================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                   FORM 10-K/A
                                (Amendment No. 1)

         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 2004

         [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from ____________to ______________.

                        Commission File Number 000-22211

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:    None

Securities registered pursuant to Section 12(g) of the Act:    None

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  [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes  [  ]      No  [X]

All of the equity securities of the registrant are owned by South Jersey
Industries, Inc., its parent company, a 1934 Act reporting company named in the
registrants description of its business, which has itself fulfilled its 1934 Act
filing requirements.

During the preceding 36 months (and any subsequent period of days) there has not
been any default in (1) any of the indebtedness of the registrant or its
subsidiaries, and (2) the payment of rentals under material long-term leases (of
which there are none).

Documents Incorporated by Reference:    None
===============================================================================

                                EXPLANATORY NOTE

        This Amendment No. 1 on Form 10-K/A (this "Amendment") amends the
registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
2004, originally filed on March 10, 2005 (the "Original Filing"). The registrant
hereby amends and restates Item 8 of Part II to include a line item on the
balance sheet entitled "Materials and Supplies, average cost" that was
inadvertently omitted from the financial statements included therein during the
EDGARization process.  In addition, in connection with the filing of this
Amendment and prusuant to the rules of the Securities and Exchange Commission,
the registrant is including with this Amendment under Item 15 certain currently
dated certifications. Except as described above, no other changes have been made
to the Original Filing.

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

               Item 8. Financial Statements and Supplementary Data


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholder and Board of Directors of
South Jersey Gas Company:

We have audited the accompanying balance sheets of South Jersey Gas Company (the
"Company") as of December 31, 2004 and 2003, and the related statements of
income, changes in common equity and comprehensive income, and cash flows for
each of the three years in the period ended December 31, 2004. Our audits also
included the financial statement schedules listed in the Index at Item 15(a)2.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedules based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of South Jersey Gas Company as of December 31,
2004 and 2003, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

As discussed in Note 1, the accompanying 2003 balance sheet has been restated.



DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 2, 2005


                            SOUTH JERSEY GAS COMPANY

                              STATEMENTS OF INCOME
--------------------------------------------------------------------------------
                                 (In Thousands)

                                                  Year Ended December 31,
                                           -------------------------------------
                                             2004           2003          2002
--------------------------------------------------------------------------------

Operating Revenues (Notes 1, 2 & 3)      $  508,827    $  536,442    $  424,027
                                        ------------  ------------  ------------

Operating Expenses:
    Cost of Sales (Note 1)                  340,860       375,815       277,199
    Operations                               56,238        54,141        46,928
    Maintenance                               5,772         5,678         6,101
    Depreciation (Note 1)                    23,048        23,663        22,350
    Energy and Other Taxes (Notes 1 & 6)     11,458        11,725        10,575
                                        ------------  ------------  ------------

       Total Operating Expenses             437,376       471,022       363,153
                                        ------------  ------------  ------------

Operating Income                             71,451        65,420        60,874

Other Income and Expense                        886           111           333

Interest Charges                             17,906        19,304        20,613
                                        ------------  ------------  ------------

Income Before Income Taxes                   54,431        46,227        40,594

Income Taxes (Notes 1, 5 & 6)                22,969        19,619        17,372
                                        ------------  ------------  ------------

Income from Continuing Operations            31,462        26,608        23,222

Loss from Discontinued
  Operations - Net (Note 12)                      -             -           (29)
                                        ------------  ------------  ------------

Net Income Applicable to Common Stock    $   31,462    $   26,608    $   23,193
                                        ============  ============  ============



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


                            SOUTH JERSEY GAS COMPANY

                            STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
                                 (In Thousands)

                                                     Year Ended December 31,
                                                 -------------------------------
                                             2004           2003         2002
--------------------------------------------------------------------------------

Cash Flows from Operating Activities:
  Net Income Applicable to Common Stock   $   31,462  $    26,608  $     23,193
  Adjustments to Reconcile Net Income
   to Cash Flows
    Provided by Operating Activities:
    Depreciation and Amortization             25,831       26,627        24,730
    Provision for Losses on
     Accounts Receivable                         816        3,084         3,664
    Revenues and Fuel Costs Deferred - Net    14,582       29,874         6,788
    Deferred and Noncurrent
     Income Taxes and Credits - Net           13,982        1,225        11,096
    Environmental Remediation Costs - Net     (2,634)       2,323         6,361
    Additional Pension Contributions          (8,028)      (5,200)      (15,851)
    Gas Plant Cost of Removal                 (1,107)        (925)       (1,147)
    Changes in:
      Accounts Receivable                      7,871        6,854       (20,569)
      Inventories                             (7,713)     (18,065)       18,670
      Other Prepayments and Current Assets      (311)       1,118          (636)
      Prepaid and Accrued Taxes - Net        (11,536)       4,888         3,518
      Accounts Payable and Other
       Accrued Liabilities                    12,435          515        11,977
      Other - Assets                             423          480        (1,390)
      Other - Liabilities                        811       (1,011)        1,009
                                          -----------  -----------  ------------
        Net Cash Provided by
         Operating Activities                 76,884       78,395        71,413
                                          -----------  -----------  ------------

Cash Flows from Investing Activities:
  Return of Investment in Affiliate                -        1,082             -
  Capital Expenditures                       (68,632)     (53,175)      (49,530)
  Purchase of Available-for-Sale
   Securities                                   (338)        (339)         (693)
  Proceeds from Sale of Appliance
   Service Operations                          2,668            -             -

                                          -----------  -----------  ------------
        Net Cash Used in Investing
         Activities                          (66,302)     (52,432)      (50,223)
                                          -----------  -----------  ------------

Cash Flows from Financing Activities:
  Net (Repayments of) Borrowing from
   Lines of Credit                           (34,200)     (66,700)       18,400
  Proceeds from Issuance of
   Long-Term Debt                             40,000      110,000             -
  Principal Repayments of Long-Term Debt     (21,773)     (86,740)      (30,268)
  Premium for Early Retirement of Debt             -       (1,048)         (617)
  Dividends on Common Stock                   (9,123)           -       (10,700)
  Payments for Issuance of Long-Term Debt       (386)      (1,845)         (201)
  Additional Investment by Shareholder        15,000       20,000         2,500
                                          ------------  ----------  ------------
        Net Cash Used in Financing
         Activities                          (10,482)     (26,333)      (20,886)
                                          ------------  ----------  ------------

Net Increase (Decrease) in Cash and
 Cash Equivalents                                100         (370)          304
Cash and Cash Equivalents at
 Beginning of Period                           3,210        3,580         3,276
                                          ------------  ----------  ------------

Cash and Cash Equivalents at
  End of Period                           $    3,310   $    3,210   $     3,580
                                          ===========  ==========   ============

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for:
    Interest (Net of Amounts Applicable to Gas Cost
      Overcollections and Amounts
       Capitalized)                       $   17,467  $    19,805   $    23,710
    Income Taxes (Net of Refunds)         $   14,594  $    14,060   $     4,779

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


                            SOUTH JERSEY GAS COMPANY

                                 BALANCE SHEETS
--------------------------------------------------------------------------------
                                (In Thousands)
                                                               December 31,
                                                      --------------------------
                                                      2004              2003 (1)
--------------------------------------------------------------------------------
ASSETS

Property, Plant and Equipment: (Notes 1, 3 & 7)
  Utility Plant, at original cost                  $   957,287      $   894,654
  Accumulated Depreciation                            (224,506)        (209,831)
                                                  -------------    -------------

    Property, Plant and Equipment - Net                732,781          684,823
                                                  -------------    -------------
Investments:
  Available-for-Sale Securities (Note 1)                 5,296            4,497
                                                  -------------    -------------

Current Assets:
  Cash and Cash Equivalents (Notes 1 & 9)                3,310            3,210
  Accounts Receivable (Notes 1, 2 & 3)                  39,916           58,012
  Unbilled Revenues (Note 1)                            34,861           31,070
  Provision for Uncollectibles (Note 1)                 (2,871)          (3,263)
  Natural Gas in Storage, average cost                  65,691           59,432
  Materials and Supplies, average cost                   4,553            3,559
  Prepaid Taxes                                          6,104            2,661
  Derivatives - Energy Related Assets (Note 1)           1,273            2,375
  Other Prepayments and Current Assets                   2,078            2,317
                                                  -------------    -------------

     Total Current Assets                              154,915          159,373
                                                  -------------    -------------


Regulatory Assets:               (Note 1)
  Environmental Remediation Costs: (Notes 2 & 13)
     Expended - Net                                      5,281            4,147
     Liability for Future Expenditures                  51,046           50,983
  Gross Receipts and Franchise Taxes (Note 6)              924            1,367
  Income Taxes - Flowthrough Depreciation (Note 6)       6,641            7,619
  Deferred Postretirement Benefit Costs (Note 11)        3,024            3,402
  Societal Benefit Costs (Note 2)                        4,562            7,529
  Other Regulatory Assets                                1,157              732
                                                  ---------------  -------------
       Total Regulatory Assets                          72,635           75,779
                                                  ---------------  -------------

Other Noncurrent Assets:
  Unamortized Debt Discount and Expense (Note 7)         7,957            8,122
  Prepaid Pension    (Notes 1 & 11)                     24,812           18,206
  Accounts Receivable - Merchandise                      7,101            4,671
  Other                                                  2,089            1,066
                                                  ---------------  -------------

       Total Other Noncurrent Assets                    41,959           32,065
                                                  ---------------  -------------

         Total Assets                              $ 1,007,586      $   956,537
                                                  ===============  =============

(1)  Restated - See Note 1.


