sji10k2007.htm

Exhibit 10 (e)(iii)

SOUTH JERSEY INDUSTRIES

SOUTH JERSEY GAS COMPANY

SOUTH JERSEY ENERGY COMPANY

Officer Employment Agreement

THIS AGREEMENT made as of the first day of January 2006, by and between South Jersey Industries, Inc. (“SJI”) and/or one or more of its subsidiaries South Jersey Gas Company and South Jersey Energy Company, all New Jersey corporations, having their principal offices at Number One South Jersey Plaza, Route 54, Folsom, New Jersey (the “Companies”), and ___________________ (the “Officer”).

WITNESSETH:

WHEREAS, the Companies desire to assure themselves of the continued employment of the Officer by the Companies and to encourage his or her continued attention and dedication to the Companies in the best interests of the Companies and SJI shareholders; and

WHEREAS, the Officer is presently employed by the Companies as follows:

WHEREAS, the Officer desires to remain and continue in the employ of the Companies on the terms hereinafter provided;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

Section 1. Employment.

The Companies hereby agrees to continue to employ the Officer in the positions in which he or she presently serves, and the Officer hereby agrees to continue to serve in those positions, on the terms and conditions set forth herein.

Section 2. Term.

The term of this Agreement shall be for a period of three (3) years beginning January 1, 2006 and ending on December 31, 2009 subject to earlier termination under sections 7 and 8.

Section 3. Duties and Responsibilities.

The Officer shall serve in the positions in which he or she presently serves and shall report only to the President and/or Chief Executive Officer of SJG. The Officer shall perform such duties and services as are customarily performed by him or her and as are assigned to him or her by the President and/or Chief Executive Officer of SJG.

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Section 4. Outside Services.

The Officer agrees to devote substantially all of his or her working time and efforts to the business and affairs of the Companies and shall not, directly or indirectly, without the written consent of the Chief Executive Officer of SJI, render any services to any other person, firm or entity, or own, manage, operate, control or participate in the management of any other person, firm or entity during the term of this Agreement. However, the Officer is not prohibited or prevented from acquiring or holding investments and securities listed on a national or regional securities exchange or sold in an over-the-counter public market, provided that the Officer is not part of any control group of such corporation or entity. So long as it does not interfere with his or her duties under this Agreement, the Officer shall have the right to serve as a director of any other corporation upon the approval of the President and/or Chief Executive Officer of SJI.

Section 5. Place of Performance.

The Officer’s services during the term of this Agreement shall be performed primarily in the corporate headquarters building of the Companies at Number One South Jersey Plaza, Route 54, Folsom, New Jersey. Without his or her prior consent, the Officer shall not be required to move his or her place of permanent employment from this corporate headquarters building, although the Officer may be required to undertake reasonable domestic and international travel from time to time consistent with his or her business travel obligations.

Section 6. Compensation and Expenses.

6.1 Total Direct Compensation.

During the period of the Officer’s employment under this Agreement, the Companies shall pay to the Officer a Base Salary of not less than $__________ per annum; a performance based annual cash award targeted at __% of base salary; and a long-term incentive plan targeted at __% of base salary, the three components being defined as Total Direct Compensation. Base Salary shall be paid in either twenty-four (24) or twenty-six (26) equal installments. The amount of Total Direct Compensation shall be reviewed annually in accordance with the normal business practices of the Companies.

6.2 Additional Benefits.

In addition to Total Direct Compensation, the Companies shall pay for and the Officer shall be entitled without limitation to participate in employee benefit plans presently in effect or hereafter adopted by the Companies which are applicable to employees generally. To the extent said benefits have been modified or additional benefits provided, they are detailed in Exhibit A, which is attached hereto and made a part hereof. If employer contributions to any such plan (other than a defined benefit plan) for the benefit of the Officer or his or her dependents or beneficiaries are reduced in amount by any statute or regulation from the payments that would otherwise be so made but for such statute or regulation, the amount

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that is prohibited from being paid to such plan because of such statute or regulation, increased if necessary as provided in the next sentence, shall be paid, at the time it would have been paid to such plan except for such prohibition to the Officer in a lump sum cash payment. Such amount shall be increased if necessary so that, after federal and state income taxes on the amount as so increased are taken into account, the net amount after such taxes, shall be paid to the Officer.

6.3 Expenses.

In addition to Total Direct Compensation and Additional Benefits, the Companies shall pay for and the Officer shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Officer in performing services under this Agreement, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Companies, provided that such expenses are incurred and accounted for in accordance with the policies and procedures presently or hereafter established by the Companies.

6.4 Services Furnished.

The Companies shall furnish the Officer with office space, administrative/clerical assistance and such other facilities and services as shall be suitable to the Officer’s position and adequate for the performance of his or her duties.

Section 7. Reasons for Termination.

7.1 Death.

This Agreement shall terminate upon the Officer’s death, and he or she shall be entitled to such death benefits to which he or she is otherwise entitled presently or which may be hereafter established by the Companies.

7.2 Disability.

If the Officer shall be determined to be disabled in accordance with the disability policy or plan of the Companies, the Officer may be removed from positions within the Companies in which he or she then may be serving. However, the Officer shall not be terminated as an employee of the Companies. The Officer shall be retained in such positions and given such duties and responsibilities as are commensurate with his or her abilities at the time. The Officer shall be entitled to such disability benefits, including short term and long term, to which he or she is otherwise entitled presently or which may be hereafter established by the Companies. Until the Officer becomes entitled to such disability benefits, he or she shall continue to be paid his or her Total Cash Compensation in accordance with this Agreement. The determination of the disability of the Officer shall be made by the Chief Executive Officer of the Companies in the exercise of his discretion in accordance with procedures set forth in the disability policies or plan.

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7.3 Retirement.

If the Officer shall retire, he or she shall be entitled to such pension and other benefits applicable to executive employees generally and him or her specifically including, without limitation, those presently existing or hereafter established by the Companies.

7.4 For Cause by the Companies.

The Companies may terminate the Officer’s employment for Cause. For purposes of this Agreement, the Companies shall have “Cause” to terminate the Officer’s employment hereunder only for the following reasons: (1) the willful and continued failure by the Officer to substantially perform his or her duties hereunder other than any such failure resulting from the Officer’s incapacity due to physical or mental illness or injury; (2) the conviction of the Officer of a crime under state or federal law and the Companies’ Board of Directors or one of its committees is unable to conclude in good faith (and in its sole discretion) that the Officer had no reasonable cause to believe that the activities of which he or she was convicted were unlawful and that such conviction will not materially impair his or her ability to discharge his or her duties; (3) the willful engaging by the Officer in misconduct which is materially injurious to the Companies, monetarily or otherwise; or (4) the continued inability of the Officer to perform his or her duties by reason of alcoholism or drug abuse even after appropriate rehabilitation services have been made available to him or her.

7.5 For Good Reason by the Officer.

The Officer may terminate the Officer’s employment for Good Reason following a Change of Control of the Companies at any time during the term of this Agreement. For purposes of this Agreement, “Good Reason” shall mean any of the following: (1) the assignment to the Officer by the Companies, without the Officer’s express written approval, of duties inconsistent with the Officer’s position, duties, responsibilities, titles, offices or status with the Companies immediately prior to a Change of Control of the Companies, or any removal of the Officer from or any failure to re-elect the Officer to any such positions; (2) a reduction in the Officer’s Total Cash Compensation as in effect on the date hereof or as the same is increased from time to time during the term of this Agreement; (3) the failure to review and increase the Officer’s Total Cash Compensation within twelve (12) months after the Officer’s last increase in Total Cash Compensation by an amount which at least equals, on a percentage basis, the average percentage increase Total Cash Compensation for all the Companies’ Officers for that same period (excluding promotions); (4) the failure to continue in effect any benefit plan or arrangement in which the Officer is participating immediately prior to a Change of Control, or the taking of any action by the Companies which would adversely affect the Officer’s participation in and/or materially reduce the Officer’s benefits under any such benefit plan or arrangement or which would deprive the Officer of any material fringe benefit enjoyed by the Officer immediately prior to a Change of Control; (5) a relocation of the Companies’ corporate headquarters to a location outside of Folsom, New Jersey, or the Officer’s relocation to any place other than the location at which the Officer performed the Officer’s duties except for required travel by the Officer on the Companies’ business to an extent substantially consistent with the Officer’s business travel obligations

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immediately prior to a Change of Control; (6) any purported termination of the Officer’s employment which is not effected pursuant to a Notice of Termination.

