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

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

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

| Large accelerated filer    o                                                                   |   | Accelerated filer     o |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|
| Non-accelerated filer      x (Do not check if a smaller reporting company) |   | Smaller reporting company o            |

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|                          | Page No.                                                                                                     |
|-------------------------------|--------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                         |
| Forward-Looking Statements    | 3                                                                                                            |
|                          |                                                                                                         |   |
|                          | PART I                                                                                                       |   |
|                          |                                                                                                         |   |
| Item 1.                       | Business                                                                                                     | 3 |
| Item 1A.                      | Risk Factors                                                                                                 | 7 |
| Item 1B.                      | Unresolved Staff Comments                                                                                    | 8 |
| Item 2.                       | Properties                                                                                                   | 8 |
| Item 3.                       | Legal Proceedings                                                                                            | 9 |
| Item 4.                       | (Removed and Reserved)                                                                                       | 9 |
|                          |                                                                                                         |   |
|                          | PART II                                                                                                      |   |
|                          |                                                                                                         |   |
| Item 5.                       | Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 9 |
| Item 6.                       | Selected Financial Data                                                                                      | 10 |
| Item 7.                       | Management's Discussion and Analysis of Financial Condition and Results of Operations                        | 11 |
| Item 7A.                      | Quantitative and Qualitative Disclosures About Market Risk                                                   | 24 |
| Item 8.                       | Financial Statements and Supplementary Data                                                                  | 25 |
| Item 9.                       | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 57 |
| Item 9A.                      | Controls and Procedures                                                                                      | 58 |
| Item 9B.                      | Other Information                                                                                            | 58 |
|                          |                                                                                                         |   |
|                          | PART III                                                                                                     |   |
|                          |                                                                                                         |   |
| Item 10.                      | Directors, Executive Officers and Corporate Governance                                                       | 58 |
| Item 11.                      | Executive Compensation                                                                                       | 58 |
| Item 12.                      | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 58 |
| Item 13.                      | Certain Relationships and Related Transactions, and Director Independence                                    | 58 |
| Item 14.                      | Principal Accountant Fees and Services                                                                       | 59 |
|                          |                                                                                                         |   |
|                          | PART IV                                                                                                      |   |
|                          |                                                                                                         |   |
| Item 15.                      | Exhibits, Financial Statement Schedules                                                                      | 59 |
|                          |                                                                                                         |   |
| Signatures                    | 63                                                                                                           |
| Financial Statement Schedules | 65                                                                                                           |

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F

Item 1

| For Natural Gas: |
|------------------|
| 1 dt             | = One decatherm |
| 1 MMdt           | = One million decatherms |
| Dts/d            | = Decatherms per day |
| MDWQ             | = Maximum daily withdrawal quantity |

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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 pilot program through 2013. Should this clause expire without replacement, lower customer energy utilization levels would likely reduce SJG’s net income. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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 interest rates.  |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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|   | • | 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, results of operations and cash flow. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | • | Proposed climate change legislation could impact SJG’s financial performance and condition.  Climate change is receiving ever increasing attention from scientists and legislators alike.  The debate is ongoing as to the extent to which our climate is changing, the potential causes of this change and its potential impacts.  Some attribute global warming to increased levels of greenhouse gases, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions.  The outcome of proposed federal and state actions to address global climate change could result in a variety of regulatory programs including additional charges to fund energy efficiency activities or other regulatory actions.  These actions could affect the demand for natural gas and electricity, result in increased costs to our business and impact the prices we charge our customers.  Because natural gas is a fossil fuel with low carbon content, it is possible that future carbon constraints could create additional demands for natural gas, both for production of electricity and direct use in homes and businesses.  Any adoption by federal or state governments mandating a substantial reduction in greenhouse gas emissions could have far-reaching and significant impacts on the energy industry.  We cannot predict the potential impact of such laws or regulations on our future financial condition, results of operations or cash flows. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 

Item 5. Market 

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|                                       | Year Ended December 31, |   |
|--------------------------------------------|-------------------------|--------|
|                                       |                    | 2010   |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                       |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Revenues                         |                    | $      | 475,982 |   |   | $ | 484,376 |   |   | $ | 568,046 |   |   | $ | 630,547 |   |   | $ | 642,671 |   |
|                                       |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Income                           |                    | $      | 90,701 |   |   | $ | 81,439 |   |   | $ | 84,417 |   |   | $ | 83,989 |   |   | $ | 81,209 |   |
|                                       |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income Applicable to Common Stock      |                    | $      | 43,925 |   |   | $ | 39,195 |   |   | $ | 39,431 |   |   | $ | 38,025 |   |   | $ | 35,779 |   |
|                                       |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average Shares of Common Stock Outstanding |                    |   | 2,339 |   |   |   | 2,339 |   |   |   | 2,339 |   |   |   | 2,339 |   |   |   | 2,339 |   |
|                                       |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of Earnings to Fixed Charges (1)     |                    |   | 5.1 | x  |   |   | 4.9 | x |   |   | 4.4 | x |   |   | 4.1 | x |   |   | 3.7 | x |

|                               | As of December 31, |
|------------------------------------|--------------------|
|                               |               | 2010 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                               |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property, Plant and Equipment, Net |               | $ | 1,046,804 |   |   | $ | 961,165 |   |   | $ | 876,582 |   |   | $ | 847,691 |   |   | $ | 821,833 |   |
|                               |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                       |               | $ | 1,468,635 |   |   | $ | 1,357,062 |   |   | $ | 1,354,015 |   |   | $ | 1,227,162 |   |   | $ | 1,228,076 |   |
|                               |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capitalization:                    |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Equity                      |               | $ | 426,885 |   |   | $ | 431,530 |   |   | $ | 401,739 |   |   | $ | 378,348 |   |   | $ | 360,353 |   |
| Long-Term Debt                     |               |   | 340,000 |   |   |   | 250,000 |   |   |   | 269,873 |   |   |   | 294,873 |   |   |   | 294,893 |   |
| Total Capitalization               |               | $ | 766,885 |   |   | $ | 681,530 |   |   | $ | 671,612 |   |   | $ | 673,221 |   |   | $ | 655,246 |   |
| Total Customers                    |               |   | 347,725 |   |   |   | 343,566 |   |   |   | 340,136 |   |   |   | 335,663 |   |   |   | 330,049 |   |

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|                                |   | 2010        |   |   | 2009        |   |   | 2008        |   |
|-------------------------------------|--------|-------------|--------|--------|-------------|--------|--------|-------------|--------|
| Net Income Benefit:                 |   |        |   |   |        |   |   |        |   |
| CIP – Weather Related         |   |        | 1.1    |   |        |   | 0.8    |        |   |   | 1.6 |   |
| CIP – Usage Related           |   |        | 5.5    |   |        |   | 8.5    |        |   |   | 9.2 |   |
| Total Net Income Benefit            |   | $           | 6.6    |   |        | $      | 9.3    |        |   | $ | 10.8 |   |
|                                |   |        |   |   |        |   |   |        |   |   |   |   |
| Weather Compared to 20-Year Average |   | 2.2% warmer |   |   | 1.1% warmer |   |   | 4.7% warmer |   |
| Weather Compared to Prior Year      |   | 0.1% warmer |   |   | 3.9% colder |   |   | 1.6% warmer |   |

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|                                      |   | 2010   |    |   | 2009   |   |   | 2008    |   |
|-------------------------------------------|--------|--------|---------|--------|--------|--------|--------|---------|--------|
| Utility Throughput – dth:           |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Firm Sales -                              |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Residential                               |   |   | 22,962  |   |   |   | 21     | %       |   |   | 22,736 |   |   |   | 23 | % |   |   | 21,530 |   |   |   | 15 | % |
| Commercial                                |   |   | 5,884   |   |   |   | 5      | %       |   |   | 6,063 |   |   |   | 6 | % |   |   | 6,127 |   |   |   | 4 | % |
| Industrial                                |   |   | 292     |   |   |   | -      |    |   |   | 331 |   |   |   | 1 | % |   |   | 188 |   |   |   | - |   |
| Cogeneration and electric generation |   |   | 1,167   |   |   |   | 1      |  % |   |   | 322 |   |   |   | - |   |   |   | 561 |   |   |   | - |   |
| Firm Transportation -                     |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                               |   |   | 2,136   |   |   |   | 2      | %       |   |   | 2,005 |   |   |   | 2 | % |   |   | 1,988 |   |   |   | 1 | % |
| Commercial                                |   |   | 6,043   |   |   |   | 6      | %       |   |   | 5,930 |   |   |   | 6 | % |   |   | 5,687 |   |   |   | 4 | % |
| Industrial                                |   |   | 12,625  |   |   |   | 11     | %       |   |   | 12,002 |   |   |   | 12 | % |   |   | 12,661 |   |   |   | 9 | % |
| Cogeneration and electric generation |   |   | 5,500   |   |   |   | 5      | %       |   |   | 2,290 |   |   |   | 2 | % |   |   | 2,536 |   |   |   | 2 | % |
|                                      |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Firm Throughput                     |   |   | 56,609  |   |   |   | 51     | %       |   |   | 51,679 |   |   |   | 52 | % |   |   | 51,278 |   |   |   | 35 | % |
|                                      |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interruptible Sales                       |   |   | 52      |   |   |   | -      |    |   |   | 5 |   |   |   | - |   |   |   | 35 |   |   |   | - |   |
| Interruptible Transportation              |   |   | 1,842   |   |   |   | 2      | %       |   |   | 2,314 |   |   |   | 2 | % |   |   | 2,716 |   |   |   | 2 | % |
| Off-System                                |   |   | 6,034   |   |   |   | 5      | %       |   |   | 6,282 |   |   |   | 7 | % |   |   | 9,632 |   |   |   | 7 | % |
| Capacity Release                          |   |   | 46,278  |   |   |   | 42     | %       |   |   | 38,387 |   |   |   | 39 | % |   |   | 80,665 |   |   |   | 56 | % |
|                                      |   |   |    |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Utility Throughput                  |   |   | 110,815 |   |   |   | 100    | %       |   |   | 98,667 |   |   |   | 100 | % |   |   | 144,326 |   |   |   | 100 | % |

|                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |
|-------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|----------|--------|--------|--------|
| Utility Operating Revenues:               |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |
| Firm Sales-                               |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |
| Residential                               |   | $      | 302,824 |   |   |   | 64     | %      |   | $      | 318,143 |   |   |   | 66       | %      |   | $      | 320,401 |   |   |   | 57 | % |
| Commercial                                |   |   | 67,967  |   |   |   | 14     | %      |   |   | 71,669  |   |   |   | 15       | %      |   |   | 81,914 |   |   |   | 15 | % |
| Industrial                                |   |   | 3,573   |   |   |   | 1      | %      |   |   | 3,824   |   |   |   | 1        | %      |   |   | 5,434 |   |   |   | 1 | % |
| Cogeneration and electric generation |   |   | 7,774   |   |   |   | 2      | %      |   |   | 2,709   |   |   |   | 1        | %      |   |   | 7,940 |   |   |   | 1 | % |
| Firm Transportation -                     |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Residential                               |   |   | 11,908  |   |   |   | 2      | %      |   |   | 10,491  |   |   |   | 2        | %      |   |   | 10,408 |   |   |   | 2 | % |
| Commercial                                |   |   | 21,989  |   |   |   | 5      | %      |   |   | 19,722  |   |   |   | 4        | %      |   |   | 18,286 |   |   |   | 3 | % |
| Industrial                                |   |   | 16,613  |   |   |   | 3      | %      |   |   | 14,751  |   |   |   | 3        | %      |   |   | 12,504 |   |   |   | 2 | % |
| Cogeneration and electric generation |   |   | 4,598   |   |   |   | 1      | %      |   |   | 2,272   |   |   |   | -        |   |   |   | 1,682 |   |   |   | - |   |
|                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Total Firm Revenues                       |   |   | 437,246 |   |   |   | 92     | %      |   |   | 443,581 |   |   |   | 92       | %      |   |   | 458,569 |   |   |   | 81 | % |
|                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Interruptible Sales                       |   |   | 770     |   |   |   | -      |   |   |   | 89      |   |   |   |   - |   |   |   | 403 |   |   |   | - |   |
| Interruptible Transportation              |   |   | 1,842   |   |   |   | -      |   |   |   | 2,122   |   |   |   |   - |   |   |   | 1,786 |   |   |   | - |   |
| Off-System                                |   |   | 30,757  |   |   |   | 7      | %      |   |   | 32,978  |   |   |   | 7        | %      |   |   | 90,430 |   |   |   | 16 | % |
| Capacity Release                          |   |   | 4,156   |   |   |   | 1      | %      |   |   | 4,282   |   |   |   | 1        | %      |   |   | 15,549 |   |   |   | 3 | % |
| Other                                     |   |   | 1,211   |   |   |   | -      |   |   |   | 1,324   |   |   |   |   - |   |   |   | 1,309 |   |   |   | - |   |
|                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Total Utility Operating Revenues     |   |   | 475,982 |   |   |   | 100    | %      |   |   | 484,376 |   |   |   | 100      | %      |   |   | 568,046 |   |   |   | 100 | % |
|                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Less:                                     |   |   |    |   |   |   |   |   |   |   |    |   |   |   |     |   |   |   |   |   |   |   |   |   |
| Cost of sales                             |   |   | 266,382 |   |   |   |   |   |   |   | 293,852 |   |   |   |     |   |   |   | 383,403 |   |   |   |   |   |
| Conservation recoveries *                 |   |   | 6,910   |   |   |   |   |   |   |   | 7,718   |   |   |   |     |   |   |   | 7,741 |   |   |   |   |   |
| RAC recoveries *                          |   |   | 6,863   |   |   |   |   |   |   |   | 5,189   |   |   |   |     |   |   |   | 3,079 |   |   |   |   |   |
| EET Recoveries *                          |   |   | 1,433   |   |   |   |   |   |   |   | 190     |   |   |   |     |   |   |   | - |   |   |   |   |   |
| Revenue taxes                             |   |   | 8,607   |   |   |   |   |   |   |   | 8,836   |   |   |   |     |   |   |   | 8,656 |   |   |   |   |   |
| Utility Margin                            |   | $      | 185,787 |   |   |   |   |   |   | $      | 168,591 |   |   |   |     |   |   | $      | 165,167 |   |   |   |   |   |

