================================================================================


                       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, 2003
                                        -----------------------

                                       OR

[  ]     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 1-6364

                          SOUTH JERSEY INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

        New Jersey                                        22-1901645
 (State of incorporation)                      (IRS employeridentification 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)

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 [ ]

As of August 1, 2003, there were 12,570,161 shares of the registrant's common
stock outstanding.


===============================================================================



                         PART I -- FINANCIAL INFORMATION



              Item 1. Financial Statements-- See Pages 3 through 20

                                     SJI-2


         SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

            (In Thousands Except for Per Share Data)

                                                             Three Months Ended
                                                                   June 30,
                                                             ------------------
                                                               2003       2002
                                                             --------   --------
Operating Revenues:
  Utility                                                    $ 68,164   $ 62,777
  Nonutility                                                   38,051     21,423
                                                             --------   --------
      Total Operating Revenues                                106,215     84,200
                                                             --------   --------
Operating Expenses:
  Cost of Gas Sold - Utility                                   41,965     38,875
  Cost of Sales - Nonutility                                   34,682     19,345
  Operations                                                   12,425     11,278
  Maintenance                                                   1,482      1,673
  Depreciation                                                  5,932      5,582
  Energy and Other Taxes                                        2,207      2,120
                                                              --------  --------
      Total Operating Expenses                                 98,693     78,873


Operating Income                                                7,522      5,327

Other Income and Expense:
  Equity in Affiliated Companies                                  192        203
  Other                                                            20        682
                                                              --------  --------

      Total Other Income and Expense                              212        885

Interest Charges                                                3,721      4,392

Preferred Dividend Requirements of Subsidiary                     764        764
                                                              --------  --------
Income Before Income Taxes                                      3,249      1,056

Income Taxes                                                    1,293        335
                                                              --------  --------

Income from Continuing Operations                               1,956        721

Discontinued Operations - Net                                    (154)     (118)
Cumulative Effect of a Change in Accounting Principle - Net        -         -
                                                              --------  --------
      Net Income Applicable to Common Stock                   $ 1,802      $ 603
                                                              ========  ========
Basic Earnings Per Common Share:
  Continuing Operations                                        $ 0.16    $4 0.06
  Discontinued Operations - Net                                 (0.01)    (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      -          -
                                                              --------  --------
      Basic Earnings Per Common Share                          $ 0.15     $ 0.05
                                                              ========  ========
Average Shares of Common Stock Outstanding - Basic             12,387     11,990

Diluted Earnings Per Common Share:
  Continuing Operations                                        $ 0.16     $ 0.06
  Discontinued Operations - Net                                 (0.01)    (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      -        -
                                                              --------  --------
      Diluted Earnings Per Common Share                        $ 0.15     $ 0.05
                                                              ========  ========
Average Shares of Common Stock Outstanding - Diluted           12,489     12,073

Dividends Declared per Common Share                           $ 0.385    $ 0.375
                                                              ========  ========

The accompanying footnotes are an integral part of the financial statements.

<TABLE>
                                     SJI-3


         SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

            (In Thousands Except for Per Share Data)
<CAPTION>

                                                                 Six Months Ended
                                                                      June 30,
                                                               ----------------------
                                                                  2003       2002
                                                               ----------  ----------
<S>                                                            <C>          <C>
Operating Revenues:
  Utility                                                      $ 284,304    204,957
  Nonutility                                                     101,737     56,274
                                                               ----------  ---------

      Total Operating Revenues                                   386,041    261,231
                                                               ----------  ---------
Operating Expenses:
  Cost of Gas Sold - Utility                                     197,032    126,318
  Cost of Sales - Nonutility                                      90,899     48,693
  Operations                                                      24,666     21,671
  Maintenance                                                      2,940      3,090
  Depreciation                                                    11,767     11,081
  Energy and Other Taxes                                           7,321      5,962
                                                               ----------  ---------
      Total Operating Expenses                                   334,625    216,815
                                                               ----------  ---------
Operating Income                                                  51,416     44,416

Other Income and Expense:
  Equity in Affiliated Companies                                     379        366
  Other                                                              (96)       609
                                                               ----------  ---------
      Total Other Income and Expense                                 283        975

Interest Charges                                                   7,705      9,039

Preferred Dividend Requirements of Subsidiary                      1,529      1,529
                                                               ----------  ---------
Income Before Income Taxes                                        42,465     34,823

Income Taxes                                                      17,672     14,384
                                                               ----------  ---------
Income from Continuing Operations                                 24,793     20,439

Discontinued Operations - Net                                       (302)      (150)
Cumulative Effect of a Change in Accounting Principle - Net         (426)         -
                                                               ----------  ---------
      Net Income Applicable to Common Stock                     $ 24,065   $ 20,289
                                                               ==========  =========
Basic Earnings Per Common Share:
  Continuing Operations                                           $ 2.01     $ 1.71
  Discontinued Operations - Net                                    (0.03)     (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      (0.03)        -
                                                               ----------  ---------
      Basic Earnings Per Common Share                             $ 1.95     $ 1.70
                                                               ==========  =========
Average Shares of Common Stock Outstanding - Basic                12,316     11,952

Diluted Earnings Per Common Share:
  Continuing Operations                                           $ 2.00     $ 1.70
  Discontinued Operations - Net                                    (0.03)     (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      (0.03)        -
                                                               ----------  ---------
      Diluted Earnings Per Common Share                           $ 1.94     $ 1.69
                                                               ==========  =========
Average Shares of Common Stock Outstanding - Diluted              12,408     12,011

Dividends Declared per Common Share                              $ 0.770    $ 0.750
                                                               ==========  =========
<FN>

The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>

                                     SJI-4

<TABLE>

                    SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Thousands)
<CAPTION>

                                                                               (Unaudited)
                                                                                 June 30,                 December 31,
                                                                       ----------------------------       ------------
                                                                          2003              2002             2002
                                                                       ------------      ----------       -----------
<S>                                                                     <C>              <C>              <C>
Property, Plant and Equipment:
  Utility Plant, at original cost                                       $ 867,801        $ 822,053        $ 846,865
    Accumulated Depreciation                                             (245,923)        (229,078)        (236,813)
  Nonutility Property and Equipment, at cost                               63,352           42,452           57,950
    Accumulated Depreciation                                               (1,550)          (1,100)          (1,428)
                                                                        -----------      -----------      -----------
        Property, Plant and Equipment - Net                               683,680          634,327          666,574
                                                                        -----------      -----------      -----------
Investments:
  Available-for-Sale Securities                                             3,712            3,330            3,462
  Restricted                                                                3,421            7,026            2,080
  Investment in Affiliates                                                  2,034            1,775            1,849
                                                                        -----------      -----------      -----------

        Total Investments                                                   9,167           12,131            7,391
                                                                        -----------      -----------      -----------
Current Assets:
  Cash and Cash Equivalents                                                 4,635            6,599            4,291
  Accounts Receivable                                                     101,265           61,811           94,105
  Unbilled Revenues                                                         7,489            9,849           33,537
  Provision for Uncollectibles                                             (3,366)          (2,671)          (3,170)
  Natural Gas in Storage, average cost                                     48,832           40,214           41,490
  Materials and Supplies, average cost                                      3,580            3,755            4,156
  Energy Trading and Related Assets                                        20,621           21,968           29,089
  Prepaid Taxes                                                            10,974           11,621            2,440
  Derivatives                                                                 803                -
  Other Prepayments and Current Assets                                      6,068            5,849            6,761
                                                                        -----------       ----------       ----------
        Total Current Assets                                              200,901          158,995          212,699
                                                                        -----------       ----------       ----------
Regulatory and Other Non-Current Assets:
  Deferred Fuel Costs - Net                                                11,941           39,683           31,594
  Other Regulatory Assets                                                  71,912           76,369           73,710
  Energy Trading and Related Assets                                         4,157            5,070            2,767
  Derivatives                                                                  37                -                -
  Unamortized Debt Discount and Expense                                     6,388            6,671            7,086
  Other                                                                    14,607            4,897            9,939
                                                                        -----------       ----------       ----------
        Total Regulatory and Other Non-Current Assets                     109,042          132,690          125,096
                                                                        -----------       ----------       ----------
              Total Assets                                            $ 1,002,790        $ 938,143      $ 1,011,760
                                                                      =============      ===========    =============
<FN>

The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>

                                     SJI-5


<TABLE>

                                   SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                   (In Thousands)
<CAPTION>

                                                                             (Unaudited)
                                                                               June 30,                December 31,
                                                                        --------------------------      ----------
                                                                           2003            2002            2002
                                                                        ----------      ----------      ----------
<S>                                                                      <C>              <C>              <C>
Capitalization and Liabilities

