<PAGE>
                               SECOND AMENDMENT TO
                                CREDIT AGREEMENT

                                  By and Among

                         NEW JERSEY NATURAL GAS COMPANY

                                 as the Borrower


                    THE FINANCIAL INSTITUTIONS PARTY THERETO

                                 as the Lenders

                                       and

                         PNC BANK, NATIONAL ASSOCIATION

                           as the Administrative Agent

                                       and

                               FLEET NATIONAL BANK

                            as the Syndication Agent

                                       and

                                  BANK ONE, NA

                           as the Documentation Agent


                                   Dated as of

                                 October 3, 2001



<PAGE>

                      SECOND AMENDMENT TO CREDIT AGREEMENT


                  THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second
Amendment") made as of October 3, 2001, among NEW JERSEY NATURAL GAS COMPANY, a
New Jersey corporation (the "Borrower"), the financial institutions listed on
the signature pages hereto (individually a "Lender" and collectively the
"Lenders"), PNC BANK, NATIONAL ASSOCIATION, a national banking association, as
Administrative Agent for the Lenders (in such capacity the "Administrative
Agent"), FLEET NATIONAL BANK (as successor to SUMMIT BANK), as Syndication Agent
and BANK ONE, NA, a national banking association, as Documentation Agent, amends
that certain Credit Agreement dated as of January 5, 2001 by and among the
Borrower, the financial institutions listed on the signature pages thereto (the
"Existing Lenders") and the Administrative Agent, as amended by a First
Amendment dated as of March 1, 2001 (the Credit Agreement, as amended, together
with the exhibits and schedules thereto and all modifications, amendments,
extensions, renewals, substitutions or replacements prior to the date hereof,
the "Existing Agreement") (the Existing Agreement, as amended by this Second
Amendment and as modified, amended, extended, renewed, substituted or replaced
from time to time hereafter, the "Agreement").

                                 WITNESSETH:

                  WHEREAS, the Borrower, the Lenders and the Administrative
Agent entered into the Existing Agreement pursuant to which the Lenders made
certain financial accommodations available to the Borrower including Commitments
to make (i) Short Term Revolving Credit Loans in an amount not to exceed
$50,000,000 and (ii) Long Term Revolving Credit Loans in an amount not to exceed
$100,000,000; and

                  WHEREAS, the Borrower, the Lenders and the Administrative
Agent desire to amend the Existing Agreement as set forth herein.

                  NOW THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the Borrower, the
Administrative Agent and the Lenders with the intent to be legally bound hereby,
agree that the Existing Agreement shall be amended as follows:


                                    ARTICLE I

                        AMENDMENTS TO EXISTING AGREEMENT

                  SECTION 1.01. ADDITIONAL DEFINITIONS. Section 1.1 of the
Existing Agreement is hereby amended by adding thereto the following definitions
in the appropriate alphabetical order:

                  "Gas Cost Underrecovery Adjustment Assets" means that
         Underrecovered Gas Cost Balance to be collected from all sales
         customers and transportation customers, through surcharge commencing
         December 1, 2001 over an amortization period of three years from that
         date, with simple interest at 5.5% per annum, until November 30, 2004.


<PAGE>


                  "Permitted Accounts Receivable Securitization" means the
         receivables financing program providing for the sale of Receivables
         Facility Assets by Borrower and its Subsidiaries to the Receivables
         Subsidiary in transactions purporting to be sales (and treated as sales
         for GAAP purposes), which Receivables Subsidiary shall finance the
         purchase of such Receivables Facility Assets by the sale, transfer,
         conveyance, lien or pledge of such Receivables Facility Assets to one
         or more limited purpose financing companies, special purpose entities
         and/or other financial institutions, in each case, on a limited
         recourse basis as to the Borrower and its Subsidiaries; provided that
         any such transaction described herein shall be consummated pursuant to
         documentation in form and substance reasonably satisfactory to the
         Agent.

                  "Receivables Documents" shall mean all documentation relating
         to any Permitted Accounts Receivable Securitization.

                  "Receivables Facility Assets" shall mean all Gas Cost
         Underrecovery Adjustment Assets of Borrower which are transferred to
         the Receivables Subsidiary pursuant to a Permitted Accounts Receivable
         Securitization, and any assets related thereto, including without
         limitation (i) all collateral given by the respective account debtor or
         on its behalf (but not by Borrower or any of its Subsidiaries) securing
         such Gas Cost Underrecovery Adjustment Assets, (ii) all contracts and
         all guarantees (but not by Borrower or any of its Subsidiaries) or
         other obligations directly related to such Gas Cost Underrecovery
         Adjustment Assets, (iii) other related assets including those set forth
         in the Receivables Documents, and (iv) proceeds of all of the
         foregoing.