|                                                 |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |    |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|---------|
| Utility Margin:                                      |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |    |
| Residential                                          |   | $      | 115,697 |   |   |   | 62     | %      |   | $      | 104,373 |   |   |   | 62     | %      |   | $      | 99,862  |   |   |   | 61     | %       |
| Commercial and industrial                            |   |   | 44,705  |   |   |   | 24     | %      |   |   | 39,853  |   |   |   | 24     | %      |   |   | 38,995  |   |   |   | 24     | %       |
| Cogeneration and electric generation            |   |   | 2,957   |   |   |   | 2      | %      |   |   | 2,251   |   |   |   | 1      | %      |   |   | 1,997   |   |   |   | 1      | %       |
| Interruptible                                        |   |   | 177     |   |   |   | -      |   |   |   | 144     |   |   |   | -      |   |   |   | 143     |   |   |   | -      |    |
| Off-system & capacity release                    |   |   | 1,258   |   |   |   | 1      | %      |   |   | 1,416   |   |   |   | 1      | %      |   |   | 3,349   |   |   |   | 2      | %       |
| Other revenues                                       |   |   | 2,158   |   |   |   | 1      | %      |   |   | 2,511   |   |   |   | 1      | %      |   |   | 2,440   |   |   |   | 1      | %       |
| Margin before weather normalization & decoupling |   |   | 166,952 |   |   |   | 90     | %      |   |   | 150,548 |   |   |   | 89     | %      |   |   | 146,786 |   |   |   | 89     | %       |
| CIRT mechanism                                       |   |   | 7,523   |   |   |   | 4      | %      |   |   | 2,198   |   |   |   | 1      | %      |   |   | -       |   |   |   | -      |    |
| CIP mechanism                                        |   |   | 11,139  |   |   |   | 6      | %      |   |   | 15,809  |   |   |   | 10     | %      |   |   | 18,381  |   |   |   | 11     | %  |
| EET mechanism                                        |   |   | 173     |   |   |   | -      |   |   |   | 36      |   |   |   | -      |   |   |   | -       |   |   |   | -      |    |
| Utility Margin                                       |   | $      | 185,787 |   |   |   | 100    | %      |   | $      | 168,591 |   |   |   | 100    | %      |   | $      | 165,167 |   |   |   | 100    | %       |
|                                                 |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |    |
| Number of Customers at Year End:                     |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |    |
| Residential                                          |   |   | 324,246 |   |   |   | 93     | %      |   |   | 320,290 |   |   |   | 93     | %      |   |   | 317,026 |   |   |   | 93     | %       |
| Commercial                                           |   |   | 23,010  |   |   |   | 7      | %      |   |   | 22,802  |   |   |   | 7      | %      |   |   | 22,636  |   |   |   | 7      | %       |
| Industrial                                           |   |   | 469     |   |   |   | -      |   |   |   | 474     |   |   |   | -      |   |   |   | 474     |   |   |   | -      |    |
| Total Customers                                      |   |   | 347,725 |   |   |   | 100    | %      |   |   | 343,566 |   |   |   | 100    | %      |   |   | 340,136 |   |   |   | 100    | %       |
|                                                 |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |   |    |
| Annual Degree Days:                                  |   |   | 4,582   |   |   |   |   |   |   |   | 4,588   |   |   |   |   |   |   |   | 4,417   |   |   |   |   |    |

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|                   |   | 2010 vs. 2009 |   |   | 2009 vs. 2008 |   |
|------------------------|--------|---------------|--------|--------|---------------|--------|
|                   |   |          |   |   |          |   |
| Operations             |   | $             | 4,728  |   |          | $      | 6,422 |   |
| Maintenance            |   | $             | 2,681  |   |          | $      | 970 |   |
| Depreciation           |   | $             | 2,463  |   |          | $      | 1,267 |   |
| Energy and Other Taxes |   | $             | (58    | )      |          | $      | 200 |   |

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|                      |   | Total Facility |                     |   | Usage  |   |   | Available Liquidity |   | Expiration Date |
|---------------------------|--------|----------------|--------------------------|--------|--------|--------|--------|---------------------|--------|-----------------|
|                      |   |           |                     |   |   |   |   |                |   |            |
| Revolving Credit Facility |   | $              | 100,000                  |   |   | $      | 50,000 |                |   | $               | 50,000 |   | August 2011(A) |
| Line of Credit            |   |           | 40,000                   |   |   |   | -      |                |   |            | 40,000 |   | August 2011 (A) |
| Uncommitted Bank Lines    |   |           |    40,000 |   |   |   | 8,900  |                |   |            | 31,100 |   | Various |
|                      |   |           |                     |   |   |   |   |                |   |            |   |   |   |
| Total                     |   | $              | 180,000                  |   |   | $      | 58,900 |                |   | $               | 121,100 |   |   |

|            |   | 2010   |   |   | 2009   |   |
|-----------------|--------|--------|--------|--------|--------|--------|
|            |   |   |   |   |   |   |
| Common Equity   |   |   | 48.8   | %      |   |   | 52.2 | % |
| Long-Term Debt  |   |   | 44.5   | %      |   |   | 30.3 | % |
| Short-Term Debt |   |   | 6.7    | %      |   |   | 17.5 | % |
|            |   |   |   |   |   |   |   |   |
| Total           |   |   | 100.0  | %      |   |   | 100.0 | % |

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| Contractual Cash Obligations             |   | Total  |    |   | Up to1 Year |   |    | Years2 & 3 |   |   | Years4 & 5 |   |   | More than5 Years |   |
|------------------------------------------|--------|--------|---------|--------|-------------|--------|---------|----------------|--------|--------|----------------|--------|--------|------------------|--------|
|                                     |   |   |    |   |        |   |    |           |   |   |           |   |   |             |   |
| Principal Payments on Long-Term Debt     |   | $      | 390,000 |   |        | $      | 50,000  |           |   | $      | 29,375         |   |   | $                | 36,284 |   |   | $ | 274,341 |   |
| Interest on Long-Term Debt               |   |   | 245,047 |   |        |   | 20,825  |           |   |   | 37,995         |   |   |             | 33,918 |   |   |   | 152,309 |   |
| Operating Leases                         |   |   | 175     |   |        |   | 70      |           |   |   | 65             |   |   |             | 40     |   |   |   | - |   |
| Construction Obligations                 |   |   | 3,259   |   |        |   | 3,259   |           |   |   | -              |   |   |             | -      |   |   |   | - |   |
| Commodity Supply Purchase Obligations    |   |   | 181,018 |   |        |   | 43,898  |           |   |   | 32,406         |   |   |             | 26,816 |   |   |   | 77,898 |   |
| New Jersey Clean Energy Program (Note 3) |   |   | 24,031  |   |        |   | 11,053  |           |   |   | 12,978         |   |   |             | -      |   |   |   | - |   |
| Other Purchase Obligations               |   |   | 608     |   |        |   | 608     |           |   |   | -              |   |   |             | -      |   |   |   | - |   |
|                                     |   |   |    |   |        |   |    |           |   |   |           |   |   |             |   |   |   |   |   |   |
| Total Contractual Cash Obligations       |   | $      | 844,138 |   |        | $      | 129,713 |           |   | $      | 112,819        |   |   | $                | 97,058 |   |   | $ | 504,548 |   |

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Item

| Assets:                |                 |   | Maturity   |   |   | Maturity    |   |   |   |   |
|------------------------|----------------------|--------|------------|--------|--------|-------------|--------|--------|--------|--------|
|                   | Source of Fair Value |   | <1 Year |   |   | 1 - 3 Years |   |   | Total  |   |
|                   |                 |   |       |   |   |        |   |   |   |   |
| Prices Actively Quoted | NYMEX                |   | $          | 623    |   |        | $      | 161    |   |   | $ | 784 |   |
| Other External Sources | Basis                |   |       | 5,241  |   |        |   | 844    |   |   |   | 6,085 |   |
| Total                  |                 |   | $          | 5,864  |   |        | $      | 1,005  |   |   | $ | 6,869 |   |
|                   |                 |   |       |   |   |        |   |   |   |   |   |   |   |
| Liabilities:           |                 |   | Maturity   |   |   | Maturity    |   |   |   |   |   |
|                   | Source of Fair Value |   | <1 Year |   |   | 1 - 3 Years |   |   | Total  |   |
|                   |                 |   |       |   |   |        |   |   |   |   |   |   |   |
| Prices Actively Quoted | NYMEX                |   | $          | 10,282 |   |        | $      | 332    |   |   | $ | 10,614 |   |
| Other External Sources | Basis                |   |       | 1,124  |   |        |   | 98     |   |   |   | 1,222 |   |
| Total                  |                 |   | $          | 11,406 |   |        | $      | 430    |   |   | $ | 11,836 |   |

| Net Derivatives — Energy Related Liability, January 1, 2010   |   | $      | (9,173 | )  |
|---------------------------------------------------------------------|--------|--------|--------|---------|
| Contracts Settled During 2010, Net                                  |   |   | 9,002  |    |
| Other Changes in Fair Value from Continuing and New Contracts, Net  |   |   | (4,796 | )       |
| Net Derivatives — Energy Related Liability, December 31, 2010 |   | $      | (4,967 | )       |

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|                                   |   | Year Ended December 31, |    |
|----------------------------------------|--------|-------------------------|---------|
|                                   |   | 2010                    |    |   | 2009 |   |   | 2008 |   |
|                                   |   |                    |    |   |   |   |   |   |   |
| Operating Revenues                     |   | $                       | 475,982 |   |   | $ | 484,376 |   |   | $ | 568,046 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Operating Expenses:                    |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cost of Sales (Excluding depreciation) |   |                    | 266,382 |   |   |   | 293,852 |   |   |   | 383,403 |   |
| Operations                             |   |                    | 67,261  |   |   |   | 62,533 |   |   |   | 56,111 |   |
| Maintenance                            |   |                    | 11,550  |   |   |   | 8,869 |   |   |   | 7,899 |   |
| Depreciation                           |   |                    | 29,319  |   |   |   | 26,856 |   |   |   | 25,589 |   |
| Energy and Other Taxes                 |   |                    | 10,769  |   |   |   | 10,827 |   |   |   | 10,627 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Total Operating Expenses               |   |                    | 385,281 |   |   |   | 402,937 |   |   |   | 483,629 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Operating Income                       |   |                    | 90,701  |   |   |   | 81,439 |   |   |   | 84,417 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Other Income and Expense               |   |                    | 543     |   |   |   | 1,302 |   |   |   | 459 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Interest Charges                       |   |                    | (17,641 | ) |   |   | (16,442 | ) |   |   | (18,937 | ) |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Income Before Income Taxes             |   |                    | 73,603  |   |   |   | 66,299 |   |   |   | 65,939 |   |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Income Taxes                           |   |                    | (29,678 | ) |   |   | (27,104 | ) |   |   | (26,508 | ) |
|                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net Income                             |   | $                       | 43,925  |   |   | $ | 39,195 |   |   | $ | 39,431 |   |