For purposes of this Agreement a “Change of Control” of the Companies shall mean any of the following: (1) consummation of any pay or proposal for the merger, liquidation, dissolution or acquisition of SJI or all or substantially all of its assets; (2) election to the Board of Directors of SJI a new majority different from the individuals who at the beginning of the term of this Agreement constituted the entire Board of Directors of SJI, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or (3) the acquisition by any person of 20% or more of the stock of SJI having general voting rights in the election of directors (for purposes of this clause (3), the term “person” shall include two or more persons acting as a group for the purpose of acquiring, holding or disposing of stock of SJI).

Section 8. Benefits upon Termination.

8.1 Termination by the Companies for Cause.

If the Officer’s employment by the Companies shall be terminated for Cause (as defined in Section 7.4), the Companies shall pay the Officer his or her Total Direct Compensation through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Companies shall have no further salary obligations to the Officer under this Agreement. The Officer shall be entitled to such retirement benefits as he or she may otherwise be entitled to on the Date of Termination. Effective as of the Date of Termination, the Officer shall no longer be an employee of the Companies and shall no longer be entitled to the privileges and benefits thereof.

8.2 Termination by the Officer for Good Reason.

If the Officer’s employment shall be terminated by the Officer for Good Reason following a Change of Control (as defined in Section 7.5), the Companies shall pay the Officer as severance pay an amount equal to 300% of a base amount determined to be the average of the aggregate annual compensation paid to the Officer during the five (5) calendar years preceding the Date of Termination and subject to federal income taxes; provided that, if any lump-sum severance payment, either alone or together with any other payment which the Officer has the right to receive from the Companies, would constitute a “parachute payment” as defined in Section 280G of the Internal Revenue Code of 1986, as amended, such lump-sum payment shall be reduced to the largest amount as will result in no portion of the lump-sum payment being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended. The Companies shall pay this lump-sum severance payment, in cash, on the Date of Termination, provided that the Officer has executed a general release and waiver of claims in a form of agreement prepared by the Companies.

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8.3 Termination by the Companies for Other than Cause.

If the Companies terminate the Officer’s employment for other than Cause following a Change of Control, the Officer shall be entitled to those benefits set forth in paragraph 8.2 above. If the Companies terminates the Officer’s employment for other than Cause without a Change of Control (as defined in Section 7.5), which the Companies may do at any time in its sole discretion, the Companies shall pay the Officer as severance pay an amount equal to 150% of the Officers then current Base Salary, to be paid out in eighteen (18) equal monthly installments. In addition, the Officer shall be entitled to such retirement benefits as he may otherwise be entitled to on the Date of Termination. However, for purposes of the Supplemental Executive Retirement Plan (“SERP”) formula, the eighteen (18) month severance period shall be included as service credit and the severance amount considered in the Final Average Earnings (“FAE”) calculation. In no case will the inclusion of this severance period produce a SERP benefit in excess of the maximum percentage of FAE provided for in the SERP plan in effect on the Date of Termination. The continuation of such payments and benefits shall be the Officer’s sole and exclusive remedy and the Companies shall have no further obligations or liability to the Officer or his survivors (except as otherwise provided by this section) under this Agreement, and shall only be provided in exchange for a fully executed general release and waiver of claims by the Officer in a form of agreement prepared by the Companies.

Section 9. Procedure for Termination.

9.1 Notice of Termination.

For the purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Officer’s employment.

9.2 Date of Termination.

For the purposes of this Agreement, the “Date of Termination” shall mean the date of the Officer’s death; or thirty (30) days after Notice of Termination is given; provided that if within ten (10) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the date of termination shall be extended for an additional period not to exceed ten (10) days. During the period between Notice of Termination and the Date of Termination the Officer may request and shall be granted a hearing before the Board of Directors of the Companies or such committee thereof as it may designate, at which time the Board of Directors shall decide whether in its reasonable good faith opinion the Officer was either disabled or discharged for Cause and specifying the particulars thereof in detail.

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Section 10.No Obligation to Mitigate Damages; No Effect on Other Contractual Rights.

10.1 The Officer shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise.

10.2 The amount of any payment provided to the Officer under this Agreement shall not be reduced by any compensation earned by the Officer as the result of employment by another employer after the Date of Termination.

10.3 The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Officer’s existing rights, or rights which would accrue solely as a result of the passage of time under any plan of benefits provided to officers and managers of the Companies.

Section 11. Confidential Information.

The Officer will not, during or after the term of this Agreement, use for himself or herself or others, or disclose to others, any formulae, trade secrets, customer lists, know-how or other confidential information of or about the Companies or any of its affiliates unless authorized in writing to do so by the Companies. The Officer understands that this undertaking applies to information of a technical or commercial or other nature and that any information not made available to the general public is to be considered confidential.

Section 12. Papers.

All correspondence, memoranda, notes, records, reports, plans and other papers and items received or made by the Officer in connection with his or her duties hereunder shall be the property of the Companies, and the Officer shall not have any property rights to such items when he or she is no longer an employee of the Companies.

Section 13. Noncompetition.

13.1 The Officer acknowledges that, during the course of his employment hereunder, he will have access to the Companies’ customer and business prospects, knowledge of and experience in the techniques and methods the Companies used to do business in its industries and other information and know-how which, even if not directly disclosed to a competitor of the Companies, would give a competitor significant and unfair advantages over the Companies if made available to it through the Officer’s employment.

13.2 Accordingly, unless the Officer requests in writing and is thereafter authorized in writing to do so by the Companies, the Officer will not, during the term of this Agreement, or for a period of one (1) year thereafter, directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by, any business corporation, proprietorship, partnership or other entity which competes with or is engaged in any alliance or joint venture with either of the Companies.

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13.3 The undertakings in this Section 13: shall apply only to those areas where the Companies engage or propose to engage in business or which the Companies, at the termination of the Officer’s employment hereunder have defined as their market territory, but shall not apply if the Company is or the Companies are, and after thirty days’ written notice to the Companies thereof continue to be, in default of its or their obligation to make any of the payments they are then required to make to the Officer and the Officer is not in default in the performance of his obligations. For the avoidance of doubt, it is agreed that Energy Company’s business involves participation in electronic gas trading markets with dealings with buyers, sellers and traders located throughout the United States, and in which geographical location of traders and managers is unimportant. Accordingly, it is agreed that the restrictions of this Section 13 shall apply to Energy Company’s competitors located throughout the northeast and mid-atlantic United States, and that such limitations are reasonable in light of the kind of business transacted by Energy Company.

13.4 If the provisions of this Section 13 should ever be adjudicated to exceed the time, geographic or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic or other limitations permitted by the law applicable in that jurisdiction. In addition, the Officer hereby authorizes the Company to bring the Officer’s obligations hereunder to the attention of, and to provide a copy or description of pertinent Sections of this Agreement to, any entity which the Company believes may offer or has offered employment to the Officer.

Section 14. Renewal and Extension of Agreement.

