----

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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      dt             | =      One decatherm                    |
|   | 1      MMdt           | =      One million decatherms           |
|   | Dts/d                 | =      Decatherms per day               |
|   | MDWQ                  | =      Maximum daily withdrawalquantity |

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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 of SJG. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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 net      income. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | 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 would      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 interestrates.  |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The inability to obtain      capital, particularly short-term capital from commercial banks, could      negatively impact the daily operations and financial performance of SJG.      SJG uses short-term borrowings under committed and uncommitted      credit facilities provided by commercial banks to supplement cash provided      by operations, to support working capital needs, and to finance capital      expenditures, as incurred. If the customary      sources of short-term capital were no longer available due to market      conditions, SJG may not be able to meet its working capital and capital      expenditure requirements and borrowing costs could increase.        |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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 ofoperations. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                 |                         | 2008   |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                                                                                                                                                                                                                                                                                                              |                         | $      | 568,046 |   |   | $ | 630,547 |   |   | $ | 642,671 |   |   | $ | 587,212 |   |   | $ | 508,827 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income                                                                                                                                                                                                                                                                                                                                                |                         | $      | 84,417 |   |   | $ | 83,989 |   |   | $ | 81,209 |   |   | $ | 77,676 |   |   | $ | 71,451 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before Preferred Dividend Requirement                                                                                                                                                                                                                                                                                                                    |                         | $      | 39,431 |   |   | $ | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,592 |   |   | $ | 31,597 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Dividend Requirements (1)                                                                                                                                                                                                                                                                                                                             |                         |   | - |   |   |   | -  |   |   |   | - |   |   |   | (45 | ) |   |   | (135 | ) |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income Applicable to Common Stock                                                                                                                                                                                                                                                                                                                           |                         | $      | 39,431 |   |   | $ | 38,025 |   |   | $ | 35,779 |   |   | $ | 34,547 |   |   | $ | 31,462 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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)                                                                                                                                                                                                                                                                                                                          |                         |   | 4.4 | x |   |   | 4.1 | x |   |   | 3.7 | x |   |   | 4.0 | x |   |   | 3.9 | x |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 | As      of December 31,      |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         | 2008   |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,      Plant and Equipment, Net                                                                                                                                                                                                                                                                                                                              |                         | $      | 876,582 |   |   | $ | 847,691 |   |   | $ | 821,833 |   |   | $ | 788,787 |   |   | $ | 732,781 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                                                                                                                                                                                                                                                                                    |                         | $      | 1,354,015 |   |   | $ | 1,227,162 |   |   | $ | 1,228,076 |   |   | $ | 1,170,975 |   |   | $ | 1,007,733 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capitalization:                                                                                                                                                                                                                                                                                                                                                      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Common      Equity (3)                                                                                                                                                                                                                                                                                                                                         |                         | $      | 401,739 |   |   | $ | 378,348 |   |   | $ | 360,353 |   |   | $ | 344,568 |   |   | $ | 302,827 |   |
|  Preferred      Stock (1)                                                                                                                                                                                                                                                                                                                                       |                         |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,690 |   |
|  Long-Term      Debt                                                                                                                                                                                                                                                                                                                                            |                         |   | 269,873 |   |   |   | 294,873 |   |   |   | 294,893 |   |   |   | 272,235 |   |   |   | 282,008 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Total      Capitalization                                                                                                                                                                                                                                                                                                                          |                         | $      | 671,612 |   |   | $ | 673,221 |   |   | $ | 655,246 |   |   | $ | 616,803 |   |   | $ | 586,525 |   |
|  Total      Customers                                                                                                                                                                                                                                                                                                                                           |                         |   | 340,136 |   |   |   | 335,663 |   |   |   | 330,049 |   |   |   | 322,424 |   |   |   | 313,579 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (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 SJI cash contributions to capital as follows: 2008, 2007 and      2006 - none; 2005 - $30.0 million; 2004 - $15.0  million.                                                                                                                                                                                                                    |

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|                                                                                                                                |   | 2008             |   |   | 2007              |   |   | 2006               |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------|-------------------|--------|--------|--------------------|--------|
| Net      Income Benefit:                                                                                                            |   |             |   |   |              |   |   |               |   |
|      TAC                                                                                                   |   |  $          | -      |   |              | $      | -      |               |   | $ | 5.1 |   |
|      CIP      – Weather Related                                                                      |   |             | 1.6    |   |              |   | 1.6    |               |   |   | 2.9 |   |
|      CIP      – Usage Related                                                                        |   |             | 9.2    |   |              |   | 5.9    |               |   |   | 1.7 |   |
|                  Total      Net Income Benefit |   | $                | 10.8   |   |              | $      | 7.5    |               |   | $ | 9.7 |   |
|                                                                                                                                |   |             |   |   |              |   |   |               |   |   |   |   |
|  Weather      Compared to 20-Year TAC Average                                                                                  |   | 4.7%      warmer |   |   | 3.2%      warmer  |   |   | 15.0      % warmer |   |
|  Weather      Compared to Prior Year                                                                                           |   | 1.6%      warmer |   |   | 13.8%      colder |   |   | 17.5      % warmer |   |

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|                                                                         |   | 2008   |    |   | 2007   |   |   | 2006   |   |
|------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Utility Throughput – dth:                                              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Firm      Sales -                                                            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                                    |   |   | 21,530  |   |   |   | 15     | %      |   |   | 22,523 |   |   |   | 16 | % |   |   | 19,830 |   |   |   | 15 | % |
|      Commercial                                     |   |   | 6,127   |   |   |   | 4      | %      |   |   | 6,339 |   |   |   | 4 | % |   |   | 6,958 |   |   |   | 5 | % |
|      Industrial                                     |   |   | 188     |   |   |   | -      |   |   |   | 193 |   |   |   | - |   |   |   | 296 |   |   |   | - |   |
|      Cogeneration      and electric generation |   |   | 561     |   |   |   | -      |   |   |   | 1,335 |   |   |   | 1 | % |   |   | 1,103 |   |   |   | 1 | % |
| Firm      Transportation -                                                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                                    |   |   | 1,988   |   |   |   | 1      | %      |   |   | 1,870 |   |   |   | 1 | % |   |   | 956 |   |   |   | 1 | % |
|      Commercial                                     |   |   | 5,687   |   |   |   | 4      | %      |   |   | 5,927 |   |   |   | 4 | % |   |   | 4,420 |   |   |   | 3 | % |
|      Industrial                                     |   |   | 12,661  |   |   |   | 9      | %      |   |   | 12,107 |   |   |   | 9 | % |   |   | 11,970 |   |   |   | 9 | % |
|      Cogeneration      and electric generation |   |   | 2,536   |   |   |   | 2      | %      |   |   | 3,088 |   |   |   | 2 | % |   |   | 2,625 |   |   |   | 2 | % |
|                                                                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Firm Throughput                     |   |   | 51,278  |   |   |   | 35     | %      |   |   | 53,382 |   |   |   | 37 | % |   |   | 48,158 |   |   |   | 36 | % |
|                                                                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible      Sales                                                     |   |   | 35      |   |   |   | -      |   |   |   | 68 |   |   |   | - |   |   |   | 93 |   |   |   | - |   |
| Interruptible      Transportation                                            |   |   | 2,716   |   |   |   | 2      | %      |   |   | 3,002 |   |   |   | 2 | % |   |   | 3,474 |   |   |   | 3 | % |
| Off-System                                                                   |   |   | 9,632   |   |   |   | 7      | %      |   |   | 17,686 |   |   |   | 13 | % |   |   | 18,221 |   |   |   | 13 | % |
| Capacity      Release                                                        |   |   | 80,665  |   |   |   | 56     | %      |   |   | 67,430 |   |   |   | 48 | % |   |   | 66,458 |   |   |   | 48 | % |
|                                                                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Throughput                          |   |   | 144,326 |   |   |   | 100    | %      |   |   | 141,568 |   |   |   | 100 | % |   |   | 136,404 |   |   |   | 100 | % |