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|                                                   |   | Year Ended December 31, |    |
|--------------------------------------------------------|--------|-------------------------|---------|
|                                                   |   | 2010                    |    |   | 2009 |   |   | 2008 |   |
|                                                   |   |                    |    |   |   |   |   |   |   |
| Cash Flows from Operating Activities:                  |   |                    |    |   |   |   |   |   |   |
| Net Income                                             |   | $                       | 43,925  |   |   | $ | 39,195 |   |   | $ | 39,431 |   |
| Provided by Operating Activities:                      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Depreciation and Amortization                          |   |                    | 39,502  |   |   |   | 34,507 |   |   |   | 31,506 |   |
| Provision for Losses on Accounts Receivable            |   |                    | 3,741   |   |   |   | 2,418 |   |   |   | 2,281 |   |
| CIP Receivable                                         |   |                    | 4,381   |   |   |   | 5,376 |   |   |   | 2,641 |   |
| Deferred Gas Costs - Net of Recoveries                 |   |                    | 22,492  |   |   |   | (7,910 | )  |   |   | 5,885 |   |
| Deferred SBC Costs - Net of Recoveries                 |   |                    | (2,344  | ) |   |   | (119 | )  |   |   | 1,199 |   |
| Environmental Remediation Costs - Net of Recoveries    |   |                    | (3,530  | ) |   |   | (444 | ) |   |   | (26,177 | ) |
| Deferred and Noncurrent Income Taxes and Credits - Net |   |                    | 24,540  |   |   |   | 22,104 |   |   |   | 21,378 |   |
| Gas Plant Cost of Removal                              |   |                    | (1,596  | ) |   |   | (1,678 | ) |   |   | (1,463 | ) |
| Changes in:                                            |   |                    |    |   |   |   |   |   |   |   |   |   |
| Accounts Receivable                                    |   |                    | (13,262 | ) |   |   | 3,526 |   |   |   | (4,531 | ) |
| Inventories                                            |   |                    | 5,945   |   |   |   | 47,934 |   |   |   | (18,659 | )  |
| Prepaid and Accrued Taxes - Net                        |   |                    | (8,744  | ) |   |   | 4,321 |   |   |   | (1,657 | ) |
| Other Prepayments and Current Assets                   |   |                    | (105    | ) |   |   | 168 |   |   |   | (138 | ) |
| Gas Purchases Payable                                  |   |                    | 7,285   |   |   |   | (16,957 | )  |   |   | 1,717 |   |
| Accounts Payable and Other Accrued Liabilities         |   |                    | (4,017  | ) |   |   | (5,856 | ) |   |   | (13,857 | )  |
| Other Assets                                           |   |                    | (5,886  | ) |   |   | (2,132 | ) |   |   | (375 | ) |
| Other Liabilities                                      |   |                    | 252     |   |   |   | (1,534 | ) |   |   | (8,920 | ) |
|                                                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net Cash Provided by Operating Activities              |   |                    | 112,579 |   |   |   | 122,919 |   |   |   | 30,261 |   |

|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
|------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|---------|---------|--------|--------|---------|---------|
| Cash Flows from Investing Activities:                                                    |   |   |     |   |   |   |    |    |   |   |    |    |
| Capital Expenditures                                                                     |   |   | (115,466 | )      |   |   | (98,673 | )       |   |   | (52,580 | )       |
| Investment in Long-Term Receivables                                                      |   |   | (3,313   | )      |   |   | (4,730  | )       |   |   | (5,558  | )       |
| Proceeds from Long-Term Receivables                                                      |   |   | 2,901    |   |   |   | 5,399   |    |   |   | 3,399   |    |
| Purchase of Restricted Investment with Escrowed Loan Proceeds                            |   |   | -        |   |   |   | -       |    |   |   | (39     | )       |
| Restricted Investment - Escrowed Loan Proceeds                                           |   |   | -        |   |   |   | -       |    |   |   | 2,146   |    |
|     Net Purchase of Restricted Investment in Margin Account          |   |   | (4,169   | )      |   |   | -       |    |   |   | -       |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
|  Net Cash Used in Investing Activities                                              |   |   | (120,047 | )      |   |   | (98,004 | )       |   |   | (52,632 | )       |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Cash Flows from Financing Activities:                                                    |   |   |     |   |   |   |    |    |   |   |    |    |
| Net (Repayments of) Borrowing from Lines of Credit                                  |   |   | (50,500  | )      |   |   | (5,150  | )  |   |   | 36,210  |    |
| Proceeds from Issuance of Long-Term Debt                                                 |   |   | 115,000  |   |   |   | -       |    |   |   | 25,000  |    |
| Principal Repayments of Long-Term Debt                                                   |   |   | (10,000  | )      |   |   | (9,873  | )       |   |   | (25,000 | )       |
| Payments for Issuance of Long-Term Debt                                                  |   |   | (1,215   | )      |   |   | (178    | )       |   |   | (320    | )  |
| Dividends on Common Stock                                                                |   |   | (45,905  | )      |   |   | (10,002 | )       |   |   | (14,867 | )       |
| Excess Tax Benefit from Restricted Stock Plan                                            |   |   | 125      |   |   |   | 53      |    |   |   | 346     |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Net Cash Provided by (Used in) Financing Activities                                      |   |   | 7,505    |   |   |   | (25,150 | )  |   |   | 21,369  |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Net Increase (Decrease) in Cash and Cash Equivalents                                     |   |   | 37       |   |   |   | (235    | )       |   |   | (1,002  | )  |
| Cash and Cash Equivalents at Beginning of Period                                         |   |   | 1,993    |   |   |   | 2,228   |    |   |   | 3,230   |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Cash and Cash Equivalents at End of Period                                               |   | $      | 2,030    |   |   | $      | 1,993   |    |   | $      | 2,228   |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Supplemental Disclosures of Cash Flow Information                                        |   |   |     |   |   |   |    |    |   |   |    |    |
| Interest (Net of Amounts Applicable to Gas Cost Overcollections and Amounts Capitalized) |   | $      | 17,611   |   |   | $      | 17,926  |    |   | $      | 19,550  |    |
| Income Taxes (Net of Refunds)                                                            |   | $      | 14,816   |   |   | $      | (4,308  | )  |   | $      | 7,315   |    |
|                                                                                     |   |   |     |   |   |   |    |    |   |   |    |    |
| Supplemental Disclosures of Noncash Investing Activities                                 |   |   |     |   |   |   |    |    |   |   |    |    |
| Capital property and equipment acquired on account but not paid at year-end              |   | $      | 14,906   |   |   | $      | 19,166  |    |   | $      | 7,590   |    |

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|                                         |   | December 31, |      |
|----------------------------------------------|--------|--------------|-----------|
|                                         |   | 2010         |      |   | 2009 |   |
| Assets                                       |   |         |      |   |   |   |
|                                         |   |         |      |   |   |   |
| Property, Plant and Equipment:               |   |         |      |   |   |   |
| Utility Plant, at original cost              |   | $            | 1,384,797 |   |   | $ | 1,275,792 |   |
| Accumulated Depreciation                     |   |         | (337,993  | ) |   |   | (314,627 | ) |
|                                         |   |         |      |   |   |   |   |   |
| Property, Plant and Equipment – Net    |   |         | 1,046,804 |   |   |   | 961,165 |   |
|                                         |   |         |      |   |   |   |   |   |
| Investments:                                 |   |         |      |   |   |   |   |   |
| Available-for-Sale Securities                |   |         | 6,700     |   |   |   | 5,941 |   |
| Restricted Investments                       |   |         | 4,301     |   |   |   | 132 |   |
|                                         |   |         |      |   |   |   |   |   |
| Total Investments                            |   |         | 11,001    |   |   |   | 6,073 |   |
|                                         |   |         |      |   |   |   |   |   |
| Current Assets:                              |   |         |      |   |   |   |   |   |
| Cash and Cash Equivalents                    |   |         | 2,030     |   |   |   | 1,993 |   |
| Accounts Receivable                          |   |         | 37,619    |   |   |   | 41,392 |   |
| Accounts Receivable - Related Parties        |   |         | 4,885     |   |   |   | 974 |   |
| Unbilled Revenues                            |   |         | 58,197    |   |   |   | 47,333 |   |
| Provision for Uncollectibles                 |   |         | (4,577    | ) |   |   | (3,915 | ) |
| Natural Gas in Storage, average cost         |   |         | 20,109    |   |   |   | 23,711 |   |
| Materials and Supplies, average cost         |   |         | 2,511     |   |   |   | 4,854 |   |
| Prepaid Taxes                                |   |         | 15,907    |   |   |   | 13,796 |   |
| Derivatives - Energy Related Assets          |   |         | 5,864     |   |   |   | 797 |   |
| Other Prepayments and Current Assets         |   |         | 2,353     |   |   |   | 2,248 |   |
|                                         |   |         |      |   |   |   |   |   |
| Total Current Assets                         |   |         | 144,898   |   |   |   | 133,183 |   |
|                                         |   |         |      |   |   |   |   |   |
| Regulatory and Other Noncurrent Assets:      |   |         |      |   |   |   |   |   |
| Regulatory Assets                            |   |         | 248,413   |   |   |   | 240,462 |   |
| Unamortized Debt Issuance Costs              |   |         | 6,718     |   |   |   | 5,829 |   |
| Long-Term Receivables                        |   |         | 7,285     |   |   |   | 7,693 |   |
| Derivatives - Energy Related Assets          |   |         | 1,005     |   |   |   | 333 |   |
| Other                                        |   |         | 2,511     |   |   |   | 2,324 |   |
|                                         |   |         |      |   |   |   |   |   |
| Total Regulatory and Other Noncurrent Assets |   |         | 265,932   |   |   |   | 256,641 |   |
|                                         |   |         |      |   |   |   |   |   |
| Total Assets                                 |   | $            | 1,468,635 |   |   | $ | 1,357,062 |   |

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|                                                   |   | December 31, |      |
|--------------------------------------------------------|--------|--------------|-----------|
|                                                   |   | 2010         |      |   | 2009 |   |
|                                                   |   |         |      |   |   |   |
| 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      |   |         | 200,841   |   |   |   | 200,716 |   |
| Accumulated Other Comprehensive Loss                   |   |         | (9,120    | ) |   |   | (6,330 | ) |
| Retained Earnings                                      |   |         | 229,316   |   |   |   | 231,296 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Total Common Equity                                    |   |         | 426,885   |   |   |   | 431,530 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Long-Term Debt                                         |   |         | 340,000   |   |   |   | 250,000 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Total Capitalization                                   |   |         | 766,885   |   |   |   | 681,530 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Current Liabilities:                                   |   |         |      |   |   |   |   |   |
| Notes Payable                                          |   |         | 58,900    |   |   |   | 109,400 |   |
| Current Portion of Long-Term Debt                      |   |         | 50,000    |   |   |   | 35,000 |   |
| Accounts Payable – Commodity                     |   |         | 26,915    |   |   |   | 19,630 |   |
| Accounts Payable – Other                         |   |         | 19,628    |   |   |   | 21,947 |   |
| Accounts Payable - Related Parties                     |   |         | 10,830    |   |   |   | 12,120 |   |
| Derivatives - Energy Related Liabilities               |   |         | 11,406    |   |   |   | 9,799 |   |
| Deferred Income Taxes – Net                      |   |         | 4,982     |   |   |   | 11,642 |   |
| Customer Deposits and Credit Balances                  |   |         | 10,525    |   |   |   | 13,542 |   |
| Environmental Remediation Costs                        |   |         | 25,662    |   |   |   | 22,499 |   |
| Taxes Accrued                                          |   |         | 1,915     |   |   |   | 8,548 |   |
| Pension Benefits                                       |   |         | 1,182     |   |   |   | 1,066 |   |
| Interest Accrued                                       |   |         | 7,011     |   |   |   | 5,979 |   |
| Other Current Liabilities                              |   |         | 5,156     |   |   |   | 7,839 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Total Current Liabilities                              |   |         | 234,112   |   |   |   | 279,011 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Regulatory and Other Noncurrent Liabilities:           |   |         |      |   |   |   |   |   |
| Regulatory Liabilities                                 |   |         | 69,248    |   |   |   | 50,193 |   |
| Deferred Income Taxes – Net                      |   |         | 239,648   |   |   |   | 210,925 |   |
| Environmental Remediation Costs                        |   |         | 61,731    |   |   |   | 46,557 |   |
| Asset Retirement Obligations                           |   |         | 27,925    |   |   |   | 22,960 |   |
| Pension and Other Postretirement Benefits              |   |         | 59,754    |   |   |   | 57,699 |   |
| Investment Tax Credits                                 |   |         | 1,207     |   |   |   | 1,517 |   |
| Derivatives - Energy Related Liabilities               |   |         | 430       |   |   |   | 504 |   |
| Derivatives – Other                              |   |         | 3,150     |   |   |   | 1,956 |   |
| Other                                                  |   |         | 4,545     |   |   |   | 4,210 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Total Regulatory and Other Noncurrent Liabilities |   |         | 467,638   |   |   |   | 396,521 |   |
|                                                   |   |         |      |   |   |   |   |   |
| Commitments and Contingencies (Note 12)                |   |         |      |   |   |   |   |   |
|                                                   |   |         |      |   |   |   |   |   |
| Total Capitalization and Liabilities                   |   | $            | 1,468,635 |   |   | $ | 1,357,062 |   |