The term of this Agreement shall be automatically renewed and extended for a period of three (3) years from the date of any Change of Control in order that the Officer obtains the full benefit of all severance benefits in the event of termination of employment after any Change of Control. This Agreement, either under its normal three (3) year term or under the term resulting from a Change of Control, shall be considered for renewal and extension by the Board of Directors of the Companies or such committee thereof as it may designate at least six (6) months prior to the end of its term. Action by the Board of Directors shall be required to renew and extend this Agreement.

Section 15. Enforcement.

The Officer acknowledges that in the event of his or her breach or threat of breach of Sections 11, 12 or 13 of this Agreement, the Companies’ remedies at law will be inadequate and, in such event, the Companies will be entitled to appropriate injunctive and other equitable relief in addition to its legal remedies.

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Section 16. Notices.

All notices and other communications provided for herein that one party intends to give to the other party shall be in writing and shall be considered given when mailed by certified mail, return receipt requested, or personally delivered, either to the party or at the address set forth below (or to such other address as a party shall designate by notice hereunder):

South Jersey Industries, Inc.

Attn: Chief Executive Officer

Number One South Jersey Plaza – Route 54

Folsom, New Jersey 08037

[Employee]

[Address]

Section 17. Amendments.

This Agreement shall inure to the benefit of the Officer’s heirs and personal representatives and shall be binding upon the successor of the Companies, including any entity with which the Companies may be merged or consolidated or which may acquire all or substantially all of the assets of the Companies. This Agreement shall not be assignable, in whole or in part, by either party, without the written consent of the other party.

Section 18. Binding Effect and Non-Assignability.

Section 19. Legal Expenses.

In the event of a dispute in connection with this Agreement, the parties shall each pay their own costs, except that in the event of such a dispute after a Change of Control involving termination of employment, or involving entitlement to compensation or benefits in the event of termination of employment, the Companies shall pay the legal expenses of the Officer.

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Section 20. Arbitration.

Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in the County of Atlantic, State of New Jersey, in accordance with the rules then in effect of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. In any such arbitration each party will choose one arbitrator and those two arbitrators will choose a third. Each party will pay the costs associated with its arbitrator and will divide equally the cost associated with the third arbitrator. Notwithstanding anything to the contrary in this Section 20, either party may commence in any court having jurisdiction over the parties hereto any action to obtain injunctive relief.

Section 21. Equitable Relief.

The Companies and the Officer confirm that the restrictions contained in Section 11, 12 and 13 are, in view of the nature of the business of the Companies, reasonable and necessary to protect the legitimate interests of the Companies, and that any violation of any provision of those Sections will result in irreparable injury to the Companies. The Officer hereby agrees that, in the event of any breach or threatened breach of the terms or conditions of the Agreement by the Officer, the Companies’ remedies at law will be inadequate and, in any such event, any of them shall be entitled to commence an action for preliminary and permanent injunctive relief and other equitable relief in any court of competent jurisdiction, notwithstanding any provision hereof relating to arbitration. The Officer further irrevocably consents to the jurisdiction of any state or federal court located in the State of New Jersey over any suit, action or proceeding arising out of or relating to this Section and hereby waives, to the fullest extent permitted by law, any objection that he may now or hereafter have to such jurisdiction or to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that such suit, action or proceeding has been brought in an inconvenient forum. The Officer agrees that effective service of process may be made upon him by mail under the notice provisions contained in Section 16. No party hereto shall be required to post a bond prior to the commencement of any suit, action or proceeding relating to this Section.

Section 22. Governing Law.

This Agreement shall be governed by the laws of the State of New Jersey.

Section 23. Entire Agreement.

This Agreement contains the entire agreement between the parties relative to its subject matter, superseding all prior agreements or understandings of the parties relating thereto.

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Section 24. Waiver.

Any term or provision of this Agreement may be waived in writing at any time by the party entitled to the benefit thereof. The failure of either party at any time to require performance of any provision of this Agreement which has not been waived in writing shall not affect such party’s rights at a later time to enforce such provision. No consent or wavier by either party to any default or to any breach of a condition or term of this Agreement shall be deemed or construed to be a consent or waiver to any other breach or default.

Section 25. Invalidity of Portion of Agreement.

If any provision of this Agreement or the application thereof to either party shall be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby and shall be enforceable to the fullest extent of the law.

Section 26. Benefits of the Agreement

This Agreement is for the benefit of each of the Companies, and each of them as well as the Companies shall have standing to enforce it as though it is a party hereto. Each reference in this Agreement to an obligation by either of the Companies shall be a reference to the obligation of the Company to cause the Companies to perform such obligation. Each undertaking by either of the Companies in this Agreement shall be the undertaking of the Company to cause the Companies to perform such undertaking.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement effective as of the date first above written.

FOR THE COMPANIES:

By:

Edward Graham,

Chief Executive Officer

By:

[Employee]

[Title]

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EXHIBIT A

ADDITIONAL OR MODIFIED OFFICER BENEFITS

The following benefits are provided to the Officer who is party to this Officer Employment Agreement.

1. Disability Plan

(a) temporary disability (sick pay), commences on the eighth (8th) consecutive day of absence. Temporary disability shall be paid at a rate of one hundred percent (100%) of the Officer’s Base Salary, and extends at full pay for up to 120 days for Officers with less than five (5) years of service, and up to 365 days for Officers with service of five (5) or more years.

(b) long term disability (LTD), begins upon the expiration of the temporary disability benefit as described above. LTD is paid at a rate of fifty percent (50%) of the Officer’s Base Salary, reduced by Social Security Disability payments, if any. LTD continues until the Officer’s status changes as a result of retirement, rehabilitation, death, voluntary resignation or reassignment as provided for in section 7.2. For the first two years of LTD, medical certification of the ongoing disability against the Officer’s “own position(s)” is required. Thereafter, medical certification shall consider “any position”. At the discretion of the CEO, the Officer’s position may be replaced following one year of his/her LTD.

2. Group Life Insurance – at a principle equivalent to two times (2x) the Officer’s Base Salary, rounded to the next highest $5,000 increment. The insurance premium shall be paid by the Companies; the Officer shall be responsible for resultant federal, state or local income taxes.

3. 24-Hour Accident Protection Coverage – while in the employ of the Company in an amount of $250,000. The insurance premium shall be paid by the Companies; the Officer shall be responsible for resultant federal, state or local income taxes.

4. Supplemental Survivor’s Benefit – upon the death of the Officer while he/she is in the employ of the Company, his/her surviving beneficiary shall receive a lump sum payment of $1,000 to be paid as soon as practical following the Officer’s death. The surviving beneficiary shall also receive a lump sum death benefit based upon years of service with the Company in the amounts of six (6) months base salary (10-15 service years); nine (9) months base salary (15-25 service years); twelve (12) months base salary (25+ service years). Such payment shall be offset by proceeds from the Officer’s qualified pension plan and SERP in the year of death.

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5. Supplemental Executive Retirement Plan (SERP) – the Officer achieving eligibility under the SERP plan, shall be entitled to the pension benefits of that plan in place on the effective date of the Officer Employment Agreement or, in effect on the earlier of his/her termination or retirement date, whichever provides the greater benefit in the opinion of the Officer.

6. Company Automobile – the Officer shall be provided a company automobile to be used for business and at the Officer’s discretion, for commuting and other non-business purposes. The Companies shall provide for vehicle registration, insurance coverage, repair, preventative maintenance and fuel. The Officer shall be responsible for any federal and/or state income taxes which result from non-business usage.

7. Time Off – the Officer shall take such time off for vacation or personal needs as may be accommodated while ensuring the duties and responsibilities of his/her position are accommodated to the satisfaction of SJI’s CEO. It is anticipated that such time off would not normally exceed twenty (20) days per calendar year, exclusive of scheduled corporate holidays. Time off shall not accrue, nor shall it be carried from one year to the next, resultantly, there shall be no payment for “unused time off” at the time of the Officer’s death, retirement or other such termination.