                  "Receivables Facility Attributed Indebtedness" at any time
         shall mean the aggregate net outstanding amount theretofore paid to the
         Receivables Subsidiary in respect of the Receivables Facilities Assets
         sold, transferred, financed or pledged by it in connection with a
         Permitted Accounts Receivable Securitization (it being the intent of
         the parties that the amount of Receivables Facility Attributed
         Indebtedness at any time outstanding approximate as closely as possible
         the principal amount of Indebtedness which would be outstanding at such
         time under the Permitted Accounts Receivable Securitization if the same
         were structured as a secured lending agreement rather than a purchase
         agreement).

                  "Receivables Subsidiary" means a special purpose, bankruptcy
         remote wholly-owned Subsidiary of Borrower which may be formed for the
         sole and exclusive purpose of engaging in activities in connection with
         the purchase, sale and financing of Gas Cost Underrecovery Adjustment
         Assets in connection with and pursuant to a Permitted Accounts
         Receivable Securitization.

                  "Second Amendment" shall mean that certain Second Amendment to
         Credit Agreement dated as of October 3, 2001.

                  "Second Amendment Effective Date" shall mean October 3, 2001.

                  "Underrecovered Gas Cost Balance" means that amount of the
         Borrower's Levelized Gas Adjustment Clause not recovered in customer
         rates for the period ending October 31, 2001.

                  SECTION 1.02. AMENDMENTS TO CERTAIN DEFINITIONS. The
definition of the term "Permitted Encumbrance" contained in Section 1.1 of the
Existing Agreement is hereby




                                     - 2 -
<PAGE>




amended by adding to the end thereof the following new clauses (x) and (xi)
which shall read as follows:

                    "(x)      Encumbrances on Receivables Facility Assets
          transferred (a) to the Receivables Subsidiary or (b) by the
          Receivables Subsidiary to the purchasers of such receivables (and the
          filing of financing statements in connection therewith) created by,
          and as set forth in, the Receivables Documents pursuant to the
          Permitted Accounts Receivable Securitization; and

                    (xi)      Encumbrances on meter assets created in connection
          with capitalized lease transactions and securing Indebtedness in favor
          of one or more financial institutions incurred in connection with such
          transactions in an aggregate principal amount not to exceed
          $27,000,000."

                    SECTION 1.03. Amendment to Section 5.2 of the Existing
Agreement. Section 5.2 of the Existing Agreement is hereby amended and restated
to read as follows:

                    "5.2      Encumbrances. The Borrower will not create or
          suffer to exist, or permit any of its Subsidiaries to create or suffer
          to exist, any Encumbrance or any other type of preferential
          arrangement, upon or with respect to any of its properties, whether
          now owned or hereafter acquired, or assign, or permit any of its
          Subsidiaries to assign, any right to receive income, in each case to
          secure or provide for the payment of any Indebtedness of any Person,
          other than:


                    (a)       purchase money liens or purchase money security
                              interests upon or in any property acquired or held
                              by the Borrower or any Subsidiary in the ordinary
                              course of business to secure the purchase price of
                              such property or to secure indebtedness incurred
                              solely for the purpose of financing the
                              acquisition of such property, so long as such
                              indebtedness does not exceed 100% of the purchase
                              price of such property;

                    (b)       Encumbrances existing on such property at the time
                              of the acquisition of such property or the
                              acquisition of such Subsidiary (other than any
                              such Encumbrance created as a result of such
                              acquisition);

                    (c)       Permitted Encumbrances; or

                    (d)       Extensions or renewals of any Encumbrance
                              described in clauses (a) through (c) above,
                              provided, that (i) any such extension or renewal
                              shall be limited to the property theretofore
                              subject to such Encumbrance and (ii) the principal
                              amount of the Indebtedness secured by such
                              Encumbrance shall not be increased;

                  provided, that the aggregate principal amount of Indebtedness
                  secured by Encumbrances referred to in clauses (a) and (b)
                  above shall not exceed $5,000,000 at any time outstanding (it
                  being expressly agreed that any




                                     - 3 -
<PAGE>


                    refinanced Indebtedness shall not by considered new
                    Indebtedness hereunder).

                    SECTION 1.04. AMENDMENT TO SECTION 5.3 OF THE EXISTING
AGREEMENT. Section 5.3 of the Existing Agreement is hereby amended and restated
to read as follows:

                              "5.3      INDEBTEDNESS. The Borrower shall not and
                    shall not permit any Subsidiary to create, incur, assume,
                    cause, permit or suffer to exist or remain outstanding any
                    Indebtedness except for:

                                        (i)       The Bank Indebtedness;

                                        (ii)      Existing Indebtedness set
                    forth on Schedule 5.3 hereof and any extensions, renewals or
                    refinancings thereof in outstanding principal amounts not
                    greater than those shown on Schedule 5.3; provided that such
                    extensions, renewals or refinancings when incurred and when
                    added to the Borrower's then outstanding Indebtedness would
                    not cause the Borrower to be in violation of Section 5.2
                    hereof;

