REGULATORY ASSETS & REGULATORY LIABILITIES:

There have been no significant changes to the nature of the Company’s regulatory assets and liabilities since December 31, 2010 which are described in Note 11 to the Consolidated Financial Statements in Item 8 of SJI’s Annual Report on Form 10-K as of December 31, 2010.

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



	September 30, 2011		December 31, 2010
Environmental Remediation Costs:
Expended - Net	$	48,199	$	39,056
Liability for Future Expenditures	81,357		87,393
Income Taxes - Flowthrough Depreciation	40		774
Deferred Asset Retirement Obligation Costs	24,781		24,247
Deferred Pension and Other Postretirement Benefit Costs	68,733		69,017
Deferred Gas Costs - Net	4,750		—
Conservation Incentive Program Receivable	4,805		12,291
Societal Benefit Costs Receivable	6,919		4,216
Premium for Early Retirement of Debt	578		699
Deferred Interest Rate Contracts	7,825		3,150
Other Regulatory Assets	9,645		7,570

Total Regulatory Assets	$	257,632	$	248,413

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



	September 30, 2011		December 31, 2010
Excess Plant Removal Costs	$	47,498	$	48,409
Deferred Revenues - Net	—		20,179
Other Regulatory Liabilities	2,139		660

Total Regulatory Liabilities	$	49,637	$	69,248

DEFERRED GAS COSTS AND DEFERRED REVENUES – 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 $20.2 million regulatory liability at December 31, 2010 to a $4.8 million regulatory asset at September 30, 2011 primarily due to the BGSS refund to customers discussed above in Note 7.