Page 1 of 23

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549
                                   FORM 10-Q


                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter Ended September 30, 2001       Commission File Number 000-22211


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


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

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

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


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                             Yes  [X]      No  [  ]


As of November 2, 2001 there were 2,339,139 shares of the registrant's common
stock outstanding.  All common shares are owned by South Jersey Industries,
Inc., the parent company of South Jersey Gas Company.

                                 - Cover Page -



                       PART I  --  FINANCIAL INFORMATION



           Item 1.  Financial Statements  --  See Pages 3 through 12





                                     SJG-2


<TABLE>
                   SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

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

<CAPTION>
                                                         Three Months Ended
                                                            September 30,
                                                       ----------------------
                                                          2001        2000
                                                       ----------  ----------
<S>                                                    <C>         <C>
Operating Revenues:
   Utility                                             $  57,592   $  63,422
   Other                                                     216         413
                                                       ----------  ----------
      Total Operating Revenues                            57,808      63,835
                                                       ----------  ----------
Operating Expenses:
   Gas Purchased for Resale                               40,007      46,345
   Utility Operations                                      9,952       9,544
   Other Operations                                          347         426
   Maintenance                                             1,554       1,350
   Depreciation                                            5,313       5,056
   Income Taxes                                           (2,599)     (2,603)
   Energy and Other Taxes                                  1,415       1,664
                                                       ----------  ----------
      Total Operating Expenses                            55,989      61,782
                                                       ----------  ----------
Operating Income                                           1,819       2,053
                                                       ----------  ----------
Interest Charges:
   Long-Term Debt                                          4,545       4,268
   Short-Term Debt and Other                                 584       1,093
                                                       ----------  ----------
      Total Interest Charges                               5,129       5,361
                                                       ----------  ----------
Loss Before Preferred Dividend Requirements               (3,310)     (3,308)

Preferred Stock Dividend Requirements                         33          35
Preferred Securities Dividend Requirements                   731         731
                                                       ----------  ----------
Net Loss Applicable to Common Stock                    $  (4,074)  $  (4,074)
                                                       ==========  ==========
Average Shares of Common Stock Outstanding                 2,339       2,339
                                                       ==========  ==========
Earnings Per Common Share                              $   (1.74)  $   (1.74)
                                                       ==========  ==========
Dividends Declared Per Common Share                    $    1.87   $    0.94
                                                       ==========  ==========

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

</FN>
</TABLE>

                                     SJG-3

<TABLE>
                   SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

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

<CAPTION>
                                                         Nine Months Ended
                                                            Septemer 30,
                                                       ----------------------
                                                           2001        2000
                                                       ----------  ----------
<S>                                                    <C>         <C>
Operating Revenues:
   Utility                                             $ 357,802   $ 286,075
   Other                                                   1,102       1,423
                                                       ----------  ----------
      Total Operating Revenues                           358,904     287,498
                                                       ----------  ----------
Operating Expenses:
   Gas Purchased for Resale                              259,907     188,111
   Utility Operations                                     28,929      29,182
   Other Operations                                        1,327       1,288
   Maintenance                                             6,227       5,840
   Depreciation                                           15,747      14,965
   Income Taxes                                            9,287       9,747
   Energy and Other Taxes                                  7,695       8,035
                                                       ----------  ----------
      Total Operating Expenses                           329,119     257,168
                                                       ----------  ----------
Operating Income                                          29,785      30,330
                                                       ----------  ----------
Interest Charges:
   Long-Term Debt                                         12,869      11,787
   Short-Term Debt and Other                               2,513       3,459
                                                       ----------  ----------
      Total Interest Charges                              15,382      15,246
                                                       ----------  ----------
Income Before Preferred Dividend Requirements             14,403      15,084

Preferred Stock Dividend Requirements                        105         115
Preferred Securities Dividend Requirements                 2,192       2,192
                                                       ----------  ----------
Net Income Applicable to Common Stock                  $  12,106   $  12,777
                                                       ==========  ==========
Average Shares of Common Stock Outstanding                 2,339       2,339
                                                       ==========  ==========
Earnings Per Common Share                              $    5.18   $    5.46
                                                       ==========  ==========
Dividends Declared Per Common Share                    $    5.61   $    4.53
                                                       ==========  ==========


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

</FN>
</TABLE>

                                     SJG-4

<TABLE>
                                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In Thousands)
<CAPTION>
                                                                                (Unaudited)
                                                                               September 30,       December 31,
                                                                         ------------------------- ------------
                                                                             2001         2000         2000
                                                                         ------------ ------------ ------------
<S>                                                                      <C>          <C>          <C>
Assets

