----

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

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

|   | Commission      File Number: 000-22211 |
|--------|----------------------------------------|

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

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|   | For      Natural Gas: |                          |
|--------|-----------------------|-------------------------------|
|   | 1      dth            | =      One decatherm          |
|   | 1      MMdth          | =      One million decatherms |
|   |                  |                          |

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|   | • |  SJG’s      business activities are concentrated in southern New Jersey. Changes in the economies of      southern New Jersey and surrounding regions could negatively impact the      growth opportunities available to SJG and the financial condition of      customers and prospects ofSJG. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Changes in the      regulatory environment or unfavorable rate regulation may have an      unfavorable impact on SJG’s financial performance or      condition.       SJG’s business is regulated by the New Jersey Board of Public Utilities      which has authority over many of the activities of the business including,      but not limited to, the rates it charges to its customers, the amount and      type of securities it can issue, the nature of investments it can make,      the nature and quality of services it provides, safety standards and other      matters. The extent to which the actions of regulatory commissions      restrict or delay SJG’s ability to earn a reasonable rate of return on      invested capital and/or fully recover operating costs may adversely affect      its results of operations, financial condition and cash flows. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | SJG may not be      able to respond effectively to competition, which may negatively impact      SJG’s financial performance or condition. Regulatory initiatives may      provide or enhance opportunities for competitors that could reduce utility      income obtained from existing or prospective customers. Also, competitors      may be able to provide superior or less costly products or services based      upon currently available or newly developed      technologies. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Warm weather,      high commodity costs, or customer conservation initiatives could result in      reduced demand for natural gas. While SJG currently has a      conservation incentive program clause that protects its revenues and gross      margin against usage that is lower than a set level, the clause is      currently approved as a three-year pilot program. Should this clause      expire without replacement, lower customer energy utilization levels would      likely reduce SJG’s netincome. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | High natural      gas prices could cause more of SJG’s receivables to be uncollectible.      Higher levels of      uncollectibles from utility customers would negatively impact SJG’s income      and could result in higher working capital      requirements. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | SJG’s net      income could decrease if it is required to incur additional costs to      comply with new governmental safety, health or environmental legislation.      SJG is subject to      extensive and changing federal and state laws and regulations that impact      many aspects of its business; including the storage, transportation and      distribution of natural gas, as well as the remediation of environmental      contamination at former manufactured gas plant      facilities. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Increasing      interest rates will negatively impact the net income of SJG. SJG is capital intensive,      resulting in the incurrence of significant amounts of debt financing. SJG      has issued all long-term debt either at fixed rates or has utilized      interest rate swaps to mitigate changes in floating rates. However, new      issues of long-term debt and all variable rate short-term debt are exposed      to the impact of rising interest  rates.  |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | A downgrade in      SJG’s credit rating could negatively affect its ability to access adequate      and cost effective capital. SJG’s ability to obtain adequate      and cost effective capital depends largely on its credit ratings, which      are greatly influenced by financial condition and results of operations.      If the rating agencies downgrade SJG’s credit ratings, particularly below      investment grade, SJG’s borrowing costs would increase. In addition, SJG      would likely be required to pay higher interest rates in future financings      and potential funding sources would likely      decrease.  |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The inability      to obtain natural gas would negatively impact the financial performance of      SJG.  SJG’s      business is based upon the ability to deliver natural gas to      customers. Disruption in the production of natural gas or transportation      of that gas to SJG from its suppliers could prevent SJG from completing      sales to its customers. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | Transporting      and storing natural gas involves numerous risks that may result in      accidents and other operating risks and costs. SJG’s gas distribution activities      involve a variety of inherent hazards and operating risks, such as leaks,      accidents and mechanical problems, which could cause substantial financial      losses. In addition, these risks could result in loss of human life,      significant damage to property, environmental pollution and impairment of      operations, which in turn could lead to substantial losses. In accordance      with customary industry practice, SJG maintains insurance against some,      but not all, of these risks and losses. The occurrence of any of these      events not fully covered by insurance could adversely affect SJG’s      financial position and results of  operations. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Adverse      results in legal proceedings could be detrimental to the financial      condition of SJG.      The outcomes of legal proceedings can be unpredictable and can result in      adverse judgments. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                 | Year      Ended December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         | 2007   |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                                                                                                                                                                                                                                                                                                              |                         | $      | 630,547 |   |   | $ | 642,671 |   |   | $ | 587,212 |   |   | $ | 508,827 |   |   | $ | 536,442 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income                                                                                                                                                                                                                                                                                                                                                |                         | $      | 83,989 |   |   | $ | 81,209 |   |   | $ | 77,676 |   |   | $ | 71,451 |   |   | $ | 65,420 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before Preferred Dividend Requirement                                                                                                                                                                                                                                                                                                                    |                         | $      | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,592 |   |   | $ | 31,597 |   |   | $ | 26,743 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Dividend Requirements (1)                                                                                                                                                                                                                                                                                                                             |                         |   | -  |   |   |   | - |   |   |   | (45 | ) |   |   | (135 | ) |   |   | (135 | ) |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income Applicable to Common Stock                                                                                                                                                                                                                                                                                                                           |                         | $      | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,547 |   |   | $ | 31,462 |   |   | $ | 26,608 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Shares of Common Stock Outstanding                                                                                                                                                                                                                                                                                                                      |                         |   | 2,339,139 |   |   |   | 2,339,139 |   |   |   | 2,339,139 |   |   |   | 2,339,139 |   |   |   | 2,339,139 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio      of Earnings to Fixed Charges (2)                                                                                                                                                                                                                                                                                                                          |                         |   | 4.1 | x |   |   | 3.7 | x |   |   | 4.0 | x |   |   | 3.9 | x |   |   | 3.3 | x |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 | As      of December 31,      |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         | 2007   |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,      Plant and Equipment, Net                                                                                                                                                                                                                                                                                                                              |                         | $      | 847,691 |   |   | $ | 821,833 |   |   | $ | 788,787 |   |   | $ | 732,781 |   |   | $ | 684,823 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                                                                                                                                                                                                                                                                                    |                         | $      | 1,227,162 |   |   | $ | 1,228,076 |   |   | $ | 1,170,975 |   |   | $ | 1,007,733 |   |   | $ | 956,537 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capitalization:                                                                                                                                                                                                                                                                                                                                                      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Common      Equity (3)                                                                                                                                                                                                                                                                                                                                         |                         | $      | 378,348 |   |   | $ | 360,353 |   |   | $ | 344,568 |   |   | $ | 302,827 |   |   | $ | 266,953 |   |
|  Preferred      Stock (1)                                                                                                                                                                                                                                                                                                                                       |                         |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,690 |   |   |   | 1,690 |   |
|  Long-Term      Debt                                                                                                                                                                                                                                                                                                                                            |                         |   | 294,873 |   |   |   | 294,893 |   |   |   | 272,235 |   |   |   | 282,008 |   |   |   | 263,781 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total                                                                                                                                                                                                                                                                                                                                                    |                         | $      | 673,221 |   |   | $ | 655,246 |   |   | $ | 616,803 |   |   | $ | 586,525 |   |   | $ | 532,424 |   |
|  Total      Customers                                                                                                                                                                                                                                                                                                                                           |                         |   | 335,663 |   |   |   | 330,049 |   |   |   | 322,424 |   |   |   | 313,579 |   |   |   | 304,562 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)      On May 2, 2005, we redeemed all of our 8% Redeemable Cumulative      Preferred Stock.                                                                                                                                                                                                                                                                  |
| (2)      The ratio of earnings to fixed charges represents, on a pre-tax basis, the      number of times earnings cover fixed charges. Earnings consist of net      income, to which has been added fixed charges and taxes based on      income of the company. Fixed charges consist of interest charges and      preferred securities dividend requirements. |
| (3)      Included are cash contributions to capital as follows: 2007 and 2006 -      none; 2005 - $30.0 million; 2004 - $15.0 million; 2003 - $20.0      million.                                                                                                                                                                                                    |

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|                                                                                                                                            |   | 2007              |   |   | 2006               |   |   | 2005              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|--------------------|--------|--------|-------------------|--------|
| Net      Income Benefit/(Reduction):                                                                                                            |   |              |   |   |               |   |   |              |   |
|      TAC                                                                                                               |   |  $           | -      |   |               | $      | 5.1    |              |   | $ | (0.2 | ) |
|      CIP      – Weather Related                                                                                  |   |              | 1.6    |   |               |   | 2.9    |              |   |   | - |   |
|      CIP      – Usage Related                                                                                    |   |              | 5.9    |   |               |   | 1.7    |              |   |   | - |   |
|                  Total      Net Income Benefit/(Reduction) |   | $                 | 7.5    |   |               | $      | 9.7    |              |   | $ | (0.2 | ) |
|                                                                                                                                            |   |              |   |   |               |   |   |              |   |   |   |   |
|  Weather Compared to 20-Year TAC      Average                                                                                              |   | 3.2%      warmer  |   |   | 15.0      % warmer |   |   | 3.0      % colder |   |
|  Weather Compared to Prior      Year                                                                                                       |   | 13.8%      colder |   |   | 17.5      % warmer |   |   | 2.9      % colder |   |

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|                                                                    |   | 2007   |    |   | 2006   |   |   | 2005   |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Utility Throughput –      dth:                                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Firm      Sales -                                                       |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                               |   |   | 22,523  |   |   |   | 16     | %      |   |   | 19,830 |   |   |   | 15 | % |   |   | 19,464 |   |   |   | 12 | % |
|      Commercial                                |   |   | 6,339   |   |   |   | 4      | %      |   |   | 6,958 |   |   |   | 5 | % |   |   | 7,607 |   |   |   | 5 | % |
|      Industrial                                |   |   | 193     |   |   |   | -      |   |   |   | 296 |   |   |   | - |   |   |   | 204 |   |   |   | - |   |
|      Cogeneration      and electric generation |   |   | 1,335   |   |   |   | 1      | %      |   |   | 1,103 |   |   |   | 1 | % |   |   | 1,743 |   |   |   | 1 | % |
| Firm      Transportation -                                              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                               |   |   | 1,870   |   |   |   | 1      | %      |   |   | 956 |   |   |   | 1 | % |   |   | 5,755 |   |   |   | 4 | % |
|      Commercial                                |   |   | 5,927   |   |   |   | 4      | %      |   |   | 4,420 |   |   |   | 3 | % |   |   | 5,267 |   |   |   | 3 | % |
|      Industrial                                |   |   | 12,107  |   |   |   | 9      | %      |   |   | 11,970 |   |   |   | 9 | % |   |   | 12,920 |   |   |   | 8 | % |
|      Cogeneration      and electric generation |   |   | 3,088   |   |   |   | 2      | %      |   |   | 2,625 |   |   |   | 2 | % |   |   | 3,604 |   |   |   | 2 | % |
|                                                                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Firm Throughput                |   |   | 53,382  |   |   |   | 37     | %      |   |   | 48,158 |   |   |   | 36 | % |   |   | 56,564 |   |   |   | 35 | % |
|                                                                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible      Sales                                                |   |   | 68      |   |   |   | -      |   |   |   | 93 |   |   |   | - |   |   |   | 119 |   |   |   | - |   |
| Interruptible      Transportation                                       |   |   | 3,002   |   |   |   | 2      | %      |   |   | 3,474 |   |   |   | 3 | % |   |   | 2,836 |   |   |   | 2 | % |
| Off-System                                                              |   |   | 17,686  |   |   |   | 13     | %      |   |   | 18,221 |   |   |   | 13 | % |   |   | 15,045 |   |   |   | 9 | % |
| Capacity      Release                                                   |   |   | 67,430  |   |   |   | 48     | %      |   |   | 66,458 |   |   |   | 48 | % |   |   | 86,119 |   |   |   | 54 | % |
|                                                                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Throughput                     |   |   | 141,568 |   |   |   | 100    | %      |   |   | 136,404 |   |   |   | 100 | % |   |   | 160,683 |   |   |   | 100 | % |