----

| Utility Operating Revenues:                                                                                                                                                    |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
| Firm      Sales-                                                                                                                                                               |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |
|      Residential                                                                                                                                      |   | $      | 320,401 |   |   |   | 57     | %      |   | $      | 342,809 |   |   |   | 54     | %      |   | $      | 334,201 |   |   |   | 52 | % |
|      Commercial                                                                                                                                       |   |   | 81,914  |   |   |   | 15     | %      |   |   | 80,237  |   |   |   | 13     | %      |   |   | 99,578 |   |   |   | 15 | % |
|      Industrial                                                                                                                                       |   |   | 5,434   |   |   |   | 1      | %      |   |   | 8,381   |   |   |   | 1      | %      |   |   | 6,590 |   |   |   | 1 | % |
|      Cogeneration      and electric generation                                                                                                   |   |   | 7,940   |   |   |   | 1      | %      |   |   | 11,722  |   |   |   | 2      | %      |   |   | 10,746 |   |   |   | 2 | % |
| Firm      Transportation -                                                                                                                                                     |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Residential                                                                                                                                      |   |   | 10,408  |   |   |   | 2      | %      |   |   | 8,982   |   |   |   | 1      | %      |   |   | 4,768 |   |   |   | 1 | % |
|      Commercial                                                                                                                                       |   |   | 18,286  |   |   |   | 3      | %      |   |   | 17,299  |   |   |   | 3      | %      |   |   | 12,510 |   |   |   | 2 | % |
|      Industrial                                                                                                                                       |   |   | 12,504  |   |   |   | 2      | %      |   |   | 12,229  |   |   |   | 2      | %      |   |   | 11,351 |   |   |   | 2 | % |
|      Cogeneration      and electric generation                                                                                                   |   |   | 1,682   |   |   |   | -      |   |   |   | 1,847   |   |   |   | -      |   |   |   | 1,552 |   |   |   | - |   |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total      Firm Revenues                                                                                                                         |   |   | 458,569 |   |   |   | 81     | %      |   |   | 483,506 |   |   |   | 76     | %      |   |   | 481,296 |   |   |   | 75 | % |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible      Sales                                                                                                                                                       |   |   | 403     |   |   |   | -      |   |   |   | 785     |   |   |   | -      |   |   |   | 1,109 |   |   |   | - |   |
| Interruptible      Transportation                                                                                                                                              |   |   | 1,786   |   |   |   | -      |   |   |   | 1,970   |   |   |   | -      |   |   |   | 1,868 |   |   |   | - |   |
| Off-System                                                                                                                                                                     |   |   | 90,430  |   |   |   | 16     | %      |   |   | 131,586 |   |   |   | 22     | %      |   |   | 147,180 |   |   |   | 23 | % |
| Capacity      Release                                                                                                                                                          |   |   | 15,549  |   |   |   | 3      | %      |   |   | 11,208  |   |   |   | 2      | %      |   |   | 9,656 |   |   |   | 2 | % |
| Other                                                                                                                                                                          |   |   | 1,309   |   |   |   | -      |   |   |   | 1,492   |   |   |   | -      |   |   |   | 1,562 |   |   |   | - |   |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Utility Operating Revenues                                                                                                                                     |   |   | 568,046 |   |   |   | 100    | %      |   |   | 630,547 |   |   |   | 100    | %      |   |   | 642,671 |   |   |   | 100 | % |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                                                                                          |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of sales                                                                                                                                                             |   |   | 383,403 |   |   |   |   |   |   |   | 453,034 |   |   |   |   |   |   |   | 472,286 |   |   |   |   |   |
| Conservation      recoveries *                                                                                                                                                 |   |   | 7,741   |   |   |   |   |   |   |   | 4,458   |   |   |   |   |   |   |   | 6,862 |   |   |   |   |   |
| RAC      recoveries *                                                                                                                                                          |   |   | 3,079   |   |   |   |   |   |   |   | 2,056   |   |   |   |   |   |   |   | 1,807 |   |   |   |   |   |
|     Revenue      taxes                                                                                                                                     |   |   | 8,656   |   |   |   |   |   |   |   | 8,850   |   |   |   |   |   |   |   | 7,890 |   |   |   |   |   |
| Utility      Margin                                                                                                                                                            |   | $      | 165,167 |   |   |   |   |   |   | $      | 162,149 |   |   |   |   |   |   | $      | 153,826 |   |   |   |   |   |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Margin:                                                                                                                                                                        |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                                                    |   | $      | 99,862  |   |   |   | 61     | %      |   | $      | 102,077 |   |   |   | 63     | %      |   | $      | 90,442 |   |   |   | 59 | % |
| Commercial      and industrial                                                                                                                                                 |   |   | 38,995  |   |   |   | 24     | %      |   |   | 40,036  |   |   |   | 25     | %      |   |   | 38,129 |   |   |   | 25 | % |
| Cogeneration      and electric generation                                                                                                                                 |   |   | 1,997   |   |   |   | 1      | %      |   |   | 2,212   |   |   |   | 1      | %      |   |   | 2,189 |   |   |   | 1 | % |
| Interruptible                                                                                                                                                                  |   |   | 143     |   |   |   | -      |   |   |   | 195     |   |   |   | -      |   |   |   | 226 |   |   |   | - |   |
| Off-system      & capacity release                                                                                                                                         |   |   | 3,349   |   |   |   | 2      | %      |   |   | 2,994   |   |   |   | 2      | %      |   |   | 4,711 |   |   |   | 3 | % |
| Other      revenues                                                                                                                                                            |   |   | 2,440   |   |   |   | 1      | %      |   |   | 1,952   |   |   |   | 1      | %      |   |   | 1,871 |   |   |   | 1 | % |
| Margin      before weather normalization & decoupling                                                                                                                      |   |   | 146,786 |   |   |   | 89     | %      |   |   | 149,466 |   |   |   | 92     | %      |   |   | 137,568 |   |   |   | 89 | % |
| TAC      mechanism                                                                                                                                                             |   |   | -       |   |   |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | 8,511 |   |   |   | 6 |   |
| CIP      mechanism                                                                                                                                                             |   |   | 18,381  |   |   |   | 11     | %      |   |   | 12,683  |   |   |   | 8      | %      |   |   | 7,747 |   |   |   | 5 |   |
| Utility      Margin                                                                                                                                                            |   | $      | 165,167 |   |   |   | 100    | %      |   | $      | 162,149 |   |   |   | 100    | %      |   | $      | 153,826 |   |   |   | 100 | % |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number of Customers at Year      End:                                                                                                                                          |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                                                                                                                                                                    |   |   | 317,026 |   |   |   | 93     | %      |   |   | 312,969 |   |   |   | 93     | %      |   |   | 307,919 |   |   |   | 93 | % |
| Commercial                                                                                                                                                                     |   |   | 22,636  |   |   |   | 7      | %      |   |   | 22,220  |   |   |   | 7      | %      |   |   | 21,652 |   |   |   | 7 | % |
| Industrial                                                                                                                                                                     |   |   | 474     |   |   |   | -      |   |   |   | 474     |   |   |   | -      |   |   |   | 478 |   |   |   | - |   |
|         Total      Customers                                                                                                           |   |   | 340,136 |   |   |   | 100    | %      |   |   | 335,663 |   |   |   | 100    | %      |   |   | 330,049 |   |   |   | 100 | % |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Annual      Degree Days:                                                                                                                                                       |   |   | 4,417   |   |   |   |   |   |   |   | 4,488   |   |   |   |   |   |   |   | 3,943 |   |   |   |   |   |
|                                                                                                                                                                           |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *      Represents expenses for which there is a corresponding credit in operating      revenues. Therefore, such recoveries have no impact on our financial      results. |   |

----

----

|                        |   | 2008      vs. 2007 |   |    | 2007      vs. 2006 |   |
|-----------------------------|--------|--------------------|--------|---------|--------------------|--------|
|                        |   |               |   |    |               |   |
| Operations                  |   | $                  | 4,375  |    |               | $      | 1,745 |   |
| Maintenance                 |   |               | 1,554  |    |               |   | 807 |   |
| Depreciation                |   |               | 975    |    |               |   | 1,106 |   |
| Energy      and Other Taxes |   |               | (202   | )  |               |   | 690 |   |

----

----

|                 |   | 2008   |   |   | 2007   |   |
|----------------------|--------|--------|--------|--------|--------|--------|
|                 |   |   |   |   |   |   |
| Common Equity   |   |   | 49.5   | %      |   |   | 50.3 | % |
| Long-Term      Debt  |   |   | 36.4   | %      |   |   | 39.3 | % |
| Short-Term      Debt |   |   | 14.1   | %      |   |   | 10.4 | % |
|                 |   |   |   |   |   |   |   |   |
| Total                |   |   | 100.0  | %      |   |   | 100.0 | % |

----

|                                          |   |   |    |   | Up      to  |   |   | Years          |   |   | Years          |   |   | More      than |   |
|-----------------------------------------------|--------|--------|---------|--------|-------------|--------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
| Contractual CashObligations                   |   | Total  |    |   | 1      Year |   |   | 2      & 3 |   |   | 4      & 5 |   |   | 5      Years   |   |
|                                          |   |   |    |   |        |   |   |           |   |   |           |   |   |           |   |
| Principal      Payments on Long-Term Debt     |   | $      | 294,873 |   |        | $      | 25,000 |           |   | $      | 35,000         |   |   | $              | 29,375 |   |   | $ | 205,498 |   |
| Interest      on Long-Term Debt               |   |   | 200,643 |   |        |   | 16,993 |           |   |   | 33,375         |   |   |           | 29,107 |   |   |   | 121,168 |   |
| Operating      Leases                         |   |   | 141     |   |        |   | 70     |           |   |   | 71             |   |   |           | -      |   |   |   | - |   |
| Construction      Obligations                 |   |   | 872     |   |        |   | 872    |           |   |   | -              |   |   |           | -      |   |   |   | - |   |
| Commodity      Supply Purchase Obligations    |   |   | 156,986 |   |        |   | 43,869 |           |   |   | 39,758         |   |   |           | 18,642 |   |   |   | 54,717 |   |
| New      Jersey Clean Energy Program (Note 2) |   |   | 41,760  |   |        |   | 8,643  |           |   |   | 20,139         |   |   |           | 12,978 |   |   |   | - |   |
| Other      Purchase Obligations               |   |   | 269     |   |        |   | 269    |           |   |   | -              |   |   |           | -      |   |   |   | - |   |
|                                          |   |   |    |   |        |   |   |           |   |   |           |   |   |           |   |   |   |   |   |   |
| Total      Contractual Cash Obligations       |   | $      | 695,544 |   |        | $      | 95,716 |           |   | $      | 128,343        |   |   | $              | 90,102 |   |   | $ | 381,383 |   |