Property, Plant and Equipment:
   Utility Plant, at original cost                                       $   791,826  $   750,498  $   763,860
     Accumulated Depreciation                                               (218,422)    (203,969)    (208,292)
   Gas Plant Acquisition Adjustment - Net                                      1,645        1,720        1,701
                                                                         ------------ ------------ ------------
          Property, Plant and Equipment - Net                                575,049      548,249      557,269
                                                                         ------------ ------------ ------------
Available-for-Sale Securities                                                  2,962        2,295        2,494
                                                                         ------------ ------------ ------------
Current Assets:
   Cash and Cash Equivalents                                                   3,311        2,900        4,715
   Accounts Receivable                                                        33,221       34,175       67,803
   Unbilled Revenues                                                           7,100        7,433       43,803
   Provision for Uncollectibles                                               (1,931)        (860)      (1,754)
   Natural Gas in Storage, average cost                                       63,758       54,977       31,769
   Materials and Supplies, average cost                                        4,033        3,807        4,037
   Prepaid Taxes                                                              13,355        8,665        3,960
   Prepayments and Other Current Assets                                        2,837        2,702        2,640
                                                                         ------------ ------------ ------------
          Total Current Assets                                               125,684      113,799      156,973
                                                                         ------------ ------------ ------------
Accounts Receivable - Merchandise                                                 23          376          277
                                                                         ------------ ------------ ------------
Regulatory and Other Non-Current Assets:
   Environmental Remediation Costs:
     Expended - Net                                                           12,352       14,527       18,474
     Liability for Future Expenditures                                        51,029       51,029       51,029
   Gross Receipts and Franchise Taxes                                          2,365        2,809        2,698
   Income Taxes - Flowthrough Depreciation                                     9,819       10,797       10,553
   Deferred Fuel Cost - Net                                                   44,409       23,811       28,810
   Deferred Postretirement Benefit Costs                                       4,252        4,630        4,536
   Other                                                                       9,409        8,352        8,970
                                                                         ------------ ------------ ------------
          Total Regulatory  and Other Non-Current Assets                     133,635      115,955      125,070
                                                                         ------------ ------------ ------------
               Total Assets                                              $   837,353  $   780,674  $   842,083
                                                                         ============ ============ ============

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

</FN>
</TABLE>

                                     SJG-5

<TABLE>
                                    SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In Thousands)

<CAPTION>
                                                                               (Unaudited)
                                                                              September 30,        December 31,
                                                                         ------------------------- ------------
                                                                             2001         2000         2000
                                                                         ------------ ------------ ------------
<S>                                                                      <C>          <C>          <C>
Capitalization and Liabilities

Common Equity:
   Common Stock, Par Value $2.50 per share:
      Authorized - 4,000,000 shares
      Outstanding - 2,339,139 shares                                     $     5,848  $     5,848  $     5,848
   Other Paid-In Capital and Premium on Common Stock                         125,817      125,817      125,817
   Retained Earnings                                                          64,416       60,634       65,436
                                                                         ------------ ------------ ------------
          Total Common Equity                                                196,081      192,299      197,101
                                                                         ------------ ------------ ------------
Preferred Stock and Securities:
   Redeemable Cumulative Preferred  -  Par Value $100 per share,
   Authorized 41,966, 43,104 and 43,104 shares, respectively
   Outstanding:
      Series A, 4.7% -  0, 300 and 300 shares                                       -          30           30
      Series B, 8% - 16,904, 17,742 and 17,742 shares                          1,690        1,774        1,774
   Company-Guaranteed Mandatorily Redeemable
    Preferred Securities of Subsidiary Trust
    Par Value $25 per share,  1,400,000 shares
    Authorized and Outstanding                                                35,000       35,000       35,000
                                                                         ------------ ------------ ------------
          Total Preferred Stock and Securities                                36,690       36,804       36,804
                                                                         ------------ ------------ ------------
Long-Term Debt                                                               230,247      207,123      204,981
                                                                         ------------ ------------ ------------
          Total Capitalization                                               463,018      436,226      438,886
                                                                         ------------ ------------ ------------
Current Liabilities:
   Notes Payable                                                             125,500       93,800      113,900
   Current Maturities of Long-Term Debt                                       11,876       11,876       11,876
   Accounts Payable                                                           27,697       51,552       75,103
   Customer Deposits                                                           5,646        5,284        5,366
   Environmental Remediation Costs                                            15,872       12,534       15,872
   Taxes Accrued                                                                 971        2,288          442
   Dividends Payable                                                           4,409             -       4,236
   Interest Accrued and Other Current Liabilities                              8,105        7,837        8,560
                                                                         ------------ ------------ ------------
          Total Current Liabilities                                          200,076      185,171      235,355
                                                                         ------------ ------------ ------------
Deferred Credits and Other Non-Current Liabilities:
   Deferred Income Taxes - Net                                               114,395       96,303      107,947
   Environmental Remediation Costs                                            35,157       38,495       35,157
   Pension and Other Postretirement Benefits                                  11,795       11,520       12,314
   Investment Tax Credits                                                      4,253        4,595        4,513
   Other                                                                       8,659        8,364        7,911
                                                                         ------------ ------------ ------------
            Total Deferred Credits and Other Non-Current Liabilities         174,259      159,277      167,842
                                                                         ------------ ------------ ------------
Commitments and Contingencies (See Note 4)

