----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-Q**

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

**September      30, 2005**

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

**000-22211**

**SOUTH      JERSEY GAS COMPANY**

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

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

**(609)      561-9000**

----

----

| **SOUTH                  JERSEY GAS COMPANY**                                                                        |
|----------------------------------------------------------------------------------------------------------------------|
|                                                                                                                 |   |   |   |   |   |   |   |
| **CONDENSED                  STATEMENTS OF INCOME (UNAUDITED)**                                                      |
| (In                  Thousands)                                                                                      |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                      |   |   | Three                  Months Ended |
|                                                                                                                      |   |   | September                  30, |
|                                                                                                                 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Operating                  Revenues**                                                                              |   | $ | 89,702 |   | $ | 73,480 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Operating                  Expenses:**                                                                             |   |   |   |   |   |   |   |
|                     Cost of Sales                                                                          |   |   | 67,076 |   |   | 50,183 |   |
|                     Operations                                                                             |   |   | 10,474 |   |   | 12,069 |   |
|                     Maintenance                                                                            |   |   | 1,456 |   |   | 1,465 |   |
|                     Depreciation                                                                           |   |   | 5,512 |   |   | 5,282 |   |
|                     Energy and Other Taxes                                                                 |   |   | 1,580 |   |   | 1,653 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                           Total Operating Expenses                           |   |   | 86,098 |   |   | 70,652 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                |   |   | 3,604 |   |   | 2,828 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Other                  Income and (Expense), Net**                                                                 |   |   | 11 |   |   | 72 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Interest                  Charges**                                                                                |   |   | (4,720 | ) |   | (4,499 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Loss                  Before Income Taxes**                                                                        |   |   | (1,105 | ) |   | (1,599 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Income                  Tax Benefit**                                                                              |   |   | 334 |   |   | 519 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Net                  Loss**                                                                                        |   | $ | (771 | ) | $ | (1,080 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |   |   |   |   |   |

----

|                                                                                                                 |   |   |                               |   |   |    |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------|--------|--------|---------|--------|
| **SOUTH                  JERSEY GAS COMPANY**                                                                        |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **CONDENSED                  STATEMENTS OF INCOME (UNAUDITED)**                                                      |
| (In                  Thousands)                                                                                      |
|                                                                                                                 |   |   |                               |   |   |    |   |
|                                                                                                                      |   |   | Nine                  Months Ended |
|                                                                                                                      |   |   | September                  30,     |
|                                                                                                                 |   |   | 2005                               |   |   | 2004    |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Operating                  Revenues**                                                                              |   | $      | 390,322                            |   | $      | 351,710 |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Operating                  Expenses:**                                                                             |   |   |                               |   |   |    |   |
|                     Cost of Sales                                                                          |   |   | 266,532                            |   |   | 234,344 |   |
|                     Operations                                                                             |   |   | 37,702                             |   |   | 39,026  |   |
|                     Maintenance                                                                            |   |   | 4,460                              |   |   | 4,249   |   |
|                     Depreciation                                                                           |   |   | 16,307                             |   |   | 17,748  |   |
|                     Energy and Other Taxes                                                                 |   |   | 8,425                              |   |   | 8,364   |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
|                           Total Operating Expenses                           |   |   | 333,426                            |   |   | 303,731 |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Operating                  Income**                                                                                |   |   | 56,896                             |   |   | 47,979  |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Other                  Income and (Expense), Net**                                                                 |   |   | (27                                | )      |   | 631     |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Interest                  Charges**                                                                                |   |   | (13,353                            | )      |   | (13,167 | )      |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Income                  Before Income Taxes**                                                                      |   |   | 43,516                             |   |   | 35,443  |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Income                  Taxes**                                                                                    |   |   | (18,368                            | )      |   | (14,994 | )      |
|                                                                                                                 |   |   |                               |   |   |    |   |
| **Net                  Income**                                                                                      |   | $      | 25,148                             |   | $      | 20,449  |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
|                                                                                                                 |   |   |                               |   |   |    |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |                               |   |   |    |   |
|                                                                                                                 |   |   |                               |   |   |    |   |

----

| **SOUTH                  JERSEY GAS COMPANY**                                                                        |
|----------------------------------------------------------------------------------------------------------------------|
|                                                                                                                 |   |   |   |   |   |   |   |
| **CONDENSED                  STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)**                                        |
| (In                  Thousands)                                                                                      |
|                                                                                                                 |   |   |   |   |
|                                                                                                                      |   |   | Three                  Months Ended |   |
|                                                                                                                      |   |   | September                  30, |   |
|                                                                                                                 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Net                  Loss**                                                                                        |   | $ | (771 | ) | $ | (1,080 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income (Loss), Net of Tax:***                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                     Change in Fair Value of Investments                                                    |   |   | 100 |   |   | (54 | ) |
|                     Change in Fair Value of Derivatives                                                    |   |   | 100 |   |   | - |   |
|                     Amortization of Realized Loss on Treasury Lock                                         |   |   |   |   |   |   |   |
|                       Related to Long-Term Debt Refinance                                        |   |   | 2 |   |   | - |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                     Other Comprehensive Income (Loss) - Net of Tax*                                        |   |   | 202 |   |   | (54 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Comprehensive                  Loss**                                                                              |   | $ | (569 | ) | $ | (1,134 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   | Nine                  Months Ended |   |
|                                                                                                                      |   |   | September                  30, |   |
|                                                                                                                 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                      |   | $ | 25,148 |   | $ | 20,449 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Other                  Comprehensive Loss, Net of Tax:***                                                          |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                     Change in Fair Value of Investments                                                    |   |   | 178 |   |   | (354 | ) |
|                     Change in Fair Value of Derivatives                                                    |   |   | (618 | ) |   | 4 |   |
|                     Amortization of Realized Loss on Treasury Lock                                         |   |   |   |   |   |   |   |
|                       Related to Long-Term Debt Refinance                                        |   |   | 2 |   |   | - |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                     Other Comprehensive Loss - Net of Tax*                                                 |   |   | (438 | ) |   | (350 | ) |
|                                                                                                                 |   |   |   |   |   |   |   |
| **Comprehensive                  Income**                                                                            |   | $ | 24,710 |   | $ | 20,099 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| *                  Determined using a combined statutory tax rate of 40.85%.                                         |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of the condensed financial                  statements. |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |

