===============================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

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

         For the quarterly period ended June 30, 2003
                                        -------------------

                                       OR

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

         For the transition period from ___________ to ____________

                        Commission File Number 000-22211

                            SOUTH JERSEY GAS COMPANY
             (Exact name of registrant as specified in its charter)

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

                     1 South Jersey Plaza, Folsom, NJ 08037
          (Address of principal executive offices, including zip code)

                                 (609) 561-9000
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

As of August 1, 2003 there were 2,339,139 shares of the registrant's common
stock outstanding. All common shares are owned by South Jersey Industries, Inc.,
the parent company of South Jersey Gas Company.

================================================================================

                                     SJG-1

                         PART I -- FINANCIAL INFORMATION


                Item 1. Financial Statements-- See Pages 3 through 14

                                     SJG-2


                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY


               CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                     (In Thousands Except for Per Share Data)


                                                     Three Months Ended
                                                          June 30,
                                                  -----------------------------
                                                      2003                2002
                                                  -----------------------------

Operating Revenues                                  $ 75,547           $ 65,007

Operating Expenses:

   Gas Purchased for Resale                           49,347             41,093
   Utility Operations                                 10,807             10,460
   Maintenance                                         1,483              1,673
   Depreciation                                        5,870              5,559
   Energy and Other Taxes                              2,131              2,039
                                                    ---------         ---------

      Total Operating Expenses                        69,638             60,824
                                                    ---------         ---------

Operating Income                                       5,909              4,183

Other Income and Expense                                  22                569

Interest Charges                                       3,745              4,383

Preferred Dividend Requirements                          764                764
                                                    ---------         ---------

Income (Loss) Before Income Taxes                      1,422               (395)

Income Taxes                                             753                (70)
                                                    ---------         ---------

Net Income (Loss) Applicable to Common Stock           $ 669             $ (325)
                                                    =========         =========

Average Shares of Common Stock Outstanding             2,339              2,339

Earnings Per Common Share                             $ 0.29            $ (0.14)
                                                    =========         =========

Dividends Declared Per Common Share                      $ -             $ 0.87
                                                    =========         =========
The accompanying footnotes are an integral part of the financial statements.

                                     SJG-3

                 SOUTH JERSEY GAS COMPANY AND SUBSIDIARY


        CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
               (In Thousands Except for Per Share Data)


                                                        Six Months Ended
                                                             June 30,
                                                 ------------------------------
                                                     2003                2002
                                                 ------------------------------

Operating Revenues                                 $ 315,483          $ 219,190
                                                  -----------        ----------

Operating Expenses:
   Gas Purchased for Resale                          228,211            140,526
   Utility Operations                                 21,299             20,081
   Maintenance                                         2,940              3,090
   Depreciation                                       11,657             11,036
   Energy and Other Taxes                              7,159              5,822
                                                   ----------        ----------

      Total Operating Expenses                       271,266            180,555
                                                   ----------        ----------

Operating Income                                      44,217             38,635

Other Income and Expense                                 (96)               454

Interest Charges                                       7,765              8,887

Preferred Dividend Requirements                        1,529              1,529
                                                    ---------         ---------

Income Before Income Taxes                            34,827             28,673

Income Taxes                                          14,724             12,059
                                                    ---------         ---------

Net Income Applicable to Common Stock               $ 20,103           $ 16,614
                                                   ==========        ==========

Average Shares of Common Stock Outstanding             2,339              2,339

Earnings Per Common Share                             $ 8.59             $ 7.10
                                                   ==========        ==========

Dividends Declared Per Common Share                      $ -             $ 2.82
                                                   ==========        ==========
The accompanying footnotes are an integral part of the financial statements.

                                     SJG-4



<TABLE>


                                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In Thousands)
<CAPTION>

                                                                           (Unaudited)
                                                                             June 30,              December 31,
                                                                  -------------------------------  --------------
                                                                      2003             2002            2002
                                                                  --------------   --------------  --------------
<S>                                                                <C>              <C>             <C>
ASSETS

Property, Plant and Equipment:

   Utility Plant, at original cost                                    $ 867,801        $ 822,053       $ 846,865
     Accumulated Depreciation                                          (245,923)        (229,078)       (236,813)
                                                                  --------------   --------------  --------------

          Property, Plant and Equipment - Net                           621,878          592,975         610,052
                                                                  --------------   --------------  --------------

Available-for-Sale Securities                                             3,657            3,249           3,407
                                                                  --------------   --------------  --------------

Current Assets:
   Cash and Cash Equivalents                                              3,630            4,129           3,580
   Accounts Receivable                                                   63,790           40,443          61,845
   Unbilled Revenues                                                      6,112            8,482          27,570
   Provision for Uncollectibles                                          (3,225)          (2,274)         (2,816)
   Natural Gas in Storage, average cost                                  40,274           39,047          40,769
   Materials and Supplies, average cost                                   3,450            3,755           4,157
   Prepaid Taxes                                                         10,974           11,621           2,440
   Other Prepayments and Current Assets                                   3,853            3,941           3,435
                                                                  --------------   --------------  --------------

          Total Current Assets                                          128,858          109,144         140,980
                                                                  --------------   --------------  --------------

Regulatory Assets:
   Environmental Remediation Costs:
     Expended - Net                                                       3,375            7,016           6,470
     Liability for Future Expenditures                                   48,211           48,790          48,211
   Gross Receipts and Franchise Taxes                                     1,589            2,032           1,811
   Income Taxes - Flowthrough Depreciation                                8,108            9,086           8,597
   Deferred Fuel Cost - Net                                              11,941           39,684          31,594
   Deferred Postretirement Benefit Costs                                  3,591            3,969           3,780
   Other Regulatory Assets                                                8,082            5,476           6,450
                                                                  --------------   --------------  --------------

          Total Regulatory Assets                                        84,897          116,053         106,913
                                                                  --------------   --------------  --------------

Other Non-Current Assets:
   Unamortized Debt Discount and Expense                                  5,461            5,709           5,660
   Accounts Receivable - Merchandise                                      3,538              815           1,776
   Other                                                                  4,352            3,080           5,538
                                                                  --------------   --------------  --------------

          Total Other Non-Current Assets                                 13,351            9,604          12,974
                                                                  --------------   --------------  --------------

               Total Assets                                           $ 852,641        $ 831,025       $ 874,326
                                                                  ==============   ==============  ==============

<FN>


The accompanying footnotes are an integral part of the financial statements.