----

| Utility Operating      Revenues:                                                                                                                  |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
| Firm      Sales-                                                                                                                                  |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |
|      Residential                                                                                                         |   | $      | 342,809 |   |   |   | 54     | %      |   | $      | 334,201 |   |   |   | 52     | %      |   | $      | 252,150 |   |   |   | 43 | % |
|      Commercial                                                                                                          |   |   | 80,237  |   |   |   | 13     | %      |   |   | 99,578  |   |   |   | 15     | %      |   |   | 88,321 |   |   |   | 15 | % |
|      Industrial                                                                                                          |   |   | 8,381   |   |   |   | 1      | %      |   |   | 6,590   |   |   |   | 1      | %      |   |   | 4,428 |   |   |   | 1 | % |
|      Cogeneration      and electric generation                                                                           |   |   | 11,722  |   |   |   | 2      | %      |   |   | 10,746  |   |   |   | 2      | %      |   |   | 17,916 |   |   |   | 3 | % |
| Firm      Transportation -                                                                                                                        |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                                                                                                         |   |   | 8,982   |   |   |   | 1      | %      |   |   | 4,768   |   |   |   | 1      | %      |   |   | 25,296 |   |   |   | 4 | % |
|      Commercial                                                                                                          |   |   | 17,299  |   |   |   | 3      | %      |   |   | 12,510  |   |   |   | 2      | %      |   |   | 14,043 |   |   |   | 3 | % |
|      Industrial                                                                                                          |   |   | 12,229  |   |   |   | 2      | %      |   |   | 11,351  |   |   |   | 2      | %      |   |   | 11,437 |   |   |   | 2 | % |
|      Cogeneration      and electric generation                                                                           |   |   | 1,847   |   |   |   | -      |   |   |   | 1,552   |   |   |   | -      |   |   |   | 1,821 |   |   |   | - |   |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Firm Revenues                                                                                            |   |   | 483,506 |   |   |   | 76     | %      |   |   | 481,296 |   |   |   | 75     | %      |   |   | 415,412 |   |   |   | 71 | % |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible      Sales                                                                                                                          |   |   | 785     |   |   |   | -      |   |   |   | 1,109   |   |   |   | -      |   |   |   | 1,498 |   |   |   | - |   |
| Interruptible      Transportation                                                                                                                 |   |   | 1,970   |   |   |   | -      |   |   |   | 1,868   |   |   |   | -      |   |   |   | 1,898 |   |   |   | - |   |
| Off-System                                                                                                                                        |   |   | 131,586 |   |   |   | 22     | %      |   |   | 147,180 |   |   |   | 23     | %      |   |   | 153,637 |   |   |   | 27 | % |
| Capacity      Release                                                                                                                             |   |   | 11,208  |   |   |   | 2      | %      |   |   | 9,656   |   |   |   | 2      | %      |   |   | 12,808 |   |   |   | 2 | % |
| Other                                                                                                                                             |   |   | 1,492   |   |   |   | -      |   |   |   | 1,562   |   |   |   | -      |   |   |   | 1,959 |   |   |   | - |   |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Utility Operating Revenues                                                                               |   | $      | 630,547 |   |   |   | 100    | %      |   | $      | 642,671 |   |   |   | 100    | %      |   | $      | 587,212 |   |   |   | 100 | % |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                                                             |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of sales                                                                                                                                |   |   | 453,034 |   |   |   |   |   |   |   | 472,286 |   |   |   |   |   |   |   | 414,952 |   |   |   |   |   |
| Conservation      recoveries *                                                                                                                    |   |   | 4,458   |   |   |   |   |   |   |   | 6,862   |   |   |   |   |   |   |   | 7,933 |   |   |   |   |   |
| RAC      recoveries *                                                                                                                             |   |   | 2,056   |   |   |   |   |   |   |   | 1,807   |   |   |   |   |   |   |   | 2,180 |   |   |   |   |   |
|     Revenue      taxes                                                                                                        |   |   | 8,850   |   |   |   |   |   |   |   | 7,890   |   |   |   |   |   |   |   | 9,089 |   |   |   |   |   |
| Utility      Margin                                                                                                                               |   | $      | 162,149 |   |   |   |   |   |   | $      | 153,826 |   |   |   |   |   |   | $      | 153,058 |   |   |   |   |   |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Margin:                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                       |   | $      | 102,077 |   |   |   | 63     | %      |   | $      | 90,442  |   |   |   | 59     | %      |   | $      | 102,706 |   |   |   | 67 | % |
| Commercial      and industrial                                                                                                                    |   |   | 40,036  |   |   |   | 25     | %      |   |   | 38,129  |   |   |   | 25     | %      |   |   | 40,862 |   |   |   | 27 | % |
| Cogeneration      and electric generation                                                                                                         |   |   | 2,212   |   |   |   | 1      | %      |   |   | 2,189   |   |   |   | 1      | %      |   |   | 2,514 |   |   |   | 2 | % |
| Interruptible                                                                                                                                     |   |   | 195     |   |   |   | -      |   |   |   | 226     |   |   |   | -      |   |   |   | 249 |   |   |   | - |   |
| Off-system      & capacity release                                                                                                            |   |   | 2,994   |   |   |   | 2      | %      |   |   | 4,711   |   |   |   | 3      | %      |   |   | 4,697 |   |   |   | 3 | % |
| Other      revenues                                                                                                                               |   |   | 1,952   |   |   |   | 1      | %      |   |   | 1,871   |   |   |   | 1      | %      |   |   | 2,319 |   |   |   | 1 | % |
| Margin      before weather normalization & decoupling                                                                                         |   |   | 149,466 |   |   |   | 92     | %      |   |   | 137,568 |   |   |   | 89     | %      |   |   | 153,347 |   |   |   | 100 | % |
| TAC      mechanism                                                                                                                                |   |   | -       |   |   |   | -      |   |   |   | 8,511   |   |   |   | 6      | %      |   |   | (289 | ) |   |   | - |   |
| CIP      mechanism                                                                                                                                |   |   | 12,683  |   |   |   | 8      | %      |   |   | 7,747   |   |   |   | 5      | %      |   |   | - |   |   |   | - |   |
| Utility      Margin                                                                                                                               |   | $      | 162,149 |   |   |   | 100    | %      |   | $      | 153,826 |   |   |   | 100    | %      |   | $      | 153,058 |   |   |   | 100 | % |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number of Customers at      Year End:                                                                                                             |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                       |   |   | 312,969 |   |   |   | 93     | %      |   |   | 307,919 |   |   |   | 93     | %      |   |   | 300,652 |   |   |   | 93 | % |
| Commercial                                                                                                                                        |   |   | 22,220  |   |   |   | 7      | %      |   |   | 21,652  |   |   |   | 7      | %      |   |   | 21,322 |   |   |   | 7 | % |
| Industrial                                                                                                                                        |   |   | 474     |   |   |   | -      |   |   |   | 478     |   |   |   | -      |   |   |   | 450 |   |   |   | - |   |
|         Total      Customers                                                                              |   |   | 335,663 |   |   |   | 100    | %      |   |   | 330,049 |   |   |   | 100    | %      |   |   | 322,424 |   |   |   | 100 | % |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Annual      Degree Days:                                                                                                                          |   |   | 4,488   |   |   |   |   |   |   |   | 3,943   |   |   |   |   |   |   |   | 4,777 |   |   |   |   |   |
|                                                                                                                                              |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *      Represents revenues for which there is a corresponding charge in operating      expenses. Therefore, such recoveries have no impacton |   |
| our      financial results.                                                                                                                       |   |

----

----

|                        |   | 2007      vs. 2006 |   |   | 2006      vs. 2005 |   |
|-----------------------------|--------|--------------------|--------|--------|--------------------|--------|
|                        |   |               |   |   |               |   |
| Operations                  |   | $                  | 1,745  |   |               | $      | (4,992 | ) |
| Maintenance                 |   |               | 807    |   |               |   | (276 | )  |
| Depreciation                |   |               | 1,106  |   |               |   | 1,602 |   |
| Energy      and Other Taxes |   |               | 690    |   |               |   | (1,742 | )  |
|                        |   |               |   |   |               |   |   |   |

----

----

----

|                 |   | 2007   |   |   | 2006   |   |
|----------------------|--------|--------|--------|--------|--------|--------|
|                 |   |   |   |   |   |   |
| Common Equity   |   |   | 50.3   | %      |   |   | 47.4 | % |
| Long-Term      Debt  |   |   | 39.3   | %      |   |   | 38.7 | % |
| Short-Term      Debt |   |   | 10.4   | %      |   |   | 13.9 | % |
|                 |   |   |   |   |   |   |   |   |
| Total                |   |   | 100.0  | %      |   |   | 100.0 | % |

----

|                                          |   |   |    |   | Up      to  |   |   | Years          |   |   | Years          |   |   | More      than |   |
|-----------------------------------------------|--------|--------|---------|--------|-------------|--------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
| Contractual Cash      Obligations             |   | Total  |    |   | 1      Year |   |   | 2      & 3 |   |   | 4      & 5 |   |   | 5      Years   |   |
|                                          |   |   |    |   |        |   |   |           |   |   |           |   |   |           |   |
| Principal      Payments on Long-Term Debt     |   | $      | 294,873 |   |        | $      | -      |           |   | $      | 10,000         |   |   | $              | 27,187 |   |   | $ | 257,686 |   |
| Interest      on Long-Term Debt               |   |   | 217,636 |   |        |   | 16,993 |           |   |   | 33,987         |   |   |           | 31,019 |   |   |   | 135,637 |   |
| Operating      Leases                         |   |   | 137     |   |        |   | 88     |           |   |   | 49             |   |   |           | -      |   |   |   | - |   |
| Commodity      Supply Purchase Obligations    |   |   | 219,114 |   |        |   | 50,962 |           |   |   | 76,160         |   |   |           | 23,891 |   |   |   | 68,101 |   |
| New      Jersey Clean Energy Program (Note 2) |   |   | 10,542  |   |        |   | 10,542 |           |   |   | -              |   |   |           | -      |   |   |   | - |   |
| Other      Purchase Obligations               |   |   | 643     |   |        |   | 643    |           |   |   | -              |   |   |           | -      |   |   |   | - |   |
|                                          |   |   |    |   |        |   |   |           |   |   |           |   |   |           |   |   |   |   |   |   |
| Total      Contractual                        |   |   |    |   |        |   |   |           |   |   |           |   |   |           |   |   |   |   |   |   |
| Cash      Obligations                         |   | $      | 742,945 |   |        | $      | 79,228 |           |   | $      | 120,196        |   |   | $              | 82,097 |   |   | $ | 461,424 |   |

----

| Assets:                             |                      |   | Maturity        |   |   | Maturity         |   |   |   |   |
|-------------------------------------|---------------------------|--------|-----------------|--------|--------|------------------|--------|--------|--------|--------|
|                                | Source      of Fair Value |   | <1      Year |   |   | 1 -      3 Years |   |   | Total  |   |
|                                |                      |   |            |   |   |             |   |   |   |   |
| Prices      Actively Quoted         | NYMEX                     |   | $               | 991    |   |             | $      | 93     |   |   | $ | 1,084 |   |
| Other      External Sources         | Basis                     |   |            | 1,245  |   |             |   | -      |   |   |   | 1,245 |   |
|      Total |                      |   | $               | 2,236  |   |             | $      | 93     |   |   | $ | 2,329 |   |
|                                |                      |   |            |   |   |             |   |   |   |   |   |   |   |
| Liabilities:                        |                      |   | Maturity        |   |   | Maturity         |   |   |   |   |   |
|                                | Source      of Fair Value |   | <1      Year |   |   | 1 -      3 Years |   |   | Total  |   |
|                                |                      |   |            |   |   |             |   |   |   |   |   |   |   |
| Prices      Actively Quoted         | NYMEX                     |   | $               | (3,601 | )      |             | $      | (61    | )      |   | $ | (3,662 | ) |
| Other      External Sources         | Basis                     |   |            | (759   | )      |             |   | -      |   |   |   | (759 | ) |
|      Total |                      |   | $               | (4,360 | )      |             | $      | (61    | )      |   | $ | (4,421 | ) |

| Net      Derivatives — Energy Related Liability, January 1, 2007                                   |   | $      | (16,669 | )  |
|----------------------------------------------------------------------------------------------------------|--------|--------|---------|---------|
|      Contracts      Settled During 2007, Net                                    |   |   | 16,531  |    |
|      Other      Changes in Fair Value from Continuing and New Contracts,    Net |   |   | (1,954  | )  |
| Net      Derivatives — Energy Related Liability, December 31, 2007                                 |   | $      | (2,092  | )  |

----

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| STATEMENTS      OF INCOME                                                          |   |
| (In      Thousands)                                                                |   |
|                                                                               |   | Year      Ended December 31, |   |
|                                                                               |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                            |   | $ | 630,547 |   |   | $ | 642,671 |   |   | $ | 587,212 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Expenses:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of Sales (Excluding depreciation)                                        |   |   | 453,034 |   |   |   | 472,286 |   |   |   | 414,952 |   |
| Operations                                                                         |   |   | 51,736 |   |   |   | 49,991 |   |   |   | 54,983 |   |
| Maintenance                                                                        |   |   | 6,345 |   |   |   | 5,538 |   |   |   | 5,814 |   |
| Depreciation                                                                       |   |   | 24,614 |   |   |   | 23,508 |   |   |   | 21,906 |   |
| Energy      and Other Taxes                                                        |   |   | 10,829 |   |   |   | 10,139 |   |   |   | 11,881 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Operating Expenses                                                      |   |   | 546,558 |   |   |   | 561,462 |   |   |   | 509,536 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income                                                              |   |   | 83,989 |   |   |   | 81,209 |   |   |   | 77,676 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income and Expense                                                      |   |   | 1,673 |   |   |   | 1,480 |   |   |   | 212 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Charges                                                              |   |   | (20,985 | ) |   |   | (22,099 | ) |   |   | (18,156 | ) |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Income Taxes                                                    |   |   | 64,677 |   |   |   | 60,590 |   |   |   | 59,732 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Taxes                                                                  |   |   | (26,652 | ) |   |   | (24,811 | ) |   |   | (25,185 | ) |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income Applicable to Common Stock                                         |   | $ | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,547 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements. |   |   |   |   |   |   |   |   |   |   |   |   |