----

| **SOUTH                JERSEY GAS COMPANY**                                                                      |   |
|------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   |   |   |   |   |   |   |
| **CONDENSED                STATEMENTS OF CASH FLOWS (UNAUDITED)**                                                |   |
| (In                Thousands)                                                                                    |   |
|                                                                                                             |   |   |   |   |   |   |   |
|                                                                                                                  |   |   | Nine                Months Ended |   |
|                                                                                                                  |   |   | September                30, |   |
|                                                                                                             |   |   | 2005 |   |   | 2004 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| **Cash                Flows from Operating Activities:**                                                         |   |   |   |   |   |   |   |
|                  Net Income                                                                                 |   | $ | 25,148 |   | $ | 20,449 |   |
|                  Adjustments to Reconcile Net Income to Net Cash                                            |   |   |   |   |   |   |   |
|                   Provided by Operating Activities:                                                    |   |   |   |   |   |   |   |
|                    Depreciation and Amortization                                                  |   |   | 18,577 |   |   | 19,377 |   |
|                    Provision for Losses on Accounts Receivable                                    |   |   | 167 |   |   | (144 | ) |
|                    Revenues and Fuel Costs Deferred - Net                                         |   |   | (8,003 | ) |   | 8,048 |   |
|                    Deferred and Non-Current Income Taxes and Credits - Net                        |   |   | 19,555 |   |   | 10,086 |   |
|                    Environmental Remediation Costs - Net                                          |   |   | (2,117 | ) |   | (1,745 | ) |
|                    Gas Plant Cost of Removal                                                      |   |   | (679 | ) |   | (679 | ) |
|                    Changes in:                                                                    |   |   |   |   |   |   |   |
|      Accounts                Receivable                                                 |   |   | 41,127 |   |   | 49,445 |   |
|                     Inventories                                                              |   |   | (32,894 | ) |   | (25,194 | ) |
|                     Prepayments and Other Current Assets                                     |   |   | (1,357 | ) |   | (652 | ) |
|                     Prepaid and Accrued Taxes - Net                                          |   |   | (13,472 | ) |   | (20,705 | ) |
|                     Accounts Payable and Other Accrued Liabilities                           |   |   | 18,940 |   |   | (5,626 | ) |
|                     Other Assets                                                             |   |   | 5,572 |   |   | 4,390 |   |
|                     Other Liabilities                                                        |   |   | (2,317 | ) |   | (1,177 | ) |
|                                                                                                             |   |   |   |   |   |   |   |
|                        Net Cash Provided by Operating Activities              |   |   | 68,247 |   |   | 55,873 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| **Cash                Flows from Investing Activities:**                                                         |   |   |   |   |   |   |   |
|                    Capital Expenditures                                                           |   |   | (51,860 | ) |   | (45,385 | ) |
|                    Purchase of Available-for-Sale Securities                                      |   |   | - |   |   | (105 | ) |
|                    Proceeds from Sale of Segment                                                  |   |   | - |   |   | 2,668 |   |
|                                                                                                             |   |   |   |   |   |   |   |
|                        Net Cash Used in Investing Activities                  |   |   | (51,860 | ) |   | (42,822 | ) |
|                                                                                                             |   |   |   |   |   |   |   |
| **Cash                Flows from Financing Activities:**                                                         |   |   |   |   |   |   |   |
|                  Net Borrowings (Repayments) of Lines of Credit                                             |   |   | 8,500 |   |   | (44,300 | ) |
|                  Proceeds from Issuance of Long-Term Debt                                                   |   |   | 10,000 |   |   | 40,000 |   |
|                  Principal Repayments of Long-Term Debt                                                     |   |   | (22,773 | ) |   | (21,773 | ) |
|                  Redemption of Preferred Stock                                                              |   |   | (1,690 | ) |   | - |   |
|                  Dividends on Common Stock                                                                  |   |   | (11,251 | ) |   | - |   |
|                  Premium for Early Retirement of Debt                                                       |   |   | (184 | ) |   | - |   |
|                  Payments for Issuance of Long-Term Debt                                                    |   |   | (289 | ) |   | (359 | ) |
|                  Additional Investment by Shareholder                                                       |   |   | - |   |   | 15,000 |   |
|                                                                                                             |   |   |   |   |   |   |   |
|                        Net Cash Used in Financing Activities                  |   |   | (17,687 | ) |   | (11,432 | ) |
|                                                                                                             |   |   |   |   |   |   |   |
| **Net                (Decrease) Increase in Cash and Cash Equivalents**                                          |   |   | (1,300 | ) |   | 1,619 |   |
| **Cash                and Cash Equivalents at Beginning of Period**                                              |   |   | 3,310 |   |   | 3,210 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| **Cash                and Cash Equivalents at End of Period**                                                    |   | $ | 2,010 |   | $ | 4,829 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the condensed financial                statements. |   |   |   |   |   |   |   |
|                                                                                                             |   |   |   |   |   |   |   |

