SEGMENTS OF BUSINESS:

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


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


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


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


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


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


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

•

Appliance service operations includes SJESP, which services residential and small commercial HVAC systems, installs small commercial HVAC systems, provides plumbing services and services appliances under warranty via a subcontractor arrangement as well as on a time and materials basis. In May 2017, SJESP entered into an agreement to sell certain assets of its residential and small commercial HVAC and plumbing business to a third party. This transaction is expected to be completed by August 31, 2017.


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

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

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Operating Revenues:
Gas Utility Operations	$	83,251		$	68,762		$	280,065		$	256,528
Energy Group:
Wholesale Energy Operations	76,409			(1,309		)	203,926			63,765
Retail Gas and Other Operations	21,759			22,305			58,637			52,038
Retail Electric Operations	42,620			43,065			91,577			82,556
Subtotal Energy Group	140,788			64,061			354,140			198,359
Energy Services:
On-Site Energy Production	25,135			23,043			44,747			39,364
Appliance Service Operations	1,980			2,050			3,638			3,938
Subtotal Energy Services	27,115			25,093			48,385			43,302
Corporate and Services	11,013			8,417			22,609			17,293
Subtotal	262,167			166,333			705,199			515,482
Intersegment Sales	(17,793		)	(11,931		)	(34,996		)	(28,045		)
Total Operating Revenues	$	244,374		$	154,402		$	670,203		$	487,437



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Operating (Loss) Income:
Gas Utility Operations	$	8,156		$	9,931		$	88,802		$	85,704
Energy Group:
Wholesale Energy Operations	(18,191		)	(31,149		)	(29,817		)	7,095
Retail Gas and Other Operations	(1,560		)	6,250			(3,227		)	5,491
Retail Electric Operations	1,155			2,277			2,461			2,862
Subtotal Energy Group	(18,596		)	(22,622		)	(30,583		)	15,448
Energy Services:
On-Site Energy Production	5,104			4,561			3,135			4,472
Appliance Service Operations	66			258			(6		)	302
Subtotal Energy Services	5,170			4,819			3,129			4,774
Corporate and Services	706			(114		)	1,774			341
Total Operating (Loss) Income	$	(4,564	)	$	(7,986	)	$	63,122		$	106,267

Depreciation and Amortization:
Gas Utility Operations	$	17,446		$	15,788		$	34,808		$	31,414
Energy Group:
Wholesale Energy Operations	33			204			61			408
Retail Gas and Other Operations	84			83			167			168
Subtotal Energy Group	117			287			228			576
Energy Services:
On-Site Energy Production	11,674			10,895			23,267			20,814
Appliance Service Operations	56			91			110			175
Subtotal Energy Services	11,730			10,986			23,377			20,989
Corporate and Services	418			260			819			483
Total Depreciation and Amortization	$	29,711		$	27,321		$	59,232		$	53,462

Interest Charges:
Gas Utility Operations	$	6,077		$	4,552		$	11,955		$	9,339
Energy Group:
Wholesale Energy Operations	134			1			3,193			65
Retail Gas and Other Operations	64			78			149			210
Subtotal Energy Group	198			79			3,342			275
Energy Services:
On-Site Energy Production	3,877			3,442			9,691			6,904
Corporate and Services	4,941			2,858			10,182			6,310
Subtotal	15,093			10,931			35,170			22,828
Intersegment Borrowings	(4,114		)	(2,702		)	(7,446		)	(5,439		)
Total Interest Charges	$	10,979		$	8,229		$	27,724		$	17,389



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Income Taxes:
Gas Utility Operations	$	1,431		$	1,415		$	31,342		$	28,819
Energy Group:
Wholesale Energy Operations	(6,384		)	(12,258		)	(12,703		)	2,479
Retail Gas and Other Operations	(593		)	2,450			(1,040		)	2,282
Retail Electric Operations	472			931			1,007			1,170
Subtotal Energy Group	(6,505		)	(8,877		)	(12,736		)	5,931
Energy Services:
On-Site Energy Production	219			110			(2,850		)	(2,902		)
Appliance Service Operations	36			126			19			152
Subtotal Energy Services	255			236			(2,831		)	(2,750		)
Corporate and Services	(725		)	37			551			78
Total Income Taxes	$	(5,544	)	$	(7,189	)	$	16,326		$	32,078

Property Additions:
Gas Utility Operations	$	66,128		$	50,133		$	128,408		$	101,503
Energy Group:
Wholesale Energy Operations	4			1			7			7
Retail Gas and Other Operations	133			354			428			725
Subtotal Energy Group	137			355			435			732
Energy Services:
On-Site Energy Production	2,917			2,665			10,266			5,316
Appliance Service Operations	254			251			260			352
Subtotal Energy Services	3,171			2,916			10,526			5,668
Corporate and Services	839			564			1,084			727
Total Property Additions	$	70,275		$	53,968		$	140,453		$	108,630



	June 30, 2017			December 31, 2016
Identifiable Assets:
Gas Utility Operations	$	2,673,743		$	2,551,923
Energy Group:
Wholesale Energy Operations	165,932			233,019
Retail Gas and Other Operations	36,954			52,729
Retail Electric Operations	34,480			41,280
Subtotal Energy Group	237,366			327,028
Energy Services:
On-Site Energy Production	719,556			767,710
Appliance Service Operations	2,571			2,879
Subtotal Energy Services	722,127			770,589
Discontinued Operations	1,778			1,756
Corporate and Services	708,131			649,795
Intersegment Assets	(601,285		)	(570,524		)
Total Identifiable Assets	$	3,741,860		$	3,730,567