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


                            SOUTH JERSEY GAS COMPANY

                                 BALANCE SHEETS
--------------------------------------------------------------------------------
                                 (In Thousands)
                                                           December 31,
                                                      --------------------------
                                                      2004              2003 (1)
--------------------------------------------------------------------------------

Capitalization and Liabilities

Common Equity: (Note 10)
  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          155,317
  Accumulated Other Comprehensive
   (Loss) Income                                          (112)             279
  Retained Earnings                                    130,695          108,356
                                                  ---------------  -------------

        Total Common Equity                            306,748          269,800
                                                  ---------------  -------------

Preferred Stock: (Note 4)
  Redeemable Cumulative Preferred 8% Series  -
   Par Value $100 per share,
    Authorized 41,966 shares,
     Outstanding 16,904 shares                           1,690            1,690
                                                  --------------  --------------

Long-Term Debt  (Notes 7 & 8)                          282,008          263,781
                                                  --------------  --------------

        Total Capitalization                           590,446          535,271
                                                  --------------  --------------


Current Liabilities:
  Notes Payable (Note 9)                                53,000           87,200
  Current Maturities of Long-Term Debt
   (Note 7)                                              5,273            5,273
  Accounts Payable (Notes 1 & 3)                        59,026           50,554
  Derivatives - Energy Related Liabilities
   (Note 1)                                              1,800              565
  Derivatives - Other (Note 1)                             344                7
  Deferred Income Taxes - Net (Note 5)                   2,627            6,694
  Customer Deposits                                      8,846            7,957
  Environmental Remediation Costs (Note 13)             13,531            7,630
  Taxes Accrued (Note 5)                                 1,228            9,321
  Interest Accrued and Other
   Current Liabilities                                  12,386            9,414
                                                  ---------------  -------------

       Total Current Liabilities                       158,061          184,615
                                                  ---------------  -------------

Deferred Credits and Other Noncurrent Liabilities:
  Deferred Income Taxes - Net (Note 5)                 138,208          118,894
  Environmental Remediation Costs (Note 13)             37,515           43,353
  Regulatory Liabilities (Note 1)                       63,836           49,970
  Pension and Other Postretirement Benefits
   (Note 11)                                            11,039           11,336
  Investment Tax Credits (Note 6)                        3,129            3,471
  Other                                                  5,352            9,627
                                                  ---------------  -------------

        Total Deferred Credits and
         Other Noncurrent Liabilities                  259,079          236,651
                                                  ---------------  -------------

         Total Capitalization and Liabilities     $  1,007,586      $   956,537
                                                  ===============  =============



(1)  Restated - See Note 1.


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

<TABLE>

                            SOUTH JERSEY GAS COMPANY

     STATEMENTS OF CHANGES IN COMMON EQUITY AND COMPREHENSIVE INCOME
-----------------------------------------------------------------------------------------------------------------------------------
                                 (In Thousands)


                                                                     Other Paid-in        Accumulated
                                                                       Capital &             Other
                                                      Common          Premium on        Comprehensive       Retained
                                                       Stock         Common Stock       (Loss) Income       Earnings        Total
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S>                                                  <C>                <C>                 <C>             <C>       <C>

Balance at December 31, 2001                           5,848              132,817             (1,939)         69,255      205,981
Net Income Applicable to Common Stock                                                                         23,193       23,193
Other Comprehensive Loss, Net of Tax:*
   Minimum Pension Liability Adjustment                                                       (6,517)                      (6,517)
   Unrealized Loss on Equity Investments                                                        (149)                        (149)
   Unrealized Loss on Derivatives                                                                (84)                         (84)
                                                                                                                       -----------
Comprehensive Income                                                                                                       16,443
Additional Investment by Shareholder                                        2,500                                           2,500
Cash Dividends Declared - Common Stock                                                                       (10,700)     (10,700)
----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2002                           5,848              135,317             (8,689)         81,748      214,224
Net Income Applicable to Common Stock                                                                         26,608       26,608
Other Comprehensive Income, Net of Tax:*
   Minimum Pension Liability Adjustment                                                        8,456                        8,456
   Unrealized Gain on Equity Investments                                                         432                          432
   Unrealized Gain on Derivatives                                                                 80                           80
                                                                                                                     -------------
Comprehensive Income                                                                                                       35,576
Additional Investment by Shareholder                                       20,000                                          20,000
Cash Dividends Declared - Common Stock                                                                             -            -
----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2003                           5,848              155,317                279         108,356      269,800
Net Income Applicable to Common Stock                                                                         31,462       31,462
Other Comprehensive Income, Net of Tax:*
   Unrealized Loss on Equity Investments                                                        (192)                        (192)
   Unrealized Loss on Derivatives                                                               (199)                        (199)
                                                                                                                        ----------
Comprehensive Income                                                                                                       31,071
Additional Investment by Shareholder                                       15,000                                          15,000
Cash Dividends Declared - Common Stock                                                                        (9,123)      (9,123)
----------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2004                         $ 5,848            $ 170,317             $ (112)      $ 130,695    $ 306,748
----------------------------------------------------------------------------------------------------------------------------------

Disclosure of Accumulated Other Comprehensive (Loss) Income Balances*
(In Thousands)
                                                                      Minimum        Unrealized                        Accumulated
                                                                      Pension        (Loss) Gain     Unrealized Gain       Other
                                                                     Liability       on Equity        (Loss) on       Comprehensive
                                                                    Adjustment       Investments      Derivatives     (Loss) Income

------------------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2001                                          $ (1,939)        $       -         $     -      $  (1,939)
   Changes During Year                                                  (6,517)             (149)            (84)        (6,750)
                                                               ------------------------------------------------------------------
Balance at December 31, 2002                                            (8,456)             (149)            (84)        (8,689)
   Changes During Year                                                   8,456               432              80          8,968
                                                               ------------------------------------------------------------------
Balance at December 31, 2003                                                 -               283              (4)           279
   Changes During Year                                                       -              (192)           (199)          (391)
                                                               ------------------------------------------------------------------
Balance at December 31, 2004                                          $      -         $      91        $   (203)     $    (112)
<FN>

*Determined using a combined statutory tax rate of 40.85%.
</FN>
</TABLE>


                            SOUTH JERSEY GAS COMPANY
                          NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

                  The Entity - South Jersey Industries, Inc. (SJI) owns all of
         the outstanding common stock of South Jersey Gas Company (SJG).

                  Restatements - Subsequent to the issuance of the December 31,
         2003 balance sheet, SJG determined that it had certain
         misclassifications, improper netting and omissions from last year's
         balance sheet. The restatements to the December 31, 2003 balance sheet
         as presented were required to correct the misclassification of prepaid
         pension assets; the improper netting of certain accounts receivables
         and accounts payables to third-party gas marketers (See Note 3); and
         the omission of gas supply derivative contracts that are subject to
         regulatory recovery.

                  A summary of the restatements of the December 31, 2003 balance
sheet is presented in the table below:

                                                          Thousands of Dollars
                                                  As Previously        As
                                                    Recorded         Restated

Current Assets:
     Accounts Receivable                           $  48,412        $  58,012
     Prepaid Pension                                  18,206               --
     Derivatives - Energy Related Assets                  --            2,375

Regulatory Assets:
     Deferred Fuel Costs - Net                         1,720               --

Other Noncurrent Assets:
     Prepaid Pension                                      --           18,206

Current Liabilities:
     Accounts Payable                                 40,954           50,554
     Derivatives - Energy Related Liabilities             --              565

Deferred Credits and Other Noncurrent Liabilities:
     Regulatory Liabilities                           49,880           49,970

                  The restatements had no impact on common equity or the
         statements of income. Furthermore, there was no impact on net cash
         flows provided by operating activities for the years ended December 31,
         2003 and 2002.

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

                  Estimates and Assumptions - We prepare our financial
         statements to conform with generally accepted accounting principles.
         Management makes estimates and assumptions that affect the amounts
         reported in the financial statements and related disclosures.
         Therefore, actual results could differ from those estimates.
         Significant estimates include amounts related to regulatory accounting,
         energy derivatives, environmental remediation costs, pension and other
         postretirement benefit costs, and revenue recognition.