----

Table of Contents

|                                               |   | Common Stock |   |   | Other Paid-In Capital and Premium on Common Stock |    |    | Accumulated Other Comprehensive Loss |   |    | Retained Earnings |   |   | Total   |    |
|----------------------------------------------------|--------|--------------|--------|--------|---------------------------------------------------|---------|---------|--------------------------------------|--------|---------|-------------------|--------|--------|---------|---------|
| Balance at January 1, 2008                         |   | $            | 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 |   |
| Net Income                                         |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    | 39,195  |   |   |   | 39,195 |   |
| Other Comprehensive Income (Loss), Net of Tax: (a) |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   |   |   |
| Postretirement Liability Adjustment                |   |         |   |   |                                              |    |    |                                 |   |    | (15               | )      |   |    |    |   |   |   | (15 | ) |
| Unrealized Gain on Available-for-Sale Securities   |   |         |   |   |                                              |    |    |                                 |   |    | 533               |   |   |    |    |   |   |   | 533 |   |
| Unrealized Gain on Derivatives                     |   |         |   |   |                                              |    |    |                                 |   |    | 27                |   |   |    |    |   |   |   | 27 |   |
| Other Comprehensive Income, Net of Tax: (a)        |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   | 545 |   |
| Comprehensive Income                               |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   | 39,740 |   |
| Cash Dividends Declared – Common Stock       |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    | (10,002 | ) |   |   | (10,002 | ) |
| Excess Tax Benefit from Restricted Stock Plan      |   |         |   |   |                                              |    | 53      |                                 |   |    |              |   |   |    |    |   |   |   | 53 |   |
|                                               |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   |   |   |
| Balance at December 31, 2009                       |   |         | 5,848  |   |                                              |    | 200,716 |                                 |   |    | (6,330            | )      |   |    | 231,296 |   |   |   | 431,530 |   |
| Net Income                                         |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    | 43,925  |   |   |   | 43,925 |   |
| Other Comprehensive Income (Loss), Net of Tax: (a) |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   |   |   |
| Postretirement Liability Adjustment                |   |         |   |   |                                              |    |    |                                 |   |    | (3,156            | )      |   |    |    |   |   |   | (3,156 | ) |
| Unrealized Gain on Available-for-Sale Securities   |   |         |   |   |                                              |    |    |                                 |   |    | 339               |   |   |    |    |   |   |   | 339 |   |
| Unrealized Gain on Derivatives                     |   |         |   |   |                                              |    |    |                                 |   |    | 27                |   |   |    |    |   |   |   | 27 |   |
| Other Comprehensive Loss, Net of Tax: (a)          |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   | (2,790 | ) |
| Comprehensive Income                               |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   | 41,135 |   |
| Cash Dividends Declared – Common Stock       |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    | (45,905 | ) |   |   | (45,905 | ) |
| Excess Tax Benefit from Restricted Stock Plan      |   |         |   |   |                                              |    | 125     |                                 |   |    |              |   |   |    |    |   |   |   | 125 |   |
|                                               |   |         |   |   |                                              |    |    |                                 |   |    |              |   |   |    |    |   |   |   |   |   |
| Balance at December 31, 2010                       |   | $            | 5,848  |   |                                              | $       | 200,841 |                                 |   | $       | (9,120            | )      |   | $       | 229,316 |   |   | $ | 426,885 |   |

|                         |   | Postretirement Liability Adjustment |   |   | Unrealized  Gain (Loss) on Available-for-Sale Securities |   |   | Unrealized (Loss) Gain on Derivatives |   |   | Accumulated Other Comprehensive Loss |   |
|------------------------------|--------|-------------------------------------|--------|--------|--------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------------------|--------|
|                         |   |                                |   |   |                                                               |   |   |                                       |   |   |                                 |   |   |   |   |   |
| Balance at January 1, 2008   |   | $                                   | (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 | ) |
| Changes During Year          |   |                                | (15    | )      |                                                               |   | 533    |                                       |   |   | 27                                   |   |   |   | 545 |   |
| Balance at December 31, 2009 |   |                                | (5,443 | )      |                                                               |   | (185   | )                                          |   |   | (702                                 | )      |   |   | (6,330 | ) |
| Changes During Year          |   |                                | (3,156 | )      |                                                               |   | 339    |                                       |   |   | 27                                   |   |   |   | (2,790 | ) |
| Balance at December 31, 2010 |   | $                                   | (8,599 | )      |                                                               | $      | 154    |                                       |   | $      | (675                                 | )      |   | $ | (9,120 | ) |

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Table of Contents

| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
|----|---------------------------------------------|

----

Table of Contents

|                          |   | 2010   |      |   | 2009   |   |
|-------------------------------|--------|--------|-----------|--------|--------|--------|
| Utility Plant:                |   |   |      |   |   |   |
| Production Plant              |   | $      | 302       |   |   | $      | 302 |   |
| Storage Plant                 |   |   | 12,390    |   |   |   | 12,193 |   |
| Transmission Plant            |   |   | 214,544   |   |   |   | 153,393 |   |
| Distribution Plant            |   |   | 1,084,989 |   |   |   | 1,021,233 |   |
| General Plant                 |   |   | 50,862    |   |   |   | 45,008 |   |
| Other Plant         |   |   | 3,665     |   |   |   | 3,665 |   |
| Utility Plant in Service      |   |   | 1,366,752 |   |   |   | 1,235,794 |   |
| Construction Work in Progress |   |   | 18,045    |   |   |   | 39,998 |   |
|                          |   |   |      |   |   |   |   |   |
| Total Utility Plant           |   | $      | 1,384,797 |   |   | $      | 1,275,792 |   |

|                                                                                                                                                                                                           |   | 2010   |   |   | 2009   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| AROs as of January 1,                                                                                                                                                                                          |   | $      | 22,960 |   |   | $      | 22,299 |   |
| Accretion                                                                                                                                                                                                      |   |   | 479    |   |   |   | 492 |   |
| Additions                                                                                                                                                                                                      |   |   | 242    |   |   |   | 193 |   |
| Settlements                                                                                                                                                                                                    |   |   | (29    | )      |   |   | (24 | ) |
| Revisions in Estimated Cash Flows *                                                                                                                                                                            |   |   | 4,273  |   |   |   | - |   |
| AROs as of December 31,                                                                                                                                                                                        |   | $      | 27,925 |   |   | $      | 22,960 |   |
|                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| * The revision in estimated cash flows reflects an increase in the contractual cost to settle the ARO’s. A corresponding increase was made to regulatory assets, thus having no impact on earnings. |

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Table of Contents

| 2. | STOCK-BASED COMPENSATION PLAN: |
|----|--------------------------------|

----

Table of Contents

| Grant Date |   | Shares Outstanding |   |   | Fair Value Per Share |   |   | Expected Volatility |   |   | Risk-Free Interest Rate |   |
|------------|--------|--------------------|--------|--------|----------------------|--------|--------|---------------------|--------|--------|-------------------------|--------|
|       |   |               |   |   |                 |   |   |                |   |   |                    |   |
| Jan. 2009  |   |               | 8,318  |   |                 | $      | 39.350 |                |   |   | 28.6                    | %      |   |   | 1.20 | % |
|       |   |               |   |   |                 |   |   |                |   |   |                    |   |   |   |   |   |
| Jan. 2010  |   |               | 10,024 |   |                 |   | 39.020 |                |   |   | 29.0                    | %      |   |   | 1.65 | % |

|                                            |   | Shares |   |   | Weighted AverageGrant DateFair Value |   |
|-------------------------------------------------|--------|--------|--------|--------|--------------------------------------|--------|
| Nonvested Shares Outstanding, January 1, 2010   |   |   | 17,556 |   |                                 | $      | 36.551 |   |
| Granted                                         |   |   | 10,024 |   |                                 | $      | 39.020 |   |
| Vested*                                         |   |   | (9,238 | )      |                                 | $      | 34.030 |   |
| Nonvested Shares Outstanding, December 31, 2010 |   |   | 18,342 |   |                                 | $      | 39.170 |   |

| *  | Actual shares expected to be awarded to SJG officers and other key employees during the first quarter of 2011, including dividend equivalents and adjustments for performance measures, total 15,186 shares. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| 3. | RATES AND REGULATORY ACTIONS: |
|----|-------------------------------|

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

|   | · | June 2009 - We made our annual BGSS filing to the BPU requesting a $54.7 million reduction, or 17.5% decrease, in gas costs recoveries in response to projected decreases in wholesale gas costs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | August 2009 - The BPU issued an Order finalizing the 2008-2009 provisional BGSS costs. |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | September 2009 - The BPU approved, on a provisional basis, SJG’s request for a $54.7 million, or 17.5%, reduction in gas cost recoveries. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | June 2010 – We made our annual BGSS filing to the BPU requesting a $38.0 million, or 13.9%, reduction in gas cost recoveries in response to projected decreases in wholesale gas costs. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | September 2010 – The BPU approved, on a provisional basis, SJG’s request for a $38.0 million, or 13.9%, reduction in gas cost recoveries. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

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

|   | · | June 2009 - We made our annual CIP filing to the BPU requesting recovery of $13.4 million which included a $13.7 million non-weather related recovery, partially offset by a credit of $0.3 million which was weather related. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | August 2009 - The BPU issued an Order finalizing the 2008-2009 provisional CIP rates. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | September 2009 - The BPU approved, on a provisional basis, the recovery of CIP revenue of $13.4 million. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | June 2010 – We made our annual CIP filing to the BPU requesting recovery of $20.0 million which included a $14.4 million non-weather related recovery and $5.6 million which was weather related.  The BGSS savings to be applied as an offset to the non-weather related recovery totaled $8.9 million. As a result, SJG will carry forward $5.5 million to be recovered from customers in the next CIP year. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | September 2010 – The BPU approved, on a provisional basis, the recovery of CIP revenue of $14.5 million. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | January 2009 - We filed a petition with the BPU for approval of an accelerated infrastructure investment program and associated rate tracker as discussed above. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | April 2009 – The BPU approved our petition for the CIRT, including a first year estimated capital expenditure level of $70.5 million, and estimated revenue of $3.2 million. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | November 2009 - We made our annual CIRT filing, requesting $10.6 million in additional revenue. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | December 2009 – The BPU approved, on a provisional basis, recovery of an additional $9.9 million in CIRT revenue. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | September 2010 – The BPU authorized $81.3 million of CIRT-related expenditures to be rolled into rate base and also authorized that the remaining balance of CIRT-related expenditures continue to be recovered.  These remaining expenditures will be reviewed and rolled into rate base during Phase II of the base rate case in 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | October 2010 – We made our annual CIRT filing requesting approval to earn a return of, and a return on, $150.0 million in additional CIRT-related expenditures during 2011, 2012 and 2013. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|   | · | January 2009 - Filed a petition with the BPU for approval of an energy efficiency program as noted above, with a projected 2009 revenue of $1.7 million. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | July 2009 - The BPU approved our petition for the EET with a revenue recovery of $1.3 million. |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | July 2010 - Filed a petition with the BPU requesting a reallocation of investment dollars between the EET programs to fund the more popular programs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | November 2010 - Filed a petition with the BPU requesting a one year extension of the program. |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | January 2011 - SJG’s request was approved by the BPU. |
|--------|--------|-------------------------------------------------------------|

|   | · | December 2008 – As part of a 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. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | January 2009 - We made our annual 2008-2009 SBC filing requesting $7.9 million increase in SBC recoveries, which includes a net increase in Remediation Adjustment Clause, Clean Energy Program Clause and Transportation Initiation Clause. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | August 2009 - We made our annual 2009-2010 SBC filing requesting a $15.5 million increase in SBC recoveries, which includes a net increase in Remediation Adjustment Clause, Clean Energy Program Clause and Transportation Initiation Clause. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | September 2010 – We made our annual 2010-2011 SBC filing requesting a $21.5 million increase in SBC recoveries, which includes a net increase in Remediation Adjustment Clause, Clean Energy Program Clause and Transportation Initiation Clause. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