Common Equity:
  Common Stock                                                           $ 15,515         $ 15,014         $ 15,258
  Premium on Common Stock                                                 156,709          144,557          150,434
  Accumulated Other Comprehensive Loss                                     (6,153)          (1,632)          (5,902)
  Retained Earnings                                                        92,558           78,532           78,002
                                                                        ----------      -----------      -----------
        Total Common Equity                                               258,629          236,471          237,792
                                                                        ----------      -----------      -----------
Preferred Stock and Securities of Subsidiary:
   Redeemable Cumulative Preferred Stock:
     South Jersey Gas Company, Par Value $100 per share
       Authorized - 41,966 shares, Outstanding 16,904 shares 8% Series      1,690            1,690            1,690
   South Jersey Gas Company-Guaranteed Mandatorily Redeemable
     Preferred Securities of Subsidiary Trust:
       Par Value $25 per share, 1,400,000 shares
       Authorized and Outstanding                                          35,000           35,000           35,000
                                                                        ----------      -----------       -----------
        Total Preferred Stock and Securities of Subsidiary                 36,690           36,690           36,690
                                                                        -----------     -----------       -----------
Long-Term Debt                                                            230,631          256,514          238,016
                                                                        -----------     -----------       -----------
        Total Capitalization                                              525,950          529,675          512,498
                                                                        -----------     -----------       -----------
Current Liabilities:
  Notes Payable                                                           125,200          107,750          166,500
  Current Maturities of Long-Term Debt                                      8,423            9,733           10,696
  Accounts Payable                                                         80,509           43,042           76,657
  Customer Deposits                                                         7,143            6,484            6,924
  Environmental Remediation Costs                                           5,076           11,293            5,104
  Taxes Accrued                                                            13,518            4,415              892
  Energy Trading and Related Liabilities                                   11,003           14,899           15,565
  Derivatives                                                                 235              243              142
  Deferred Income Taxes - Net                                              19,431           27,117           24,818
  Interest Accrued and Other Current Liabilities                           16,415           14,918            9,334
                                                                        -----------     -----------       -----------
 Total Current Liabilities                                                286,953          239,894          316,632
                                                                        -----------     -----------       -----------
Deferred Credits and Other Non-Current Liabilities:
  Deferred Income Taxes - Net                                             103,355           90,967           97,890
  Investment Tax Credits                                                    3,645            3,992            3,819
  Pension and Other Postretirement Benefits                                18,183           16,347           15,828
  Environmental Remediation Costs                                          47,051           41,423           47,051
  Energy Trading and Related Liabilities                                    1,908            3,938            2,095
  Derivatives                                                               2,965              618            2,431
  Other                                                                    12,780           11,289           13,516
                                                                        -----------     -----------       -----------
        Total Deferred Credits
          and Other Non-Current Liabilities                               189,887          168,574          182,630
                                                                        -----------     -----------       -----------
Commitments and Contingencies  (Note 9)

              Total Capitalization and Liabilities                    $ 1,002,790        $ 938,143      $ 1,011,760
                                                                      ============      ===========     =============
<FN>

The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
                                     SJI-6


<TABLE>


                             SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                             (In Thousands)

<CAPTION>

                                                                                 Six Months Ended
                                                                                     June 30,
                                                                          --------------------------------
                                                                              2003              2002
                                                                          --------------    --------------
<S>                                                                            <C>               <C>
Cash Flows from Operating Activities:
   Net Income Applicable to Common Stock                                       $ 24,065          $ 20,289
   Adjustments to Reconcile Net Income to Cash Flows
    Provided by Operating Activities:
     Depreciation and Amortization                                               12,942            12,269
     Unrealized Gain on Energy Trading and Related Contracts                       (776)             (782)
     Provision for Losses on Accounts Receivable                                    936               860
     Revenues and Fuel Costs Deferred - Net                                      19,653              (616)
     Deferred and Non-Current Income Taxes and Credits - Net                        846             6,925
     Environmental Remediation Costs - Net                                        3,067             5,789
   Changes in:
     Accounts Receivable                                                         18,148            28,825
     Inventories                                                                 (6,766)           19,627
     Prepayments and Other Current Assets                                           693            (2,233)
     Prepaid and Accrued Taxes - Net                                              4,092            (5,299)
     Accounts Payable and Other Accrued Liabilities                              11,152            (3,924)
     Other - Net                                                                 (3,173)           (3,055)
                                                                          --------------    --------------

          Net Cash Provided by Operating Activities                              84,879            78,675
                                                                          --------------    --------------

Cash Flows from Investing Activities:
   Investment in Affiliate                                                         (183)             (406)
   Affiliate Repayment of Loan                                                      395               350
   Purchase of Available-For-Sale Securities                                          -              (229)
   (Purchase of) Proceeds from Sale of Restricted Investments                    (1,341)           15,936
   Capital Expenditures, Cost of Removal and Salvage                            (29,366)          (40,126)
                                                                          --------------    --------------

          Net Cash Used in Investing Activities                                 (30,495)          (24,475)
                                                                          --------------    --------------

Cash Flows from Financing Activities:
   Net Repayments of Lines of Credit                                            (41,300)          (44,610)
   Proceeds from Issuance of Long-Term Debt                                       6,000            10,000
   Principal Repayments of Long-Term Debt                                       (15,658)          (12,733)
   Dividends on Common Stock                                                     (9,509)           (8,975)
   Proceeds from Sale of Common Stock                                             6,497             4,782
   Payments for Issuance of Long-Term Debt                                          (70)              (30)
                                                                          --------------    --------------

          Net Cash Used in Financing Activities                                 (54,040)          (51,566)
                                                                          --------------    --------------

Net Increase in Cash and Cash Equivalents                                           344             2,634
Cash and Cash Equivalents at Beginning of Period                                  4,291             3,965
                                                                          --------------    --------------

Cash and Cash Equivalents at End of Period                                      $ 4,635           $ 6,599
                                                                          ==============    ==============

<FN>

The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>

                                     SJI-7


        Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 1.  Summary of Significant Accounting Policies:

         Consolidation - The condensed consolidated financial statements include
the accounts of South Jersey Industries, Inc. (SJI) and its subsidiaries. We
eliminated all significant intercompany accounts and transactions. SJI
reclassified some previously reported amounts to conform with current year
classifications. In our opinion, the condensed consolidated financial statements
reflect all adjustments needed to fairly present SJI's financial position and
operating results at the dates and for the periods presented. Our businesses are
subject to seasonal fluctuations and, accordingly, this interim financial
information should not be the basis for estimating the full year's operating
results. These financial statements should be read in conjunction with SJI's
2002 Form 10K and annual report.

         Equity Investments - We classify equity investments purchased as
long-term investments as Available-for-Sale Securities on our condensed
consolidated balance sheets and carry them at their estimated fair value with
any changes in unrealized gains or losses included in Other Comprehensive
Income. SJI, either directly or through its wholly owned subsidiaries, currently
holds a 50% non-controlling interest in two affiliated companies and accounts
for these investments under the equity method. We include the operations of
these affiliated companies in the statements of condensed consolidated income
under the caption, Equity in Affiliated Companies.

              Estimates and Assumptions - We prepare our financial statements to
conform with generally accepted accounting principles. Management makes
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual results could differ from
those estimates.

         Energy Trading Activities & Derivative Instruments - South Jersey
Resources Group, LLC (SJRG) manages its portfolio of purchases and sales, as

                                     SJI-8

well as natural gas in storage, using a variety of instruments that include
forward contracts, swap agreements, option contracts and futures contracts.
Because SJRG's transactions will not necessarily settle physically, SJRG
accounted for these contracts at fair value under Emerging Issues Task Force
(EITF) Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities" or FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. Under this method of
accounting, SJRG measures the difference between the contract price and the fair
value of the contracts and records these as Energy Trading and Related Assets or
Energy Trading and Related Liabilities on our condensed consolidated balance
sheets. For the three months ended June 30, 2003 and 2002, we recorded net
unrealized pre-tax losses of $(.8) million and $(.9) million, respectively. For
the six months ended June 30, 2003 and 2002, we recorded net unrealized pre-tax
gains of $.8 million and $.8 million, respectively. These unrealized gains and
losses on energy trading and related contracts determined under the
mark-to-market method are included in Operating Revenues - Nonutility.