8. Annual Physical Examination – the Companies shall provide the Officer with an annual physical examination at its expense. The Officer shall be responsible to schedule and undergo a reasonably comprehensive annual physical examination by a physician of his/her choosing, between the months of June and October. The attending physician shall provide to the Officer a reasonably detailed oral or written report of his/her findings and recommendations. Said report and recommendations shall neither be requested nor provided to the Company, its other officer, employees or agents. However, should the Officer be diagnosed with a condition which in his or her judgment will (a) substantially effect his/her performance, or (b) render him or her unable to continue as an Officer, or (c) likely result in his or her death within a twelve month period of such diagnosis, the Companies request that the Officer advise the CEO accordingly, so that proper succession planning can be initiated.

9. Severance Benefits – in the event the Officer terminates subject to section 8.2 or 8.3, the Companies shall provide out placement services to the Officer in an amount not to exceed $15,000 or at the discretion of the CEO, up to $20,000. The Officer shall provide the Companies with a proposal from the consultant of the Officer’s choosing. Consultant invoices shall be rendered directly to the Companies and payment shall be made up to the approved amount, directly to the out placement firm. In the event the Officer terminates by virtue of retirement, disability, for good reason by the Officer or, by the companies for other than cause, the CEO of SJI may at his/her discretion, transfer title to the companies car to the Officer (if the SJI CEO, at the discretion of the SJI Board of Director’s Compensation & Pension Committee). Subject to governing law and/or regulation, death benefits and health benefits may continue at the Officer’s (or survivor’s) request and expense and at the applicable individual, group or COBRA premium/rates.

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10.Retiree Health Care – in the event the Officer retires from the Companies pursuant to section 7.3 during the Agreement’s term as defined in section 2, he/she shall receive the same or substantially similar medical, hospitalization, prescription, dental and major medical benefits as are provided, from time to time to the senior officers of the Companies. Upon reaching age 65, the Officer shall continue to receive such benefits as are provided to Medicare-eligible retirees. However, during retirement, the Officer shall continue to pay the same monthly/annual contribution toward medical/hospitalization benefits as was in effect on the effective date of his/her retirement. He/she will be subject to any and all future changes to plan deductibles, co-payments, etc.

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New Jersey	22-1901645
(State of incorporation)	(IRS employer identification no.)

Common Stock
($1.25 par value per share)	New York Stock Exchange
(Title of each class)	(Name of exchange on which registered)

	Units of Measurement

	For Natural Gas:
	1 Mcf	= One thousand cubic feet
	1 MMcf	= One million cubic feet
	1 Bcf	= One billion cubic feet
	1dth	= One decatherm
	1 MMdth	= One million decatherms

	Name, age and position with the Company	Period Served

	Edward J. Graham, Age 50
	Chairman	April 2005 - Present
	Chief Executive Officer	February 2004 - Present
	President	January 2003 - Present
	Chief Operating Officer	January 2002 - February 2004
	Executive Vice President	January 2002 - January 2003

	David A. Kindlick, Age 53
	Chief Financial Officer	January 2002 - Present
	Vice President	June 1997 - Present
	Treasurer	April 2001 - January 2004


	Jeffery E. DuBois, Age 49
	Vice President	January 2004 - Present
	Assistant Vice President (SJG)	January 2002 - January 2004

	Michael J. Renna, Age 40
	Vice President	January 2004 - Present
	Assistant Vice President	January 2002 - January 2004

	Richard H. Walker, Jr., Age 57
	Vice President, General Counsel and Secretary	January 2006 - Present
	Vice President, Corporate Counsel & Corporate Secretary	May 2003 - January 2006
	Corporate Counsel & Corporate Secretary	April 2002 - May 2003

	Kevin D. Patrick, Age 47
	Vice President	June 2007 - Present
	Albertsons/Super Valu
	Division CFO – Eastern Region	September 2004 – June 2006
	Brown-Forman Corporation
	Assistant Vice President Corporate Development	June 2000 – September 2004

	Sharon M. Pennington, Age 45
	Vice President	January 2008 to Present
	Vice President (SJI Services LLC)	January 2006 – December 2007
	Assistant Vice President (SJG)	April 2004 – December 2005
	Director, Human Resources (SJG)	July 2002 – March 2004

Market Price of Common Stock and Related Information


Quarter Ended	Market Price Per Share					Dividends		Quarter Ended	Market Price Per Share					Dividends
						Declared								Declared
2007		High		Low		Per Share		2006		High		Low		Per Share

March 31		$	38.56	$	31.81	$	0.2450	March 31		$	30.15	$	26.72	$	0.2250
June 30		$	41.27	$	34.53	$	0.2450	June 30		$	27.89	$	25.63	$	0.2250
September 30		$	36.48	$	31.20	$	0.2450	September 30		$	30.09	$	27.20	$	0.2250
December 31		$	38.50	$	33.80	$	0.2700	December 31		$	34.26	$	29.10	$	0.2450


These quotations are based on the list of composite transactions of the New York Stock Exchange. Our stock is traded on the New York Stock Exchange under the symbol SJI. We have declared and expect to continue to declare regular quarterly cash dividends. As of December 31, 2007, the latest available date, our records indicate that there were 7,715 shareholders of record.

2007 HIGHLIGHTS
Five-Year Summary of Selected Financial Data	South Jersey Industries, Inc. and Subsidiaries
(In Thousands Where Applicable)	Year Ended December 31,

	2007			2006			2005			2004			2003


Operating Results:
Operating Revenues	$	956,371		$	931,428		$	906,016		$	819,416		$	703,898

Operating Income	$	129,623		$	145,802		$	86,818		$	91,079		$	76,545

Income Applicable to Common Stock:
Continuing Operations	$	62,659		$	72,250		$	39,770		$	43,173		$	33,789
Discontinued Operations - Net (1)		(391	)		(818	)		(669	)		(680	)		(775	)
Cumulative Effect of a Change in Accounting Principle - Net		-			-			-			-			(426	)

Net Income Applicable to Common Stock	$	62,268		$	71,432		$	39,101		$	42,493		$	32,588

Total Assets	$	1,529,441		$	1,573,032		$	1,441,712		$	1,243,666		$	1,126,203

Capitalization:
Common Equity	$	481,080		$	443,036		$	393,645		$	343,363		$	296,412
Preferred Stock (2)		-			-			-			1,690			1,690
Long-Term Debt		357,896			358,022			319,066			328,914			308,781

Total Capitalization	$	838,976		$	801,058		$	712,711		$	673,967		$	606,883

Ratio of Operating Income to Fixed Charges (3)		4.8	x		5.3	x		4.1	x		4.4	x		3.7	x

Diluted Earnings Per Common Share
(Based on Average Diluted Shares Outstanding):
Continuing Operations	$	2.12		$	2.47		$	1.40		$	1.56		$	1.33
Discontinued Operations - Net (1)		(0.02	)		(0.03	)		(0.02	)		(0.03	)		(0.03	)
Cumulative Effect of a Change in Accounting Principle - Net		-			-			-			-			(0.02	)

Diluted Earnings Per Common Share	$	2.10		$	2.44		$	1.38		$	1.53		$	1.28

Return on Average Common Equity (4)		13.3	%		16.9	%		12.5	%		13.0	%		12.5	%

Share Data:
Number of Shareholders of Record		7.7			7.9			8.1			8.1			8.3
Average Common Shares		29,480			29,175			28,175			27,382			25,118
Common Shares Outstanding at Year End		29,607			29,326			28,982			27,760			26,458
Dividend Reinvestment Plan:
Number of Shareholders		5.3			5.3			5.3			5.2			5.1
Number of Participating Shares		2,179			2,194			2,722			2,764			2,750
Book Value at Year End	$	16.25		$	15.11		$	13.58		$	12.37		$	11.20
Dividends Declared per Common Share	$	1.01		$	0.92		$	0.86		$	0.82		$	0.78
Market Price at Year End	$	36.09		$	33.41		$	29.14		$	26.28		$	20.25
Dividend Payout :
From Continuing Operations		47.3	%		37.2	%		60.9	%		52.0	%		58.0	%
From Total Net Income		47.6	%		37.6	%		62.0	%		52.8	%		60.1	%
Market-to-Book Ratio		2.2	x		2.2	x		2.1	x		2.1	x		1.8	x
Price Earnings Ratio (4)		17.0	x		13.5	x		20.8	x		16.8	x		15.2	x


(1) Represents discontinued business segments: sand mining and distribution operations (sold in 1996) and fuel oil operations with related environmental liabilities (discontinued in 1986) (See Note 2 to Consolidated Financial Statements).
(2) On May 2, 2005, South Jersey Gas (SJG) redeemed its 8% Redeemable Cumulative Preferred Stock at par.
(3) Calculated as Operating Income divided by Interest Charges.
(4) Calculated based on Income from Continuing Operations.