</FN>
</TABLE>

                                     SJG-5
<TABLE>


                                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In Thousands)

<CAPTION>

                                                                           (Unaudited)
                                                                             June 30,              December 31,
                                                                  -------------------------------  --------------
                                                                      2003             2002            2002
                                                                  --------------   --------------  --------------

<S>                                                                 <C>              <C>             <C>
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         $ 5,848
   Other Paid-In Capital and Premium on Common Stock                    135,317          135,317         135,317
   Accumulated Other Comprehensive Loss                                  (8,466)          (2,083)         (8,689)
   Retained Earnings                                                    101,851           79,269          81,748
                                                                  --------------   --------------  --------------

          Total Common Equity                                           234,550          218,351         214,224
                                                                  --------------   --------------  --------------

Preferred Stock and Securities:
   Redeemable Cumulative Preferred  -  Par Value $100 per share,
    Authorized 41,966 shares, Outstanding 16,904 shares 8% Series         1,690            1,690           1,690
   Company-Guaranteed Mandatorily Redeemable Preferred
    Securities of Subsidiary Trust, Par Value $25 per share,
    1,400,000 shares Authorized and Outstanding                          35,000           35,000          35,000
                                                                  --------------   --------------  --------------

          Total Preferred Stock and Securities                           36,690           36,690          36,690
                                                                  --------------   --------------  --------------

Long-Term Debt                                                          185,631          217,514         199,016
                                                                  --------------   --------------  --------------

          Total Capitalization                                          456,871          472,555         449,930
                                                                  --------------   --------------  --------------

Current Liabilities:
   Notes Payable                                                        119,500          102,900         153,900
   Current Maturities of Long-Term Debt                                   8,423            9,733          10,696
   Accounts Payable                                                      39,076           29,705          43,066
   Deferred Income Taxes - Net                                           14,563           25,074          19,844
   Customer Deposits                                                      7,143            6,484           6,924
   Environmental Remediation Costs                                        4,852           11,052           4,852
   Taxes Accrued                                                         15,563            2,823           4,212
   Derivatives                                                               24              243             142
   Interest Accrued and Other Current Liabilities                         6,721           10,189           8,106
                                                                  --------------   --------------  --------------

          Total Current Liabilities                                     215,865          198,203         251,742
                                                                  --------------   --------------  --------------

Deferred Credits and Other Non-Current Liabilities:
   Deferred Income Taxes - Net                                          104,275           92,882          98,537
   Environmental Remediation Costs                                       43,359           37,738          43,359
   Pension and Other Postretirement Benefits                             16,256           15,022          14,205
   Investment Tax Credits                                                 3,645            3,992           3,819
   Other                                                                 12,370           10,633          12,734
                                                                  --------------   --------------  --------------

        Total Deferred Credits and Other Non-Current Liabilities        179,905          160,267         172,654
                                                                  --------------   --------------  --------------

               Total Capitalization and Liabilities                   $ 852,641        $ 831,025       $ 874,326
                                                                  ==============   ==============  ==============
<FN>


The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>

                                     SJG-6
<TABLE>



                                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                               (In Thousands)

<CAPTION>

                                                                                     Six Months Ended
                                                                                         June 30,
                                                                              -------------------------------
                                                                                  2003             2002
                                                                              -------------    --------------
<S>                                                                          <C>               <C>
Cash Flows from Operating Activities:


  Net Income Applicable to Common Stock                                           $ 20,103          $ 16,614
  Adjustments to Reconcile Net Income to Cash Flows
   Provided by Operating Activities:
    Depreciation and Amortization                                                   12,816            12,204
    Provision for Losses on Accounts Receivable                                        936               860
    Revenues and Fuel Costs Deferred - Net                                          19,653              (616)
    Deferred and Non-Current Income Taxes and Credits - Net                            529             6,606
    Environmental Remediation Costs - Net                                            3,095             5,815
    Changes in:
      Accounts Receivable                                                           18,986            21,002
      Inventories                                                                    1,202            20,794
      Prepayments and Other Current Assets                                            (418)           (1,141)
      Prepaid and Accrued Taxes - Net                                                2,817            (7,052)
      Accounts Payable and Other Accrued Liabilities                                (5,156)              259
    Other - Net                                                                       (461)           (3,062)
                                                                              -------------    --------------

        Net Cash Provided by Operating Activities                                   74,102            72,283
                                                                              -------------    --------------

Cash Flows from Investing Activities:
  Capital Expenditures, Cost of Removal and Salvage                                (23,924)          (21,773)
  Purchase of Available-for-Sale Securities                                              -              (194)
                                                                              -------------    --------------

        Net Cash Used in Investing Activities                                      (23,924)          (21,967)
                                                                              -------------    --------------

Cash Flows from Financing Activities:
  Net Repayments of Lines of Credit                                                (34,400)          (32,600)
  Principal Repayments of Long-Term Debt                                           (15,658)          (12,733)
  Dividends on Common Stock                                                              -            (6,600)
  Payments for Issuance of Long-Term Debt                                              (70)              (30)
  Additional Investment by Shareholder                                                   -             2,500
                                                                              -------------    --------------

