |   | 2006   |   |                                                   |   | 2007 |   | 2006 |   |
| Operating                Revenues:                |   |                                                                    |   |   |   |                                                   |   |   |   |   |   |   |   |   |   |   |
|  SJRG                                             |   | $                                                                       | 3,542  |   | $      | 9,860                                                  |   |   |   |   | $ | 16,046 |   | $ | 17,362 |   |
|  Other                                            |   |                                                                    | 93     |   |   | 55                                                     |   |   |   |   |   | 201 |   |   | 138 |   |
| Total                Operating                Revenues |   | $                                                                       | 3,635  |   | $      | 9,915                                                  |   |   |   |   | $ | 16,247 |   | $ | 17,500 |   |

|                                                                               |   | Three                Months                EndedJune                30, |   |   |    | Six                Months EndedJune                30, |   |
|------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------|---------|--------------------------------------------------------|--------|
|                                                                               |   |                                                                    |   |   |    |
|                                                                               |   | 2007                                                                    |   | 2006   |    |                                                   |   | 2007 |   | 2006 |   |
|  Costs                of Sales (Excluding                depreciation):  |   |                                                                    |   |   |    |                                                   |   |   |   |   |   |   |   |   |   |   |
|   SJRG                                                                   |   |  $                                                                 | 4,946  |   | $       | 10,732                                                 |   |   |   |   | $ | 23,033 |   | $ | 29,288 |   |
|  Total                Cost of                Sales                            |   |  $                                                                 | 4,946  |   | $  | 10,732                                                 |   |   |   |   | $  | 23,033 |   | $  | 29,288 |   |
|                                                                               |   |                                                                    |   |   |    |                                                   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |                                                                    |   |   |    |                                                   |   |   |   |   |   |   |   |   |   |   |
|  Operations                Expense                                       |   |                                                                    |   |   |    |                                                   |   |   |   |   |   |   |   |   |   |   |
|      SJI                                                  |   | $                                                                       | 1,415  |   | $       | 1,265                                                  |   |   |   |   | $ | 2,778 |   | $ | 4,045 |   |
|      SJIS                                                 |   |                                                                    | 1,073  |   |    | 1,170                                                  |   |   |   |   |   | 2,155 |   |   | 2,538 |   |
|      Millennium                                           |   |                                                                    | 712    |   |    | 683                                                    |   |   |   |   |   | 1,412 |   |   | 1,356 |   |
|      Other                                                |   |                                                                    | 74     |   |    | (145)                                                  |   |   |   |   |   | 188 |   |   | 98 |   |
| Total                Operations                Expense                             |   | $                                                                       | 3,274  |   | $       | 2,973                                                  |   |   |   |   | $ | 6,533 |   | $ | 8,037 |   |
|                                                                               |   |                                                                    |   |   |    |                                                   |   |   |   |   |   |   |   |   |   |   |