         Beginning with the third quarter of 2002, SJI began presenting revenues
and expenses related to SJRG's physical power contracts and energy-related
derivative contracts on a net basis in our condensed consolidated statements of
income consistent with EITF Issue No. 02-03, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities." Consequently, we reclassified Operating
Revenues - Nonutility and Cost of Sales - Nonutility for the three and six
months ended June 30, 2002 to conform with this presentation. Because of the
difficulty in obtaining certain information, we determined this presentation by
netting the energy contract related revenue and expense transactions of SJRG. As
a result, we based certain nonutility costs of sales on the transfer prices
between SJRG and South Jersey Energy Company (SJE). These transfer prices are
generally at market. There is no effect on operating income or net income from
the above changes in presentation.

         On October 25, 2002, the EITF rescinded its consensus in Issue No.
98-10 effective for transactions entered into after that date, with a cumulative
effect adjustment for previously existing transactions being recognized in the
quarter beginning January 1, 2003. As a result of the recision, SJI only
marks-to-market those energy-related contracts that meet the definition of a
derivative in Statement No. 133. Energy-related contracts that do not meet the
definition of a derivative are accounted for using the accrual basis of
accounting. The effect of this change in accounting resulted in a net charge of
$426,338 shown as a Cumulative Effect of a Change in Accounting Principle - Net.
Furthermore, management has designated any contract entered into after December
31, 2002 to hedge physical gas in storage as cash flow hedges and accounts for
them accordingly. We include these balances on the condensed consolidated
balance sheets under the caption Derivatives. As of June 30, 2003, we calculated
these hedges to be highly effective; therefore, we record the offset, net of
taxes, in Accumulated Other Comprehensive Loss.

         In November 2001, we entered into two interest rate swap contracts. The
first swap effectively provides us with a fixed interest rate of 4.08% on Marina
Energy LLC's (Marina) tax-exempt Series A variable rate bonds for a 10-year
period. The second swap effectively fixed the interest rate of Marina's taxable
Series B variable rate bonds at 4.55% for a 6-year period. The notional amount
of this second swap decreases by $3.0 million per year beginning in December
2005.

         In January 2002, Marina issued an additional $10.0 million of taxable
Series B variable rate bonds. In April 2002, we entered into an interest rate
swap contract that effectively fixed the interest rate on these bonds at 4.62%
for a 4-year period. The notional amount of this swap decreases to $8.0 million
in December 2003, then to $3.9 million in December 2004, and terminates in
December 2005.

         In May 2003, SJG entered into an interest rate swap contract that
effectively fixed the interest rate at 2.24% through May 20, 2004 on $20.0
million of SJG's debt outstanding under its bank lines.

         We entered into interest rate swap agreements to hedge the exposure to
increasing rates with respect to our variable rate debt. The differential to be
paid or received as a result of these swap agreements is accrued as interest
rates change and is recognized as an adjustment to interest expense. We account
for these interest rate swaps as cash flow hedges. As of June 30, 2003 and 2002,

                                     SJI-9

the market value of these swaps was $(2.9) and $(0.9) million, respectively,
which represents the amount we would have to pay the counterparty to terminate
these contracts as of those dates. We include these balances on the condensed
consolidated balance sheets under the caption Derivatives. As of June 30, 2003
and 2002, we calculated the swaps to be highly effective; therefore, we record
the offset to the hedge, net of taxes, in Accumulated Other Comprehensive Loss.

         We determined the fair value of derivative instruments by reference to
quoted market prices of listed contracts, published quotations or quotations
from independent parties.

         New Accounting Pronouncements - In January 2003, SJI adopted FASB
Statement No. 143, "Accounting for Asset Retirement Obligations," which
establishes accounting and reporting standards for legal obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. SJG has certain easements and right-of-way agreements that
qualify as legal obligations under Statement No. 143. However, it is our intent
to maintain these agreements in perpetuity; therefore, no change in SJG's
current accounting practices is required at this time.

         SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When we retire
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, SJG had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in utility plant accumulated depreciation. The
adoption of this statement did not materially affect SJI's financial condition
or results of operations.

         In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which was effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. Effective April 1, 2003, SJI adopted the policy
of accounting for this compensation using the fair value based method on a
prospective basis. This method calls for the expensing of the difference between
the estimated fair value of a stock option and the amount, if any, that the
employee must pay for the option. The provisions of this statement currently
have no impact on SJI's financial statements.

         In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJI will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJI's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.

                                     SJI-10

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

                                    Years     June 30    June 30     December 31
                                   Remaining    2003       2002          2002
------------------------------------------------------------------------------
Environmental Remedation Costs:
   Expended - Net                      7    $  3,375     $ 7,016    $     6,470
   Liability for Future Expenditures   -      48,211      48,790         48,211
Income Taxes - Flowthrough
  Depreciation                        8.3      8,108       9,086          8,597
Postretirement Benefit Costs          9.5      3,591       3,969          3,780
Gross Receipts and Franchise Taxes    3.6      1,589       2,032          1,811
Other                                  -       7,038       5,476          4,841
                                            ------------------------------------
     Total Other Regulatory Assets          $ 71,912    $ 76,369    $    73,710
                                            ====================================

         Each item separately identified is being recovered through utility rate
charges without a return on investment over the period indicated. The majority
of the assets reflected above under the caption "Other" are currently subject to
filings with the New Jersey Board of Public Utilities (BPU) requesting recovery.
Management believes that all such deferred costs are probable of recovery from
ratepayers through future utility rates.

         In addition, SJG has one significant regulatory liability for
overcollected taxes totaling $3.8 million and $2.3 million, including interest,
as of June 30, 2003 and 2002, respectively. We include these amounts in the
caption "Other" under the heading Deferred Credits and Other Non-Current
Liabilities and they are subject to being returned to ratepayers in future rate
proceedings.


Note 2.  Divestitures and Affiliations:

         Divestitures - In 1996, Energy & Minerals, Inc. (EMI), an SJI
subsidiary, sold the common stock of The Morie Company, Inc. (Morie), its sand
mining and processing subsidiary.

         In 1997, R&T Group, Inc., SJI's construction subsidiary, sold all its
operating assets, except some real estate.

         SJI conducts tests annually to estimate the environmental remediation
costs for properties owned by South Jersey Fuel, Inc. (SJF), an EMI subsidiary,
from its previously operated fuel oil business. SJI reports the environmental
remediation activity related to these properties as discontinued operations.
This reporting is consistent with previous years.

         SJG operated two retail stores which sold natural gas appliances. The
stores were intended to provide gas customers with access to and choice among
natural gas appliances. In 2001, SJG formally discontinued this merchandising
segment of its operations as those appliances are readily available from other
retailers.

                                     SJI-11

         Summarized operating results of the discontinued operations for the
three and six months ending June 30 were (in thousands):

                                        Three Months Ended      Six Months Ended
                                               June 30,             June 30,
                                          2003       2002       2003        2002
                                       -----------------------------------------
Loss before Income Taxes:
     Sand Mining                        $ (219)    $ (175)    $ (429)    $ (206)
     Construction                           (8)        (6)       (16)       (12)
     Fuel Oil                              (10)       (16)       (21)       (31)
Income Taxes                                83         79        164         99
                                        ----------------------------------------
Loss from Discontinued Operations - Net $ (154)    $ (118)    $ (302)    $ (150)
                                        ========================================
Earnings Per Common Share from
     Discontinued Operations - Net      $ (0.01)   $ (0.01)   $(0.03)   $(0.01)
                                        ========================================

Losses from sand mining are mainly comprised of environmental remediation and
product liability litigation associated with Morie's prior activities.

         Affiliations - In January 1999, SJI and Conectiv Solutions, LLC formed
Millennium Account Services, LLC to provide meter reading services in southern
New Jersey.

         In June 1999, SJE and Energy East Solutions, Inc. (EES) formed South
Jersey Energy Solutions, LLC (SJES) to market retail electricity and energy
management services. SJES began supplying retail electric during 2000, and
ceased active operations in May 2002. In January 2003, SJES became a wholly
owned subsidiary of SJE when EES redeemed its 50% interest in SJES for the book
value of its investment of $54,686.

         In April 2000, SJE and GZA GeoEnvironmental, Inc. formed AirLogics,
LLC to market a jointly developed air monitoring system designed to assist
companies involved in environmental cleanup activities.

         In October 2000, SJI formed Marina, a wholly owned subsidiary, to
develop, construct and operate a $56.6 million thermal energy plant. In December
2000, Marina entered into a 20-year contract with Marina District Development
Corporation to supply heat, hot water and cooling to The Borgata Resort. The
plant began commercial operations in July 2003.