----

| **SOUTH                    JERSEY GAS COMPANY**                                                                          |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |   |   |   |   |   |   |
| **CONDENSED                    BALANCE SHEETS (UNAUDITED)**                                                              |   |
| (In                    Thousands)                                                                                        |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                                                                                                                          |   |   | September                    30, |   |   | December                    31, |   |
|                                                                                                                     |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Assets**                                                                                                               |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Property,                    Plant and Equipment:**                                                                    |   |   |   |   |   |   |   |
|                       Utility Plant, at original cost                                                          |   | $ | 1,004,515 |   | $ | 957,287 |   |
|                          Accumulated Depreciation                                               |   |   | (233,986 | ) |   | (224,506 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |
|                            Property, Plant and Equipment - Net                        |   |   | 770,529 |   |   | 732,781 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Investments:**                                                                                                         |   |   |   |   |   |   |   |
|                      Available-for-Sale Securities                                                                  |   |   | 5,517 |   |   | 5,296 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Current                    Assets:**                                                                                   |   |   |   |   |   |   |   |
|                      Cash and Cash Equivalents                                                                      |   |   | 2,010 |   |   | 3,310 |   |
|                      Accounts Receivable                                                                            |   |   | 24,915 |   |   | 39,916 |   |
|                      Unbilled Revenues                                                                              |   |   | 8,163 |   |   | 34,861 |   |
|                      Provision for Uncollectibles                                                                   |   |   | (2,466 | ) |   | (2,871 | ) |
|                      Natural Gas in Storage, average cost                                                           |   |   | 99,049 |   |   | 65,691 |   |
|                      Materials and Supplies, average cost                                                           |   |   | 4,089 |   |   | 4,553 |   |
|                      Prepaid Taxes                                                                                  |   |   | 19,463 |   |   | 6,104 |   |
|                      Derivatives - Energy Related Assets                                                            |   |   | 15,572 |   |   | 1,273 |   |
|                      Other Prepayments and Current Assets                                                           |   |   | 3,435 |   |   | 2,078 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                            Total Current Assets                                       |   |   | 174,230 |   |   | 154,915 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Regulatory                    Assets:**                                                                                |   |   |   |   |   |   |   |
|                      Gross Receipts and Franchise Taxes                                                             |   |   | 591 |   |   | 924 |   |
|                      Environmental Remediation Costs:                                                               |   |   |   |   |   |   |   |
|                         Expended - Net                                                               |   |   | 7,398 |   |   | 5,281 |   |
|                         Liability for Future Expenditures                                            |   |   | 56,290 |   |   | 51,046 |   |
|                      Income Taxes - Flowthrough Depreciation                                                        |   |   | 5,908 |   |   | 6,641 |   |
|                      Deferred Postretirement Benefit Costs                                                          |   |   | 2,740 |   |   | 3,024 |   |
|                      Societal Benefit Costs                                                                         |   |   | 2,107 |   |   | 4,562 |   |
|                      Other Regulatory Assets                                                                        |   |   | 1,164 |   |   | 1,157 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                            Total Regulatory Assets                                    |   |   | 76,198 |   |   | 72,635 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| **Other                    Noncurrent Assets:**                                                                          |   |   |   |   |   |   |   |
|                      Unamortized Debt Discount and Expense                                                          |   |   | 7,969 |   |   | 7,957 |   |
|                      Prepaid Pension                                                                                |   |   | 22,924 |   |   | 24,812 |   |
|                      Accounts Receivable - Merchandise                                                              |   |   | 6,004 |   |   | 7,101 |   |
|                      Derivatives - Energy Related Assets                                                            |   |   | 780 |   |   | - |   |
|                      Other                                                                                          |   |   | 2,031 |   |   | 2,089 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                            Total Other Noncurrent Assets                              |   |   | 39,708 |   |   | 41,959 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                              Total Assets                                   |   | $ | 1,066,182 |   | $ | 1,007,586 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| The                    accompanying notes are an integral part of the condensed financial                    statements. |   |   |   |   |   |   |   |

----

|                                                                                                                     |   |   |                             |   |   |                            |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|---------------------------------|--------|
| **SOUTH                    JERSEY GAS COMPANY**                                                                          |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **CONDENSED                    BALANCE SHEETS (UNAUDITED)**                                                              |   |
| (In                    Thousands)                                                                                        |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                                                                                                                          |   |   | September                    30, |   |   | December                    31, |   |
|                                                                                                                     |   |   | 2005                             |   |   | 2004                            |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **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                                         |   |   | 170,317                          |   |   | 170,317                         |   |
|                      Accumulated Other Comprehensive Loss                                                           |   |   | (550                             | )      |   | (112                            | )      |
|                      Retained Earnings                                                                              |   |   | 138,967                          |   |   | 130,695                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                            Total Common Equity                                        |   |   | 314,582                          |   |   | 306,748                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **Preferred                    Stock:**                                                                                  |   |   |                             |   |   |                            |   |
|                      Redeemable Cumulative Preferred 8% Series - Par Value $100                                     |   |   |                             |   |   |                            |   |
|     per                    share; Authorized 41,966 shares; 0 and 16,904 shares outstanding          |   |   |                             |   |   |                            |   |
|                        at September 30, 2005 and December 31, 2004, respectively                          |   |   | -                                |   |   | 1,690                           |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **Long-Term                    Debt**                                                                                    |   |   | 272,235                          |   |   | 282,008                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                            Total Capitalization                                       |   |   | 586,817                          |   |   | 590,446                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **Current                    Liabilities:**                                                                              |   |   |                             |   |   |                            |   |
|                      Notes Payable                                                                                  |   |   | 61,500                           |   |   | 53,000                          |   |
|                      Current Maturities of Long-Term Debt                                                           |   |   | 2,273                            |   |   | 5,273                           |   |
|                      Accounts Payable                                                                               |   |   | 82,761                           |   |   | 59,026                          |   |
|                      Derivatives - Energy Related Liabilities                                                       |   |   | 680                              |   |   | 1,800                           |   |
|                      Derivatives - Other                                                                            |   |   | -                                |   |   | 344                             |   |
|                      Deferred Income Taxes - Net                                                                    |   |   | 18,295                           |   |   | 2,627                           |   |
|                      Customer Deposits                                                                              |   |   | 8,994                            |   |   | 8,846                           |   |
|                      Environmental Remediation Costs                                                                |   |   | 16,553                           |   |   | 13,531                          |   |
|                      Taxes Accrued                                                                                  |   |   | 1,115                            |   |   | 1,228                           |   |
|                      Dividends Declared                                                                             |   |   | 5,626                            |   |   | -                               |   |
|                      Interest Accrued and Other Current Liabilities                                                 |   |   | 9,262                            |   |   | 12,386                          |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                            Total Current Liabilities                                  |   |   | 207,059                          |   |   | 158,061                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| **Deferred                    Credits and Other Noncurrent Liabilities:**                                                |   |   |                             |   |   |                            |   |
|                      Deferred Income Taxes - Net                                                                    |   |   | 142,350                          |   |   | 138,208                         |   |
|                      Environmental Remediation Costs                                                                |   |   | 39,737                           |   |   | 37,515                          |   |
|                      Regulatory Liabilities                                                                         |   |   | 73,433                           |   |   | 63,836                          |   |
|                      Pension and Other Postretirement Benefits                                                      |   |   | 9,946                            |   |   | 11,039                          |   |
|                      Investment Tax Credits                                                                         |   |   | 2,878                            |   |   | 3,129                           |   |
|                      Derivatives - Energy Related Liabilities                                                       |   |   | 86                               |   |   | -                               |   |
|                      Other                                                                                          |   |   | 3,876                            |   |   | 5,352                           |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                            Total Deferred Credits and Other Noncurrent Liabilities    |   |   | 272,306                          |   |   | 259,079                         |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
|                              Total Capitalization and Liabilities           |   | $      | 1,066,182                        |   | $      | 1,007,586                       |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |
| The                    accompanying notes are an integral part of the condensed financial                    statements. |   |   |                             |   |   |                            |   |
|                                                                                                                     |   |   |                             |   |   |                            |   |