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

|   | · | June 2009 - We made our annual USF filing, along with the state’s other electric and gas utilities, proposing to decrease annual statewide gas revenues by $39.1 million.  This proposal was designed to decrease our annual USF revenue by $4.9 million. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | October 2009 – The BPU approved the statewide budget of $60.1 million for all of the State’s gas utilities.  Our portion of this total is approximately $5.1 million and decreased rates were implemented effective October 12, 2009, resulting in a $4.1 million decrease to our annual USF recoveries. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | July 2010 – We made our annual USF filing, along with the state’s other electric and gas utilities, proposing to increase annual statewide gas revenues by $3.4 million.  This proposal was designed to increase our annual USF revenue by $0.4 million. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | August 2010 – We updated our July 2010 filing to reflect actual data through June 2010. |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | October 2010 – The BPU approved the statewide budget of $64.8 million for all of the State’s gas utilities.  Our portion of the total is approximately $6.6 million and increased rates were implemented effective November 1, 2010, resulting in a $0.4 million increase to our annual USF recoveries. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| 4. | REGULATORY ASSETS AND LIABILITIES: |
|----|------------------------------------|

|                                                    |   | 2010   |    |   | 2009   |   |
|---------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Environmental Remediation Costs:                   |   |   |    |   |   |   |   |   |
| Expended – Net                                    |   | $      | 39,056  |   |   | $      | 42,924 |   |
| Liability for Future Expenditures                       |   |   | 87,393  |   |   |   | 69,056 |   |
| Income Taxes - Flowthrough Depreciation                 |   |   | 774     |   |   |   | 1,752 |   |
| Deferred Asset Retirement Obligation Costs              |   |   | 24,247  |   |   |   | 22,438 |   |
| Deferred Gas Costs – Net                          |   |   | -       |   |   |   | 6,519 |   |
| Deferred Pension and Other Postretirement Benefit Costs |   |   | 69,017  |   |   |   | 71,192 |   |
| Conservation Incentive Program Receivable               |   |   | 12,291  |   |   |   | 16,672 |   |
| Societal Benefit Costs Receivable                       |   |   | 4,216   |   |   |   | 1,872 |   |
| Premium for Early Retirement of Debt                    |   |   | 699     |   |   |   | 1,046 |   |
| Other Regulatory Assets                                 |   |   | 10,720  |   |   |   | 6,991 |   |
| Total Regulatory Assets                                 |   | $      | 248,413 |   |   | $      | 240,462 |   |

----

Table of Contents

|                         |   | 2010   |   |   | 2009   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Excess Plant Removal Costs   |   | $      | 48,409 |   |   | $      | 48,715 |   |
| Deferred Revenues - Net      |   |   | 20,179 |   |   |   | - |   |
| Other                        |   |   | 660    |   |   |   | 1,478 |   |
| Total Regulatory Liabilities |   | $      | 69,248 |   |   | $      | 50,193 |   |

----

Table of Contents

| 5. | RELATED PARTY TRANSACTIONS: |
|----|-----------------------------|

|   | · | 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, Appalachian and southern states. 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 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                     |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                     |   |   |   |   |   |   |   |   |   |
| Operating Revenues/Affiliates:      |   |   |   |   |   |   |   |   |   |
| SJRG                                     |   | $      | 6,244  |   |   | $      | 3,782  |   |   | $ | 7,604 |   |
| Other                                    |   |   | 464    |   |   |   | 456    |   |   |   | 402 |   |
| Total Operating Revenues/Affiliates |   | $      | 6,708  |   |   | $      | 4,238  |   |   | $ | 8,006 |   |

----

Table of Contents

|                                    |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs of Sales/Affiliates               |   |   |   |   |   |   |   |   |   |   |   |   |
| (Excluding depreciation):               |   |   |   |   |   |   |   |   |   |   |   |   |
| SJRG                                    |   | $      | 16,768 |   |   | $      | 38,643 |   |   | $ | 28,565 |   |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Derivative Losses (Gains) (See Note 1): |   |   |   |   |   |   |   |   |   |   |   |   |
| SJRG                                    |   | $      | 23,526 |   |   | $      | 51,856 |   |   | $ | (6,215 | ) |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Operations Expense/Affiliates           |   |   |   |   |   |   |   |   |   |   |   |   |
| SJI                                     |   | $      | 8,546  |   |   | $      | 8,042  |   |   | $ | 6,957 |   |
| SJIS                                    |   |   | 5,174  |   |   |   | 4,768  |   |   |   | 4,154 |   |
| Millennium                              |   |   | 2,986  |   |   |   | 2,904  |   |   |   | 2,982 |   |
| Other                                   |   |   | (244   | )      |   |   | (288   | )      |   |   | (226 | ) |
| Total Operations Expense/Affiliates     |   | $      | 16,462 |   |   | $      | 15,426 |   |   | $ | 13,867 |   |

| 6. | INCOME TAXES AND CREDITS: |
|----|---------------------------|

|                                     |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax at Statutory Rate                    |   | $      | 25,760 |   |   | $      | 23,205 |   |   | $ | 23,078 |   |
| Increase (Decrease) Resulting from:      |   |   |   |   |   |   |   |   |   |   |   |   |
| State Income Taxes                       |   |   | 4,340  |   |   |   | 4,471  |   |   |   | 4,491 |   |
| Amortization of Investment Tax Credits   |   |   | (310   | )      |   |   | (314   | )      |   |   | (318 | ) |
| ESOP Dividend                            |   |   | (874   | )      |   |   | (730   | )      |   |   | (736 | ) |
| Amortization of Flowthrough Depreciation |   |   | 664    |   |   |   | 664    |   |   |   | 664 |   |
| Other - Net                              |   |   | 98     |   |   |   | (192   | )      |   |   | (671 | ) |
| Net Income Taxes                         |   | $      | 29,678 |   |   | $      | 27,104 |   |   | $ | 26,508 |   |

|                   |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Current:               |   |   |   |   |   |   |   |   |   |
| Federal                |   | $      | 399    |   |   | $      | 3,158  |   |   | $ | 1,042 |   |
| State                  |   |   | 4,739  |   |   |   | 1,842  |   |   |   | 4,088 |   |
| Total Current          |   |   | 5,138  |   |   |   | 5,000  |   |   |   | 5,130 |   |
| Deferred:              |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                |   |   | 22,912 |   |   |   | 17,381 |   |   |   |   18,877 |   |
| State                  |   |   | 1,938  |   |   |   | 5,037  |   |   |   | 2,819 |   |
| Total Deferred         |   |   | 24,850 |   |   |   | 22,418 |   |   |   | 21,696 |   |
| Investment Tax Credits |   |   | (310   | )      |   |   | (314   | )      |   |   | (318 | ) |
| Net Income Taxes       |   | $      | 29,678 |   |   | $      | 27,104 |   |   | $ | 26,508 |   |

----

Table of Contents

|                                                  |   | 2010   |    |   | 2009   |   |
|-------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                  |   |   |    |   |   |   |
| Current:                                              |   |   |    |   |   |   |
| Deferred Fuel Costs - Net                             |   | $      | -       |   |   | $      | 4,121 |   |
| Uncollectibles                                        |   |   | (1,597  | )      |   |   | (1,322 | ) |
| Deferred Revenues                                     |   |   | 5,408   |   |   |   | 7,396 |   |
| Section 461 Prepayments                               |   |   | 745     |   |   |   | 709 |   |
| Other                                                 |   |   | 426     |   |   |   | 738 |   |
| Current Deferred Tax Liability - Net                  |   | $      | 4,982   |   |   | $      | 11,642 |   |
|                                                  |   |   |    |   |   |   |   |   |
| Noncurrent:                                           |   |   |    |   |   |   |   |   |
| Book Versus Tax Basis of Property                     |   | $      | 236,804 |   |   | $      | 201,546 |   |
| Deferred Fuel Costs - Net                             |   |   | 2,955   |   |   |   | 7,568 |   |
| Environmental                                         |   |   | 16,502  |   |   |   | 17,247 |   |
| Deferred Regulatory Costs                             |   |   | 3,278   |   |   |   | 1,259 |   |
| Deferred State Tax                                    |   |   | (9,631  | )      |   |   | (9,075 | ) |
| Investment Tax Credit Basis Gross-Up                  |   |   | (622    | )      |   |   | (782 | ) |
| Deferred Pension & Other Post Retirement Benefits |   |   | 27,885  |   |   |   | 28,783 |   |
| Pension & Other Post Retirement Benefits          |   |   | (21,223 | )      |   |   | (20,882 | ) |
| Deferred Revenues                                     |   |   | (15,281 | )      |   |   | (14,455 | ) |
| Other                                                 |   |   | (1,019  | )      |   |   | (284 | ) |
| Noncurrent Deferred Tax Liability – Net         |   | $      | 239,648 |   |   | $      | 210,925 |   |

|                                                      |   | 2010   |   |   | 2009   |   |   | 2008    |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|
|                                                      |   |   |   |   |   |   |   |    |   |
| Balance at January 1,                                |   | $      | 576    |   |   | $      | 910    |    |   | $ | 907 |   |
| Increase as a result of tax position taken in prior years |   |   | -      |   |   |   | 42     |    |   |   | 253 |   |
| Decrease due to a lapse in the statue of limitations      |   |   | -      |   |   |   | (376   | )  |   |   | (250 | )  |
| Settlements                                               |   |   | (98    | )      |   |   | -      |    |   |   | - |   |
| Balance at December 31,                                   |   | $      | 478    |   |   | $      | 576    |    |   | $ | 910 |   |