        Net Cash Used in Financing Activities                                      (50,128)          (49,463)
                                                                              -------------    --------------

Net Increase in Cash and Cash Equivalents                                               50               853
Cash and Cash Equivalents at Beginning of Period                                     3,580             3,276
                                                                              -------------    --------------

Cash and Cash Equivalents at End of Period                                         $ 3,630           $ 4,129
                                                                              =============    ==============


<FN>

The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>

                                     SJG-7


        Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1.  Significant Accounting Practices:

         The Entity - The condensed consolidated financial statements include
the accounts of South Jersey Gas Company (SJG) and its wholly owned statutory
trust subsidiary, SJG Capital Trust. We eliminated all significant intercompany
accounts and transactions. SJG reclassified some previously reported amounts to
conform with current year classifications. In our opinion, the condensed
consolidated financial statements reflect all adjustments needed to fairly
present SJG's financial position and operating results at the dates and for the
periods presented. Our business is subject to seasonal fluctuations and,
accordingly, this interim financial information should not be the basis for
estimating the full year's operating results. These financial statements should
be read in conjunction with SJG's 2002 Form 10K and annual certified financial
statements.

         South Jersey Industries, Inc.(SJI)owns all of the outstanding common
stock of SJG.

         Equity Investments - We classify equity investments purchased as
long-term investments as Available-for-Sale Securities on our condensed
consolidated balance sheets and carry them at their estimated fair value with
any changes in unrealized gains or losses included in Other Comprehensive
Income.

         Estimates and Assumptions - We prepare our financial statements to
conform with generally accepted accounting principles. Management makes
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual results could differ from
those estimates.

         Regulation - SJG is subject to the rules and regulations of the New
Jersey Board of Public Utilities (BPU). We maintain our accounts according to
the BPU's prescribed Uniform System of Accounts (See Note 2). SJG follows the
accounting for regulated enterprises prescribed by the Financial Accounting
Standards Board (FASB) Statement No. 71, "Accounting for the Effects of Certain
Types of Regulation." In general, Statement No. 71 allows deferral of certain
costs and creation of certain obligations when it is probable that such items
will be recovered from or refunded to customers in future periods.

         Derivative Instruments and Hedge Accounting - Effective January 1,
2001, SJG adopted FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. This statement establishes accounting and
reporting standards for derivative instruments, including those embedded in
other contracts, and for hedging activities. It requires that all derivatives,
whether designated as hedging relationships or not, must be recorded on the
balance sheet at fair value. If the derivative is designated as a fair value
hedge, we recognize the changes in the fair value of the derivative and of the
hedged item attributable to the hedged risk in earnings. If the derivative is
designated as a cash flow hedge, we record the effective portion of changes in
the fair value of the derivative in Other Comprehensive Income and recognize it
in the income statement when the hedged item affects earnings. We recognize
ineffective portions of changes in the fair value of cash flow hedges in
earnings.

                                     SJG-8

         In May 2003, SJG entered into an interest rate swap contract that
effectively fixed the interest rate at 2.24% through May 2004 on $20.0 million
of SJG's debt outstanding under its bank lines.

         We have also identified other financial instruments that qualify as
derivatives. Management believes, however, based on its interpretation of
guidance issued, that as these derivative contracts relate to the purchase and
sale of natural gas, they qualify for the normal purchases and normal sales
exception and, therefore, are not required to be marked to market.

         New Accounting Pronouncements - In January 2003, we adopted FASB
Statement No. 143, "Accounting for Asset Retirement Obligations," which
establishes accounting and reporting standards for legal obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. We have certain easements and right-of-way agreements that
qualify as legal obligations under Statement No. 143. However, it is our intent
to maintain these agreements in perpetuity; therefore, no change in our current
accounting practices is required at this time.

         We recover certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When we retire
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, we had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in Utility Plant Accumulated Depreciation. The
adoption of this statement did not materially affect our financial condition or
results of operations.

         In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities." The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJG effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJG will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJG's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers.  With the adoption of FIN 46, we
expect Statement No. 150 to have no impact on our financial statements.


Note 2.  Regulatory Actions:

         In January 1997, the BPU granted SJG a 9.62% rate of return on rate
base, which included an 11.25% return on common equity. Additionally, our
threshold for sharing pre-tax margins generated by interruptible and off-system
sales and transportation increased. Currently, SJG keeps 100% of pre-tax margins
up to the threshold level of $7.8 million. The next $750,000 is credited to

                                     SJG-9

customers through the Basic Gas Supply Service ("BGSS") clause. Thereafter, SJG
keeps 20% of the pre-tax margins as we have historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC). The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through self-implementing rate changes under certain conditions and
under certain limitations, resulting in the reduction of over/under-recoveries.
LGAC related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation

                                     SJG-10

Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas costs
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.


Note 3.  Regulatory Assets and Liabilities:

         All significant regulatory assets are separately identified on the
condensed consolidated balance sheets under the caption Regulatory Assets. Each
item that is separately identified is being recovered through utility rate
charges without a return on investments over the following periods:

                                                         Years Remaining
               Regulatory Asset                        As of June 30, 2003
               ----------------                        -------------------
      Environmental Remediation Costs:
               Expended - Net                                   7
               Liability for Future Expenditures         Not Applicable
      Gross Receipts and Franchise Taxes                       3.6
      Income Taxes - Flowthrough Depreciation                  8.3
      Deferred Fuel Costs - Net                              < 1.5
      Deferred Postretirement Benefit Costs                    9.5


         The majority of the assets reflected under the caption Other Regulatory
Assets are currently subject to filings with the BPU requesting recovery.
Management believes that all such deferred costs are probable of recovery from
ratepayers through future utility rates.