----

**Note      1.**
**Summary      of Significant Accounting Policies:**

**The      Entity**

**Equity      Investments**

**Estimates      and Assumptions**

**Regulation**

**Operating      Revenues**

----

**Accounts      Receivable and Provision for Uncollectible Accounts**

**Property,      Plant & Equipment**

**Depreciation      **

**Capitalized      Interest**

|                             |   | September                30,2005 |   | September                30,2004 |   |
|----------------------------------|--------|----------------------------------|--------|----------------------------------|--------|
|                             |   |                             |   |                             |   |   |   |
| Quarter                ended     |   | $                                | 258    |                             | $      | 200 |   |
| Nine                months ended |   |                             | 800    |                             |   | 531 |   |

----

**Impairment      of Long-Lived Assets**

**Derivative      Instruments**

----

**Asset      Retirement Costs**

**New      Accounting Pronouncements**

**Regulatory      Assets & Regulatory Liabilities**

----

|                                                   | Years                RemainingAs                of September 30, 2005 |
|--------------------------------------------------------|-----------------------------------------------------------------------|
| Regulatory                Asset                        |
| Gross                Receipts and Franchise Taxes      | 1                                                                     |
| Environmental                Remediation Costs:        |                                                                  |
| Expended                - Net                          | Various                                                               |
| Liability                for Future Expenditures       | Not                Applicable                                         |
| Income                Taxes - Flowthrough Depreciation | 6                                                                     |
| Deferred                Postretirement Benefit Costs   | 7                                                                     |
| Societal                Benefit Costs                  | Various                                                               |

|                                                                       |   | September                30,      2005     |   | December                31,     2004     |   |
|----------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|
|                                                                       |   |
|                                                                       |   |                                                                                         |   |                                                                                  |   |   |   |
| Deferred                Gas Revenues - Net                                 |   | $                                                                                            | 20,447 |                                                                                  | $      | 12,334 |   |
| Excess                Plant Removal Costs                                  |   |                                                                                         | 47,886 |                                                                                  |   | 47,345 |   |
| Overcollected                State Taxes                                   |   |                                                                                         | 3,987  |                                                                                  |   | 3,871 |   |
| Other                                                                      |   |                                                                                         | 1,113  |                                                                                  |   | 286 |   |
|                      Total Regulatory Liabilities |   | $                                                                                            | 73,433 |                                                                                  | $      | 63,836 |   |

----

**Cash      and Cash Equivalents**

**Reclassifications**

**Note      2.**
**Regulatory      Actions**

**Base      Rates - **

----

**Pending      Audits**

**Appliance      Service Business**

**Other      Regulatory Matters - **

----

**Note      3.**
**Related      Party Transactions:**

|   | · | South                Jersey Energy Company (SJE) - a third party energy marketer supplying                natural gas to customers within our                territory. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | South                Jersey Resources Group (SJRG) - a wholesale gas and risk management                business that supplies natural gas to retail marketers, utility businesses                and electricity generators in the mid-Atlantic and southern                regions. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Marina                Energy LLC (Marina) - an owner and operator of production facilities                for                the commercial and industrial                markets. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | South                Jersey Energy Service Plus (SJESP) - an appliance service and installation                company. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|                                               |   | Three                MonthsEnded                September 30, | Nine                MonthsEnded                September 30, |
|----------------------------------------------------|--------|---------------------------------------------------------------|--------------------------------------------------------------|
| *Sales                and Services Provided to:*   |   |                                                          | 2005                                                         |   |   | 2004 |   |   | 2005 |   |   | 2004 |   |
|                                               |   |                                                          |                                                         |   |   |   |   |   |   |   |   |   |   |
| SJI                                                |   | $                                                             | 298                                                          |   | $ | 201 |   | $ | 1,038 |   | $ | 621 |   |
| SJE                                                |   |                                                          | 184                                                          |   |   | 2,203 |   |   | 581 |   |   | 7,167 |   |
| SJRG                                               |   |                                                          | 628                                                          |   |   | 13 |   |   | 4,250 |   |   | 4,197 |   |
| Marina                                             |   |                                                          | 53                                                           |   |   | 55 |   |   | 205 |   |   | 162 |   |
| SJESP                                              |   |                                                          | 198                                                          |   |   | 92 |   |   | 582 |   |   | 92 |   |
|                                               |   |                                                          |                                                         |   |   |   |   |   |   |   |   |   |   |
| *Sales                and Services Received from:* |   |                                                          |                                                         |   |   |   |   |   |   |
| SJRG                                               |   | $                                                             | 80                                                           |   | $ | 8,507 |   | $ | 2,807 |   | $ | 18,647 |   |
| SJI                                                |   |                                                          | 1,020                                                        |   |   | 1,014 |   |   | 4,449 |   |   | 3,997 |   |
|                                               |   |                                                          |                                                         |   |   |   |   |   |   |   |   |   |   |