               Total Capitalization and Liabilities                      $   837,353  $   780,674  $   842,083
                                                                         ============ ============ ============

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

</FN>
</TABLE>

                                     SJG-6

<TABLE>
                          SOUTH JERSEY GAS COMPANY AND SUBSIDIARY

                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (In Thousands)
<CAPTION>
                                                                    Nine Months Ended
                                                                      September 30,
                                                               ---------------------------
                                                                   2001           2000
                                                               ------------   ------------
<S>                                                            <C>            <C>
Cash Flows from Operating Activities:
  Net Income Applicable to Common Stock                        $    12,106    $    12,777

  Adjustments to Reconcile Net Income to Cash Flows
   Provided by Operating Activities:
    Depreciation and Amortization                                   17,464         17,192
    Provision for Losses on Accounts Receivable                      1,046            740
    Revenues and Fuel Costs Deferred - Net                         (15,599)       (10,637)
    Deferred and Non-Current Income Taxes and Credits - Net          6,787          3,107
    Environmental Remediation Costs - Net                            6,122         11,175
    Changes in:
      Accounts Receivable                                           70,416         15,940
      Inventories                                                  (31,985)       (27,859)
      Prepayments and Other Current Assets                            (197)          (241)
      Prepaid and Accrued Taxes - Net                               (8,866)        (2,942)
      Accounts Payable and Other Accrued Liabilities               (51,783)        14,043
    Other - Net                                                        939          1,407
                                                               ------------   ------------
        Net Cash Provided by Operating Activities                    6,450         34,702
                                                               ------------   ------------
Cash Flows from Investing Activities:
  Capital Expenditures, Cost of Removal and Salvage                (34,244)       (33,222)
  Purchase of Available-for-Sale Securities                           (571)          (506)
                                                               ------------   ------------
        Net Cash Used in Investing Activities                      (34,815)       (33,728)
                                                               ------------   ------------
Cash Flows from Financing Activities:
  Net Borrowings from (Repayments of) Lines of Credit               11,600        (25,100)
  Proceeds from Sale of Long-Term Debt                              35,000         35,000
  Principal Repayments of Long-Term Debt                            (9,734)        (8,438)
  Dividends on Common Stock                                         (8,750)       (10,600)
  Repurchase of Preferred Stock                                       (114)          (240)
  Additional Investment by Shareholder                                    -         8,000
  Payments for Issuance of Long-Term Debt                           (1,041)        (1,390)
                                                               ------------   ------------
        Net Cash Provided by (Used in) Financing Activities         26,961         (2,768)
                                                               ------------   ------------
Net Decrease in Cash and Cash Equivalents                           (1,404)        (1,794)
Cash and Cash Equivalents at Beginning of Period                     4,715          4,694
                                                               ------------   ------------
Cash and Cash Equivalents at End of Period                      $    3,311    $     2,900
                                                               ============   ============

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

</FN>
</TABLE>

                                     SJG-7

        Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 1.  Significant Accounting Practices:

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

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

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

     New Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and in June 2000, FASB issued Statement
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities."  Both were effective for our fiscal year beginning January 2001.
These statements establish accounting and reporting standards for derivative
instruments, including those embedded in other contracts, and for hedging
activities.  They require recognizing derivatives as assets or liabilities at
fair value on the balance sheet.  SJG has identified financial instruments that
qualify as derivatives.  Management believes, based on its interpretation of
guidance issued, that the derivative contracts qualify for the normal purchases
and normal sales exception and, therefore, no additional disclosure is
required.  Subsequent guidance from FASB could affect the accounting for such
transactions in the future.

     In June 2001, the FASB issued Statement No. 141, "Business Combinations,"
FASB No. 142, "Goodwill and Other Tangible Assets" and FASB No. 143,
"Accounting for Asset Retirement Obligations."  FASB No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination.  FASB
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition.  FASB No. 142 provides

                                     SJG-8

that intangible assets with finite useful lives be amortized and that goodwill
and intangible assets with indefinite lives not be amortized, but rather be
tested at least annually for impairment.  FASB No. 143 establishes accounting
and reporting standards for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.  SJG
expects to adopt FASB Nos. 141 and 142 for its fiscal year beginning January 1,
2002 and FASB 143 for its fiscal year beginning January 1, 2003.  We are
currently evaluating the effects of these pronouncements; however, they are not
expected to have a material impact on SJG's financial condition or results of
operations.

