10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

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

For the transition period from ________________ to ________________

Commission File Number 000-22211

SOUTH JERSEY GAS COMPANY

(Exact name of registrant as specified in its charter)

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

1 South Jersey Plaza, Folsom, NJ 08037

(Address of principal executive offices, including zip code)

(609) 561-9000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

As of August 1, 2012 there were 2,339,139 shares of the registrant’s common stock outstanding. All common shares are owned by South Jersey Industries, Inc., the parent company of South Jersey Gas Company.

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 6.	Exhibits	29
Signatures		30

2

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended
	June 30,
	2012			2011
Operating Revenues	$	59,177		$	65,187
Operating Expenses:
Cost of Sales (Excluding depreciation)	20,407			28,259
Operations	18,577			17,403
Maintenance	3,371			3,215
Depreciation	7,878			7,523
Energy and Other Taxes	1,479			1,722
Total Operating Expenses	51,712			58,122
Operating Income	7,465			7,065
Other Income and Expense	1,430			515
Interest Charges	(3,771		)	(4,895		)
Income Before Income Taxes	5,124			2,685
Income Taxes	(1,887		)	(1,065		)
Net Income	$	3,237		$	1,620

The accompanying notes are an integral part of the unaudited condensed financial statements.

3

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(In Thousands)

	Six Months Ended
	June 30,
	2012			2011
Operating Revenues	$	238,613		$	245,510
Operating Expenses:
Cost of Sales (Excluding depreciation)	106,906			116,833
Operations	39,141			35,676
Maintenance	6,563			6,224
Depreciation	15,035			14,983
Energy and Other Taxes	4,648			6,236
Total Operating Expenses	172,293			179,952
Operating Income	66,320			65,558
Other Income and Expense	2,779			1,393
Interest Charges	(7,960		)	(9,924		)
Income Before Income Taxes	61,139			57,027
Income Taxes	(22,864		)	(23,111		)
Net Income	$	38,275		$	33,916

The accompanying notes are an integral part of the unaudited condensed financial statements.

4

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In Thousands)

	Three Months Ended
	June 30,
	2012			2011
Net Income	$	3,237		$	1,620
Other Comprehensive (Loss) Gain  - Net of Tax: *
Unrealized (Loss) Gain on Available-for-Sale Securities	(136		)	50
Unrealized Gain on Derivatives - Other	7			7
Other Comprehensive (Loss) Gain  - Net of Tax *	(129		)	57
Comprehensive Income	$	3,108		$	1,677

	Six Months Ended
	June 30,
	2012		2011
Net Income	$	38,275	$	33,916
Other Comprehensive Gain (Loss)   - Net of Tax: *
Unrealized Gain (Loss) on Available-for-Sale Securities	215		(103		)
Unrealized Gain on Derivatives - Other	14		14
Other Comprehensive Gain (Loss)  - Net of Tax *	229		(89		)
Comprehensive Income	$	38,504	$	33,827

* Determined using a combined statutory tax rate of 41% .

The accompanying notes are an integral part of the unaudited condensed financial statements.

5

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Thousands)

	Six Months Ended
	June 30,
	2012			2011
Net Cash Provided by Operating Activities	$	47,184		$	51,301
Cash Flows from Investing Activities:
Capital Expenditures	(77,548		)	(55,611		)
Net Sale of Restricted Investments in Margin Accounts	458			994
Investment in Long-Term Receivables	(2,871		)	(2,390		)
Proceeds from Long-Term Receivables	3,781			2,418
Net Cash Used in Investing Activities	(76,180		)	(54,589		)
Cash Flows from Financing Activities:
Net Borrowing from Short-Term Credit Facilities	26,900			1,600
Proceeds from Issuance of Long-Term Debt	35,000			—
Principal Repayments of Long-Term Debt	(35,000		)	—
Premium for Early Retirement of Debt	(700		)	—
Payments for Issuance of Long-Term Debt	(341		)	(28		)
Net Cash Provided by Financing Activities	25,859			1,572
Net Decrease in Cash and Cash Equivalents	(3,137		)	(1,716		)
Cash and Cash Equivalents at Beginning of Period	3,504			2,030
Cash and Cash Equivalents at End of Period	$	367		$	314

The accompanying notes are an integral part of the unaudited condensed financial statements.

6

SOUTH JERSEY GAS COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

(In Thousands)

	June 30, 2012			December 31, 2011
Assets
Property, Plant and Equipment:
Utility Plant, at original cost	$	1,590,771		$	1,515,274
Accumulated Depreciation	(367,710		)	(357,245		)
Property, Plant and Equipment - Net	1,223,061			1,158,029
Investments:
Available-for-Sale Securities	7,000			6,655
Restricted Investments	1,740			2,198
Total Investments	8,740			8,853
Current Assets:
Cash and Cash Equivalents	367			3,504
Accounts Receivable	46,355			24,800
Accounts Receivable - Related Parties	821			1,122
Unbilled Revenues	8,157			31,978
Provision for Uncollectibles	(3,863		)	(3,060		)
Natural Gas in Storage, average cost	12,065			27,251
Materials and Supplies, average cost	1,681			1,654
Deferred Income Taxes - Net	—			6,301
Prepaid Taxes	22,238			17,296
Derivatives - Energy Related Assets	850			2,263
Other Prepayments and Current Assets	3,990			3,773
Total Current Assets	92,661			116,882
Regulatory and Other Noncurrent Assets:
Regulatory Assets	316,256			315,221
Unamortized Debt Issuance Costs	7,000			6,198
Long-Term Receivables	8,709			8,345
Derivatives - Energy Related Assets	239			—
Other	2,340			2,195
Total Regulatory and Other Noncurrent Assets	334,544			331,959
Total Assets	$	1,659,006		$	1,615,723

The accompanying notes are an integral part of the unaudited condensed financial statements.

7

SOUTH JERSEY GAS COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

(In Thousands, except per share amounts)

	June 30, 2012			December 31, 2011
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	200,926			200,926
Accumulated Other Comprehensive Loss	(11,900		)	(12,129		)
Retained Earnings	307,816			269,541
Total Common Equity	502,690			464,186
Long-Term Debt	365,000			362,813
Total Capitalization	867,690			826,999
Current Liabilities:
Notes Payable	153,500			126,600
Current Portion of Long-Term Debt	—			2,187
Accounts Payable - Commodity	11,218			17,867
Accounts Payable - Other	22,338			28,280
Accounts Payable - Related Parties	5,549			6,571
Derivatives - Energy Related Liabilities	7,446			11,385
Deferred Income Taxes - Net	2,249			—
Customer Deposits and Credit Balances	20,012			24,387
Environmental Remediation Costs	20,984			23,009
Taxes Accrued	1,416			1,774
Pension Benefits	1,240			1,240
Interest Accrued	5,794			6,240
Other Current Liabilities	4,108			6,016
Total Current Liabilities	255,854			255,556
Regulatory and Other Noncurrent Liabilities:
Regulatory Liabilities	47,946			48,311
Deferred Income Taxes - Net	302,486			285,159
Environmental Remediation Costs	67,869			66,975
Asset Retirement Obligations	29,888			29,388
Pension and Other Postretirement Benefits	74,354			90,055
Investment Tax Credits	761			905
Derivatives - Energy Related Liabilities	338			1,122
Derivatives - Other	8,680			8,146
Other	3,140			3,107
Total Regulatory and Other Noncurrent Liabilities	535,462			533,168
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities	$	1,659,006		$	1,615,723

The accompanying notes are an integral part of the unaudited condensed financial statements.

8

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE ENTITY - South Jersey Industries, Inc. (SJI) owns all of the outstanding common stock of South Jersey Gas Company (SJG), a regulated natural gas utility. SJG distributes natural gas in the seven southern most counties of New Jersey. In our opinion, the condensed financial statements reflect all normal and recurring adjustments needed to fairly present our financial position and operating results at the dates and for the periods presented. SJG’s business is subject to seasonal fluctuations and accordingly, this interim financial information should not be the basis for estimating the full year’s operating results. As permitted by the rules and regulations of the Securities and Exchange Commission, the accompanying condensed financial statements contain certain condensed financial information and exclude certain note disclosures normally included in annual audited financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These condensed financial statements should be read in conjunction with SJG’s 2011 Form 10-K for a more complete discussion of our accounting policies and certain other information.

REVENUE BASED TAXES - SJG collects certain revenue-based energy taxes from its customers. Such taxes include New Jersey State Sales Tax, Transitional Energy Facility Assessment (TEFA) and Public Utilities Assessment (PUA). State sales tax is recorded as a liability when billed to customers and is not included in revenue or operating expenses. TEFA and PUA are included in both revenues and cost of sales, and totaled $0.9 million and $1.2 million for the three months ended June 30, 2012 and 2011, and $3.4 million and $5.0 million for the six months ended June 30, 2012 and 2011, respectively. TEFA, which accounts for the majority of the revenue based taxes, is subject to a planned phase-out which decreased rates by 25% effective January 1, 2012.

NEW ACCOUNTING PRONOUNCEMENTS — Other than as described below, no new accounting pronouncement issued or effective during 2011 and 2012 had, or is expected to have, a material impact on the condensed financial statements.

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU amends Accounting Standards Codification Topic 820 to include a consistent definition of the term “fair value” and set forth common requirements for measuring fair value and disclosing information about fair value measurements in financial statements. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance modified the disclosures around fair value, but did not have an impact on the Company's financial statement results.

In June 2011, the FASB has issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  This ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with a total for other comprehensive income, and a total amount for comprehensive income.  ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  In January 2012, the FASB issued ASU 2011-12, Deferral of the Effective Date for the Presentation of Reclassification Adjustments Out of Accumulated Other Comprehensive Income, which defers the provisions related to the presentation of reclassification adjustments. The other portions of the ASU remain unchanged and are effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance did not have an impact on the Company's financial statement results.

In January 2012, the FASB issued ASU 2011-11, Enhanced Disclosure Requirements Concerning Offsetting of Financial Assets and Financial Liabilities. This ASU amends ASC 210-20 to add disclosure requirements in respect of the offsetting of financial assets and financial liabilities. The new guidance is effective for fiscal years beginning on or after January 1, 2013. Management does not anticipate the adoption of this guidance to have an impact on the Company's financial statement results.

9

2. STOCK-BASED COMPENSATION PLANS:

Officers and other key employees of SJG participate in the Stock Option, Stock Appreciation Rights and Restricted Stock Award Plan ("Plan") of SJI. Restricted shares issued under this plan vest over a three-year period and are subject to SJI achieving certain market or earnings-based performance targets as compared to a peer group average, which can cause the actual amount of shares that ultimately vest to range from between 0% to 150% of the original share units granted. Grants containing market-based performance targets have been issued in each of the last three years and use SJI's total shareholder return (TSR) relative to a peer group to measure performance. Beginning with 2012, grants containing earnings-based targets have also been issued. These new grants are based on SJI's earnings per share growth rate relative to a peer group to measure performance.

See Note 2 to the Consolidated Financial Statements in Item 8 of SJG Annual Report on Form 10-K as of December 31, 2011 for the related accounting policy.

The following table summarizes the SJI nonvested restricted stock awards pertaining to SJG outstanding at June 30, 2012, and the assumptions used to estimate the fair value of the awards:

Grant Date	Shares Outstanding	Fair Value Per Share		Expected Volatility		Risk-Free Interest Rate
Jan. 2010 - TSR	9,920	$	39.020	29.0	%	1.65	%
Jan. 2011 - TSR	7,372	$	50.940	27.5	%	1.01	%
Jan. 2012 - TSR	3,868	$	51.230	22.5	%	0.43	%
Jan. 2012 - EPS	3,868	$	56.930	n/a		n/a

Expected volatility is based on the actual volatility of SJI’s share price over the preceding three year period as of the valuation date. The risk-free interest rate is based on the zero-coupon U.S. Treasury Bond, with a term equal to the three year term of the restricted shares. As notional dividend equivalents are credited to the holders, which are reinvested during the three year service period, no reduction to the fair value of the award is required.

The cost for restricted stock awards during 2012 and 2011 is approximately $0.1 million per quarter.

As of June 30, 2012, there was $0.6 million of total unrecognized compensation cost related to nonvested share-based compensation awards granted under the restricted stock plans. That cost is expected to be recognized over a weighted average period of 2.0 years.

The following table summarizes information regarding restricted stock award activity during the six months ended June 30, 2012, excluding accrued dividend equivalents:

	Shares		Weighted Average Grant Date Fair Value
Nonvested Shares Outstanding, January 1, 2012	17,568		$	44.139
Granted	7,913		$	54.080
Canceled / Forfeited	(453	)	$	49.430
Nonvested Shares Outstanding, June 30, 2012	25,028		$	47.186

During the six months ended June 30, 2012, SJG awarded 7,098 shares that had vested at December 31, 2011, to its officers and other key employees at a market value of $0.4 million. During the six month ended June 30, 2011, SJG awarded 15,186 shares at a market value of $0.8 million. SJG has a policy of making cash payments to SJI to satisfy its obligations under this plan. Cash payments to SJI during each of the six months ended June 30, 2012 and 2011 were approximately $0.3 million relating to stock awards. Additionally, a change in control could result in the nonvested shares becoming nonforfeitable or immediately payable in cash.

10

3. RATES AND REGULATORY ACTIONS:

SJG is subject to the rules and regulations of the New Jersey Board of Public Utilities (BPU).  In October 2011, the Company filed a petition with the BPU requesting to modify and extend its CIRT II program. In March 2012, the parties executed a stipulation agreeing to an incremental investment of $35.0 million through December 2012. The BPU approved this stipulation in May 2012.

In May 2012, SJG filed a petition requesting the approval of a new Energy Efficiency Program (“EEP II”). The petition requests the approval to continue its Energy Efficiency Tracker (“EET”) to recover all cost associated with the EEP II through a 0.35% increase in rates. These programs provide customers with increased incentives to reduce their natural gas consumption. This petition is currently pending.

SJG filed its annual EET rate adjustment petition in June 2012 requesting a 0.7% increase in rates to recover the costs associated with its current Energy Efficiency Program (“EEP I”), which ended April 2012. Also in June 2012, SJG filed a petition requesting a continuation of the EEP I program to bridge the gap between the expiration of the EEP I program and the implementation of the proposed new EEP II program. Both petitions are currently pending.

In June 2012, the Company filed its annual Basic Gas Supply Service (“BGSS”) and Conservation Incentive Program (“CIP”) petitions with the BPU. These petitions request an 8.8% reduction in rates for the BGSS and a 7.0% increase in rates for the CIP, both commencing on October 1, 2012. Both petitions are currently pending.

There have been no other significant regulatory actions or changes to SJG's rate structure since December 31, 2011. See Note 3 to the Financial Statements in Item 8 of SJG's Form 10-K as of December 31, 2011.

4. REGULATORY ASSETS AND LIABILITIES:

There have been no significant changes to the nature of SJG’s regulatory assets and liabilities since December 31, 2011, which are described in Notes 3 and 4 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011.