----

| Assets:                             |                      |   | Maturity        |   |   | Maturity         |   |   |   |   |
|-------------------------------------|---------------------------|--------|-----------------|--------|--------|------------------|--------|--------|--------|--------|
|                                | Source      of Fair Value |   | <1      Year |   |   | 1 -      3 Years |   |   | Total  |   |
|                                |                      |   |            |   |   |             |   |   |   |   |
| Prices      Actively Quoted         | NYMEX                     |   | $               | 345    |   |             | $      | 15     |   |   | $ | 360 |   |
| Other      External Sources         | Basis                     |   |            | 35     |   |             |   | -      |   |   |   | 35 |   |
|      Total |                      |   | $               | 380    |   |             | $      | 15     |   |   | $ | 395 |   |
|                                |                      |   |            |   |   |             |   |   |   |   |   |   |   |
| Liabilities:                        |                      |   | Maturity        |   |   | Maturity         |   |   |   |   |   |
|                                | Source      of Fair Value |   | <1      Year |   |   | 1 -      3 Years |   |   | Total  |   |
|                                |                      |   |            |   |   |             |   |   |   |   |   |   |   |
| Prices      Actively Quoted         | NYMEX                     |   | $               | 26,178 |   |             | $      | 2,667  |   |   | $ | 28,845 |   |
| Other      External Sources         | Basis                     |   |            | 520    |   |             |   | -      |   |   |   | 520 |   |
|      Total |                      |   | $               | 26,698 |   |             | $      | 2,667  |   |   | $ | 29,365 |   |

| Net      Derivatives — Energy Related Liability, January 1, 2008                                   |   | $      | (2,092  | )  |
|----------------------------------------------------------------------------------------------------------|--------|--------|---------|---------|
|      Contracts      Settled During 2008, Net                                    |   |   | 2,224   |    |
|      Other      Changes in Fair Value from Continuing and New Contracts,    Net |   |   | (29,102 | )  |
| Net      Derivatives — Energy Related Liability, December 31, 2008                                 |   | $      | (28,970 | )  |

----

----

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| STATEMENTS      OF INCOME                                                          |   |
| (In      Thousands)                                                                |   |
|                                                                               |   | Year      Ended December 31, |   |
|                                                                               |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                            |   | $ | 568,046 |   |   | $ | 630,547 |   |   | $ | 642,671 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Expenses:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of Sales (Excluding depreciation)                                        |   |   | 383,403 |   |   |   | 453,034 |   |   |   | 472,286 |   |
| Operations                                                                         |   |   | 56,111 |   |   |   | 51,736 |   |   |   | 49,991 |   |
| Maintenance                                                                        |   |   | 7,899 |   |   |   | 6,345 |   |   |   | 5,538 |   |
| Depreciation                                                                       |   |   | 25,589 |   |   |   | 24,614 |   |   |   | 23,508 |   |
| Energy      and Other Taxes                                                        |   |   | 10,627 |   |   |   | 10,829 |   |   |   | 10,139 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Operating Expenses                                                      |   |   | 483,629 |   |   |   | 546,558 |   |   |   | 561,462 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income                                                              |   |   | 84,417 |   |   |   | 83,989 |   |   |   | 81,209 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income and Expense                                                      |   |   | 459 |   |   |   | 1,673 |   |   |   | 1,480 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Charges                                                              |   |   | (18,937 | ) |   |   | (20,985 | ) |   |   | (22,099 | ) |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Income Taxes                                                    |   |   | 65,939 |   |   |   | 64,677 |   |   |   | 60,590 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Taxes                                                                  |   |   | (26,508 | ) |   |   | (26,652 | ) |   |   | (24,811 | ) |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                    |   | $ | 39,431 |   |   | $ | 38,025 |   |   | $ | 35,779 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| 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, |   |
|                                                                                                    |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Operating Activities:                                                              |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                                         |   | $ | 39,431 |   |   | $ | 38,025 |   |   | $ | 35,779 |   |
| Provided      by Operating Activities:                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization                                                                      |   |   | 31,506 |   |   |   | 29,317 |   |   |   | 28,140 |   |
| Provision      for Losses on Accounts Receivable                                                        |   |   | 2,281 |   |   |   | 2,672 |   |   |   | 1,284 |   |
| TAC/CIP      Receivable                                                                                 |   |   | 2,641 |   |   |   | (7,946 | )  |   |   | (15,740 | )  |
| Deferred      Gas Costs - Net of Recoveries                                                             |   |   | 5,885 |   |   |   | 7,755 |   |   |   | 18,694 |   |
| Deferred      SBC Costs - Net of Recoveries                                                             |   |   | 1,199 |   |   |   | 3,960 |   |   |   | (4,221 | )  |
| Environmental      Remediation Costs - Net of Recoveries                                                |   |   | (26,177 | ) |   |   | (10,926 | ) |   |   | (10,840 | ) |
| Deferred      and Noncurrent Income Taxes and Credits - Net                                             |   |   | 21,378 |   |   |   | 12,957 |   |   |   | 4,426 |   |
| Gas      Plant Cost of Removal                                                                          |   |   | (1,463 | ) |   |   | (1,275 | ) |   |   | (1,369 | ) |
| Changes      in:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts      Receivable                                                                                |   |   | (4,531 | )  |   |   | (8,528 | )  |   |   | 9,658 |   |
| Inventories                                                                                             |   |   | (18,659 | )  |   |   | 24,884 |   |   |   | 11,099 |   |
| Prepaid      and Accrued Taxes - Net                                                                    |   |   | (1,657 | )  |   |   | (2,099 | )  |   |   | 4,997 |   |
| Other      Prepayments and Current Assets                                                               |   |   | (138 | )  |   |   | (14 | )  |   |   | 594 |   |
| Gas      Purchases Payable                                                                              |   |   | 1,717 |   |   |   | (8,817 | )  |   |   | (40,270 | )  |
| Accounts      Payable and Other Accrued Liabilities                                                     |   |   | (13,857 | )  |   |   | 9,787 |   |   |   | 11,605 |   |
| Other      Assets                                                                                       |   |   | (375 | )  |   |   | (121 | )  |   |   | 1,978 |   |
| Other      Liabilities                                                                                  |   |   | (8,920 | ) |   |   | (272 | )  |   |   | (5,120 | )  |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash Provided by Operating Activities                                                    |   |   | 30,261 |   |   |   | 89,359 |   |   |   | 50,694 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Investing Activities:                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      Expenditures                                                                               |   |   | (52,580 | ) |   |   | (48,070 | ) |   |   | (61,440 | ) |
| Investment      in Long-Term Receivables                                                                |   |   | (5,558 | )  |   |   | (4,123 | )  |   |   | (3,342 | ) |
| Proceeds      from Long-Term Receivables                                                                |   |   | 3,399 |   |   |   | 3,877 |   |   |   | 3,707 |   |
| Purchase      of Restricted Investment with Escrowed Loan Proceeds                                      |   |   | (39 | ) |   |   | (363 | )  |   |   | (14,661 | )  |
|     Proceeds      from Sale of Restricted Investment from Escrowed Loan    Proceeds |   |   | 2,146 |   |   |   | 6,710 |   |   |   | 6,075 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash Used in Investing Activities                                                        |   |   | (52,632 | ) |   |   | (41,969 | ) |   |   | (69,661 | ) |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flows from Financing Activities:                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Borrowing from (Repayments of) Lines of Credit                                                 |   |   | 36,210 |   |   |   | (25,160 | )  |   |   | 16,500 |   |
| Proceeds      from Issuance of Long-Term Debt                                                           |   |   | 25,000 |   |   |   | - |   |   |   | 25,000 |   |
| Principal      Repayments of Long-Term Debt                                                             |   |   | (25,000 | ) |   |   | (2,290 | ) |   |   | (2,345 | ) |
| Dividends      on Common Stock                                                                          |   |   | (14,867 | ) |   |   | (18,732 | ) |   |   | (19,902 | ) |
| Payments      for Issuance of Long-Term Debt                                                            |   |   | (320 | )  |   |   | - |   |   |   | (1,051 | ) |
| Excess      Tax Benefit from Restricted Stock Plan                                                      |   |   | 346 |   |   |   | 55 |   |   |   | 181 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net      Cash Provided by (Used in)  Financing Activities                               |   |   | 21,369 |   |   |   | (46,127 | )  |   |   | 18,383 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (Decrease) Increase  in Cash and Cash      Equivalents                          |   |   | (1,002 | )  |   |   | 1,263 |   |   |   | (584 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                                   |   |   | 3,230 |   |   |   | 1,967 |   |   |   | 2,551 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents at End of Period                                                         |   | $ | 2,228 |   |   | $ | 3,230 |   |   | $ | 1,967 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      Disclosures of Cash Flow Information:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      (Net of Amounts Applicable to Gas Cost                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Overcollections      and Amounts Capitalized)                                                           |   | $ | 19,550 |   |   | $ | 20,863 |   |   | $ | 21,832 |   |
| Income      Taxes (Net of Refunds)                                                                      |   | $ | 7,315 |   |   | $ | 15,684 |   |   | $ | 11,309 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      Disclosures of Noncash Investing Activities:                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      property and equipment acquired on                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| account      but not paid at year-end                                                                   |   | $ | 7,590 |   |   | $ | 4,182 |   |   | $ | 2,819 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements.                      |   |   |   |   |   |   |   |   |   |   |   |   |