Note 3.  Common Stock:

         SJI has 20,000,000 shares of authorized Common Stock. The following
shares were issued and outstanding:

                                     SJI-12

                                                  2003               2002
                                               ----------------------------
Beginning Balance, January 1                   12,206,474        11,860,990
New Issues During Year:
     Dividend Reinvestment Plan                   173,240           148,033
     Employees' Stock Ownership Plan                  832             1,731
     Stock Option, Stock Appreciation Rights
         and Restricted Stock Award Plan           32,005               590
                                               ----------------------------
Ending Balance, June 30                        12,412,551        12,011,344
                                               ============================

         We credited the par value ($1.25 per share) of stock issued in 2003 and
2002 to Common Stock. We credited the net excess over par value of approximately
$6.3 million and $4.6 million, respectively, to Premium on Common Stock.

         Earnings Per Common Share - We present basic EPS based on the
weighted-average number of common shares outstanding. EPS are presented in
accordance with FASB Statement No. 128, "Earnings Per Share," which establishes
standards for computing and presenting basic and diluted EPS. The incremental
shares required for inclusion in the denominator for the diluted EPS calculation
were 101,782 and 82,634 shares for the three months ended, and 91,941 and 58,654
shares for the six months ended June 30, 2003 and 2002, respectively. These
shares relate to restricted stock and stock options and were calculated using
the treasury stock method.

         Stock Option, Stock Appreciation Rights and Restricted Stock Award Plan
- Under this plan, no more than 306,000 shares in the aggregate may be issued to
SJI's officers and other key employees. No options or stock appreciation rights
may be granted under the Plan after November 22, 2006. At June 30, 2003 and
2002, SJI had no options outstanding. No options were granted in 2003 or 2002.
Prior to 2003, SJI valued stock options to employees using the intrinsic value
method. Effective in 2003, SJI adopted the policy of accounting for this
compensation using the fair value based method on a prospective basis. No stock
appreciation rights were issued under the Plan. In 1999, we amended the Plan to
include restricted stock awards. In 2003 and 2002, we granted 30,810 and 23,839
restricted shares, respectively. These restricted shares vest over a 3-year
period and are subject to SJI achieving certain performance targets.

         Dividend Reinvestment Plan (DRP) and Employees' Stock Ownership Plan
(ESOP) - Newly issued shares of common stock offered through the DRP are issued
directly by SJI. All shares offered through the ESOP are also issued directly by
SJI. As of June 30, 2003, SJI reserved 992,467 and 14,734 shares of authorized,
but unissued, common stock for future issuance to the DRP and ESOP,
respectively.


Note 4.  Financial Instruments:

         Restricted Investments - In accordance with the terms of Marina's bond
agreements, we are required to invest unused proceeds in high-quality, highly
liquid investments pending approved construction expenditures. As of June 30,
2003 and 2002, these residual proceeds totaled $.7 and $6.9 million,
respectively.

                                     SJI-13

         Margin Account - SJRG maintains a margin account with a national
investment firm to support its energy trading activities. As of June 30, 2003
and 2002, the account reflected a $2.7 million and $68.0 thousand balance due to
changes in the market value of outstanding contracts.

Note 5.           Segments of Business:

         Information about SJI's operations in different industry segments for
the three and six months ended June 30 is presented below (in thousands):

<TABLE>
<CAPTION>

                                             Three Months Ended         Six Months Ended
                                                   June 30,                  June 30,
                                        ---------------------------------------------------
                                               2003         2002         2003         2002
  <S>                                     <C>          <C>          <C>          <C>
Operating Revenues:
     Gas Utility Operations             $    75,608  $    65,006  $   315,544  $   219,189
     Wholesale Gas Operations                 1,632          525        5,998        3,499
     Retail Gas and Other Operations         35,865       20,645       94,596       53,056
     On-Site Energy Production                  981           64        2,000           71
                                        ---------------------------------------------------
         Subtotal                           114,086       86,240      418,138      275,815
     Intersegment Sales                      (7,871)      (2,040)     (32,097)     (14,584)
                                        ---------------------------------------------------
         Total Operating Revenues          $106,215     $ 84,200  $   386,041  $   261,231
                                        ===================================================

Operating Income:
     Gas Utility Operations             $     5,919  $     4,183  $    44,226  $    38,635
     Wholesale Gas Operations                 1,368          593        3,271        3,341
     Retail Gas and Other Operations            149          784        3,869        2,583
     On-Site Energy Production                  271           14          480           21
     General Corporate                         (185)        (247)        (430)        (164)
                                        ---------------------------------------------------
         Total Operating Income         $     7,522  $     5,327  $    51,416  $    44,416
                                        ===================================================

Depreciation and Amortization:
     Gas Utility Operations             $     6,445  $     6,117  $    12,816  $    12,204
     Wholesale Gas Operations                     3            3            6            6
     Retail Gas and Other Operations             26           22           49           42
     On-Site Energy Production                   34            -           57            -
     Discontinued Operations                      7           10           14           17
                                           ------------------------------------------------
       Total Depreciation and Amortization $  6,515  $     6,152  $    12,942  $    12,269
                                           ================================================

Property Additions:
     Gas Utility Operations             $    11,956  $    11,797  $    23,660  $    21,367
     Wholesale Gas Operations                     -            -            -           -
     Retail Gas and Other Operations            109           52          156           55
     On-Site Energy Production                1,611       10,775        5,286       18,298
     Discontinued Operations                      -            -            -           -
                                        ---------------------------------------------------
         Total Property Additions       $    13,676  $    22,624  $    29,102  $    39,720
                                        ===================================================
</TABLE>

                                     SJI-14
<TABLE>

Identifiable Assets:

<S>                                                               <C>          <C>
     Gas Utility Operations                                       $   851,598  $   831,024
     Wholesale Gas Operations                                          64,059       37,396
     Retail Gas and Other Operations                                   31,359       24,982
     On-Site Energy Production                                         68,697       48,733
     Discontinued Operations                                            2,313        2,359
                                                                ---------------------------
         Subtotal                                                   1,018,026      944,494
     Corporate Assets                                                  29,959       27,276
     Intersegment Assets                                              (45,195)     (33,627)
                                                                ---------------------------
         Total Identifiable Assets                              $   1,002,790  $   938,143
                                                                ===========================

</TABLE>


         Gas Utility Operations consists primarily of natural gas distribution
to residential, commercial and industrial customers. Wholesale Gas Operations
include SJRG's activities. Retail Gas and Other Operations include natural gas
and electricity acquisition and transportation service companies. On-Site Energy
Production consists of Marina's construction and related financing activities.

         SJI's interest expense relates primarily to SJG's borrowing and
financing activities. Interest income is essentially derived from borrowings
between the subsidiaries and is eliminated during consolidation.


Note 6.           Comprehensive Income:

         The components of comprehensive income for the three and six months
ended June 30 are as follows (in thousands):

<TABLE>

<CAPTION>

                                                                 Three Months Ended           Six Months Ended
                                                                        June 30,                   June 30,
                                                                   2003         2002          2003         2002
                                                            -----------------------------------------------------


<S>                                                         <C>            <C>         <C>            <C>
Net Income Applicable to Common Stock                       $     1,802    $     603   $    24,065    $    20,289
Other Comprehensive Income (Loss):
     Change in Fair Value of Investments - Net *                    193            -          153             -
     Change in Fair Value of Energy Trading
         and Related Assets / Liabilities - Net *                 1,643          865         (186)           865
     Change in Fair Value of Interest Rate
         Swaps - Net *                                             (323)        (941)        (218)          (810)
                                                            -----------------------------------------------------
Total Other Comprehensive Income (Loss)                           1,513          (76)        (251)            55
                                                            -----------------------------------------------------
Comprehensive Income                                        $     3,315    $     527   $   23,814     $   20,344
                                                            =====================================================
<FN>

* Determined using an effective tax rate of 40.85%.
</FN>

</TABLE>

                                     SJI-15

Note 7.  Regulatory Actions:

         In January 1997, the BPU granted SJG a 9.62% rate of return on rate
base, which included an 11.25% return on common equity. Additionally, our
threshold for sharing pre-tax margins generated by interruptible and off-system
sales and transportation increased. Currently, SJG keeps 100% of pre-tax margins
up to the threshold level of $7.8 million. The next $750,000 is credited to
customers through the Basic Gas Supply Service ("BGSS") clause. Thereafter, SJG
keeps 20% of the pre-tax margins as it has historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC). The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through automatic rate changes under certain conditions and under
certain limitations, resulting in the reduction of over/under-recoveries. LGAC
related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

                                     SJI-16

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas cost
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.


Note 8.  Retained Earnings:

         Restrictions exist under various loan agreements regarding the amount
of cash dividends or other distributions that SJG may pay on its common stock.
As of June 30, 2003, SJG's restrictions do not affect the amount that may be
distributed from SJI's retained earnings.


Note 9.  Commitments and Contingencies:

         Construction and Environmental - SJI's estimated net cost of
construction and environmental remediation programs for 2003 totals $57.8
million. Commitments were made regarding some of these programs.

