SEGMENTS OF BUSINESS:

SJI operates in several different reportable operating segments which reflect the financial information regularly evaluated by the chief operating decision maker. These segments are as follows:


•	Gas utility operations (SJG) consist primarily of natural gas distribution to residential, commercial and industrial customers. The result of SJG are only included in this operating segment.


•	Wholesale energy operations include the activities of SJRG and SJEX.


•	SJE is involved in both retail gas and retail electric activities.


◦	Retail gas and other operations include natural gas acquisition and transportation service business lines.


◦	Retail electric operations consist of electricity acquisition and transportation to commercial, industrial and residential customers.


•	On-site energy production consists of Marina's thermal energy facility and other energy-related projects. Also included in this segment are the activities of ACB, ACLE, BCLE, SCLE, SXLE, MCS, NBS and SBS.

•

Appliance service operations includes SJESP, which serviced residential and small commercial HVAC systems, installed small commercial HVAC systems, provided plumbing services and serviced appliances under warranty via a subcontractor arrangement as well as on a time and materials basis. On September 1, 2017, SJESP sold certain assets of its residential and small commercial HVAC and plumbing business to a third party. SJESP will receive commissions paid on service contracts from the third party on a go forward basis.


•	Midstream was formed to invest in infrastructure and other midstream projects, including a current project to build a natural gas pipeline in Pennsylvania and New Jersey. The activities of Midstream are a part of the Corporate and Services segment.

SJI groups its nonutility operations into two categories: Energy Group and Energy Services. Energy Group includes wholesale energy, retail gas and other, and retail electric operations. Energy Services includes on-site energy production and appliance service operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are treated as if the sales or transfers were to third parties at current market prices.

Information about SJI’s operations in different reportable operating segments is presented below (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating Revenues:
Gas Utility Operations	$	66,755		$	62,025		$	346,820		$	318,553
Energy Group:
Wholesale Energy Operations	70,741			67,926			274,667			131,691
Retail Gas and Other Operations	18,156			11,865			76,793			63,903
Retail Electric Operations	45,316			51,585			136,893			134,141
Subtotal Energy Group	134,213			131,376			488,353			329,735
Energy Services:
On-Site Energy Production	29,942			31,034			74,689			70,398
Appliance Service Operations	1,552			1,812			5,190			5,750
Subtotal Energy Services	31,494			32,846			79,879			76,148
Corporate and Services	9,577			7,059			32,186			24,352
Subtotal	242,039			233,306			947,238			748,788
Intersegment Sales	(14,912		)	(14,224		)	(49,908		)	(42,269		)
Total Operating Revenues	$	227,127		$	219,082		$	897,330		$	706,519



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating (Loss) Income:
Gas Utility Operations	$	(4,628	)	$	(2,453	)	$	84,174		$	83,251
Energy Group:
Wholesale Energy Operations	(11,346		)	8,014			(41,163		)	15,109
Retail Gas and Other Operations	(574		)	(2,520		)	(3,801		)	2,971
Retail Electric Operations	(344		)	1,223			2,117			4,085
Subtotal Energy Group	(12,264		)	6,717			(42,847		)	22,165
Energy Services:
On-Site Energy Production	(38,351		)	8,077			(35,216		)	12,549
Appliance Service Operations	(392		)	277			(398		)	579
Subtotal Energy Services	(38,743		)	8,354			(35,614		)	13,128
Corporate and Services	380			(28		)	2,154			313
Total Operating (Loss) Income	$	(55,255	)	$	12,590		$	7,867		$	118,857

Depreciation and Amortization:
Gas Utility Operations	$	17,751		$	15,954		$	52,559		$	47,368
Energy Group:
Wholesale Energy Operations	31			39			92			447
Retail Gas and Other Operations	80			85			247			253
Subtotal Energy Group	111			124			339			700
Energy Services:
On-Site Energy Production	11,731			11,274			34,998			32,088
Appliance Service Operations	43			73			153			248
Subtotal Energy Services	11,774			11,347			35,151			32,336
Corporate and Services	448			373			1,267			856
Total Depreciation and Amortization	$	30,084		$	27,798		$	89,316		$	81,260

Interest Charges:
Gas Utility Operations	$	6,437		$	4,058		$	18,392		$	13,397
Energy Group:
Wholesale Energy Operations	(162		)	—			3,031			32
Retail Gas and Other Operations	55			86			204			296
Subtotal Energy Group	(107		)	86			3,235			328
Energy Services:
On-Site Energy Production	3,549			3,032			13,240			9,936
Corporate and Services	5,055			2,896			15,237			9,206
Subtotal	14,934			10,072			50,104			32,867
Intersegment Borrowings	(4,367		)	(2,717		)	(11,813		)	(8,123		)
Total Interest Charges	$	10,567		$	7,355		$	38,291		$	24,744



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Income Taxes:
Gas Utility Operations	$	(3,688	)	$	(2,007	)	$	27,654		$	26,812
Energy Group:
Wholesale Energy Operations	(4,281		)	3,125			(16,984		)	5,604
Retail Gas and Other Operations	(225		)	(1,062		)	(1,265		)	1,220
Retail Electric Operations	(141		)	499			866			1,669
Subtotal Energy Group	(4,647		)	2,562			(17,383		)	8,493
Energy Services:
On-Site Energy Production	(16,270		)	2,118			(19,120		)	(784		)
Appliance Service Operations	(220		)	102			(201		)	254
Subtotal Energy Services	(16,490		)	2,220			(19,321		)	(530		)
Corporate and Services	60			32			611			110
Total Income Taxes	$	(24,765	)	$	2,807		$	(8,439	)	$	34,885

Property Additions:
Gas Utility Operations	$	59,179		$	53,623		$	187,587		$	155,126
Energy Group:
Wholesale Energy Operations	—			—			5			7
Retail Gas and Other Operations	204			455			632			1,180
Subtotal Energy Group	204			455			637			1,187
Energy Services:
On-Site Energy Production	1,633			9,152			11,899			14,468
Appliance Service Operations	—			73			260			425
Subtotal Energy Services	1,633			9,225			12,159			14,893
Corporate and Services	105			174			1,191			901
Total Property Additions	$	61,121		$	63,477		$	201,574		$	172,107



	September 30, 2017			December 31, 2016
Identifiable Assets:
Gas Utility Operations	$	2,736,775		$	2,551,923
Energy Group:
Wholesale Energy Operations	153,933			233,019
Retail Gas and Other Operations	35,487			52,729
Retail Electric Operations	32,103			41,280
Subtotal Energy Group	221,523			327,028
Energy Services:
On-Site Energy Production	662,087			767,710
Appliance Service Operations	1,720			2,879
Subtotal Energy Services	663,807			770,589
Discontinued Operations	1,769			1,756
Corporate and Services	781,238			649,795
Intersegment Assets	(665,046		)	(570,524		)
Total Identifiable Assets	$	3,740,066		$	3,730,567