Regulatory Assets consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Environmental Remediation Costs:
Expended - Net	$	39,747	$	45,815
Liability for Future Expenditures	88,853		89,984
Deferred Asset Retirement Obligation Costs	25,319		25,162
Deferred Pension and Other Postretirement Benefit Costs	88,435		88,624
Deferred Gas Costs - Net	5,197		22,441
Conservation Incentive Program Receivable	31,498		13,580
Societal Benefit Costs Receivable	11,215		8,618
Premium for Early Retirement of Debt	456		537
Deferred Interest Rate Contracts (Note 11)	8,680		8,146
Energy Efficiency Tracker	11,650		8,464
Other Regulatory Assets	5,206		3,850
Total Regulatory Assets	$	316,256	$	315,221

CONSERVATION INCENTIVE PROGRAM RECEIVABLE (CIP)– The increase in this receivable is primarily the result of unusually warm weather experienced in the region during the first half of 2012. The CIP tracking mechanism adjusts earnings when actual usage per customer experienced during the period varies from an established baseline usage per customer. 

11

DEFERRED GAS COSTS – NET – Over/under collections of gas costs are monitored through SJG’s BGSS clause.  Net undercollected gas costs are classified as a regulatory asset and net overcollected gas costs are classified as a regulatory liability.  Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval.  The BGSS decreased from a $22.4 million regulatory asset at December 31, 2011 to a $5.2 million regulatory asset at June 30, 2012 primarily due to gas costs recovered from customers exceeding the actual cost of the commodity incurred during the first half of 2012, as a result of natural gas prices remaining at very low levels.

Regulatory Liabilities consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Excess Plant Removal Costs	$	46,668	$	47,230
Other Regulatory Liabilities	1,278		1,081
Total Regulatory Liabilities	$	47,946	$	48,311

5. RELATED PARTY TRANSACTIONS:

There have been no significant changes in the nature of SJG’s related party transactions since December 31, 2011. See Note 5 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011 for a detailed description of such transactions.

A summary of related party transactions, excluding pass-through items, included in Operating Revenues were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Operating Revenues/Affiliates:
SJRG	$	89	$	184	$	272	$	6,059
Other	85		167		187		484
Total Operating Revenue/Affiliates	$	174	$	351	$	459	$	6,543

Related party transactions, excluding pass-through items, included in Operating Expenses were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Costs of Sales/Affiliates (Excluding depreciation):
SJRG	$	4,267	$	14,263	$	5,762	$	19,507
Energy-Related Derivative Losses *
SJRG	$	5,688	$	2,453	$	10,655	$	7,054

* Contracts used to hedge natural gas purchases. Included in Cost of Sales on the Condensed Statement of Income.

Operations Expense/Affiliates
SJI	$	2,486		$	2,712		$	5,163		$	5,208
SJIS	1,255			1,131			2,593			2,273
Millennium	796			771			1,583			1,502
Other	(142		)	(104		)	(278		)	(201		)
Total Operations Expense/Affiliates	$	4,395		$	4,510		$	9,061		$	8,782

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6. FINANCIAL INSTRUMENTS:

RESTRICTED INVESTMENTS - In accordance with the terms of our tax-exempt first mortgage bonds, unused proceeds are required to be escrowed pending approved construction expenditures. As of both June 30, 2012 and December 31, 2011, the escrowed proceeds, including interest earned, totaled $0.1 million. SJG established a margin account with SJRG in conjunction with SJG's risk management activities as detailed in Note 11. The funds provided by SJG will increase or decrease as the number and value of outstanding energy-related contracts held with SJRG changes. As of June 30, 2012 and December 31, 2011, the balance held with SJRG totaled $1.6 million and $2.1 million, respectively. The carrying amounts of the Restricted Investments approximate their fair value at June 30, 2012 and December 31, 2011, which would be included in Level 1 of the fair value hierarchy. (See Note 10 - Fair Value of Financial Assets and Financial Liabilities).

LONG-TERM RECEIVABLES– SJG provides financing to customers for the purpose of attracting conversions to natural gas heating systems from competing fuel sources.  The terms of these loans call for customers to make monthly payments over a period of up to five years with no interest.  The carrying amounts of such loans were $12.6 million and $11.7 million as of June 30, 2012 and December 31, 2011, respectively.  The current portion of these receivables is reflected in Accounts Receivable and the non-current portion is reflected in Long-Term Receivables on the condensed balance sheets.  The carrying amounts noted above are net of unamortized discounts resulting from imputed interest in the amount of $1.3 million and $1.2 million as of June 30, 2012 and December 31, 2011, respectively.  The annual amortization to interest is not material to SJG’s financial statements.  The carrying amounts of these receivables approximate their fair value at June 30, 2012 and December 31, 2011, which would be included in Level 2 of the fair value hierarchy. (See Note 10 - Fair Value of Financial Assets and Financial Liabilities).

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE - The fair value of a financial instrument is the market price to sell an asset or transfer a liability at the measurement date. The carrying amounts of SJG's financial instruments that are not carried at fair value, including those financial instruments disclosed in this footnote, approximate their fair values at June 30, 2012 and December 31, 2011, except as noted below.

• For Long-Term Debt, in estimating the fair value, we use the present value of remaining cash flows at the balance sheet date. We based the estimates on interest rates available to SJG at the end of each period for debt with similar terms and maturities (Level 2 in the fair value hierarchy. See Note 10 - Fair Value of Financial Assets and Financial Liabilities). The estimated fair values of SJG's long-term debt, including current maturities, as of June 30, 2012 and December 31, 2011, were $467.8 million and $472.0 million, respectively.  The carrying amounts of SJG's long-term debt, including current maturities, as of both June 30, 2012 and December 31, 2011, were both $365.0 million.

7. UNUSED LINES OF CREDIT:

Credit facilities and available liquidity as of June 30, 2012 were as follows (in thousands):

	Total Facility		Usage		Available Liquidity		Expiration Date
Commercial Paper Program/ Revolving Credit Facility	$	200,000	$	153,500	$	46,500	May 2015
Uncommitted Bank Lines	10,000		—		10,000		August 2012 (A)
Total	$	210,000	$	153,500	$	56,500

(A) SJG reduced the uncommitted bank lines by $10.0 million during 2012. SJG anticipates renewing the remaining line of credit during the third quarter of 2012.

The SJG facility is provided by a syndicate of banks and contains one financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the credit agreement) to not more than 0.65 to 1 measured at the end of each fiscal quarter.  SJG was in compliance with this covenant as of June 30, 2012.

13

During the third quarter of 2011, SJG began a commercial paper program under which SJG may issue short-term, unsecured promissory notes to qualified investors up to a maximum aggregate amount outstanding at any time of $200.0 million.  The notes  have fixed maturities which vary by note, but may not exceed 270 days from the date of issue. Proceeds from the notes are used for general corporate purposes.  SJG uses the commercial paper program in tandem with the $200.0 million revolving credit facility and does not expect the principal amount of borrowings outstanding under the commercial paper program and the credit facility at any time to exceed an aggregate of $200.0 million.

Average borrowings outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2012 and 2011 were $137.1 million and $37.6 million, respectively.  The maximum amount outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2012 and 2011 were $155.2 million and $61.8 million, respectively.

Based upon the existing credit facilities and a regular dialogue with our banks, we believe that there will continue to be sufficient credit available to meet our business’ future liquidity needs. Borrowings under these credit facilities are at market rates.  The weighted average interest rate on these borrowings, which changes daily, was 0.48% and 1.27% at June 30, 2012 and 2011, respectively.

8. PENSION AND OTHER POSTRETIREMENT BENEFITS:

For the three and six months ended  June 30, 2012 and 2011, net periodic benefit cost related to the employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):

	Pension Benefits						Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	848		$	696		$	1,746		$	1,481
Interest Cost	1,893			1,775			3,706			3,601
Expected Return on Plan Assets	(1,897		)	(1,726		)	(3,983		)	(3,541		)
Amortizations:
Prior Service Cost	49			48			97			100
Actuarial Loss	1,612			1,048			2,938			2,057
Net Periodic Benefit Cost	2,505			1,841			4,504			3,698
Capitalized Benefit Costs	(1,228		)	(902		)	(2,207		)	(1,812		)
Total Net Periodic Benefit Expense	$	1,277		$	939		$	2,297		$	1,886

	Other Postretirement Benefits						Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	173		$	164		$	396		$	379
Interest Cost	563			597			1,146			1,216
Expected Return on Plan Assets	(380		)	(408		)	(804		)	(854		)
Amortizations:
Prior Service Credits	(54		)	(64		)	(109		)	(135		)
Actuarial Loss	370			316			659			628
Net Periodic Benefit Cost	672			605			1,288			1,234
Capitalized Benefit Costs	(329		)	(297		)	(631		)	(605		)
Total Net Periodic Benefit Expense	$	343		$	308		$	657		$	629

Capitalized benefit costs reflected in the table above relate to our construction program.

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SJG contributed $19.8 million to the pension plans in January 2012. No contributions were made to the pension plans during the six-month period ending June 30, 2011.  Payments related to the unfunded Supplemental Executive Retirement Plan are expected to approximate $1.2 million in 2012. We also have a regulatory obligation to contribute approximately $3.6 million annually to the other postretirement benefit plans’ trusts, less direct costs incurred.

See Note 11 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011 for additional information related to SJG’s pension and other postretirement benefits.

9. COMMITMENTS AND CONTINGENCIES:

STANDBY LETTER OF CREDIT -    SJG provided a $25.2 million letter of credit under a separate facility outside of the revolving credit facility to support variable-rate demand bonds issued through the New Jersey Economic Development Authority (NJEDA) to finance the expansion of SJG’s natural gas distribution system. 

ENVIRONMENTAL REMEDIATION COSTS - SJG incurred and recorded costs for environmental cleanup of 12 sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas in the 1950s. There have been no changes to the status of SJG’s environmental remediation efforts since December 31, 2011, as described in Note 12 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011.

GAS SUPPLY RELATED CONTRACTS - In the normal course of conducting business, we have entered into long-term contracts for natural gas supplies, firm transportation and gas storage service. The earliest date at which any of the primary terms of these contracts expire is October 2012. The transportation and storage agreements entered into between us and each of our interstate pipeline service providers were done so in accordance with their respective FERC approved tariff. Our cumulative obligation for gas supply related demand charges and reservation fees paid for these services averages approximately $3.6 million per month and is recovered on a current basis through the BGSS.

PENDING LITIGATION - We are subject to claims arising in the ordinary course of business and other legal proceedings. We accrue liabilities related to these claims when we can reasonably estimate the amount or range of amounts of probable settlement costs or other charges for these claims. The Company has accrued approximately $0.4 million and $0.2 million related to all claims in the aggregate, as of June 30, 2012 and December 31, 2011, respectively. Management does not believe that it is reasonably possible that there will be a material change in the Company's estimated liability in the near term and does not currently anticipate the disposition of any known claims that would have a material effect on the Company's financial position, results of operations or cash flows.

COLLECTIVE BARGAINING AGREEMENTS - Unionized personnel represent approximately 63% of our workforce at June 30, 2012. The Company has collective bargaining agreements with two unions who represent these employees: the International Brotherhood of Electrical Workers (IBEW) that operates under a collective bargaining agreement that runs through February 2013, with the option to extend until February 2014 at the union’s election, and the International Association of Machinists and Aerospace Workers (IAM) that operates under a collective bargaining agreement that runs through  August 2014.

10. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques.  The levels of the hierarchy are described below:

• 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.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.

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For financial assets and financial liabilities measured at fair value on a recurring basis, information about the fair value measurements for each major category is as follows (in thousands):

As of June 30, 2012
	Total		Level 1		Level 2		Level 3
Assets -
Available-for-Sale Securities (A)	$	7,000	$	620	$	6,380	$	—
Derivatives – Energy Related Assets (B)	1,089		388		701		—
	$	8,089	$	1,008	$	7,081	$	—
Liabilities -
Derivatives – Energy Related Liabilities (B)	$	7,784	$	7,209	$	575	$	—
Derivatives – Other (C)	8,680		—		8,680		—
	$	16,464	$	7,209	$	9,255	$	—

As of December 31, 2011
	Total		Level 1		Level 2		Level 3
Assets
Available-for-Sale Securities (A)	$	6,655	$	597	$	6,058	$	—
Derivatives – Energy Related Assets (B)	2,263		—		2,263		—
	$	8,918	$	597	$	8,321	$	—
Liabilities
Derivatives – Energy Related Liabilities (B)	$	12,507	$	11,173	$	1,334	$	—
Derivatives – Other (C)	8,146		—		8,146		—
	$	20,653	$	11,173	$	9,480	$	—

(A)  Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly.  The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.  The remaining securities consist of funds that are not publicly traded.  These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

(B)  Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

(C)  Derivatives – Other, include interest rate swaps that are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model.  Market inputs can generally be verified and model selection does not involve significant management judgment.

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11. DERIVATIVE INSTRUMENTS:

SJG is involved in buying, selling, transporting and storing natural gas and is subject to market risk on expected future purchases and sales due to commodity price fluctuations. The Company, through its affiliate South Jersey Resources Group (SJRG), uses a variety of derivative instruments to limit this exposure to market risk in accordance with strict corporate guidelines. These derivative instruments include forward contracts, futures contracts, swap agreements and options contracts. As of June 30, 2012, SJG had outstanding derivative contracts intended to limit the exposure to market risk on 9.2 MMdts of expected future purchases of natural gas. These contracts, which do not qualify for the normal purchase and sale exemption and have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives —Energy Related Assets or Derivatives — Energy Related Liabilities on the condensed balance sheets. The costs or benefits of these short-term contracts are recoverable through SJG’s Basic Gas Supply Service (BGSS) clause, subject to BPU approval. As a result, the net unrealized pre-tax gains and losses for these energy related commodity contracts are included with realized gains and losses in Regulatory Assets or Regulatory Liabilities on the condensed balance sheets. As of June 30, 2012 and December 31, 2011, SJG had $6.7 million and $10.2 million of unrealized losses, respectively, included in its BGSS related to open financial contracts.

The Company has also entered into interest rate derivatives to hedge exposure to increasing interest rates and the impact of those rates on cash flows of variable-rate debt. These interest rate derivatives, which have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives-Other on the condensed balance sheets. The fair value represents the amount SJG would have to pay the counterparty to terminate these contracts as of those dates. There have been no significant changes to the Company’s active interest rate swaps since December 31, 2011 which are described in Note 1 to the Financial Statements in Item 8 of SJG’s Annual Report on Form 10-K as of December 31, 2011. Subject to BPU approval, the market value upon termination of these interest rate derivatives can be recovered in rates and therefore these unrealized losses have been included in Regulatory Assets on the condensed balance sheets.

We previously used derivative transactions known as “Treasury Locks” to hedge against the impact on our cash flows of possible interest rate increases on debt issued in September 2005.  The initial $1.4 million cost of the Treasury Locks has been included in Accumulated Other Comprehensive Loss and is being amortized over the 30 year life of the associated debt issue.  As of both June 30, 2012 and December 31, 2011, the unamortized balance was approximately $1.1 million.