----

| SOUTH      JERSEY GAS COMPANY                                                      |   |
|------------------------------------------------------------------------------------|--------|
| BALANCE      SHEETS                                                                |   |
| (In      Thousands)                                                                |   |
|                                                                               |   | December      31, |   |
|                                                                               |   | 2008 |   |   | 2007 |   |
| Assets                                                                             |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |
| Property,      Plant and Equipment:                                                |   |   |   |   |   |   |
| Utility      Plant, at original cost                                               |   | $ | 1,172,014 |   |   | $ | 1,123,992 |   |
| Accumulated      Depreciation                                                      |   |   | (295,432 | ) |   |   | (276,301 | ) |
|                                                                               |   |   |   |   |   |   |   |   |
| Property,      Plant and Equipment – Net                                     |   |   | 876,582 |   |   |   | 847,691 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Investments:                                                                       |   |   |   |   |   |   |   |   |
| Available-for-Sale      Securities                                                 |   |   | 4,841 |   |   |   | 6,714 |   |
| Restricted      Investments                                                        |   |   | 132 |   |   |   | 2,239 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Investments                                                             |   |   | 4,973 |   |   |   | 8,953 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Current      Assets:                                                               |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents                                                     |   |   | 2,228 |   |   |   | 3,230 |   |
| Accounts      Receivable                                                           |   |   | 47,787 |   |   |   | 48,984 |   |
| Accounts      Receivable - Related Parties                                         |   |   | 624 |   |   |   | 2,267 |   |
| Unbilled      Revenues                                                             |   |   | 48,225 |   |   |   | 41,576 |   |
| Provision      for Uncollectibles                                                  |   |   | (3,628 | ) |   |   | (3,265 | ) |
| Natural      Gas in Storage, average cost                                          |   |   | 65,252 |   |   |   | 56,404 |   |
| Materials      and Supplies, average cost                                          |   |   | 11,247 |   |   |   | 1,436 |   |
| Prepaid      Taxes                                                                 |   |   | 11,860 |   |   |   | 10,849 |   |
| Derivatives      - Energy Related Assets                                           |   |   | 380 |   |   |   | 2,236 |   |
| Other      Prepayments and Current Assets                                          |   |   | 2,416 |   |   |   | 2,278 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Current Assets                                                          |   |   | 186,391 |   |   |   | 165,995 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Regulatory      and Other Noncurrent Assets:                                       |   |   |   |   |   |   |   |   |
| Regulatory      Assets                                                             |   |   | 270,434 |   |   |   | 188,688 |   |
| Unamortized      Debt Issuance Costs                                               |   |   | 6,147 |   |   |   | 6,307 |   |
| Prepaid      Pension                                                               |   |   | - |   |   |   | 1,472 |   |
| Long-Term      Receivables                                                         |   |   | 7,081 |   |   |   | 6,118 |   |
| Derivatives      - Energy Related Assets                                           |   |   | 15 |   |   |   | 93 |   |
| Other                                                                              |   |   | 2,392 |   |   |   | 1,845 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Regulatory and Other Noncurrent Assets                                  |   |   | 286,069 |   |   |   | 204,523 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Assets                                                                  |   | $ | 1,354,015 |   |   | $ | 1,227,162 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| 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, |   |
|                                                                               |   | 2008 |   |   | 2007 |   |
|                                                                               |   |   |   |   |   |   |
| 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                             |   |   | 200,663 |   |   |   | 200,317 |   |
| Accumulated      Other Comprehensive Loss                                          |   |   | (6,875 | ) |   |   | (5,356 | ) |
| Retained      Earnings                                                             |   |   | 202,103 |   |   |   | 177,539 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Common Equity                                                           |   |   | 401,739 |   |   |   | 378,348 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Long-Term      Debt                                                                |   |   | 269,873 |   |   |   | 294,873 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Capitalization                                                          |   |   | 671,612 |   |   |   | 673,221 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Current      Liabilities:                                                          |   |   |   |   |   |   |   |   |
| Notes      Payable                                                                 |   |   | 114,550 |   |   |   | 78,340 |   |
| Current      Portion of Long-Term Debt                                             |   |   | 25,000 |   |   |   | - |   |
| Accounts      Payable – Commodity                                            |   |   | 36,587 |   |   |   | 34,870 |   |
| Accounts      Payable – Other                                                |   |   | 12,051 |   |   |   | 13,650 |   |
| Accounts      Payable - Related Parties                                            |   |   | 16,744 |   |   |   | 22,417 |   |
| Derivatives      - Energy Related Liabilities                                      |   |   | 26,698 |   |   |   | 4,360 |   |
| Deferred      Income Taxes – Net                                             |   |   | 12,475 |   |   |   | 11,582 |   |
| Customer      Deposits and Credit Balances                                         |   |   | 14,219 |   |   |   | 18,067 |   |
| Environmental      Remediation Costs                                               |   |   | 13,117 |   |   |   | 25,447 |   |
| Taxes      Accrued                                                                 |   |   | 2,291 |   |   |   | 2,937 |   |
| Pension      Benefits                                                              |   |   | 991 |   |   |   | 765 |   |
| Interest      Accrued                                                              |   |   | 6,244 |   |   |   | 6,245 |   |
| Other      Current Liabilities                                                     |   |   | 6,449 |   |   |   | 5,777 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Current Liabilities                                                     |   |   | 287,416 |   |   |   | 224,457 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Regulatory      and Other Noncurrent Liabilities:                                  |   |   |   |   |   |   |   |   |
| Regulatory      Liabilities                                                        |   |   | 50,447 |   |   |   | 55,779 |   |
| Deferred      Income Taxes – Net                                             |   |   | 187,050 |   |   |   | 168,254 |   |
| Environmental      Remediation Costs                                               |   |   | 50,976 |   |   |   | 48,433 |   |
| Asset      Retirement Obligations                                                  |   |   | 22,299 |   |   |   | 24,364 |   |
| Pension      and Other Postretirement Benefits                                     |   |   | 67,566 |   |   |   | 24,682 |   |
| Investment      Tax Credits                                                        |   |   | 1,832 |   |   |   | 2,149 |   |
| Derivatives      - Energy Related Liabilities                                      |   |   | 2,667 |   |   |   | 61 |   |
| Derivatives      – Other                                                     |   |   | 7,578 |   |   |   | 618 |   |
| Other                                                                              |   |   | 4,572 |   |   |   | 5,144 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total Regulatory      and Other Noncurrent Liabilities                        |   |   | 394,987 |   |   |   | 329,484 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Commitments      and Contingencies (Note 12)                                       |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |
| Total      Capitalization and Liabilities                                          |   | $ | 1,354,015 |   |   | $ | 1,227,162 |   |
|                                                                               |   |   |   |   |   |   |   |   |
| 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      Capitaland      Premium onCommon      Stock |   |   | Accumulated      Other Comprehensive Loss |   |   | RetainedEarnings |   |   | Total |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2006                                                    |   | $ | 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 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 |   |
| Net      Income                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 39,431 |   |   |   | 39,431 |   |
| Other      Comprehensive Income (Loss), Net of Tax (a)                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Postretirement       Liability Adjustment                                     |   |   |   |   |   |   |   |   |   |   | (1,181 | ) |   |   |   |   |   |   | (1,181 | ) |
| Unrealized      Loss on Available-for-Sale Securities                              |   |   |   |   |   |   |   |   |   |   | (731 | ) |   |   |   |   |   |   | (731 | ) |
| Unrealized      Gain on Derivatives                                                |   |   |   |   |   |   |   |   |   |   | 393 |   |   |   |   |   |   |   | 393 |   |
| Other      Comprehensive Loss, Net of Tax (a)                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,519 | )  |
| Comprehensive      Income                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 37,912 |   |
| Cash      Dividends Declared - Common Stock                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (14,867 | ) |   |   | (14,867 | ) |
|  Excess      Tax Benefit from Restricted Stock Plan                           |   |   |   |   |   |   | 346 |   |   |   |   |   |   |   |   |   |   |   | 346 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                                                  |   | $ | 5,848 |   |   | $ | 200,663 |   |   | $ | (6,875 | ) |   | $ | 202,103 |   |   | $ | 401,739 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Disclosure of Changes in Accumulated Other      Comprehensive Loss Balances (a)    |
| (In      Thousands)                                                                |
|                                                                               |   |   |   |   |   | PostretirementLiabilityAdjustment |   |   | Unrealized (Loss)      Gain on Available-for-Sale Securities |   |   | Unrealized      Gain (Loss) on Derivatives |   |   | Accumulated      Other Comprehensive Loss |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2006                                                    |   |   |   |   |   | $ | (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 | ) |
| Changes      During Year                                                           |   |   |   |   |   |   | (1,181 | ) |   |   | (731 | ) |   |   | 393 |   |   |   | (1,519 | ) |
| Balance      at December 31, 2008                                                  |   |   |   |   |   | $ | (5,428 | ) |   | $ | (718 | )  |   | $ | (729 | ) |   | $ | (6,875 | ) |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)       Determined using a combined statutory tax rate of 41.08%.           |   |   |   |   |   |
| (b)       Due to the implementation of FIN 48.  See Note 1.              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of the financial      statements. |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                          |   | 2008   |      |   | 2007   |   |
|-------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Utility      Plant:                                                           |   |   |      |   |   |   |
| Production      Plant                                                         |   | $      | 302       |   |   | $      | 302 |   |
| Storage      Plant                                                            |   |   | 11,543    |   |   |   | 11,582 |   |
| Transmission      Plant                                                       |   |   | 151,546   |   |   |   | 149,542 |   |
| Distribution      Plant                                                       |   |   | 959,807   |   |   |   | 919,205 |   |
| General      Plant                                                            |   |   | 41,122    |   |   |   | 37,136 |   |
| Other Plant                                                         |   |   | 3,665     |   |   |   | 3,665 |   |
|         Utility      Plant in Service |   |   | 1,167,985 |   |   |   | 1,121,432 |   |
| Construction      Work in Progress                                            |   |   | 4,029     |   |   |   | 2,560 |   |
|                                                                          |   |   |      |   |   |   |   |   |
|         Total      Utility Plant      |   | $      | 1,172,014 |   |   | $      | 1,123,992 |   |

----

|                                                                                                          |   | 2008   |   |   | 2007   |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| AROs      as of January 1,                                                                                    |   | $      | 24,364 |   |   | $      | 23,743 |   |
|      Accretion                                                                       |   |   | 427    |   |   |   | 498 |   |
|      Additions                                                                       |   |   | 136    |   |   |   | 174 |   |
|      Settlements                                                                     |   |   | (37    | )      |   |   | (51 | ) |
|      Revisions      in Estimated Cash Flows *                                        |   |   | (2,591 | )      |   |   | - |   |
| AROs      as of December 31,                                                                                  |   | $      | 22,299 |   |   | $      | 24,364 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |
| * A      corresponding reduction was made to Regulatory Assets, thus having no      impact on  Earnings. |