                                     SJG-11

         In addition, we had one significant regulatory liability for
overcollected taxes totaling $3.8 million and $2.3 million, including interest,
as of June 30, 2003 and 2002, respectively. We included these amounts in the
caption Other under the heading Deferred Credits and Other Non-Current
Liabilities and they are subject to being returned to ratepayers in future rate
proceedings.


Note 4.  Retained Earnings:

                  Restrictions exist under various loan agreements regarding the
amount of cash dividends or other distributions that we may pay on our common
stock. As of June 30, 2003, SJG's restrictions do not affect the amount that may
be distributed from its retained earnings.


Note 5.  Comprehensive Income:

         The components of comprehensive income (loss) for the three and six
months ended June 30 are as follows (in thousands):

                                             Three Months Ended Six Months Ended

                                                     June 30,        June 30,
                                                -------------------------------
                                                 2003    2002     2003     2002
                                                ------  ------   ------   ------

Net Income (Loss) Applicable to Common Stock   $  669 $  (325) $ 20,103  $16,614

Other Comprehensive (Loss) Income:
   Change in Fair Value of Derivatives - Net *    (14)   (143)       70    (143)
   Change in Fair Value of Investments - Net *    193      -        153      -
                                                 -----   -----    -----    -----
       Total Other Comprehensive Income (Loss)    179    (143)      223    (143)
                                                 -----   -----    -----    -----

Comprehensive Income (Loss)                    $  848  $ (468) $ 20,326 $ 16,471
                                               ======= ======= ======== ========

* Determined using an effective tax rate of 40.85%.


Note 6.  Commitments and Contingencies:

         Construction and Environmental Commitments - Our estimated net
cost of construction and environmental remediation programs for 2003 totals
$55.2 million. Commitments were made regarding some of these programs.

         Pending Litigation - We are subject to claims arising in the
ordinary course of business and other legal proceedings. We accrue liabilities
related to these claims when we can determine the amount or range of amounts of
likely settlement costs for those claims. We also maintain insurance and record
probable insurance recoveries relating to outstanding claims. Management does
not currently anticipate the disposition of any known claims to have a material
adverse effect on SJG's financial position, results of operations or liquidity.

                                     SJG-12

         Environmental Remediation Costs - We incurred and recorded
costs for environmental clean up of sites where the Company or its predecessors
operated gas manufacturing plants. We stopped manufacturing gas in the 1950s.

         We successfully entered into settlements with all of our historic
comprehensive general liability carriers regarding the environmental remediation
expenditures at our sites. Also, we have purchased a Cleanup Cost Cap Insurance
Policy limiting the amount of remediation expenditures that we will be required
to make at 11 of our sites. This Policy will be in force until 2024 at 10 sites
and until 2029 at one site. The minimum future cost estimate discussed below is
not reduced by projected insurance recoveries from the Cleanup Cost Cap
Insurance Policy.

         Since the early 1980s, we accrued environmental remediation
costs of $132.5 million, of which $84.3 million has been spent as of June 30,
2003. With the assistance of a consulting firm, we estimate that future costs to
clean up our sites will range from $48.2 million to $143.9 million. We recorded
the lower end of this range as a liability. It is reflected on the 2003
condensed consolidated balance sheet under the captions Current Liabilities and
Deferred Credits and Other Non-Current Liabilities. Recorded amounts include
estimated costs based on projected investigation and remediation work plans
using existing technologies. Actual costs could differ from the estimates due to
the long-term nature of the projects, changing technology, government
regulations and site-specific requirements.

         We have two regulatory assets associated with environmental
costs. The first asset is titled Environmental Remediation Cost: Expended - Net.
These expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of FASB Statement
No. 71. The BPU allows us to recover expenditures through the RAC.

         The other asset titled Environmental Remediation Cost:
Liability for Future Expenditures relates to estimated future expenditures
determined under the guidance of FASB Statement No. 5, "Accounting for
Contingencies." We recorded this amount, which relates to former manufactured
gas plant sites, as a deferred debit with the corresponding amount reflected on
the condensed consolidated balance sheets under the captions, Current
Liabilities and Deferred Credits and Other Non-Current Liabilities. The deferred
debit is a regulatory asset under Statement No. 71. The BPU's intent, evidenced
by current practice, is to allow us to recover the deferred costs after they are
spent over 7-year periods.

         As of June 30, 2003, we reflected the unamortized remediation
costs of $3.4 million on the condensed consolidated balance sheet under the
caption Regulatory Assets. Since implementing the RAC in 1992, we have recovered
$38.7 million through rates.


Note 7.  Subsequent Event:

         On July 16, 2003, SJG made settlement on $85.5 million of debt
under its Medium Term Note Program established in 2002. A remainder of $64.5
million is authorized to be issued under this program through July 31, 2005. The
debt issued has maturities of 10, 11, 13, 14 and 30 years, with a weighted

                                     SJG-13

average maturity of 19 years at a weighted average interest rate of 4.95%.
Proceeds were used to refinance short-term borrowings under commercial bank
lines.

                                     SJG-14

            Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

Overview

        South Jersey Gas Company (SJG) is a regulated natural gas utility. SJG
distributed natural gas in the seven southernmost counties of New Jersey to
298,877 customers at June 30, 2003 compared with 291,691 customers at June 30,
2002. SJG also:

     o        sells natural gas and pipeline transportation capacity
              (off-system sales) on a wholesale basis to various customers
              on the interstate pipeline system;

     o        transports natural gas purchased directly from producers
              or suppliers for its own sales and for some of its
              customers; and

     o        services appliances via the sale of appliance warranty
              programs, as well as on a time and materials basis.


Estimates and Assumptions

         As described in the footnotes to our condensed consolidated financial
statements, management must make estimates and assumptions that affect the
amounts reported in the financial statements and related disclosures. Actual
results could differ from those estimates. Two types of transactions presented
in our consolidated financial statements require a significant amount of
judgment and estimation. These relate to regulatory assets and environmental
remediation costs.