The fair values of all derivative instruments, as reflected in the condensed balance sheets as of June 30, 2012 and December 31, 2011, are as follows (in thousands):

Derivatives not designated as hedging instruments under GAAP	June 30, 2012				December 31, 2011
	Assets		Liabilities		Assets		Liabilities
Energy related commodity contracts:
Derivatives – Energy Related – Current	$	850	$	7,446	$	2,263	$	11,385
Derivatives – Energy Related – Non-Current	239		338		—		1,122
Interest rate contracts:
Derivatives – Other	—		8,680		—		8,146
Total derivatives not designated as hedging instruments under GAAP	$	1,089	$	16,464	$	2,263	$	20,653

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The effect of derivative instruments on the condensed statements of income for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
Derivatives in Cash Flow Hedging Relationships Interest Rate Contracts:	2012			2011			2012			2011
Losses reclassified from accumulated OCI into income (a)	$	(12	)	$	(12	)	$	(24	)	$	(24	)

(a) Included in Interest Charges

Net realized losses associated with SJG’s energy-related financial commodity contracts of $5.7 million and $2.5 million for the three months ended June 30, 2012 and 2011, and $10.7 million and $7.1 million for the six months ended June 30, 2012 and 2011 respectively, are not included in the above table.  These contracts are part of SJG’s regulated risk management activities that serve to mitigate BGSS costs passed on to its customers. As these transactions are entered into pursuant to, and recoverable through, regulatory riders, any changes in the value of SJG’s energy related financial commodity contracts are deferred in Regulatory Assets or Liabilities and there is no impact to earnings.

12. LONG-TERM DEBT:

In 2011, SJG received approval from the BPU to issue up to $200.0 million in long-term debt under its MTN program by September 30, 2014. At June 30, 2012, $165.0 million was available under this program.

In February 2012, SJG called its $35.0 million, 7.70% MTN due April 2027 at par, plus a 2.0% premium. The early redemption occurred concurrently with the issuance in April 2012 of $35.0 million, 3.74% Series D MTN due April 2032.

We retire debt when it is cost effective as permitted by the debt agreements.  Our long-term debt agreements contain no financial covenants.

13.    SUBSEQUENT EVENT:

In July 2012, the Company filed a petition with the BPU requesting approval for an infrastructure replacement and improvement program that would operate in the same manner as SJG's existing CIRT. The petition requests approval for infrastructure improvement projects over the next five years totaling approximately $250.0 million that are incremental to the Company's normal capital projects scheduled over that same time period.  Under the program, SJG would spend $50.0 million per year for this work and is requesting the ability to earn a return of and a return on these investments. This petition is pending.

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Item 2. Management’s Discussion and Analysis

of Financial Condition and Results of Operations

OVERVIEW:

Organization - We are an operating public utility company engaged in the purchase, transmission and sale of natural gas for residential, commercial and industrial use. We also sell natural gas and pipeline transportation capacity (off-system sales) on a wholesale basis to various customers on the interstate pipeline system and transport natural gas purchased directly from producers or suppliers to their customers. We served 354,305 customers at June 30, 2012 compared with 348,346 customers at June 30, 2011.

Forward-Looking Statements and Risk Factors- Certain statements contained in this Quarterly Report may qualify as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report should be considered forward-looking statements made in good faith by the Company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Words such as “anticipate”, “believe”, “expect”, “estimate”, “forecast”, “goal”, “intend”, “objective”, “plan”, “project”, “seek”, “strategy” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements. These risks and uncertainties include, but are not limited to, the following: general economic conditions on an international, national, state and local level; weather conditions in our marketing areas; changes in commodity costs; changes in the availability of natural gas; “non-routine” or “extraordinary” disruptions in our distribution system; regulatory, legislative and court decisions; competition; the availability and cost of capital; costs and effects of legal proceedings and environmental liabilities; the failure of customers or suppliers to fulfill their contractual obligations; and changes in business strategies.

A discussion of these and other risks and uncertainties may be found in SJG’s Form 10-K for the year ended December 31, 2011 and in other filings made by us with the Securities and Exchange Commission. These cautionary statements should not be construed by you to be exhaustive and they are made only as of the date of this Quarterly Report on Form 10-Q, or in any document incorporated by reference, at the date of such document. While SJG believes these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, SJG undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise.

Critical Accounting Policies-Estimates and Assumptions - Management must make estimates and assumptions that affect the amounts reported in the condensed financial statements and related disclosures. Actual results could differ from those estimates. Five types of transactions presented in our condensed financial statements require a significant amount of judgment and estimation. These relate to regulatory accounting, derivatives, environmental remediation costs, pension and other postretirement benefit costs, and revenue recognition. A discussion of these estimates and assumptions may be found in SJG’s Form 10-K for the year ended December 31, 2011.

New Accounting Pronouncements-    See detailed discussions concerning New Accounting Pronouncements and their impact on SJG in Note 1 to the condensed financial statements.

Regulatory Actions – Other than the changes discussed in Note 3 to the condensed financial statements, there have been no significant regulatory actions since December 31, 2011. See detailed discussions concerning Regulatory Actions in Note 3 to the Financial Statements in item 8 of SJG’s Form 10-K for the year ended December 31, 2011.

Environmental Remediation –There have been no significant changes to the status of SJG’s environmental remediation efforts since December 31, 2011. See detailed discussion concerning Environmental Remediation in Note 12 to the Financial Statements in Item 8 of SJG’s Form 10-K for the year ended December 31, 2011.

Competition- See detailed discussion concerning competition in SJG’s Form 10-K for the year ended December 31, 2011.

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Customer Choice Legislation- All residential natural gas customers in New Jersey can choose their natural gas commodity supplier under the terms of the “Electric Discount and Energy Competition Act of 1999.” This bill created the framework and necessary time schedules for the restructuring of the state’s electric and natural gas utilities. The Act established unbundling, under which redesigned utility rate structures allow natural gas and electric consumers to choose their energy supplier. Customers purchasing natural gas from a provider other than the local utility (marketer) are charged for the gas costs by the marketer and charged for the transportation costs by the utility. The number of customers purchasing their natural gas from marketers was 38,174 and 39,243 at June 30, 2012 and 2011, respectively.

RESULTS OF OPERATIONS:

The following table summarizes the composition of selected gas utility data for the three and six months ended June 30, (in thousands, except for degree day data):

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Utility Throughput – dt:
Firm Sales -
Residential	2,294	2,514	10,889	13,755
Commercial	638	639	2,617	3,434
Industrial	36	27	162	182
Cogeneration & Electric Generation	418	434	494	554
Firm Transportation -
Residential	274	317	1,240	1,570
Commercial	920	877	3,165	3,636
Industrial	3,064	3,191	6,494	6,636
Cogeneration & Electric Generation	1,903	1,125	4,065	3,526
Total Firm Throughput	9,547	9,124	29,126	33,293
Interruptible Sales	2	9	2	12
Interruptible Transportation	317	372	741	1,064
Off-System	1,080	1,551	5,551	3,455
Capacity Release	17,019	17,504	33,986	27,659
Total Throughput - Utility	27,965	28,560	69,406	65,483

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	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Utility Operating Revenues:
Firm Sales -
Residential	$	33,024	$	34,036	$	146,653	$	148,888
Commercial	7,229		7,741		29,291		34,541
Industrial	381		574		1,634		2,294
Cogeneration & Electric Generation	1,525		2,692		1,928		3,501
Firm Transportation -
Residential	2,158		2,313		8,081		8,863
Commercial	3,936		3,482		13,049		13,187
Industrial	5,188		4,270		10,608		8,665
Cogeneration & Electric Generation	1,241		745		3,242		2,487
Total Firm Revenues	54,682		55,853		214,486		222,426
Interruptible Sales	42		161		50		215
Interruptible Transportation	338		328		816		962
Off-System	3,054		7,314		18,883		17,448
Capacity Release	787		1,228		3,846		3,899
Other	274		303		532		560
Total Utility Operating Revenues	59,177		65,187		238,613		245,510
Less:
Cost of Sales	20,407		28,259		106,906		116,833
Conservation Recoveries*	1,540		1,447		4,842		4,702
RAC Recoveries*	1,911		1,592		3,823		3,183
EET Recoveries*	843		635		1,555		1,144
Revenue Taxes	884		1,156		3,375		5,029
Utility Margin	$	33,592	$	32,098	$	118,112	$	114,619
Margin:
Residential	$	18,723	$	19,676	$	65,616	$	78,475
Commercial and Industrial	9,892		9,239		27,480		30,566
Cogeneration and Electric Generation	1,165		765		2,129		1,540
Interruptible	21		39		52		87
Off-system & Capacity Release	196		233		1,096		928
Other Revenues	515		386		772		642
Margin Before Weather Normalization & Decoupling	30,512		30,338		97,145		112,238
CIRT Mechanism	763		626		1,530		1,192
CIP Mechanism	2,212		1,040		19,233		1,014
EET Mechanism	105		94		204		175
Utility Margin	$	33,592	$	32,098	$	118,112	$	114,619
Degree Days:	367		376		2,297		2,871

*Represents expenses for which there is a corresponding credit in operating revenues.  Therefore, such recoveries have no impact on our financial results.

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Throughput– Total gas throughput decreased 0.6 MMdts, or 2.1%, for the three months ended June 30, 2012, compared with the same period in 2011. This decrease was realized primarily in the Capacity Release and Off-System Sales (OSS) markets. Following an unusually warm winter season in the region, the demand for both Capacity Release and OSS declined in the second quarter and combined for a decrease of 1.0 MMdts for the period. Partially offsetting that decline in usage was higher electric generation sales throughput, which increased 0.8 MMdts, or 69.2%, as a result of the excessive heat during the second quarter. As the second quarter of 2012 was one of the warmest on record in the region, higher electric consumption for air conditioning drove the demand for greater natural gas consumption by the region's electric producers.

Total gas throughput increased  3.9 MMdts, or 6.0%, for the six months ended June 30, 2012, compared with the same period in 2011.  This increase was realized primarily in the Capacity Release and OSS markets which increased 6.3 MMdts and 2.1 MMdts, respectively, during the six months ended June 30, 2012, as compared with the same period in 2011. Due to unusually warm weather experienced in the region during the first quarter of 2012, SJG experienced a lower demand by its firm customers, thereby creating greater opportunity for both Capacity Release and OSS sales outside of SJG's territory during the winter months. Firm throughput decreased 4.2 MMdts, or 12.5%, during the six months ended June 30, 2012, compared to the same period in 2011.  This was primarily the result of weather that was 20.0% warmer for the six months ended June 30, 2012, as compared with the same period last year, partially offset by customer growth.  The Company added 5,959 customers over the twelve month period ended June 30, 2012, which represents a growth rate of 1.7%.

Conservation Incentive Program (CIP) - The effects of the CIP on our net income and the associated weather comparisons were as follows ($’s in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012		2011
Net Income Benefit:
CIP – Weather Related	$	1.4		$	1.9		$	7.6	$	1.3
CIP – Usage Related	(0.1		)	(1.3		)	3.8		(0.7		)
Total Net Income Benefit	$	1.3		$	0.6		$	11.4	$	0.6
Weather Compared to 20-Year Average	31.1% warmer			29.5% warmer			23.1% warmer		3.9% warmer
Weather Compared to Prior Year	2.4% warmer			8.7% colder			20.0% warmer		3.3% colder

Operating Revenues – Revenues decreased $6.0 million, or 9.2%, during the three months ended June 30, 2012, compared with the same period in the prior year. Firm sales revenue decreased $1.2 million, or 2.1%, during the second quarter of 2012 versus the same period in 2011 as a result of lower natural gas costs, primarily in the Cogeneration and Electric Generation markets. Firm sales volume to those markets remained consistent with prior year; however, revenue decreased $1.2 million, or 43.4%, as lower gas costs are being passed through to those customers. While changes in gas costs and BGSS recoveries may fluctuate from period to period, SJG does not profit from the sale of the commodity.  Therefore, corresponding fluctuations in Operating Revenue or Cost of Sales have no impact on Company profitability, as further discussed below under the caption “Margin.”

Lower Off-System Sales (OSS) volume, coupled with lower natural gas prices, resulted in a $4.3 million, or 58.2%, reduction in OSS revenues during the three months ended June 30, 2012, compared with the same period last year. The average price per decatherm of gas sold in the second quarter of 2012 was $2.83 versus $4.72 during the same period last year. As reflected in the Margin table above, the impact of changes in OSS and capacity release activity do not have a material impact on the earnings of the Company, as SJG is required to share 85% of the profits of such activity with the ratepayers.

Revenues decreased $6.9 million, or 2.8%, during the six months ended June 30, 2012, compared with the same period in the prior year. Firm sales revenue decreased $7.9 million, or 3.6%, during the first six months of 2012 versus the same period in 2011, as a result of lower firm throughput as reflected in the table above. This reduction in sales was the direct result of weather that was 20.0% warmer than last year. The impact of the warmer weather can readily be seen in the throughput table above; however, the impact on firm revenue is not as evident in the corresponding revenue table above. As SJG provided firm customers with a $21.1 million refund in March 2011 due to lower gas costs, revenues during the first quarter of 2011 were also lower than normal.

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OSS revenue increased slightly during the first six months of 2012, versus the same period in 2011, despite a significant increase in sales throughput during the period as a result of lower gas costs during 2012, as previously discussed.

Margin (pre-tax)- SJG’s margin is defined as natural gas revenues less natural gas costs, regulatory rider expenses and related volumetric and revenue based energy taxes. SJG believes that margin provides a more meaningful basis for evaluating utility operations than revenues since natural gas costs, regulatory rider expenses and related energy expenses are passed through to customers, and therefore, they have no effect on margin. Natural gas costs are charged to operating expenses on the basis of therm sales at the prices approved by the New Jersey Board of Public Utilities (BPU) through SJG’s BGSS clause.

Total margin increased $1.5 million, or 4.7% for the three months ended June 30, 2012, compared with the same period in 2011, primarily due to customer additions and increased margins from cogeneration and electric generation due to the warmer temperatures noted above.  SJG added 5,959 customers over the 12-month period ended June 30, 2012, representing growth of 1.7% over the prior year and a corresponding increase in margin.

Under SJG's CIP, the Company was protected from the impact of the unusually warm second quarter, the impact from which can be seen on the Margin table above, primarily in the residential and commercial markets. The CIP protected $2.2 million of pre-tax margin in the second quarter of 2012 that would have been lost due to lower customer usage, compared with $1.0 million in the same period last year.

Total margin increased $3.5 million, or 3.0% for the six months ended June 30, 2012 compared with the same period in 2011 due to customer additions, higher margins from cogeneration and electric generation and increased margins from commercial and industrial customers.

The CIP protected $19.2 million of pre-tax margin in the first half of 2012 that would have been lost due to lower customer usage, compared with $1.0 million in the same period last year. Of these amounts, $12.8 million and $2.2 million were related to weather variations and $6.5 and $(1.2) million were related to other customer usage variations in 2012 and 2011, respectively.

Operating Expenses - A summary of changes in operating expenses (in thousands):

	Three Months Ended June 30, 2012 vs. 2011	Six Months Ended June 30, 2012 vs. 2011
Operations	1,174	3,465
Maintenance	156	339
Depreciation	355	52
Energy and Other Taxes	(243)	(1,588)

Operations – Operations expense increased $1.2 million and $3.5 million for the three and six month periods ended June 30, 2012, respectively, as compared with the same periods in 2011.  The increases are primarily due to several factors as follows:

• Expense related to changes in SJG's reserve for uncollectible customer accounts (decreased) increased $(0.4) million and $0.5 million for the three and six month periods ended June 30, 2012, respectively, as compared to the same periods in 2011. Changes in the uncollectible reserve are the result of fluctuations in levels of customer account receivable balances from period to period.