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

                  Operating Revenues - We bill customers monthly for gas
         deliveries. For retail customers not billed at the end of each month,
         we record an estimate to recognize unbilled revenues from the date of
         the last meter reading to the end of the month. We deferred and
         recognized revenues related to our appliance service contracts
         seasonally over the full 12-month term of the contract prior to
         transferring that business to South Jersey Energy Service Plus (SJESP).
         SJESP is an affiliate by common ownership.

                  The BPU allows us to recover gas costs through the Basic Gas
         Supply Service (BGSS) clause. We collect these costs on a forecasted
         basis upon BPU order. SJG defers over/under-recoveries of gas costs and
         includes them in the following year's BGSS or other similar recovery
         mechanism. We pay interest on overcollected BGSS balances at the rate
         of return on rate base utilized by the BPU to set rates in its last
         base rate proceeding (See Note 2).

                  Our tariff also includes a Temperature Adjustment Clause
         (TAC), a Remediation Adjustment Clause (RAC), a New Jersey Clean Energy
         Program (NJCEP) and a Universal Service Fund (USF) program. Our TAC
         reduces the impact of temperature fluctuations on the Company and our
         customers. The RAC recovers environmental remediation costs of former
         gas manufacturing plants and the NJCEP recovers costs associated with
         our energy efficiency and renewable energy programs. The USF is a
         statewide customer assistance program that utilizes utilities as a
         collection agent. TAC adjustments affect revenue, income and cash flows
         since colder-than-normal weather can generate credits to customers,
         while warmer-than-normal weather can result in additional billings. RAC
         adjustments do not directly affect earnings because we defer and
         recover these costs through rates over 7-year amortization periods (See
         Notes 2 & 13). NJCEP and USF adjustments are also deferred and do not
         affect earnings, as related costs and customer credits are recovered
         through rates on an ongoing basis (See Note 2).

                  Accounts Receivable and Provision for Uncollectible Accounts -
         Accounts receivable are carried at the amount owed by customers. A
         provision for uncollectible accounts has been established based on our
         collection experience and an assessment of the collectibility of
         specific accounts.

                  Property, Plant & Equipment - For regulatory purposes, utility
         plant is stated at original cost, which may be different than SJG's
         cost if the assets were acquired from another regulated entity. The
         cost of adding, replacing and renewing property is charged to the
         appropriate plant account. The Utility Plant balances as of December
         31, 2004 and 2003 were comprised of the following:

                                                    Thousands of Dollars
                                                    2004            2003
                                                   ------          ------
         Utility Plant:
         Production Plant                      $        302      $       302
         Storage Plant                               11,049           11,013
         Transmission Plant                         113,691          105,173
         Distribution Plant                         784,267          741,441
         General Plant                               33,775           30,977
         Intangible Plant                             1,855            1,856
                                                ----------------------------

         Utility Plant in Service                   944,939          890,762
         Construction Work in Progress               12,348            3,892
                                                ----------------------------
              Total Utility Plant              $    957,287      $   894,654
                                               ==============================


                  Depreciation - We depreciate utility plant on a straight-line
         basis over the estimated remaining lives of the various property
         classes. These estimates are periodically reviewed and adjusted as
         required after BPU approval. The composite annual rate for all
         depreciable utility property was approximately 2.9% in both 2003 and
         2002. As a result of our recent rate case settlement, our composite
         depreciation rate was reduced from 2.9% to 2.4%, effective July 8, 2004
         (See Note 2). Except for extraordinary retirements, accumulated
         depreciation is charged with the cost of depreciable utility property
         retired, less salvage (See Asset Retirement Costs).

                  Capitalized Interest - SJG capitalizes interest on
         construction at the rate of return on rate base utilized by the BPU to
         set rates in the last base rate proceeding (See Note 2). SJG
         capitalized interest of $0.7 million in 2004, $0.6 million in 2003 and
         $0.4 million in 2002 which are included in Utility Plant on the balance
         sheets. All capitalized interest is reflected on the statements of
         income as a reduction of Interest Charges.

                  Impairment of Long-Lived Assets - We review the carrying
         amount of an asset for possible impairment whenever events or changes
         in circumstances indicate that such amount may not be recoverable. For
         the years ended 2004, 2003 and 2002, no significant circumstances were
         identified.

                  Derivative Instruments - SJG accounts for derivative
         instruments in accordance with FASB Statement No. 133, "Accounting for
         Derivative Instruments and Hedging Activities," as amended. This
         statement establishes accounting and reporting standards for derivative
         instruments, including those embedded in other contracts, and for
         hedging activities. It requires that all derivatives, whether
         designated as hedging relationships or not, must be recorded on the
         balance sheet at fair value unless the derivative contracts qualify for
         the normal purchase and sale exemption. If the derivative is designated
         as a fair value hedge, we recognize the changes in the fair value of
         the derivative and of the hedged item attributable to the hedged risk
         in earnings. If the derivative is designated as a cash flow hedge, we
         record the effective portion of changes in the fair value of the
         derivative in Accumulated Other Comprehensive Income (Loss) and
         recognize it in the income statement when the hedged item affects
         earnings. We recognize ineffective portions of changes in the fair
         value of cash flow hedges in earnings. We currently have no fair value
         hedges.

                  As part of its gas purchasing strategy, SJG occasionally uses
         financial contracts to hedge against forward price risk. The costs of
         these short-term contracts are recoverable through our BGSS, subject to
         BPU approval. As of December 31, 2004 and 2003, SJG has $0.5 million
         and $(1.8) million of cost (cost reductions), respectively, included in
         its BGSS related to these contracts (See Caption Regulatory Assets &
         Regulatory Liabilities).

                  The vast majority of our contracts related to physical
         transactions that qualify as derivatives. Management believes, however,
         based on its interpretation of guidance issued, that as these
         derivative contracts relate to the purchase and sale of natural gas,
         they qualify for the normal purchase and sale exception. Therefore, we
         are not required to mark these contracts to market.

                  In May 2003, we entered into an interest rate swap contract
         that effectively fixed the interest rate at 2.24% through May 20, 2004
         on $20.0 million of our debt outstanding under bank lines.

                  In November 2004, we entered into a derivative transaction
         known as a "Treasury Lock" to hedge against the impact of possible
         interest rate increases on a $10.0 million, 30-year debt issuance
         planned for July 2005.

                  We enter into interest rate derivative agreements to hedge the
         exposure to increasing rates with respect to our variable rate debt.
         The differential to be paid or received as a result of these agreements


         is accrued as interest rates change and is recognized as an adjustment
         to interest expense. Interest rate derivatives are accounted for as
         cash flow hedges. As of December 31, 2004 and 2003, the market value of
         these contracts was $(344,000) and $(7,000), respectively, which
         represents the amount we would have to pay the counterparty to
         terminate the contracts as of those dates. We included these balances
         on the balance sheets under the caption Derivatives - Other. As of
         December 31, 2004 and 2003, we calculated the derivatives to be highly
         effective; therefore, we recorded the change in fair value of the
         contracts, net of taxes, in Accumulated Other Comprehensive Income
         (Loss).

                  We determined the fair value of interest rate derivative
         agreements using quotations from independent parties.

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

                  SJG recovers certain asset retirement costs through rates
         charged to customers. As of December 31, 2004 and 2003, we had accrued
         amounts in excess of actual removal costs incurred totaling $47.3 and
         $45.2 million, respectively, which in accordance with Statement No.
         143, are recorded as Regulatory Liabilities on the balance sheets. The
         adoption of this statement did not materially affect our financial
         condition or results of operations.

                  Stock Compensation - Officers of SJG participate in the Stock
         Option, Stock Appreciation Rights and Restricted Stock Awards Plan of
         SJI. Under the SJI plan, no more than 306,000 shares of SJI common
         stock in the aggregate may be issued to officers of SJI and SJG, or
         other key employees. No options or stock appreciation rights may be
         granted under the plan after November 22, 2006. No options were granted
         or outstanding during the three years ended December 31, 2004, 2003 and
         2002. No stock appreciation rights have been issued under the plan. In
         2004, 2003 and 2003, SJI granted 21,899, 30,810 and 26,034 restricted
         shares, respectively. Of these amounts, 14,601, 24,296 and 21,083
         restricted shares were issued to SJG officers in 2004, 2003 and 2002,
         respectively. These restricted shares vest over a 3-year period and are
         subject to SJI achieving certain performance targets. SJG's annual
         expense associated with these awards was approximately $1.3 million,
         $0.8 million and $0.4 million in 2004, 2003 and 2002, respectively.

                   Prior to 2003, SJI valued stock options to employees using
         the intrinsic value method. Effective in 2003, SJI adopted the policy
         of accounting for this compensation using the fair value based method
         on a prospective basis.