----

| SOUTH JERSEY GAS      COMPANY                                                                           |   |
|---------------------------------------------------------------------------------------------------------|--------|
| STATEMENTS      OF CASH FLOWS                                                                           |   |
| (In      Thousands)                                                                                     |   |
|                                                                                                    |   | Year      Ended December 31, |   |
|                                                                                                    |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Operating Activities:                                                              |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                                         |   | $ | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,547 |   |
| Adjustments      to Reconcile Net Income to Net Cash                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Provided      by Operating Activities:                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization                                                                      |   |   | 29,317 |   |   |   | 28,140 |   |   |   | 27,303 |   |
| Provision      for Losses on Accounts Receivable                                                        |   |   | 2,672 |   |   |   | 1,284 |   |   |   | 2,073 |   |
| TAC/CIP      Receivable                                                                                 |   |   | (7,946 | ) |   |   | (15,740 | )  |   |   | 291 |   |
| Deferred      Gas Costs - Net of Recoveries                                                             |   |   | 7,755 |   |   |   | 18,694 |   |   |   | (34,585 | )  |
| Deferred      SBC Costs - Net of Recoveries                                                             |   |   | 3,960 |   |   |   | (4,221 | )  |   |   | 1,871 |   |
| Environmental      Remediation Costs - Net of Recoveries                                                |   |   | (10,926 | ) |   |   | (10,840 | ) |   |   | (6,655 | ) |
| Deferred      and Noncurrent Income Taxes and Credits - Net                                             |   |   | 12,957 |   |   |   | 4,426 |   |   |   | 25,662 |   |
| Additional      Pension Contributions                                                                   |   |   | - |   |   |   | - |   |   |   | (1,390 | ) |
| Gas      Plant Cost of Removal                                                                          |   |   | (1,275 | ) |   |   | (1,369 | ) |   |   | (985 | ) |
| Changes      in:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      Receivable                                                                                |   |   | (8,528 | )  |   |   | 9,658 |   |   |   | (22,829 | )  |
| Inventories                                                                                             |   |   | 24,884 |   |   |   | 11,099 |   |   |   | (23,579 | ) |
| Prepaid      and Accrued Taxes - Net                                                                    |   |   | (2,099 | )  |   |   | 4,997 |   |   |   | (5,934 | ) |
| Other      Prepayments and Current Assets                                                               |   |   | (14 | )  |   |   | 594 |   |   |   | (780 | ) |
| Gas      Purchases Payable                                                                              |   |   | (8,817 | ) |   |   | (40,270 | )  |   |   | 59,001 |   |
| Accounts      Payable and Other Accrued Liabilities                                                     |   |   | 9,787 |   |   |   | 11,605 |   |   |   | (13,246 | )  |
| Other      Assets                                                                                       |   |   | (121 | )  |   |   | 1,978 |   |   |   | 336 |   |
| Other      Liabilities                                                                                  |   |   | (272 | ) |   |   | (5,120 | )  |   |   | 1,423 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash Provided by Operating Activities                                                    |   |   | 89,359 |   |   |   | 50,694 |   |   |   | 42,524 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Investing Activities:                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      Expenditures                                                                               |   |   | (48,070 | ) |   |   | (61,440 | ) |   |   | (70,120 | ) |
| Merchandise      Loans                                                                                  |   |   | (4,123 | )  |   |   | (3,342 | )  |   |   | (4,425 | ) |
| Proceeds      from Merchandise Loans                                                                    |   |   | 3,877 |   |   |   | 3,707 |   |   |   | 4,831 |   |
| Purchase      of Restricted Investment with Escrowed Loan Proceeds                                      |   |   | (363 | ) |   |   | (14,661 | )  |   |   | - |   |
|     Proceeds      from Sale of Restricted Investment from Escrowed Loan    Proceeds |   |   | 6,710 |   |   |   | 6,075 |   |   |   | - |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash Used in Investing Activities                                                        |   |   | (41,969 | ) |   |   | (69,661 | ) |   |   | (69,714 | ) |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Financing Activities:                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (Repayments of) Borrowing from Lines of Credit                                                 |   |   | (25,160 | )  |   |   | 16,500 |   |   |   | 34,000 |   |
| Proceeds      from Issuance of Long-Term Debt                                                           |   |   | - |   |   |   | 25,000 |   |   |   | 10,000 |   |
| Principal      Repayments of Long-Term Debt                                                             |   |   | (2,290 | ) |   |   | (2,345 | ) |   |   | (22,773 | ) |
| Redemption      of Preferred Stock                                                                      |   |   | - |   |   |   | - |   |   |   | (1,690 | )  |
| Dividends      on Common Stock                                                                          |   |   | (18,732 | ) |   |   | (19,902 | ) |   |   | (22,502 | ) |
| Premium      for Early Retirement of Debt                                                               |   |   | - |   |   |   | - |   |   |   | (184 | )  |
| Payments      for Issuance of Long-Term Debt                                                            |   |   | - |   |   |   | (1,051 | ) |   |   | (420 | ) |
| Additional      Investment by Shareholder                                                               |   |   | - |   |   |   | - |   |   |   | 30,000 |   |
| Excess      Tax Benefit from Restricted Stock Plan                                                      |   |   | 55 |   |   |   | 181 |   |   |   | - |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash (Used in) Provided by  Financing Activities                               |   |   | (46,127 | )  |   |   | 18,383 |   |   |   | 26,431 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                               |   |   | 1,263 |   |   |   | (584 | ) |   |   | (759 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                                   |   |   | 1,967 |   |   |   | 2,551 |   |   |   | 3,310 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents at End of Period                                                         |   | $ | 3,230 |   |   | $ | 1,967 |   |   | $ | 2,551 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      Disclosures of Cash Flow Information:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      (Net of Amounts Applicable to Gas Cost                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Overcollections      and Amounts Capitalized)                                                           |   | $ | 20,863 |   |   | $ | 21,832 |   |   | $ | 18,899 |   |
| Income      Taxes (Net of Refunds)                                                                      |   | $ | 15,684 |   |   | $ | 11,309 |   |   | $ | 8,434 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      Disclosures of Noncash Investing Activities:                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      property and equipment acquired on                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| account      but not paid at year-end                                                                   |   | $ | 4,182 |   |   | $ | 2,819 |   |   | $ | 8,990 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements.                      |   |   |   |   |   |   |   |   |   |   |   |   |

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| BALANCE      SHEETS                                                                |   |
| (In      Thousands)                                                                |   |
|                                                                               |   | December      31, |   |
|                                                                               |   | 2007 |   |   | 2006 |   |
| Assets                                                                             |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |
| Property,      Plant and Equipment:                                                |   |   |   |   |   |   |
| Utility      Plant, at original cost                                               |   | $ | 1,123,992 |   |   | $ | 1,079,614 |   |
| Accumulated      Depreciation                                                      |   |   | (276,301 | ) |   |   | (257,781 | ) |
|                                                                               |   |   |   |   |   |   |   |   |
| Property,      Plant and Equipment - Net                                           |   |   | 847,691 |   |   |   | 821,833 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Investments:                                                                       |   |   |   |   |   |   |   |   |
| Available-for-Sale      Securities                                                 |   |   | 6,714 |   |   |   | 6,342 |   |
| Restricted      Investments                                                        |   |   | 2,239 |   |   |   | 8,586 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Investments                                                             |   |   | 8,953 |   |   |   | 14,928 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Current      Assets:                                                               |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents                                                     |   |   | 3,230 |   |   |   | 1,967 |   |
| Accounts      Receivable                                                           |   |   | 48,984 |   |   |   | 47,928 |   |
| Accounts      Receivable - Related Parties                                         |   |   | 2,267 |   |   |   | 3,939 |   |
| Unbilled      Revenues                                                             |   |   | 41,576 |   |   |   | 34,502 |   |
| Provision      for Uncollectibles                                                  |   |   | (3,265 | ) |   |   | (2,741 | ) |
| Natural      Gas in Storage, average cost                                          |   |   | 56,404 |   |   |   | 81,039 |   |
| Materials      and Supplies, average cost                                          |   |   | 1,436 |   |   |   | 1,685 |   |
| Prepaid      Taxes                                                                 |   |   | 10,849 |   |   |   | 7,774 |   |
| Derivatives      - Energy Related Assets                                           |   |   | 2,236 |   |   |   | 1,692 |   |
| Other      Prepayments and Current Assets                                          |   |   | 2,278 |   |   |   | 2,264 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Current Assets                                                          |   |   | 165,995 |   |   |   | 180,049 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Regulatory      and Other Noncurrent Assets:                                       |   |   |   |   |   |   |   |   |
| Regulatory      Assets                                                             |   |   | 188,688 |   |   |   | 196,962 |   |
| Unamortized      Debt Issuance Costs                                               |   |   | 6,307 |   |   |   | 6,835 |   |
| Prepaid      Pension                                                               |   |   | 1,472 |   |   |   | - |   |
| Accounts      Receivable - Merchandise                                             |   |   | 6,118 |   |   |   | 5,950 |   |
| Derivatives      - Energy Related Assets                                           |   |   | 93 |   |   |   | 19 |   |
| Derivatives      - Other                                                           |   |   | - |   |   |   | 148 |   |
| Other                                                                              |   |   | 1,845 |   |   |   | 1,352 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Regulatory and Other Noncurrent Assets                                  |   |   | 204,523 |   |   |   | 211,266 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Assets                                                                  |   | $ | 1,227,162 |   |   | $ | 1,228,076 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements. |   |   |   |   |   |   |   |   |

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| BALANCE      SHEETS                                                                |   |
| (In      Thousands, except for share data)                                         |   |
|                                                                               |   |   |   |
|                                                                               |   | December      31, |   |
|                                                                               |   | 2007 |   |   | 2006 |   |
|                                                                               |   |   |   |   |   |   |
| Capitalization and      Liabilities                                                |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |
| Common      Equity:                                                                |   |   |   |   |   |   |
| Common      Stock, Par Value $2.50 per share:                                      |   |   |   |   |   |   |
| Authorized      - 4,000,000 shares                                                 |   |   |   |   |   |   |
| Outstanding      - 2,339,139 shares                                                |   | $ | 5,848 |   |   | $ | 5,848 |   |
| Other      Paid-In Capital and Premium on Common Stock                             |   |   | 200,317 |   |   |   | 200,317 |   |
| Accumulated      Other Comprehensive Loss                                          |   |   | (5,356 | ) |   |   | (4,429 | ) |
| Retained      Earnings                                                             |   |   | 177,539 |   |   |   | 158,617 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Common Equity                                                           |   |   | 378,348 |   |   |   | 360,353 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Long-Term      Debt                                                                |   |   | 294,873 |   |   |   | 294,893 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Capitalization                                                          |   |   | 673,221 |   |   |   | 655,246 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Current      Liabilities:                                                          |   |   |   |   |   |   |   |   |
| Notes      Payable                                                                 |   |   | 78,340 |   |   |   | 103,500 |   |
| Current      Maturities of Long-Term Debt                                          |   |   | - |   |   |   | 2,270 |   |
| Accounts      Payable - Commodity                                                  |   |   | 34,870 |   |   |   | 43,687 |   |
| Accounts      Payable - Other                                                      |   |   | 13,650 |   |   |   | 8,786 |   |
| Accounts      Payable - Related Parties                                            |   |   | 22,417 |   |   |   | 12,134 |   |
| Derivatives      - Energy Related Liabilities                                      |   |   | 4,360 |   |   |   | 18,006 |   |
| Deferred      Income Taxes - Net                                                   |   |   | 11,582 |   |   |   | 4,049 |   |
| Customer      Deposits and Credit Balances                                         |   |   | 18,067 |   |   |   | 23,016 |   |
| Environmental      Remediation Costs                                               |   |   | 25,447 |   |   |   | 26,048 |   |
| Taxes      Accrued                                                                 |   |   | 2,937 |   |   |   | 1,961 |   |
| Pension      Benefits                                                              |   |   | 765 |   |   |   | 776 |   |
| Interest      Accrued                                                              |   |   | 6,245 |   |   |   | 6,112 |   |
| Other      Current Liabilities                                                     |   |   | 5,777 |   |   |   | 4,904 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Current Liabilities                                                     |   |   | 224,457 |   |   |   | 255,249 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Regulatory      and Other Noncurrent Liabilities:                                  |   |   |   |   |   |   |   |   |
| Regulatory      Liabilities                                                        |   |   | 55,779 |   |   |   | 50,797 |   |
| Deferred      Income Taxes - Net                                                   |   |   | 168,254 |   |   |   | 164,797 |   |
| Environmental      Remediation Costs                                               |   |   | 48,433 |   |   |   | 41,746 |   |
| Asset      Retirement Obligations                                                  |   |   | 24,364 |   |   |   | 23,743 |   |
| Pension      and Other Postretirement Benefits                                     |   |   | 24,682 |   |   |   | 29,354 |   |
| Investment      Tax Credits                                                        |   |   | 2,149 |   |   |   | 2,470 |   |
| Derivatives      - Energy Related Liabilities                                      |   |   | 61 |   |   |   | 374 |   |
| Derivatives      - Other                                                           |   |   | 618 |   |   |   | - |   |
| Other                                                                              |   |   | 5,144 |   |   |   | 4,300 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total Regulatory      and Other Noncurrent Liabilities                        |   |   | 329,484 |   |   |   | 317,581 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Commitments      and Contingencies (Note 12)                                       |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Capitalization and Liabilities                                          |   | $ | 1,227,162 |   |   | $ | 1,228,076 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements. |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |

----

| SOUTH      JERSEY GAS COMPANY                                                                                            |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
| STATEMENTS      OF CHANGES IN COMMON EQUITY AND COMPREHENSIVE INCOME                                                     |   |
| (In      Thousands)                                                                                                      |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   | CommonStock |   |   | OtherPaid-In      Capital&      Premium onCommon      Stock |   |   | Accumulated      Other Comprehensive Loss |   |   | RetainedEarnings |   |   | Total |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2005                                                                                          |   | $ | 5,848 |   |   | $ | 170,317 |   |   | $ | (4,033 | ) |   | $ | 130,695 |   |   | $ | 302,827 |   |
| Net      Income                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 34,547 |   |   |   | 34,547 |   |
| Other      Comprehensive Income (Loss), Net of Tax: (a)                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minimum      Pension Liability Adjustment                                                                                |   |   |   |   |   |   |   |   |   |   | 423 |   |   |   |   |   |   |   | 423 |   |
| Unrealized      Gain on Available-for-Sale Securities                                                                    |   |   |   |   |   |   |   |   |   |   | 63 |   |   |   |   |   |   |   | 63 |   |
| Unrealized      Loss on Derivatives                                                                                      |   |   |   |   |   |   |   |   |   |   | (790 | ) |   |   |   |   |   |   | (790 | ) |
| Other      Comprehensive Loss, Net of Tax: (a)                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (304 | ) |
| Comprehensive      Income                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 34,243 |   |
| Additional      Investment by Shareholder                                                                                |   |   |   |   |   |   | 30,000 |   |   |   |   |   |   |   |   |   |   |   | 30,000 |   |
| Cash      Dividends Declared - Common Stock                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (22,502 | ) |   |   | (22,502 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2005                                                                                        |   |   | 5,848 |   |   |   | 200,317 |   |   |   | (4,337 | ) |   |   | 142,740 |   |   |   | 344,568 |   |
| Net      Income                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 35,779 |   |   |   | 35,779 |   |
| Other      Comprehensive Income (Loss), Net of Tax: (a)                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minimum      Pension Liability Adjustment                                                                                |   |   |   |   |   |   |   |   |   |   | (442 | ) |   |   |   |   |   |   | (442 | ) |
| Unrealized      Gain on Available-for-Sale Securities                                                                    |   |   |   |   |   |   |   |   |   |   | 54 |   |   |   |   |   |   |   | 54 |   |
| Unrealized      Gain on Derivatives                                                                                      |   |   |   |   |   |   |   |   |   |   | 296 |   |   |   |   |   |   |   | 296 |   |
| Other      Comprehensive Loss, Net of Tax: (a)                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (92 | )  |
| Comprehensive      Income                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 35,687 |   |
| Cash      Dividends Declared - Common Stock                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (19,902 | ) |   |   | (19,902 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2006                                                                                        |   |   | 5,848 |   |   |   | 200,317 |   |   |   | (4,429 | ) |   |   | 158,617 |   |   |   | 360,353 |   |
| Cumulative      Effect Adjustment (b)                                                                                    |   |   | -  |   |   |   |  - |   |   |   | -  |   |   |   | (371 | ) |   |   | (371 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2007, as adjusted                                                                             |   |   | 5,848 |   |   |   | 200,317 |   |   |   | (4,429 | ) |   |   | 158,246 |   |   |   | 359,982 |   |
| Net      Income                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 38,025 |   |   |   | 38,025 |   |
| Other      Comprehensive Income (Loss), Net of Tax (a)                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Postretirement       Liability Adjustment                                                                           |   |   |   |   |   |   |   |   |   |   | (307 | ) |   |   |   |   |   |   | (307 | ) |
| Unrealized      Loss on Available-for-Sale Securities                                                                    |   |   |   |   |   |   |   |   |   |   | (195 | ) |   |   |   |   |   |   | (195 | ) |
| Unrealized      Loss on Derivatives                                                                                      |   |   |   |   |   |   |   |   |   |   | (425 | ) |   |   |   |   |   |   | (425 | ) |
| Other      Comprehensive Loss, Net of Tax (a)                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (927 | )  |
| Comprehensive      Income                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 37,098 |   |
| Cash      Dividends Declared - Common Stock                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (18,732 | ) |   |   | (18,732 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                                                        |   | $ | 5,848 |   |   | $ | 200,317 |   |   | $ | (5,356 | ) |   | $ | 177,539 |   |   | $ | 378,348 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Disclosure      of Changes in Accumulated Other Comprehensive Loss Balances      (a)                                     |
| (In      Thousands)                                                                                                      |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   | Postretirement      PlanLiabilityAdjustment |   |   | Unrealized      Gain (Loss) on Available-for-Sale Securities |   |   | Unrealized      (Loss) Gain on Derivatives |   |   | Accumulated      Other Comprehensive Loss |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2005                                                                                          |   |   |   |   |   | $ | (3,921 | ) |   | $ | 91 |   |   | $ | (203 | ) |   | $ | (4,033 | ) |
| Changes      During Year                                                                                                 |   |   |   |   |   |   | 423 |   |   |   | 63 |   |   |   | (790 | ) |   |   | (304 | ) |
| Balance      at December 31, 2005                                                                                        |   |   |   |   |   |   | (3,498 | ) |   |   | 154 |   |   |   | (993 | ) |   |   | (4,337 | ) |
| Changes      During Year                                                                                                 |   |   |   |   |   |   | (442 | ) |   |   | 54 |   |   |   | 296 |   |   |   | (92 | ) |
| Balance      at December 31, 2006                                                                                        |   |   |   |   |   |   | (3,940 | ) |   |   | 208 |   |   |   | (697 | ) |   |   | (4,429 | ) |
| Changes      During Year                                                                                                 |   |   |   |   |   |   | (307 | ) |   |   | (195 | ) |   |   | (425 | ) |   |   | (927 | ) |
| Balance      at December 31, 2007                                                                                        |   |   |   |   |   | $ | (4,247 | ) |   | $ | 13 |   |   | $ | (1,122 | ) |   | $ | (5,356 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)       Determined using a combined statutory tax rate of 41.08% in 2007 and 2006      and 40.85% in prior years. |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (b)       Due to the implementation of FIN 48.  See Note 1.                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements.                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                                                                          |   | 2007   |      |   | 2006   |   |
|-------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Utility      Plant:                                                           |   |   |      |   |   |   |
| Production      Plant                                                         |   | $      | 302       |   |   | $      | 302 |   |
| Storage      Plant                                                            |   |   | 11,582    |   |   |   | 11,576 |   |
| Transmission      Plant                                                       |   |   | 149,542   |   |   |   | 147,891 |   |
| Distribution      Plant                                                       |   |   | 919,205   |   |   |   | 878,168 |   |
| General      Plant                                                            |   |   | 37,136    |   |   |   | 35,529 |   |
| Other Plant                                                         |   |   | 3,665     |   |   |   | 3,394 |   |
|         Utility      Plant in Service |   |   | 1,121,432 |   |   |   | 1,076,860 |   |
| Construction      Work in Progress                                            |   |   | 2,560     |   |   |   | 2,754 |   |
|                                                                          |   |   |      |   |   |   |   |   |
|         Total      Utility Plant      |   | $      | 1,123,992 |   |   | $      | 1,079,614 |   |

|                                      |   | 2007   |   |   | 2006   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|
| AROs      as of January 1,                |   | $      | 23,743 |   |   | $      | 22,505 |   |
|      Accretion   |   |   | 498    |   |   |   | 953 |   |
|      Additions   |   |   | 174    |   |   |   | 290 |   |
|      Settlements |   |   | (51    | )      |   |   | (5 | ) |
| AROs      as of December 31,              |   | $      | 24,364 |   |   | $      | 23,743 |   |

----

----

| Grant          |   | Shares      |   |   | Fair      Value |   |   | Expected   |   |   | Risk-Free          |   |
|----------------|--------|-------------|--------|--------|-----------------|--------|--------|------------|--------|--------|--------------------|--------|
| Date           |   | Outstanding |   |   | Per      Share  |   |   | Volatility |   |   | Interest      Rate |   |
|           |   |        |   |   |            |   |   |       |   |   |               |   |
| Jan.      2005 |   |        | 8,126  |   |            | $      | 25.155 |       |   |   | 15.5               | %      |   |   | 3.4 | % |
| Jan.      2006 |   |        | 8,450  |   |            | $      | 27.950 |       |   |   | 16.9               | %      |   |   | 4.5 | % |
| Jan.      2007 |   |        | 9,526  |   |            | $      | 29.210 |       |   |   | 18.5               | %      |   |   | 4.9 | % |

----

|                                                                                                                                               |   | Shares |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|
| Nonvested      Shares Outstanding, January 1, 2007                                                                                                 |   |   | 26,738  |   |
| Granted                                                                                                                                            |   |   | 9,628   |   |
| Vested*                                                                                                                                            |   |   | (10,352 | ) |
| Cancelled/Forfeited                                                                                                                                |   |   | (1,734  | ) |
|    Transferred      From Affiliate                                                                                                  |   |   | 1,822   |   |
| Nonvested      Shares Outstanding, December 31, 2007                                                                                               |   |   | 26,102  |   |
|                                                                                                                                               |   |   |    |   |
| *      Actual shares awarded upon vesting, including dividend equivalents and      adjustments for performance measures, totaled 17,143    shares. |