• Spending under the New Jersey Clean Energy Program and Energy Efficiency Programs increased $0.3 million and $0.6 million for the three and six month periods ended June 30, 2012, respectively, as compared to 2011.  Such costs are recovered on a dollar-for-dollar basis; therefore, SJG experienced an offsetting increase in revenues during the period.  

• Employee benefit costs, including pension costs, increased $0.3 million and $0.7 million for the three and six month periods ended June 30, 2012, respectively, as compared to 2011. Lower discount rates in 2012 increased the cost of providing pension and other postretirement benefits.

23

• Corporate support, governance and compliance costs, primarily attributable to our parent, SJI, increased $0.3 million and $0.6 million during the three and six month periods ended June 30, 2012, respectively, as compared to 2011. 

• Bank fees increased $0.3 million in both the three and six month periods ended June 30, 2012, as compared to 2011. This increase in cost is primarily associated with SJG's commercial paper program.

• The Company also experienced higher expense in various other areas such as compensation, telecommunication and sales expense.

Maintenance and Depreciation - Changes in maintenance and depreciation expense for the three and six month periods ended June 30, 2012, compared with the same periods in 2011, were not significant.

Energy and Other Taxes - Energy and Other Taxes decreased $0.2 million and $1.6 million during the three and six month periods ended June 30, 2012, respectively, compared with the same periods in 2011, primarily due to a 25% decrease in the Company's primary energy tax, the Transitional Energy Facilities Assessment, effective January 1, 2012. The Company also experienced lower taxable firm throughput in 2012 resulting from significantly warmer weather during 2012.  Additional weather information can be found above under the caption “Conservation Incentive Program (CIP).”

Other Income and Expense - Other Income and Expense increased $0.9 million and $1.4 million during the three and six month periods ended June 30, 2012, respectively, compared with the same periods in 2011.  With the approval of the Company’s CIRT II in March 2011, and the subsequent approval of its extension in March 2012, the Company is permitted to recognize a return on its qualified incremental spending.  While the debt-related component of the Company's return is credited against interest charges, the equity-related component is recognized as Other Income.  Given the timing of the approvals, the impact was greater during 2012, when the program was in effect for the full six month period.

Interest Charges–  Interest Charges decreased $1.1 million and $2.0 million during the three and six month periods ended June 30, 2012, respectively, compared with the same periods in 2011. This decrease was primarily due to the redemption of $25.0 million aggregate principal long-term debt during the third quarter 2011, and the April 2012 retirement and concurrent issuance of $35.0 million of Medium Term Notes, which effectively reduced the Company's long-term rate on the $35.0 million of debt from 7.7% to 3.7%. Also, higher levels of capitalized interest associated with increased spending under the CIRT programs reduced interest expense during 2012.

Income Taxes– Income tax expense generally fluctuates as income before income taxes changes. Minor variations will occur period to period as a result of effective tax rate adjustments. These adjustments are due to a projected increase in the Allowance for Funds Used During Construction resulting from the Company's CIRT programs which will lower the 2012 effective tax rate, compared with the 2011 effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES:

Liquidity needs are driven by factors that include natural gas commodity prices; the impact of weather on customer bills; lags in fully collecting gas costs from customers under the Basic Gas Supply Service charge; the timing of construction and remediation expenditures and related permanent financings; mandated tax payment dates; both discretionary and required repayments of long-term debt; and the amounts and timing of dividend payments.

Cash Flows from Operating Activities - Liquidity needs are first met with net cash provided by operating activities.  Net cash provided by operating activities totaled $47.2 million and $51.3 million in the first six months of 2012 and 2011, respectively.  Net cash provided by operating activities varies from year-to-year primarily due to the impact of weather on customer demand and related gas purchases, customer usage factors related to conversion efforts and the price of the natural gas commodity, inventory utilization, and gas cost recoveries.  Net cash provided by operations was negatively impacted by a $19.8 million pension contribution that occurred in January 2012.  There were no pension contributions made by the Company in 2011. This was offset by tax benefits, which resulted in lower cash tax payments during the period, and lower natural gas costs, which resulted in lower cash requirements as inventory is being filled during the spring and summer months.

24

Cash Flows from Investing Activities - SJG has a continuing need for cash resources for capital purchases, primarily to invest in new and replacement facilities and equipment. Cash used for capital purchases was $77.5 million and $55.6 million during the first six months of 2012 and 2011, respectively.   We estimate the net cash outflows for construction projects for fiscal years 2012, 2013 and 2014 to be approximately $135.0 million, $106.0 million and $105.0 million, respectively.  For capital expenditures, including those under the CIRT, SJG will use short-term borrowings to finance capital expenditures as incurred.  From time to time, the Company will refinance the short-term debt incurred to support capital expenditures with long-term debt.

Cash Flows from Financing Activities - SJG uses short-term borrowings under lines of credit from commercial banks, or under its commercial paper program discussed below, to supplement cash from operations, to support working capital needs and to finance capital expenditures as incurred. From time to time, the Company refinances short-term debt incurred to finance capital expenditures with long-term debt. Debt is incurred primarily to expand and upgrade our gas transmission and distribution system and to support seasonal working capital needs related to inventories and customer receivables.

Credit facilities and available liquidity as of June 30, 2012 were as follows (in thousands):

	Total Facility		Usage		Available  Liquidity		Expiration Date
Commercial Paper/Revolving Credit Facilities	$	200,000	$	153,500	$	46,500	May 2015
Uncommitted Bank Lines	10,000		—		10,000		August 2012 (A)
Total	$	210,000	$	153,500	$	56,500

(A) SJG reduced the uncommitted bank lines by $10.0 million during 2012. SJG anticipates renewing the remaining line of credit during the third quarter of 2012.

The SJG facility is provided by a syndicate of banks and contains one financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the credit agreement) to not more than 0.65 to 1, measured at the end of each fiscal quarter.  SJG was in compliance with this covenant as of June 30, 2012.

During the third quarter 2011, SJG began a commercial paper program under which SJG may issue short-term, unsecured promissory notes to qualified investors up to a maximum aggregate amount outstanding at any time of $200.0 million.  The notes will have fixed maturities which will vary by note, but may not exceed 270 days from the date of issue. Proceeds from the notes will be used for general corporate purposes.  SJG intends to use the commercial paper program in tandem with its $200.0 million revolving credit facility and does not expect the principal amount of borrowings outstanding under the commercial paper program and the credit facility at any time to exceed an aggregate of $200.0 million.

Average borrowings outstanding under the commercial paper program/revolving credit facility during the six months ended June 30, 2012 and 2011 were $137.1 million and $37.6 million, respectively.  The maximum amount outstanding under these credit facilities during the six months ended June 30, 2012 and 2011 were $155.2 million and $61.8 million, respectively.

Based upon the existing credit facilities and a regular dialogue with our banks, we believe there will continue to be sufficient credit available to meet our future liquidity needs.

SJG supplements its operating cash flow and credit lines with both debt and equity capital. Over the years, SJG has used long-term debt, primarily in the form of First Mortgage Bonds and Medium Term Notes (MTN), secured by the same pool of utility assets, to finance our long-term borrowing needs. These needs are primarily capital expenditures for property, plant and equipment. In April 2012, SJG issued an aggregate $35.0 million of 3.74% First Mortgage Bonds under a private placement due April 2032 and concurrently redeemed an aggregate $35.0 million of 7.7% First Mortgage Bonds due April 2027 at a 2% premium.  No other long-term debt was issued during the first six months of 2012 or 2011.

In December 2011, SJG received approval from the BPU to issue up to $200.0 million in long-term debt under its MTN program by September 30, 2014. At the end of the second quarter 2012, there was $165.0 million available to be issued under this program.

25

SJG’s capital structure was as follows:

	As of June 30, 2012		As of December 31, 2011
Common Equity	49	%	49	%
Long-Term Debt	36		38
Short-Term Debt	15		13
Total	100	%	100	%

COMMITMENTS AND CONTINGENCIES:

SJG has a continuing need for cash resources and capital, primarily to invest in new and replacement facilities and equipment, working capital, and for environmental remediation costs. Cash outflows for capital expenditures for the first six months of 2012 amounted to $77.5 million. Management estimates net cash outflows for construction projects for 2012, 2013 and 2014, to be approximately $135.0 million, $106.0 million and $105.0 million, respectively.  Costs for remediation projects, net of insurance reimbursements, for the first six months of 2012 amounted to net cash inflows of $2.1 million.  Total cash outflows for remediation projects are expected to be $5.3 million, $24.0 million and $9.8 million million for 2012, 2013, and 2014, respectively.  As discussed in Notes 4 and 12 to the Financial Statements in Item 8 of SJG’s 10-K as of December 31, 2011, environmental remediation costs are subject to recovery from insurance carriers and ratepayers.

SJG provided a $25.2 million letter of credit under a separate facility, outside of the revolving credit facility to support variable-rate demand bonds issued through the NJEDA to finance the expansion of SJG's natural gas distribution system.  

SJG has certain commitments for interstate pipeline capacity, storage services, Liquefied Natural Gas (LNG) and LNG transportation services, which carry demand type charges for which it pays fees regardless of usage. Those commitments as of June 30, 2012, average $43.2 million annually and total $198.6 million over the contracts’ lives.  Approximately 37% of the financial commitments under these contracts expire during the next five years. SJG expects to renew each of these contracts under renewal provisions as provided in each contract. SJG recovers all prudently incurred fees through rates via the BGSS.

Contractual Cash Obligations –   Details concerning contractual cash obligations may be found in SJG’s Form 10-K for the year ended December 31, 2011.  There were no significant changes to SJG’s contractual cash obligations in 2012 except for commodity supply purchase obligations, which decreased by $53.0 million since December 31, 2011, due to payments made during the first six months of 2012.

Off-Balance Sheet Arrangements- We have no off-balance sheet arrangements.

Pending Litigation - We are subject to claims arising in the ordinary course of business and other legal proceedings. We accrue liabilities related to claims when we can reasonably estimate the amount or range of amounts of probable settlement costs or other charges for these claims. The Company has accrued approximately $0.4 million and $0.2 million related to all claims in the aggregate, as of June 30, 2012 and December 31, 2011, respectively. Management does not believe that it is reasonably possible that there will be a material change in the Company's estimated liability in the near term and does not currently anticipate the disposition of any known claims that would have a material effect on the Company's financial position, results of operations or cash flows.

26

Ratio of Earnings to Fixed Charges- Our ratio of earnings to fixed charges for each of the periods indicated is as follows:

Twelve Months Ended June 30,	Year Ended December 31,
2012	2011	2010	2009	2008	2007
5.7x	5.3x	5.1x	4.9x	4.4x	4.1x

The ratio of earnings to fixed charges represents, on a pre-tax basis, the number of times earnings covers fixed charges. Earnings consist of net income, to which has been added fixed charges and taxes. Fixed charges consist of interest charges (rentals are not material).

Item 3. Quantitative and Qualitative Disclosures about Market Risks

MARKET RISKS:

Commodity Market Risks - We are involved in buying, selling, transporting and storing natural gas and are subject to market risk due to price fluctuations. To hedge against this risk, we enter into a variety of physical and financial transactions including forward contracts, futures and options agreements. To manage these transactions, we have a well-defined risk management policy approved by our Board of Directors that includes volumetric and monetary limits. Management reviews reports detailing activity daily. Generally, the derivative activities described above are entered into for risk management purposes.

We transact commodities on a physical basis and typically do not enter into financial derivative positions directly. South Jersey Resources Group, LLC (SJRG), an affiliate by common ownership, manages our risk by entering into the types of transactions noted above. As part of our gas purchasing strategy, we use financial contracts through SJRG to hedge against forward price risk. These contracts are recoverable through our BGSS, subject to BPU approval. It is management’s policy, to the extent practical, within predetermined risk management policy guidelines, to have limited unmatched positions on a deal or portfolio basis while conducting these activities. As a result of holding open positions to a minimal level, the economic impact of changes in value of a particular transaction is substantially offset by an opposite change in the related hedge transaction. The majority of our contracts are typically less than 12-months long. The fair value and maturity of these energy trading and hedging contracts determined using mark-to-market accounting as of June 30, 2012 is as follows (in thousands):

Assets
Source of Fair Value	Maturity < 1 Year		Maturity 1 - 3 Years		Total
Prices Actively Quoted (NYMEX)	$	149	$	239	$	388
Prices Provided by Other External Sources (Basis)	701		—		701
Total	$	850	$	239	$	1,089

Liabilities
	Maturity		Maturity
Source of Fair Value	< 1 Year		1 - 3 Years		Total
Prices Actively Quoted (NYMEX)	$	6,923	$	286	$	7,209
Prices Provided by Other External Sources (Basis)	523		52		575
Total	$	7,446	$	338	$	7,784

NYMEX (New York Mercantile Exchange) is the primary national commodities exchange on which natural gas is traded. Basis represents the price of a NYMEX natural gas futures contract adjusted for the difference in price for delivering the gas at another location.  Contracted volumes of our NYMEX contracts are 8.2 MMdt with a weighted-average settlement price of $3.74 per dt.  Contracted volumes of our Basis contracts are 2.6 MMdt with a weighted average settlement price of $0.26 per dt.

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A reconciliation of our estimated net fair value of energy-related derivatives follows (in thousands):

Net Derivatives — Energy Related Liability, January 1, 2012	$	(10,244	)
Contracts Settled During the Six Months ended June 30, 2012, Net	6,204
Other Changes in Fair Value from Continuing and New Contracts, Net	(2,655		)
Net Derivatives — Energy Related Liability, June 30, 2012	$	(6,695	)

Interest Rate Risk - Our exposure to interest rate risk relates primarily to short-term, variable-rate borrowings. Short-term, variable-rate debt outstanding at June 30, 2012, was $153.5 million and averaged $137.1 million during the first six months of 2012. A hypothetical 100 basis point (1%) increase in interest rates on our average variable-rate debt outstanding would result in a $0.8 million increase in our annual interest expense, net of tax. The 100 basis point increase was chosen for illustrative purposes, as it provides a simple basis for calculating the impact of interest rate changes under a variety of interest rate scenarios. Over the past five years, the change in basis points (b.p.) of our average monthly interest rates from the beginning to end of each year was as follows: 2011 - 14 b.p. decrease; 2010 – 5 b.p. increase; 2009 – 29 b.p. decrease; 2008 - 317 b.p. decrease; and 2007 - 36 b.p. decrease.  As of June 30, 2012, our average interest rate on variable-rate debt was 0.48%.

We issue long-term debt either at fixed rates or use interest rate derivatives to limit our exposure to changes in interest rates on variable-rate, long-term debt. As of June 30, 2012, the interest costs on all of our long-term debt was either at a fixed-rate or hedged via an interest rate derivative.  Consequently, interest expense on existing long-term debt is not significantly impacted by changes in market interest rates.

As of June 30, 2012, SJG’s active interest rate swaps were as follows:

Amount		Fixed Interest Rate		Start Date	Maturity	Type
$	12,500,000	3.43	%	12/1/2006	2/1/2036	Tax-exempt
$	12,500,000	3.43	%	12/1/2006	2/1/2036	Tax-exempt

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

SJG’s management, with the participation of its president (principal executive officer) and treasurer (principal financial officer), evaluated the effectiveness of the design and operation of SJG’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2012. Based on that evaluation, SJG’s president and treasurer concluded that the disclosure controls and procedures employed at SJG are effective.