----

Table of Contents

| 7. | LONG-TERM DEBT: (A) |
|----|---------------------|

|                                          |   |   |    |                | 2010   |   |    | 2009   |   |
|-----------------------------------------------|--------|--------|---------|---------------------|--------|--------|---------|--------|--------|
|                                          |   |   |    |                |   |   |
| First Mortgage Bonds: (B)                     |   |   |    |                |   |   |
|                                          |   |   |    |                |   |   |
|                                          | 6.12   | %      |    | Series due 2010 (C) |   | $      | -       |   |   | $ | 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 |   |
|                                          | 5.437  | %      |    | Series due 2016     |   |   | 10,000  |   |   |   | 10,000 |   |
|                                          | 4.60   | %      |    | Series due 2016     |   |   | 17,000  |   |   |   | 17,000 |   |
|                                          | 4.657  | %      |    | Series due 2017     |   |   | 15,000  |   |   |   | 15,000 |   |
|                                          | 7.97   | %      |    | Series due 2018     |   |   | 10,000  |   |   |   | 10,000 |   |
|                                          | 7.125  | %      |    | Series due 2018     |   |   | 20,000  |   |   |   | 20,000 |   |
|                                          | 5.587  | %      |    | Series due 2019     |   |   | 10,000  |   |   |   | 10,000 |   |
|                                          | 3.63   | %      |    | Series due 2025 (D) |   |   | 10,000  |   |   |   | - |   |
|                                          | 4.84   | %      |    | Series due 2026 (D) |   |   | 15,000  |   |   |   | - |   |
|                                          | 4.93   | %      |    | Series due 2026 (D) |   |   | 45,000  |   |   |   | - |   |
|                                          | 4.03   | %      |    | Series due 2027 (D) |   |   | 45,000  |   |   |   | - |   |
|                                          | 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 (E)                   |   |   | 25,000  |                |   |   | 25,000  |   |
|                                          |   |   |    |                |   |   |    |   |   |   |   |   |
| Total Long-Term Debt Outstanding              |   |   | 390,000 |                |   |   | 285,000 |   |
| Less Current Maturities (A) (E)               |   |   | (50,000 | )                   |   |   | (35,000 | )      |
| Long-Term Debt                                |   | $      | 340,000 |                |   | $      | 250,000 |   |

| (A) | Long-term debt maturities and sinking funds requirements for the succeeding five years are as follows (in thousands): 2011, $25,000; 2012, $2,187; 2013, $27,187; 2014, $23,188; 2015, $13,097 (See Note (E) 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 October 21, 2010, SJG retired its 6.12% Medium Term Notes (MTN), at par. |
|-----|-----------------------------------------------------------------------------|

| (D) | During 2010, SJG made the following private placement issuances under its MTN Program: $15.0 million on March 1, 2010, due 2026; $45.0 million on June 30, 2010, due 2026; $10.0 million on December 30, 2010, due 2025, requiring annual principal payments of $0.9 million beginning December 2015; and $45.0 million on December 30, 2010, due 2027, requiring annual principal payments of $9.0 million beginning December 2023.  As of December 31, 2010, $35.0 million remains available under this program. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (E) | 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 current letter of credit expires in August 2011, 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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| 8. | FINANCIAL INSTRUMENTS: |
|----|------------------------|

| 9. | UNUSED LINES OF CREDIT: |
|----|-------------------------|

|                      |   | Total Facility |    |   | Usage  |   |   | Available Liquidity |   | Expiration Date |
|---------------------------|--------|----------------|---------|--------|--------|--------|--------|---------------------|--------|-----------------|
|                      |   |           |    |   |   |   |   |                |   |            |
| Revolving Credit Facility |   | $              | 100,000 |   |   | $      | 50,000 |                |   | $               | 50,000 |   | August 2011(A) |
| Line of Credit            |   |           | 40,000  |   |   |   | -      |                |   |            | 40,000 |   | August 2011 (A) |
| Uncommitted Bank Lines    |   |           | 40,000  |   |   |   | 8,900  |                |   |            | 31,100 |   | Various |
|                      |   |           |    |   |   |   |   |                |   |            |   |   |   |
| Total                     |   | $              | 180,000 |   |   | $      | 58,900 |                |   | $               | 121,100 |   |   |

| 10. | RETAINED EARNINGS: |
|-----|--------------------|

----

Table of Contents

| 11. | PENSION AND OTHER POSTRETIREMENT BENEFITS: |
|-----|--------------------------------------------|

|                               |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
|------------------------------------|--------|------------------|--------|--------|-------------------------------|--------|
|                               |   | 2010             |   |   | 2009                          |   |   | 2008 |   |   | 2010 |   |   | 2009 |   |   | 2008 |   |
|                               |   |             |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service Cost                       |   | $                | 2,648  |   |                          | $      | 2,412 |   |   | $ | 2,408 |   |   | $ | 644 |   |   | $ | 622 |   |   | $ | 605 |   |
| Interest Cost                      |   |             | 7,584  |   |                          |   | 7,125 |   |   |   | 6,843 |   |   |   | 2,708 |   |   |   | 2,712 |   |   |   | 2,497 |   |
| Expected Return on Plan Assets     |   |             | (6,711 | )      |                          |   | (6,035 | ) |   |   | (8,394 | ) |   |   | (1,758 | ) |   |   | (1,405 | ) |   |   | (1,995 | ) |
| Amortization:                      |   |             |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior Service Cost (Credits)       |   |             | 232    |   |                          |   | 227 |   |   |   | 239 |   |   |   | (254 | ) |   |   | (254 | ) |   |   | (254 | ) |
| Actuarial Loss                     |   |             | 3,940  |   |                          |   | 4,421 |   |   |   | 1,365 |   |   |   | 1,351 |   |   |   | 1,746 |   |   |   | 677 |   |
| Net Periodic Benefit Cost          |   |             | 7,693  |   |                          |   | 8,150 |   |   |   | 2,461 |   |   |   | 2,691 |   |   |   | 3,421 |   |   |   | 1,530 |   |
| Capitalized Benefit Costs          |   |             | (3,445 | )      |                          |   | (3,798 | ) |   |   | (1,073 | ) |   |   | (1,295 | ) |   |   | (1,676 | ) |   |   | (765 | ) |
| Affiliate SERP Allocations         |   |             | (533   | )      |                          |   | (399 | ) |   |   | (315 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Total Net Periodic Benefit Expense |   | $                | 3,715  |   |                          | $      | 3,953 |   |   | $ | 1,073 |   |   | $ | 1,396 |   |   | $ | 1,745 |   |   | $ | 765 |   |

----

Table of Contents

|                                     |   | Regulatory Assets |   |   | Accumulated Other Comprehensive Loss  (pre-tax) |   |
|------------------------------------------|--------|-------------------|--------|--------|------------------------------------------------------|--------|
|                                     |   | Pension Benefits  |   |   | Other Postretirement Benefits                        |   |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
| Balance at January 1, 2009               |   | $                 | 55,774 |   |                                                 | $      | 22,876 |   |   | $ | 9,212 |   |   | $ | - |   |
|                                     |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Amounts Arising during the Period:       |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net Actuarial (Gain) Loss                |   |              | (4,188 | )      |                                                 |   | 610 |   |   |   | 804 |   |   |   | - |   |
| Prior Service Cost                       |   |              | 347    |   |                                                 |   | - |   |   |   | - |   |   |   |   |   |
| Amounts Amortized to Net Periodic Costs: |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |
| Net Actuarial Loss                       |   |              | (3,642 | )      |                                                 |   | (1,746 | ) |   |   | (779 | ) |   |   | - |   |
| Prior Service (Cost) Credit              |   |              | (227   | )      |                                                 |   | 254 |   |   |   | - |   |   |   | - |   |
|                                     |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009             |   | $                 | 48,064 |   |                                                 | $      | 21,994 |   |   | $ | 9,237 |   |   | $ | - |   |
|                                     |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Amounts Arising during the Period:       |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net Actuarial Loss                       |   |              | 2,300  |   |                                                 |   | 167 |   |   |   | 6,304 |   |   |   | - |   |
|                                     |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   | - |   |
| Amounts Amortized to Net Periodic Costs: |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |
| Net Actuarial Loss                       |   |              | (2,935 | )      |                                                 |   | (1,351 | ) |   |   | (1,005 | ) |   |   | - |   |
| Prior Service (Cost) Credit              |   |              | (232   | )      |                                                 |   | 254 |   |   |   | - |   |   |   | - |   |
|                                     |   |              |   |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010             |   | $                 | 47,197 |   |                                                 | $      | 21,064 |   |   | $ | 14,536 |   |   | $ | - |   |

|                          |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
|-------------------------------|--------|------------------|--------|--------|-------------------------------|--------|
| Prior Service Costs (Credits) |   | $                | 220    |   |                          | $      | (254 | ) |
| Net Actuarial Loss            |   | $                | 2,980  |   |                          | $      | 1,337 |   |

|               |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
|--------------------|--------|------------------|--------|--------|-------------------------------|--------|
| Net Actuarial Loss |   | $                | 1,328  |   |                          | $      | - |   |

----

Table of Contents

|                                           |   |             |    |   |                    |   |    | Other  |   |
|------------------------------------------------|--------|------------------|---------|--------|-------------------------|--------|---------|--------|--------|
|                                           |   | Pension Benefits |    |   | Postretirement Benefits |   |
|                                           |   | 2010             |    |   | 2009                    |   |    | 2010   |   |   | 2009 |   |
|                                           |   |             |    |   |                    |   |    |   |   |   |   |   |
| Change in Benefit Obligations:                 |   |             |    |   |                    |   |    |   |   |   |   |   |
| Benefit Obligation at Beginning of Year        |   | $                | 122,542 |   |                    | $      | 117,321 |   |   | $ | 46,754 |   |   | $ | 42,488 |   |
| Service Cost                                   |   |             | 2,648   |   |                    |   | 2,412   |   |   |   | 644 |   |   |   | 622 |   |
| Interest Cost                                  |   |             | 7,584   |   |                    |   | 7,125   |   |   |   | 2,708 |   |   |   | 2,712 |   |
| Actuarial Loss                                 |   |             | 12,093  |   |                    |   | 2,213   |   |   |   | 1,703 |   |   |   | 3,889 |   |
| Retiree Contributions                          |   |             | -       |   |                    |   | -       |   |   |   | 185 |   |   |   | 192 |   |
| Plan Amendments                                |   |             | -       |   |                    |   | 347     |   |   |   | - |   |   |   | - |   |
| Benefits Paid                                  |   |             | (6,735  | )      |                    |   | (6,876  | )      |   |   | (4,299 | ) |   |   | (3,149 | ) |
| Benefit Obligation at End of Year              |   | $                | 138,132 |   |                    | $      | 122,542 |   |   | $ | 47,695 |   |   | $ | 46,754 |   |
|                                           |   |             |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |
| Change in Plan Assets:                         |   |             |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |
| Fair Value of Plan Assets at Beginning of Year |   | $                | 84,681  |   |                    | $      | 70,588  |   |   | $ | 25,850 |   |   | $ | 20,665 |   |
| Actual Return on Plan Assets                   |   |             | 10,200  |   |                    |   | 11,631  |   |   |   | 3,294 |   |   |   | 4,684 |   |
| Employer Contributions                         |   |             | 7,600   |   |                    |   | 9,338   |   |   |   | 4,115 |   |   |   | 3,458 |   |
| Retiree Contributions                          |   |             | -       |   |                    |   | -       |   |   |   | 185 |   |   |   | 192 |   |
| Benefits Paid                                  |   |             | (6,735  | )      |                    |   | (6,876  | )      |   |   | (4,299 | ) |   |   | (3,149 | ) |
| Fair Value of Plan Assets at End of Year       |   | $                | 95,746  |   |                    | $      | 84,681  |   |   | $ | 29,145 |   |   | $ | 25,850 |   |
|                                           |   |             |    |   |                    |   |    |   |   |   |   |   |   |   |   |   |

| Funded Status at End of Year:                                          |   |   |    |   |   |   |    |   |   |   |    |   |
|------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Accrued  Net Benefit Cost at End of Year                          |   | $      | (42,386 | )      |   | $      | (37,861 | )      |   | $      | (18,550 | )      |   | $ | (20,904 | ) |
|                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Amounts Recognized in the Statement of Financial Position Consist of:  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Current Liabilities                                                    |   | $      | (1,182  | )      |   | $      | (1,066  | )      |   | $      | -       |   |   | $ | - |   |
| Noncurrent Liabilities                                                 |   |   | (41,204 | )      |   |   | (36,795 | )      |   |   | (18,550 | )      |   |   | (20,904 | ) |
| Net Amount Recognized at End of Year                                   |   | $      | (42,386 | )      |   | $      | (37,861 | )      |   | $      | (18,550 | )      |   | $ | (20,904 | ) |
|                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Amounts Recognized in Regulatory Assets Consist of:                    |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Prior Service Costs (Credit)                                           |   | $      | 1,268   |   |   | $      | 1,500   |   |   | $      | (215    | )      |   | $ | (469 | ) |
| Net Actuarial Loss                                                     |   |   | 45,929  |   |   |   | 46,564  |   |   |   | 21,279  |   |   |   | 22,463 |   |
|                                                                   |   | $      | 47,197  |   |   | $      | 48,064  |   |   | $      | 21,064  |   |   | $ | 21,994 |   |
|                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Amounts Recognized in Accumulated Other Comprehensive Loss Consist of: |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net Actuarial Loss                                                     |   | $      | 14,536  |   |   | $      | 9,237   |   |   | $      | -       |   |   | $ | - |   |