----

| Amounts                due to related parties included in Accounts                Payable                and amounts due from related parties included in Accounts                Receivable                on                the condensed financial statements are as follows: |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                  |   |   | As                of September 30, |   |   | As                of December 31, |   |
| *Amounts                due to:*                                                                                                                                                                                                                                                 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |
| SJI                                                                                                                                                                                                                                                                              |   | $ | 348 |   | $ | 741 |   |
| SJE                                                                                                                                                                                                                                                                              |   |   | 2,993 |   |   | 622 |   |
| SJESP                                                                                                                                                                                                                                                                            |   |   | 1,169 |   |   | 1,808 |   |
|                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |
| *Amounts                due from:*                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |
| SJI                                                                                                                                                                                                                                                                              |   | $ | 88 |   | $ | 49 |   |
| SJE                                                                                                                                                                                                                                                                              |   |   | 53 |   |   | 79 |   |
| SJRG                                                                                                                                                                                                                                                                             |   |   | 1,599 |   |   | 6 |   |
| Marina                                                                                                                                                                                                                                                                           |   |   | 12 |   |   | 24 |   |
| SJESP                                                                                                                                                                                                                                                                            |   |   | 58 |   |   | 83 |   |

|                                      |   | Three                MonthsEnded                September 30, |                                             | Nine                MonthsEnded                September 30, |   |
|-------------------------------------------|--------|---------------------------------------------------------------|--------------------------------------------------|--------------------------------------------------------------|--------|
|                                      |   | 2005                                                          |                                             | 2004                                                         |   | 2005 |   | 2004 |   |
|                                      |   |                                                          |                                             |                                                         |   |   |   |   |   |   |   |   |   |
| Meter                Reading Service Fees |   | $                                                             | 659                                              |                                                         | $      | 653 |   | $ | 1,955 |   | $ | 1,941 |   |
|                                      |   |                                                          |                                             |                                                         |   |   |   |   |   |   |   |   |   |
|                                      |   |                                                          |                                             |                                                         |   |   |   |   |   |   |   |   |   |
|                                           |   |                                                          | As                ofSeptember                30, |                                                         |   | As                ofDecember                31, |   |   |   |   |   |   |   |
|                                      |   |                                                          | 2005                                             |                                                         |   | 2004 |   |   |   |   |   |   |   |
|                                      |   |                                                          |                                             |                                                         |   |   |   |   |   |   |   |   |   |
| Amounts                due to Millennium  |   | $                                                             | 221                                              |                                                         | $      | 440 |   |   |   |   |   |   |   |

----

**Note      4.**
**Long-Term      Debt:**

**Note      5.**
**Unused      Lines of Credit and Compensating Balances:**

**Note      6.**
**Retained      Earnings**

----

**Note      7.**
**Pensions      & Other Postretirement Benefit Plans**

|                                                 |   | Pension                Benefits              |                             |
|------------------------------------------------------|--------|----------------------------------------------|----------------------------------|
|                                                 |   | Three                Months Ended            |                             | Nine                Months Ended |   |
|                                                      |   | September                30,                 | September                30,     |
|                                                 |   |                                         | 2005                             |   |   | 2004 |   |   | 2005 |   |   | 2004 |   |
|                                                 |   |                                         |                             |   |   |   |   |   |   |   |   |   |   |
| Service                Cost                          |   | $                                            | 689                              |   | $ | 672 |   | $ | 2,066 |   | $ | 2,016 |   |
| Interest                Cost                         |   |                                         | 1,332                            |   |   | 1,274 |   |   | 3,996 |   |   | 3,822 |   |
| Expected                Return on Plan Assets        |   |                                         | (1,869                           | ) |   | (1,580 | ) |   | (5,608 | ) |   | (4,740 | ) |
| Amortization                of Loss and Other        |   |                                         | 475                              |   |   | 388 |   |   | 1,427 |   |   | 1,164 |   |
| Net                Periodic Benefit Cost             |   |                                         | 627                              |   |   | 754 |   |   | 1,881 |   |   | 2,262 |   |
| Capitalized                Benefit Costs             |   |                                         | (219                             | ) |   | (226 | ) |   | (658 | ) |   | (678 | ) |
| Net                Periodic Benefit Expense          |   | $                                            | 408                              |   | $ | 528 |   | $ | 1,223 |   | $ | 1,584 |   |
|                                                 |   |                                         |                             |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                                         |
|                                                 |   | Other                Postretirement Benefits |
|                                                      |   | Three                Months Ended            | Nine                Months Ended |
|                                                      |   | September                  30,               | September                30,     |
|                                                 |   |                                         | 2005                             |   |   | 2004 |   |   | 2005 |   |   | 2004 |   |
|                                                 |   |                                         |                             |   |   |   |   |   |   |   |   |   |   |
| Service                Cost                          |   | $                                            | 183                              |   | $ | 341 |   | $ | 549 |   | $ | 1,023 |   |
| Interest                Cost                         |   |                                         | 491                              |   |   | 603 |   |   | 1,473 |   |   | 1,809 |   |
| Expected                Return on Plan Assets        |   |                                         | (371                             | ) |   | (351 | ) |   | (1,112 | ) |   | (1,053 | ) |
| Amortization                of Transition Obligation |   |                                         | -                                |   |   | 189 |   |   | - |   |   | 567 |   |
| Amortization                of Loss and Other        |   |                                         | 52                               |   |   | 37 |   |   | 156 |   |   | 111 |   |
| Net                Periodic Benefit Cost             |   |                                         | 355                              |   |   | 819 |   |   | 1,066 |   |   | 2,457 |   |
| Capitalized                Benefit Costs             |   |                                         | (124                             | ) |   | (246 | ) |   | (373 | ) |   | (737 | ) |
| Net                Periodic Benefit Expense          |   | $                                            | 231                              |   | $ | 573 |   | $ | 693 |   | $ | 1,720 |   |