Changes in Internal Control Over Financial Reporting

There has not been any change in SJG’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, SJG’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item l. Legal Proceedings

Information required by this Item is incorporated by reference to Part I, Item 2, Pending Litigation, beginning on page 26.

Item 1A. Risk Factors

There have been no material changes to our risk factors from those disclosed in Part I, Item 1A of SJG’s Annual Report on Form 10-K for the year ended December 31, 2011.

28

Item 6. Exhibits

(a)           Exhibits

Exhibit No.	Description
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
32.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
32.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
101	The following financial statements from South Jersey Gas’ Quarterly Report on Form 10-Q for the three and six months ended June 30, 2012, filed with the Securities and Exchange Commission on August 7, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Statements of Income; (ii) the Condensed Statements of Comprehensive Income; (iii) the Condensed Statements of Cash Flows; (iv) the Condensed Balance Sheets and (v) the Notes to Condensed Financial Statements.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SOUTH JERSEY GAS COMPANY

(Registrant)

Dated:	August 7, 2012	By:	/s/ Jeffrey E. DuBois
			Jeffrey E. DuBois
			President
			(Principal Executive Officer)
Dated:	August 7, 2012	By:	/s/ Stephen H. Clark
			Stephen H. Clark
			Treasurer
			(Principal Financial Officer)
Dated:	August 7, 2012	By:	/s/ Thomas S. Kavanaugh
			Thomas S. Kavanaugh
			Controller

30

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jeffrey E. DuBois, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012 of South Jersey Gas Company;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		South Jersey Gas Company
Date:	August 7, 2012	By:	/s/ Jeffrey E. DuBois
			Jeffrey E. DuBois
			President
			(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Stephen H. Clark, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012, of South Jersey Gas Company;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		South Jersey Gas Company
Date:	August 7, 2012	By:	/s/ Stephen H. Clark
			Stephen H. Clark
			Treasurer
			(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q of South Jersey Gas Company (the “Company”) for the period ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey E. DuBois, President (Principal Executive Officer) of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey E. DuBois

Name:  Jeffrey E. DuBois

Title:  President

(Principal Executive Officer)

August 7, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q of South Jersey Gas Company (the “Company”) for the period ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen H. Clark, Treasurer (Principal Financial Officer) of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen H. Clark

Name:  Stephen H. Clark

Title:  Treasurer

(Principal Financial Officer)

August 7, 2012

XML

DERIVATIVE INSTRUMENTS (Details) (USD $)					3 Months Ended				6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2005	Jun. 30, 2012 Natural Gas (in MMdts) [Member] Derivative Transaction Type, Purchase [Member] millions_of_decatherms	Jun. 30, 2012 South Jersey Resource Group [Member]		Jun. 30, 2011 South Jersey Resource Group [Member]		Jun. 30, 2012 South Jersey Resource Group [Member]		Jun. 30, 2011 South Jersey Resource Group [Member]
Derivative [Line Items]
Outstanding derivative contracts notional amount				9.2
Unrealized losses included in its BGSS related to open financial contracts	$ 6,700,000	$ 10,200,000
Initial cost of Treasury Locks			1,400,000
Amortization period of Treasury Locks			30 years
Unamortized balance of Treasury Locks	1,100,000	1,100,000
Net realized losses associated with SJG's energy-related financial commodity contracts					$ 5,688,000	[1]	$ 2,453,000	[1]	$ 10,655,000	[1]	$ 7,054,000	[1]

[1] Contracts used to hedge natural gas purchases. Included in Cost of Sales on the Condensed Statement of Income.

XML

RELATED PARTY TRANSACTIONS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Operating Revenues [Abstract]
Operating Revenues	$ 174		$ 351		$ 459		$ 6,543
Operating Expenses [Abstract]
Operating Expenses	4,395		4,510		9,061		8,782
South Jersey Resource Group [Member]
Operating Revenues [Abstract]
Operating Revenues	89		184		272		6,059
Cost of Sales	4,267		14,263		5,762		19,507
Energy-Related Derivative Losses	5,688	[1]	2,453	[1]	10,655	[1]	7,054	[1]
SJI [Member]
Operating Expenses [Abstract]
Operating Expenses	2,486		2,712		5,163		5,208
SJIS [Member]
Operating Expenses [Abstract]
Operating Expenses	1,255		1,131		2,593		2,273
Millennium [Member]
Operating Expenses [Abstract]
Operating Expenses	796		771		1,583		1,502
Other [Member]
Operating Revenues [Abstract]
Operating Revenues	85		167		187		484
Operating Expenses [Abstract]
Operating Expenses	$ (142)		$ (104)		$ (278)		$ (201)

[1] Contracts used to hedge natural gas purchases. Included in Cost of Sales on the Condensed Statement of Income.

XML

PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables)

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Schedule of defined benefit plans disclosures

For the three and six months ended  June 30, 2012 and 2011, net periodic benefit cost related to the employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):

	Pension Benefits						Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	848		$	696		$	1,746		$	1,481
Interest Cost	1,893			1,775			3,706			3,601
Expected Return on Plan Assets	(1,897		)	(1,726		)	(3,983		)	(3,541		)
Amortizations:
Prior Service Cost	49			48			97			100
Actuarial Loss	1,612			1,048			2,938			2,057
Net Periodic Benefit Cost	2,505			1,841			4,504			3,698
Capitalized Benefit Costs	(1,228		)	(902		)	(2,207		)	(1,812		)
Total Net Periodic Benefit Expense	$	1,277		$	939		$	2,297		$	1,886

	Other Postretirement Benefits						Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	173		$	164		$	396		$	379
Interest Cost	563			597			1,146			1,216
Expected Return on Plan Assets	(380		)	(408		)	(804		)	(854		)
Amortizations:
Prior Service Credits	(54		)	(64		)	(109		)	(135		)
Actuarial Loss	370			316			659			628
Net Periodic Benefit Cost	672			605			1,288			1,234
Capitalized Benefit Costs	(329		)	(297		)	(631		)	(605		)
Total Net Periodic Benefit Expense	$	343		$	308		$	657		$	629

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LONG-TERM DEBT (Details) (Medium-term Notes [Member], USD $) In Millions, unless otherwise specified	1 Months Ended
	Feb. 28, 2012 Series Due 2027, 7.7 Percent [Member]	Jun. 30, 2012 Series Due 2027, 7.7 Percent [Member]	Dec. 31, 2011 Series Due 2027, 7.7 Percent [Member]	Apr. 30, 2012 Series Due 2032, 3.74 Percent [Member]
Debt Instrument [Line Items]
Approved borrowing capacity			$ 200.0
Remaining balance available under note program		165.0
Debt called	35.0
Stated interest rate	7.70%			3.74%
Premium in addition to par for called debt	2.00%
Debt issued				$ 35.0

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	6 Months Ended
	Jun. 30, 2012 unions sites	Dec. 31, 2011
Loss Contingencies [Line Items]
Letter of credit provided	$ 210,000,000
Number of sites for environmental cleanup	12
Monthly gas supply related demand charges and reservation fees	3,600,000
Estimated litigation liability	400,000	200,000
Percentage of personnel represented in collective bargaining agreements	63.00%
Number of unions	2
Standby Letter of Credit [Member]
Loss Contingencies [Line Items]
Letter of credit provided	$ 25,200,000

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RATES AND REGULATORY ACTIONS

6 Months Ended

Jun. 30, 2012

Public Utilities, General Disclosures [Abstract]

RATES AND REGULATORY ACTIONS

RATES AND REGULATORY ACTIONS:

SJG is subject to the rules and regulations of the New Jersey Board of Public Utilities (BPU).  In October 2011, the Company filed a petition with the BPU requesting to modify and extend its CIRT II program. In March 2012, the parties executed a stipulation agreeing to an incremental investment of $35.0 million through December 2012. The BPU approved this stipulation in May 2012.

In May 2012, SJG filed a petition requesting the approval of a new Energy Efficiency Program (“EEP II”). The petition requests the approval to continue its Energy Efficiency Tracker (“EET”) to recover all cost associated with the EEP II through a 0.35% increase in rates. These programs provide customers with increased incentives to reduce their natural gas consumption. This petition is currently pending.

SJG filed its annual EET rate adjustment petition in June 2012 requesting a 0.7% increase in rates to recover the costs associated with its current Energy Efficiency Program (“EEP I”), which ended April 2012. Also in June 2012, SJG filed a petition requesting a continuation of the EEP I program to bridge the gap between the expiration of the EEP I program and the implementation of the proposed new EEP II program. Both petitions are currently pending.

In June 2012, the Company filed its annual Basic Gas Supply Service (“BGSS”) and Conservation Incentive Program (“CIP”) petitions with the BPU. These petitions request an 8.8% reduction in rates for the BGSS and a 7.0% increase in rates for the CIP, both commencing on October 1, 2012. Both petitions are currently pending.

There have been no other significant regulatory actions or changes to SJG's rate structure since December 31, 2011. See Note 3 to the Financial Statements in Item 8 of SJG's Form 10-K as of December 31, 2011.

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SUBSEQUENT EVENTS (Details) (Petition for Infrastructure Improvements [Member], USD $) In Millions, unless otherwise specified	Jul. 31, 2012
Petition for Infrastructure Improvements [Member]
Subsequent Event [Line Items]
Term of infrastructure improvement projects	5 years
Estimated cost of infrastructure improvement projects	$ 250.0
Estimated cost per year of infrastructure improvement projects	$ 50.0

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STOCK-BASED COMPENSATION PLANS (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares Outstanding (in shares)	25,028		25,028
Fair Value Per Share (in dollars per share)	$ 47.186		$ 47.186
Vesting period of shares			3 years	3 years
Cost of Restricted Stock Awards	$ 0.1	$ 0.1
Unrecognized compensation cost of awards granted under the plan	0.6		0.6
Weighted average period over which unrecognized compensation cost is to be recognized (in years)			2 years
Restricted stock award activity, excluding accrued dividend equivalents [Rolll Forward}
Nonvested Shares Outstanding, beginning balance (in shares)			17,568
Granted (in shares)			7,913
Canceled / Forfeited (in shares)			(453)
Nonvested Shares Outstanding, ending balance (in shares)	25,028		25,028
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, beginning balance (in dollars per share)			$ 44.139
Weighted Average Grant Date Fair Value, Granted (in dollars per share)			$ 54.080
Weighted Average Grant Date Fair Value, Canceled / Forfeited (in dollars per share)			$ 49.430
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, ending balance (in dollars per share)	$ 47.186		$ 47.186
Number of shares awarded during the period			7,098	15,186
Market value of shares awarded			0.4	0.8
Cash payments to SJI relating to stock awards			$ 0.3	$ 0.3
Grant Date January 2010 - TSR [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares Outstanding (in shares)	9,920		9,920
Fair Value Per Share (in dollars per share)	$ 39.020		$ 39.020
Expected Volatility			29.00%
Risk-Free Interest Rate			1.65%
Restricted stock award activity, excluding accrued dividend equivalents [Rolll Forward}
Nonvested Shares Outstanding, ending balance (in shares)	9,920		9,920
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, ending balance (in dollars per share)	$ 39.020		$ 39.020
Grant Date January 2011 - TSR [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares Outstanding (in shares)	7,372		7,372
Fair Value Per Share (in dollars per share)	$ 50.940		$ 50.940
Expected Volatility			27.50%
Risk-Free Interest Rate			1.01%
Restricted stock award activity, excluding accrued dividend equivalents [Rolll Forward}
Nonvested Shares Outstanding, ending balance (in shares)	7,372		7,372
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, ending balance (in dollars per share)	$ 50.940		$ 50.940
Grant Date January 2012 - TSR [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares Outstanding (in shares)	3,868		3,868
Fair Value Per Share (in dollars per share)	$ 51.230		$ 51.230
Expected Volatility			22.50%
Risk-Free Interest Rate			0.43%
Restricted stock award activity, excluding accrued dividend equivalents [Rolll Forward}
Nonvested Shares Outstanding, ending balance (in shares)	3,868		3,868
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, ending balance (in dollars per share)	$ 51.230		$ 51.230
Grant Date January 2012 - EPS [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Shares Outstanding (in shares)	3,868		3,868
Fair Value Per Share (in dollars per share)	$ 56.930		$ 56.930
Restricted stock award activity, excluding accrued dividend equivalents [Rolll Forward}
Nonvested Shares Outstanding, ending balance (in shares)	3,868		3,868
Weighted Average Grant Date Fair Value, Nonvested Shares Outstanding, ending balance (in dollars per share)	$ 56.930		$ 56.930
Minimum [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Percentage of actual amount of shares that ultimately vest of original share units granted			0.00%
Maximum [Member]
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Percentage of actual amount of shares that ultimately vest of original share units granted			150.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Accounting Policies [Abstract]
Amount of Transitional Energy Facility Assessment and Public Utilities Assessment included in revenues and cost of sales	$ 0.9	$ 1.2	$ 3.4	$ 5.0
Decrease in TEFA revenue based tax rate					25.00%

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RATES AND REGULATORY ACTIONS (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended
	Jun. 30, 2012	May 31, 2012	Mar. 31, 2012
Public Utilities, General Disclosures [Abstract]
Investment requested to be recoverd through CIRT II			$ 35.0
Cost requested to be recovered through EEP II, rate increase		0.35%
Cost requested to be recovered through EEP I, rate increase	0.70%
Petition to adjust BGSS, rate reduction	8.80%
Petition to adjust CIP, rate increase	7.00%

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REGULATORY ASSETS AND LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Regulatory Assets [Line Items]
Total regulatory assets	$ 316,256	$ 315,221
Environmental Restoration Costs: Expended - Net [Member]
Regulatory Assets [Line Items]
Total regulatory assets	39,747	45,815
Environmental Restoration Costs: Liability for Future Expenditures [Member]
Regulatory Assets [Line Items]
Total regulatory assets	88,853	89,984
Deferred Asset Retirement Obligation Costs [Member]
Regulatory Assets [Line Items]
Total regulatory assets	25,319	25,162
Deferred Pension and Other Postretirement Benefit Costs [Member]
Regulatory Assets [Line Items]
Total regulatory assets	88,435	88,624
Deferred Gas Costs - Net [Member]
Regulatory Assets [Line Items]
Total regulatory assets	5,197	22,441
Conservation Incentive Program Receivable [Member]
Regulatory Assets [Line Items]
Total regulatory assets	31,498	13,580
Societal Benefit Costs Receivable [Member]
Regulatory Assets [Line Items]
Total regulatory assets	11,215	8,618
Premium for Early Retirement of Debt [Member]
Regulatory Assets [Line Items]
Total regulatory assets	456	537
Deferred Interest Rate Contracts [Member]
Regulatory Assets [Line Items]
Total regulatory assets	8,680	8,146
Energy Efficiency Tracker [Member]
Regulatory Assets [Line Items]
Total regulatory assets	11,650	8,464
Other Regulatory Assets [Member]
Regulatory Assets [Line Items]
Total regulatory assets	$ 5,206	$ 3,850

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STOCK-BASED COMPENSATION PLANS

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS:

Officers and other key employees of SJG participate in the Stock Option, Stock Appreciation Rights and Restricted Stock Award Plan ("Plan") of SJI. Restricted shares issued under this plan vest over a three-year period and are subject to SJI achieving certain market or earnings-based performance targets as compared to a peer group average, which can cause the actual amount of shares that ultimately vest to range from between 0% to 150% of the original share units granted. Grants containing market-based performance targets have been issued in each of the last three years and use SJI's total shareholder return (TSR) relative to a peer group to measure performance. Beginning with 2012, grants containing earnings-based targets have also been issued. These new grants are based on SJI's earnings per share growth rate relative to a peer group to measure performance.