Note 2.  Regulatory Actions:

     In January 1997, the New Jersey Board of Public Utilities (BPU) granted
SJG a total rate increase of $10.3 million.  The $6.0 million base rate portion
of the increase was based on a 9.62% rate of return on rate base, which
included an 11.25% return on common equity.  Additionally, SJG's threshold for
sharing pre-tax margins generated by interruptible and off-system sales and
transportation (Sharing Formula) increased from $4.0 million to $7.8 million.
SJG keeps 100% of pre-tax margins up to the threshold level and 20% of margins
above that level.  In October 1998, the BPU approved a revision to the Sharing
Formula as part of an agreement to modify SJG's Temperature Adjustment Clause
(TAC).  The revision credits the first $750,000 above the current threshold
level to the Levelized Gas Adjustment Clause (LGAC) customers.  Thereafter, SJG
keeps 20% of the pre-tax margins as it has historically.

     In September 1999, the BPU approved an annual recovery level of $6.5
million for remediation costs expended from August 1995 through July 1998.  In
January 2000, the BPU approved the recovery of carrying costs on unrecovered
remediation costs and a proposal by SJG to keep its current Remediation
Adjustment Clause (RAC) rate in effect through October 2002.  However, due to
substantial RAC insurance recoveries, SJG filed for a RAC rate decrease in
October 2001.  This proposal would reduce the annual recovery level to $4.2
million, if approved.

     Effective January 10, 2000, the BPU approved full unbundling of SJG's
system.  This allows all natural gas consumers to select their natural gas
supplier.  As of September 30, 2001, 36,393 of SJG's residential customers were
purchasing their gas commodity from someone other than SJG.  The bills of those
using a gas supplier other than SJG are reduced for cost of gas charges and
applicable taxes.  The resulting decrease in revenues is offset by a
corresponding decrease in gas costs and taxes under SJG's BPU-approved fuel
clause.  SJG's net income and financial condition are not affected as a result
of the unbundling.

     In addition to allowing all customers to select their own supplier, the
unbundling settlement also created an incentive to customers to select a
supplier, other than SJG, in the form of a Market Development Credit (MDC).
This credit is being provided to customers over a two-year period beginning
January 2000, and will approximate $2.5 million plus carrying costs through

                                     SJG-9

December 2001.  This credit was provided for on SJG's books as a Deferred
Credit.  Therefore, the impact of the MDC will not materially impact future
periods.

     Also approved was a modification to SJG's LGAC whereby underrecovered gas
costs of $11.9 million as of October 31, 1999, and carrying costs thereon, are
being recovered over a three-year period beginning January 2000.

     On November 16, 2000, SJG received approval to increase its LGAC in
response to unprecedented natural gas price run-ups during 2000.  The impact of
this initial increase was approximately 19.0% to a typical residential heating
customer.  The BPU also approved the creation of a flexible pricing mechanism,
allowing additional 2.0% increases each month from December 2000 through July
2001.  In addition, the ruling permits SJG to recover unrecovered gas costs as
of October 31, 2001 with interest at 5.5% or 5.75% over a three-year period,
beginning December 1, 2001.  The higher interest rate is applicable if SJG does
not seek an LGAC rate increase for the next LGAC year.  Recoverable interest
costs began accruing on April 1, 2001.

Note 3.  Common Equity:

     Restrictions exist under various loan agreements regarding the amount of
cash dividends or other distributions that we may pay on our common stock.
SJG's retained earnings, which is free of these restrictions, was approximately
$62.6 million as of September 30, 2001.

     SJG received an equity infusion of $8 million from SJI during 2000.
Contributions of capital are credited to Other Paid-In Capital and Premium on
Common Stock.  Future equity contributions will occur on an as-needed basis.

Note 4.  Commitments and Contingencies:

     Construction and Environmental Commitments - SJG's estimated cost of
construction and environmental remediation programs for 2001 totals $47.8
million.  Commitments were made regarding these programs.

     Pending Litigation - SJG is subject to claims arising in the ordinary
course of business and other legal proceedings.  We accrue liabilities when
these claims become apparent for amounts we believe these claims may be
settled.  We also maintain insurance and record probable insurance recoveries
relating to outstanding claims.