----

| Balance      at January 1, 2007                                 |   | $      | 1,112 |   |
|-----------------------------------------------------------------|--------|--------|-------|--------|
| Increase      as a result of tax positions taken in prior years |   |   | 28    |   |
| Decrease      due to a lapse in the statute of limitations      |   |   | (233  | )      |
| Balance      at December 31, 2007                               |   | $      | 907   |   |

|   | · | Cash      flows related to merchandise loans to customers for the purpose of      attracting conversions to natural gas heating systems should have been      classified under the caption Cash Flows from Investing Activities on the      Statements of Cash Flows. Accordingly, cash outflows for loans      originated of $3.3 million in 2006 and $4.4 million in 2005 and      cash inflows from the principal collection on these loans of $3.7      million in 2006 and $4.8 million in 2005 are now included within Cash      Flows from Investing Activities. The overall net impact resulted      in $0.4 million of Cash Flows from Operating Activities for each of      the years ended December 31, 2006 and 2005 now being included within Cash      Flows from InvestingActivities. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Cash      flows related to unused loan proceeds that are held in restricted escrow      accounts were incorrectly presented on a net basis within Cash Flows from      Investing Activities on the Statements of Cash Flows. Accordingly,      purchases of restricted investments with unused loan proceeds of $14.7      million in 2006 is now included in Purchase of Restricted Investments with      Escrowed Loan Proceeds and proceeds from the sale of these restricted      investments of $6.1 million in 2006 are now included in Proceeds from Sale      of Restricted Investments from Escrowed Loan Proceeds. This change had no      overall impact on total Cash Flows from Investing Activities on the      Statements of Cash Flows. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | February 2005 - We filed notice      with the BPU to provide for an $11.4 million bill credit to      customers. |
|--------|------------------------------------------------------------------------------------------------------------------|

| · | March 2005 - The bill credit was      approved and implemented. |
|--------|-----------------------------------------------------------------|

| · | June 2005 - We made our annual      periodic BGSS filing with the BPU requesting a $17.1 million, or 6.3%,      increase in gas cost recoveries in response to increasing wholesale gas      costs. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | August 2005 - The BPU approved      our requested June 2005 increase, effective September 1, 2005, on an      interim basis. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| · | November 2005 - We filed a BGSS      Motion for Emergent Rate Relief in conjunction with the other natural gas      utilities in New Jersey. This filing was necessary due to substantial      increases in wholesale natural gas prices across the country. We requested      a $103.2 million increase. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | December 2005 - The BPU approved      on a provisional basis, an $85.7 million increase to our rates, effective      December 15, 2005. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

| · | March 2006 - The BPU approved a      global settlement, effective April 1, 2006, which among other items, fully      resolved our 2004-2005 BGSS filing and certain issues in our 2005-2006      BGSS filing. The net impact of our global settlement was a $4.4 million      reduction to annual revenues; however, this reduction had no impact on net      income as there was a corresponding reduction in expense. In addition, a      pilot storage incentive program was approved. This program began during      the second quarter of 2006 and will continue for three summer injection      periods through 2008. It is designed to provide us with the opportunity to      achieve BGSS price reductions and additional price stability. It will also      provide us with an opportunity to share in storage-related gains and      losses, with 20% being retained by us, and 80% being credited to      customers. Total storage-related gains for 2007 and 2006 were $2.3 million      and $1.6 million, respectively, under this storage incentive      program. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | June 2006 - We made our annual      periodic BGSS filing with the BPU requesting a $19.7 million, or 4.4%,      decrease in gas cost recoveries in response to decreasing wholesale gas      costs, an $11.5 million benefit derived from the release of a storage      facility and the liquidation of some low-cost base gas during the second      quarter. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | September      2006 - The BPU approved on a provisional basis, a $38.7 million, or 8.6%,      annual decrease in gas cost recoveries due to the continuing decrease in      wholesale gas costs subsequent to our June 2006 filing, an agreement to      utilize gas from a released storage facility for the upcoming winter, and      a credit to gas costs for previously overcollected state      taxes. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | June      2007 – We made our annual periodic BGSS filing with the BPU requesting a      $16.9 million, or 5.0%, decrease in gas cost recoveries in response to      decreasing wholesale gas costs and a $5.4 million benefit derived from the      Company electing not to extend the terms of two firm transportation      contracts beyond their primaryterms. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | October      2007 – The BPU approved on a provisional basis, a $36.7 million, or 11%,      annual decrease in gas cost recoveries due to the continuing decrease in      wholesale gas costs subsequent to our June 2007  filing. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | November 2005 - We made our      annual TAC filing, requesting a $1.0 million increase in annual revenues,      to recover the cash related to the net TAC deficiency resulting from      warmer-than-normal weather for the 2003-2004 winter, partially offset by      colder-than-normal weather for the 2004-2005  winter. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | March 2006 - The BPU approved a      global settlement, effective April 1, 2006, fully resolving our 2003-2004      TAC filing. |
|--------|---------------------------------------------------------------------------------------------------------------------------------|

| · | October  2006 - The TAC was      replaced by the Conservation Incentive Program    (CIP). |
|--------|------------------------------------------------------------------------------------------------|

| · | October      2006 - We made our annual TAC filing, requesting recovery of an $8.3      million net deficiency associated with weather being 12.5%      warmer-than-normal for the TAC year ended May 31,  2006. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | October      2007 – The BPU approved on a provisional basis, our 2005-2006 TAC filing,      which superseded our 2004-2005 TAC filing.  The effect of this      action resulted in an $8.0 million increase in annual      revenues. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | June      2007 – We made our first annual CIP filing, requesting recovery of $14.3      million in deficiency. |
|--------|----------------------------------------------------------------------------------------------------------------------|

| · | October      2007 – The BPU approved on a provisional basis, recovery of $15.5 million      in deficiency of which $9.1 million was non-weather    related. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | November 2005 - We made our      annual SBC filing, requesting a $6.1 million reduction in annual      recoveries. |
|--------|--------------------------------------------------------------------------------------------------------------------|

| · | March 2006 - As part of the      global settlement discussed under BGSS above, our September 2004 SBC      filing was fully resolved effective April 1,  2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | October      2006 - We made our annual SBC filing, superseding our 2005 SBC filing,      requesting a $0.4 million reduction in annual SBC    recoveries. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | December      2007 – We made our annual SBC filing, superseding our 2005 and 2006 SBC      filings, requesting a $7.4 million increase in annual SBC      recoveries. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | April 2005 - We made our annual      USF filing, along with the state’s other electric and gas utilities,      proposing no rate change to the statewide program. This rate proposal was      approved by the BPU in June2005. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | July      2006 - We made our annual USF filing, along with the state’s other      electric and gas utilities, proposing to increase annual statewide gas      revenues to $115.3 million, an increase of $68.5 million. This rate      proposal was approved by the BPU in October 2006, on an interim basis, and      was designed to increase our annual USF revenues by $7.7 million. The      revised rates were effective from November 1, 2006 through September 30,      2007. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | July      2007 – We made our annual USF filing, along with the state’s other      electric and gas utilities, proposing to decrease annual statewide gas      revenues to $78.1 million.  This rate proposal was approved by      the BPU in October 2007, on an interim basis, and is designed to decrease      our annual USF revenues by $3.4 million.  The revised rates are      effective from October 5, 2007 through September 30,  2008. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Regulatory      Assets at December 31 consisted of the following items (in      thousands): |   |
|---------------------------------------------------------------------------------------------|--------|
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   | 2007 |   |   | 2006 |   |
| Environmental      Remediation Costs:Expended      - Net                                    |   | $ | 25,960 |   |   | $ | 17,854 |   |
| Liability      for Future Expenditures                                                      |   |   | 73,880 |   |   |   | 67,794 |   |
| Income      Taxes - Flowthrough Depreciation                                                |   |   | 3,707 |   |   |   | 4,685 |   |
| Deferred      Asset Retirement Obligation Costs                                             |   |   | 21,572 |   |   |   | 21,009 |   |
| Deferred      Fuel Costs - Net                                                              |   |   | - |   |   |   | 19,698 |   |
| Deferred      Pension and Other Postretirement Benefit Costs                                |   |   | 32,686 |   |   |   | 39,359 |   |
| Temperature      Adjustment Clause Receivable                                               |   |   | 6,516 |   |   |   | 8,996 |   |
| Conservation      Incentive Program Receivable                                              |   |   | 18,173 |   |   |   | 7,747 |   |
| Societal      Benefit Costs Receivable                                                      |   |   | 2,952 |   |   |   | 6,912 |   |
| Premium      for Early Retirement of Debt                                                   |   |   | 1,370 |   |   |   | 1,532 |   |
| Other      Regulatory Assets                                                                |   |   | 1,872 |   |   |   | 1,376 |   |
|                                                                                        |   | $ | 188,688 |   |   | $ | 196,962 |   |

----

|                              |   | 2007   |   |   | 2006   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| Excess      Plant Removal Costs   |   | $      | 48,705 |   |   | $      | 48,377 |   |
| Liability      for NJCEP          |   |   | 2,797  |   |   |   | 796 |   |
| Deferred      Revenues - Net      |   |   | 2,586  |   |   |   | - |   |
| Other                             |   |   | 1,691  |   |   |   | 1,624 |   |
|                              |   |   |   |   |   |   |   |   |
| Total      Regulatory Liabilities |   | $      | 55,779 |   |   | $      | 50,797 |   |

----

| · | South      Jersey Energy Company (SJE) - a wholly owned subsidiary of      SJI and a third party energy marketer that acquires and markets natural      gas and electricity to retail end users and provides total energy      management services to commercial and industrial customers. We previously      sold natural gas for resale to SJE and also provide them with billing      services. For SJE’s residential customers, for which we perform billing      services, we purchase the related accounts receivable at book value less a      factor for potential uncollectible accounts, and assume all risk      associated with collection. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | South      Jersey Resources Group, LLC (SJRG) - a wholly owned subsidiary of      SJI and a wholesale gas and risk management business that supplies natural      gas storage, commodity and transportation to retail marketers, utility      businesses and electricity generators in the mid-Atlantic and southern      regions. We sell natural gas for resale and capacity release to SJRG and      also meet some of our gas purchasing requirements by purchasing natural      gas from SJRG. Additionally, SJRG manages our market risk associated with      fluctuations in the cost of natural gas by entering into financial      derivative contracts on our behalf. The gain or loss associated with these      derivative contracts is included in our BGSS and in the SJRG receivable      and payable amounts shown below.   In addition to our      normal gas purchases and sales with SJRG, during 2006, we sold 1,710,903      decatherms (dth) of gas to SJRG for $13.1 million.  The proceeds      from the sale were credited to the BGSS clause and did not impact      earnings. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Marina      Energy LLC (Marina)      - a wholly owned subsidiary of SJI and developer, owner and operator of      energy related projects. We provide natural gas transportation services to      Marina under BPU-approvedtariffs. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | South      Jersey Energy Service Plus, LLC (SJESP) - a wholly owned subsidiary of      SJI and an appliance service and installation of heating and cooling      systems company. We lease vehicles and provide billing services to      SJESP. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                          |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   |   |   |   |   |   |   |   |   |
| Operating      Revenues/Affiliates:      |   |   |   |   |   |   |   |   |   |
|  SJRG                               |   | $      | 19,328 |   |   | $      | 67,262 |   |   | $ | 10,680 |   |
| Other                                         |   |   | 386    |   |   |   | 2,302  |   |   |   | 3,028 |   |
| Total      Operating Revenues/Affiliates |   | $      | 19,714 |   |   | $      | 69,564 |   |   | $ | 13,708 |   |

|                                           |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|  Costs      of Sales/Affiliates           |   |   |   |   |   |   |   |   |   |   |   |   |
|  (Excluding      depreciation):      |   |   |   |   |   |   |   |   |   |   |   |   |
|   SJRG                               |   | $      | 43,770 |   |   | $      | 53,196 |   |   | $ | 13,140 |   |
|  Total Cost of      Sales/Affiliates      |   | $      | 43,770 |   |   | $      | 53,196 |   |   | $ | 13,140 |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Operations      Expense/Affiliates        |   |   |   |   |   |   |   |   |   |   |   |   |
|  SJI                                 |   | $      | 1,014  |   |   | $      | 7,434  |   |   | $ | 5,811 |   |
|  SJIS                                     |   |   | 4,550  |   |   |   | 5,373  |   |   |   | - |   |
|  Millennium                               |   |   | 2,872  |   |   |   | 2,743  |   |   |   | 2,626 |   |
|  Other                                    |   |   | 139    |   |   |   | -      |   |   |   | - |   |
|  Total      Operations Expense/Affiliates |   | $      | 8,575  |   |   | $      | 15,550 |   |   | $ | 8,437 |   |

|                                          |   | 2007   |   |   | 2006   |   |   | 2005    |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                          |   |   |   |   |   |   |   |    |   |   |   |   |
| Tax      at Statutory Rate                    |   | $      | 22,637 |   |   | $      | 21,206 |    |   | $ | 20,906 |   |
| Increase      (Decrease) Resulting from:      |   |   |   |   |   |   |   |    |   |   |   |   |
| State      Income Taxes                       |   |   | 4,396  |   |   |   | 4,107  |    |   |   | 4,035 |   |
| Amortization      of Investment Tax Credits   |   |   | (320   | )      |   |   | (325   | )       |   |   | (334 | ) |
| ESOP      Dividend                            |   |   | (610   | )      |   |   | (674   | )  |   |   | - |   |
| Amortization      of Flowthrough Depreciation |   |   | 664    |   |   |   | 664    |    |   |   | 664 |   |
| Other      - Net                              |   |   | (115   | )      |   |   | (167   | )       |   |   | (86 | ) |
| Net      Income Taxes                         |   | $      | 26,652 |   |   | $      | 24,811 |    |   | $ | 25,185 |   |
|                                          |   |   |   |   |   |   |   |    |   |   |   |   |