See Note 2 to the Consolidated Financial Statements in Item 8 of SJG Annual Report on Form 10-K as of December 31, 2011 for the related accounting policy.

The following table summarizes the SJI nonvested restricted stock awards pertaining to SJG outstanding at June 30, 2012, and the assumptions used to estimate the fair value of the awards:

Grant Date	Shares Outstanding	Fair Value Per Share		Expected Volatility		Risk-Free Interest Rate
Jan. 2010 - TSR	9,920	$	39.020	29.0	%	1.65	%
Jan. 2011 - TSR	7,372	$	50.940	27.5	%	1.01	%
Jan. 2012 - TSR	3,868	$	51.230	22.5	%	0.43	%
Jan. 2012 - EPS	3,868	$	56.930	n/a		n/a

Expected volatility is based on the actual volatility of SJI’s share price over the preceding three year period as of the valuation date. The risk-free interest rate is based on the zero-coupon U.S. Treasury Bond, with a term equal to the three year term of the restricted shares. As notional dividend equivalents are credited to the holders, which are reinvested during the three year service period, no reduction to the fair value of the award is required.

The cost for restricted stock awards during 2012 and 2011 is approximately $0.1 million per quarter.

As of June 30, 2012, there was $0.6 million of total unrecognized compensation cost related to nonvested share-based compensation awards granted under the restricted stock plans. That cost is expected to be recognized over a weighted average period of 2.0 years.

The following table summarizes information regarding restricted stock award activity during the six months ended June 30, 2012, excluding accrued dividend equivalents:

	Shares		Weighted Average Grant Date Fair Value
Nonvested Shares Outstanding, January 1, 2012	17,568		$	44.139
Granted	7,913		$	54.080
Canceled / Forfeited	(453	)	$	49.430
Nonvested Shares Outstanding, June 30, 2012	25,028		$	47.186

During the six months ended June 30, 2012, SJG awarded 7,098 shares that had vested at December 31, 2011, to its officers and other key employees at a market value of $0.4 million. During the six month ended June 30, 2011, SJG awarded 15,186 shares at a market value of $0.8 million. SJG has a policy of making cash payments to SJI to satisfy its obligations under this plan. Cash payments to SJI during each of the six months ended June 30, 2012 and 2011 were approximately $0.3 million relating to stock awards. Additionally, a change in control could result in the nonvested shares becoming nonforfeitable or immediately payable in cash.

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REGULATORY ASSETS AND LIABILITIES REGULATORY ASSETS AND LIABILITIES 2 (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Regulatory Liabilities [Line Items]
Regulatory Liabilities	$ 47,946	$ 48,311
Excess Plant Removal Costs [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	46,668	47,230
Other Regulatory Liablities [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	$ 1,278	$ 1,081

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DERIVATIVE INSTRUMENTS 2 (Details) (Not Designated as Hedging Instrument [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Derivatives, Fair Value [Line Items]
Fair value Derivative Assets	$ 1,089	$ 2,263
Fair value Derivative Liabilities	16,464	20,653
Commodity Contract [Member] | Derivatives-Energy Related-Current [Member]
Derivatives, Fair Value [Line Items]
Fair value Derivative Assets	850	2,263
Fair value Derivative Liabilities	7,446	11,385
Commodity Contract [Member] | Derivatives-Energy Related-NonCurrent [Member]
Derivatives, Fair Value [Line Items]
Fair value Derivative Assets	239	0
Fair value Derivative Liabilities	338	1,122
Interest Rate Contract [Member] | Derivatives-Other [Member]
Derivatives, Fair Value [Line Items]
Fair value Derivative Assets	0	0
Fair value Derivative Liabilities	$ 8,680	$ 8,146

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CONDENSED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Operating Revenues	$ 59,177	$ 65,187	$ 238,613	$ 245,510
Operating Expenses:
Cost of Sales (Excluding depreciation)	20,407	28,259	106,906	116,833
Operations	18,577	17,403	39,141	35,676
Maintenance	3,371	3,215	6,563	6,224
Depreciation	7,878	7,523	15,035	14,983
Energy and Other Taxes	1,479	1,722	4,648	6,236
Total Operating Expenses	51,712	58,122	172,293	179,952
Operating Income	7,465	7,065	66,320	65,558
Other Income and Expense	1,430	515	2,779	1,393
Interest Charges	(3,771)	(4,895)	(7,960)	(9,924)
Income Before Income Taxes	5,124	2,685	61,139	57,027
Income Taxes	(1,887)	(1,065)	(22,864)	(23,111)
Net Income	$ 3,237	$ 1,620	$ 38,275	$ 33,916

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CONDENSED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Common Stock, Par Value (in dollars per share)	$ 2.50	$ 2.50
Authorized (in shares)	4,000,000	4,000,000
Outstanding (in shares)	2,339,139	2,339,139

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UNUSED LINES OF CREDIT (Details) (USD $)	6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011
Line of Credit Facility [Line Items]
Total Facility	$ 210,000,000
Usage	153,500,000
Available Liquidity	56,500,000
Letters of credit outstanding	10,000,000
Average borrowings outstanding during the period	137,100,000		37,600,000
Maximum amounts outstanding during the period	155,200,000		61,800,000
Weighted average borrowing cost	0.48%		1.27%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Total Facility	200,000,000
Usage	153,500,000
Available Liquidity	46,500,000
Expiration Date	May 2015
Uncommitted Bank Lines [Member]
Line of Credit Facility [Line Items]
Total Facility	10,000,000
Usage	0
Available Liquidity	10,000,000
Expiration Date	August 2012 (A)	[1]
South Jersey Gas Commerical Paper Program [Member]
Line of Credit Facility [Line Items]
Total Facility	$ 200,000,000
Fixed maturities of notes, at maximum number of days (in days)	270
Minimum [Member]
Line of Credit Facility [Line Items]
Financial covenant, ratio of indebtedness to consolidated total capitalization minimum	0.65

[1] SJG reduced the uncommitted bank lines by $10.0 million during 2012. SJG anticipates renewing the remaining line of credit during the third quarter of 2012.

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REGULATORY ASSETS AND LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2012

Regulatory Assets and Liabilities Disclosure [Abstract]

Schedule of Regulatory Assets

Regulatory Assets consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Environmental Remediation Costs:
Expended - Net	$	39,747	$	45,815
Liability for Future Expenditures	88,853		89,984
Deferred Asset Retirement Obligation Costs	25,319		25,162
Deferred Pension and Other Postretirement Benefit Costs	88,435		88,624
Deferred Gas Costs - Net	5,197		22,441
Conservation Incentive Program Receivable	31,498		13,580
Societal Benefit Costs Receivable	11,215		8,618
Premium for Early Retirement of Debt	456		537
Deferred Interest Rate Contracts (Note 11)	8,680		8,146
Energy Efficiency Tracker	11,650		8,464
Other Regulatory Assets	5,206		3,850
Total Regulatory Assets	$	316,256	$	315,221

Schedule of Regulatory Liabilities

Regulatory Liabilities consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Excess Plant Removal Costs	$	46,668	$	47,230
Other Regulatory Liabilities	1,278		1,081
Total Regulatory Liabilities	$	47,946	$	48,311

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PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2012	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Benefits [Member]
Net periodic benefit cost [Abstract]
Service cost		$ 848,000	$ 696,000	$ 1,746,000	$ 1,481,000
Interest cost		1,893,000	1,775,000	3,706,000	3,601,000
Expected return on plan assets		(1,897,000)	(1,726,000)	(3,983,000)	(3,541,000)
Amortizations [Abstract]
Prior service cost (credits)		49,000	48,000	97,000	100,000
Actuarial loss		1,612,000	1,048,000	2,938,000	2,057,000
Net periodic benefit cost prior to capitalized benefit costs		2,505,000	1,841,000	4,504,000	3,698,000
Capitalized benefit costs		(1,228,000)	(902,000)	(2,207,000)	(1,812,000)
Total net periodic benefit expense		1,277,000	939,000	2,297,000	1,886,000
Contributions	19,800,000
Other Postretirement Benefits [Member]
Net periodic benefit cost [Abstract]
Service cost		173,000	164,000	396,000	379,000
Interest cost		563,000	597,000	1,146,000	1,216,000
Expected return on plan assets		(380,000)	(408,000)	(804,000)	(854,000)
Amortizations [Abstract]
Prior service cost (credits)		(54,000)	(64,000)	(109,000)	(135,000)
Actuarial loss		370,000	316,000	659,000	628,000
Net periodic benefit cost prior to capitalized benefit costs		672,000	605,000	1,288,000	1,234,000
Capitalized benefit costs		(329,000)	(297,000)	(631,000)	(605,000)
Total net periodic benefit expense		343,000	308,000	657,000	629,000
Defined benefit plan regulatory obligation to contribute to the plan during the period		3,600,000		3,600,000
Supplemental Employee Retirement Plans, Defined Benefit [Member]
Amortizations [Abstract]
Estimated future contributions		$ 1,200,000		$ 1,200,000

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UNUSED LINES OF CREDIT (Tables)

6 Months Ended

Jun. 30, 2012

Line of Credit Facility [Abstract]

Schedule of lines of credit

Credit facilities and available liquidity as of June 30, 2012 were as follows (in thousands):

	Total Facility		Usage		Available Liquidity		Expiration Date
Commercial Paper Program/ Revolving Credit Facility	$	200,000	$	153,500	$	46,500	May 2015
Uncommitted Bank Lines	10,000		—		10,000		August 2012 (A)
Total	$	210,000	$	153,500	$	56,500

(A) SJG reduced the uncommitted bank lines by $10.0 million during 2012. SJG anticipates renewing the remaining line of credit during the third quarter of 2012.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE ENTITY - South Jersey Industries, Inc. (SJI) owns all of the outstanding common stock of South Jersey Gas Company (SJG), a regulated natural gas utility. SJG distributes natural gas in the seven southern most counties of New Jersey. In our opinion, the condensed financial statements reflect all normal and recurring adjustments needed to fairly present our financial position and operating results at the dates and for the periods presented. SJG’s business is subject to seasonal fluctuations and accordingly, this interim financial information should not be the basis for estimating the full year’s operating results. As permitted by the rules and regulations of the Securities and Exchange Commission, the accompanying condensed financial statements contain certain condensed financial information and exclude certain note disclosures normally included in annual audited financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These condensed financial statements should be read in conjunction with SJG’s 2011 Form 10-K for a more complete discussion of our accounting policies and certain other information.

REVENUE BASED TAXES - SJG collects certain revenue-based energy taxes from its customers. Such taxes include New Jersey State Sales Tax, Transitional Energy Facility Assessment (TEFA) and Public Utilities Assessment (PUA). State sales tax is recorded as a liability when billed to customers and is not included in revenue or operating expenses. TEFA and PUA are included in both revenues and cost of sales, and totaled $0.9 million and $1.2 million for the three months ended June 30, 2012 and 2011, and $3.4 million and $5.0 million for the six months ended June 30, 2012 and 2011, respectively. TEFA, which accounts for the majority of the revenue based taxes, is subject to a planned phase-out which decreased rates by 25% effective January 1, 2012.

NEW ACCOUNTING PRONOUNCEMENTS — Other than as described below, no new accounting pronouncement issued or effective during 2011 and 2012 had, or is expected to have, a material impact on the condensed financial statements.

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU amends Accounting Standards Codification Topic 820 to include a consistent definition of the term “fair value” and set forth common requirements for measuring fair value and disclosing information about fair value measurements in financial statements. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance modified the disclosures around fair value, but did not have an impact on the Company's financial statement results.

In June 2011, the FASB has issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  This ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with a total for other comprehensive income, and a total amount for comprehensive income.  ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  In January 2012, the FASB issued ASU 2011-12, Deferral of the Effective Date for the Presentation of Reclassification Adjustments Out of Accumulated Other Comprehensive Income, which defers the provisions related to the presentation of reclassification adjustments. The other portions of the ASU remain unchanged and are effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance did not have an impact on the Company's financial statement results.

In January 2012, the FASB issued ASU 2011-11, Enhanced Disclosure Requirements Concerning Offsetting of Financial Assets and Financial Liabilities. This ASU amends ASC 210-20 to add disclosure requirements in respect of the offsetting of financial assets and financial liabilities. The new guidance is effective for fiscal years beginning on or after January 1, 2013. Management does not anticipate the adoption of this guidance to have an impact on the Company's financial statement results.

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CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Net Income	$ 3,237		$ 1,620		$ 38,275		$ 33,916
Other Comprehensive (Loss) Gain - Net of Tax:
Unrealized (Loss) Gain on Available-for-Sale Securities	(136)	[1]	50	[1]	215	[1]	(103)	[1]
Unrealized Gain on Derivatives - Other	7	[1]	7	[1]	14	[1]	14	[1]
Other Comprehensive (Loss) Gain - Net of Tax	(129)	[1]	57	[1]	229	[1]	(89)	[1]
Comprehensive Income	$ 3,108		$ 1,677		$ 38,504		$ 33,827
Combined statutory rate	41.00%		41.00%		41.00%		41.00%

[1] Determined using a combined statutory tax rate of 41% .

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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS:

SJG is involved in buying, selling, transporting and storing natural gas and is subject to market risk on expected future purchases and sales due to commodity price fluctuations. The Company, through its affiliate South Jersey Resources Group (SJRG), uses a variety of derivative instruments to limit this exposure to market risk in accordance with strict corporate guidelines. These derivative instruments include forward contracts, futures contracts, swap agreements and options contracts. As of June 30, 2012, SJG had outstanding derivative contracts intended to limit the exposure to market risk on 9.2 MMdts of expected future purchases of natural gas. These contracts, which do not qualify for the normal purchase and sale exemption and have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives —Energy Related Assets or Derivatives — Energy Related Liabilities on the condensed balance sheets. The costs or benefits of these short-term contracts are recoverable through SJG’s Basic Gas Supply Service (BGSS) clause, subject to BPU approval. As a result, the net unrealized pre-tax gains and losses for these energy related commodity contracts are included with realized gains and losses in Regulatory Assets or Regulatory Liabilities on the condensed balance sheets. As of June 30, 2012 and December 31, 2011, SJG had $6.7 million and $10.2 million of unrealized losses, respectively, included in its BGSS related to open financial contracts.

The Company has also entered into interest rate derivatives to hedge exposure to increasing interest rates and the impact of those rates on cash flows of variable-rate debt. These interest rate derivatives, which have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives-Other on the condensed balance sheets. The fair value represents the amount SJG would have to pay the counterparty to terminate these contracts as of those dates. There have been no significant changes to the Company’s active interest rate swaps since December 31, 2011 which are described in Note 1 to the Financial Statements in Item 8 of SJG’s Annual Report on Form 10-K as of December 31, 2011. Subject to BPU approval, the market value upon termination of these interest rate derivatives can be recovered in rates and therefore these unrealized losses have been included in Regulatory Assets on the condensed balance sheets.