**5.           RESTRICTED      INVESTMENTS:**

**6.           UNUSED      LINES OF      CREDIT:**

**7.           RETAINED      EARNINGS:**

**8.**

** **

**PENSION      **

**AND**

**      OTHER      POSTRETIREMENT BENEFITS**

|                                                                                                                           |   | Pension                  Benefits                                             |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                                                                                           |   | Three                  Months                  EndedJune                  30, |   |   | Six                  Months EndedJune                  30, |   |
|                                                                                                                           |   | 2007                                                                          |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                           |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Service                  Cost                                                                                                  |   | $                                                                             | 427    |   |   | $ | 471 |   |   | $ | 1,260 |   |   | $ | 1,149 |   |
| Interest                  Cost                                                                                                 |   |                                                                          | 1,028  |   |   |   | 1,524 |   |   |   | 2,954 |   |   |   | 2,940 |   |
| Expected                  Return on Plan                  Assets                                                               |   |                                                                          | (1,240 | ) |   |   | (1,964 | ) |   |   | (3,772 | ) |   |   | (3,759 | ) |
| Amortizations:                                                                                                                 |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior                  Service                  Cost                                                                           |   |                                                                          | 36     |   |   |   | 97 |   |   |   | 110 |   |   |   | 194 |   |
|               Actuarial                  Loss            |   |                                                                          | 296    |   |   |   | 426 |   |   |   | 747 |   |   |   | 958 |   |
| Net                  Periodic Benefit                  Cost                                                                    |   |                                                                          | 547    |   |   |   | 554 |   |   |   | 1,299 |   |   |   | 1,482 |   |
|               Capitalized                  Benefit Costs |   |                                                                          | (266   | ) |   |   | (238 | ) |   |   | (633 | ) |   |   | (637 | ) |
| Total                  Net Periodic                  Benefit                  Expense                                          |   | $                                                                             | 281    |   |   | $ | 316 |   |   | $ | 666 |   |   | $ | 845 |   |
|                                                                                                                           |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                                                           |   | Other                  Postretirement                  Benefits               |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                                                                                           |   | Three                  Months                  EndedJune                  30, |   |   | Six                  Months EndedJune                  30, |   |
|                                                                                                                           |   | 2007                                                                          |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                                           |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Service                  Cost                                                                                                  |   | $                                                                             | 160    |   |   | $ | 129 |   |   | $ | 415 |   |   | $ | 258 |   |
| Interest                  Cost                                                                                                 |   |                                                                          | 438    |   |   |   | 307 |   |   |   | 1,140 |   |   |   | 614 |   |
| Expected                  Return on Plan                  Assets                                                               |   |                                                                          | (342   | ) |   |   | (228 | ) |   |   | (889 | ) |   |   | (456 | )  |
| Amortizations:                                                                                                                 |   |                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior                  Service                  Credits                                                                        |   |                                                                          | (58    | ) |   |   | (66 | ) |   |   | (151 | )  |   |   | (132 | )  |
|               Actuarial                  Loss            |   |                                                                          | 99     |   |   |   | 866 |   |   |   | 257 |   |   |   | 172 |   |
| Net                  Periodic Benefit                  Cost                                                                    |   |                                                                          | 297    |   |   |   | 228 |   |   |   | 772 |   |   |   | 456 |   |
|               Capitalized                  Benefit Costs |   |                                                                          | (145   | ) |   |   | (98 | ) |   |   | (378 | ) |   |   | (196 | )  |
| Total                  Net Periodic                  Benefit                  Expense                                          |   | $                                                                             | 152    |   |   | $ | 130 |   |   | $ | 394 |   |   | $ | 260 |   |