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

                                     SJG-10

     SJG has successfully entered into settlements with all of its historic
comprehensive general liability carriers regarding the environmental
remediation expenditures at our sites.  In addition, we have purchased a
Cleanup Cost Cap Insurance Policy which limits the amount of remediation
expenditures that we will be required to make at eleven of our sites.  This
Policy will be in force for a 25-year period at ten sites and for a 30-year
period at one site.  The following future cost estimates have not been reduced
by any insurance recoveries from settlements or the Cleanup Cost Cap Insurance
Policy.

     Since the early 1980s, SJG accrued environmental remediation costs of
$126.8 million, of which $75.8 million was spent as of September 30, 2001.
With the assistance of an outside consulting firm, we estimate that future
costs to clean up SJG's sites will range from $51.0 million to $148.5 million.
We recorded the lower end of this range as a liability.  It is reflected on the
2001 condensed consolidated balance sheets under the captions Current
Liabilities and Deferred Credits and Other Non-Current Liabilities.  SJG did
not adjust the accrued liability for future insurance recoveries, which we were
successful in pursuing.  We used these proceeds to offset related legal fees
and to reduce the balance of deferred environmental remediation costs.
Recorded amounts include estimated costs based on projected investigation and
remediation work plans using existing technologies.  Actual costs could differ
from the estimates due to the long-term nature of the projects, changing
technology, government regulations and site-specific requirements.

     SJG has two regulatory assets associated with environmental cost.  The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites.  These costs meet the requirements of FASB No. 71,
"Accounting for the Effects of Certain Types of Regulation."  The BPU allows
SJG to recover expenditures through the RAC.  SJG's current recovery level
includes remediation costs expended through July 1998 and petitions to recover
costs through July 2001 are pending.

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

     SJG files with the BPU to recover these costs in rates through its RAC.
The BPU has consistently allowed the full recovery over 7-year periods, and SJG
believes this will continue.  As of September 30, 2001, SJG's unamortized
remediation costs of $12.3 million are reflected on the condensed consolidated
balance sheets under the caption Regulatory and Other Non-Current Assets.
Since implementing the RAC in 1992, SJG recovered $28.0 million through rates
as of September 30, 2001.

                                     SJG-11

Note 5.  Long-Term Debt:

     In July 2001, SJG issued the remaining $35 million of debt under its
Medium Term Note Program.  Notes totaling $10 million were issued at 6.74%,
maturing in 2011; notes totaling $15 million were issued at 6.57%, maturing in
2011; and notes totaling $10 million were issued at 6.50%, maturing in 2016.



                                     SJG-12


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


Overview

     South Jersey Gas Company (SJG) is a regulated natural gas utility.  SJG
distributes natural gas to 284,240 customers in the seven southernmost counties
of New Jersey.  SJG also:

     .  makes off-system sales of natural gas 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;
     .  services appliances via the sale of appliance warranty programs, as
        well as on a time and materials basis.

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

Forward Looking Statements

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

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

Customer Choice Legislation

     Effective January 1, 2000, all residential natural gas customers in New
Jersey are able to choose their gas supplier under the terms of the Electric
Discount and Energy Competition Act of February 1999.  Commercial and
industrial customers have had the ability to choose gas suppliers since 1987.
SJG's residential customers have been able to choose a gas supplier since April
1997 under a pilot program.  As of September 30, 2001, 36,393 SJG residential
customers chose a natural gas supplier other than the utility.  This number
decreased from 44,863 at September 30, 2000 as third party marketers were

                                     SJG-13

unable to offer natural gas at prices competitive with those available to
consumers under regulated utility tariffs.  During the spring of 2001, the
market price of natural gas became comparable to utility prices.  Consequently,
third party marketers increased customer acquisition efforts.  The bills of
customers choosing to purchase natural gas from providers other than the
utility are reduced for cost of gas charges and applicable taxes.  The
resulting decrease in SJG's revenues is offset by a corresponding decrease in
gas costs and taxes.  While customer choice can reduce utility revenues, it
does not negatively affect SJG's net income or financial condition.

Energy Adjustment Clauses

     SJG's Board of Public Utilities (BPU) approved Temperature Adjustment
Clause (TAC) had the following impact on 2001 and 2000 third quarter and nine
month net earnings:

                                                 2001        2000
                                               --------    --------
     TAC Adjustment Increase to Net Income
      ($ in thousands)

           Quarter Ended September 30              $0           $0
           Nine Months Ended September 30        $132       $1,349


     While the revenue and income impact of TAC adjustments are recorded as
incurred, cash inflows or outflows directly attributable to TAC adjustments
generally do not begin until the next TAC year.  Each TAC year begins
October 1.