         Pending Litigation - SJI is subject to claims arising in the ordinary
course of business and other legal proceedings. We accrue liabilities related to
these claims when we can determine the amount or range of amounts of likely
settlement costs for those claims. Among other actions, SJI has been named in
certain product liability claims related to our former sand mining subsidiary.
Management does not currently anticipate the disposition of any known claims to
have a material adverse effect on SJI's financial position, results of
operations or liquidity.

                                     SJI-17

         Parental Guarantees - In 2002, the FASB released Interpretation No. 45
(FIN 45) "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires
companies to disclose the nature of its guarantees or indemnification agreements
for interim and year-end financial statements ending after December 15, 2002. As
of June 30, 2003, SJI had issued $113.1 million of parental guarantees on behalf
of its subsidiaries. Of this total, $76.5 million expire within one year, $83.8
million expire within two years and $29.3 million presently have no expiration
date. The vast majority of these guarantees were issued as guarantees of payment
to third parties with whom our subsidiaries have commodity supply contracts. As
of June 30, 2003, these guarantees support $25.5 million of the Accounts Payable
recorded on our condensed consolidated balance sheet. As part of our risk
management policy, we also require parental guarantees from trading
counterparties as applicable. These arrangements are typical in our industry.
SJI has also issued two parental guarantees totaling $7.3 million related to
Marina's construction activity.

         Standby Letters of Credit - SJI provided a $17 million standby letter
of credit to Marina District Development Corporation in support of Marina's
contractual obligations to construct the thermal energy plant and to supply
heat, hot water and cooling to The Borgata Resort. This letter of credit was
reduced to $6.4 million as of June 30, 2003.

         As of June 30, 2003, SJI also provided $46 million of standby letters
of credit by commercial banks supporting the variable rate demand bonds issued
through the New Jersey Economic Development Authority were used to finance
Marina's thermal plant project.

         Environmental Remediation Costs - SJI incurred and recorded costs for
environmental clean up of sites where SJG or its predecessors operated gas
manufacturing plants. SJG stopped manufacturing gas in the 1950s. SJI and some
of its nonutility subsidiaries also recorded costs for environmental clean up of
sites where SJF previously operated a fuel oil business and Morie maintained
equipment, fueling stations and storage.

         SJI successfully entered into settlements with all of its historic
comprehensive general liability carriers regarding the environmental remediation
expenditures at the SJG sites. Also, SJG purchased a Cleanup Cost Cap Insurance
Policy limiting the amount of remediation expenditures that SJG will be required
to make at 11 of its sites. This Policy will be in force until 2024 at 10 sites
and until 2029 at one site. The minimum future cost estimate discussed below is
not reduced by projected insurance recoveries from the Cleanup Cost Cap
Insurance Policy.

         Since the early 1980s, SJI accrued environmental remediation costs of
$139.1 million, of which $87.0 million has been spent as of June 30, 2003. With
the assistance of a consulting firm, we estimate that future costs to clean up
SJG's sites will range from $48.2 million to $143.9 million. We recorded the
lower end of this range as a liability. It is reflected on the 2003 condensed
consolidated balance sheet under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. Recorded amounts include estimated
costs based on projected investigation and remediation work plans using existing
technologies. Actual costs could differ from the estimates due to the long-term
nature of the projects, changing technology, government regulations and
site-specific requirements. The major portion of accrued environmental costs
relate to the clean up of SJG's former gas manufacturing sites.

                                     SJI-18

         SJG has two regulatory assets associated with environmental costs. The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of Statement No.
71. The BPU allows SJG to recover expenditures through the RAC.

         The other asset titled Environmental Remediation Cost: Liability for
Future Expenditures relates to estimated future expenditures determined under
the guidance of FASB Statement No. 5, "Accounting for Contingencies." We
recorded this amount, which relates to former manufactured gas plant sites, as a
deferred debit with the corresponding amount reflected on the condensed
consolidated balance sheets under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. The deferred debit is a regulatory
asset under Statement No. 71. The BPU's intent, evidenced by current practice,
is to allow SJG to recover the deferred costs over 7-year periods after they are
spent.

         As of June 30, 2003, we reflected SJG's unamortized remediation costs
of $3.4 million on the condensed consolidated balance sheet under the caption
Regulatory Assets. Since implementing the RAC in 1992, SJG has recovered $38.7
million through rates.

         With Morie's sale, EMI assumed responsibility for environmental
liabilities estimated between $2.7 million and $8.8 million. The information
available on these sites is sufficient only to establish a range of probable
liability and no point within the range is more likely than any other.
Therefore, EMI continues to accrue the lower end of the range. Changes in the
accrual are included in the statements of condensed consolidated income under
the caption Loss from Discontinued Operations - Net.

         SJI and SJF estimated their potential exposure for the future
remediation of four sites where fuel oil operations existed years ago. Estimates
for SJI's site range between $0.1 million and $0.3 million, while SJF's
estimated liability ranges from $1.1 million to $4.9 million for its three
sites. We recorded the lower ends of these ranges on the condensed consolidated
balance sheet under Current Liabilities and Deferred Credits and Other
Non-Current Liabilities as of June 30, 2003.


Note 10.          Subsequent Event:

         On July 16, 2003, SJG made settlement on $85.5 million of debt under
its Medium Term Note Program established in 2002. A remainder of $64.5 million
is authorized to be issued under this program through July 31, 2005. The debt
issued has maturities of 10, 11, 13, 14 and 30 years, with a weighted-average
maturity of 19 years and a weighted-average interest rate of 4.95%. Proceeds
were used to refinance short-term borrowings under commercial bank lines.

                                     SJI-19

           Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

 Overview

         South Jersey Industries, Inc. (SJI) is an energy services holding
company that provides a variety of products and services through the following
wholly owned subsidiaries:

         1) South Jersey Gas Company (SJG) is a regulated natural gas utility.
SJG distributed natural gas in the seven southernmost counties of New Jersey to
298,877 customers at June 30, 2003 compared with 291,691 customers at June 30,
2002. SJG also:

     o   sells natural gas and pipeline transportation capacity
         off-system sales) on a wholesale basis to various customers
         on the interstate pipeline system;

     o   transports natural gas purchased directly from producers or
         suppliers for its own sales and for some of its customers; and

     o   services appliances via the sale of appliance warranty programs,
         as well as on a time and materials basis.

          2) South Jersey Energy Company (SJE) acquires and markets natural gas
to retail end users and provides total energy management services to commercial
and industrial customers. SJE has one subsidiary, SJ EnerTrade (EnerTrade), that
formerly provided services for natural gas sales to the casino industry in
Atlantic City, N.J. and is now inactive. SJE also markets an air quality
monitoring system through AirLogics, LLC. SJE and GZA GeoEnvironmental, Inc., an
environmental consulting firm, each have a 50% equity interest in AirLogics.

         3) South Jersey Resources Group, LLC (SJRG) markets wholesale natural
gas storage, commodity and transportation in the mid-Atlantic and southern
states. SJRG also conducts price-risk management activities.

         4) Marina Energy LLC (Marina) develops and operates energy-related
projects in southern New Jersey. Marina's largest project, the development of a
facility to provide cooling, heating and hot water to The Borgata Resort in
Atlantic City, began commercial operations in July 2003.

         SJI also has a joint venture investment with Conectiv Solutions, LLC in
Millennium Account Services, LLC (Millennium). Millennium provides meter reading
services to SJG and Conectiv Power Delivery in southern New Jersey.

         Estimates and Assumptions - As described in the footnotes to our
condensed consolidated financial statements, management must make estimates and
assumptions that affect the amounts reported in the financial statements and
related disclosures. Actual results could differ from those estimates. Three

                                     SJI-20

types of transactions presented in our condensed consolidated financial
statements require a significant amount of judgment and estimation. These relate
to regulatory assets, energy trading activities and environmental remediation
costs.

         The New Jersey Board of Public Utilities (BPU) has reviewed and
approved, through specific orders, most of the items shown as regulatory assets.
Other items represent costs that were not yet approved by the BPU for recovery,
but are the subject of current or future filings. In recording these costs as
regulatory assets, management believes the costs are probable of recovery under
existing rate-making concepts that are embodied in current rate orders received
by SJG. However, ultimate recovery is subject to BPU approval.

         Beginning January 1, 2001, SJI recognizes assets or liabilities for the
energy-related contracts entered into by its non-regulated subsidiary, SJRG,
when the contracts are executed. We record contracts at their fair value in
accordance with FASB Statement No. 133. We adjust the fair value of the
contracts each reporting period for changes in the market. We derive the fair
value for most of the energy-related contracts from markets where the contracts
are actively traded and quoted. For other contracts, SJI uses published market
surveys and in certain cases, independent parties to obtain quotes concerning
the contracts' current value. Market quotes tend to be more plentiful for
contracts maturing in two years or less. Very few of our contracts extend beyond
two years.