Utility Operating Revenues:
Firm Sales-
Residential	$	342,809		54	%	$	334,201		52	%	$	252,150		43	%
Commercial		80,237		13	%		99,578		15	%		88,321		15	%
Industrial		8,381		1	%		6,590		1	%		4,428		1	%
Cogeneration and electric generation		11,722		2	%		10,746		2	%		17,916		3	%
Firm Transportation -
Residential		8,982		1	%		4,768		1	%		25,296		4	%
Commercial		17,299		3	%		12,510		2	%		14,043		3	%
Industrial		12,229		2	%		11,351		2	%		11,437		2	%
Cogeneration and electric generation		1,847		-			1,552		-			1,821		-

Total Firm Revenues		483,506		76	%		481,296		75	%		415,412		71	%

Interruptible Sales		785		-			1,109		-			1,498		-
Interruptible Transportation		1,970		-			1,868		-			1,898		-
Off-System		131,586		22	%		147,180		23	%		153,637		27	%
Capacity Release		11,208		2	%		9,656		2	%		12,808		2	%
Other		1,492		-			1,562		-			1,959		-
Intercompany Sales		(19,540	)	-			(40,672	)	-			(10,807	)

Total Utility Operating Revenues		611,007		100	%		601,999		100	%		576,405		100	%

Less:
Cost of sales		433,495					431,615					404,144
Conservation recoveries *		4,458					6,862					7,933
RAC recoveries *		2,056					1,806					2,181
Revenue taxes		8,850					7,890					9,089
Utility Net Operating Revenues (margin)	$	162,148				$	153,826				$	153,058

Margin:
Residential	$	102,077		63	%	$	90,442		59	%	$	102,706		67	%
Commercial and industrial		40,036		25	%		38,129		25	%		40,862		27	%
Cogeneration and electric generation		2,212		1	%		2,189		1	%		2,514		2	%
Interruptible		195		-			226		-			249		-
Off-system & capacity release		2,994		2	%		4,711		3	%		4,697		3	%
Other revenues		1,952		1	%		1,871		1	%		2,319		1	%
Margin before weather normalization & decoupling		149,466		92	%		137,568		89	%		153,347		100	%
TAC mechanism		-		-			8,511		6	%		(289	)	-
CIP mechanism		12,682		8	%		7,747		5	%		-		-
Utility Net Operating Revenues (margin)	$	162,148		100	%	$	153,826		100	%	$	153,058		100	%

Number of Customers at Year End:
Residential		312,969		93	%		307,919		93	%		300,652		93	%
Commercial		22,220		7	%		21,652		7	%		21,322		7	%
Industrial		474		-			478		-			450		-
Total Customers		335,663		100	%		330,049		100	%		322,424		100	%

Degree Days		4,488					3,943					4,777

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

	2007			2006			Change

SJRG Revenue	$	75.2		$	77.5		$	(2.3	)

Less: Unrealized gains		(3.8	)		(36.5	)		32.7

SJRG Revenue, Excluding unrealized gains	$	71.4		$	41.0		$	30.4

	2007 vs. 2006			2006 vs. 2005
Utility	$	1,745		$	(4,995	)
Nonutility:
Wholesale Gas		978			1,035
Retail Gas and Other		667			(2,029	)
Retail Electricity		230			(113	)
On-Site Energy Production		2,720			1,445
Appliance Service		1,307			(2,105	)
Total Nonutility		5,902			(1,767	)
Intercompany Eliminations and Other		(295	)		(2,235	)
Total Operations	$	7,352		$	(8,997	)

	2007 vs. 2006		2006 vs. 2005
Maintenance	$	807	$	(276	)
Depreciation		1,693		2,218
Energy and Other Taxes		706		(1,158	)

	As of December 31,
	2007			2006

Common Equity		50.3	%		44.4	%
Long-Term Debt		37.3	%		36.1	%
Short-Term Debt		12.4	%		19.5	%
Total		100.0	%		100.0	%

			Up to		Years		Years		More than
Contractual Cash Obligations	Total		1 Year		2 & 3		4 & 5		5 Years

Long-Term Debt	$	358,002	$	106	$	10,231	$	27,446	$	320,219
Interest on Long-Term Debt		277,611		20,009		39,999		36,997		180,606
Capital Contribution Obligation		30,000		-		30,000		-		-
Operating Leases		2,302		674		953		442		233
Commodity Supply Purchase Obligations		491,717		296,652		102,831		24,133		68,101
New Jersey Clean Energy Program (Note 9)		10,542		10,542		-		-		-
Other Purchase Obligations		1,538		892		500		146		-
Total Contractual Cash Obligations	$	1,171,712	$	328,875	$	184,514	$	89,164	$	569,159

Assets	Source of Fair Value	Maturity < 1 Year		Maturity 1 - 3 Years		Beyond 3 Years		Total
Prices Actively Quoted	NYMEX	$	10,862	$	7,589	$	0	$	18,451
Other External Sources	Basis		12,408		3,336		16		15,760
Total		$	23,270	$	10,925	$	16	$	34,211

Liabilities	Source of Fair Value	Maturity < 1 Year		Maturity 1 - 3 Years		Beyond 3 Years		Total
Prices Actively Quoted	NYMEX	$	6,802	$	1,319	$	0	$	8,121
Other External Sources	Basis		6,933		2,858		13		9,804
Total		$	13,735	$	4,177	$	13	$	17,925

	2007		2006		2005
Net Income Benefit/(Reduction):
TAC	$	-	$	5.1	$	(0.2	)
CIP – Weather Related		1.6		2.9		-
CIP – Usage Related		5.9		1.7		-
Total Net Income Benefit/(Reduction)	$	7.5	$	9.7	$	(0.2	)

Weather Compared to 20-Year TAC Average	3.2% warmer		15.0 % warmer		3.0 % colder
Weather Compared to Prior Year	13.8% colder		17.5 % warmer		2.9 % colder

Net Derivatives — Energy Related Assets,
January 1, 2007	$	19,122
Contracts Settled During 2007, Net		(3,275	)
Other Changes in Fair Value from Continuing and New Contracts, Net		439
Net Derivatives — Energy Related Assets,
December 31, 2007	$	16,286

Notional Amount		Fixed Interest Rate			Start Date	Maturity	Type of Debt	Obligor
$	3,900,000		4.795	%	12/01/2004	12/01/2014	Taxable	Marina
$	8,000,000		4.775	%	11/12/2004	11/12/2014	Taxable	Marina
$	20,000,000		4.080	%	11/19/2001	12/01/2011	Tax-exempt	Marina
$	14,500,000		3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	500,000		3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	330,000		3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	7,100,000		4.895	%	02/01/2006	02/01/2016	Taxable	Marina
$	12,500,000		3.430	%	12/01/2006	02/01/2036	Tax-exempt	SJG
$	12,500,000		3.430	%	12/01/2006	02/01/2036	Tax-exempt	SJG