Results of Operations - Three and Nine Months Ended September 30, 2001
Compared to Three and Nine Months Ended September 30, 2000

Operating Revenues

     Revenues decreased $6.0 million in the third quarter, but increased $71.4
million in the first nine months of 2001 compared with the prior year periods.
Both periods were positively impacted by increased rates resulting from an
increase in the Levelized Gas Adjustment Clause (LGAC) that reflects higher gas
costs, the return of residential customers to firm gas sales from firm
transportation and, 5,745 additional customers.  A large number of residential
customers resumed purchasing natural gas from SJG as third party gas marketers
were unable to offer competitive prices through the spring of this year.
Increased off-system sales also had a significant positive impact on nine month
results.  The increase in off-system revenues was due to higher prices for
natural gas sold during the first half of the year.  Significantly lower gas
prices experienced during the third quarter completely offset the positive
factors discussed previously, causing the revenue decline for the three month
period.  Total volumes of gas sold off-system were lower in the first three
quarters of 2001 than in the prior year.

                                     SJG-14

     Weather in the third quarter of 2001 was 2.3% warmer than the prior year
period.  Weather for the nine-month period was 3.8% colder than in 2000.
Weather was 82.6% colder and 0.1% warmer for the third quarter and first nine
months, respectively, than the 20-year averages.  Even large percentage changes
in weather experienced during the third quarter typically have a minimal impact
on revenues.  The number of degree days experienced during the period is very
small, rarely sufficient for our customers to use their heaters.  Revenues for
2001 will be more closely tied to the 20-year normal temperatures than actual
weather conditions due to our TAC.

     The following is a comparison of operating revenue and throughput for the
three- and nine-month periods ended September 30, 2001 and the same periods
ended September 30, 2000.

                                       Three Months Ended    Nine Months Ended
                                         September 30,         September 30,
                                         2001      2000       2001      2000
                                       --------  --------   --------  --------
Operating Revenues (Thousands):
  Firm
    Residential                         $18,243   $14,911   $143,067  $107,808
    Commercial                            6,922     4,404     58,447    25,895
    Industrial                              497       559      2,999     3,576
    Cogeneration & Electric Generation    3,929     3,894      6,586    10,093
    Firm Transportation                   5,363     6,077     19,822    27,952
                                       --------  --------   --------  --------
      Total Firm Operating Revenues      34,954    29,845    230,921   175,324

  Interruptible                             236       308      1,173     1,140
  Interruptible Transportation              284       309        881     1,154
  Off-System                             20,530    32,015    119,203   104,290
  Capacity Release & Storage              1,130       568      3,978     2,996
  Other                                     674       790      2,748     2,594
                                       --------  --------   --------  --------
      Total Operating Revenues          $57,808   $63,835   $358,904  $287,498
                                       ========  ========   ========  ========
Throughput (MMcf):
  Firm
    Residential                           1,259     1,331     12,631    12,114
    Commercial                              617       514      5,922     3,314
    Industrial                               13        25        186       181
    Cogeneration & Electric Generation    1,021       707      1,397     1,958
    Firm Transportation                   5,353     5,135     15,939    19,949
                                       --------  --------   --------  --------
      Total Firm Throughput               8,263     7,712     36,075    37,516

  Interruptible                              41        29        157       134
  Interruptible Transportation              611       661      1,841     2,238
  Off-System                              6,257     6,948     21,880    28,375
  Capacity Release & Storage              7,321     9,627     19,048    29,561
                                       --------  --------   --------  --------
      Total Throughput                   22,493    24,977     79,001    97,824
                                       ========  ========   ========  ========

                                     SJG-15

Gas Purchased for Resale

     Gas purchased for resale decreased $6.3 million and increased $71.8
million for the third quarter and first nine months of 2001 compared with the
same periods in 2000.  Higher gas costs for both local distribution and
off-system sales were responsible for the nine-month comparison.  However,
the cost of gas sold off-system was comparatively lower in the third quarter of
2001.  SJG's gas cost during 2001 averaged $5.25/dt compared with $3.61/dt in
the first nine months of 2000.  Unlike gas costs associated with off-system
sales, changes in the unit cost of gas sold to utility rate payers are not
reflected in Gas Purchased for Resale as incurred.  Fluctuations in gas costs
to rate payers not reflected in current rates are deferred and addressed in
future periods under a BPU approved Levelized Gas Adjustment Clause (LGAC).
Higher gas costs are reflected in rates via a series of monthly LGAC increases
between November 2000 and July 2001.  Gas supply sources include contract and
open-market purchases.  SJG secures and maintains its own gas supplies to serve
its customers.

