SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by NJR in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The September 30, 2010 Balance Sheet data is derived from the audited financial statements of the Company. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and the notes thereto included in NJR's 2010 Annual Report on Form 10-K.

The Unaudited Condensed Consolidated Financial Statements include the accounts of NJR and its subsidiaries. In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary, for a fair presentation of the results of the interim periods presented. These adjustments are of a normal and recurring nature. Because of the seasonal nature of NJR's utility and wholesale energy services operations, in addition to other factors, the financial results for the interim periods presented are not indicative of the results that are to be expected for the fiscal year ended September 30, 2011.

Intercompany transactions and accounts have been eliminated.

Gas in Storage

The following table summarizes Gas in storage by company as of:



	June 30, 2011				September 30, 2010
($ in thousands)	Gas in Storage			Bcf	Gas in Storage			Bcf
NJNG		$	94,666	14.2		$	181,098	24.7
NJRES		153,470		34.8		155,065		42.3
Total		$	248,136	49.0		$	336,163	67.0

Capitalized and Deferred Interest

Included in the Unaudited Condensed Consolidated Balance Sheets are capitalized amounts associated with the debt and equity components of NJNG's allowance for funds used during construction (AFUDC), which are recorded in utility plant. NJNG's base rates include the ability for NJNG to recover the cost of debt associated with AFUDC and construction work in progress (CWIP). An incremental cost of equity is also recoverable during periods when NJNG's short-term debt balances are lower than its construction work in progress. Corresponding amounts recognized in interest expense and other income, as appropriate, are included in the Unaudited Condensed Consolidated Statements of Operations are as follows:



	Three Months Ended						Nine Months Ended
	June 30,						June 30,
($ in thousands)	2011			2010			2011			2010
AFUDC:
Debt	$	352		$	262		$	622		$	662
Equity	753			557			1,252			1,474
Total	$	1,105		$	819		$	1,874		$	2,136
Weighted average rate	7.76		%	7.76		%	5.57		%	7.34		%

Pursuant to a BPU order, NJNG is permitted to recover carrying costs on uncollected balances related to Societal Benefits Clause (SBC) program costs, which include New Jersey Clean Energy Program (NJCEP), Remediation Adjustment (RA) and Universal Service Fund (USF) expenditures (see Note 3. Regulation). Accordingly, other income included $275,000 and $374,000 of deferred interest related to these SBC program costs for the three months ended June 30, 2011 and 2010, respectively, and $794,000 and $1.3 million for the nine months ended June 30, 2011 and 2010, respectively.

Customer Accounts Receivable

Customer accounts receivable include outstanding billings from the following subsidiaries as of:



($ in thousands)	June 30, 2011				September 30, 2010
NJNG⁽¹⁾	$	52,056	20	%	$	17,983	11	%
NJRES	196,335		76		136,064		83
NJRHS and other	10,420		4		8,914		6
Total	$	258,811	100	%	$	162,961	100	%


(1)	Does not include unbilled revenues of $7.3 million and $7.4 million as of June 30, 2011 and September 30, 2010, respectively.

Asset Held for Sale

As of June 30, 2011, NJR has classified a property located in Monmouth County as held for sale in the Unaudited Condensed Consolidated Balance Sheets. The property is approximately 4.5 acres of undeveloped land with a net book value of $1.6 million, which is expected to be sold during the fourth quarter of fiscal 2011.

Recent Updates to the Accounting Standards Codification (ASC)

Consolidation:

In June 2009, the Financial Accounting Standards Board (FASB) issued guidance requiring qualitative evaluations including an additional emphasis on identifying the party who effectively controls the entity, which replaces the quantitative assessments previously in practice, when determining whether a company has a controlling financial interest in a variable interest entity (VIE). In addition, the assessments will be required on an ongoing basis, rather than limiting the reassessments to when certain triggering events occur. Additional disclosures provide information on a company's involvement with VIE's. The Company adopted the provisions of the statement prospectively during its first quarter of fiscal 2011 and the adoption had no impact on its financial position, results of operations or cash flows.

Fair Value

In May 2011, the FASB issued an amendment to ASC Topic 820, Fair Value Measurements and Disclosures, clarifying certain guidance to ensure that U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) have the same fair value meaning, measurements and disclosure requirements. The amended guidance will become effective for interim and annual periods beginning after December 15, 2011. The Company is evaluating the impact of the new guidance on its financial position, results of operations or cash flows upon adoption.

Presentation of Comprehensive Income

In June 2011, the FASB issued an amendment to ASC Topic 220, Comprehensive Income, allowing two alternatives for the presentation of comprehensive income, eliminating the option to present the components of comprehensive income (OCI) as a part of the statement of changes in stockholder's equity and requiring that reclassification adjustments from OCI to income be presented on the face of the financial statements. Upon adoption, the total of comprehensive income, including the components of net income and OCI, will be presented in either one statement or in two separate but consecutive statements. The amendment will become effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. Since the new guidance only amends presentation of comprehensive income, there will be no impact to the Company's financial position, results of operations or cash flows upon adoption.