         The New Jersey Board of Public Utilities (BPU) has reviewed and
approved, through specific orders, most of the items shown as regulatory assets.
Other items represent costs that were not yet approved by the BPU for recovery,
but are the subject of current or future filings. In recording these costs as
regulatory assets, management believes the costs are probable of recovery under
existing rate-making concepts that are embodied in current rate orders received
by SJG. However, ultimate recovery is subject to BPU approval.

         An outside consulting firm assists us in estimating future costs for
environmental remediation activities. We estimate future costs based on
projected investigation and work plans using existing technologies. Developing a
single reliable estimation point is not feasible because of the amount of
uncertainty involved in the nature of projected remediation efforts and the long
period over which remediation efforts will continue. Therefore, we estimate the
range of future costs at $48.2 million to $143.9 million. In preparing financial
statements, SJG records liabilities for future costs using the lower end of the
range. We update estimates each year to take into account past efforts, changes
in work plans and remediation technologies.

                                     SJG-15

Revenue Recognition

         SJG bills customers monthly for gas delivered and recognizes those
revenues during the month. For SJG retail customers we do not bill at the end of
each month; we make an accrual to recognize revenues for gas delivered from the
date of the last meter reading to the end of the month. We bill customers at
rates approved by the BPU.

         We defer and recognize revenues related to SJG's appliance warranty
contracts over the full 12-month term of the contract as earned.

         The BPU allows SJG to recover the excess cost of gas sold over the cost
included in base rates through the Basic Gas Supply Service (BGSS) price
structure (formerly known as the Levelized Gas Adjustment Clause). SJG defers
over/under-recoveries of gas costs and includes them in subsequent adjustments
to the BGSS rate or other similar rate recovery mechanism. These adjustments
result in over/under-recoveries of gas costs being included in rates during
future periods. As a result of these deferrals, utility revenue recognition does
not directly translate to profitability. While we realize profits on gas sales
during the month of providing the utility service, significant shifts in revenue
recognition may result from the various recovery clauses approved by the BPU
(See Regulatory Matters) without shifting profits between periods, as these
clauses provide for recovery of costs on a dollar-for-dollar basis.


New Accounting Pronouncements

         Statement No. 143, "Accounting for Asset Retirement Obligations," which
was adopted in 2003, establishes accounting and reporting standards for legal
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. We have certain easements and right-of-way
agreements that qualify as legal obligations under Statement No. 143. However,
we intend to maintain such agreements in perpetuity; therefore, no change in our
current accounting practices is required at this time.

         SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When we retire
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, SJG had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in utility plant accumulated depreciation. We do not
expect the adoption of this statement to materially affect SJG's financial
condition or results of operations.

         In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJG effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJG will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJG's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

                                     SJG-16

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.

Forward-Looking Statements

         This report contains certain forward-looking statements concerning
projected financial and operating performance, future plans and courses of
action and future economic conditions. All statements in this report other than
statements of historical fact are forward-looking statements. These
forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the company and involve a number of
risks and uncertainties. We caution that forward-looking statements are not
guarantees and actual results could differ materially from those expressed or
implied in the forward-looking statements. Also, in making forward-looking
statements, we assume no duty to update these statements should expectations
change or actual results and events differ from current expectations.

         A number of factors could cause our actual results to differ materially
from those anticipated including, but not limited to, the following: general
economic conditions on an international, national, state and local level;
weather conditions in our marketing areas; changes in commodity costs; changes
in the availability of natural gas; regulatory and court decisions; competition
in our utility and nonutility activities; the availability and cost of capital;
costs and effects of legal proceedings and environmental liabilities; the
failure of customers or suppliers to fulfill their contractual obligations; and
changes in business strategies.


Mandatorily Redeemable Preferred Securities

         SJG's statutory trust subsidiary, SJG Capital Trust, currently has $35
million of 8.35% SJG-Guaranteed Mandatorily Redeemable Preferred Securities
outstanding. SJG may redeem these securities at a price equal to 100% of the
principal amount at any time. The securities currently trade on the New York
Stock Exchange under the symbol SJI.T. As noted, these securities will be
reflected as liabilities effective July 1, 2003.


Customer Choice Legislation

         All residential natural gas customers in New Jersey can choose their
gas supplier under the terms of the Electric Discount and Energy Competition Act
of 1999. As of June 30, 2003, 95,410 SJG residential customers chose a natural
gas commodity supplier other than the utility. This number increased from 63,682
at June 30, 2002 as marketers were able to offer natural gas at prices
competitive with those available under regulated utility tariffs. Customers
purchasing natural gas from providers other than SJG are charged for gas costs
by the marketer, not SJG. The resulting decrease in SJG's revenues is offset by

                                     SJG-17

a corresponding decrease in SJG's gas costs. While customer choice can reduce
utility revenues, it does not negatively affect SJG's net income or financial
condition. The Board of Public Utilities continues to allow for full recovery of
natural gas costs through the Basic Gas Supply Service as well as other costs of
service including deferred costs, through tariffs.


Temperature Adjustment Clause

         SJG's Board of Public Utilities approved Temperature Adjustment Clause
(TAC) had the following impacts on 2003 and 2002 second quarter and six months
net earnings:

                                                   2003               2002
                                               ------------       ------------
      TAC Adjustment (Decrease) Increase to
        Net Income (in thousands)

           Quarter Ended June 30               $    (1,022)      $       247
           Six Months Ended June 30            $    (2,377)      $     3,249


         The clause is designed to mitigate the effect of variations in heating
season temperatures from historical norms for both SJG and its customers. While
the revenue and income impacts of TAC adjustments are recorded as incurred, cash
inflows or outflows directly attributable to TAC adjustments generally do not
begin until the next TAC year. Each TAC year begins October 1.