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|                          |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
|-------------------------------|--------|------------------|--------|--------|-------------------------------|--------|
|                          |   | 2010             |   |   | 2009                          |   |   | 2010 |   |   | 2009 |   |
|                          |   |             |   |   |                          |   |   |   |   |   |   |   |
| Discount Rate                 |   |             | 5.78   | %      |                          |   | 6.22 | % |   |   | 5.55 | % |   |   | 6.22 | % |
| Rate of Compensation Increase |   |             | 3.25   | %      |                          |   | 3.60 | % |   |   | - |   |   |   | - |   |

|                                     |   | Pension Benefits |   |   | Other Postretirement Benefits |   |
|------------------------------------------|--------|------------------|--------|--------|-------------------------------|--------|
|                                     |   | 2010             |   |   | 2009                          |   |   | 2008 |   |   | 2010 |   |   | 2009 |   |   | 2008 |   |
|                                     |   |             |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount Rate                            |   |             | 6.22   | %      |                          |   | 6.24 | % |   |   | 6.36 | % |   |   | 6.22 | % |   |   | 6.24 | % |   |   | 6.36 | % |
| Expected Long-Term Return on Plan Assets |   |             | 7.75   | %      |                          |   | 8.25 | % |   |   | 8.50 | % |   |   | 6.80 | % |   |   | 6.80 | % |   |   | 7.00 | % |
| Rate of Compensation Increase            |   |             | 3.60   | %      |                          |   | 3.60 | % |   |   | 3.60 | % |   |   | - |   |   |   | - |   |   |   | - |   |

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|                                                                            |   | 2010   |   |   |   | 2009   |   |
|---------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                            |   |   |   |   |   |   |   |
| Medical Care and Drug Cost Trend Rate Assumed for Next Year                     |   | 8.25   | %      |   |   | 9.00   | %      |
| Dental Care Cost Trend Rate Assumed for Next Year                               |   |   | 4.75   | %      |   |   | 4.75   | % |
| Rate to which Cost Trend Rates are Assumed to Decline (the Ultimate Trend Rate) |   |   | 4.75   | %      |   |   | 4.75   | % |
| Year that the Rate Reaches the Ultimate Trend Rate                              |   |   | 2019   |   |   |   | 2019   |   |

|                                             | 1-Percentage-Point Increase |   | 1-Percentage-Point Decrease |   |
|--------------------------------------------------|-----------------------------|--------|-----------------------------|--------|
|                                             |                        |   |                        |   |   |   |
| Effect on the Total of Service and Interest Cost |                        | $      | 202                         |   |   | $ | (158 | ) |
| Effect on Postretirement Benefit Obligation      |                        | $      | 1,920                       |   |   | $ | (1,752 | ) |

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| Asset Category                                          |   | Total  |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|---------------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| Cash / Cash Equivalents:                                |   |   |   |   |    |   |   |    |   |   |    |   |
| Common/Collective Trust Funds (a)                       |   | $      | 369    |   |    | $      | -      |    |   | $      | 369     |   |   | $ | - |   |
| STIF-Type Instrument (b)                                |   |   | 852    |   |    |   | -      |    |   |   | 852     |   |   |   | - |   |
| Equity securities:                                      |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Common/Collective Trust Funds – U.S. (a)          |   |   | 28,356 |   |    |   | -      |    |   |   | 28,356  |   |   |   | - |   |
| Common/Collective Trust Funds – International (a) |   |   | 15,371 |   |    |   |   |    |   |   | 15,371  |   |   |   |   |   |
| U.S. Large-Cap (c)                                      |   |   | 5,032  |   |    |   | 5,032  |    |   |   | -       |   |   |   | - |   |
| U.S. Mid-Cap (c)                                        |   |   | 4,846  |   |    |   | 4,846  |    |   |   | -       |   |   |   | - |   |
| International (c)                                       |   |   | 1,114  |   |    |   | 1,114  |    |   |   | -       |   |   |   | - |   |
| Fixed Income:                                           |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Common/Collective Trust Funds (a)                       |   |   | 23,562 |   |    |   | -      |    |   |   | 23,562  |   |   |   | - |   |
| Guaranteed Insurance Contract (d)                       |   |   | 9,972  |   |    |   | -      |    |   |   | -       |   |   |   | 9,972 |   |
| Hedge Funds (e)                                         |   |   | 98     |   |    |   | -      |    |   |   | -       |   |   |   | 98 |   |
| Other types of investments:                             |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Private Equity Fund (f)                                 |   |   | 2,503  |   |    |   | -      |    |   |   | -       |   |   |   | 2,503 |   |
| Common/Collective Trust Fund – Real Estate (g)    |   |   | 3,671  |   |    |   | -      |    |   |   | -       |   |   |   | 3,671 |   |
| Total                                                   |   | $      | 95,746 |   |    | $      | 10,992 |    |   | $      | 68,510  |   |   | $ | 16,244 |   |

|   | (a) | This category represents common/collective trust fund investments through a commingled employee benefit trust (excluding real estate).  These commingled funds are not traded publicly; however, the majority of the underlying assets held in these funds are stocks and bonds that are traded on active markets and prices for these assets are readily observable.  Also included in these funds are interest rate swaps, asset backed securities, mortgage backed securities and other investments with observable market values. Holdings in these commingled funds are classified as Level 2 investments. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | This category represents short-term investment funds held for the purpose of funding disbursement payment arrangements.  Underlying assets are based on quoted prices in active markets, or where quoted prices are not available, based on models using observable market information.  Since not all values can be obtained from quoted prices in active markets, these funds are classified as Level 2 investments. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | This category of equity investments represents a managed portfolio of common stock investments in five sectors: telecommunications, electric utilities, gas utilities, water and energy.  These common stocks are actively traded on exchanges and price quotes for these shares are readily available.  These common stocks are classified as Level 1 investments. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | This category represents SJI’s Group Annuity contracts with a nationally recognized life insurance company.  The contracts are the assets of the plan, while the underlying assets of the contracts are owned by the contract holder.  Valuation is based on a formula and calculation specified within the contract.  Since the valuation is based on the reporting entity’s own assumptions, these contracts are classified as Level 3 investments. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | This category represents a collection of underlying funds which are all domiciled outside of the United States.  Most of the underlying fund managers are based in the U.S.; however, they do not necessarily trade only in U.S. markets.   It is important to note that the SJI Pension Funds are in the process of divesting investments from this fund of funds.  The fair value of these funds is determined by the underlying fund’s general partner or manager. These funds are classified as Level 3 investments. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | This category represents a limited partnership which includes several investments in U.S. leveraged buyout, venture capital, and special situation funds.  Fund valuations are reported on a 90 day lag and, therefore, the value reported herein represents the market value as of September 30, 2010.  The fund’s investments are stated at fair value, which is generally based on the valuations provided by the general partners or managers of such investments.  Fund investments are illiquid and resale is restricted.  These funds are classified as Level 3 investments. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | This category represents real estate common/collective trust fund investments through a commingled employee benefit trust.  These commingled funds are part of a direct investment in a pool of real estate properties.  These funds are valued by investment managers on a periodic basis using pricing models that use independent appraisals from sources with professional qualifications.  Since these valuation inputs are not highly observable, the real estate funds are classified as Level 3 investments. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                |   | GuaranteedInsuranceContract |   |   | HedgeFunds |   |   | PrivateEquityFunds |   |   | RealEstate |   |   | Total  |   |
|-----------------------------------------------------|--------|-----------------------------|--------|--------|------------|--------|--------|--------------------|--------|--------|------------|--------|--------|--------|--------|
|                                                |   |                        |   |   |       |   |   |               |   |   |       |   |   |   |   |
| Balance at December 31, 2009                        |   | $                           | 9,338  |   |       | $      | 881    |               |   | $      | 2,163      |   |   | $      | 3,524  |   |   | $ | 15,906 |   |
| Actual return on plan assets:                       |   |                        |   |   |       |   |   |               |   |   |       |   |   |   |   |   |   |   |   |   |
| Relating to assets still held at the reporting date |   |                        | 1,649  |   |       |   | (230   | )                  |   |   | 349        |   |   |   | 172    |   |   |   | 1,940 |   |
| Relating to assets sold during the period           |   |                        | 11     |   |       |   | (211   | )                  |   |   | -          |   |   |   | -      |   |   |   | (200 | ) |
| Purchases, Sales and Settlements                    |   |                        | (1,026 | )      |       |   | (342   | )                  |   |   | (9         | )      |   |   | (25    | ) |   |   | (1,402 | ) |
| Balance at December 31, 2010                        |   | $                           | 9,972  |   |       | $      | 98     |               |   | $      | 2,503      |   |   | $      | 3,671  |   |   | $ | 16,244 |   |

| Asset Category                                                                                   |   | Total  |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|--------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|
| Equity Securities:                                                                               |   |   |   |   |    |   |   |    |   |   |    |   |
| U.S. Large-Cap                                                                                   |   | $      | 10,515 |   |    | $      | 10,515 |    |   | $      | -       |   |   | $ | - |   |
| U.S. Mid & Small-Cap                                                                         |   |   | 4,080  |   |    |   | 4,080  |    |   |   | -       |   |   |   | - |   |
| International                                                                                    |   |   | 4,204  |   |    |   | 4,204  |    |   |   | -       |   |   |   | - |   |
| Fixed Income:                                                                                    |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Corporate Bonds                                                                                  |   |   | 10,346 |   |    |   | 10,346 |    |   |   | -       |   |   |   | - |   |
| Total                                                                                            |   | $      | 29,145 |   |    | $      | 29,145 |    |   | $      | -       |   |   | $ | - |   |
|                                                                                             |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| All investments above are holdings in mutual funds and actively traded on major stock exchanges. |   |

|       |   | Pension Benefits |   |   | OtherPostretirement Benefits |   |
|------------|--------|------------------|--------|--------|------------------------------|--------|
|       |   |             |   |   |                         |   |
| 2011       |   | $                | 6,999  |   |                         | $      | 3,766 |   |
| 2012       |   | $                | 7,196  |   |                         | $      | 3,677 |   |
| 2013       |   | $                | 7,344  |   |                         | $      | 3,655 |   |
| 2014       |   | $                | 7,542  |   |                         | $      | 3,631 |   |
| 2016       |   | $                | 7,949  |   |                         | $      | 3,683 |   |
| 2016 -2020 |   | $                | 47,450 |   |                         | $      | 19,106 |   |

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| 12. | COMMITMENTS AND CONTINGENCIES: |
|-----|--------------------------------|

|              |   | 2010   |    |   | 2009   |   |
|-------------------|--------|--------|---------|--------|--------|--------|
|              |   |   |    |   |   |   |
| Beginning of Year |   | $      | 69,056  |   |   | $      | 64,093 |   |
| Accruals          |   |   | 28,987  |   |   |   | 16,501 |   |
| Expenditures      |   |   | (10,650 | )      |   |   | (11,538 | ) |
|              |   |   |    |   |   |   |   |   |
| End of Year       |   | $      | 87,393  |   |   | $      | 69,056 |   |

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| 13. | FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES: |
|-----|-----------------------------------------------------------|

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

|   | · | 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)                  |   | $      | 6,700  |   |    | $      | 6,700  |    |   | $      | -       |   |   | $ | - |   |
| Derivatives – Energy Related Assets (B)      |   |   | 6,869  |   |    |   | 784    |    |   |   | 6,085   |   |   |   | - |   |
|                                               |   | $      | 13,569 |   |    | $      | 7,484  |    |   | $      | 6,085   |   |   | $ | - |   |
|                                               |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Liabilities -                                      |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
|                                               |   |   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |
| Derivatives – Energy Related Liabilities (B) |   | $      | 11,836 |   |    | $      | 10,614 |    |   | $      | 1,222   |   |   | $ | - |   |
| Derivatives – Other (C)                      |   |   | 3,150  |   |    |   | -      |    |   |   | 3,150   |   |   |   | - |   |
|                                               |   | $      | 14,986 |   |    | $      | 10,614 |    |   | $      | 4,372   |   |   | $ | - |   |