Statements of Consolidated Income	South Jersey Industries, Inc. and Subsidiaries
(In Thousands Except for Per Share Data)	Year Ended December 31,


	2007			2006			2005

Operating Revenues:
Utility	$	611,007		$	601,999		$	576,405
Nonutility		345,364			329,429			329,611

Total Operating Revenues		956,371			931,428			906,016

Operating Expenses:
Cost of Sales - (Excluding depreciation)
- Utility		433,495			431,615			404,144
- Nonutility		273,206			244,522			297,352
Operations		73,577			66,225			75,222
Maintenance		6,345			5,538			5,814
Depreciation		27,942			26,249			24,031
Energy and Other Taxes		12,183			11,477			12,635

Total Operating Expenses		826,748			785,626			819,198

Operating Income		129,623			145,802			86,818

Other Income and Expense		2,422			2,672			619
Interest Charges		(27,215	)		(27,671	)		(20,950	)

Income Before Income Taxes		104,830			120,803			66,487

Income Taxes		(43,056	)		(49,683	)		(27,619	)
Equity in Affiliated Companies		885			1,130			902

Income from Continuing Operations		62,659			72,250			39,770

Loss from Discontinued Operations - (Net of tax benefit)		(391	)		(818	)		(669	)

Net Income	$	62,268		$	71,432		$	39,101

Basic Earnings per Common Share:
Continuing Operations	$	2.13		$	2.48		$	1.41
Discontinued Operations		(0.02	)		(0.03	)		(0.02	)

Basic Earnings per Common Share	$	2.11		$	2.45		$	1.39

Average Shares of Common Stock Outstanding - Basic		29,480			29,175			28,175

Diluted Earnings per Common Share:
Continuing Operations	$	2.12		$	2.47		$	1.40
Discontinued Operations		(0.02	)		(0.03	)		(0.02	)

Diluted Earnings per Common Share	$	2.10		$	2.44		$	1.38

Average Shares of Common Stock Outstanding - Diluted		29,593			29,261			28,399

Dividends Declared per Common Share	$	1.01		$	0.92		$	0.86


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


Statements of Consolidated Cash Flows		South Jersey Industries, Inc. and Subsidiaries
(In Thousands)		Year Ended December 31,


		2007			2006			2005

Cash Flows from Operating Activities:

Net Income	$	62,268		$	71,432		$	39,101
Loss from Discontinued Operations		391			818			669
Income from Continuing Operations		62,659			72,250			39,770
Adjustments to Reconcile Income from Continuing Operations to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization		32,865			30,834			26,842
Unrealized (Gain) Loss on Derivatives - Energy Related		(3,635	)		(36,688	)		12,397
Provision for Losses on Accounts Receivable		2,603			1,466			3,910
TAC/CIP Receivable		(7,946	)		(15,740	)		291
Deferred Gas Costs - Net of Recoveries		7,755			18,694			(34,742	)
Deferred SBC Costs - Net of Recoveries		3,960			(4,221	)		1,871
Stock-Based Compensation Expense		1,090			1,059			3,208
Deferred and Noncurrent Income Taxes and Credits - Net		12,030			21,829			19,030
Environmental Remediation Costs - Net		(10,926	)		(10,840	)		(4,071	)
Additional Pension Contributions		-			-			(1,486	)
Gas Plant Cost of Removal		(1,275	)		(1,369	)		(985	)
Changes in:
Accounts Receivable		(5,232	)		38,020			(36,778	)
Inventories		21,459			(25,726	)		(33,503	)
Prepaid and Accrued Taxes - Net		8,916			(5,243	)		(4,677	)
Accounts Payable and Other Accrued Liabilities		(5,036	)		(57,892	)		56,037
Margin Account Liability		4,112			-			-
Derivatives - Energy Related		21,050			3,046			(4,310	)
Other Assets and Liabilities		3,453			(948	)		(2,729	)
Cash Flows from Discontinued Operations		(56	)		178			(1,155	)

Net Cash Provided by Operating Activities		147,846			28,709			38,920

Cash Flows from Investing Activities:

Capital Expenditures		(55,539	)		(73,677	)		(92,906	)
Net Proceeds from Sale of (Purchase of) Restricted Investments in Margin Account		10,404			(2,170	)		4,810
Proceeds from Sale of Restricted Investments from Escrowed Loan Proceeds		6,710			6,075			553
Purchase of Restricted Investments with Escrowed Loan Proceeds		(523	)		(18,722	)		-
Merchandise Loans		(4,123	)		(3,342	)		(4,425	)
Proceeds from Merchandise Loans		3,877			3,707			4,831
Purchase of Company Owned Life Insurance		(3,917	)		-			-
Investment in Affiliate		(7,463	)		-			-
Return of Investment in Affiliate		7,208			-			-
Proceeds from Sale of Investment in Affiliate		-			1,450			-
Purchase of Gas Marketing and Production Assets		-			(3,277	)		-
Other		-			(650	)		470

Net Cash Used in Investing Activities		(43,366	)		(90,606	)		(86,667	)

Cash Flows from Financing Activities:

Net (Repayments of) Borrowings from Lines of Credit		(76,310	)		47,300			55,000
Proceeds from Issuance of Long-Term Debt		-			41,400			10,000
Principal Repayments of Long-Term Debt		(2,389	)		(2,437	)		(22,832	)
Dividends on Common Stock		(29,656	)		(26,874	)		(24,397	)
Proceeds from Sale of Common Stock		7,484			6,606			31,882
Payments for Issuance of Long-Term Debt		-			(1,350	)		(420	)
Redemption of Preferred Stock		-			-			(1,690	)
Other		137			300			(184	)

Net Cash (Used in) Provided by Financing Activities		(100,734	)		64,945			47,359

Net Increase (Decrease) in Cash and Cash Equivalents		3,746			3,048			(388	)
Cash and Cash Equivalents at Beginning of Year		7,932			4,884			5,272

Cash and Cash Equivalents at End of Year	$	11,678		$	7,932		$	4,884

Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest (Net of Amounts Capitalized)	$	27,025		$	27,341		$	21,608
Income Taxes (Net of Refunds)	$	22,461		$	28,171		$	15,054

Supplemental Disclosures of Non-Cash Investing Activities
Capital Expenditures acquired on account but unpaid as of year-end	$	4,797		$	3,776		$	10,397
Guarantee of certain obligations of unconsolidated affiliates	$	1,985		$	-		$	-

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


Consolidated Balance Sheets	South Jersey Industries, Inc. and Subsidiaries
(In Thousands)		December 31,
		2007			2006
Assets

Property, Plant and Equipment:
Utility Plant, at original cost	$	1,123,992		$	1,079,614
Accumulated Depreciation		(276,301	)		(257,781	)
Nonutility Property and Equipment, at cost		112,971			106,657
Accumulated Depreciation		(11,793	)		(8,485	)

Property, Plant and Equipment - Net		948,869			920,005

Investments:
Available-for-Sale Securities		6,734			6,356
Restricted		6,460			23,051
Investment in Affiliates		1,694			1,368

Total Investments		14,888			30,775

Current Assets:
Cash and Cash Equivalents		11,678			7,932
Accounts Receivable		111,899			117,832
Unbilled Revenues		48,304			39,397
Provision for Uncollectibles		(5,491	)		(5,224	)
Natural Gas in Storage, average cost		123,790			145,130
Materials and Supplies, average cost		2,777			2,895
Prepaid Taxes		6,878			12,443
Derivatives - Energy Related Assets		23,270			45,627
Other Prepayments and Current Assets		5,225			5,692

Total Current Assets		328,330			371,724

Regulatory and Other Noncurrent Assets:
Regulatory Assets		188,688			196,962
Prepaid Pension		1,970			-
Derivatives - Energy Related Assets		10,941			23,537
Unamortized Debt Issuance Costs		7,386			7,972
Contract Receivables		13,220			13,654
Other		15,149			8,403