                  New Accounting Pronouncements - In December 2002, the FASB
         issued Statement No. 148, "Accounting for Stock-Based
         Compensation--Transition and Disclosure," which was effective for SJG's
         2002 annual financial statements. As previously discussed, SJG
         participates in the stock compensation plans of SJI. Effective in 2003,
         SJI adopted the policy of accounting for this compensation using the
         fair value based method on a prospective basis. This method calls for
         expensing the estimated fair value of a stock option. The provisions of
         this statement currently have no impact on either SJG's or SJI's
         financial statements. In addition, the FASB issued Statement No.
         123(R), "Share-Based Payment," in December 2004. This statement
         establishes standards for the accounting for transactions in which an
         entity exchanges its equity instruments for goods or services. While
         this statement is not effective until reporting periods beginning after
         June 15, 2005, management has completed its assessment of Statement No.
         123(R) and has determined that it does not have any impact on either
         SJG's or SJI's accounting for share-based payments.


                  In December 2003, the FASB revised Interpretation No. 46,
         "Consolidation of Variable Interest Entities" (FIN 46R), which
         clarifies the application of Accounting Research Bulletin No. 51,
         "Consolidated Financial Statements." This interpretation provides
         guidance on the identification and consolidation of variable interest
         entities (VIEs), whereby consolidation is achieved through means other
         than through control. We have completed our assessment of FIN 46R and
         have determined that we do not have any interest in VIEs.

                  Also in December 2003, the FASB revised Statement No. 132,
         "Employers' Disclosure about Pensions and Other Postretirement
         Benefits." This statement revises employers' disclosures about pension
         and other post-retirement benefit plans, including new interim
         reporting requirements. We have adopted and complied with new
         disclosure requirements.

                  In November 2004, the FASB issued Statement No. 151,
         "Inventory Costs." This statement requires that abnormal amounts of
         idle facility expense, freight, handling costs and spoilage be charged
         to income as a current period expense rather than capitalized as
         inventory costs. The effective date of this statement is January 1,
         2006; however, it is not expected to have any impact on SJG based on
         its current lines of business.

                  In December 2004, the FASB issued Statement No. 153,
         "Exchanges of Nonmonetary Assets, an amendment to APB Opinion No. 29,
         Accounting for Nonmonetary Transactions." This statement redefines the
         types of nonmonetary exchanges that require fair value measurement.
         Statement No. 153 is effective for nonmonetary transactions entered
         into on and after July 1, 2005. Management is currently evaluating the
         effect of this standard, but it does not anticipate the adoption of
         this statement to have a material effect on our consolidated financial
         statements.

                  Income Taxes - Deferred income taxes are provided for all
         significant temporary differences between book and taxable basis of
         assets and liabilities (See Notes 5 & 6).

                  Regulatory Assets & Regulatory Liabilities - All significant
         regulatory assets are separately identified on the balance sheets under
         the caption Regulatory Assets. Each item that is separately identified
         is being recovered through utility rate charges. SJG is currently
         permitted to recover interest on its Environmental Remediation and
         Societal Benefit costs while the other assets are being recovered
         without a return on investments over the following periods (See Note
         2):
                                                             Years Remaining
              Regulatory Asset                           As of December 31, 2004
              ----------------                           -----------------------

    Environmental Remediation Costs:
    (Notes 2 & 13)
      Expended - Net                                             Various
      Liability for Future Expenditures                      Not Applicable
    Gross Receipts and Franchise Taxes (Note 6)                     2
    Income Taxes - Flowthrough Depreciation (Note 6)                7
    Deferred Postretirement Benefit Costs (Note 11)                 8
    Societal Benefit Costs (Note 2)                              Various

                  Most of the assets reflected under the caption Other
         Regulatory Assets are currently being recovered from ratepayers as
         approved by the BPU (See Note 2). Management believes that all deferred
         costs are probable of recovery from ratepayers through future utility
         rates.
                  Regulatory Liabilities at December 31, 2004 and 2003 consisted
         of the following items:


                                                      Thousands of Dollars
                                                     2004              2003
                                                   --------      ------------

         Deferred Gas Revenues - Net (Note 2)      $    12,334    $        90
         Excess Plant Removal Costs                     47,345         45,241
         Overcollected State Taxes                       3,871          4,353
         Other                                             286            286
                                                   --------------------------

              Total Regulatory Liabilities         $    63,836    $    49,970
                                                   ==========================

                  Deferred Gas Revenues - Net represent SJG's net overcollected
         gas costs and are monitored through SJG's BGSS mechanism. As of
         December 31, 2003, we carried an offsetting underrecovery of gas costs
         in the amount of $16.1 million representing the remaining balance of a
         $38.9 million underrecovery originating in 2001. This 2001
         underrecovery was collected from customers over a 3-year period. The
         remaining balance was collected during 2004 (See previous discussion of
         Revenues and Note 9).

                  Derivatives used to hedge our natural gas purchases are
         recoverable through its BGSS, subject to BPU approval. The offset to
         the change in fair value of these contracts is recorded as a Regulatory
         Asset or Regulatory Liability accordingly.

                  Excess Plant Removal Costs represent amounts accrued in excess
         of actual utility plant removal costs incurred to date (See Asset
         Retirement Costs). All other amounts are subject to being returned to
         ratepayers in future rate proceedings.

                  Cash and Cash Equivalents - For purposes of reporting cash
         flows, highly liquid investments with original maturities of three
         months or less are considered cash equivalents.

                  Reclassifications - SJG reclassified some previously reported
         amounts to conform with current year classifications. Such
         reclassifications include the move of $8.4 million and $6.8 million of
         certain operating expenses previously included in Revenue to Cost of
         Sales and Operations Expense for 2003 and 2002, respectively. These
         amounts are considered immaterial to the overall presentation of SJG's
         financial statements.

2. REGULATORY ACTIONS:

                  Base Rates - In January 1997, the BPU granted SJG rate relief,
         which was predicated in part upon a 9.62% rate of return on rate base
         that included an 11.25% return on common equity. This rate relief
         provided for cost-of-service recovery, including deferred costs,
         through base rates. Additionally, our threshold for sharing pre-tax
         margins generated by interruptible and off-system sales and
         transportation had increased. As a result of this case, SJG kept 100%
         of pre-tax margins up to the threshold level of $7.8 million. The next
         $750,000 was credited to customers through the Basic Gas Supply Service
         (BGSS) clause. Thereafter, SJG kept 20% of the pre-tax margins as it
         had historically.

                  On July 7, 2004, the BPU granted SJG a base rate increase of
         $20.0 million, which was predicated in part upon a 7.97% rate of return
         on rate base that included a 10.0% return on common equity. The
         increase was effective July 8, 2004 and designed to provide an
         incremental $8.5 million on an annualized basis to net income. SJG was
         also permitted recovery of regulatory assets contained in its petition
         and a reduction in its composite depreciation rate from 2.9% to 2.4%.

                  Included in the base rate increase was a change to the sharing
         of pre-tax margins on interruptible and off-system sales and
         transportation. SJG now recovers through its base rates $7.8 million
         that it had previously recovered through the sharing of pre-tax
         margins. As a result, the sharing of pre-tax margins now begins from
         dollar one, with SJG retaining 20%. Moreover, SJG now shares pre-tax

         margins from on-system capacity release sales, in addition to the
         interruptible and off-system sales and transportation. Effective July
         1, 2006, the 20% retained by SJG will decrease to 15% of such margins.

                  As part of the overall settlement effective July 8, 2004, SJG
         reduced rates in several rate clauses that were no longer needed by SJG
         to recover costs. SJG was either no longer incurring or had already
         recovered the specific costs that these clauses were designed to
         recover. Since revenues raised under these clauses were for cost
         recovery only and had no profit margin built in, their elimination has
         no impact on SJG's net income. However, SJG's customers' bills are
         estimated to decline by $38.9 million annually due to the elimination
         of these clauses, more than offsetting the base rate increase awarded.

                  Pending Audits - The BPU issued an order under which it will
         perform a competitive services audit and a management audit that
         includes a focused review of SJG's gas supply and purchasing practices.
         The audits, which commenced in October 2004, are mandated by statute to
         be conducted at predetermined intervals. Management does not currently
         anticipate the outcome of these audits to have a material effect on
         SJG's financial position, results of operations or liquidity.

                  Appliance Service Business - On July 23, 2004, the BPU
         approved SJG's petition and related agreements to transfer its
         appliance service business from the regulated utility. In anticipation
         of this transfer, SJI had formed South Jersey Energy Service Plus, LLC
         (SJESP) to perform appliance repair services after BPU approval of the
         transfer. SJESP purchased certain assets and assumed certain
         liabilities required to perform such repair services from SJG for the
         net book value of $1.2 million on September 1, 2004. The agreements
         also called for SJESP to pay an additional $1.5 million to SJG. This
         $1.5 million was credited by SJG to customers through the Remediation
         Adjustment Clause (RAC) and had no earnings impact on SJG. The transfer
         has no effect on the provision of safety-related or emergency-related
         services to the public since the transferred services include only
         non-safety related, competitive appliance services.