----

----

| Grant          |   | Shares      |   |   | Fair      Value |   |   | Expected   |   |   | Risk-Free          |   |
|----------------|--------|-------------|--------|--------|-----------------|--------|--------|------------|--------|--------|--------------------|--------|
| Date           |   | Outstanding |   |   | Per      Share  |   |   | Volatility |   |   | Interest      Rate |   |
|           |   |        |   |   |            |   |   |       |   |   |               |   |
| Jan.      2007 |   |        | 9,045  |   |            | $      | 29.210 |       |   |   | 18.5               | %      |   |   | 4.9 | % |
| Jan.      2008 |   |        | 9,238  |   |            | $      | 34.030 |       |   |   | 21.7               | %      |   |   | 2.9 | % |

|                                                                                                                                                                                                                 |   |   |   | Weighted      Average |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------|--------|
|                                                                                                                                                                                                                 |   |   |   | Grant      Date       |   |
|                                                                                                                                                                                                                 | Shares |   |   | Fair      Value       |   |
| Nonvested      Shares Outstanding, January 1, 2008                                                                                                                                                                   |   |   | 17,976 |                  |   | $ | 28.618 |   |
| Granted                                                                                                                                                                                                              |   |   | 10,000 |                  |   |   | 34.030 |   |
| Vested*                                                                                                                                                                                                              |   |   | (8,234 | )                     |   |   | 27.950 |   |
| Forfeited                                                                                                                                                                                                            |   |   | (1,459 | )                     |   |   | 31.541 |   |
| Nonvested      Shares Outstanding, December 31, 2008                                                                                                                                                                 |   |   | 18,283 |                  |   | $ | 31.645 |   |
|                                                                                                                                                                                                                 |   |   |   |                  |   |   |   |   |
| * Actual      shares expected to be awarded to officers during the first quarter of      2009, including dividend equivalents and   adjustments for      performance measures, totaled 13,640 shares. |   |

----

----

|   | · | 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      continued through the 2008 summer injection period. Any party to this      settlement may request that the BPU terminate this program after October      31, 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 2008, 2007 and 2006 were $5.7 million, $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. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | May      2008 - We made our annual periodic BGSS filing with the BPU requesting a      $73.7 million, or 23%, increase in gas cost recoveries in response to      increasing wholesale gas costs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | November      2008 – The BPU approved, on a provisional basis, a $38.0 million, or 12%      increase in gas cost recoveries reflecting a lower increase in gas costs      than originally projected in our May 2008  filing. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | December      2008 - As part of a global settlement, the BPU approved on a provisional      basis, a decrease in gas cost recoveries of $9.0 million, or 3%, due to      the continued decline in projections in the wholesale gas      market. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | 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. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | December      2008 –The regulatory asset related to the TAC was completely recovered and      as part of a global settlement, the BPU approved the suspension of the TAC      rate which resulted in a decrease of $9.3 million in annual      revenues. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | June      2007 – We made our first annual CIP filing, requesting recovery of $14.3      million in deficiency, of which $9.6 million was non-weather      related. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | May      2008 - We made our annual CIP filing, requesting recovery of $19.1      million, of which $14.1 million was non-weather  related. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | December      2008 - As part of a global settlement, the BPU approved, on a provisional      basis, the recovery of CIP revenue of $20.4 million, of which $16.4      million was non-weather related. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | December      2008 – As part of the global settlement, the BPU approved an increase in      the RAC portion of the SBC, resulting in an increase in revenue of $8.5      million.  In addition, the BPU approved a reduction in the      interest rate utilized to calculate deferred tax on the    RAC. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | 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 were designed to      decrease our annual USF revenues by $3.4 million.  The revised      rates were effective from October 5, 2007 through September 30,      2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | June      2008 – We made our annual USF filing, along with the state’s other      electric and gas utilities, proposing to increase annual statewide gas      revenues to $97.3 million.  This proposal was designed to      increase our annual USF revenues by $ 2.6  million. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | October      2008 – The BPU approved the statewide budget of $96.7 million for all of      the State’s gas utilities.  Our portion of this total is      approximately $8.8 million and increased rates were implemented effective      October 27, 2008 resulting in a $2.5 million increase to our annual USF      recoveries. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Regulatory      Assets at December 31 consisted of the following items (in      thousands): |   |
|---------------------------------------------------------------------------------------------|--------|
|                                                                                        |   |   |   |   |   |   |
|                                                                                        |   | 2008 |   |   | 2007 |   |
| Environmental      Remediation Costs:Expended      – Net                              |   | $ | 48,143 |   |   | $ | 25,960 |   |
| Liability      for Future Expenditures                                                      |   |   | 64,093 |   |   |   | 73,880 |   |
| Income      Taxes - Flowthrough Depreciation                                                |   |   | 2,729 |   |   |   | 3,707 |   |
| Deferred      Asset Retirement Obligation Costs                                             |   |   | 21,901 |   |   |   | 21,572 |   |
| Deferred      Gas Costs – Net                                                         |   |   | 18,406 |   |   |   | - |   |
| Deferred      Pension and Other Postretirement Benefit Costs                                |   |   | 80,162 |   |   |   | 32,686 |   |
| Temperature      Adjustment Clause Receivable                                               |   |   | - |   |   |   | 6,516 |   |
| Conservation      Incentive Program Receivable                                              |   |   | 22,048 |   |   |   | 18,173 |   |
| Societal      Benefit Costs Receivable                                                      |   |   | 1,753 |   |   |   | 2,952 |   |
| Premium      for Early Retirement of Debt                                                   |   |   | 1,208 |   |   |   | 1,370 |   |
| Other      Regulatory Assets                                                                |   |   | 9,991 |   |   |   | 1,872 |   |
|                                                                                        |   | $ | 270,434 |   |   | $ | 188,688 |   |

----

|                               |   | 2008   |   |   | 2007   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|
| Excess      Plant Removal Costs    |   | $      | 48,820 |   |   | $      | 48,705 |   |
| Liability      for NJCEP           |   |   | -      |   |   |   | 2,797 |   |
| Deferred      Revenues – Net |   |   | -      |   |   |   | 2,586 |   |
| Other                              |   |   | 1,627  |   |   |   | 1,691 |   |
|                               |   |   |   |   |   |   |   |   |
| Total      Regulatory Liabilities  |   | $      | 50,447 |   |   | $      | 55,779 |   |

----

|   | · | 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  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-approved    tariffs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   |   |   |   |   |   |   |   |   |
| Operating      Revenues/Affiliates:      |   |   |   |   |   |   |   |   |   |
|  SJRG                               |   | $      | 7,604  |   |   | $      | 19,328 |   |   | $ | 67,262 |   |
|  Other                                   |   |   | 402    |   |   |   | 386    |   |   |   | 2,302 |   |
| Total      Operating Revenues/Affiliates |   | $      | 8,006  |   |   | $      | 19,714 |   |   | $ | 69,564 |   |

----

|                                           |   | 2008   |   |    | 2007   |   |   | 2006   |   |
|------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|                                           |   |   |   |    |   |   |   |   |   |   |   |   |
|  Costs      of Sales/Affiliates           |   |   |   |    |   |   |   |   |   |   |   |   |
|  (Excluding      depreciation):      |   |   |   |    |   |   |   |   |   |   |   |   |
|   SJRG                               |   | $      | 28,565 |    |   | $      | 24,601 |   |   | $ | 23,083 |   |
|                                           |   |   |   |    |   |   |   |   |   |   |   |   |
| Derivative      Gains (Losses) (See Note 1):   |   |   |   |    |   |   |   |   |   |   |   |   |
|  SJRG                                     |   | $      | (6,215 | )       |   | $      | 19,169 |   |   | $ | 30,113 |   |
|                                           |   |   |   |    |   |   |   |   |   |   |   |   |
| Operations      Expense/Affiliates        |   |   |   |    |   |   |   |   |   |   |   |   |
|  SJI                                 |   | $      | 6,957  |    |   | $      | 6,650  |   |   | $ | 7,434 |   |
|  SJIS                                     |   |   | 4,154  |    |   |   | 4,550  |   |   |   | 5,373 |   |
|  Millennium                               |   |   | 2,982  |    |   |   | 2,872  |   |   |   | 2,743 |   |
|  Other                                    |   |   | (226   | )  |   |   | 139    |   |   |   | - |   |
|  Total      Operations Expense/Affiliates |   | $      | 13,867 |    |   | $      | 14,211 |   |   | $ | 15,550 |   |

|                                          |   | 2008   |   |   | 2007   |   |   | 2006   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax      at Statutory Rate                    |   | $      | 23,078 |   |   | $      | 22,637 |   |   | $ | 21,206 |   |
| Increase      (Decrease) Resulting from:      |   |   |   |   |   |   |   |   |   |   |   |   |
| State      Income Taxes                       |   |   | 4,491  |   |   |   | 4,396  |   |   |   | 4,107 |   |
| Amortization      of Investment Tax Credits   |   |   | (318   | )      |   |   | (320   | )      |   |   | (325 | ) |
| ESOP      Dividend                            |   |   | (736   | )      |   |   | (610   | )      |   |   | (674 | )  |
| Amortization      of Flowthrough Depreciation |   |   | 664    |   |   |   | 664    |   |   |   | 664 |   |
| Other      - Net                              |   |   | (671   | )      |   |   | (115   | )      |   |   | (167 | ) |
| Net      Income Taxes                         |   | $      | 26,508 |   |   | $      | 26,652 |   |   | $ | 24,811 |   |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |

| The      provision for Income Taxes is comprised of the following (in      thousands): |   |   |               |   |
|----------------------------------------------------------------------------------------|--------|--------|--------------------|--------|
|                                                                                   |   |   |               |   |
|                                                                                   |   | 2008   |               |   | 2007 |   |   | 2006 |   |
| Current:                                                                               |   |   |               |   |   |   |   |   |   |
| Federal                                                                                |   | $      | 1,042              |   |   | $ | 9,951 |   |   | $ | 16,556 |   |
| State                                                                                  |   |   | 4,088              |   |   |   | 3,744 |   |   |   | 3,829 |   |
| Total      Current                                                                     |   |   | 5,130              |   |   |   | 13,695 |   |   |   | 20,385 |   |
| Deferred:                                                                              |   |   |               |   |   |   |   |   |   |   |   |   |
| Federal                                                                                |   |   |   18,877 |   |   |   | 10,258 |   |   |   | 2,262 |   |
| State                                                                                  |   |   | 2,819              |   |   |   | 3,019 |   |   |   | 2,489 |   |
| Total      Deferred                                                                    |   |   | 21,696             |   |   |   | 13,277 |   |   |   | 4,751 |   |
| Investment      Tax Credits                                                            |   |   | (318               | )      |   |   | (320 | ) |   |   | (325 | ) |
| Net      Income Taxes                                                                  |   | $      | 26,508             |   |   | $ | 26,652 |   |   | $ | 24,811 |   |

----

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

|                                                       |   | 2008   |    |    | 2007   |   |
|------------------------------------------------------------|--------|--------|---------|---------|--------|--------|
|                                                       |   |   |    |    |   |   |
| Current:                                                   |   |   |    |    |   |   |
| Deferred      Fuel Costs - Net                             |   | $      | 4,121   |    |   | $      | 4,121 |   |
| Uncollectibles                                             |   |   | (1,208  | )       |   |   | (976 | ) |
| Deferred      Revenues                                     |   |   | 9,055   |    |   |   | 8,061 |   |
| Section      461 Prepayments                               |   |   | 514     |    |   |   | 866 |   |
| Other                                                      |   |   | (7      | )       |   |   | (490 | ) |
| Current      Deferred Tax Liability - Net                  |   | $      | 12,475  |    |   | $      | 11,582 |   |
|                                                       |   |   |    |    |   |   |   |   |
|  Noncurrent:                                          |   |   |    |    |   |   |   |   |
| Book      Versus Tax Basis of Property                     |   | $      | 174,208 |    |   | $      | 156,634 |   |
| Deferred      Fuel Costs - Net                             |   |   | 5,470   |    |   |   | 5,141 |   |
| Environmental                                              |   |   | 20,608  |    |   |   | 11,068 |   |
| Deferred      Regulatory Costs                             |   |   | 1,246   |    |   |   | 1,238 |   |
| Deferred      State Tax                                    |   |   | (7,366  | )       |   |   | (6,331 | ) |
| Investment      Tax Credit Basis Gross-Up                  |   |   | (944    | )       |   |   | (1,107 | ) |
| Deferred      Pension & Other Post Retirement Benefits |   |   | 32,311  |    |   |   | 15,239 |   |
| Pension      & Other Post Retirement Benefits          |   |   | (27,063 | )       |   |   | (9,021 | ) |
| Deferred      Revenues                                     |   |   | (11,226 | )  |   |   | (3,726 | )  |
| Other                                                      |   |   | (194    | )  |   |   | (881 | )  |
| Noncurrent      Deferred Tax Liability - Net               |   | $      | 187,050 |    |   | $      | 168,254 |   |

|                                                                                    |   | 2008   |   |   | 2007   |   |
|-----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                    |   |   |   |   |   |   |
| Balance      at January 1,                                                              |   | $      | 907    |   |   | $      | 1,112 |   |
|     Increase      as a result of tax positions taken in prior years |   |   | 253    |   |   |   | 28 |   |
|     Decrease      due to a lapse in the statute of limitations      |   |   | (250   | )      |   |   | (233 | ) |
| Balance      at December 31,                                                            |   | $      | 910    |   |   | $      | 907 |   |

----

|                                               |   |   |                 | 2008    |    |   | 2007    |   |
|----------------------------------------------------|--------|--------|----------------------|---------|---------|--------|---------|--------|
|                                               |   |   |                 |    |    |   |
| First      Mortgage Bonds: (B)                     |   |   |                 |    |    |   |
|                                               | 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  |    |   |   | 9,873 |   |
|                                               | 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              |    |    |   | 294,873 |   |
| Current      Portion of Long-Term Debt (C)         |   |   | (25,000              | )  |    |   | -       |   |
| Long-Term      Debt                                |   |   |                 | $       | 269,873 |   |    | $      | 294,873 |   |

| (A) | Long-term      debt maturities and sinking funds requirements for the succeeding five      years are as follows (in thousands): 2009, $0; 2010, $10,000; 2011,      $25,000; 2012, $2,187; 2013, $25,000 (See Note (c) below).  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) | On      April 20, 2006, SJG issued $25.0 million of tax-exempt, auction-rate debt      through the New Jersey Economic Development Authority (NJEDA) under its      $150.0 million MTN Program.  These bonds were repurchased by the      Company in June 2008 and remarketed to the public in August 2008 as      variable-rate demand bonds with liquidity support provided by a letter of      credit from a commercial bank.  The letter of credit expires in      August 2009, and as such, these bonds have been included in the current      portion of long-term debt.  Material terms of the original      bonds, such as the 2036 maturity date, floating rate interest that resets      weekly, and a first mortgage collateral position, remain      unchanged. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                    |   |   |   |   | Pension      Benefits |   |   |   |   |   | OtherPostretirement      Benefits |   |
|-----------------------------------------|--------|--------|--------|--------|-----------------------|--------|--------|--------|--------|--------|-----------------------------------|--------|
|                                    |   | 2008   |   |   | 2007                  |   |   | 2006   |   |   | 2008                              |   |   | 2007 |   |   | 2006 |   |
|                                    |   |   |   |   |                  |   |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      Cost                       |   | $      | 2,408  |   |                  | $      | 2,442  |   |   | $      | 2,322                             |   |   | $ | 605 |   |   | $ | 661 |   |   | $ | 656 |   |
| Interest      Cost                      |   |   | 6,843  |   |                  |   | 6,376  |   |   |   | 5,988                             |   |   |   | 2,497 |   |   |   | 2,295 |   |   |   | 2,279 |   |
| Expected      Return on Plan Assets     |   |   | (8,394 | )      |                  |   | (8,068 | )      |   |   | (7,518                            | )      |   |   | (1,995 | ) |   |   | (1,895 | ) |   |   | (1,617 | ) |
| Amortizations:                          |   |   |   |   |                  |   |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior      Service Cost (Credits)       |   |   | 239    |   |                  |   | 239    |   |   |   | 389                               |   |   |   | (254 | ) |   |   | (254 | ) |   |   | (264 | ) |
| Actuarial      Loss                     |   |   | 1,365  |   |                  |   | 1,624  |   |   |   | 2,032                             |   |   |   | 677 |   |   |   | 560 |   |   |   | 789 |   |
| Net      Periodic Benefit Cost          |   |   | 2,461  |   |                  |   | 2,613  |   |   |   | 3,213                             |   |   |   | 1,530 |   |   |   | 1,367 |   |   |   | 1,843 |   |
| Capitalized      Benefit Costs          |   |   | (1,073 | )      |                  |   | (1,131 | )      |   |   | (1,574                            | )      |   |   | (765 | ) |   |   | (648 | ) |   |   | (903 | ) |
| Affiliate      SERP Allocations         |   |   | (315   | )      |                  |   | (232   | )      |   |   | (247                              | )      |   |   | - |   |   |   | - |   |   |   | - |   |
| Total      Net Periodic Benefit Expense |   | $      | 1,073  |   |                  | $      | 1,250  |   |   | $      | 1,392                             |   |   | $ | 765 |   |   | $ | 719 |   |   | $ | 940 |   |

|                               |   | PensionBenefits |   |   | OtherPostretirementBenefits |   |
|------------------------------------|--------|-----------------|--------|--------|-----------------------------|--------|
| Prior      Service Costs (Credits) |   | $               | 232    |   |                        | $      | (254 | ) |
| Net      Actuarial Loss            |   | $               | 3,754  |   |                        | $      | 1,616 |   |

|                    |   | PensionBenefits |   |   | OtherPostretirementBenefits |   |
|-------------------------|--------|-----------------|--------|--------|-----------------------------|--------|
| Net      Actuarial Loss |   | $               | 824    |   |                        | $      | - |   |