         An outside consulting firm assists us in estimating future costs for
environmental remediation activities. We estimate future costs based on
projected investigation and work plans using existing technologies. Developing a
single reliable estimation point is not feasible because of the amount of
uncertainty involved in the nature of projected remediation efforts and the long
period over which remediation efforts will continue. Therefore, we estimate the
range of future costs at $52.1 million to $157.9 million. In preparing financial
statements, SJI records liabilities for future costs using the lower end of the
range. We update estimates each year to take into account past efforts, changes
in work plans and remediation technologies.

         Revenue Recognition - SJG, SJE and SJRG bill customers monthly for gas
delivered and recognize those revenues during the month. For SJG and SJE retail
customers we do not bill at the end of each month; we make an accrual to
recognize revenues for gas delivered from the date of the last meter reading to
the end of the month. We bill SJG customers at rates approved by the BPU. SJE
and SJRG customers are billed at rates negotiated between the parties.

         We defer and recognize revenues related to SJG's appliance warranty
contracts over the full 12-month term of the contract as earned.

         The BPU allows SJG to recover the excess cost of gas sold over the cost
included in rates through the Basic Gas Supply Service (BGSS) price structure
(formerly known as the Levelized Gas Adjustment Clause). SJG defers
over/under-recoveries of gas costs and includes them in subsequent adjustments
to the BGSS rate or other similar rate recovery mechanism. These adjustments
result in over/under-recoveries of gas costs being included in rates during
future periods. As a result of these deferrals, utility revenue recognition does
not directly translate to profitability. While we realize profits on gas sales
during the month of providing the utility service, significant shifts in revenue

                                     SJI-21

recognition may result from the various recovery clauses approved by the BPU
(See Regulatory Matters) without shifting profits between periods, as these
clauses provide for recovery of costs on a dollar-for-dollar basis.

         New Accounting Pronouncements - In January 2003, SJI adopted Statement
No. 143, "Accounting for Asset Retirement Obligations," which establishes
accounting and reporting standards for legal obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. SJG has certain easements and right-of-way agreements that qualify as
legal obligations under Statement No. 143. However, SJG intends to maintain
these agreements in perpetuity; therefore, no change in its current accounting
practices is required at this time.

          SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When SJG retires
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, SJG had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in utility plant accumulated depreciation. We do not
expect the adoption of this statement to materially affect SJI's financial
condition or results of operations.

          In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," which is effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The provisions of this statement currently have
no impact on SJI's financial statements.

        In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJI will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJI's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.

          Forward-Looking Statements - This report contains certain
forward-looking statements concerning projected financial and operating
performance, future plans and courses of action and future economic conditions.
All statements in this report other than statements of historical fact are
forward-looking statements. These forward-looking statements are made based upon
management's expectations and beliefs concerning future events impacting the
company and involve a number of risks and uncertainties. We caution that

                                     SJI-22

forward-looking statements are not guarantees and actual results could differ
materially from those expressed or implied in the forward-looking statements.
Also, in making forward-looking statements, we assume no duty to update these
statements should expectations change or actual results and events differ from
current expectations.

         A number of factors could cause our actual results to differ materially
from those anticipated including, but 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; regulatory and court decisions; competition
in our utility and nonutility activities; the availability and cost of capital;
our ability to maintain existing joint ventures to take advantage of marketing
opportunities; 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.

         Mandatorily Redeemable Preferred Securities - SJG's statutory trust
subsidiary, SJG Capital Trust, currently has $35 million of 8.35% SJG-Guaranteed
Mandatorily Redeemable Preferred Securities outstanding. SJG may redeem these
securities at a price equal to 100% of the principal amount at any time. The
securities currently trade on the New York Stock Exchange under the symbol
SJI.T. As noted above, these securities will be reflected as liabilities
effective July 1, 2003.

         Customer Choice Legislation - All residential natural gas customers in
New Jersey can choose their gas supplier under the terms of the Electric
Discount and Energy Competition Act of 1999. As of June 30, 2003, 95,410 SJG
residential customers chose a natural gas commodity supplier other than the
utility. This number increased from 63,682 at June 30, 2002 as marketers were
able to offer natural gas at prices competitive with those available under
regulated utility tariffs. Customers purchasing natural gas from providers other
than SJG are charged for gas costs by the marketer, not SJG. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in SJG's gas
costs. While customer choice can reduce utility revenues, it does not negatively
affect SJG's net income or financial condition. The BPU continues to allow for
full recovery of natural gas costs through the Basic Gas Supply Service as well
as other costs of service including deferred costs, through tariffs. SJI has
benefited from customer choice legislation as SJE has successfully competed for
and profited from its gas commodity customers.

         Temperature Adjustment Clause -

         SJG's Board of Public Utilities approved Temperature Adjustment Clause
(TAC) had the following impacts on 2003 and 2002 second quarter and six months
net earnings:

                                                     2003              2002
                                                ------------       ------------
         TAC Adjustment (Decrease) Increase to
           Net Income (in thousands)

              Quarter Ended June 30             $    (1,022)      $        247
              Six Months Ended June 30          $    (2,377)      $      3,249

                                     SJI-23

         The clause is designed to mitigate the effect of variations in heating
season temperatures from historical norms for both SJG and its customers. While
the revenue and income impacts of TAC adjustments are recorded as incurred, cash
inflows or outflows directly attributable to TAC adjustments generally do not
begin until the next TAC year. Each TAC year begins October 1.

          Operating Revenues - Utility - Revenues increased $5.4 million and
$79.3 million in the second quarter and for the six months ended June 30, 2003,
respectively, compared with the prior year periods. These increases were
primarily due to three factors. First, weather in the second quarter and for the
six months ended June 30, 2003 was 41.9% and 30.3% colder than the respective
prior year periods. Second, off-system sales revenues increased due to higher
prices for natural gas sold in 2003 than in the prior year. Third, SJG's total
customers increased from 291,691 as of June 30, 2002 to 298,877 as of June 30,
2003. Partially offsetting the effect of these factors was a 50% increase in the
number of residential customers purchasing their gas from a source other than
SJG. The decline in customers who purchased their natural gas from SJG directly
impacted utility revenues. However, since gas costs are passed on directly to
customers without any profit margin added by SJG, the increased customer usage
of gas marketers did not impact SJG's profitability.

         As a result of SJG's Temperature Adjustment Clause, revenues from
utility ratepayers are closely tied to 20-year normal temperatures calculated
under the clause and not actual temperatures. While the clause significantly
reduces fluctuations in revenues related to temperature, as a general rule,
revenues continue to be positively impacted by colder weather and negatively
impacted by warmer weather. Weather in the second quarter of 2003 was 41.9%
colder than in 2002 and 28.9 % colder than the 20-year TAC average. During the
six months ended June 30, 2003, weather was 30.3% colder than in 2002 and 10.1%
colder than the 20-year TAC average.

         The following is a comparison of operating revenue and throughput for
the three and six month periods ended June 30, 2003 vs. the same periods ended
June 30, 2002.

<TABLE>
<CAPTION>

                                                  Three Months Ended         Six Months Ended
                                                       June 30,                  June 30,
                                                  2003         2002         2003         2002
                                           ---------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>
Operating Revenues (Thousands):
Firm
     Residential                           $    25,699  $    25,133  $   115,007  $   101,232
     Commercial                                  7,287        6,111       34,717       28,655
     Industrial                                    973          838        3,340        2,547
     Cogeneration & Electric Generation          1,969        2,963        3,291        3,579
     Firm Transportation                        13,142        8,394       41,202       22,658
                                           ---------------------------------------------------

         Total Firm Operating Revenues          49,070       43,439      197,557      158,671
                                           ---------------------------------------------------

Interruptible                                      558          307        1,049          546
Interruptible Transportation                       300          327          495          802
Off-System                                      22,985       18,908      111,715       54,661
Capacity Release & Storage                       1,510        1,136        2,813        2,830
Other                                            1,124          890        1,854        1,680
Intercompany Sales                              (7,383)      (2,230)     (31,179)     (14,233)
                                           ---------------------------------------------------

         Total Operating Revenues          $    68,164  $    62,777     $284,304     $209,957
                                           ===================================================

Throughput (MMcf):
Firm
     Residential                                 2,449        2,229       10,504        9,371
     Commercial                                    793          684        3,522        3,018
     Industrial                                     43           24          148          115
     Cogeneration & Electric Generation            240          635          348          722
     Firm Transportation                         6,427        5,311       17,490       12,794
                                           ---------------------------------------------------

         Total Firm Throughput                   9,952        8,883       32,012       26,020
                                           ---------------------------------------------------

Interruptible                                       96           55          132          103
Interruptible Transportation                       547          683          958        1,640
Off-System                                       3,744         4,940      15,474       16,243
Capacity Release & Storage                      10,402       10,498       16,395       17,144
                                           ---------------------------------------------------

         Total Throughput                       27,741       25,059       64,971       61,150
                                           ===================================================
</TABLE>

                                     SJI-24

          Total gas throughput increased 10.7% % to 27.7 billion cubic feet
(Bcf) in the second quarter and 6.2% to 65.0 Bcf for the six months ended June
30, 2003 compared with the respective prior year periods. The higher throughput
was primarily due to colder temperatures experienced in 2003. The increase in
firm transportation throughput reflected the increasing number of households
purchasing their gas from suppliers other than SJG.