Operating Revenues

         Revenues increased $10.5 million and $96.3 million in the second
quarter and for the six months ended June 30, 2003, respectively, compared with
the prior year periods. These increases were primarily due to three factors.
First, weather in the second quarter and for the six months ended June 30, 2003
was 41.9% and 30.3% colder than the respective prior year periods. Second,
off-system sales revenues increased due to higher prices for natural gas sold in
2003 than in the prior year. Third, SJG's total customers increased from 291,691
as of June 30, 2002 to 298,877 as of June 30, 2003. Partially offsetting the
effect of these factors was a 50% increase in the number of residential
customers purchasing their gas from a source other than SJG. The decline in
customers who purchased their natural gas from SJG directly impacted utility
revenues. However, since gas costs are passed on directly to customers without
any profit margin added by SJG, the increased customer usage of gas marketers
did not impact SJG's profitability.

         As a result of SJG's Temperature Adjustment Clause, revenues from
utility ratepayers are closely tied to 20-year normal temperatures calculated
under the clause and not actual temperatures. While the clause significantly
reduces fluctuations in revenues related to temperature, as a general rule,
revenues continue to be positively impacted by colder weather and negatively
impacted by warmer weather. Weather in the second quarter of 2003 was 41.9%
colder than in 2002 and 28.9 % colder than the 20-year TAC average. During the

                                     SJG-18

six months ended June 30, 2003, weather was 30.3% colder than in 2002 and 10.1%
colder than the 20-year TAC average.

         The following is a comparison of operating revenue and throughput for
the three and six month periods ended June 30, 2003 vs. the same periods ended
June 30, 2002.

                                          Three Months Ended    Six Months Ended
                                               June 30,             June 30,
                                            2003      2002      2003       2002
                                        ----------------------------------------
Operating Revenues (Thousands):
Firm
     Residential                         $ 25,699  $ 25,133  $ 115,007 $ 101,232
     Commercial                             7,287     6,111     34,717    28,655
     Industrial                               973       838      3,340     2,547
     Cogeneration & Electric Generation     1,969     2,963      3,291     3,579
     Firm Transportation                   13,142     8,394     41,202    22,658
                                        ----------------------------------------

         Total Firm Operating Revenues     49,070    43,439      7,557    58,671
                                        ----------------------------------------

Interruptible                                 558       307      1,049       546
Interruptible Transportation                  300       327        495       802
Off-System                                 22,985    18,908     111,71    54,661
Capacity Release & Storage                  1,510     1,136      2,813     2,830
Other                                       1,124       890      1,854     1,680
                                        ----------------------------------------

         Total Operating Revenues        $ 75,547  $ 65,007  $ 315,483 $ 219,190
                                        ========================================

Throughput (MMcf):
Firm
     Residential                            2,449     2,229     10,504     9,371
     Commercial                               793       684      3,522     3,018
     Industrial                                43        24        148       115
     Cogeneration & Electric Generation       240       635        348       722
     Firm Transportation                    6,427     5,311     17,490    12,794
                                        ----------------------------------------

         Total Firm Throughput              9,952     8,883     32,012    26,020
                                        ----------------------------------------

Interruptible                                  96        55        132       103
Interruptible Transportation                  547       683        958     1,640
Off-System                                  3,744     4,940     15,474    16,243
Capacity Release & Storage                 10,402    10,498     16,395    17,144
                                        ----------------------------------------

         Total Throughput                  27,741    25,059     64,971    61,150
                                        ========================================

                                     SJG-19

         Total gas throughput increased 10.7% % to 27.7 billion cubic feet
(Bcf) in the second quarter and 6.2% to 65.0 Bcf for the six months ended June
30, 2003 compared with the respective prior year periods. The higher throughput
was primarily due to colder temperatures experienced in 2003. The increase in
firm transportation throughput reflected the increasing number of households
purchasing their gas from suppliers other than SJG.


Gas Purchased for Resale

         Gas purchased for resale increased $8.3 million and $87.7 million for
the second quarter and for the six months ended June 30, 2003, respectively,
compared with the same periods in 2002 due principally to an increase in firm
gas sales volume and higher gas costs for off-system sales. Colder weather was
the main cause of the increase in firm gas sales volume; however, this was
partially offset by the migration of firm gas sales customers to transportation
service. SJG's gas cost during the second quarter of 2003 averaged $7.05 per
decatherm (dt) compared with $3.79/dt in 2002. During the six months ended June
30, 2003, gas costs averaged $6.64/dt compared with $4.01/dt in 2002. Unlike gas
costs associated with off-system sales, changes in the unit cost of gas sold to
utility ratepayers do not directly affect cost of gas sold. We defer
fluctuations in gas costs to ratepayers not reflected in current rates in future
periods under a BPU-approved Basic Gas Supply Service price structure, formerly
known as the Levelized Gas Adjustment Clause. Gas supply sources include
contract and open-market purchases. SJG secures and maintains its own gas
supplies to serve its sales customers. We do not anticipate any difficulty
renewing or replacing expiring contracts under substantially similar terms and
conditions.


Utility Operations

     A summary of net changes in utility operations (in thousands):

                                       Three Months Ended       Six Months Ended
                                            June 30,                June 30,
                                          2003 vs. 2002           2003 vs. 2002
                                          --------------------------------------
    Other Production Expense             $         9              $        32
    Transmission                                  13                       44
    Distribution                                  73                      294
    Customer Accounts and Services               (59)                    (186)
    Sales                                         87                       85
    Administration and General                   224                      949
                                         ---------------------------------------
            Total Utility Operations     $       347              $     1,218
                                         =======================================


         Distribution expenses increased for both the three and six months ended
June 30, 2003 compared with the respective periods in 2002. The increase during
the six month period was primarily due to severe weather conditions experienced
during the first quarter of 2003 that resulted in a significant increase in
overtime hours. The weather created operating issues that ranged from snow

                                     SJG-20

removal, to water intrusion in gas lines in oceanfront communities, to higher
shut-off for non-payment activity.