Total Regulatory and Other Noncurrent Assets		237,354			250,528

Total Assets	$	1,529,441		$	1,573,032


Capitalization and Liabilities

Capitalization:
Common Equity	$	481,080	$	443,036
Long-Term Debt		357,896		358,022

Total Capitalization		838,976		801,058

Minority Interest		440		461

Current Liabilities:
Notes Payable		118,290		194,600
Current Maturities of Long-Term Debt		106		2,369
Accounts Payable		101,154		101,615
Customer Deposits and Credit Balances		18,475		24,982
Margin Account Liability		4,112		-
Environmental Remediation Costs		25,827		26,439
Taxes Accrued		5,310		1,967
Derivatives - Energy Related Liabilities		13,735		42,124
Deferred Income Taxes - Net		20,251		10,687
Deferred Contract Revenues		5,231		5,066
Interest Accrued		6,657		6,458
Pension and Other Postretirement Benefits		805		788
Other Current Liabilities		8,358		5,699

Total Current Liabilities		328,311		422,794

Deferred Credits and Other Noncurrent Liabilities:
Deferred Income Taxes - Net		175,686		177,220
Investment Tax Credits		2,150		2,470
Pension and Other Postretirement Benefits		29,036		33,162
Environmental Remediation Costs		52,078		45,391
Asset Retirement Obligations		24,604		23,970
Derivatives - Energy Related Liabilities		4,190		7,918
Derivatives - Other		2,484		488
Regulatory Liabilities		55,779		50,797
Other		15,707		7,303

Total Deferred Credits and Other Noncurrent Liabilities		361,714		348,719

Commitments and Contingencies (Note 14)
Total Capitalization and Liabilities	$	1,529,441	$	1,573,032



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

Statements of Consolidated Capitalization						South Jersey Industries, Inc. and Subsidiaries
(In Thousands Except for Share Data)						December 31,

						2007			2006

Common Equity:
Common Stock: Par Value $1.25 per share; Authorized 60,000,000 shares;
	Outstanding Shares: 29,607,802 (2007) and 29,325,593 (2006)
	Balance at Beginning of Year					$	36,657		$	36,228
	Common Stock Issued or Granted Under Stock Plans						353			429

	Balance at End of Year						37,010			36,657
Premium on Common Stock							248,449			239,763
Treasury Stock (at par)							(187	)		-
Accumulated Other Comprehensive Loss							(10,315	)		(7,791	)
Retained Earnings							206,123			174,407

		Total Common Equity					481,080			443,036

Long-Term Debt: (A)
South Jersey Gas Company:
	First Mortgage Bonds: (B)
			8.19	%	Series due 2007		-			2,270
			6.12	%	Series due 2010		10,000			10,000
			6.74	%	Series due 2011		10,000			10,000
			6.57	%	Series due 2011		15,000			15,000
			4.46	%	Series due 2013		10,500			10,500
			5.027	%	Series due 2013		14,500			14,500
			4.52	%	Series due 2014		11,000			11,000
			5.115	%	Series due 2014		10,000			10,000
			5.387	%	Series due 2015		10,000			10,000
			5.437	%	Series due 2016		10,000			10,000
			6.50	%	Series due 2016		9,873			9,893
			4.60	%	Series due 2016		17,000			17,000
			4.657	%	Series due 2017		15,000			15,000
			7.97	%	Series due 2018		10,000			10,000
			7.125	%	Series due 2018		20,000			20,000
			5.587	%	Series due 2019		10,000			10,000
			7.7	%	Series due 2027		35,000			35,000
			5.55	%	Series due 2033		32,000			32,000
			6.213	%	Series due 2034		10,000			10,000
			5.45	%	Series due 2035		10,000			10,000

	Series A 2006 Bonds at variable rates due 2036 (C)						25,000			25,000

Marina Energy LLC: (D)
	Series A 2001 Bonds at variable rates due 2031						20,000			20,000
	Series B 2001 Bonds at variable rates due 2021						25,000			25,000
	Series A 2006 Bonds at variable rates due 2036						16,400			16,400

AC Landfill Energy, LLC: (E)
	Bank Term Loan, 6% due 2014						548			647
	Mortgage Bond, 4.19% due 2019						1,181			1,181

		Total Long-Term Debt Outstanding					358,002			360,391
		Less Current Maturities					(106	)		(2,369	)

		Total Long-Term Debt					357,896			358,022

Total Capitalization						$	838,976		$	801,058


(A)	The long-term debt maturities and sinking fund requirements for the succeeding five years are as follows:
	2008, $106; 2009, $112; 2010, $10,119; 2011, $25,126 and 2012, $2,320.

(B)	SJG's First Mortgage dated October 1, 1947, as supplemented, securing the First Mortgage Bonds constitutes a direct first mortgage lien on substantially all
	utility plant.

(C)	On April 20, 2006, SJG issued $25.0 million of tax exempt, auction rate debt through the New Jersey Economic Development Authority (NJEDA) under its $150.0
	million MTN Program. As of December 31, 2007, $115.0 million remains available under the program.

(D)	Marina has issued $61.4 million of unsecured variable-rate revenue bonds through the (NJEDA). The variable rates at December 31, 2007 for the Series A 2001,
	Series B 2001, and Series A 2006 bonds were 3.43%, 4.90% and 3.48% respectively.

(E)	The debt of AC Landfill Energy is secured by a first mortgage interest in plant and equipment, and an assignment of rents and leases of the facility.

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

Consolidated Statements of Changes In Common Equity
and Comprehensive Income	South Jersey Industries, Inc. and Subsidiaries
(In Thousands)	Years Ended December 31, 2005, 2006 & 2007

								Accumulated
								Other
	Common		Premium on		Treasury			Comprehensive			Retained
	Stock		Common Stock		Stock			Loss			Earnings			Total

Balance at January 1, 2005	$	34,700	$	197,737	$	-		$	(4,933	)	$	115,859		$	343,363
Net Income												39,101			39,101
Other Comprehensive Income (Loss), Net of Tax:(a)
Minimum Pension Liability Adjustment									427						427
Unrealized Gain on Available-for-Sale Securities									63						63
Unrealized Loss on Derivatives - Other									(2	)					(2	)
Other Comprehensive Income, Net of Tax (a)															488
Comprehensive Income															39,589
Common Stock Issued or Granted Under Stock Plans		1,528		34,124								(562	)		35,090
Cash Dividends Declared - Common Stock												(24,397	)		(24,397	)

Balance at December 31, 2005		36,228		231,861		-			(4,445	)		130,001			393,645
Net Income												71,432			71,432
Other Comprehensive Income (Loss), Net of Tax:(a)
Minimum Pension Liability Adjustment									(439	)					(439	)
Unrealized Gain on Available-for-Sale Securities									53						53
Unrealized Gain on Derivatives - Other									260						260
Other Comprehensive Loss, Net of Tax (a)															(126	)
Comprehensive Income															71,306
FAS 158 Transition Amount (b)									(3,220	)					(3,220	)
Common Stock Issued or Granted Under Stock Plans		429		7,902								(152	)		8,179
Cash Dividends Declared - Common Stock												(26,874	)		(26,874	)

Balance at December 31, 2006		36,657		239,763		-			(7,791	)		174,407			443,036
Cumulative Effect Adjustment (c)		-		-		-			-			(771	)		(771	)

Balance at January 1, 2007, as adjusted		36,657		239,763		-			(7,791	)		173,636			442,265
Net Income												62,268			62,268
Other Comprehensive Income (Loss), Net of Tax:(a)
Postretirement Liability Adjustment									199						199
Unrealized Loss on Available-for-Sale Securities									(195	)					(195	)
Unrealized Loss on Derivatives - Other									(1,385	)					(1,385	)
Other Comprehensive Loss of Affiliated Companies									(1,143	)					(1,143	)
Other Comprehensive Loss, Net of Tax (a)															(2,524	)
Comprehensive Income															59,744
Common Stock Issued or Granted Under Stock Plans		353		8,686		(187	)					(125	)		8,727
Cash Dividends Declared - Common Stock												(29,656	)		(29,656	)