We previously used derivative transactions known as “Treasury Locks” to hedge against the impact on our cash flows of possible interest rate increases on debt issued in September 2005.  The initial $1.4 million cost of the Treasury Locks has been included in Accumulated Other Comprehensive Loss and is being amortized over the 30 year life of the associated debt issue.  As of both June 30, 2012 and December 31, 2011, the unamortized balance was approximately $1.1 million.

The fair values of all derivative instruments, as reflected in the condensed balance sheets as of June 30, 2012 and December 31, 2011, are as follows (in thousands):

Derivatives not designated as hedging instruments under GAAP	June 30, 2012				December 31, 2011
	Assets		Liabilities		Assets		Liabilities
Energy related commodity contracts:
Derivatives – Energy Related – Current	$	850	$	7,446	$	2,263	$	11,385
Derivatives – Energy Related – Non-Current	239		338		—		1,122
Interest rate contracts:
Derivatives – Other	—		8,680		—		8,146
Total derivatives not designated as hedging instruments under GAAP	$	1,089	$	16,464	$	2,263	$	20,653

The effect of derivative instruments on the condensed statements of income for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
Derivatives in Cash Flow Hedging Relationships Interest Rate Contracts:	2012			2011			2012			2011
Losses reclassified from accumulated OCI into income (a)	$	(12	)	$	(12	)	$	(24	)	$	(24	)

(a) Included in Interest Charges

Net realized losses associated with SJG’s energy-related financial commodity contracts of $5.7 million and $2.5 million for the three months ended June 30, 2012 and 2011, and $10.7 million and $7.1 million for the six months ended June 30, 2012 and 2011 respectively, are not included in the above table.  These contracts are part of SJG’s regulated risk management activities that serve to mitigate BGSS costs passed on to its customers. As these transactions are entered into pursuant to, and recoverable through, regulatory riders, any changes in the value of SJG’s energy related financial commodity contracts are deferred in Regulatory Assets or Liabilities and there is no impact to earnings.

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DOCMENT AND ENTITY INFORMATION Document	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Entity Registrant Name	SOUTH JERSEY GAS Co
Entity Central Index Key	0001035216
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		2,339,139
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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LONG-TERM DEBT

6 Months Ended

Jun. 30, 2012

Long-term Debt, Unclassified [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT:

In 2011, SJG received approval from the BPU to issue up to $200.0 million in long-term debt under its MTN program by September 30, 2014. At June 30, 2012, $165.0 million was available under this program.

In February 2012, SJG called its $35.0 million, 7.70% MTN due April 2027 at par, plus a 2.0% premium. The early redemption occurred concurrently with the issuance in April 2012 of $35.0 million, 3.74% Series D MTN due April 2032.

We retire debt when it is cost effective as permitted by the debt agreements.  Our long-term debt agreements contain no financial covenants.

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CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Net Cash Provided by Operating Activities	$ 47,184	$ 51,301
Cash Flows from Investing Activities:
Capital Expenditures	(77,548)	(55,611)
Net Sale of Restricted Investments in Margin Accounts	458	994
Investment in Long-Term Receivables	(2,871)	(2,390)
Proceeds from Long-Term Receivables	3,781	2,418
Net Cash Used in Investing Activities	(76,180)	(54,589)
Cash Flows from Financing Activities:
Net Borrowing from Short-Term Credit Facilities	26,900	1,600
Proceeds from Issuance of Long-Term Debt	35,000	0
Principal Repayments of Long-Term Debt	(35,000)	0
Premium for Early Retirement of Debt	(700)	0
Payments for Issuance of Long-Term Debt	(341)	(28)
Net Cash Provided by Financing Activities	25,859	1,572
Net Decrease in Cash and Cash Equivalents	(3,137)	(1,716)
Cash and Cash Equivalents at Beginning of Period	3,504	2,030
Cash and Cash Equivalents at End of Period	$ 367	$ 314

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FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2012

Investments, All Other Investments [Abstract]

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS:

RESTRICTED INVESTMENTS - In accordance with the terms of our tax-exempt first mortgage bonds, unused proceeds are required to be escrowed pending approved construction expenditures. As of both June 30, 2012 and December 31, 2011, the escrowed proceeds, including interest earned, totaled $0.1 million. SJG established a margin account with SJRG in conjunction with SJG's risk management activities as detailed in Note 11. The funds provided by SJG will increase or decrease as the number and value of outstanding energy-related contracts held with SJRG changes. As of June 30, 2012 and December 31, 2011, the balance held with SJRG totaled $1.6 million and $2.1 million, respectively. The carrying amounts of the Restricted Investments approximate their fair value at June 30, 2012 and December 31, 2011, which would be included in Level 1 of the fair value hierarchy. (See Note 10 - Fair Value of Financial Assets and Financial Liabilities).

LONG-TERM RECEIVABLES– SJG provides financing to customers for the purpose of attracting conversions to natural gas heating systems from competing fuel sources.  The terms of these loans call for customers to make monthly payments over a period of up to five years with no interest.  The carrying amounts of such loans were $12.6 million and $11.7 million as of June 30, 2012 and December 31, 2011, respectively.  The current portion of these receivables is reflected in Accounts Receivable and the non-current portion is reflected in Long-Term Receivables on the condensed balance sheets.  The carrying amounts noted above are net of unamortized discounts resulting from imputed interest in the amount of $1.3 million and $1.2 million as of June 30, 2012 and December 31, 2011, respectively.  The annual amortization to interest is not material to SJG’s financial statements.  The carrying amounts of these receivables approximate their fair value at June 30, 2012 and December 31, 2011, which would be included in Level 2 of the fair value hierarchy. (See Note 10 - Fair Value of Financial Assets and Financial Liabilities).

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE - The fair value of a financial instrument is the market price to sell an asset or transfer a liability at the measurement date. The carrying amounts of SJG's financial instruments that are not carried at fair value, including those financial instruments disclosed in this footnote, approximate their fair values at June 30, 2012 and December 31, 2011, except as noted below.

• For Long-Term Debt, in estimating the fair value, we use the present value of remaining cash flows at the balance sheet date. We based the estimates on interest rates available to SJG at the end of each period for debt with similar terms and maturities (Level 2 in the fair value hierarchy. See Note 10 - Fair Value of Financial Assets and Financial Liabilities). The estimated fair values of SJG's long-term debt, including current maturities, as of June 30, 2012 and December 31, 2011, were $467.8 million and $472.0 million, respectively.  The carrying amounts of SJG's long-term debt, including current maturities, as of both June 30, 2012 and December 31, 2011, were both $365.0 million.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS:

There have been no significant changes in the nature of SJG’s related party transactions since December 31, 2011. See Note 5 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011 for a detailed description of such transactions.

A summary of related party transactions, excluding pass-through items, included in Operating Revenues were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Operating Revenues/Affiliates:
SJRG	$	89	$	184	$	272	$	6,059
Other	85		167		187		484
Total Operating Revenue/Affiliates	$	174	$	351	$	459	$	6,543

Related party transactions, excluding pass-through items, included in Operating Expenses were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Costs of Sales/Affiliates (Excluding depreciation):
SJRG	$	4,267	$	14,263	$	5,762	$	19,507
Energy-Related Derivative Losses *
SJRG	$	5,688	$	2,453	$	10,655	$	7,054

* Contracts used to hedge natural gas purchases. Included in Cost of Sales on the Condensed Statement of Income.

Operations Expense/Affiliates
SJI	$	2,486		$	2,712		$	5,163		$	5,208
SJIS	1,255			1,131			2,593			2,273
Millennium	796			771			1,583			1,502
Other	(142		)	(104		)	(278		)	(201		)
Total Operations Expense/Affiliates	$	4,395		$	4,510		$	9,061		$	8,782

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RELATED PARTY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

Summary of related party transactions

A summary of related party transactions, excluding pass-through items, included in Operating Revenues were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Operating Revenues/Affiliates:
SJRG	$	89	$	184	$	272	$	6,059
Other	85		167		187		484
Total Operating Revenue/Affiliates	$	174	$	351	$	459	$	6,543

Related party transactions, excluding pass-through items, included in Operating Expenses were as follows, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Costs of Sales/Affiliates (Excluding depreciation):
SJRG	$	4,267	$	14,263	$	5,762	$	19,507
Energy-Related Derivative Losses *
SJRG	$	5,688	$	2,453	$	10,655	$	7,054

* Contracts used to hedge natural gas purchases. Included in Cost of Sales on the Condensed Statement of Income.

Operations Expense/Affiliates
SJI	$	2,486		$	2,712		$	5,163		$	5,208
SJIS	1,255			1,131			2,593			2,273
Millennium	796			771			1,583			1,502
Other	(142		)	(104		)	(278		)	(201		)
Total Operations Expense/Affiliates	$	4,395		$	4,510		$	9,061		$	8,782

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

13.    SUBSEQUENT EVENT:

In July 2012, the Company filed a petition with the BPU requesting approval for an infrastructure replacement and improvement program that would operate in the same manner as SJG's existing CIRT. The petition requests approval for infrastructure improvement projects over the next five years totaling approximately $250.0 million that are incremental to the Company's normal capital projects scheduled over that same time period.  Under the program, SJG would spend $50.0 million per year for this work and is requesting the ability to earn a return of and a return on these investments. This petition is pending.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES:

STANDBY LETTER OF CREDIT -    SJG provided a $25.2 million letter of credit under a separate facility outside of the revolving credit facility to support variable-rate demand bonds issued through the New Jersey Economic Development Authority (NJEDA) to finance the expansion of SJG’s natural gas distribution system. 

ENVIRONMENTAL REMEDIATION COSTS - SJG incurred and recorded costs for environmental cleanup of 12 sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas in the 1950s. There have been no changes to the status of SJG’s environmental remediation efforts since December 31, 2011, as described in Note 12 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011.

GAS SUPPLY RELATED CONTRACTS - In the normal course of conducting business, we have entered into long-term contracts for natural gas supplies, firm transportation and gas storage service. The earliest date at which any of the primary terms of these contracts expire is October 2012. The transportation and storage agreements entered into between us and each of our interstate pipeline service providers were done so in accordance with their respective FERC approved tariff. Our cumulative obligation for gas supply related demand charges and reservation fees paid for these services averages approximately $3.6 million per month and is recovered on a current basis through the BGSS.

PENDING LITIGATION - We are subject to claims arising in the ordinary course of business and other legal proceedings. We accrue liabilities related to these claims when we can reasonably estimate the amount or range of amounts of probable settlement costs or other charges for these claims. The Company has accrued approximately $0.4 million and $0.2 million related to all claims in the aggregate, as of June 30, 2012 and December 31, 2011, respectively. Management does not believe that it is reasonably possible that there will be a material change in the Company's estimated liability in the near term and does not currently anticipate the disposition of any known claims that would have a material effect on the Company's financial position, results of operations or cash flows.

COLLECTIVE BARGAINING AGREEMENTS - Unionized personnel represent approximately 63% of our workforce at June 30, 2012. The Company has collective bargaining agreements with two unions who represent these employees: the International Brotherhood of Electrical Workers (IBEW) that operates under a collective bargaining agreement that runs through February 2013, with the option to extend until February 2014 at the union’s election, and the International Association of Machinists and Aerospace Workers (IAM) that operates under a collective bargaining agreement that runs through  August 2014.

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UNUSED LINES OF CREDIT

6 Months Ended

Jun. 30, 2012

Line of Credit Facility [Abstract]

UNUSED LINES OF CREDIT

UNUSED LINES OF CREDIT:

Credit facilities and available liquidity as of June 30, 2012 were as follows (in thousands):

	Total Facility		Usage		Available Liquidity		Expiration Date
Commercial Paper Program/ Revolving Credit Facility	$	200,000	$	153,500	$	46,500	May 2015
Uncommitted Bank Lines	10,000		—		10,000		August 2012 (A)
Total	$	210,000	$	153,500	$	56,500

(A) SJG reduced the uncommitted bank lines by $10.0 million during 2012. SJG anticipates renewing the remaining line of credit during the third quarter of 2012.

The SJG facility is provided by a syndicate of banks and contains one financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the credit agreement) to not more than 0.65 to 1 measured at the end of each fiscal quarter.  SJG was in compliance with this covenant as of June 30, 2012.

During the third quarter of 2011, SJG began a commercial paper program under which SJG may issue short-term, unsecured promissory notes to qualified investors up to a maximum aggregate amount outstanding at any time of $200.0 million.  The notes  have fixed maturities which vary by note, but may not exceed 270 days from the date of issue. Proceeds from the notes are used for general corporate purposes.  SJG uses the commercial paper program in tandem with the $200.0 million revolving credit facility and does not expect the principal amount of borrowings outstanding under the commercial paper program and the credit facility at any time to exceed an aggregate of $200.0 million.

Average borrowings outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2012 and 2011 were $137.1 million and $37.6 million, respectively.  The maximum amount outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2012 and 2011 were $155.2 million and $61.8 million, respectively.

Based upon the existing credit facilities and a regular dialogue with our banks, we believe that there will continue to be sufficient credit available to meet our business’ future liquidity needs. Borrowings under these credit facilities are at market rates.  The weighted average interest rate on these borrowings, which changes daily, was 0.48% and 1.27% at June 30, 2012 and 2011, respectively.

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PENSION AND OTHER POSTRETIREMENT BENEFITS

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

PENSION AND OTHER POSTRETIREMENT BENEFITS

PENSION AND OTHER POSTRETIREMENT BENEFITS:

For the three and six months ended  June 30, 2012 and 2011, net periodic benefit cost related to the employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):

	Pension Benefits						Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	848		$	696		$	1,746		$	1,481
Interest Cost	1,893			1,775			3,706			3,601
Expected Return on Plan Assets	(1,897		)	(1,726		)	(3,983		)	(3,541		)
Amortizations:
Prior Service Cost	49			48			97			100
Actuarial Loss	1,612			1,048			2,938			2,057
Net Periodic Benefit Cost	2,505			1,841			4,504			3,698
Capitalized Benefit Costs	(1,228		)	(902		)	(2,207		)	(1,812		)
Total Net Periodic Benefit Expense	$	1,277		$	939		$	2,297		$	1,886

	Other Postretirement Benefits						Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Service Cost	$	173		$	164		$	396		$	379
Interest Cost	563			597			1,146			1,216
Expected Return on Plan Assets	(380		)	(408		)	(804		)	(854		)
Amortizations:
Prior Service Credits	(54		)	(64		)	(109		)	(135		)
Actuarial Loss	370			316			659			628
Net Periodic Benefit Cost	672			605			1,288			1,234
Capitalized Benefit Costs	(329		)	(297		)	(631		)	(605		)
Total Net Periodic Benefit Expense	$	343		$	308		$	657		$	629

Capitalized benefit costs reflected in the table above relate to our construction program.

SJG contributed $19.8 million to the pension plans in January 2012. No contributions were made to the pension plans during the six-month period ending June 30, 2011.  Payments related to the unfunded Supplemental Executive Retirement Plan are expected to approximate $1.2 million in 2012. We also have a regulatory obligation to contribute approximately $3.6 million annually to the other postretirement benefit plans’ trusts, less direct costs incurred.

See Note 11 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011 for additional information related to SJG’s pension and other postretirement benefits.