                                        (iii)     Additional Indebtedness under
                    the Mortgage Indenture as permitted pursuant to the terms of
                    the Mortgage Indenture in the form in effect on the Closing
                    Date;

                                        (iv)      Additional Indebtedness in
                    favor of one or more financial institutions in connection
                    with capitalized leases of meter assets in an aggregate
                    principal amount not to exceed $27,000,000 at any one time
                    outstanding;

                                        (v)       Receivables Facility
                    Attributed Indebtedness; and

                                        (vi)      Additional Indebtedness not
                    otherwise permitted by the foregoing clauses (i), (ii),
                    (iii), (iv), or (v) in an aggregate principal amount not to
                    exceed $25,000,000 at any one time outstanding.

                    In addition, Indebtedness incurred pursuant to item (vi) may
                    not contain covenants (other than covenants relating to
                    collateral, if any, securing such Indebtedness as such
                    security interests are permitted hereby) more restrictive
                    than or in addition to those contained herein.

                    SECTION 1.05. AMENDMENT TO SECTION 5.4 OF THE EXISTING
AGREEMENT. Section 5.4 of the Existing Agreement is hereby amended to add the
following language to the end thereof:

                    ", except for investments in the Receivables Subsidiary
          prior to the occurrence and continuance of any Potential Default or
          Event of Default."

                    SECTION 1.06. AMENDMENT TO SECTION 5.5 OF THE EXISTING
AGREEMENT. Section 5.5 of the Existing Agreement is hereby amended to add the
following language to the end thereof:



                                     - 4 -
<PAGE>

                  ", and other than (i) a sale, contribution or other transfer
         of Receivables Facility Assets to the Receivables Subsidiary and the
         Receivables Subsidiary may sell and make other transfers of Receivables
         Facility assets, in each case pursuant to the Receivables Documents in
         connection with the Permitted Accounts Receivable Securitization" and
         (ii) in connection with the capitalized lease transactions permitted
         under Section 5.3(iv)."

                  SECTION 1.07. NO OTHER AMENDMENTS OR WAIVERS. The amendments
to the Existing Agreement set forth in Sections 1.01 through 1.05 above do not
either implicitly or explicitly alter, waive or amend, except as expressly
provided in this Second Amendment, the provisions of the Existing Agreement. The
amendments set forth in Sections 1.01 through 1.05 hereof do not waive, now or
in the future, compliance with any other covenant, term or condition to be
performed or complied with nor do they impair any rights or remedies of the
Lenders or the and the Administrative Agent under the Existing Agreement with
respect to any such violation. Nothing in this Second Amendment shall be deemed
or construed to be a waiver or release of, or a limitation upon, the Lenders' or
the Administrative Agent's exercise of any of their respective rights and
remedies under the Existing Agreement and the other Loan Documents, whether
arising as a consequence of any Events of Default which may now exist or
otherwise, and all such rights and remedies are hereby expressly reserved.


                                   ARTICLE II

                     BORROWER'S SUPPLEMENTAL REPRESENTATIONS

                  SECTION 2.01. INCORPORATION BY REFERENCE. As an inducement to
the Lenders to enter into this Second Amendment, the Borrower hereby repeats
herein, for the benefit of the Lenders, the representations and warranties made
by the Borrower in Article III of the Existing Agreement, as amended hereby,
except that for purposes hereof such representations and warranties shall be
deemed to extend to and cover this Second Amendment.


                                   ARTICLE III

                              CONDITIONS PRECEDENT

                  SECTION 3.01. CONDITIONS PRECEDENT. Each of the following
shall be a condition precedent to the effectiveness of this Second Amendment:

                    (i)       The Administrative Agent shall have received on
behalf of each Lender, on or before the Second Amendment Effective Date, duly
executed counterpart originals of this Second Amendment (which may be initially
delivered via telecopier).

                    (ii)      The following statements shall be true and correct
on the Second Amendment Effective Date, and the Administrative Agent shall have
received a certificate signed by an authorized officer of the Borrower dated the
Second Amendment Effective Date stating that:

                              (A)       except to the extent modified in writing
by the Borrower heretofore delivered to the Banks, the representations and
warranties made pursuant to Section 3.01 of this Second Amendment and in the
other Loan Documents are true and correct on and as of the



                                     - 5 -
<PAGE>


Second Amendment Effective Date as though made on and as of such date in all
material respects;

                              (B)       no Event of Default or Potential Default
has occurred and is continuing, or would result from the execution of or
performance under this Second Amendment;

                              (C)       the Borrower has in all material
respects performed all agreements, covenants and conditions required to be
performed on or prior to the date hereof under the Existing Agreement and the
other Loan Documents.