----

|                                                |   |                  |    |    |                         |   |    | Other   |   |
|-----------------------------------------------------|--------|-----------------------|---------|---------|------------------------------|--------|---------|---------|--------|
|                                                |   | Pension      Benefits |    |    | Postretirement      Benefits |   |
|                                                |   | 2008                  |    |    | 2007                         |   |    | 2008    |   |   | 2007 |   |
|                                                |   |                  |    |    |                         |   |    |    |   |   |   |   |
| Change in Benefit      Obligations:                 |   |                  |    |    |                         |   |    |    |   |   |   |   |
| Benefit      Obligation at Beginning of Year        |   | $                     | 109,301 |    |                         | $      | 109,735 |    |   | $ | 39,499 |   |   | $ | 41,272 |   |
| Service      Cost                                   |   |                  | 2,408   |    |                         |   | 2,442   |    |   |   | 605 |   |   |   | 661 |   |
| Interest      Cost                                  |   |                  | 6,843   |    |                         |   | 6,376   |    |   |   | 2,497 |   |   |   | 2,295 |   |
| Actuarial      Loss / (Gain)                        |   |                  | 5,071   |    |                         |   | (3,188  | )  |   |   | 2,947 |   |   |   | (1,910 | )  |
| Retiree      Contributions                          |   |                  | -       |    |                         |   | -       |    |   |   | 164 |   |   |   | 147 |   |
| Benefits      Paid                                  |   |                  | (6,302  | )       |                         |   | (6,064  | )       |   |   | (3,224 | ) |   |   | (2,966 | ) |
| Benefit      Obligation at End of Year              |   | $                     | 117,321 |    |                         | $      | 109,301 |    |   | $ | 42,488 |   |   | $ | 39,499 |   |
|                                                |   |                  |    |    |                         |   |    |    |   |   |   |   |   |   |   |   |
| Change      in Plan Assets:                         |   |                  |    |    |                         |   |    |    |   |   |   |   |   |   |   |   |
| Fair      Value of Plan Assets at Beginning of Year |   | $                     | 96,541  |    |                         | $      | 94,603  |    |   | $ | 28,284 |   |   | $ | 26,274 |   |
| Actual      Return on Plan Assets                   |   |                  | (25,384 | )  |                         |   | 7,172   |    |   |   | (8,094 | )  |   |   | 1,273 |   |
| Employer      Contributions                         |   |                  | 5,733   |    |                         |   | 830     |    |   |   | 3,535 |   |   |   | 3,556 |   |
| Retiree      Contributions                          |   |                  | -       |    |                         |   | -       |    |   |   | 164 |   |   |   | 147 |   |
| Benefits      Paid                                  |   |                  | (6,302  | )       |                         |   | (6,064  | )       |   |   | (3,224 | ) |   |   | (2,966 | ) |
| Fair      Value of Plan Assets at End of Year       |   | $                     | 70,588  |    |                         | $      | 96,541  |    |   | $ | 20,665 |   |   | $ | 28,284 |   |

| Funded Status at End of      Year:                 |   |   |    |   |   |   |    |    |   |   |    |   |
|----------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|---------|--------|--------|---------|--------|
| Accrued       Net Benefit Cost at End of Year |   | $      | (46,733 | )      |   | $      | (12,760 | )       |   | $      | (21,823 | )      |   | $ | (11,215 | ) |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in the Statement           |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| of Financial Position Consist      of:        |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Noncurrent      Asset                              |   | $      | -       |   |   | $      | 1,472   |    |   | $      | -       |   |   | $ | - |   |
| Current      Liabilities                           |   |   | (991    | )      |   |   | (765    | )  |   |   | -       |   |   |   | - |   |
| Noncurrent      Liabilities                        |   |   | (45,742 | )      |   |   | (13,467 | )       |   |   | (21,823 | )      |   |   | (11,215 | ) |
| Net      Amount Recognized at End of Year          |   | $      | (46,733 | )      |   | $      | (12,760 | )       |   | $      | (21,823 | )      |   | $ | (11,215 | ) |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in Regulatory Assets       |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Consist      of:                              |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Prior      Service Costs (Credit)                  |   | $      | 1,381   |   |   | $      | 1,620   |    |   | $      | (723    | )      |   | $ | (977 | ) |
| Net      Actuarial Loss                            |   |   | 54,393  |   |   |   | 18,913  |    |   |   | 23,599  |   |   |   | 11,240 |   |
|                                               |   | $      | 55,774  |   |   | $      | 20,533  |    |   | $      | 22,876  |   |   | $ | 10,263 |   |
|                                               |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Amounts      Recognized in Accumulated Other       |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Comprehensive Loss Consist      of:           |   |   |    |   |   |   |    |    |   |   |    |   |   |   |   |   |
| Net      Actuarial Loss                            |   | $      | 9,212   |   |   | $      | 7,208   |    |   | $      | -       |   |   | $ | - |   |

----

|                                                           |   |                   |   |   | Accumulated      Other                 |   |
|----------------------------------------------------------------|--------|------------------------|--------|--------|----------------------------------------|--------|
|                                                           |   | Regulatory      Assets |   |   | Comprehensive      Loss (pre-tax) |   |
|                                                           |   |                   |   |   | Other                                  |   |   |   |   |   | Other |   |
|                                                           |   | Pension                |   |   | Postretirement                         |   |   | Pension |   |   | Postretirement |   |
|                                                           |   | Benefits               |   |   | Benefits                               |   |   | Benefits |   |   | Benefits |   |
| Balance      at December 31, 2006                              |   | $                      | 25,235 |   |                                   | $      | 11,856 |   |   | $ | 6,661 |   |   | $ | - |   |
|                                                           |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Amounts      Arising during the Period:                        |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|      Net      Actuarial (Gain) Loss   |   |                   | (3,495 | )      |                                   |   | (1,287 | ) |   |   | 1,203 |   |   |   | - |   |
| Amounts      Amortized to Net Periodic Costs:                  |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |
|      Net      Actuarial Loss          |   |                   | (968   | )      |                                   |   | (560 | ) |   |   | (656 | ) |   |   | - |   |
|      Prior      Service (Cost) Credit |   |                   | (239   | )      |                                   |   | 254 |   |   |   | - |   |   |   | - |   |
|                                                           |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                              |   | $                      | 20,533 |   |                                   | $      | 10,263 |   |   | $ | 7,208 |   |   | $ | - |   |
|                                                           |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Amounts      Arising during the Period:                        |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|      Net      Actuarial Loss          |   |                   | 36,171 |   |                                   |   | 13,036 |   |   |   | 2,678 |   |   |   | - |   |
| Amounts      Amortized to Net Periodic Costs:                  |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |
|      Net      Actuarial Loss          |   |                   | (691   | )      |                                   |   | (677 | ) |   |   | (674 | ) |   |   | - |   |
|      Prior      Service (Cost) Credit |   |                   | (239   | )      |                                   |   | 254 |   |   |   | - |   |   |   | - |   |
|                                                           |   |                   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                              |   | $                      | 55,774 |   |                                   | $      | 22,876 |   |   | $ | 9,212 |   |   | $ | - |   |

|                               |   | Pension      Benefits |   |   | OtherPostretirement      Benefits |   |
|------------------------------------|--------|-----------------------|--------|--------|-----------------------------------|--------|
|                               |   | 2008                  |   |   | 2007                              |   |   | 2008 |   |   | 2007 |   |
|                               |   |                  |   |   |                              |   |   |   |   |   |   |   |
| Discount      Rate                 |   |                  | 6.24   | %      |                              |   | 6.36 | % |   |   | 6.24 | % |   |   | 6.36 | % |
| Rate      of Compensation Increase |   |                  | 3.60   | %      |                              |   | 3.60 | % |   |   | - |   |   |   | - |   |

|                                          |   | Pension      Benefits |   |   | OtherPostretirement      Benefits |   |
|-----------------------------------------------|--------|-----------------------|--------|--------|-----------------------------------|--------|
|                                          |   | 2008                  |   |   | 2007                              |   |   | 2006 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                          |   |                  |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      Rate                            |   |                  | 6.36   | %      |                              |   | 6.04 | % |   |   | 5.84 | % |   |   | 6.36 | % |   |   | 6.04 | % |   |   | 5.84 | % |
| Expected      Long-Term Return on Plan Assets |   |                  | 8.50   | %      |                              |   | 8.75 | % |   |   | 8.75 | % |   |   | 7.00 | % |   |   | 7.25 | % |   |   | 7.25 | % |
| Rate      of Compensation Increase            |   |                  | 3.60   | %      |                              |   | 3.60 | % |   |   | 3.60 | % |   |   | - |   |   |   | - |   |   |   | - |   |

----

|                                                             |   | 2008   |   |   |   | 2007   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                             |   |   |   |   |   |   |   |
| Medical      Care and Drug Cost Trend Rate Assumed for Next Year |   | 9.0    | %      |   |   | 10.0   | %      |
| Dental      Care Cost Trend Rate Assumed for Next Year           |   |   | 6.33   | %      |   |   | 6.33   | % |
| 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          |   |   | 2012   |   |   |   | 2012   |   |

|                                                  | 1-Percentage-       |   | 1-Percentage-       |   |
|-------------------------------------------------------|---------------------|--------|---------------------|--------|
|                                                  | Point      Increase |   | Point      Decrease |   |
|                                                  |                |   |                |   |   |   |
| Effect      on the Total of Service and Interest Cost |                | $      | 66                  |   |   | $ | (60 | ) |
| Effect      on Postretirement Benefit Obligation      |                |   | 1,105               |   |   |   | (986 | ) |

|                                 |   |                  |   |   |                         |   |   | Other  |   |
|--------------------------------------|--------|-----------------------|--------|--------|------------------------------|--------|--------|--------|--------|
|                                 |   | Pension      Benefits |   |   | Postretirement      Benefits |   |
|                                 |   | 2008                  |   |   | 2007                         |   |   | 2008   |   |   | 2007 |   |
|                                 |   |                  |   |   |                         |   |   |   |   |   |   |   |
| Asset      Category:                 |   |                  |   |   |                         |   |   |   |   |   |   |   |
| U.S.      Equity Securities          |   |                  | 47     | %      |                         |   | 50     | %      |   |   | 39 | % |   |   | 47 | % |
| International      Equity Securities |   |                  | 12     |   |                         |   | 15     |   |   |   | 12 |   |   |   | 15 |   |
| Fixed      Income                    |   |                  | 41     |   |                         |   | 35     |   |   |   | 49 |   |   |   | 38 |   |
|                                 |   |                  |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Total                                |   |                  | 100    | %      |                         |   | 100    | %      |   |   | 100 | % |   |   | 100 | % |