**9.**

**COMMITMENTS      **

**AND**

**      CONTINGENCIES**

**Contractual      Cash      Obligations**

**Environmental      Remediation      Costs**

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

**and      Results of Operations      (Unaudited)**

**OVERVIEW:**

**Organization**

**Forward-Looking      Statements      and Risk Factors**

** **

**Critical      Accounting      Policies**

**Estimates      and Assumptions**

**New      Accounting      Pronouncements**

**      - **

**Rates      and Regulation:**

**Environmental      Remediation**

**Competition**

**      - **

**Customer      Choice      Legislation**

**      - **

*Electric Discount      and Energy      Competition Act of 1999*

*unbundling*

**RESULTS      OF      OPERATIONS:**

|                                                         |   | Three                Months                Ended |   |   | Six                Months                Ended |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                         |   | June                30,                          |   |   | June                30,                        |   |
|                                                         |   | 2007                                             |   |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
| Throughput–                dth:                        |   |                                             |   |   |                                           |   |   |   |   |   |   |   |
| Firm                Sales -                                  |   |                                             |   |   |                                           |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 3,232  |   |                                           |   | 2,542 |   |   |   | 14,513 |   |   |   | 12,726 |   |
| Commercial                                                   |   |                                             | 931    |   |                                           |   | 941 |   |   |   | 3,860 |   |   |   | 4,357 |   |
| Industrial                                                   |   |                                             | 15     |   |                                           |   | 29 |   |   |   | 121 |   |   |   | 134 |   |
| Cogeneration&Electric                Generation          |   |                                             | 131    |   |                                           |   | 224 |   |   |   | 162 |   |   |   | 254 |   |
| Firm                Transportation -                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 273    |   |                                           |   | 141 |   |   |   | 1,144 |   |   |   | 466 |   |
| Commercial                                                   |   |                                             | 1,054  |   |                                           |   | 777 |   |   |   | 3,664 |   |   |   | 2,438 |   |
| Industrial                                                   |   |                                             | 2,957  |   |                                           |   | 3,406 |   |   |   | 6,068 |   |   |   | 6,908 |   |
| Cogeneration&Electric                Generation          |   |                                             | 713    |   |                                           |   | 10 |   |   |   | 1,127 |   |   |   | 12 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| TotalFirm                Throughput                          |   |                                             | 9,306  |   |                                           |   | 8,070 |   |   |   | 30,659 |   |   |   | 27,295 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible                Sales                           |   |                                             | 28     |   |                                           |   | 34 |   |   |   | 38 |   |   |   | 66 |   |
| Interruptible                Transportation                  |   |                                             | 728    |   |                                           |   | 846 |   |   |   | 1,379 |   |   |   | 1,860 |   |
| Off-System                                                   |   |                                             | 3,079  |   |                                           |   | 4,708 |   |   |   | 9,914 |   |   |   | 8,999 |   |
| Capacity                Release &                Storage |   |                                             | 22,665 |   |                                           |   | 16,765 |   |   |   | 31,479 |   |   |   | 32,504 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| TotalThroughput                                              |   |                                             | 35,806 |   |                                           |   | 30,423 |   |   |   | 73,469 |   |   |   | 70,724 |   |

|                                                         |   | Three                Months                Ended |   |   | Six                Months                Ended |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                         |   | June                30,                          |   |   | June                30,                        |   |
|                                                         |   | 2007                                             |   |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
| Operating                Revenues:                           |   |                                             |   |   |                                           |   |   |   |   |   |   |   |
| Firm                Sales -                                  |   |                                             |   |   |                                           |   |   |   |   |   |   |   |
| Residential                                                  |   | $                                                | 46,183 |   |                                           | $      | 46,948 |   |   | $ | 214,255 |   |   | $ | 213,384 |   |
| Commercial                                                   |   |                                             | 11,069 |   |                                           |   | 12,844 |   |   |   | 47,647 |   |   |   | 64,253 |   |
| Industrial                                                   |   |                                             | 1,423  |   |                                           |   | 948 |   |   |   | 5,406 |   |   |   | 2,962 |   |
| Cogeneration&Electric                Generation          |   |                                             | 1,618  |   |                                           |   | 2,303 |   |   |   | 2,067 |   |   |   | 3,360 |   |
| Firm                Transportation -                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                  |   |                                             | 1,214  |   |                                           |   | 781 |   |   |   | 4,788 |   |   |   | 2,143 |   |
| Commercial                                                   |   |                                             | 2,596  |   |                                           |   | 2,252 |   |   |   | 9,624 |   |   |   | 6,473 |   |
| Industrial                                                   |   |                                             | 2,643  |   |                                           |   | 2,992 |   |   |   | 5,733 |   |   |   | 6,262 |   |
| Cogeneration&Electric                Generation          |   |                                             | 552    |   |                                           |   | 11 |   |   |   | 946 |   |   |   | 11 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Total                Firm                Revenues            |   |                                             | 67,298 |   |                                           |   | 69,079 |   |   |   | 290,466 |   |   |   | 298,848 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible                Sales                           |   |                                             | 296    |   |                                           |   | 370 |   |   |   | 436 |   |   |   | 769 |   |
| Interruptible                Transportation                  |   |                                             | 475    |   |                                           |   | 358 |   |   |   | 938 |   |   |   | 992 |   |
| Off-System                                                   |   |                                             | 24,230 |   |                                           |   | 33,101 |   |   |   | 76,296 |   |   |   | 74,744 |   |
| Capacity                Release &                Storage |   |                                             | 3,338  |   |                                           |   | 1,699 |   |   |   | 5,082 |   |   |   | 6,001 |   |
| Other                                                        |   |                                             | 359    |   |                                           |   | 399 |   |   |   | 642 |   |   |   | 733 |   |
|                                                         |   |                                             |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Total                Operating                Revenues       |   | $                                                | 95,996 |   |                                           | $      | 105,006 |   |   | $ | 373,860 |   |   | $ | 382,087 |   |