                    (iii)     The Administrative Agent shall have received a
certificate, duly certified as of the date hereof, by the secretary or assistant
secretary of the Borrower, as to (A) the Certificate of Incorporation of the
Borrower in effect as of the date hereof, (B) the By-Laws of the Borrower in
effect as of the date hereof, (C) the resolutions of the Borrower's Board of
Directors authorizing the borrowings hereunder and the execution and delivery of
this Second Amendment, and all documents supplemental hereto and (D) the names
of the officers of the Borrower authorized to sign this Second Amendment and all
supplemental documentation and which contains a true signature of each such
officer.

                    (iv)      The Borrower shall pay to the Administrative Agent
for the account of each Lender who executes this Second Amendment on or before
the Second Amendment Effective Date a fee equal to one (1) basis point (.01%) of
such Lender's aggregate Commitment.


                                   ARTICLE IV

                               GENERAL PROVISIONS

                  SECTION 4.01. RATIFICATION OF TERMS. Except as expressly
amended by this Second Amendment, the Existing Agreement and each and every
representation, warranty, covenant, term and condition contained therein is
specifically ratified and confirmed in all material respects.

                  SECTION 4.02. REFERENCES. All notices, communications,
agreements, certificates, documents or other instruments executed and delivered
after the execution and delivery of this Second Amendment in connection with the
Agreement, any of the other Loan Documents or the transactions contemplated
thereby may refer to the Existing Agreement without making specific reference to
this Second Amendment, but nevertheless all such references shall include this
Second Amendment unless the context requires otherwise. From and after the
Second Amendment Effective Date, all references in the Existing Agreement and
each of the other Loan Documents to the "Agreement" shall be deemed to be
references to the Existing Agreement as amended hereby.

                  SECTION 4.03. COUNTERPARTS. This Second Amendment may be
executed in different counterparts, each of which when executed by the Borrower,
the Administrative Agent and the Lenders shall be regarded as an original, and
all such counterparts shall constitute one Second Amendment. Delivery of an
executed counterpart by telecopier shall be effective as delivery of a manually
executed counterpart hereof.



                                     - 6 -
<PAGE>


                  SECTION 4.04. CAPITALIZED TERMS. Except for proper nouns and
as otherwise defined herein, capitalized terms used herein as defined terms
shall have the meanings ascribed to them in the Existing Agreement, as amended
hereby.

                  SECTION 4.05. GOVERNING LAW. THIS SECOND AMENDMENT AND THE
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO THE PROVISIONS
THEREOF REGARDING CONFLICTS OF LAW.

                  SECTION 4.06. HEADINGS. The headings of the sections in this
Second Amendment are for purposes of reference only and shall not be deemed to
be a part hereof.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                     - 7 -
<PAGE>



         IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Second Amendment to Credit Agreement to be duly
executed by their duly authorized officers as of the date first written above.

<TABLE>
ATTEST:                                     NEW JERSEY NATURAL GAS COMPANY


<S>                                       <C>
By:                                        By:                                           (SEAL)
   -----------------------------------        -------------------------------------------
Name:                                      Name:
     ---------------------------------          --------------------------------------------------
Title:                                     Title:
      --------------------------------           -------------------------------------------------


                                           PNC BANK, NATIONAL ASSOCIATION, in its
                                           capacity as the Administrative Agent
                                           hereunder


                                           By:                                              (SEAL)
                                              ----------------------------------------------
                                           Name:
                                                --------------------------------------------------
                                           Title:
                                                 -------------------------------------------------


                                           PNC BANK, NATIONAL ASSOCIATION, as a Lender


                                           By:                                              (SEAL)
                                              ----------------------------------------------
                                           Name:
                                                --------------------------------------------------
                                           Title:
                                                 -------------------------------------------------


                                           FLEET NATIONAL BANK , as a Lender


                                           By:                                              (SEAL)
                                              ----------------------------------------------
                                           Name:
                                                --------------------------------------------------
                                           Title:
                                                 -------------------------------------------------


                                           BANK ONE, N.A., as a Lender


                                           By:                                              (SEAL)
                                              ----------------------------------------------
                                           Name:
                                                --------------------------------------------------
                                           Title:
                                                 -------------------------------------------------
</TABLE>


              [REMAINDER OF SIGNATURES CONTINUED OF FOLLOWING PAGE]


<PAGE>


                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]


                                THE BANK OF NEW YORK, as a Lender


                                By:                                       (SEAL)
                                   ---------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------


                                CITIZENS BANK OF MASSACHUSETTS, as a Lender


                                By:                                       (SEAL)
                                   ---------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------


                                BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as a
                                Lender

                                By:                                       (SEAL)
                                   ---------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------


                                THE CHASE MANHATTAN BANK, as a Lender


                                By:                                       (SEAL)
                                   ---------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------