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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques.  The levels of the hierarchy are described below:

• 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.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.

For financial assets and financial liabilities measured at fair value on a recurring basis, information about the fair value measurements for each major category is as follows (in thousands):

As of June 30, 2012
	Total		Level 1		Level 2		Level 3
Assets -
Available-for-Sale Securities (A)	$	7,000	$	620	$	6,380	$	—
Derivatives – Energy Related Assets (B)	1,089		388		701		—
	$	8,089	$	1,008	$	7,081	$	—
Liabilities -
Derivatives – Energy Related Liabilities (B)	$	7,784	$	7,209	$	575	$	—
Derivatives – Other (C)	8,680		—		8,680		—
	$	16,464	$	7,209	$	9,255	$	—

As of December 31, 2011
	Total		Level 1		Level 2		Level 3
Assets
Available-for-Sale Securities (A)	$	6,655	$	597	$	6,058	$	—
Derivatives – Energy Related Assets (B)	2,263		—		2,263		—
	$	8,918	$	597	$	8,321	$	—
Liabilities
Derivatives – Energy Related Liabilities (B)	$	12,507	$	11,173	$	1,334	$	—
Derivatives – Other (C)	8,146		—		8,146		—
	$	20,653	$	11,173	$	9,480	$	—

(A)  Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly.  The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.  The remaining securities consist of funds that are not publicly traded.  These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

(B)  Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

(C)  Derivatives – Other, include interest rate swaps that are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model.  Market inputs can generally be verified and model selection does not involve significant management judgment.

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FINANCIAL INSTRUMENTS (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Financial Instruments [Line Items]
Restricted investments held in escrow	$ 0.1	$ 0.1
Margin accounts with selected counterparties to support risk management activities	1.6	2.1
Estimated fair value of long-term debt	467.8	472.0
Carrying amount of long-term debt	365.0	365.0
Financing Receivable [Member]
Schedule of Financial Instruments [Line Items]
Long-term receivables, net of unamortized discount	12.6	11.7
Imputed interest on long term receivables	$ (1.3)	$ (1.2)

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STOCK-BASED COMPENSATION PLANS (Tables)

6 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of the SJI nonvested restricted stock awards pertaining to SJG outstanding at and the assumptions used to estimate the fair value of the awards

The following table summarizes the SJI nonvested restricted stock awards pertaining to SJG outstanding at June 30, 2012, and the assumptions used to estimate the fair value of the awards:

Grant Date	Shares Outstanding	Fair Value Per Share		Expected Volatility		Risk-Free Interest Rate
Jan. 2010 - TSR	9,920	$	39.020	29.0	%	1.65	%
Jan. 2011 - TSR	7,372	$	50.940	27.5	%	1.01	%
Jan. 2012 - TSR	3,868	$	51.230	22.5	%	0.43	%
Jan. 2012 - EPS	3,868	$	56.930	n/a		n/a

Summary of the information regarding restricted stock award activity excluding accrued dividend equivalents

The following table summarizes information regarding restricted stock award activity during the six months ended June 30, 2012, excluding accrued dividend equivalents:

	Shares		Weighted Average Grant Date Fair Value
Nonvested Shares Outstanding, January 1, 2012	17,568		$	44.139
Granted	7,913		$	54.080
Canceled / Forfeited	(453	)	$	49.430
Nonvested Shares Outstanding, June 30, 2012	25,028		$	47.186

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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair value of assets and liabilities

For financial assets and financial liabilities measured at fair value on a recurring basis, information about the fair value measurements for each major category is as follows (in thousands):

As of June 30, 2012
	Total		Level 1		Level 2		Level 3
Assets -
Available-for-Sale Securities (A)	$	7,000	$	620	$	6,380	$	—
Derivatives – Energy Related Assets (B)	1,089		388		701		—
	$	8,089	$	1,008	$	7,081	$	—
Liabilities -
Derivatives – Energy Related Liabilities (B)	$	7,784	$	7,209	$	575	$	—
Derivatives – Other (C)	8,680		—		8,680		—
	$	16,464	$	7,209	$	9,255	$	—

As of December 31, 2011
	Total		Level 1		Level 2		Level 3
Assets
Available-for-Sale Securities (A)	$	6,655	$	597	$	6,058	$	—
Derivatives – Energy Related Assets (B)	2,263		—		2,263		—
	$	8,918	$	597	$	8,321	$	—
Liabilities
Derivatives – Energy Related Liabilities (B)	$	12,507	$	11,173	$	1,334	$	—
Derivatives – Other (C)	8,146		—		8,146		—
	$	20,653	$	11,173	$	9,480	$	—

(A)  Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly.  The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.  The remaining securities consist of funds that are not publicly traded.  These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

(B)  Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

(C)  Derivatives – Other, include interest rate swaps that are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model.  Market inputs can generally be verified and model selection does not involve significant management judgment.

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DERIVATIVE INSTRUMENTS 3 (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Losses reclassified from accumulated OCI into income	$ (12)	[1]	$ (12)	[1]	$ (24)	[1]	$ (24)	[1]

[1] Included in Interest Charges

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CONDENSED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Property, Plant and Equipment:
Utility Plant, at original cost	$ 1,590,771	$ 1,515,274
Accumulated Depreciation	(367,710)	(357,245)
Property, Plant and Equipment - Net	1,223,061	1,158,029
Investments:
Available-for-Sale Securities	7,000	6,655
Restricted Investments	1,740	2,198
Total Investments	8,740	8,853
Current Assets:
Cash and Cash Equivalents	367	3,504
Accounts Receivable	46,355	24,800
Accounts Receivable - Related Parties	821	1,122
Unbilled Revenues	8,157	31,978
Provision for Uncollectibles	(3,863)	(3,060)
Natural Gas in Storage, average cost	12,065	27,251
Materials and Supplies, average cost	1,681	1,654
Deferred Income Taxes - Net	0	6,301
Prepaid Taxes	22,238	17,296
Derivatives - Energy Related Assets	850	2,263
Other Prepayments and Current Assets	3,990	3,773
Total Current Assets	92,661	116,882
Regulatory and Other Noncurrent Assets:
Regulatory Assets	316,256	315,221
Unamortized Debt Issuance Costs	7,000	6,198
Long-Term Receivables	8,709	8,345
Derivatives - Energy Related Assets	239	0
Other	2,340	2,195
Total Regulatory and Other Noncurrent Assets	334,544	331,959
Total Assets	1,659,006	1,615,723
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	200,926	200,926
Accumulated Other Comprehensive Loss	(11,900)	(12,129)
Retained Earnings	307,816	269,541
Total Common Equity	502,690	464,186
Long-Term Debt	365,000	362,813
Total Capitalization	867,690	826,999
Current Liabilities:
Notes Payable	153,500	126,600
Current Portion of Long-Term Debt	0	2,187
Accounts Payable - Commodity	11,218	17,867
Accounts Payable - Other	22,338	28,280
Accounts Payable - Related Parties	5,549	6,571
Derivatives - Energy Related Liabilities	7,446	11,385
Deferred Income Taxes - Net	2,249	0
Customer Deposits and Credit Balances	20,012	24,387
Environmental Remediation Costs	20,984	23,009
Taxes Accrued	1,416	1,774
Pension Benefits	1,240	1,240
Interest Accrued	5,794	6,240
Other Current Liabilities	4,108	6,016
Total Current Liabilities	255,854	255,556
Regulatory and Other Noncurrent Liabilities:
Regulatory Liabilities	47,946	48,311
Deferred Income Taxes - Net	302,486	285,159
Environmental Remediation Costs	67,869	66,975
Asset Retirement Obligations	29,888	29,388
Pension and Other Postretirement Benefits	74,354	90,055
Investment Tax Credits	761	905
Derivatives - Energy Related Liabilities	338	1,122
Derivatives - Other	8,680	8,146
Other	3,140	3,107
Total Regulatory and Other Noncurrent Liabilities	535,462	533,168
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities	$ 1,659,006	$ 1,615,723

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REGULATORY ASSETS AND LIABILITIES

6 Months Ended

Jun. 30, 2012

Regulatory Assets and Liabilities Disclosure [Abstract]

REGULATORY ASSETS AND LIABILITIES

REGULATORY ASSETS AND LIABILITIES:

There have been no significant changes to the nature of SJG’s regulatory assets and liabilities since December 31, 2011, which are described in Notes 3 and 4 to the Financial Statements in Item 8 of SJG’s Form 10-K as of December 31, 2011.

Regulatory Assets consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Environmental Remediation Costs:
Expended - Net	$	39,747	$	45,815
Liability for Future Expenditures	88,853		89,984
Deferred Asset Retirement Obligation Costs	25,319		25,162
Deferred Pension and Other Postretirement Benefit Costs	88,435		88,624
Deferred Gas Costs - Net	5,197		22,441
Conservation Incentive Program Receivable	31,498		13,580
Societal Benefit Costs Receivable	11,215		8,618
Premium for Early Retirement of Debt	456		537
Deferred Interest Rate Contracts (Note 11)	8,680		8,146
Energy Efficiency Tracker	11,650		8,464
Other Regulatory Assets	5,206		3,850
Total Regulatory Assets	$	316,256	$	315,221

CONSERVATION INCENTIVE PROGRAM RECEIVABLE (CIP)– The increase in this receivable is primarily the result of unusually warm weather experienced in the region during the first half of 2012. The CIP tracking mechanism adjusts earnings when actual usage per customer experienced during the period varies from an established baseline usage per customer. 

DEFERRED GAS COSTS – NET – Over/under collections of gas costs are monitored through SJG’s BGSS clause.  Net undercollected gas costs are classified as a regulatory asset and net overcollected gas costs are classified as a regulatory liability.  Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval.  The BGSS decreased from a $22.4 million regulatory asset at December 31, 2011 to a $5.2 million regulatory asset at June 30, 2012 primarily due to gas costs recovered from customers exceeding the actual cost of the commodity incurred during the first half of 2012, as a result of natural gas prices remaining at very low levels.

Regulatory Liabilities consisted of the following items (in thousands):

	June 30, 2012		December 31, 2011
Excess Plant Removal Costs	$	46,668	$	47,230
Other Regulatory Liabilities	1,278		1,081
Total Regulatory Liabilities	$	47,946	$	48,311

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DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair value of derivative instruments

The fair values of all derivative instruments, as reflected in the condensed balance sheets as of June 30, 2012 and December 31, 2011, are as follows (in thousands):

Derivatives not designated as hedging instruments under GAAP	June 30, 2012				December 31, 2011
	Assets		Liabilities		Assets		Liabilities
Energy related commodity contracts:
Derivatives – Energy Related – Current	$	850	$	7,446	$	2,263	$	11,385
Derivatives – Energy Related – Non-Current	239		338		—		1,122
Interest rate contracts:
Derivatives – Other	—		8,680		—		8,146
Total derivatives not designated as hedging instruments under GAAP	$	1,089	$	16,464	$	2,263	$	20,653

Derivatives in cash flow hedging relationships

The effect of derivative instruments on the condensed statements of income for the three and six months ended June 30, 2012 and 2011 are as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
Derivatives in Cash Flow Hedging Relationships Interest Rate Contracts:	2012			2011			2012			2011
Losses reclassified from accumulated OCI into income (a)	$	(12	)	$	(12	)	$	(24	)	$	(24	)

(a) Included in Interest Charges

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FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011
Total [Member]
Assets [Abstract]
Available-for-sale Securities	$ 7,000	[1]	$ 6,655	[1]
Derivatives - Energy Related Assets	1,089	[2]	2,263	[2]
Total Assets	8,089		8,918
Liabilities [Abstract]
Derivatives - Energy Related Liabilities	7,784	[2]	12,507	[2]
Derivatives - Other	8,680	[3]	8,146	[3]
Total Liabilites	16,464		20,653
Level 1 [Member]
Assets [Abstract]
Available-for-sale Securities	620	[1]	597	[1]
Derivatives - Energy Related Assets	388	[2]	0	[2]
Total Assets	1,008		597
Liabilities [Abstract]
Derivatives - Energy Related Liabilities	7,209	[2]	11,173	[2]
Derivatives - Other	0	[3]	0	[3]
Total Liabilites	7,209		11,173
Level 2 [Member]
Assets [Abstract]
Available-for-sale Securities	6,380	[1]	6,058	[1]
Derivatives - Energy Related Assets	701	[2]	2,263	[2]
Total Assets	7,081		8,321
Liabilities [Abstract]
Derivatives - Energy Related Liabilities	575	[2]	1,334	[2]
Derivatives - Other	8,680	[3]	8,146	[3]
Total Liabilites	9,255		9,480
Level 3 [Member]
Assets [Abstract]
Available-for-sale Securities	0	[1]	0	[1]
Derivatives - Energy Related Assets	0	[2]	0	[2]
Total Assets	0		0
Liabilities [Abstract]
Derivatives - Energy Related Liabilities	0	[2]	0	[2]
Derivatives - Other	0	[3]	0	[3]
Total Liabilites	$ 0		$ 0

[1] Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly. The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy. The remaining securities consist of funds that are not publicly traded. These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

[2] Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

[3] Derivatives – Other, include interest rate swaps that are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

REVENUE BASED TAXES

REVENUE BASED TAXES - SJG collects certain revenue-based energy taxes from its customers. Such taxes include New Jersey State Sales Tax, Transitional Energy Facility Assessment (TEFA) and Public Utilities Assessment (PUA). State sales tax is recorded as a liability when billed to customers and is not included in revenue or operating expenses. TEFA and PUA are included in both revenues and cost of sales, and totaled $0.9 million and $1.2 million for the three months ended June 30, 2012 and 2011, and $3.4 million and $5.0 million for the six months ended June 30, 2012 and 2011, respectively. TEFA, which accounts for the majority of the revenue based taxes, is subject to a planned phase-out which decreased rates by 25% effective January 1, 2012.

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS — Other than as described below, no new accounting pronouncement issued or effective during 2011 and 2012 had, or is expected to have, a material impact on the condensed financial statements.

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU amends Accounting Standards Codification Topic 820 to include a consistent definition of the term “fair value” and set forth common requirements for measuring fair value and disclosing information about fair value measurements in financial statements. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance modified the disclosures around fair value, but did not have an impact on the Company's financial statement results.

In June 2011, the FASB has issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  This ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with a total for other comprehensive income, and a total amount for comprehensive income.  ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  In January 2012, the FASB issued ASU 2011-12, Deferral of the Effective Date for the Presentation of Reclassification Adjustments Out of Accumulated Other Comprehensive Income, which defers the provisions related to the presentation of reclassification adjustments. The other portions of the ASU remain unchanged and are effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance did not have an impact on the Company's financial statement results.

In January 2012, the FASB issued ASU 2011-11, Enhanced Disclosure Requirements Concerning Offsetting of Financial Assets and Financial Liabilities. This ASU amends ASC 210-20 to add disclosure requirements in respect of the offsetting of financial assets and financial liabilities. The new guidance is effective for fiscal years beginning on or after January 1, 2013. Management does not anticipate the adoption of this guidance to have an impact on the Company's financial statement results.

FAIR VALUE

(A)  Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly.  The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.  The remaining securities consist of funds that are not publicly traded.  These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

(B)  Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

(C)  Derivatives – Other, include interest rate swaps that are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model.  Market inputs can generally be verified and model selection does not involve significant management judgment.