                  Other Regulatory Matters - Effective January 10, 2000, the BPU
         approved full unbundling of SJG's system. This allows all natural gas
         consumers to select their natural gas commodity supplier. As of
         December 31, 2004, 87,645 of SJG's residential customers were
         purchasing their gas commodity from someone other than SJG. Customers
         choosing to purchase natural gas from providers other than the utility
         are charged for the cost of gas by the marketer, not the utility. The
         resulting decrease in SJG's revenues is offset by a corresponding
         decrease in gas costs. While customer choice can reduce utility
         revenues, it does not negatively affect SJG's net income or financial
         condition. The BPU continues to allow for full recovery of prudently
         incurred natural gas costs through the BGSS. Unbundling did not change
         the fact that SJG still recovers cost of service, including deferred
         costs, through base rates.

                  In December 2001, the BPU approved recovery of SJG's October
         31, 2001 underrecovered gas cost balance of $48.9 million plus accrued
         interest since April 1, 2001 at a rate of 5.75%. The recovery of this
         balance was completed upon the settlement of SJG's base rate case in
         July 2004.

                  In August 2002, SJG filed for a Societal Benefits Clause (SBC)
         rate increase. The SBC recovers costs related to BPU-mandated programs,
         including environmental remediation costs that are recovered through
         SJG's RAC; energy efficiency and renewable energy program costs that
         are recovered through SJG's New Jersey Clean Energy Programs; consumer
         education program costs; and low income program costs that are
         recovered through the Universal Service Fund. In August 2003, the BPU
         approved a $6.7 million increase to SJG's SBC, effective September 1,
         2003. In September 2004, SJG filed for a $2.6 million reduction to its
         current SBC annual recovery level of $17.5 million.

                  In September 2002, SJG filed for an $8.6 million rate increase
         to recover the cash related to a Temperature Adjustment Clause (TAC)

         deficiency resulting from warmer-than-normal weather for the 2001-2002
         winter. As a result of the colder-than-normal 2002-2003 winter, the
         cumulative TAC deficiency decreased to $5.7 million. In August 2003,
         the BPU approved the recovery of the $5.7 million TAC deficiency,
         effective September 1, 2003. SJG has fully recovered the $5.7 million.
         In September 2004, SJG filed for a $1.2 million increase to recover the
         cash related to the TAC deficiency resulting from the 2003-2004 winter,
         which was warmer than normal.

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

                  In March 2003, the BPU approved a statewide Universal Service
         Fund (USF) program on a permanent basis. In June 2003, the BPU
         established a statewide program through which funds for the USF and
         Lifeline Credit and Tenants Assistance (Lifeline) Programs would be
         collected from customers of all electric and gas utilities in the
         state. The BPU ordered that utility rates be set to recover a total
         statewide USF budget of $33.0 million, and a total Lifeline budget of
         $72.0 million. Recovery rates for both programs were implemented on
         August 1, 2003. In April 2004, SJG made its annual USF filing, along
         with the state's other electric and gas utilities, proposing a
         statewide USF budget of $105.5 million. The proposed statewide budget
         was updated to $113.0 million and filed with the BPU in May 2004. In
         June 2004, the BPU approved the statewide budget of $113.0 million and
         the increased rates were implemented effective July 1, 2004, resulting
         in a $3.9 million increase to SJG's annual USF recoveries.

                  In July 2003, SJG made its annual BGSS filing, as amended,
         with the BPU. Due to further price increases in the wholesale market,
         SJG filed for a $24.0 million increase to their annual gas cost
         revenues. In August 2003, the BPU approved SJG's price increase on a
         provisional basis, subject to refund with interest, effective September
         1, 2003. In October 2004, the provisional rate increase was made final
         with no refund required.

                  In February 2004, SJG filed notice with the BPU to reduce its
         gas cost revenues by approximately $5.0 million, via a rate reduction,
         in addition to providing for a $20.8 million bill credit to customers.
         Both the rate reduction and bill credit were approved and implemented
         in March 2004.

                  In June 2004, SJG made its annual BGSS filing with the BPU
         requesting a $4.9 million increase in gas cost recoveries. In October
         2004, the requested increase was approved on a provisional basis.

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

3.       RELATED PARTY TRANSACTIONS:

                  SJG sells natural gas for resale to South Jersey Energy
         Company (SJE) and South Jersey Resources Group, LLC (SJRG), SJI's
         wholly owned subsidiaries. These sales comply with Section 284.402 of
         the Regulations of the Federal Energy Regulatory Commission (FERC).
         Sales to SJE were approximately $7.6 million, $25.9 million, and $14.0
         million for the years ended December 31, 2004, 2003 and 2002,
         respectively. The amounts due from SJE relating to these sales were $
         -0- and $0.8 million at December 31, 2004 and 2003, respectively. Sales
         to SJRG were approximately $5.1 million, $12.8 million and $17.0
         million for the years ended December 31, 2004, 2003 and 2002,
         respectively. The amounts due from SJRG relating to these sales were
         $0.6 million and $ -0- at December 31, 2004 and 2003, respectively.

                  We also meet some of our gas purchasing requirements by
         purchasing natural gas for resale from SJRG. Such purchases were
         approximately $22.1 million, $20.5 million and $11.7 million for the
         years ended December 31, 2004, 2003 and 2002, respectively.
         Additionally, we purchased gas storage services from SJRG totaling

         approximately $ -0-, $0.2 million and $0.6 million for the years ended
         December 31, 2004, 2003 and 2002, respectively. There were no amounts
         due to SJRG relating to gas purchases and storage services at December
         31, 2004 or 2003.

                  SJG also provides transportation services to Marina Energy,
         LLC, an affiliate by common ownership. Sales for these services were
         $171,200 and $71,000 for the years ended December 31, 2004 and 2003.
         The amount due relating to such services was $18,000 and $48,000 at
         December 31, 2004 and 2003, respectively.

                  SJG provides billing services for third-party energy marketers
         supplying natural gas to customers within SJG's territory. For
         commercial and industrial customers, SJG provides this service for a
         fixed fee per customer. For residential customers, SJG purchases the
         accounts receivable at book value from the marketer and assumes all
         risk associated with the collection of such amounts. The fee paid by
         third-party energy marketers for the purchase of the residential
         accounts receivables includes a factor for potential uncollectible
         accounts. The largest marketer in SJG's territory is SJE. Fees charged
         for the billing service and the purchase of SJE's customer accounts
         receivable totaled $0.5 million, $0.3 million and $0.1 million for the
         years ended 2004, 2003 and 2002, respectively. The amounts due to SJE
         for account collections and the purchase of the residential accounts
         receivables were $6.5 million and $8.2 million at December 31, 2004 and
         2003, respectively.

                  SJG also provides billing services for South Jersey Energy
         Service Plus, LLC (SJESP), an affiliate by common ownership, and
         receives a fee for the provision of this service. Since the transfer of
         SJG's appliance service operations on September 1, 2004 (See Note 2),
         fees for providing such services totaled $22,800 for the four months
         ended December 31, 2004. The amount due to SJESP relating to these
         collections was $1.8 million at December 31, 2004.

                  SJI and Conectiv Solution, LLC formed Millennium Account
         Services, LLC (Millennium) to provide meter reading services in
         southern New Jersey. SJG uses the services of Millennium to read
         utility customers' meters on a monthly basis for a fee. The fees
         incurred by SJG related to such services were approximately $2.4
         million in each of the three years ended December 31, 2004, 2003, and
         2002. The amounts due to Millennium for meter reading services were
         $0.4 million and $0.2 million at December 31, 2004 and 2003,
         respectively.

4. PREFERRED STOCK:

                  Redeemable Cumulative Preferred Stock - Annually, we are
         required to offer to purchase 1,500 shares of our Cumulative Preferred
         Stock, Series B, at par value, plus accrued dividends. We may not
         declare or pay dividends or make distributions on our common stock if
         preferred stock dividends are in arrears. Preferred shareholders may
         elect a majority of our directors if four or more quarterly dividends
         are in arrears.

5. INCOME TAXES:

                  SJG is included in the consolidated Federal income tax return
         filed by SJI. The actual taxes, including credits, are allocated by SJI
         to its subsidiaries, generally on a separate return basis. Total income
         taxes applicable to operations differ from the tax that would have
         resulted by applying the statutory Federal Income Tax rate to pre-tax
         income for the following reasons:

                                                    Thousands of Dollars

                                             2004        2003         2002
                                           ------------------------------------

Tax at Statutory Rate                     $  19,051    $   16,319    $   14,208
Increase (Decrease) Resulting from:
     State Income Taxes                        3,738         3,137        2,847
     Amortization of Investment
         Tax Credit (Note 6)                    (342)         (347)        (347)
     Amortization of Flowthrough
         Depreciation (Note 6)                   664           664          664

     Other - Net                                (142)         (154)           -
                                          --------------------------------------

Income Taxes:
     Continuing Operations                    22,969        19,619       17,372
     Discontinued Operations                       -             -          (21)
                                          --------------------------------------

Net Income Taxes                          $   22,969   $    19,619   $   17,351
                                          ======================================

     The provision for Income Taxes is comprised of the following:

                                                   Thousands of Dollars

                                             2004          2003           2002
                                          -------------------------------------

Current:
     Federal                              $    4,078   $    12,143   $    3,152
     State                                     4,632         6,251        3,124
                                          --------------------------------------