|                                                                                                 |   | Three                Months                Ended |         |   | Six                Months                Ended |   |
|------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------------|--------|------------------------------------------------|--------|
|                                                                                                 |   | June                30,                          |         |   | June                30,                        |   |
|                                                                                                 |   | 2007                                             |         |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
| Net                Operating                Revenues:                                                |   |                                             |         |   |                                           |   |   |   |   |   |   |   |
| Residential                                                                                          |   | $                                                |  47,397 |   |                                           | $      | 47,729 |   |   | $ |  219,043 |   |   | $ | 215,527 |   |
| Commercial                and                Industrial                                              |   |                                             | 17,731       |   |                                           |   | 19,036 |   |   |   | 68,410 |   |   |   | 79,950 |   |
| Cogeneration                and Electric                Generation                                   |   |                                             | 2,170        |   |                                           |   | 2,314 |   |   |   | 3,013 |   |   |   | 3,371 |   |
| Interruptible                                                                                        |   |                                             | 771          |   |                                           |   | 728 |   |   |   | 1,374 |   |   |   | 1,761 |   |
| Off-system,                Capacity Release &                Storage                             |   |                                             | 27,568       |   |                                           |   | 34,800 |   |   |   | 81,378 |   |   |   | 80,745 |   |
| Other                Revenues                                                                        |   |                                             | 359          |   |                                           |   | 399 |   |   |   | 642 |   |   |   | 733 |   |
| Total                Utility Operating                Revenues                                       |   | $                                                | 95,996       |   |                                           | $      | 105,006 |   |   | $ | 373,860 |   |   | $ | 382,087 |   |
|                                                                                                 |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Cost                of                Sales                                                          |   | $                                                | 63,848       |   |                                           | $      | 76,040 |   |   | $ | 269,392 |   |   | $ | 284,661 |   |
| Conservation                Recoveries                                                               |   |                                             | 1,042        |   |                                           |   | 1,751 |   |   |   | 2,255 |   |   |   | 3,968 |   |
| RAC                Recoveries                                                                        |   |                                             | 473          |   |                                           |   | 448 |   |   |   | 945 |   |   |   | 895 |   |
|    Revenue                Taxes                                                       |   |                                             | 1,398        |   |                                           |   | 1,082 |   |   |   | 5,433 |   |   |   | 4,761 |   |
| Net                Operating Revenues                (Margin)                                        |   | $                                                | 29,235       |   |                                           | $      | 25,685 |   |   | $ | 95,835 |   |   | $ | 87,802 |   |
|                                                                                                 |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Margin:                                                                                              |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                          |   | $                                                | 17,490       |   |                                           | $      | 14,929 |   |   | $ | 61,752 |   |   | $ | 53,794 |   |
| Commercial                and                Industrial                                              |   |                                             | 7,625        |   |                                           |   | 6,753 |   |   |   | 22,985 |   |   |   | 20,920 |   |
| Cogeneration                and Electric                Generation                                   |   |                                             | 620          |   |                                           |   | 526 |   |   |   | 979 |   |   |   | 1,045 |   |
| Interruptible                                                                                        |   |                                             | 41           |   |                                           |   | 72 |   |   |   | 98 |   |   |   | 142 |   |
| Off-system,                Capacity Release &                Storage                             |   |                                             | 599          |   |                                           |   | 600 |   |   |   | 1,590 |   |   |   | 2,757 |   |
| Other                Revenues                                                                        |   |                                             | 544          |   |                                           |   | 541 |   |   |   | 826 |   |   |   | 874 |   |
|    Margin                Before                Weather Normalization & Decoupling |   |                                             | 26,919       |   |                                           |   | 23,421 |   |   |   | 88,230 |   |   |   | 79,532 |   |
|    TAC                Mechanism                                                       |   |                                             | -            |   |                                           |   | 2,264 |   |   |   | - |   |   |   | 8,270 |   |
|    CIP                Mechanism                                                       |   |                                             | 2,316        |   |                                           |   | - |   |   |   | 7,605 |   |   |   | - |   |
| Utility                Net Operating Revenues                (Margin)                                |   | $                                                | 29,235       |   |                                           | $      | 25,685 |   |   | $ | 95,835 |   |   | $ | 87,802 |   |
|                                                                                                 |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |
|  Degree                Days                                                                     |   |                                             | 547          |   |                                           |   | 401 |   |   |   | 2,965 |   |   |   | 2,564 |   |
|                                                                                                 |   |                                             |         |   |                                           |   |   |   |   |   |   |   |   |   |   |   |