         Customer Accounts and Services expenses includes bad debt expense from
customer account write-offs. The collectibility of delinquent customer accounts
is generally determined during the winter season following the one where the
customer's account became delinquent - as temperatures drop, many customers with
delinquent balances will begin making payments in order to have their heat
restored. As the 2001-2002 winter season was one of the warmest winters on
record, many of our customers with delinquent balances from the prior winter did
not make payments to have their heat restored as would normally be expected. As
such, our bad debt expense was unusually high during the first half of 2002.
However, as the 2002-2003 winter season was colder-than-normal, customers with
delinquent balances from the year before did make payments as expected to have
their heat restored. This resulted in a much lower bad debt expense in the first
half of 2003, as compared with 2002.

         Administrative and General expenses increased in both the three and six
months ended June 30, 2003 compared with the same periods in 2002 primarily
because of increasing healthcare, pension and insurance costs.


Other Operating Expenses

         A summary of principal changes in other operating expenses (in
thousands):

                                Three Months Ended              Six Months Ended
                                     June 30,                       June 30,
                                   2003 vs. 2002                  2003 vs. 2002
                                   ---------------------------------------------
Maintenance                       $      (190)                 $      (150)
Depreciation                              311                          621
Energy and Other Taxes                     92                        1,337

         Depreciation was higher due to our increased investment in property,
plant and equipment. The increases in Energy and Other Taxes relate primarily to
increases in volumes of gas sold and transported as reflected in the table under
the caption "Operating Revenues."


Interest Charges

         Interest charges decreased in the second quarter and first six months
of 2003 compared with the prior year period due primarily to reductions in
short-term rates on line of credit borrowings and the refunding of higher
priced, fixed rate, long-term debt with lower cost, floating rate, short-term
debt. These refundings were refinanced in July 2003 with long-term debt
issuances under our Medium-Term Note Program at significantly lower interest
rates compared to the previous long-term interest rate (See Note 7 - Subsequent
Event). We have incurred debt primarily to expand and upgrade SJG's gas

                                     SJG-21

transmission and distribution system and to support seasonal working capital
needs related to gas inventories and customer receivables.


Net Income Applicable to Common Stock

         The details affecting the changes in net income and earnings per share
are discussed under the appropriate captions above.


Regulatory Matters

         In January 1997, the BPU granted SJG a 9.62% rate of return on rate
base, which included an 11.25% return on common equity. Additionally, our
threshold for sharing pre-tax margins generated by interruptible and off-system
sales and transportation increased. Currently, SJG keeps 100% of pre-tax margins
up to the threshold level of $7.8 million. The next $750,000 is credited to
customers through the Basic Gas Supply Service ("BGSS") clause. Thereafter, SJG
keeps 20% of the pre-tax margins as we have historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC). The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved

                                     SJG-22

price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through self-implementing rate changes under certain conditions and
under certain limitations, resulting in the reduction of over/under-recoveries.
LGAC related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas costs
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.

Liquidity and Capital Resources

         Liquidity needs at SJG are driven by factors that include natural gas
commodity prices; the impact of weather on customer bills; lags in fully
collecting gas costs from customers under the Basic Gas Supply Service charge;
the timing of construction and remediation expenditures and related permanent
financings; mandated tax payment dates; and both discretionary and required
repayments of long-term debt.

                                     SJG-23

         Lines of credit available to SJG totaled $157.0 million at June 30,
2003, of which $119.5 million was used. These lines are available through seven
commercial banks on an uncommitted basis. The banks and SJG review and renew the
lines annually. SJG has long-standing relationships with these banks and we
believe, based upon ongoing dialogue, that there will continue to be sufficient
credit available to meet our business' future liquidity needs. However, SJG has
begun the process of obtaining up to $100 million of committed bank facilities
to enhance our liquidity position. We anticipate having committed facilities in
place during the third quarter.

         SJG supplements its operating cash flow and credit lines with both debt
and equity capital. Over the years, SJG has used long-term debt, primarily in
the form of First Mortgage Bonds, to finance its long-term needs. These needs
are primarily capital expenditures for property, plant and equipment. Since
1998, SJG has financed these needs via a Medium Term Note (MTN) program, secured
in similar fashion to the First Mortgage Bonds. SJG's registration of a new $150
million MTN program with the Securities and Exchange Commission became effective
in December 2002. This program replaces a previous $100 million, 3-year MTN
program that was fully used in 2001. In July 2003, SJG issued $85.5 million of
long-term debt under the program. Consequently, $64.5 million of the MTN program
remains available for future debt issuances. Proceeds of the July issues were
used to refinance short-term debt outstanding under commercial bank lines.
Current maturities on long-term debt over the next five years are as follows:
$8.4 million per year in 2003 through 2006; and $4.7 million in 2007.


Capital Expenditures, Commitments and Contingencies

         Capital Expenditures

         SJG has a continuing need for cash resources and capital, primarily to
invest in new and replacement facilities and equipment and for environmental
remediation costs. Net construction and remediation expenditures for the first
six months of 2003 amounted to $20.8 million. We estimate the net costs for
2003, 2004 and 2005 at approximately $56.3 million, $62.0 million and $54.2
million, respectively.

         Commitments and Contingencies

         SJG has certain commitments for both pipeline capacity and gas supply
for which it pays fees regardless of usage. Those commitments as of June 30,
2003 average $46.2 million annually and total $277.1 million over the contracts'
lives. Approximately 15% of the financial commitment under these contracts
expires during the next five years. We expect to renew each of these contracts
under renewal provisions as provided in each contract. SJG recovers all
prudently incurred fees through rates via the BGSS.