----

| The      provision for Income Taxes is comprised of the following (in      thousands):                                                                                                                                                                     |   |   |   |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|---------|
|                                                                                                                                                                                                                                                       |   |   |   |    |
|                                                                                                                                                                                                                                                       |   | 2007   |   |    | 2006 |   |   | 2005 |   |
| Current:                                                                                                                                                                                                                                                   |   |   |   |    |   |   |   |   |   |
| Federal                                                                                                                                                                                                                                                    |   | $      | 9,951  |    |   | $ | 16,556 |   |   | $ | (1,819 | ) |
| State                                                                                                                                                                                                                                                      |   |   | 3,744  |    |   |   | 3,829 |   |   |   | 1,342 |   |
| Total      Current                                                                                                                                                                                                                                         |   |   | 13,695 |    |   |   | 20,385 |   |   |   | (477 | )  |
| Deferred:                                                                                                                                                                                                                                                  |   |   |   |    |   |   |   |   |   |   |   |   |
| Federal:                                                                                                                                                                                                                                                   |   |   |   |    |   |   |   |   |   |   |   |   |
| Excess      of Tax Depreciation Over                                                                                                                                                                                                                       |   |   |   |    |   |   |   |   |   |   |   |   |
|                                      Book      Depreciation - Net |   |   | 7,747  |    |   |   | 7,979 |   |   |   | 4,832 |   |
| Deferred      Fuel Costs - Net                                                                                                                                                                                                                             |   |   | (6,228 | )       |   |   | (12,646 | )  |   |   | 17,567 |   |
| Environmental      Costs - Net                                                                                                                                                                                                                             |   |   | 3,586  |    |   |   | 1,808 |   |   |   | 970 |   |
| Prepaid      Pension                                                                                                                                                                                                                                       |   |   | 1,378  |    |   |   | 202 |   |   |   | 346 |   |
| Deferred      Regulatory Costs                                                                                                                                                                                                                             |   |   | (1,928 | )  |   |   | 3,525 |   |   |   | (1,156 | ) |
| Conservation      Incentive Program                                                                                                                                                                                                                        |   |   | 6,361  |    |   |   | - |   |   |   | - |   |
| Other      - Net                                                                                                                                                                                                                                           |   |   | (658   | )  |   |   | 1,394 |   |   |   | (1,429 | )  |
| State                                                                                                                                                                                                                                                      |   |   | 3,019  |    |   |   | 2,489 |   |   |   | 4,866 |   |
| Total      Deferred                                                                                                                                                                                                                                        |   |   | 13,277 |    |   |   | 4,751 |   |   |   | 25,996 |   |
| Investment      Tax Credits                                                                                                                                                                                                                                |   |   | (320   | )       |   |   | (325 | ) |   |   | (334 | ) |
| Net      Income Taxes                                                                                                                                                                                                                                      |   | $      | 26,652 |    |   | $ | 24,811 |   |   | $ | 25,185 |   |

|   |    |
|--------|--------------|

|                                                       |   | 2007   |    |    | 2006   |   |
|------------------------------------------------------------|--------|--------|---------|---------|--------|--------|
|                                                       |   |   |    |    |   |   |
| Current:                                                   |   |   |    |    |   |   |
| Deferred      Fuel Costs - Net                             |   | $      | 4,121   |    |   | $      | 4,121 |   |
| Uncollectibles                                             |   |   | (976    | )       |   |   | (956 | ) |
| Deferred      Revenues                                     |   |   | 8,061   |    |   |   | - |   |
| Section      461 Prepayments                               |   |   | 866     |    |   |   | 967 |   |
| Other                                                      |   |   | (490    | )       |   |   | (83 | ) |
| Current      Deferred Tax Liability - Net                  |   | $      | 11,582  |    |   | $      | 4,049 |   |
|                                                       |   |   |    |    |   |   |   |   |
|  Noncurrent:                                          |   |   |    |    |   |   |   |   |
| Book      Versus Tax Basis of Property                     |   | $      | 156,634 |    |   | $      | 147,296 |   |
| Deferred      Fuel Costs - Net                             |   |   | 5,141   |    |   |   | 6,733 |   |
| Environmental                                              |   |   | 11,068  |    |   |   | 6,546 |   |
| Deferred      Regulatory Costs                             |   |   | 1,238   |    |   |   | 3,370 |   |
| Deferred      State Tax                                    |   |   | (6,331  | )       |   |   | (4,238 | ) |
| Investment      Tax Credit Basis Gross-Up                  |   |   | (1,107  | )       |   |   | (1,272 | ) |
| Deferred      Pension & Other Post Retirement Benefits |   |   | 15,239  |    |   |   | 15,239 |   |
| Pension      & Other Post Retirement Benefits          |   |   | (9,021  | )       |   |   | (11,672 | )  |
| Deferred      Revenues                                     |   |   | (3,726  | )  |   |   | 2,376 |   |
| Other                                                      |   |   | (881    | )  |   |   | 419 |   |
| Noncurrent      Deferred Tax Liability - Net               |   | $      | 168,254 |    |   | $      | 164,797 |   |

----

|                                               |   |   |    |                 | 2007   |    |    | 2006   |   |
|----------------------------------------------------|--------|--------|---------|----------------------|--------|---------|---------|--------|--------|
|                                               |   |   |    |                 |   |    |
| First      Mortgage Bonds: (B)                     |   |   |    |                 |   |    |
|                                               | 8.19   | %      |    | Series      due 2007 |   | $       | -       |   |   | $ | 2,270 |   |
|                                               | 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 |   |
|                                               | 5.387  | %      |    | Series      due 2015 |   |    | 10,000  |   |   |   | 10,000 |   |
|                                               | 6.50   | %      |    | Series      due 2016 |   |    | 9,873   |   |   |   | 9,893 |   |
|                                               | 4.60   | %      |    | Series      due 2016 |   |    | 17,000  |   |   |   | 17,000 |   |
|                                               | 5.437  | %      |    | Series      due 2016 |   |    | 10,000  |   |   |   | 10,000 |   |
|                                               | 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 |   |
|                                               | 5.587  | %      |    | Series      due 2019 |   |    | 10,000  |   |   |   | 10,000 |   |
|                                               | 7.7    | %      |    | Series      due 2027 |   |    | 35,000  |   |   |   | 35,000 |   |
|                                               | 5.55   | %      |    | Series      due 2033 |   |    | 32,000  |   |   |   | 32,000 |   |
|                                               | 6.213  | %      |    | Series      due 2034 |   |    | 10,000  |   |   |   | 10,000 |   |
|                                               | 5.45   | %      |    | Series      due 2035 |   |    | 10,000  |   |   |   | 10,000 |   |
| Series      A 2006 Tax-Exempt First Mortgage Bonds |   |   |    |                 |   |    |    |   |
| Variable      Rate, due 2036 (C)                   |   |   | 25,000  |                 |   |    | 25,000  |   |
|                                               |   |   |    |                 |   |    |    |   |   |   |   |   |
| Total      Long-Term Debt Outstanding              |   |   | 294,873 |                 |   |    | 297,163 |   |
| Less      Current Maturities                       |   |   | -       |                 |   |    | (2,270  | )      |
| Long-Term      Debt                                |   |   |    |                 | $      | 294,873 |    |   | $      | 294,893 |   |

| (A) | Long-term debt maturities and      sinking funds requirements for the succeeding five years are as follows      (in thousands): 2008, $-0-; 2009, $-0-; 2010, $10,000; 2011, $25,000;      2012, $2,187.  Our long-term debt agreements contain no financial      covenants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (B) | Our First Mortgage dated October      1, 1947, as supplemented, securing the First Mortgage Bonds constitutes a      direct first mortgage lien on substantially all utility      plant. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (C) | In April 2006, we issued $25.0      million of secured tax-exempt, auction-rate debt through the New Jersey      Economic Development Authority (NJEDA) to finance infrastructure costs      that qualify for tax-exempt financing.  The auction rate, which      resets weekly, was set at 4.90% as of December 31, 2007. As of December      31, 2007, $2.2 million, including interest thereon, remains in escrow      pending the incurrence of capital costs that qualify for tax-exempt      financing. In conjunction with this debt, we entered into interest rate      swap agreements under which we pay a fixed interest rate 3.43% and receive      floating rate interest payments at 67% of  LIBOR, from December      1, 2006 through January 2036.  This debt was issued under the      Medium-Term Note (MTN) program.  As of December 31, 2007,      an additional $115.0 million remains available under the MTN      program.  These notes contain no financial      covenants. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                    |   |   |   |   | Pension      Benefits |   |   |   |   |   | OtherPostretirement      Benefits |   |
|-----------------------------------------|--------|--------|--------|--------|-----------------------|--------|--------|--------|--------|--------|-----------------------------------|--------|
|                                    |   | 2007   |   |   | 2006                  |   |   | 2005   |   |   | 2007                              |   |   | 2006 |   |   | 2005 |   |
|                                    |   |   |   |   |                  |   |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                       |   | $      | 2,442  |   |                  | $      | 2,322  |   |   | $      | 2,704                             |   |   | $ | 661 |   |   | $ | 656 |   |   | $ | 732 |   |
| Interest      Cost                      |   |   | 6,376  |   |                  |   | 5,988  |   |   |   | 5,970                             |   |   |   | 2,295 |   |   |   | 2,279 |   |   |   | 1,963 |   |
| Expected      Return on Plan Assets     |   |   | (8,068 | )      |                  |   | (7,518 | )      |   |   | (7,494                            | )      |   |   | (1,895 | ) |   |   | (1,617 | ) |   |   | (1,482 | ) |
| Amortizations:                          |   |   |   |   |                  |   |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior      Service Cost (Credits)       |   |   | 239    |   |                  |   | 389    |   |   |   | 522                               |   |   |   | (254 | ) |   |   | (264 | ) |   |   | (361 | ) |
| Actuarial      Loss                     |   |   | 1,624  |   |                  |   | 2,032  |   |   |   | 2,349                             |   |   |   | 560 |   |   |   | 789 |   |   |   | 570 |   |
| Net      Periodic Benefit Cost          |   |   | 2,613  |   |                  |   | 3,213  |   |   |   | 4,051                             |   |   |   | 1,367 |   |   |   | 1,843 |   |   |   | 1,422 |   |
| ERIP      Cost                          |   |   | -      |   |                  |   | -      |   |   |   | 459                               |   |   |   | - |   |   |   | - |   |   |   | 1,187 |   |
| Capitalized      Benefit Costs          |   |   | (1,131 | )      |                  |   | (1,574 | )      |   |   | (1,823                            | )      |   |   | (648 | ) |   |   | (903 | ) |   |   | (640 | ) |
| Total      Net Periodic Benefit Expense |   | $      | 1,482  |   |                  | $      | 1,639  |   |   | $      | 2,687                             |   |   | $ | 719 |   |   | $ | 940 |   |   | $ | 1,969 |   |

|                               |   | PensionBenefits |   |   | OtherPostretirementBenefits |   |
|------------------------------------|--------|-----------------|--------|--------|-----------------------------|--------|
| Prior      Service Costs (Credits) |   | $               | 239    |   |                        | $      | (254 | ) |
| Net      Actuarial Loss            |   | $               | 677    |   |                        | $      | 540 |   |

|                    |   | PensionBenefits |   |   | OtherPostretirementBenefits |   |
|-------------------------|--------|-----------------|--------|--------|-----------------------------|--------|
| Net      Actuarial Loss |   | $               | 690    |   |                        | $      | - |   |

----

|                                                |   |                  |    |    |                         |   |    | Other   |   |
|-----------------------------------------------------|--------|-----------------------|---------|---------|------------------------------|--------|---------|---------|--------|
|                                                |   | Pension      Benefits |    |    | Postretirement      Benefits |   |
|                                                |   | 2007                  |    |    | 2006                         |   |    | 2007    |   |   | 2006 |   |
|                                                |   |                  |    |    |                         |   |    |    |   |   |   |   |
| Change in Benefit      Obligations:                 |   |                  |    |    |                         |   |    |    |   |   |   |   |
| Benefit      Obligation at Beginning of Year        |   | $                     | 109,735 |    |                         | $      | 111,767 |    |   | $ | 41,272 |   |   | $ | 39,062 |   |
| Transferred      to Affiliate                       |   |                  | -       |    |                         |   | (5,356  | )  |   |   | - |   |   |   | (1,639 | )  |
| Service      Cost                                   |   |                  | 2,442   |    |                         |   | 2,322   |    |   |   | 661 |   |   |   | 656 |   |
| Interest      Cost                                  |   |                  | 6,376   |    |                         |   | 5,988   |    |   |   | 2,295 |   |   |   | 2,279 |   |
| Plan      Amendments                                |   |                  | -       |    |                         |   | -       |    |   |   | - |   |   |   | 1,408 |   |
| Actuarial      (Gain) / Loss                        |   |                  | (3,188  | )  |                         |   | 711     |    |   |   | (1,910 | ) |   |   | 2,014 |   |
| Retiree      Contributions                          |   |                  | -       |    |                         |   | -       |    |   |   | 147 |   |   |   | 305 |   |
| Benefits      Paid                                  |   |                  | (6,064  | )       |                         |   | (5,697  | )       |   |   | (2,966 | ) |   |   | (2,813 | ) |
| Benefit      Obligation at End of Year              |   | $                     | 109,301 |    |                         | $      | 109,735 |    |   | $ | 39,499 |   |   | $ | 41,272 |   |
|                                                |   |                  |    |    |                         |   |    |    |   |   |   |   |   |   |   |   |
| Change      in Plan Assets:                         |   |                  |    |    |                         |   |    |    |   |   |   |   |   |   |   |   |
| Fair      Value of Plan Assets at Beginning of Year |   | $                     | 94,603  |    |                         | $      | 94,311  |    |   | $ | 26,274 |   |   | $ | 23,373 |   |
| Transferred      to Affiliate                       |   |                  | -       |    |                         |   | (5,137  | )  |   |   | - |   |   |   | (882 | )  |
| Actual      Return on Plan Assets                   |   |                  | 7,172   |    |                         |   | 10,360  |    |   |   | 1,273 |   |   |   | 2,822 |   |
| Employer      Contributions                         |   |                  | 830     |    |                         |   | 766     |    |   |   | 3,556 |   |   |   | 3,469 |   |
| Retiree      Contributions                          |   |                  | -       |    |                         |   | -       |    |   |   | 147 |   |   |   | 305 |   |
| Benefits      Paid                                  |   |                  | (6,064  | )       |                         |   | (5,697  | )       |   |   | (2,966 | ) |   |   | (2,813 | ) |
| Fair      Value of Plan Assets at End of Year       |   | $                     | 96,541  |    |                         | $      | 94,603  |    |   | $ | 28,284 |   |   | $ | 26,274 |   |