----

**Future      Benefit Payments**

|      |   |                            |   | Other                                  |   |
|-----------|--------|---------------------------------|--------|----------------------------------------|--------|
|      |   | Pension                Benefits |   | Postretirement                Benefits |   |
|      |   |                            |   |                                   |   |   |   |
| 2005      |   | $                               | 3,823  |                                   | $      | 1,461 |   |
| 2006      |   |                            | 3,987  |                                   |   | 1,651 |   |
| 2007      |   |                            | 4,189  |                                   |   | 1,854 |   |
| 2008      |   |                            | 4,420  |                                   |   | 2,036 |   |
| 2009      |   |                            | 4,694  |                                   |   | 2,207 |   |
| 2010-2014 |   |                            | 29,188 |                                   |   | 12,606 |   |

**Contributions**

**Note      8.**
**Commitments      and Contingencies**

**Contractual      Cash Obligations - **

|                                                      |   |   |    |   |   | Up                to  |   |   | 2                -                3 |   |   | 4                -                5 |   |   | More                than |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|-----------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------------------|--------|
| Contractual                Obligations               |   |   | Total   |   |   | 1                Year |   |   | Years                               |   |   | Years                               |   |   | 5                Years   |   |
|                                                 |   |   |    |   |   |                  |   |   |                                |   |   |                                |   |   |                     |   |
| Long-Term                Debt                        |   | $      | 274,508 |   | $      | 2,273                 |   | $      | 2,270                               |   | $      | 10,000                              |   | $      | 259,965                  |   |
| Interest                on Long-Term Debt            |   |   | 228,917 |   |   | 15,605                |   |   | 32,476                              |   |   | 32,287                              |   |   | 148,549                  |   |
| Operating                Leases                      |   |   | 531     |   |   | 86                    |   |   | 365                                 |   |   | 64                                  |   |   | 16                       |   |
| Construction                Obligations              |   |   | 11,498  |   |   | 11,436                |   |   | 62                                  |   |   | -                                   |   |   | -                        |   |
| Commodity                Supply Purchase Obligations |   |   | 251,628 |   |   | 1,450                 |   |   | 19,626                              |   |   | 112,014                             |   |   | 118,538                  |   |

----

| New                Jersey Clean Energy            |   |   |    |   |   |   |   |   |   |   |   |    |   |   |    |   |
|---------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Program                (Note 2)                   |   |   | 21,394  |   |   | 4,994  |   |   | 14,400 |   |   | 2,000   |   |   | -       |   |
| Other                Purchase Obligations         |   |   | 4,831   |   |   | 1,779  |   |   | 1,927  |   |   | 1,125   |   |   | -       |   |
|                                              |   |   |         |   |   |        |   |   |        |   |   |         |   |   |         |   |
| Total                Contractual Cash Obligations |   | $      | 793,307 |   | $      | 37,623 |   | $      | 71,126 |   | $      | 157,490 |   | $      | 527,068 |   |

**Gas      Supply Contracts**

**Pending      Litigation**

**Environmental      Remediation Costs**

----

|                             |   | Three                Months Ended |   | Nine                Months Ended  |   |
|----------------------------------|--------|-----------------------------------|--------|-----------------------------------|--------|
|                             |   | September                30, 2005 |   | September                30, 2005 |   |
|                             |   |                              |   |                              |   |   |   |
| Beginning                Balance |   | $                                 | 52,700 |                              | $      | 51,046 |   |
| Accruals                         |   |                              | 5,160  |                              |   | 8,994 |   |
| Expenditures                     |   |                              | (1,570 | )                                 |   | (3,750 | ) |
|                             |   |                              |   |                              |   |   |   |
| Ending                Balance    |   | $                                 | 56,290 |                              | $      | 56,290 |   |

----

**Note      9.**
**Subsequent      Events:**

----

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

**Condition      and Results of Operations (Unaudited)**

**Overview**

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

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

|   | · | serviced                appliances via the sale of appliance service programs, as well as                on a                time and materials basis through September 1, 2004, at which time                the                business line was transferred out of SJG and into an affiliate by                common                ownership, South Jersey Energy Service Plus,                LLC. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Forward-Looking      Statement and Risk Factors**