         Total Current                         8,710        18,394        6,276
                                          --------------------------------------

Deferred:
     Federal:
         Excess of Tax Depreciation
          Over Book Depreciation - Net        14,781        10,752        9,609
         Deferred Fuel Costs - Net            (3,548)      (10,446)      (3,728)
         Environmental Costs - Net               826          (184)      (1,494)
         Alternative Minimum Tax                   -         1,332          (66)
         Prepaid Pension                       2,515         1,496        5,343
         Deferred Regulatory Costs              (883)          750        1,543
         Other - Net                            (209)         (703)      (1,021)
     State                                     1,119        (1,425)       1,257
                                          --------------------------------------

         Total Deferred                       14,601         1,572       11,443

Investment Tax Credit                           (342)         (347)        (347)
                                          --------------------------------------
Income Taxes:
     Continuing Operations                    22,969        19,619       17,372
     Discontinued Operations                       -             -          (21)
                                          --------------------------------------

Net Income Taxes                          $   22,969   $    19,619   $   17,351
                                          ======================================

                  The net tax effect of temporary differences between the
         carrying amounts of assets and liabilities for financial reporting and
         income tax purposes resulted in the following deferred tax liabilities
         at December 31:

                                                      Thousands of Dollars

                                                       2004           2003
                                                     -------------------------
Current:
     Deferred Fuel Costs - Net                     $     2,774    $     7,236
     Other                                                (147)          (542)
                                                   ---------------------------

         Current Deferred Tax Liability - Net            2,627          6,694
                                                   ---------------------------

Noncurrent:
     Book Versus Tax Basis of Property                 124,630        110,994
     Prepaid Pension                                    11,570          7,138
     Environmental                                       2,680          1,642
     Deferred Regulatory Costs                           3,241          4,687
     Deferred State Tax                                 (2,711)        (2,146)
     Investment Tax Credit Basis Gross-Up               (1,612)        (1,891)

     Other                                                 410         (1,530)
                                                   ---------------------------
         Noncurrent Deferred Tax Liability - Net       138,208        118,894
                                                   ---------------------------

                                                   $   140,835    $   125,588
                                                   ===========================

                  As of December 31, 2004 and 2003, income taxes (due from) due
         to SJI were approximately $(0.2) million and $2.8 million,
         respectively.

6. FEDERAL AND OTHER REGULATORY TAX ASSETS AND DEFERRED CREDITS:

                  The primary asset created by adopting FASB Statement No. 109,
         "Accounting for Income Taxes," was Income Taxes - Flowthrough
         Depreciation in the amount of $17.6 million as of January 1, 1993. This
         amount represented excess tax depreciation over book depreciation on
         utility plant because of temporary differences for which, prior to
         Statement No. 109, deferred taxes previously were not provided. We
         previously passed these tax benefits through to ratepayers. We are
         recovering the amortization of the regulatory asset through rates over
         18 years which began in December 1994 (See Notes 1 & 5).

                  The Investment Tax Credit was deferred and continues to be
         amortized at the annual rate of 3%, which approximates the life of
         related assets (See Note 5).

                  We deferred $11.8 million resulting from a change in the basis
         for accruing the Gross Receipts & Franchise Tax in 1978, and are
         amortizing it on a straight-line basis to operations over 30 years
         beginning that same year. We accelerated this amortization slightly as
         a result of a subsequent rate making proceeding (See Note 1).

7. LONG-TERM DEBT: (A)
                                                        Principal Outstanding
                                                             December 31,
                                                           (In Thousands)
                                                        2004           2003
                                                       ---------------------
First Mortgage Bonds:  (B)
     8.19%  Series due 2007                        $     6,816    $     9,089
     6.12%  Series due 2010                             10,000         10,000
     6.74%  Series due 2011                             10,000         10,000
     6.57%  Series due 2011                             15,000         15,000
     4.46%  Series due 2013                             10,500         10,500
    5.027%  Series due 2013                             14,500         14,500
     4.52%  Series due 2014                             11,000         11,000
    5.115%  Series due 2014                             10,000         10,000
      7.7%  Series due 2015 (C)                              -         15,000
     6.50%  Series due 2016                              9,965          9,965
     4.60%  Series due 2016                             17,000         17,000
    4.657%  Series due 2017                             15,000         15,000
     7.97%  Series due 2018                             10,000         10,000
    7.125%  Series due 2018                             20,000         20,000
      7.7%  Series due 2027                             35,000         35,000
      7.9%  Series due 2030                             10,000         10,000
     5.55%  Series due 2033                             32,000         32,000
    5.387%  Series due 2015 (D)                         10,000              -
    5.437%  Series due 2016 (D)                         10,000              -
    5.587%  Series due 2019 (D)                         10,000              -
    6.213%  Series due 2034 (D)                         10,000              -

Unsecured Notes:
   Debenture Notes, 8.6% due 2010                       10,500         15,000
                                                     --------------------------

     Total Long-Term Debt Outstanding                  287,281        269,054

     Less Current Maturities                             5,273          5,273
                                                     --------------------------

         Long-Term Debt                            $   282,008    $   263,781
                                                   ============================

         (A) Long-term debt maturities and sinking fund requirements for the
         succeeding five years are as follows (in thousands): 2005, $5,273;
         2006, $5,273; 2007, $5,270; 2008, $1,500; and 2009, $ -0-.
         (B) SJG's First Mortgage dated October 1, 1947, as supplemented,
         securing the First Mortgage Bonds (FMB) constitutes a direct first
         mortgage lien on substantially all utility plant.
         (C) On July 15, 2004, SJG redeemed its 7.7% Series due 2015 at par.
         (D) On August 4, 2004, we issued $40.0 million of debt under our Medium
         Term Note program established in 2002.

8. FINANCIAL INSTRUMENTS:

                  Long-Term Debt - We estimate the fair values of our long-term
         debt, including current maturities, as of December 31, 2004 and 2003,
         to be $303.3 and $293.6 million, respectively. Carrying amounts are
         $287.3 and $269.1 million, respectively. We base the estimates on
         interest rates available to us at the end of each year for debt with
         similar terms and maturities. We retire debt when it is cost effective
         as permitted by the debt agreements.

                  Other Financial Instruments - The carrying amounts of our
         other financial instruments approximate their fair values at December
         31, 2004 and 2003.

9. UNUSED LINES OF CREDIT AND COMPENSATING BALANCES:

                  Unused lines of credit available at December 31, 2004 were
         $123.0 million. Borrowings under these lines of credit are at market
         rates. The weighted borrowing cost, which changes daily, was 3.00% and
         1.81% at December 31, 2004 and 2003, respectively. We maintain demand
         deposits with lending banks on an informal basis and they do not
         constitute compensating balances.

10. RETAINED EARNINGS:

                  Restrictions exist under various loan agreements regarding the
         amount of cash dividends or other distributions that we may pay on our
         common stock. As of December 31, 2004, these restrictions did not
         affect the amount that may be distributed from SJG's retained earnings.

                  SJG is restricted as to the amount of cash dividends or other
         distributions that may be paid on its common stock by an order issued
         by the New Jersey Board of Public Utilities in July 2004, that granted
         SJG an increase in base rates. Per the order, SJG is required to
         maintain Total Common Equity of no less than $289.0 million. SJG's
         Total Common Equity balance was $306.7 million at December 31, 2004.

                  We received equity infusions of $15.0 million, $20.0 million
         and $2.5 million from SJI during 2004, 2003 and 2002, respectively.
         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.

11. EMPLOYEE BENEFIT PLANS:

                  Pensions & Other Postretirement Benefit Plans - We participate
         in the defined benefit pension plans and other postretirement benefit
         plans of SJI. The pension plans provide annuity payments to the
         majority of full-time, regular employees upon retirement. Newly hired

         employees in certain classifications and companies do not qualify for
         participation in the defined benefit pension plans. The other
         postretirement benefit plans provide health care and life insurance
         benefits to some retirees.

                  The BPU authorized SJG to recover costs related to
         postretirement benefits other than pensions under the accrual method of
         accounting consistent with FASB Statement No. 106, "Employers'
         Accounting for Postretirement Benefits Other Than Pensions." We
         deferred amounts accrued prior to that authorization and are amortizing
         them as allowed by the BPU. The unamortized balance of $3.0 million at
         December 31, 2004 is recoverable in rates. We are amortizing this
         amount over 15 years which started January 1998.

                  On December 8, 2003, the President signed into law the
         Medicare Prescription Drug, Improvement and Modernization Act (the
         "Act") of 2003. In accordance with FASB Staff Position No. 106-1,
         "Accounting and Disclosure Requirements Related to the Medicare
         Prescription Drug, Improvement and Modernization Act of 2003," issued
         in December 2003, management elected to defer any financial impact
         resulting from the Act pending the availability of more information. In
         2004, with the assistance of SJI's actuary, management has determined
         that the Act has no impact on the postretirement benefits plans of SJI.