Balance at December 31, 2007	$	37,010	$	248,449	$	(187	)	$	(10,315	)	$	206,123		$	481,080


Disclosure of Changes In Accumulated Other Comprehensive Loss Balances (a)
(In Thousands)	Postretirement Liability Adjustment			Unrealized (Loss) Gain on Derivatives			Unrealized Gain (Loss) on Available-for-Sale Securities			Other Comprehensive Loss of Affiliated Companies			Accumulated Other Comprehensive Loss




Balance at January 1, 2005	$	(3,924	)	$	(1,100	)	$	91		$	-		$	(4,933	)
Changes During Year		427			(2	)		63			-			488
Balance at December 31, 2005		(3,497	)		(1,102	)		154			-			(4,445	)
Changes During Year		(3,659	)		260			53			-			(3,346	)
Balance at December 31, 2006		(7,156	)		(842	)		207			-			(7,791	)
Changes During Year		199			(1,385	)		(195	)		(1,143	)		(2,524	)
Balance at December 31, 2007	$	(6,957	)	$	(2,227	)	$	12		$	(1,143	)	$	(10,315	)


(a) Determined using a combined statutory tax rate of 41.08% in 2007 and 2006 and 40.85% in 2005.
(b) See Note 11, Pension and Other Postretirement Benefits
(c) Due to the implementation of FIN 48. See Note 1.
The accompanying notes are an integral part of the consolidated financial statements.

	2007			2006
AROs as of January 1,	$	23,970		$	22,588
Accretion		511			961
Additions		174			426
Settlements		(51	)		(5	)
ARO’s as of December 31,	$	24,604		$	23,970

Notional Amount		Fixed Interest Rate		Start Date	Maturity	Type of Debt	Obligor
$	3,900,000	4.795	%	12/01/2004	12/01/2014	Taxable	Marina
$	8,000,000	4.775	%	11/12/2004	11/12/2014	Taxable	Marina
$	20,000,000	4.080	%	11/19/2001	12/01/2011	Tax-exempt	Marina
$	14,500,000	3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	500,000	3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	330,000	3.905	%	03/17/2006	01/15/2026	Tax-exempt	Marina
$	7,100,000	4.895	%	02/01/2006	02/01/2016	Taxable	Marina
$	12,500,000	3.430	%	12/01/2006	02/01/2036	Tax-exempt	SJG
$	12,500,000	3.430	%	12/01/2006	02/01/2036	Tax-exempt	SJG

	Grant	Shares	Fair Value		Expected	Risk-Free
	Date	Outstanding	Per Share		Volatility	Interest Rate

Officers &	Jan. 2005	34,311	$	25.155	15.5%	3.4%
Key Employees	Jan. 2006	36,591	$	27.950	16.9%	4.5%
	Jan. 2007	40,066	$	29.210	18.5%	4.9%

Directors -	Dec. 2005	6,340	$	29.970	-	-
	Dec. 2006	9,261	$	34.020	-	-
					-	-

	Officers &
	Key Employees			Directors

Nonvested Shares Outstanding, January 1, 2007		116,432			20,821

Granted		44,106			-
Vested*		(42,135	)		(5,220	)
Cancelled/Forfeited		(7,435	)		-

Nonvested Shares Outstanding, December 31, 2007		110,968			15,601

Balance at January 1, 2007	$	2,125

Increase as a result of tax positions taken in prior years		154

Decrease due to a lapse in the statute of limitations		(353	)

Balance at December 31, 2007	$	1,926

	2007			2006
Current:
Deferred Fuel Costs - Net	$	4,122		$	7,669
Derivatives / Unrealized Gain		8,681			3,487
Conservation Incentive Program		8,061			-
Other		(613	)		(469	)
Current Deferred Tax Liability - Net	$	20,251		$	10,687
Noncurrent:
Book versus Tax Basis of Property	$	163,366		$	152,802
Deferred Fuel Costs - Net		5,141			9,108
Environmental		9,711			5,188
Deferred Regulatory Costs		1,239			3,370
Deferred State Tax		(6,708	)		(4,461	)
Investment Tax Credit Basis Gross-Up		(1,107	)		(1,272	)
Deferred Pension & Other Post Retirement Benefits		15,239			15,239
Pension & Other Post Retirement Benefits		(10,862	)		(12,991	)
Deferred Revenues		(3,726	)		2,376
Derivatives/Unrealized Gain		2,428			6,646
Other		965			1,215
Noncurrent Deferred Tax Liability - Net	$	175,686		$	177,220

Property Additions:
Gas Utility Operations	$	49,061		$	55,510		$	74,873
Wholesale Gas Operations		330			557			2
Retail Gas and Other Operations		74			8			151
On-Site Energy Production		5,495			10,731			23,149
Appliance Service Operations		219			313			315
Corporate and Services		1,381			491			-
Total Property Additions	$	56,560		$	67,610		$	98,490

Identifiable Assets:
Gas Utility Operations	$	1,227,162		$	1,228,076
Wholesale Gas Operations		142,848			181,257
Retail Gas and Other Operations		42,735			48,998
Retail Electric Operations		7,082			4,537
On-Site Energy Production		124,982			121,498
Appliance Service Operations		16,060			14,147
Discontinued Operations		2,604			415
Subtotal		1,563,473			1,598,928
Corporate and Services		58,274			109,201
Intersegment Assets		(92,306	)		(135,097	)
Total Identifiable Assets	$	1,529,441		$	1,573,032

Year ended December 31,
2008	$	4,618
2009		4,618
2010		4,618
2011		4,618
2012		4,618
Thereafter		62,343
Total minimum future rentals	$	85,433

	2007		2006
Environmental Remediation Costs:
Expended - Net	$	25,960	$	17,743
Liability for Future Expenditures		73,880		67,905
Income Taxes-Flowthrough Depreciation		3,707		4,685
Deferred Asset Retirement Obligation Costs		21,572		21,009
Deferred Fuel Costs - Net		-		19,698
Deferred Pension and Other Postretirement Benefit Costs		32,686		39,359
Temperature Adjustment Clause Receivable		6,516		8,996
Conservation Incentive Program Receivable		18,173		7,747
Societal Benefit Costs Receivable		2,952		6,912
Premium for Early Retirement of Debt		1,370		1,532
Other Regulatory Assets		1,872		1,376
	$	188,688	$	196,962

	2007		2006
Excess Plant Removal Costs	$	48,705	$	48,377
Liability for NJCEP		2,797		796
Deferred Revenues - Net		2,586		-
Other		1,691		1,624

Total Regulatory Liabilities	$	55,779	$	50,797

	Pension Benefits									Other Postretirement Benefits
	2007			2006			2005			2007			2006			2005
Service Cost	$	3,324		$	3,169		$	3,236		$	976		$	931		$	907
Interest Cost		7,765			7,214			6,761			2,681			2,622			2,155
Expected Return on Plan Assets		(9,998	)		(9,237	)		(8,569	)		(2,091	)		(1,791	)		(1,597	)
Amortizations:
Prior Service Cost (Credits)		292			457			606			(355	)		(355	)		(466	)
Actuarial Loss		1,923			2,385			2,394			606			822			603
Net Periodic Benefit Cost		3,306			3,988			4,428			1,817			2,229			1,602
ERIP Cost		-			-			532			-			-			1,415
Capitalized Benefit Costs		(1,131	)		(1,574	)		(1,823	)		(648	)		(903	)		(640	)
Total Net Periodic Benefit Expense	$	2,175		$	2,414		$	3,137		$	1,169		$	1,326		$	2,377