| Funded Status at End of      Year:                 |   |   |    |   |   |   |    |    |   |   |    |   |
|----------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|---------|--------|--------|---------|--------|
| Accrued       Net Benefit Cost at End of Year |   | $      | (12,760 | )      |   | $      | (15,132 | )       |   | $      | (11,215 | )      |   | $ | (14,998 | ) |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in the Statement           |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| of Financial Position Consist      of:        |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Noncurrent      Asset                              |   | $      | 1,472   |   |   | $      | -       |    |   | $      | -       |   |   | $ | - |   |
| Current      Liabilities                           |   |   | (765    | )      |   |   | (776    | )  |   |   | -       |   |   |   | - |   |
| Noncurrent      Liabilities                        |   |   | (13,467 | )      |   |   | (14,356 | )       |   |   | (11,215 | )      |   |   | (14,998 | ) |
| Net      Amount Recognized at End of Year          |   | $      | (12,760 | )      |   | $      | (15,132 | )       |   | $      | (11,215 | )      |   | $ | (14,998 | ) |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in Regulatory Assets       |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Consist      of:                              |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Prior      Service Costs (Credit)                  |   | $      | 1,620   |   |   | $      | 1,859   |    |   | $      | (977    | )      |   | $ | (1,231 | ) |
| Net      Actuarial Loss                            |   |   | 18,913  |   |   |   | 23,376  |    |   |   | 11,240  |   |   |   | 13,087 |   |
|                                               |   | $      | 20,533  |   |   | $      | 25,235  |    |   | $      | 10,263  |   |   | $ | 11,856 |   |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in Accumulated Other       |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Comprehensive Loss Consist      of:           |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Net      Actuarial Loss                            |   | $      | 7,208   |   |   | $      | 6,661   |    |   | $      | -       |   |   | $ | - |   |

----

|                               |   | Pension      Benefits |   |   | OtherPostretirement      Benefits |   |
|------------------------------------|--------|-----------------------|--------|--------|-----------------------------------|--------|
|                               |   | 2007                  |   |   | 2006                              |   |   | 2007 |   |   | 2006 |   |
|                               |   |                  |   |   |                              |   |   |   |   |   |   |   |
| Discount      Rate                 |   |                  | 6.36   | %      |                              |   | 6.04 | % |   |   | 6.36 | % |   |   | 6.04 | % |
| Rate      of Compensation Increase |   |                  | 3.60   | %      |                              |   | 3.60 | % |   |   | - |   |   |   | - |   |

|                                          |   |  Pension      Benefits |   |   | OtherPostretirement      Benefits |   |
|-----------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------------|--------|
|                                          |   | 2007                        |   |   | 2006                              |   |   | 2005 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                          |   |                        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      Rate                            |   |                        | 6.04   | %      |                              |   | 5.84 | % |   |   | 5.75 | % |   |   | 6.04 | % |   |   | 5.84 | % |   |   | 5.75 | % |
| Expected      Long-Term Return on Plan Assets |   |                        | 8.75   | %      |                              |   | 8.75 | % |   |   | 8.75 | % |   |   | 7.25 | % |   |   | 7.25 | % |   |   | 7.25 | % |
| Rate      of Compensation Increase            |   |                        | 3.60   | %      |                              |   | 3.60 | % |   |   | 3.60 | % |   |   | - |   |   |   | - |   |   |   | - |   |

|                                                            |   | 2007   |   |   |   | 2006   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| Post-65      Medical Care Cost Trend Rate Assumed for Next Year |   | 10.0   | %      |   |   | 6.67   | %      |
| Pre-65      Medical Care Cost Trend Rate Assumed for Next Year  |   |   | 10.0   | %      |   |   | 9.0    | % |
| Dental      Care Cost Trend Rate Assumed for Next Year          |   |   | 6.33   | %      |   |   | 6.67   | % |
| 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         |   |   | 2013   |   |   |   | 2013   |   |

----

|                                                  | 1-Percentage-       |   | 1-Percentage-       |   |
|-------------------------------------------------------|---------------------|--------|---------------------|--------|
|                                                  | Point      Increase |   | Point      Decrease |   |
|                                                  |                |   |                |   |   |   |
| Effect      on the Total of Service and Interest Cost |                | $      | 119                 |   |   | $ | (105 | ) |
| Effect      on Postretirement Benefit Obligation      |                |   | 1,266               |   |   |   | (1,129 | ) |

|                                 |   |                  |   |   |                         |   |   | Other  |   |
|--------------------------------------|--------|-----------------------|--------|--------|------------------------------|--------|--------|--------|--------|
|                                 |   | Pension      Benefits |   |   | Postretirement      Benefits |   |
|                                 |   | 2007                  |   |   | 2006                         |   |   | 2007   |   |   | 2006 |   |
|                                 |   |                  |   |   |                         |   |   |   |   |   |   |   |
| Asset      Category:                 |   |                  |   |   |                         |   |   |   |   |   |   |   |
| U.S.      Equity Securities          |   |                  | 50     | %      |                         |   | 51     | %      |   |   | 47 | % |   |   | 48 | % |
| International      Equity Securities |   |                  | 15     |   |                         |   | 16     |   |   |   | 15 |   |   |   | 17 |   |
| Fixed      Income                    |   |                  | 35     |   |                         |   | 33     |   |   |   | 38 |   |   |   | 35 |   |
|                                 |   |                  |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Total                                |   |                  | 100    | %      |                         |   | 100    | %      |   |   | 100 | % |   |   | 100 | % |

|             |   |                  |   |   | Other                        |   |
|------------------|--------|-----------------------|--------|--------|------------------------------|--------|
|             |   | Pension      Benefits |   |   | Postretirement      Benefits |   |
|             |   |                  |   |   |                         |   |
| 2008             |   | $                     | 6,040  |   |                         | $      | 3,413 |   |
| 2009             |   |                  | 6,103  |   |                         |   | 3,549 |   |
| 2010             |   |                  | 6,227  |   |                         |   | 3,656 |   |
| 2011             |   |                  | 6,478  |   |                         |   | 3,509 |   |
| 2012             |   |                  | 6,701  |   |                         |   | 3,469 |   |
| 2013      - 2017 |   |                  | 39,808 |   |                         |   | 17,252 |   |

----

|                                                                     |   | 2007   |    |   | 2006   |   |
|--------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                     |   |   |    |   |   |   |
| Beginning      of Year                                                   |   | $      | 67,794  |   |   | $      | 56,717 |   |
|           Accruals     |   |   | 18,666  |   |   |   | 20,553 |   |
|           Expenditures |   |   | (12,580 | )      |   |   | (9,476 | ) |
|                                                                     |   |   |    |   |   |   |   |   |
| End      of Year                                                         |   | $      | 73,880  |   |   | $      | 67,794 |   |

----

|                                                                                                                                                  |   | 2007      Quarter Ended |    |   | 2006      Quarter Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                  |   | March      31           |    |   | June      30            |   |   | Sept.      30 |   |   | Dec.      31 |   |   | March      31 |   |   | June      30 |   |   | Sept.      30 |   |   | Dec.      31 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                                                                                               |   | $                       | 277,864 |   |                    | $      | 95,996 |   |   | $ | 84,420 |   |   | $ | 172,267 |   |   | $ | 277,081 |   |   | $ | 105,006 |   |   | $ | 87,715 |   |   | $ | 172,869 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                                                             |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of Sales                                                                                                                                    |   |                    | 205,544 |   |                    |   | 63,848 |   |   |   | 62,223 |   |   |   | 121,419 |   |   |   | 208,621 |   |   |   | 76,040 |   |   |   | 65,014 |   |   |   | 122,611 |   |
| Operation      and Maintenance                                                                                                                        |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Including      Fixed Charges                                                                                                                          |   |                    | 26,667  |   |                    |   | 23,890 |   |   |   | 24,071 |   |   |   | 29,052 |   |   |   | 26,146 |   |   |   | 22,914 |   |   |   | 24,194 |   |   |   | 27,882 |   |
| Income      Taxes (Benefit)                                                                                                                           |   |                    | 16,870  |   |                    |   | 2,839 |   |   |   | (1,278 | ) |   |   | 8,221 |   |   |   | 15,530 |   |   |   | 1,938 |   |   |   | (1,062 | ) |   |   | 8,405 |   |
| Energy      and Other Taxes                                                                                                                           |   |                    | 4,624   |   |                    |   | 1,872 |   |   |   | 1,307 |   |   |   | 3,026 |   |   |   | 4,286 |   |   |   | 1,673 |   |   |   | 1,336 |   |   |   | 2,844 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Expenses                                                                                                                                   |   |                    | 253,705 |   |                    |   | 92,449 |   |   |   | 86,323 |   |   |   | 161,718 |   |   |   | 254,583 |   |   |   | 102,565 |   |   |   | 89,482 |   |   |   | 161,742 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income and Expense                                                                                                                         |   |                    | 100     |   |                    |   | 356 |   |   |   | 157 |   |   |   | 1,060 |   |   |   | (20 | ) |   |   | 158 |   |   |   | 232 |   |   |   | 1,110 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income (Loss) Applicable                                                                                                                     |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to      Common Stock                                                                                                                                  |   | $                       | 24,259  |   |                    | $      | 3,903 |   |   | $ | (1,746 | ) |   | $ | 11,609 |   |   | $ | 22,478 |   |   | $ | 2,599 |   |   | $ | (1,535 | ) |   | $ | 12,237 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOTE:      Because of the seasonal nature of our business, statements for the 3-month      periods are not indicative of the results for a full year. |   |

----

----

----

| ExhibitNumber                                        | Description                                                                                                         | Reference                                                                                                                                                   |
|------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (3)(a)                                         |  Certificate      of Incorporation of South Jersey Gas Company.                                                |  Incorporated      by reference from Exhibit (3)(a) ofForm      10-K filed March 7, 1997.                                                              |
|  (3)(b)                                         |  Bylaws      of South Jersey Gas Company, as amended and restated through May 25,      2007.              |              Incorporated by reference from Exhibit (3)(b) of    Form      10-K filed March 6, 2007. |
|  (4)(a)                                         |  Form      of Stock Certificate for Common Stock.                                                              |  Incorporated      by reference from Exhibit (4)(a) of Form 10 filed      March 7, 1997.                                                          |
|  (4)(b)(i)                                      |  First      Mortgage Indenture dated October 1, 1947.                                                          |  Incorporated      by reference from Exhibit (4)(b)(i) of Form      10-K of SJI for 1987 (1-6364).                                                |
|  (4)(b)(ii)                                     |  Nineteenth      Supplemental Indenture dated as of April 1, 1992.                                             |  Incorporated      by reference from Exhibit (4)(b)(xvii) ofForm      10-K of SJI for 1992 (1-6364).                                                   |
|  (4)(b)(iii)                                    |  Twenty-First      Supplemental Indenture dated as of March 1, 1997.                                           |  Incorporated      by reference from Exhibit (4)(b)(xviv) ofForm      10-K of SJI for 1997 (1-6364).                                                   |
|  (4)(b)(iv)                                     |  Twenty-Second      Supplemental Indenture dated as of October 1, 1998.                                        |  Incorporated      by reference from Exhibit (4)(b)(ix) of Form      S-3 (333-62019).                                                             |
|  (4)(b)(v)                                      |  Twenty-Third      Supplemental Indenture dated as of September 1, 2002.                                       |  Incorporated      by reference from Exhibit (4)(b)(x) ofForm      S-3 (333-98411)                                                                     |
|             (4)(b)(vi) |             Twenty-Fourth Supplemental Indenture dated as of September 1,      2005.  |           Incorporated by reference from Exhibit (4)(b)(vi) ofForm      S-3 (333-126822).                                               |
|  (4)(b)(vii)                               |  Amendment      to Twenty-Fourth Supplemental Indenture dated as ofMarch      31, 2006.                        |  Incorporated      by reference from Exhibit 4 of Form 8-K                                                                                        |
| (4)(b)(viii)                                         |  Loan      Agreement by and between New Jersey Economic Development Authority as SJG      dated April 1, 2006. |  Incorporated      by reference from Exhibit 10 of Form 8-K of      SJG as filed April 26, 2006.                                                  |
|  (4)(c)(i)                                      |  Medium      Term Note Indenture of Trust dated October 1, 1998.                                               |  Incorporated      by reference from Exhibit (4)(e) of Form S-3  (333-62019).                                                                          |
|  (4)(c)(ii)                                     |  First      Supplement to Indenture of Trust dated as of June 29,2000.                                         |  Incorporated      by reference from Exhibit 4.1 of Form 8-K of      SJG dated July, 12, 2001.                                                    |
|  (4)(c)(iii)                                    |  Second      Supplement to Indenture of Trust dated as of July 5, 2000.                                        |  Incorporated      by reference from Exhibit 4.2 of Form 8-Kof      SJG dated July, 12, 2001.                                                          |
|  (4)(c)(iv)                                     |  Third      Supplement to Indenture of Trust dated as of July 9, 2001.                                         |  Incorporated      by reference from Exhibit 4.3 of Form 8-K of      SJG dated July, 12, 2001.                                                    |