                  Net periodic benefit cost related to the pension and other
         postretirement benefit plans consisted of the following components:

<TABLE>
                                                                             Thousands of Dollars
                                                                                            Other
                                                        Pension Benefits            Postretirement Benefits
                                                  2004       2003      2002       2004       2003       2002
                                               --------------------------------------------------------------
<CAPTION>
        <S>                                   <C>        <C>        <C>        <C>       <C>        <C>

         Service Cost                          $  2,443   $  2,375   $  2,079   $  1,160  $   1,421  $   1,095
         Interest Cost                            4,665      4,848      4,597      2,173      2,448      2,285
         Expected Return on
              Plan Assets                        (5,793)    (4,996)    (4,157)    (1,302)    (1,078)    (1,046)
         Amortization of
                      Transition Obligation           -         87         87        592        756        756
         Amortization of Loss
              and Other                           1,432      1,563        722        130        373         72
                                               ---------------------------------------------------------------

         Net Periodic
              Benefit Cost                        2,747      3,877      3,328      2,753      3,920      3,162
              ERIP Cost                             711          -          -        134          -          -
                                               ---------------------------------------------------------------

         Total Net Periodic
              Benefit Cost                     $  3,458   $  3,877   $  3,328   $  2,887  $   3,920  $   3,162
                                               ===============================================================
</TABLE>

                  The table above includes benefit costs capitalized by SJG
         related to its construction program. Capitalized pension benefit costs
         totaled $1.0 million, $1.3 million and $1.1 million in 2004, 2003 and
         2002, respectively. Capitalized other postretirement benefit costs
         totaled $1.0 million, $1.3 million and $1.0 million in 2004, 2003 and
         2002, respectively.

                  The ERIP costs reflected in the table above relate to an early
         retirement plan offered during 2004. Additional monetary incentives not
         reflected in the table above totaled $367,500, which will be funded
         outside of the retirement plans.

                  A reconciliation of the plans' benefit obligations, fair value
         of plan assets, funded status and amounts recognized in our balance
         sheets follows:


<TABLE>


                                                                         Thousands of Dollars

                                                                      Pension                      Other
                                                                     Benefits           Postretirement Benefits
                                                                2004         2003          2004          2003
                                                            --------------------------------------------------
<CAPTION>
<S>                                                          <C>          <C>          <C>          <C>

         Change in Benefit Obligations:
         Benefit Obligation at Beginning of Year              $    84,099  $    75,004  $    43,109  $    30,025
              Transferred to Affiliate (Note 2)                    (4,024)           -       (2,804)           -
              Service Cost                                          2,443        2,375        1,160        1,421
              Interest Cost                                         4,665        4,848        2,172        2,448
              Plan Amendments                                         434            -       (8,643)           -
              Actuarial Loss and Other                              9,966        5,437        1,723       10,556
              Benefits Paid                                        (3,559)      (3,565)      (1,751)      (1,341)
                                                              --------------------------------------------------

         Benefit Obligation at End of Year                    $    94,024  $    84,099  $    34,966  $    43,109
                                                              ==================================================

         Change in Plan Assets:
         Fair Value of Plan Assets at
            Beginning of Year                                 $    76,626  $    58,204  $    19,096  $    13,835
              Transferred to Affiliate (Note 2)                    (3,585)           -       (1,392)           -
              Actual Return on Plan Assets                          7,643       12,911        1,533        3,336
              Employer Contributions                               10,762        9,076        3,225        3,266
              Benefits Paid                                        (3,559)      (3,565)      (1,751)      (1,341)
                                                              --------------------------------------------------

         Fair Value of Plan Assets at End of Year             $    87,887  $    76,626  $    20,711  $    19,096
                                                              ==================================================

         Funded Status:                                       $    (6,137) $    (7,473) $   (14,255) $   (24,014)
              Unrecognized Prior Service Cost                       2,612        2,485       (3,260)           -
              Unrecognized Net Obligation
                  Assets from Transition                                -            -            -        6,801
              Unrecognized Net Loss and Other                      28,337       23,194       11,368       10,268
                                                              --------------------------------------------------
         Prepaid (Accrued) Net Benefit Cost at
              End of Year                                     $    24,812  $    18,206  $    (6,147) $    (6,945)
                                                              ==================================================

</TABLE>

                  The accumulated benefit obligation of our pension plans at
         December 31, 2004 and 2003 was $82.2 million and $70.0 million,
         respectively. In 2003, SJG had a decrease in its minimum pension
         liability included in Accumulated Other Comprehensive Income amounting
         to $8.5 million. As of December 31, 2004, no minimum pension liability
         adjustment was required.

                  As of November 2004, we implemented caps on the amount of the
         premium we pay for all employees eligible for postretirement health
         care. Employees are responsible for those costs which exceed the
         premium caps. Subsequently, we were able to reduce our 2004
         postretirement benefit costs other than pension by a total of $325,200
         for the months of November and December 2004. On an ongoing basis, we
         will experience reduced postretirement benefit costs other than pension
         due to this plan change.

                  We also have unqualified pension plans provided to certain
         officers and outside directors which are unfunded. The aggregate
         accrued net benefit obligation of such plans as of December 31, 2004
         and 2003 was $4.7 million and $4.2 million, respectively.

                  The weighted-average assumptions used to determine benefit
obligations at December 31 were:


<TABLE>

                                                                                             Other
                                                               Pension Benefits        Postretirement Benefits
                                                             2004         2003             2004        2003
                                                          -------------------------------------------------
<CAPTION>
        <S>                                                 <C>          <C>            <C>           <C>

         Discount Rate                                       5.75%        6.25%          5.75%         6.25%
         Rate of Compensation Increase                       3.60%        3.60%             -            -
</TABLE>

The weighted-average assumptions used to determine net periodic benefit cost for
years ended December 31 were:

<TABLE>
                                                                                                         Other
                                                                Pension Benefits                Postretirement Benefits
                                                             2004      2003      2002           2004      2003     2002
                                                            --------------------------------------------------------------
<CAPTION>
        <S>                                                 <C>       <C>      <C>             <C>      <C>      <C>

         Discount Rate                                       6.25%     6.75%    7.25%           6.25%    6.75%    7.25%
         Expected Long-Term Return
              on Plan Assets                                 8.75%     9.00%    9.00%           7.25%    7.50%    7.50%
         Rate of Compensation Increase                       3.60%     3.60%    4.10%              -        -        -
</TABLE>

                  The expected long-term return on plan assets was based on
         return projections prepared by our investment manager using SJI's
         current investment mix as described under Plan Assets below.

                  The assumed health care cost trend rates at December 31 were:

                                                                   2004     2003
                                                                 ---------------

 Post-65 Medical Care Cost Trend Rate Assumed for Next Year        6.5%     7.0%
 Pre-65 Medical Care Cost Trend Rate Assumed for Next Year        11.0%    11.5%
 Dental Care Cost Trend Rate Assumed for Next Year                 6.5%     7.0%
 Rate to which Cost Trend Rates are Assumed to Decline
   (the Ultimate Trend Rate)                                       5.0%     5.0%
 Year that the Rate Reaches the Ultimate Trend Rate                2016     2016

                  Assumed health care cost trend rates have a significant effect
         on the amounts reported for our postretirement health care plans. A
         one-percentage-point change in assumed health care cost trend rates
         would have the following effects:

                                                         Thousands of Dollars
                                                1-Percentage-      1-Percentage-
                                               Point Increase     Point Decrease

  Effect on the Total of Service
   and Interest Cost                               $      84           $    (71)
  Effect on Postretirement
   Benefit Obligation                                  1,121             (1,076)

                    Plan Assets - SJG's weighted-average asset allocations at
         December 31, 2004 and 2003, by asset category are as follows:


<TABLE>

                                                                                              Other
                                                              Pension Benefits        Postretirement Benefits
                                                            2004          2003            2004        2003
                                                            -------------------------------------------------
<CAPTION>
        <S>                                                 <C>          <C>             <C>          <C>

         Asset Category
         U.S. Equity Securities                               52%          47%             48%          47%
         International Equity Securities                      16           13              16           13
         Fixed Income                                         32           40              36           40
                                                            ------------------------------------------------
              Total                                          100%         100%            100%         100%
                                                            ================================================
</TABLE>

                  Based on the investment objectives and risk tolerances stated
         in SJI's current pension and other postretirement benefit plans'
         investment policy and guidelines, the long-term asset mix target
         considered appropriate is within the range of 58 to 68% equity and 32
         to 42% fixed-income investments. Historical performance results and
         future expectations suggest that equities will provide higher total
         investment returns than fixed-income securities over a long-term
         investment horizon.

                  The policy recognizes that risk and volatility are present to
         some degree with all types of investments. We seek to avoid high levels
         of risk at the total fund level through diversification by asset class,
         style of manager, and sector and industry limits. Specifically
         prohibited investments include, but are not limited to, venture
         capital, margin trading, commodities and securities of companies with
         less than $250.0 million capitalization (except in the small-cap
         portion of the fund where capitalization levels as low as $50.0 million
         are permissible).