         Operating Revenues - Nonutility - Nonutility operating revenues
increased by $16.6 million and $45.5 million for the second quarter and first
six months of 2003, respectively, compared to the same periods of 2002. Most of
the increase was due to the significant customer growth experienced by SJE,
evidenced by the addition of over 32,500 residential and 2,300 commercial
natural gas customers over the last twelve months. Higher natural gas prices
and significantly colder weather primarily in the first quarter also
contributed to this increase.

         Cost of Gas Sold - Utility - Gas purchased for resale increased $3.1
million and $70.7 million for the second quarter and for the six months ended
June 30, 2003, respectively, compared with the same periods in 2002 due
principally to an increase in firm gas sales volume and higher gas costs for
off-system sales. Colder weather was the main cause of the increase in firm gas
sales volume; however, this was partially offset by the migration of firm gas
sales customers to transportation service. SJG's gas cost during the second
quarter of 2003 averaged $7.05 per decatherm (dt) compared with $3.79/dt in
2002. During the six months ended June 30, 2003, gas costs averaged $6.64/dt
compared with $4.01/dt in 2002. Unlike gas costs associated with off-system
sales, changes in the unit cost of gas sold to utility ratepayers do not
directly affect cost of gas sold. We defer fluctuations in gas costs to
ratepayers not reflected in current rates in future periods under a BPU-
approved Basic Gas Supply Service price structure, formerly known as the
Levelized Gas Adjustment Clause. Gas supply sources include contract and

                                     SJI-25

open-market purchases. SJG secures and maintains its own gas supplies to serve
its sales customers. We do not anticipate any difficulty renewing or replacing
expiring contracts under substantially similar terms and conditions.

         Cost of Sales - Nonutility - Cost of sales - nonutility increased $15.3
million and $42.2 million for the second quarter and six months ended June 30,
2003 compared to the same periods of 2002 due mainly to SJE's customer growth,
colder temperatures and higher gas prices as described in the Operating Revenues
- Nonutility section.

         Operations - A summary of net changes in operations (in thousands):

                                            Three Months Ended  Six Months Ended
                                                  June 30,            June 30,
                                               2003 vs. 2002      2003 vs. 2002
                                           ------------------------------------
Utility:
         Other Production Expense             $         9         $        32
         Transmission                                  13                  44
         Distribution                                  73                 294
         Customer Accounts and Services               (59)               (186)
         Sales                                         87                  85
         Administration and General                   224                 949
         Nonutility                                   800               1,777
                                              ---------------------------------

                  Total Operations            $     1,147         $     2,995
                                              =================================

         Distribution expenses increased for both the three and six months ended
June 30, 2003 compared with the respective periods in 2002. The increase during
the six month period was primarily due to severe weather conditions experienced
during the first quarter of 2003 that resulted in a significant increase in
overtime hours. The weather created operating issues that ranged from snow
removal, to water intrusion in gas lines in oceanfront communities, to higher
shut-off for non-payment activity.

         Customer Accounts and Services expenses includes bad debt expense from
customer account write-offs. The collectibility of delinquent customer accounts
is generally determined during the winter season following the one where the
customer's account became delinquent - as temperatures drop, many customers with
delinquent balances will begin making payments in order to have their heat
restored. As the 2001-2002 winter season was one of the warmest winters on
record, many of our customers with delinquent balances from the prior winter did
not make payments to have their heat restored as would normally be expected. As
such, our bad debt expense was unusually high during the first half of 2002.
However, as the 2002-2003 winter season was colder-than-normal, customers with
delinquent balances from the year before did make payments as expected to have
their heat restored. This resulted in a much lower bad debt expense in the first
half of 2003, as compared with 2002.

         Administrative and General expenses increased in both the three and six
months ended June 30, 2003 compared with the same periods in 2002 primarily
because of increasing healthcare, pension and insurance costs.

                                     SJI-26

         Nonutility expenses in 2003 rose primarily due to higher customer
acquisition costs resulting from substantial growth in SJE's customer base and
activity associated with Marina's energy projects.

         Other Operating Expenses - A summary of principal changes in other
consolidated operating expenses (in thousands):

                                  Three Months Ended           Six Months Ended
                                       June 30,                    June 30,
                                     2003 vs. 2002               2003 vs. 2002
                                    --------------               -------------

Maintenance                           $    (191)                   $    (150)
Depreciation                                350                          686
Energy and Other Taxes                       87                        1,359

         Depreciation was higher due to SJG's increased investment in property,
plant and equipment. The increase in Energy and Other Taxes relate primarily to
increases in volumes of gas sold and transported by SJG as reflected under the
caption, "Operating Revenues - Utility".

         Interest Charges - Interest charges were lower in the second quarter
and first six months of 2003 compared with the same periods of 2002 due
primarily to reductions in short-term rates on line of credit borrowings and the
refunding of higher priced, fixed rate, long-term debt with lower cost, floating
rate, and short-term debt. These refundings were refinanced in July 2003 with
long-term debt issuances under our Medium Term Note program at significantly
lower interest rates compared to the previous long-term interest rates (See Note
10 - Subsequent Event).

         Discontinued Operations - Loss from discontinued operations increased
in 2003 due mainly to product liability litigation associated with previously
disposed of businesses.

         Cumulative Effect of a Change in Accounting Principle - Net - On
October 25, 2002, the EITF rescinded its consensus in Issue No. 98-10 effective
for transactions entered into after that date, with a cumulative effect
adjustment for previously existing transactions to be recognized in the quarter
beginning January 1, 2003. As a result of the rescission, SJI only
marks-to-market those energy-related contracts that meet the definition of a
derivative in Statement No. 133. Energy-related contracts that do not meet the
definition of a derivative are accounted for using the accrual basis of
accounting. The effect of this change in accounting resulted in a net charge of
$426,338 shown as a Cumulative Effect of a Change in Accounting Principle - Net.
Furthermore, management has designated any contract entered into after December
31, 2002 to hedge physical gas in storage as a cash flow hedge and accounts for
them accordingly. As of June 30, 2003, we calculated these hedges to be highly
effective; therefore, we record the offset, net of taxes, in Accumulated Other
Comprehensive Loss.

         Net Income Applicable to Common Stock - Net income (in thousands) and
earnings per common share reflect the following changes:

                                     SJI-27

                                           Three Months Ended   Six Months Ended
                                                  June 30,            June 30,
                                               2003 vs. 2002      2003 vs. 2002
                                             -----------------------------------
Income from Continuing Operations               $  1,235           $   4,354
Loss from Discontinued Operations - Net              (36)               (152)
Cumulative Effect of Accounting Change - Net           -                (426)
                                               ---------------------------------
  Net Income Increase                           $  1,199           $   3,776
                                               =================================

Earnings per Common Share:
  Continuing Operations                         $   0.10           $    0.30
  Discontinued Operations - Net                     0.00               (0.02)
  Cumulative Effect of Accounting Change - Net      0.00               (0.03)
                                                --------------------------------
    Earnings per Share Increase                 $   0.10           $    0.25
                                                ================================

         Regulatory Matters - In January 1997, the BPU granted SJG a 9.62% rate
of return on rate base, which included an 11.25% return on common equity.
Additionally, our threshold for sharing pre-tax margins generated by
interruptible and off-system sales and transportation increased. Currently, SJG
keeps 100% of pre-tax margins up to the threshold level of $7.8 million. The
next $750,000 is credited to customers through the Basic Gas Supply Service
("BGSS") clause. Thereafter, SJG keeps 20% of the pre-tax margins as it has
historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC) The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

                                     SJI-28

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through self-implementing rate changes under certain conditions and
under certain limitations, resulting in the reduction of over/under-recoveries.
LGAC related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas cost
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.