----

**Critical Accounting Policies**

**    Estimates      and      Assumptions - **

**New      Accounting Pronouncements - **

**Temperature      Adjustment Clause **

**Recent      Regulatory Actions**
** **

**Environmental      Remediation **
** **

----

**Customer      Choice**

**Results      of Operations**

**Operating      Revenues**

----

|                                                  |   | Three                Months Ended |                         | Nine                Months Ended |   |
|-------------------------------------------------------|--------|-----------------------------------|------------------------------|----------------------------------|--------|
|                                                       |   | September                30,      | September                30, |
|                                                  |   |                              | 2005                         |                             |   | 2004 |   |   | 2005 |   |   | 2004 |   |
| Operating                Revenues (thousands):        |   |                              |                         |                             |   |   |   |   |   |   |   |   |   |
| Firm                                                  |   |                              |                         |                             |   |   |   |   |   |   |   |   |   |
| Residential                                           |   | $                                 | 22,307                       |                             | $      | 23,052 |   | $ | 148,724 |   | $ | 122,160 |   |
| Commercial                                            |   |                              | 10,325                       |                             |   | 7,331 |   |   | 55,440 |   |   | 36,311 |   |
| Industrial                                            |   |                              | 1,279                        |                             |   | 787 |   |   | 3,383 |   |   | 3,819 |   |
| Cogeneration                & Electric Generation |   |                              | 10,901                       |                             |   | 5,503 |   |   | 16,040 |   |   | 7,926 |   |
| Firm                Transportation                    |   |                              | 8,258                        |                             |   | 10,921 |   |   | 45,335 |   |   | 57,331 |   |
|                                                  |   |                              |                    |                             |   |                  |   |   |                  |   |   |                  |   |
| Total                Firm Operating Revenues          |   |                              | 53,070                       |                             |   | 47,594 |   |   | 268,922 |   |   | 227,547 |   |
|                                                  |   |                              |                         |                             |   |   |   |   |   |   |   |   |   |
| Interruptible                                         |   |                              | 340                          |                             |   | 421 |   |   | 1,179 |   |   | 1,178 |   |
| Interruptible                Transportation           |   |                              | 361                          |                             |   | 369 |   |   | 1,476 |   |   | 933 |   |
| Off-System                                            |   |                              | 32,909                       |                             |   | 20,934 |   |   | 108,148 |   |   | 107,310 |   |
| Capacity                Release & Storage         |   |                              | 2,608                        |                             |   | 2,184 |   |   | 9,214 |   |   | 6,848 |   |
| Appliance                Service                      |   |                              | -                            |                             |   | 1,451 |   |   | - |   |   | 6,360 |   |
| Other                                                 |   |                              | 414                          |                             |   | 527 |   |   | 1,383 |   |   | 1,534 |   |
|                                                  |   |                              |                         |                             |   |   |   |   |   |   |   |    |   |
| Total                Operating Revenues               |   | $                                 | 89,702                       |                             | $      | 73,480 |   | $ | 390,322 |   | $ | 351,710 |   |

----

| Throughput                (MMcf):                     |   |   |         |   |   |         |   |   |         |   |   |         |   |
|-------------------------------------------------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| Firm                                                  |   |   |         |   |   |         |   |   |         |   |   |         |   |
| Residential                                           |   |   | 1,176        |   |   | 1,051        |   |   | 11,767       |   |   | 10,340       |   |
| Commercial                                            |   |   | 699          |   |   | 429          |   |   | 4,959        |   |   | 3,447        |   |
| Industrial                                            |   |   | 12           |   |   | 15           |   |   | 138          |   |   | 131          |   |
| Cogeneration                & Electric Generation |   |   | 1,114        |   |   | 701          |   |   | 1,601        |   |   | 944          |   |
| Firm                Transportation                    |   |   | 5,304        |   |   | 5,794        |   |   | 21,457       |   |   | 24,568       |   |
|                                                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
| Total                Firm Throughput                  |   |   | 8,305        |   |   | 7,990        |   |   | 39,922       |   |   | 39,430       |   |

| Interruptible                                 |   |   | 16           |   |   | 40           |   |   | 95           |   |   | 128          |   |
|-----------------------------------------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| Interruptible                Transportation   |   |   | 523          |   |   | 581          |   |   | 2,119        |   |   | 1,746        |   |
| Off-System                                    |   |   | 3,463        |   |   | 3,349        |   |   | 13,593       |   |   | 15,971       |   |
| Capacity                Release & Storage |   |   | 25,512       |   |   | 14,462       |   |   | 64,016       |   |   | 39,657       |   |
|                                          |   |   |    |   |   |    |   |   |    |   |   |    |   |
| Total                Throughput               |   |   | 37,819       |   |   | 26,422       |   |   | 119,745      |   |   | 96,932       |   |

**Cost      of Sales**

**Operating      Expenses**

|                                  |   | Three                MonthsEnded                September 30, |                         | Nine                MonthsEnded                September 30, |   |
|---------------------------------------|--------|---------------------------------------------------------------|------------------------------|--------------------------------------------------------------|--------|
|                                       |   |                                                          | 2005                vs. 2004 |                                                         |   | 2005                vs. 2004 |   |
|                                  |   |                                                          |                         |                                                         |   |   |   |
| Operations                            |   | $                                                             | (1,595                       | )                                                            | $      | (1,324 | ) |
| Maintenance                           |   |                                                          | (9                           | )                                                            |   | 211 |   |
| Depreciation                          |   |                                                          | 230                          |                                                         |   | (1,441 | ) |
| Energy                and Other Taxes |   |                                                          | (73                          | )                                                            |   | 61 |   |

----

**Other      Income and Expense **

**Interest      Charges **

----

**Income      Taxes - **

**Net      Income **

**Liquidity      and Capital Resources **

----

|                           | September                30,                                                                                                                     | December                31,                                                                                                          |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|
|                           | 2005                                                                                                                                             | 2004                                                                                                                                 |
|                           |                                                                                                                                             |                                                                                                                                 |
| Common                Equity   | 48%                                                                                                                                              | 48%                                                                                                                                  |
| Long-Term                Debt  | 42%                                                                                                                                              | 44%                                                                                                                                  |
| Short-Term                Debt | 10%                                                                                                                                              | 8%                                                                                                                                   |
|                           |                          |                        |
| Total                          | 100%                                                                                                                                             | 100%                                                                                                                                 |