----

| ExhibitNumber      |  Description                                                                                                                                                                          |  Reference                                                                                             |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
|  (10)(a)(i)   |  Gas      storage agreement (GSS) between South Jersey Gas Company and Transco dated      October 1, 1993.                                                                            |  Incorporated      by reference from Exhibit (10)(d) ofForm      10-K of SJI for 1993 (1-6364).        |
|  (10)(a)(ii)  |  Gas      storage agreement (LG-A) between South Jersey Gas Company and Transco      dated June 3, 1974.                                                                         |  Incorporated      by reference from Exhibit (5)(f) ofForm      S-& (2-56233).                     |
|  (10)(a)(iii) |  Gas      storage agreement (WSS) between South Jersey Gas Company and Transco dated      August 1, 1991.                                                                             |  Incorporated      by reference from Exhibit (10)(h) ofForm      10-K for 1991 (1-6364).          |
|  (10)(a)(iv)  |  Gas      storage agreement (LSS) between South Jersey Gas Company and Transco dated      October 1, 1993.                                                                            |  Incorporated      by reference from Exhibit (10)(i) of Form      10-K for 1993 (1-6364).    |
|  (10)(a)(v)   |  Gas      storage agreement (SS-1) between South Jersey Gas Company and Transco      dated May 10, 1987 (effective April 1, 1988).                                                    |  Incorporated      by reference from Exhibit (10)(i)(a) ofForm      10-K for 1988 (1-6364).       |
|  (10)(b)(i)   |  Gas      storage agreement (SS-2) between South Jersey Gas Company and Transco      dated July 25, 1990.                                                                             |  Incorporated      by reference from Exhibit (10)(i)(i) ofForm      10-K for 1991 (1-6364).       |
|  (10)(b)(ii)  |  Gas      transportation service agreement (LG-A) between South Jersey Gas Company      and Transco dated December 20, 1991.                                                          |  Incorporated      by reference from Exhibit (10)(i)(j) ofForm      10-K for 1993 (1-6364).       |
|  (10)(b)(iii) |  Amendment      to gas transportation agreement dated December 20,      1991 between       South Jersey Gas Company and Transco dated  October      5, 1993. |  Incorporated      by reference from Exhibit (10)(i)(k) ofForm      10-K for 1993 (1-6364).       |
|  (10)(b)(iv)  |  CNJEP      Service agreement between South Jersey Gas Company and Transco dated June      27, 2005.                                                                                  |  Incorporated      by reference from Exhibit (10)(i)(l) ofForm      10-K for 2005 (1-6364).       |
|  (10)(b)(v)   |  Gas      transportation service agreement (TF) between South Jersey Gas      Company and CNG Transmission Corporation dated October 1,      1993.                               |  Incorporated      by reference from Exhibit (10)(k)(h)of      Form 10-K for 1993 (1-6364).       |
|  (10)(c)(i)   |  Gas      transportation service agreement (FTS-1) between South Jersey Gas Company      and Columbia Gulf Transmission Company dated November 1,       1993.          |  Incorporated      by reference from Exhibit (10)(k)(k) of      Form 10-K for 1993 (1-6364).      |
|  (10)(c)(ii)  |  FTS      Service Agreement No. 39556 between South Jersey Gas Company and Columbia      Gas Transmission Corporation dated November 1, 1993.                                         |  Incorporated      by reference from Exhibit (10)(k)(m) of      Form 10-K for 1993 (1-6364). |
|  (10)(c)(iii) |  FTS      Service Agreement No. 38099 between South Jersey Gas Company and Columbia      Gas Transmission Corporation dated November 1, 1993.                                         |  Incorporated      by reference from Exhibit (10)(k)(n)of      Form 10-K for 1993 (1-6364).       |
|  (10)(c)(iv)  |  NTS      Service Agreement No. 39305 between South Jersey Gas Company and Columbia      Gas Transmission Corporation dated November 1, 1993.                                         |  Incorporated      by reference from Exhibit (10)(k)(o)of      Form 10-K for 1993 (1-6364).       |
|  (10)(c)(v)   |  FSS      Service Agreement No. 38130 between South Jersey Gas Company and Columbia      Gas Transmission Corporation dated November 1, 1993.                                         |  Incorporated      by reference from Exhibit (10)(k)(p)of      Form 10-K for 1993 (1-6364).       |
|  (10)(d)(i)   |  SST      Service Agreement No. 38086 between South Jersey Gas Company and Columbia      Gas Transmission Corporation dated November 1, 1993.                                         |  Incorporated      by reference from Exhibit (10)(k)(q)of      Form 10-K for 1993 (1-6364).       |

----

| ExhibitNumber           |  Description                                                                                                                                                                                                                                    |  Reference                                                                                               |
|-------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|
|  (10)(h)(i)*       |  Deferred      Payment Plan for Directors of South Jersey Industries, Inc., South Jersey      Gas Company, Energy & Minerals, Inc., R&T Group, Inc. and South      Jersey Energy Company as amended and restated October      21, 1994. |  Incorporated      by reference from Exhibit (10)(l) ofForm      10-K of SJI for 1994 (1-6364).          |
|  (10)(h)(ii)*      |  Schedule      of Deferred Compensation Agreements.                                                                                                                                                                                             |  Incorporated      by reference from Exhibit (10)(l)(b) of      Form 10-K of SJI for 1997 (1-6364). |
|  (10)(h)(iii)*     |  Supplemental      Executive Retirement Program, as amended and restated effective July 1,      1997, and Form of Agreement between certain South Jersey Industries, Inc.      or subsidiary Company officers.                                  |  Incorporated      by reference from Exhibit (10)(l)(i) of      Form 10-K of SJI for 1997 (1-6364). |
|  (10)(h)(iv)*      |  Form      of Officer Employment Agreement between certain officers and either South      Jersey Industries, Inc. or its subsidiaries.                                                                                                          |  Incorporated      by reference from Exhibit (10)(e)(iii)of      Form 10-K of SJI for 2007 (1-6364).     |
|        (10)(h)(v)* |        Schedule      of Officer Employment Agreements.                                                                                                                                                                                          |        Incorporated      by reference from Exhibit (10)(e)(iv) of      Form 10-K of SJI for 2007.   |
|  (10)(h)(vi)*      |  Officer      Severance Benefit Program for all officers.                                                                                                                                                                                       |  Incorporated      by reference from Exhibit (10)(l)(g) of      Form 10-K of SJI for 1985(1-6364).  |
|  (10)(i)(i)        |  Five-year      Revolving Credit Agreement for SJG.                                                                                                                                                                                             |  Incorporated      by reference from Exhibit 10 ofForm      8-K as filed on August 8, 2006.              |
|  (12)              |  Calculation      of Ratio of Earnings to Fixed Charges (Before Federal Income Taxes) (filed      herewith).                                                                                                                                    |                                                                                                          |
|  (14)              |  Code      of Ethics                                                                                                                                                                                                                            |  Incorporated      by reference from Exhibit (14) ofForm      10-K of SJI as filed for 2007.             |
|  (21)              |  Subsidiaries      of the Registrant (filed herewith).                                                                                                                                                                                          |                                                                                                          |
|  (23)              |  Independent      Registered Public Accounting Firm’s Consent (filed      herewith).                                                                                                                                                      |                                                                                                          |

| ExhibitNumber |  Description                                                                                                                    |  Reference |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------|-----------------|
|  (31.1)  |  Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002 (filed herewith). |            |
|  (31.2)  |  Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002 (filed herewith). |            |
|  (32.1)  |  Certification      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley      Act of 2002 (filed herewith). |            |
|  (32.2)  |  Certification      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley      Act of 2002 (filed herewith). |            |

----

----

| Signature                                                                                                    | Title                                                                     | Date                         |
|--------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|------------------------------|
|                                                                                                         |                                                                      |                         |
|                                                                                                         |                                                                      |                         |
|  /s/      Edward J.      Graham             |  Chairman      of the Board, President & Chief Executive Officer |  February      29, 2008 |
|  (Edward      J. Graham)                                                                                | (Principal      Executive Officer)                                        |                         |
|                                                                                                         |                                                                      |                         |
|                                                                                                         |                                                                      |                         |
|  /s/      David A.      Kindlick                      |  Senior      Vice President & Chief Financial Officer            |  February      29, 2008 |
| (David      A. Kindlick)                                                                                     | (Principal      Financial and Accounting Officer)                         |                         |
|                                                                                                         |                                                                      |                         |
|                                                                                                         |                                                                      |                         |
|  /s/      Richard H. Walker, Jr.                                                                        |  Senior      Vice President, General Counsel & Secretary    |  February      29, 2008 |
|  (Richard      H. Walker, Jr.)                                                                          |                                                                      |                         |
|                                                                                                         |                                                                      |                         |
|                                                                                                         |                                                                      |                         |
|  /s/      Shirli M.      Billings                               |  Director                                                            |  February      29, 2008 |
| (Shirli      M. Billings)                                                                                    |                                                                      |                         |

|                                                                      |     |                   |
|---------------------------------------------------------------------------|----------|------------------------|
|                                                                      |     |                   |
| /s/      Sheila Hartnett-Devlin                                           | Director | February      29, 2008 |
| (Sheila      Hartnett-Devlin)                                             |     |                   |
|                                                                      |     |                   |
|                                                                      |     |                   |
|                                                                      |     |                   |
| /s/      William J. Hughes                                                | Director | February      29, 2008 |
| (William      J. Hughes)                                                  |     |                   |
|                                                                      |     |                   |
|                                                                      |     |                   |
|                                                                      |     |                   |
| /s/      Frederick R.    Raring        | Director | February      29, 2008 |
| (Frederick      R. Raring)                                                |     |                   |

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| SCHEDULE      II - VALUATION AND QUALIFYING ACCOUNTS                               |   |
| (In      Thousands)                                                                |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Col.      A                                                                        |   | Col.      B |   |   | Col.      C |   |   | Col.      D |   |   | Col.      E |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   | Additions |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   | Balance      at |   |   | Charged      to |   |   | Charged      to |   |   |   |   |   | Balance      at |   |
|                                                                               |   | Beginning |   |   | Costs      and |   |   | Other      Accounts - |   |   | Deductions      - |   |   | End |   |
| Classification                                                                     |   | of      Period |   |   | Expenses |   |   | Describe      (a) |   |   | Describe      (b) |   |   | of      Period |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for Uncollectible                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      for the Year Ended                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2007                                                             |   | $ | 2,741 |   |   | $ | 2,672 |   |   | $ | 725 |   |   | $ | 2,873 |   |   | $ | 3,265 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for Uncollectible                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      for the Year Ended                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2006                                                             |   | $ | 3,461 |   |   | $ | 1,284 |   |   | $ | (428 | )  |   | $ | 1,576 |   |   | $ | 2,741 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for Uncollectible                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      for the Year Ended                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2005                                                             |   | $ | 2,871 |   |   | $ | 2,073 |   |   | $ | 85 |   |   | $ | 1,568 |   |   | $ | 3,461 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)      Recoveries of accounts previously written off and minor      adjustments. |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (b) Uncollectible accounts      written off.                                       |   |   |   |   |   |   |   |   |   |

----