Operations

     A summary of net changes in Utility Operations and Other Operations (in
thousands):

                                         Three Months Ended   Nine Months Ended
                                            September 30,       September 30,
                                            2001 vs. 2000       2001 vs. 2000
                                            -------------       -------------

          Other Production Expense                 ($9)               $(29)
          Transmission                             (10)                (26)
          Distribution                             (17)               (515)
          Appliance Service - Net                  190                 114
          Customer Accounts and Services           208                 474
          Sales                                     29                 (42)
          Administration and General                17                (229)
          Other                                    (79)                 39
                                              --------            --------
                                                  $329               $(214)
                                              ========            ========


     Distribution expenses decreased in the first quarter of 2001 as costs
related to our unionized workforce were avoided as a result of a work stoppage
that ended on January 17, 2001.  Further reductions occurred for the year-to-
date through decreases in overtime expenses.  Expenses related to performing
critical operational functions during the work stoppage were recognized under
Administration and General.  Offsetting these expenses in the Administration
and General account was a reallocation of costs among other expense
categories.  The reallocation was BPU mandated as part of the energy
deregulation process in New Jersey.  Customer Accounts and Services rose due to
a third quarter increase to the allowance for uncollectible accounts.  Higher
meter reading costs resulting from customer additions and fewer estimated meter
reads were factors for the nine-month period.

                                     SJG-16

Other Operating Expenses

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

                                         Three Months Ended   Nine Months Ended
                                            September 30,       September 30,
                                            2001 vs. 2000       2001 vs. 2000
                                            -------------       -------------

                Maintenance                       $204               $387
                Depreciation                       257                782
                Income Taxes                         4               (460)
                Energy and Other Taxes            (249)              (340)


     Maintenance expense increased during both periods primarily due to the
deferral last year of expenses associated with the Remediation Adjustment
Clause (RAC).  Higher levels of RAC recoveries this year eliminated the need to
defer these expenses.  RAC related expenses do not affect earnings, as an
offsetting amount is recognized in revenues.  Depreciation was higher due to
increased investment in property, plant and equipment by SJG.  Income Tax
changes reflect the impact of changes in pre-tax income.

Interest Charges

     Interest charges were lower in the third quarter of 2001 compared with
the prior year period.  Increased debt outstanding was offset by lower interest
rates and recoveries of carrying costs associated with unrecovered RAC and
purchased gas costs.  The debt was incurred primarily to support the expansion
and upgrade of SJG's gas transmission and distribution system, as well as
higher levels of unrecovered gas costs.  Interest expense for the nine month
period was higher than the same period in 2000 mostly due to expenses
associated with higher levels of unrecovered gas costs.

Net Income Applicable to Common Stock

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

Liquidity

     The seasonal nature of gas operations; the timing of construction and
remediation expenditures and related permanent financing; as well as mandated
tax and sinking fund payment dates require large, short-term cash requirements.
These requirements are generally met by cash from operations and short-term
lines of credit.  We maintain short-term lines of credit with a number of
banks, totaling $175.0 million, of which $49.5 million was available at
September 30, 2001.  The credit lines are uncommitted and unsecured with
interest rates typically available based upon the Federal Funds Rates or London
Interbank Offered Rates (LIBOR).

                                     SJG-17

     The changes in cash flows from operating activities (in thousands):

                                                   Nine Months Ended
                                                     September 30,
                                                     2001 vs. 2000
                                                     -------------
     Increases/(Decreases):
     Net Income Applicable to Common Stock                ($671)
     Depreciation and Amortization                          272
     Provision for Losses on Accounts Receivable            306
     Revenues and Fuel Costs Deferred - Net              (4,962)
     Deferred and Non-Current Income Taxes and
      Credits - Net                                       3,680
     Environmental Remediation Costs-Net                 (5,053)
     Accounts Receivable                                 54,476
     Inventories                                         (4,126)
     Prepayments and Other Current Assets                    44
     Prepaid and Accrued Taxes - Net                     (5,924)
     Accounts Payable and Other Accrued Liabilities     (65,826)
     Other - Net                                           (468)
                                                       --------
           Net Cash Provided by Operating Activities   ($28,252)
                                                       ========


     Depreciation and Amortization are non-cash charges to income and do not
impact cash flow.  Changes in depreciation cost reflect the effect of additions
and reductions to fixed assets.

     Decreases in Revenues and Fuel Costs Deferred - Net reflect the impact
of payments or credits to customers for amounts previously overcollected and
the undercollection of fuel costs resulting from increases in natural gas
costs.  Increases reflect the impact of overcollection of fuel costs or the
recovery of previously deferred fuel costs.

     Changes in Deferred and Non-Current Income Taxes and Credits - Net
represent the differences between taxes accrued and amounts paid.  Generally,
deferred income taxes related to deferred fuel costs will be paid in the next
year.

     Changes in Environmental Remediation Costs - Net represent the
differences between amounts expended for environmental remediation compared
with amounts collected under the RAC and insurance recoveries.