----

**Capital      Expenditures, Commitments and Contingencies **

**Capital      Expenditures **

**Commitments      and Contingencies **

|                                                 |   |   |         | Up                to |   | 2                -                3 |   | 4                -                5 |         | More                than |   |
|------------------------------------------------------|--------|--------|--------------|----------------------|--------|-------------------------------------|--------|-------------------------------------|--------------|--------------------------|--------|
| Contractual                Obligations               |   |   | Total        |                 |   | 1                Year               |   |                                | Years        |                     |   | Years |   |   | 5                Years |   |
|                                                 |   |   |         |                 |   |                                |   |                                |         |                     |   |   |   |   |   |   |
| Long-Term                Debt                        |   | $      | 274,508      |                 | $      | 2,273                               |   | $                                   | 2,270        |                     | $      | 10,000 |   | $ | 259,965 |   |
| Interest                on Long-Term Debt            |   |   | 228,917      |                 |   | 15,605                              |   |                                | 32,476       |                     |   | 32,287 |   |   | 148,549 |   |
| Operating                Leases                      |   |   | 531          |                 |   | 86                                  |   |                                | 365          |                     |   | 64 |   |   | 16 |   |
| Construction                Obligations              |   |   | 11,498       |                 |   | 11,436                              |   |                                | 62           |                     |   | - |   |   | - |   |
| Commodity                Supply Purchase Obligations |   |   | 251,628      |                 |   | 1,450                               |   |                                | 19,626       |                     |   | 112,014 |   |   | 118,538 |   |
| New                Jersey Clean Energy               |   |   |         |                 |   |                                |   |                                |         |                     |   |   |   |   |   |   |
|                    Program (Note2)    |   |   | 21,394       |                 |   | 4,994                               |   |                                | 14,400       |                     |   | 2,000 |   |   | - |   |
| Other                Purchase Obligations            |   |   | 4,831        |                 |   | 1,779                               |   |                                | 1,927        |                     |   | 1,125 |   |   | - |   |
|                                                 |   |   |    |                 |   |                           |   |                                |    |                     |   |    |   |   |    |   |
| Total                Contractual Cash Obligations    |   | $      | 793,307      |                 | $      | 37,623                              |   | $                                   | 71,126       |                     | $      | 157,490 |   | $ | 527,068 |   |

**Off-Balance      Sheet Arrangements **

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**Pending      Litigation **

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**Item      3. Quantitative and Qualitative Disclosures About**

**Market      Risks of the Company (Unaudited)**

**Market      Risks**

**Commodity      Market Risks **

| **Assets**                                                                                |   |   |   | Maturity |   | Maturity                     |   | Beyond |                                          |   |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|----------|--------|------------------------------|--------|--------|-----------------------------------------------|--------|--------|
|         **Source                  of Fair Value** |   |   |   |     |   | <                  1 Year |   |   | 1                  -                  3 Years |   |   | 3                  Years |   |   | Total |   |
|                                                                                      |   |   |   |     |   |                         |   |   |                                          |   |   |   |   |   |   |   |
| Prices                  Actively Quoted                                                   |   |   | NYMEX  |     | $      | 15,275                       |   | $      | 780                                           |   | $      | - |   | $ | 16,055 |   |
| Other                  External Sources                                                   |   |   | Basis  |     |   | 297                          |   |   | -                                             |   |   | - |   |   | 297 |   |
| Total                                                                                     |   |   |   |     | $      | 15,572                       |   | $      | 780                                           |   | $      | - |   | $ | 16,352 |   |
|                                                                                      |   |   |   |     |   |                         |   |   |                                          |   |   |   |   |   |   |   |
| **Liabilities**                                                                           |   |   |   |     |   | Maturity                     |   |   | Maturity                                      |   |   | Beyond |   |   |   |   |
|         **Source                  of Fair Value** |   |   |   |     |   | <                  1 Year |   |   | 1                  -                  3 Years |   |   | 3                  Years |   |   | Total |   |
|                                                                                      |   |   |   |     |   |                         |   |   |                                          |   |   |   |   |   |   |   |
| Prices                  Actively Quoted                                                   |   |   | NYMEX  |     | $      | 169                          |   | $      | 86                                            |   | $      | - |   | $ | 255 |   |
| Other                  External Sources                                                   |   |   | Basis  |     |   | 511                          |   |   | -                                             |   |   | - |   |   | 511 |   |
| Total                                                                                     |   |   |   |     | $      | 680                          |   | $      | 86                                            |   | $      | - |   | $ | 766 |   |

| Net                Derivatives — Energy Related Liability, January 1, 2005 |   | $      | (527   | )      |
|----------------------------------------------------------------------------------|--------|--------|--------|--------|
| Contracts                Settled During Quarter Ended September 30, 2005         |   |   | (2,534 | )      |
| Other                Changes in Fair Value from Continuing                       |   |   |   |   |
| and                New Contracts, Net                                            |   |   | 18,647 |   |
| Net                Derivatives — Energy Related Asset, September 30, 2005  |   | $      | 15,586 |   |

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**Interest      Rate Risk **

**Ratio      of Earnings to Fixed Charges**

| Twelve                Months |   |                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Ended                        |   |                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September                30, |   |                  Year                Ended December                31,                |
| 2005                         |   |                                                                                                                                                                                                                                                  | 2004   |   |   | 2003   |   |   | 2002   |   |   | 2001   |   |   | 2000   |   |
| 4.2x                         |   |                                                                                                                                                                                                                                                  | 3.9x   |   |   | 3.3x   |   |   | 2.9x   |   |   | 2.6x   |   |   | 2.6x   |   |

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**Item      4. Controls and Procedures**

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| (a)                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). |

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| Dated:                November 9, 2005 | By:                        /s/                Edward J. Graham  |
|----------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                   | Edward                J. Graham                                                                         |
|                                   | President                & Chief Executive Officer                                                  |
|                                   |                                                                                                    |
|                                   |                                                                                                    |
| Dated:                November 9, 2005 | By:                        /s/                David A. Kindlick |
|                                   | David                A. Kindlick                                                                        |
|                                   | Executive                Vice President & Chief Financial Officer                                   |

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