                  Future Benefit Payments - The following benefit payments,
         which reflect expected future service, as appropriate, are expected to
         be paid during the following years:

                                         Thousands of Dollars
                                                              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 - SJG expects to make no contributions to its
         pension plan and contribute approximately $3.0 million to its other
         postretirement benefit plan in 2005.

                  Defined Contribution Plan - The company also offers an
         Employees' Retirement Savings Plan (Savings Plan) to eligible
         employees. We match 50% of participants' contributions up to 6% of base
         compensation. For newly hired employees who are not eligible for
         participation in SJI's defined benefit plan, we match 50% of
         participants' contributions up to 8% of base compensation. We also make
         a year-end contribution of $500 for employees with fewer than 10 years
         of service and $1,000 for employees with 10 years or more of service.

                  The amount expensed and contributed for the matching provision
         of the Savings Plan was approximately $0.8 million in each of the years
         2004, 2003 and 2002.

12. DISCONTINUED OPERATIONS:

                  We operated retail stores which sold natural gas appliances.
         The stores were intended to provide gas customers with access to and
         choice among natural gas appliances. In 2001, we formally discontinued
         this merchandising segment of our operations as such appliances are

         readily available from other retailers. In 2002, SJG incurred a loss of
         $29,000 related to these operations. No additional impact on earnings
         was recognized in either 2004 or 2003.

13. COMMITMENTS AND CONTINGENCIES:

                  The following table summarizes our contractual cash
         obligations and their applicable payment due dates (in thousands):

<TABLE>


                                                                   Up to        1 - 3         3 - 5     More than
              Contractual Obligations                   Total     1 Year         Years        Years       5 Years
              -----------------------              ----------------------------------------------------------------
<CAPTION>
        <S>                                       <C>          <C>          <C>          <C>           <C>

         Long-Term Debt                            $   287,281  $     5,273  $    10,543  $     1,500   $   269,965
         Interest on Long-Term Debt                    247,872       17,628       33,926       32,842       163,476
         Operating Leases                                  741          255          420           50            16
         Construction Obligations                        5,133        5,133            -            -             -
         Commodity Supply
                 Purchase Obligations                  209,673       42,331       78,870       63,431        25,041
         Other Purchase Obligations                      3,509        3,446           63            -             -
                                                   ----------------------------------------------------------------

         Total Contractual
              Cash Obligations                     $   754,209  $    74,066  $   123,822  $    97,823      $458,498
                                                   ================================================================
</TABLE>

                  Expected environmental remediation costs are not included in
         the table above due to the subjective nature of such costs and time of
         anticipated payments. SJG's regulatory obligation to contribute $3.6
         million annually to its postretirement benefit plans, less costs
         incurred directly, is not included as the duration is indefinite. As a
         result, the total obligation cannot be calculated. SJG does not expect
         to make a pension contribution in 2005 and future contributions cannot
         be determined at this time (See Note 11).

                  Construction and Environmental Commitments - Our estimated net
         cost of construction and environmental remediation programs for 2005
         totals $67.1 million. Commitments were made regarding some of these
         programs.

                  Gas Supply Contracts - SJG, in the normal course of conducting
         business, has entered into long-term contracts for natural gas
         supplies, firm transportation and gas storage service. The earliest
         that any of these contracts expires is 2005. The transportation and
         storage service agreements between us and our interstate pipeline
         suppliers were made under Federal Energy Regulatory Commission approved
         tariffs. Our cumulative obligation for demand charges and reservation
         fees paid to suppliers for these services is approximately $4.5 million
         per month, recovered on a current basis through the BGSS.

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

                  Environmental Remediation Costs - We incurred and recorded
         costs for environmental cleanup of 12 sites where the Company or its
         predecessors operated manufactured gas plants (MGP). We stopped
         manufacturing gas in the 1950s.

                  We successfully entered into settlements with all of our
         historic comprehensive general liability carriers regarding the
         environmental remediation expenditures at our sites. Also, we have
         purchased a Cleanup Cost Cap Insurance Policy limiting the amount of
         remediation expenditures that we will be required to make at 11 of our

         sites. This Policy will be in force until 2024 at 10 sites and until
         2029 at one site. The following minimum future cost estimates were not
         reduced by projected insurance recoveries from the Cleanup Cost Cap
         Insurance Policy.

                  Since the early 1980s, we accrued environmental remediation
         costs of $142.8 million, of which $91.8 million has been spent as of
         December 31, 2004. With the assistance of a consulting firm, we
         estimate that undiscounted future costs to clean up our sites will
         range from $51.0 million to $192.8 million. We recorded the lower end
         of this range as a liability because a single reliable estimation point
         is not feasible due to the amount of uncertainty involved in the nature
         of projected remediation efforts and the long period over which
         remediation efforts will continue. It is reflected on the 2004
         consolidated balance sheet under the captions Current Liabilities and
         Deferred Credits and Other Non-Current Liabilities (See Note 1).
         Recorded amounts include estimated costs based on projected
         investigation and remediation work plans using existing technologies.
         Actual costs could differ from the estimates due to the long-term
         nature of the projects, changing technology, government regulations and
         site-specific requirements.

                  We have two regulatory assets associated with environmental
         costs (See Note 1). The first asset, Environmental Remediation Cost:
         Expended - Net, represents what was actually spent to clean up former
         gas manufacturing plant sites. These costs meet the requirements of
         FASB Statement No. 71. The BPU allows us to recover expenditures
         through the RAC (See Note 2).

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

                  As of December 31, 2004, we reflected the unamortized
         remediation costs of $5.3 million on the balance sheet under the
         caption Regulatory Assets. Since implementing the RAC in 1992, we have
         recovered $43.9 million through rates (See Note 2).


14.      QUARTERLY RESULTS OF OPERATIONS - UNAUDITED:

                  The summarized quarterly results of SJG's operations, in
thousands:

<TABLE>


                              SOUTH JERSEY GAS COMPANY QUARTERLY FINANCIAL DATA (Unaudited)


Summarized quarterly results of SJG's operations, in thousands except for per share amounts:


                            ------------------------------------------------
                                          2004 Quarter Ended                              2003 Quarter Ended
                            ------------------------------------------------  --------------------------------------------

                              March 31    June 30    Sept. 30    Dec. 31      March 31    June 30   Sept. 30     Dec. 31
                              ---------  ----------  ---------  ----------    ---------  ---------- ----------  ----------
<CAPTION>
<S>                          <C>         <C>        <C>         <C>          <C>         <C>        <C>         <C>


Operating Revenues            $202,260    $ 75,970   $ 73,480    $157,117     $241,956    $ 77,405   $ 60,389    $156,692
                              ---------  ----------  ---------  ----------    ---------  ---------- ----------  ----------

Expenses:
  Cost of Sales                137,096      47,066     50,184     106,514      179,694      49,919     40,762     105,440
  Operation and Maintenance
    Including Fixed Charges     25,614      25,260     23,314      28,776       23,711      23,955     24,508      30,566
  Income Taxes (Benefit)        14,683         830       (519)      7,975       13,971         753     (2,420)      7,315
  Energy and Other Taxes         4,728       1,983      1,653       3,094        5,028       2,131      1,349       3,217
                              ---------  ----------  ---------  ----------    ---------  ---------- ----------  ----------

     Total Expenses            182,121      75,139     74,632     146,359      222,404      76,758     64,199     146,538
                              ---------  ----------  ---------  ----------    ---------  ---------- ----------  ----------

Other Income and Expense           567          (8)        72         255         (118)         22          6         155
                              ---------  ----------  ---------  ----------    ---------  ---------- ----------  ----------

Net Income (Loss) Applicable
  to Common Stock             $ 20,706       $ 823   $ (1,080)   $ 11,013     $ 19,434       $ 669   $ (3,804)   $ 10,309
                              =========  ==========  =========  ==========    =========  ========== ==========  ==========

                            ------------------------------------------------

<FN>

NOTE:  Because of the seasonal nature of the business, statements for the
3-month periods are not indicative of the results for a full year.
</FN>
</TABLE>


Item 15. Exhibits and financial statement schedules.

Exhibit                   Description
Number

  23                Independent Registered Public Accounting Firm's Consent

31.1                Certification of Chief Executive Officer
                    pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.

31.2                Certification of Chief Financial Officer
                    pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.

32.1                Certification of Chief Executive Officer
                    pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.

32.2                Certification of Chief Financial Officer
                    pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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



                     BY:   /s/ David A. Kindlick
                           ---------------------------------------------
                           David A. Kindlick, Executive Vice President &
                             Chief Financial Officer

                     Date:  March 31, 2005
                           -----------------

                                 EXHIBIT INDEX

Exhibit                   Description
Number

  23                Independent Registered Public Accounting Firm's Consent

31.1                Certification of Chief Executive Officer
                    pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.

31.2                Certification of Chief Financial Officer
                    pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.

32.1                Certification of Chief Executive Officer
                    pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.

32.2                Certification of Chief Financial Officer
                    pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.