                                     SJG-24

Ratio of Earnings to Fixed Charges

         The company's ratio of earnings to fixed charges for each of the
periods indicated is as follows:

  Twelve Months
      Ended
    June 30,                         Year Ended December 31,
    -------        ------------------------------------------------------------
      2003          2002          2001          2000          1999        1998
      ----          ----          ----          ----          ----        ----

      3.3x          2.9x          2.6x          2.6x          2.5x        2.2x

         The ratio of earnings to fixed charges represents, on a pre-tax basis,
the number of times earnings covers fixed charges. Earnings consist of net
income, to which has been added fixed charges and taxes based on income of the
company before discontinued operations. Fixed charges consist of interest
charges and preferred securities dividend requirements and an interest factor in
rentals.


             Item 3. Quantitative and Qualitative Disclosures About
                           Market Risks of the Company


Commodity Market Risks

         SJG is a regulated utility. As such, we recover gas commodity costs
under the Basic Gas Supply Service clause that is part of our tariff. While SJG
is protected from gas cost fluctuations by the clause, we do utilize physical
forward contracts to shield our customers from gas cost fluctuations.


Interest Rate Risk

         Our exposure to interest rate risk relates primarily to short-term,
variable rate borrowings. Our short-term, variable rate debt outstanding at June
30, 2003 was $119.5 million and averaged $108.2 million for the first six months
of 2003. A hypothetical 100 basis point (1%) increase in interest rates on our
average variable rate debt outstanding would result in a $639,000 increase in
our interest expense, net of tax, on an annual basis. The 100 basis point
increase was chosen for illustrative purposes, as it provides a simple basis for
calculating the impact of interest rate changes under a variety of interest rate
scenarios. Over the last five years, the change in basis points (b.p.) of our
average monthly interest rates from the beginning to end of each year was as
follows: 2002 -74 b.p. decrease; 2001 - 383 b.p. decrease; 2000 - 83 b.p.
increase; 1999 - 81 b.p. increase; and 1998 - 38 b.p. decrease. For June 2003,
our average interest rate on variable rate debt was 2.05%.

                                     SJG-25

         To reduce exposure to an interest rate increase on our variable rate
debt, SJG entered into an interest rate swap agreement that became effective in
June 2003 which fixed the rate on $20.0 million of variable rate debt through
May 2004 at 2.24%. SJG primarily issues long-term debt at fixed rates and,
consequently, interest expense is not significantly impacted by changes in
market interest rates. SJG prepaid, at par, $3.0 million of 8.6% debenture notes
in February 2003. In May 2003, we also redeemed an additional $5.1 million of
10.25% first mortgage bonds prior to scheduled maturity. SJG paid a premium of
$110,000 to bondholders in conjunction with that redemption.


                         Item 4. Controls and Procedures

         SJG management, including the Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

                                     SJG-26

                          PART II -- OTHER INFORMATION


                            Item l. Legal Proceedings

         Information required by this Item is incorporated by reference to Part
I, Item 1, Note 6, beginning on page 11.



                                Item 6. Exhibits

         (a)      Exhibits

                  Exhibit No.                  Description
                  -----------                  -----------

                  31.1         Certification of Chief Executive Officer Pursuant
                               to Rule 13a-14(a).

                  31.2         Certification of Chief Financial Officer Pursuant
                               to Rule 13a-14(a).

                  32           Certification Pursuant to Rule 13a-14(b) and
                               Section 906 of the Sarbanes-Oxley Act of 2002
                               (subsections (a) and (b) of Section 1350,
                               Chapter 63 of Title 18, United States Code).

                                     SJG-27

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                            SOUTH JERSEY GAS COMPANY
                                  (Registrant)



Dated:  August 13, 2003            By:  /s/ Charles Biscieglia
                                       ----------------------------------------
                                        Charles Biscieglia
                                        Chief Executive Officer



Dated:  August 13, 2003            By:  /s/ David A. Kindlick
                                       ----------------------------------------
                                        David A. Kindlick
                                        Executive Vice President &
                                        Chief Financial Officer

                                     SJG-28

CERTIFICATION                                                      Exhibit 31.1


I, Charles Biscieglia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey Gas
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJG-29

Date: August 13, 2003              /s/ Charles Biscieglia
                                  ---------------------------------------------
                                   Charles Biscieglia
                                   Chief Executive Officer

                                     SJG-30

CERTIFICATION                                                       Exhibit 31.2


I, David A. Kindlick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey Gas
Company;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJG-31

Date: August 13, 2003              /s/ David A. Kindlick
                                  ---------------------------------------------
                                   David A. Kindlick
                                   Executive Vice President and
                                   Chief Financial Officer

                                     SJG-32

CERTIFICATION                                                         Exhibit 32



             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)



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), each of the
undersigned officers of South Jersey Gas Company, a New Jersey Corporation (the
"Company"), does hereby certify, to such officer's knowledge, that:


The Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (the "Form
10-Q") of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 and information contained in the
Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of the Company.


Dated:  August 13, 2003             By:  /s/  Charles Biscieglia
                                        ---------------------------------------
                                         Charles Biscieglia
                                         Chief Executive Officer



Dated:  August 13, 2003             By:  /s/  David A. Kindlick
                                        ---------------------------------------
                                         David A. Kindlick
                                         Executive Vice President &
                                         Chief Financial Officer


The foregoing certification is being furnished solely 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) and is not being filed as part of the Form
10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been
provided to South Jersey Gas Company and will be retained by South Jersey Gas
Company and furnished to the Securities and Exchange Commission or its staff
upon request.

                                     SJG-33