----

|            |   |                  |   |   | Other                        |   |
|-----------------|--------|-----------------------|--------|--------|------------------------------|--------|
|            |   | Pension      Benefits |   |   | Postretirement      Benefits |   |
|            |   |                  |   |   |                         |   |
| 2009            |   | $                     | 6,475  |   |                         | $      | 3,694 |   |
| 2010            |   | $                     | 6,592  |   |                         | $      | 3,791 |   |
| 2011            |   | $                     | 6,767  |   |                         | $      | 3,671 |   |
| 2012            |   | $                     | 6,983  |   |                         | $      | 3,651 |   |
| 2013            |   | $                     | 7,325  |   |                         | $      | 3,617 |   |
| 2014      -2018 |   | $                     | 42,460 |   |                         | $      | 18,037 |   |

----

|                                                                     |   | 2008   |    |   | 2007   |   |
|--------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                     |   |   |    |   |   |   |
| Beginning      of Year                                                   |   | $      | 73,880  |   |   | $      | 67,794 |   |
|           Accruals     |   |   | 14,622  |   |   |   | 18,666 |   |
|           Expenditures |   |   | (24,409 | )      |   |   | (12,580 | ) |
|                                                                     |   |   |    |   |   |   |   |   |
| End      of Year                                                         |   | $      | 64,093  |   |   | $      | 73,880 |   |

----

|   | · | Level      1:  Observable inputs such as quoted prices in active markets      for identical assets orliabilities. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | Level      2:  Inputs other than quoted prices that are observable for the      asset or liability, either directly or indirectly; these include quoted      prices for similar assets or liabilities in active markets and quoted      prices for identical or similar assets or liabilities in markets that are      not active. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level      3:  Unobservable inputs that reflect the reporting entity’s own      assumptions. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|                                                    |   | Total  |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|---------------------------------------------------------|--------|--------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| Assets -                                           |   |   |   |   |         |   |   |         |   |   |         |   |
|                                                    |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
| Available-for-Sale      Securities (A)                  |   | $      | 4,841  |   |         | $      | 4,841  |         |   | $      | -            |   |   | $ | - |   |
| Derivatives      – Energy Related Assets (B)      |   |   | 395    |   |         |   | 360    |         |   |   | 35           |   |   |   | - |   |
|                                                    |   | $      | 5,236  |   |         | $      | 5,201  |         |   | $      | 35           |   |   | $ | - |   |
|                                                    |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
| Liabilities -                                           |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
|                                                    |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
| Derivatives      – Energy Related Liabilities (B) |   | $      | 29,365 |   |         | $      | 28,845 |         |   | $      | 520          |   |   | $ | - |   |
| Derivatives      – Other (C)                      |   |   | 7,578  |   |         |   | -      |         |   |   | 7,578        |   |   |   | - |   |
|                                                    |   | $      | 36,943 |   |         | $      | 28,845 |         |   | $      | 8,098        |   |   | $ | - |   |
|                                                    |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |

----

| 14. | AVAILABLE–FOR–SALE      SECURITIES: |
|-----|-------------------------------------------------|

|                              | Less than 12 Months | Greater Than 12 Months | Total           |
|-----------------------------------|---------------------|------------------------|-----------------|
|                              |                |                   |            |   |   |   |
|                              | Fair      Value     | Unrealized      Losses | Fair      Value | Unrealized      Losses | Fair      Value | Unrealized      Losses |
| Marketable      Equity Securities | $3,609              | $1,218                 | $0              | $0 | $3,609 | $1,218 |

| 15. | QUARTERLY      RESULTS OF OPERATIONS -UNAUDITED: |
|-----|--------------------------------------------------|

|                                                                                                                                                  |   | 2008      Quarter Ended |    |   | 2007      Quarter Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------------|--------|
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                  |   | March      31           |    |   | June      30            |   |   | Sept.      30 |   |   | Dec.      31 |   |   | March      31 |   |   | June      30 |   |   | Sept.      30 |   |   | Dec.      31 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Revenues                                                                                                                               |   | $                       | 237,904 |   |                    | $      | 93,571 |   |   | $ | 64,563 |   |   | $ | 172,008 |   |   | $ | 277,864 |   |   | $ | 95,996 |   |   | $ | 84,420 |   |   | $ | 172,267 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                                                             |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of Sales                                                                                                                                    |   |                    | 162,917 |   |                    |   | 60,263 |   |   |   | 41,201 |   |   |   | 119,022 |   |   |   | 205,544 |   |   |   | 63,848 |   |   |   | 62,223 |   |   |   | 121,419 |   |
| Operation      and Maintenance                                                                                                                        |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Including      Fixed Charges                                                                                                                          |   |                    | 28,257  |   |                    |   | 26,134 |   |   |   | 25,408 |   |   |   | 28,737 |   |   |   | 26,667 |   |   |   | 23,890 |   |   |   | 24,071 |   |   |   | 29,052 |   |
| Income      Taxes (Benefit)                                                                                                                           |   |                    | 17,530  |   |                    |   | 2,482 |   |   |   | (1,306 | ) |   |   | 7,802 |   |   |   | 16,870 |   |   |   | 2,839 |   |   |   | (1,278 | ) |   |   | 8,221 |   |
| Energy      and Other Taxes                                                                                                                           |   |                    | 4,357   |   |                    |   | 1,711 |   |   |   | 1,356 |   |   |   | 3,203 |   |   |   | 4,624 |   |   |   | 1,872 |   |   |   | 1,307 |   |   |   | 3,026 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Expenses                                                                                                                                   |   |                    | 213,061 |   |                    |   | 90,590 |   |   |   | 66,659 |   |   |   | 158,764 |   |   |   | 253,705 |   |   |   | 92,449 |   |   |   | 86,323 |   |   |   | 161,718 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income and Expense                                                                                                                         |   |                    | 170     |   |                    |   | 457 |   |   |   | 242 |   |   |   | (410 | )  |   |   | 100 |   |   |   | 356 |   |   |   | 157 |   |   |   | 1,060 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income (Loss) Applicable                                                                                                                     |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to      Common Stock                                                                                                                                  |   | $                       | 25,013  |   |                    | $      | 3,438 |   |   | $ | (1,854 | ) |   | $ | 12,834 |   |   | $ | 24,259 |   |   | $ | 3,903 |   |   | $ | (1,746 | ) |   | $ | 11,609 |   |
|                                                                                                                                                  |   |                    |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 April      18, 2008 (filed herewith). |                                                                           |
|  (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) of Form 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) of Form 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) of Form S-3    (333-126822).              |
|  (4)(b)(vii)                               |  Amendment      to Twenty-Fourth Supplemental Indenture dated as of March 31,      2006.                             |  Incorporated      by reference from Exhibit 4 of Form      8-K as filed April 26, 2006.           |
| (4)(b)(viii)                                         |  Loan      Agreement by and between New Jersey Economic Development Authority as      SJGdated      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-K of 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 (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)(iv)                    |  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) of Form 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) of Form 10-K for      1991 (1-6364).            |
|  (10)(b)(ii)                    |  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) of Form 10-K for 1993      (1-6364).            |
|  (10)(b)(iii)                   |  CNJEP      Service agreement between South Jersey Gas Company and Transco dated June      27, 2005.                                                                            |  Incorporated      by reference from Exhibit (10)(i)(l) of  Form 10-K for 2005      (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. 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)(iii) |  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)(iv)                    |  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) of Form 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 2008      (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      2008.                     |
|  (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 of Form 8-K as filed on August 8,      2006.                    |
|  (10)(i)(ii)  |  Loan Agreement between Toronto      Dominion (New York) LLC and SJG dated December 15, 2008 ( filed      herewith).                                                                                                                       |                                                                                                                 |
|  (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) of Form 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).                                                                                                                                                 |                                                                                                                 |

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| 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). |            |

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| Signature                                                                                                    | Title                                                                     | Date                     |
|--------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|--------------------------|
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      Edward J.      Graham             |  Chairman      of the Board, President & Chief Executive Officer |  March      4, 2009 |
|  (Edward      J. Graham)                                                                                | (Principal      Executive Officer)                                        |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      David A.      Kindlick                      |  Senior      Vice President & Chief Financial Officer            |  March      4, 2009 |
| (David      A. Kindlick)                                                                                     | (Principal      Financial and Accounting Officer)                         |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      Richard H. Walker, Jr.                                                                        |  Senior      Vice President, General Counsel & Secretary    |  March      4, 2009 |
|  (Richard      H. Walker, Jr.)                                                                          |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      Shirli M.      Billings                               |  Director                                                            |  March      4, 2009 |
| (Shirli      M. Billings)                                                                                    |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      Thomas A. Bracken                                                                             |  Director                                                            |  March      4, 2009 |
| (Thomas      A. Bracken)                                                                                     |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|  /s/      Sheila Hartnett-Devlin                                                                        |  Director                                                            |  March      4, 2009 |
| (Sheila      Hartnett-Devlin)                                                                                |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
| /s/      William J. Hughes                                                                                   | Director                                                                  | March      4, 2009       |
| (William      J. Hughes)                                                                                     |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
|                                                                                                         |                                                                      |                     |
| /s/      Frederick R.    Raring                                           | Director                                                                  | March      4, 2009       |
| (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, 2008                                                             |   | $ | 3,265 |   |   | $ | 2,281 |   |   | $ | 279 |   |   | $ | 2,197 |   |   | $ | 3,628 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)      Recoveries of accounts previously written off and minor      adjustments. |   |   |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (b)      Uncollectible accounts written off.                                       |   |   |   |   |   |   |   |   |   |

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