**Volumes**

**Operating      Revenues**

**Margin      (pre-tax)**

**      - **

**Operating      Expenses**

|                                                 |   | Three                MonthsEndedJune                30, |   |   | Six                MonthsEndedJune                30, |   |
|------------------------------------------------------|--------|---------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|
|                                                 |   | 2007                vs. 2006                            |   |   | 2007                vs. 2006                          |   |
|                                                 |   |                                                    |   |   |                                                  |   |
| Operations                                           |   | $                                                       | 1,034  |   |                                                  | $      | 1,104 |   |
| Maintenance                                          |   |                                                    | 65     |   |                                                  |   | 132 |   |
| Depreciation                                         |   |                                                    | 267    |   |                                                  |   | 562 |   |
| Energy                and Other                Taxes |   |                                                    | 199    |   |                                                  |   | 537 |   |

**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                ofJune                30, 2007 |   |   | As                ofDecember                31, 2006 |   |
|--------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------------|--------|
|                           |   |                                             |   |   |                                                 |   |
| Common Equity             |   |                                             | 51.8   | %      |                                                 |   | 47.4 | % |
| Long-Term                Debt  |   |                                             | 40.2   |   |                                                 |   | 39.0 |   |
| Short-Term                Debt |   |                                             | 8.0    |   |                                                 |   | 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                June                30, |   |   | Year                Ended December                31, |   |
|--------------------------------------------------------------------------|--------|--------|-------------------------------------------------------|--------|
|                                                                     |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2007                                                                     |   |   | 2006                                                  |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |   | 2002 |   |
|                                                                     |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     | 4.0x   |   |                                                  |   | 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                                                    |   | $                         | 1,331  |   |                                      | $      | 27     |   |   | $ | 1,358 |   |
|                                                 |                                                     |   |                      |   |   |                                      |   |   |   |   |   |   |   |
| Liabilities:                                         |                                                     |   | Maturity                  |   |   | Maturity                                  |   |   |   |   |   |
|                                                 |  Source                of Fair                Value |   | <1                Year |   |   | 1                - 3 Years                |   |   | Total  |   |
|                                                 |                                                     |   |                      |   |   |                                      |   |   |   |   |   |   |   |
| Prices                Actively                Quoted | NYMEX                                                    |   | $                         | 8,010  |   |                                      | $      | 121    |   |   | $ | 8,131 |   |

| Net                Derivatives                — Energy Related Liability, January 1,                2007               |   |  $ | (16,669 | )      |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------|---------|--------|
| Contracts                Settled During the Six                Months ended June 30,                2007,                Net |   |    | 9,470   |   |
| Other                Changes in Fair Value from                Continuing and New Contracts, Net                             |   |    | 426     |   |
| Net                Derivatives — Energy Related                Liability, June 30,                2007                 |   | $       | (6,773  | )      |

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