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| 14.  | DERIVATIVE INSTRUMENTS: |
|-----------|-------------------------|

|   | Notional Amount                             |   | Fixed Interest Rate |   | Start Date |       | Maturity |       | Type of Debt |       | Obligor |
|--------|---------------------------------------------|--------|---------------------|--------|------------|------------|----------|------------|--------------|------------|---------|
|   | $       12,500,000 |   |                | 3.430  | %          | 12/01/2006 |     | 02/01/2036 |         | Tax-exempt |    | SJG |
|   | $       12,500,000 |   |                | 3.430  | %          | 12/01/2006 |     | 02/01/2036 |         | Tax-exempt |    | SJG |

| Derivatives not designated as hedging instruments under GAAP       |   | 2010    |   |   | 2009        |    |
|--------------------------------------------------------------------|--------|---------|--------|--------|-------------|---------|
|                                                               |   | Assets  |   |   | Liabilities |    |   | Assets |   |   | Liabilities |   |
|                                                               |   |    |   |   |        |    |   |   |   |   |   |   |
|                                                               |   |    |   |   |        |    |   |   |   |   |   |   |
| Energy related commodity contracts:                                |   |    |   |   |        |    |   |   |   |   |   |   |
| Derivatives – Energy Related – Current                 |   | $       | 5,864  |   |        | $       | 11,406 |   |   | $ | 797 |   |   | $ | 9,799 |   |
| Derivatives – Energy Related – Non-Current             |   |    | 1,005  |   |        |    | 430 |   |   |   | 333 |   |   |   | 504 |   |
| Interest rate contracts:                                           |   |    |   |   |        |    |   |   |   |   |   |   |   |   |   |   |
| Derivatives - Other                                                |   |    | -      |   |        |    | 3,150 |   |   |   | - |   |   |   | 1,956 |   |
| Total derivatives not designated as hedging instruments under GAAP |   |  $ | 6,869  |   |        |  $ | 14,986 |   |   |  $ | 1,130 |   |   |  $ | 12,259 |   |

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|                                                          |   | Year ended December 31, |   |
|---------------------------------------------------------------|--------|-------------------------|--------|
| Derivatives in Cash Flow Hedging Relationships                |   | 2010                    |   |   | 2009 |   |   | 2008 |   |
|                                                          |   |                    |   |   |   |   |   |   |   |
| Interest Rate Contracts:                                      |   |                    |   |   |   |   |   |   |   |
| Gains recognized in OCI on effective portion                  |   | $                       | -      |   |   | $ | - |   |   | $ | 621 |   |
| Losses reclassified from accumulated OCI into income (a) |   | $                       | (46    | ) |   | $ | (46 | ) |   | $ | (46 | ) |

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

|                                         |   | 2010 Quarter Ended |    |   | 2009 Quarter Ended |   |
|----------------------------------------------|--------|--------------------|---------|--------|--------------------|--------|
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | March 31           |    |   | June 30            |   |   | Sept. 30 |   |   | Dec. 31 |   |   | March 31 |   |   | June 30 |   |   | Sept. 30 |   |   | Dec. 31 |   |
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Revenues                           |   | $                  | 196,716 |   |               | $      | 61,344 |   |   | $ | 57,140 |   |   | $ | 160,782 |   |   | $ | 243,113 |   |   | $ | 64,835 |   |   | $ | 56,305 |   |   | $ | 120,123 |   |
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                    |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of Sales                                |   |               | 116,875 |   |               |   | 23,941 |   |   |   | 28,834 |   |   |   | 96,732 |   |   |   | 165,977 |   |   |   | 29,905 |   |   |   | 31,726 |   |   |   | 66,244 |   |
| Operation and Maintenance                    |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Including Fixed Charges                      |   |               | 31,717  |   |               |   | 30,752 |   |   |   | 30,369 |   |   |   | 32,933 |   |   |   | 30,246 |   |   |   | 28,413 |   |   |   | 27,016 |   |   |   | 29,025 |   |
| Income Taxes (Benefit)                       |   |               | 18,139  |   |               |   | 2,125 |   |   |   | (2,132 | ) |   |   | 11,546 |   |   |   | 17,615 |   |   |   | 2,102 |   |   |   | (1,666 | ) |   |   | 9,053 |   |
| Energy and Other Taxes                       |   |               | 4,348   |   |               |   | 1,590 |   |   |   | 1,377 |   |   |   | 3,454 |   |   |   | 4,621 |   |   |   | 1,746 |   |   |   | 1,416 |   |   |   | 3,044 |   |
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Expenses                               |   |               | 171,079 |   |               |   | 58,408 |   |   |   | 58,448 |   |   |   | 144,665 |   |   |   | 218,459 |   |   |   | 62,166 |   |   |   | 58,492 |   |   |   | 107,366 |   |
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income and Expense                     |   |               | 233     |   |               |   | 240 |   |   |   | (671 | ) |   |   | 741 |   |   |   | 324 |   |   |   | 358 |   |   |   | 107 |   |   |   | 513 |   |
|                                         |   |               |    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss) Applicable to Common Stock |   | $                  | 25,870  |   |               | $      | 3,176 |   |   | $ | (1,979 | ) |   | $ | 16,858 |   |   | $ | 24,978 |   |   | $ | 3,027 |   |   | $ | (2,080 | ) |   | $ | 13,270 |   |

Item 

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Item

Item 9B

Item 10. 

Item 

Item 12

Item 13. Certain 

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Item 14

Ite

| (a) | Listed below are all financial statements and schedules filed as part of this report: |
|-----|---------------------------------------------------------------------------------------|

| (b) | List of Exhibits (Exhibit Number is in Accordance with the Exhibit Table in Item 601 of Regulation S-K). |
|-----|----------------------------------------------------------------------------------------------------------|

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| Exhibit Number | Description                                                                                                  |   | Reference                                                                                  |
|----------------|--------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|
|           |                                                                                                         |   |                                                                                       |
| (3)(a)         | Certificate of Incorporation of South Jersey Gas Company.                                                    |   | Incorporated by reference from Exhibit (3)(a) of Form 10-K filed March 7, 1997.            |
|           |                                                                                                         |   |                                                                                       |
| (3)(b)         | Bylaws of South Jersey Gas Company, as amended and restated through November 19, 2010. (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) of Form 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 SJG dated April 1, 2006.          |   | Incorporated by reference from Exhibit 10 of Form 8-K of SJG as filed April 26, 2006.      |
|           |                                                                                                         |   |                                                                                       |
| (4)(c)(i)      | Medium Term Note Indenture of Trust dated October 1, 1998.                                                   |   | Incorporated by reference from Exhibit (4)(e) of Form S-3 (333-62019).                     |
|           |                                                                                                         |   |                                                                                       |
| (4)(c)(ii)     | First Supplement to Indenture of Trust dated as of June 29, 2000.                                            |   | Incorporated by reference from Exhibit 4.1 of Form 8-K of SJG dated July, 12, 2001.        |
|           |                                                                                                         |   |                                                                                       |
| (4)(c)(iii)    | Second Supplement to Indenture of Trust dated as of July 5, 2000.                                            |   | Incorporated by reference from Exhibit 4.2 of Form 8-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.        |
|           |                                                                                                         |   |                                                                                       |
| (4)(c)(v)      | Fourth Supplement to Indenture of Trust dated as of February 26, 2010.                                       |   | Incorporated by reference from Exhibit 4.1 Form 8K dated March 5, 2010.                    |

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Table of Contents

| Exhibit Number | 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) of Form 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) of Form 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)     | 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)(ii)    | 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)(iii)   | 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).            |

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Table of Contents

| Exhibit Number | 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 January 1, 2009, and Form of Agreement between certain South Jersey Industries, Inc. or subsidiary Company officers.                          |   | Incorporated by reference from Exhibit (10)(f)(ii)  of Form 10-K of SJI for 2009  (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 2010.                                |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (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 10.1 of Form 10-Q of SJI as filed on November 8, 2010.                   |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (10)(i)(ii)    | Loan Agreement between Toronto Dominion (New York) LLC and SJG dated December 15, 2008.                                                                                                                                    |   | Incorporated by reference from Exhibit (10)(i)(ii)of Form 10-K for 2008.                                        |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (10)(i)(iii)   | Amendment No. 1 dated December 14, 2009 to the Loan Agreement between Toronto Dominion (New York) LLC and SJG.                                                                                                             |   | Incorporated by reference from Exhibit (10)(g)(v)of Form 10K of SJI for 2009.                                   |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (10)(i)(iv)    | Amendment No. 2 dated August 31, 2010 to the Loan Agreement between Toronto Dominion (New York) LLC and SJG.                                                                                                               |   | Incorporated by reference from Exhibit (10)(g)(viii) of Form 10-K of SJI for 2010.                              |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (10)(i)(v)     | Note Purchase Agreement dated as of March 1, 2010.                                                                                                                                                                         |   | Incorporated by reference from Exhibit 10 of Form 8-K dated March 5, 2010.                                      |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (10)(i)(vi)    | Note Purchase Agreement dated as of December 30, 2010.                                                                                                                                                                     |   | Incorporated by reference from Exhibit 10 of Form 8-K dated January 5, 2011.                                    |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
|           |                                                                                                                                                                                                                       |   |                                                                                                            |
| (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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Table of Contents

| Exhibit Number | 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). |   |      |

SIG

|                          |   | SOUTH JERSEY GAS COMPANY                       |
|-------------------------------|--------|------------------------------------------------|
|                          |   |                                           |
|  Date: February 28, 2011 | BY:    | /s/ David A. Kindlick                          |
|                          |   | David A. Kindlick, Senior Vice President & |
|                          |   | Chief Financial Officer                        |

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Table of Contents

| Signature                        |   | Title                                                          |   | Date              |
|----------------------------------|--------|----------------------------------------------------------------|--------|-------------------|
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Edward J. Graham       |   | Chairman of the Board, President & Chief Executive Officer |   | February 28, 2011 |
| (Edward J. Graham)               |   | (Principal Executive Officer)                                  |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  David A. Kindlick      |   | Senior Vice President & Chief Financial Officer            |   | February 28, 2011 |
| (David A. Kindlick)              |   | (Principal Financial and Accounting Officer)                   |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Gina Merritt-Epps      |   | Corporate Counsel & Secretary                              |   | February 28, 2011 |
| (Gina Merritt-Epps)              |   |                                                           |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Shirli M. Billings     |   | Director                                                       |   | February 28, 2011 |
| (Shirli M. Billings)             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Thomas A. Bracken      |   | Director                                                       |   | February 28, 2011 |
| (Thomas A. Bracken)              |   |                                                           |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Victor Fortkiewicz     |   | Director                                                       |   | February 28, 2011 |
| (Victor Fortkiewicz)             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  Sheila Hartnett-Devlin |   | Director                                                       |   | February 28, 2011 |
| (Sheila Hartnett-Devlin)         |   |                                                           |   |              |
|                             |   |                                                           |   |              |
|                             |   |                                                           |   |              |
| /s/  William J. Hughes      |   | Director                                                       |   | February 28, 2011 |
| (William J. Hughes)              |   |                                                           |   |              |

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Table of Contents

SOU

| Col. A                      |   | Col. B                         |   |   | Col. C                       |   |   | Col. D                                  |   |   | Col. E                   |   |
|-----------------------------|--------|--------------------------------|--------|--------|------------------------------|--------|--------|-----------------------------------------|--------|--------|--------------------------|--------|
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |
|                        |   |                           |   |   | Additions                    |   |   |                                    |   |   |                     |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |
| Classification              |   | Balance at Beginning of Period |   |   | Charged to Costs andExpenses |   |   | Charged to Other Accounts -Describe (a) |   |   | Deductions -Describe (b) |   |   | Balance at Endof Period |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |
| Provision for Uncollectible |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |
| Accounts for the Year Ended |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |
| December 31, 2010           |   | $                              | 3,915  |   |                         | $      | 3,741  |                                    |   | $      | (217                     | )      |   | $ | 2,862 |   |   | $ | 4,577 |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| Provision for Uncollectible |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| Accounts for the Year Ended |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| December 31, 2009           |   | $                              | 3,628  |   |                         | $      | 2,418  |                                    |   | $      | 594                      |   |   | $ | 2,725 |   |   | $ | 3,915 |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
|                        |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| Provision for Uncollectible |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| Accounts for the Year Ended |   |                           |   |   |                         |   |   |                                    |   |   |                     |   |   |   |   |   |   |   |   |   |
| December 31, 2008           |   | $                              | 3,265  |   |                         | $      | 2,281  |                                    |   | $      | 279                      |   |   | $ | 2,197 |   |   | $ | 3,628 |   |

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