     Changes in Accounts Receivable are primarily due to changes in
off-system sales activity and SJG's sales volumes.  Weather and commodity
prices are the variables that primarily impact these sales.  Changes impact
cash flows when collected in subsequent periods.

                                     SJG-18

     Changes in Inventories reflect the impact of seasonal requirements,
temperatures and commodity price changes.

     Changes in Prepaid and Accrued Taxes - Net reflect the impact of
differences between taxes paid and taxes accrued.  Significant timing
differences exist in cash flows during the year.  Approximately 50% of SJG's
taxes are paid in installments during the first half of the year and the
remaining 50% are paid on May 15 of each year.  SJG uses short-term borrowings
to pay taxes, resulting in a temporary increase in the short-term debt level.
The carrying costs of timing differences are recognized in base utility rates.

     Changes in Accounts Payable and Other Current Liabilities reflect the
impact of timing differences between the accrual and payment of costs.

     Changes in Other - Net reflect numerous changes in noncurrent assets
and liabilities, including accrued deferred income taxes.

Regulatory Matters

     Rate Actions

     On November 16, 2000, SJG received approval to increase its LGAC.  The
impact of this increase was approximately 19.0% to a typical residential
heating customer.  The BPU also approved the creation of a flexible pricing
mechanism, allowing for five additional 2.0% increases effective for December
2000 and January, February, March and April of 2001.  In March 2001, the BPU
approved additional LGAC rate increases for SJG using a flexible pricing
mechanism.  Additional rate increases of 2% in May, June and July 2001 were
approved.  In addition, the ruling permits SJG to recover unrecovered gas costs
as of October 31, 2001 with interest at 5.5% or 5.75% over a three-year period,
beginning December 1, 2001.  The higher interest rate becomes effective only
if SJG does not file for an increase in the LGAC rate for the next LGAC year.
Recoverable interest costs began accruing on April 1, 2001.

     Other matters are incorporated by reference to Note 2 to the condensed
consolidated financial statements included as part of this report.

Capital Resources

     SJG has a continuing need for cash resources and capital, primarily to
invest in new and replacement facilities and equipment and for environmental
remediation costs.  Net construction and remediation expenditures for the
first nine months of 2001 amounted to $28.1 million.  The costs for 2001, 2002
and 2003 are estimated at approximately $47.8 million, $59.7 million and $64.2
million, respectively.  We expect to fund these expenditures from several
sources, which may include cash generated by operations, temporary use of
short-term debt, sale of medium-term notes, capital leases, RAC recoveries,
insurance recoveries and equity infusions from SJI.

                                     SJG-19

     In July 2001, SJG issued a total of $35 million of debt under its
Medium Term Note program (MTN).  Notes totaling $10 million were issued at
6.74%, maturing in 2011; notes totaling $15 million were issued at 6.57%,
maturing in 2011; and notes totaling $10 million were issued at 6.50%,
maturing in 2016.  The net proceeds of these note issuances were used to
retire short-term debt.

Ratio of Earnings to Fixed Charges

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

                                                        Twelve Months
                                                            Ended
                    Years Ended December 31,            September 30,
          --------------------------------------------  -------------
          1996      1997      1998      1999      2000       2001
          2.5x      2.6x      2.2x      2.5x      2.6x       2.5x


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


                                     SJG-20


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


     We have exposure to interest rate risk related to short-term debt and,
to a much lesser degree, commodity price risk.  For information regarding our
exposure related to these risks, see Item 7A in our Form 10-K for the year
ended December 31, 2000.  Our market risks have not materially changed from
December 31, 2000.




                                     SKG-21


                         PART II  --  OTHER INFORMATION


                           Item l.  Legal Proceedings

     Information required by this Item is incorporated by reference to Part
I, Item 1, Note 4, beginning on page 10.


                   Item 6.  Exhibits and Reports on Form 8-K

     On July 12, 2001, July 13, 2001 and July 20, 2001, South Jersey Gas
Company filed Forms 8-K in relation to the issuance of a total of $35,000,000
of Secured Medium Term Notes.  The company registered the Notes under the
Securities Act of 1933 pursuant to a Registration Statement on Form S-3 (File
No. 333-62019).

          Items reported include:

          Item 5. Other Events
          Item 7. Exhibits



                                     SJG-22


                                   SIGNATURES


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

                            SOUTH JERSEY GAS COMPANY
                                  (Registrant)



    Dated:  November 13, 20011    By:  /s/ David A. Kindlick
                                       David A. Kindlick
                                       Senior Vice President, Finance and
                                       Treasurer





    Dated:  November 13, 2001     By:  /s/ George L. Baulig
                                       George L. Baulig
                                       Senior Vice President & Corporate
                                       Secretary




                                     SJG-23