         Liquidity and Capital Resources - Liquidity needs at SJI 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; working capital needs of our energy trading and
marketing activities; the timing of construction and remediation expenditures
and related permanent financings; mandated tax payment dates; and both
discretionary and required repayments of long-term debt.

                                     SJI-29

         Lines of credit available to SJI totaled $182.0 million at June 30,
2003, of which $125.2 million was used. These lines are available through seven
commercial banks on an uncommitted basis. The banks and SJI review and renew the
lines annually. $157 million of these lines were exclusively for SJG's use. SJI
has long-standing relationships with all of these banks and we believe, based
upon ongoing dialogue, that there will continue to be sufficient credit
available to meet our business' future liquidity needs. However, SJI has begun
the process of obtaining up to $140 million of committed bank facilities to
enhance our liquidity position. We anticipate having committed facilities in
place during the third quarter.

         SJI 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, to finance its long-term needs. These needs
are primarily capital expenditures for property, plant and equipment. Since
1998, SJG has financed these needs via a Medium Term Note (MTN) program, secured
in similar fashion to the First Mortgage Bonds. SJG's registration of a new $150
million MTN program with the Securities and Exchange Commission became effective
in December 2002. This program replaces a previous $100 million, 3-year MTN
program that was fully used in 2001. In July 2003, SJG issued $85.5 million of
long-term debt under the program. Consequently, $64.5 million of the MTN program
remains available for future debt issuances. Proceeds of the July issues were
used to refinance short-term debt outstanding under commercial bank lines.
Current maturities on long-term debt over the next five years are as follows,
$8.4 million per year in 2003 through 2006 and $4.7 million in 2007.

         Since September 2001, Marina issued $20 million of tax-exempt and $25
million of taxable variable rate demand bonds through the New Jersey Economic
Development Authority. The tax-exempt and taxable bonds mature in 2031 and 2021,
respectively. Investors in the bonds receive liquidity and credit support via a
letter of credit provided by a syndicate of commercial banks. We used the
proceeds of this bond issuance to fund project development and construction
costs for the thermal energy plant constructed by Marina to serve The Borgata
Resort which opened in July 2003.

         SJI has raised equity capital over the past three years through its
Dividend Reinvestment Plan (DRP). Participants in SJI's DRP receive newly issued
shares. We offer a 2% discount on DRP investments because it is the most
cost-effective way for us to raise equity capital in the quantities we are
seeking. Through the DRP, SJI raised $5.65 million of equity capital by issuing
173,240 shares for the six months ended June 30, 2003 and $4.9 million of equity
capital by issuing 148,033 shares for the six months ended June 30, 2002.

Capital Expenditures, Commitments and Contingencies

         Capital Expenditures - SJI has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities and equipment and
for environmental remediation costs. We estimate the net costs for 2003, 2004
and 2005 at approximately $58.2 million, $64.0 million and $55.7 million,
respectively.

         Commitments and Contingencies - SJG has certain commitments for both
pipeline capacity and gas supply for which it pays fees regardless of usage.

                                     SJI-30

Those commitments as of June 30, 2003 average $46.2 million annually and total
$277.1 million over the contracts' lives. Approximately 15% of the financial
commitment under these contracts expires during the next five years. We expect
to renew each of these contracts under renewal provisions provided in each
contract. SJG recovers all prudently incurred fees through rates via the BGSS.

             Item 3. Quantitative and Qualitative Disclosures About
                           Market Risks of the Company

Commodity Market Risks

         Certain regulated and unregulated SJI subsidiaries are involved in
buying, selling, transporting and storing natural gas for their own accounts as
well as managing these activities for others. These subsidiaries 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,
swaps, futures and options agreements. To manage these transactions, SJI has a
well-defined risk management policy approved by our board of directors that
includes volumetric and monetary limits. Management reviews reports detailing
trading activity daily. Generally, we enter into derivative activities described
above for risk management, not trading, purposes.

         SJG and SJE transact commodities on a physical basis only and do not
enter into financial derivative positions directly. SJRG manages risk for these
entities as well as for its own portfolio by entering into the types of
transactions noted above. 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
financial impact to SJRG of changes in value of a particular transaction is
substantially offset by an opposite change in the related hedge transaction. As
of June 30, 2003, SJRG had $15.5 million of accounts receivable under sales
contracts. Of that total, 85% were with companies rated investment-grade, or
were guaranteed by an investment-grade-rated parent or were with companies where
we have a collateral arrangement.

         SJRG and SJE entered into certain contracts to purchase, sell, and
transport natural gas. For the quarters ended June 30, 2003 and 2002, we
recorded net unrealized pre-tax losses on these energy trading and related
contracts of $(.8) million and $(.9) million, respectively. For the six months
ended June 30, 2003 and 2002, we recorded net unrealized pre-tax gains on these
energy and related contracts of $.8 million and $.8 million, respectively. These
losses and gains were derived primarily from contracts entered into during 2003
and 2002 and it is included as a component of Revenues - Nonutility. SJRG's and
SJE's contracts are typically less than 12 months long. The fair value of these
contracts determined under the mark-to-market method as of June 30, 2003 is as
follows (in thousands):

Assets
                                     Maturity      Maturity
    Source of Fair Value             < 1 Year      1-3 Years           Total
    --------------------           -----------    -----------      -----------
Prices Actively Quoted     NYMEX   $    14,633    $     3,541      $    18,174
Other External Sources     Basis         5,988            616            6,604
                                   -----------    -----------      -----------
Total                              $    20,621    $     4,157      $    24,778
                                   ===========    ===========      ===========

                                     SJI-31

Liabilities
                                      Maturity      Maturity
    Source of Fair Value              < 1 Year      1-3 Years          Total
    --------------------            ----------    -----------      -----------
Prices Actively Quoted     NYMEX    $    7,715    $     1,348      $     9,063
Other External Sources     Basis         3,288            560            3,848
                                    ----------    -----------      -----------
Total                               $   11,003    $     1,908      $    12,911
                                    ==========    ===========      ===========

         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.

         A reconciliation of SJI's estimated net fair value of energy trading
and related contracts follows (in thousands):

   Net Energy Trading and Related Assets, January 1, 2003            $  14,196
   Contracts Settled During the Six Months Ended June 30, 2003, Net     (2,113)
   Other Changes in Fair Value from Continuing and
      New Contracts,  Net                                                 (216)
                                                                     ----------

   Net Energy Trading and Related Assets, June 30, 2003              $  11,867
                                                                     ==========

Interest Rate Risk

         Our exposure to interest rate risk relates primarily to short-term,
variable rate borrowings. Our short-term, variable rate debt outstanding at June
30, 2003 was $125.2 million and averaged $110.4 million for the first six months
of 2003. A hypothetical 100 basis point (1%) increase in interest rates on our
average variable rate debt outstanding would result in a $651,000 increase in
our interest expense, net of tax, on an annual basis. We chose the 100 basis
point increase 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: 2002 -- 74 b.p. decrease; 2001 -- 383 b.p. decrease; 2000 -- 83 b.p.
increase; 1999 -- 81 b.p. increase; and 1998 -- 38 b.p. decrease. For June 2003,
our average interest rate on variable rate debt was 2.05%.

         To reduce exposure to an interest rate increase on our variable rate
debt, SJG entered into an interest rate swap agreement that became effective in
June 2003 which fixed the rate on $20.0 million of variable rate debt through
May 2004 at 2.24%.. SJG primarily issues long-term debt at fixed rates and,
consequently, interest expense is not significantly impacted by changes in
market interest rates. SJG prepaid, at par, $3.0 million of 8.6% debenture notes
in February 2003. In May 2003, SJG also redeemed an additional $5.1 million of
10.25% first mortgage bonds prior to scheduled maturity. SJG paid a premium of
$110,000 to redeem that issue. The only long-term debt outstanding other than
that issued by the utility consists of the New Jersey Economic Development
Authority bonds used to finance the construction of Marina's thermal plant. They
were issued at floating rates that reset weekly. Subsequent to issuance, we

                                     SJI-32

entered into interest rate swap contracts that effectively fixed the rate on $20
million of tax-exempt debt at 4.08% through 2011 and $19 million of taxable debt
at 4.59% through 2007. The amount of the swap on the taxable debt reduces
annually commencing December 2003.


                         Item 4. Controls and Procedures

         SJI management, including the Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

                                     SJI-33

                          PART II -- OTHER INFORMATION


                            Item l. Legal Proceedings

         Information required by this Item is incorporated by reference to Part
I, Item 1, Note 9, beginning on page 17.


             Item 4. Submission of Matters to a Vote of Security Holders

         (a) Our annual meeting of shareholders was held on April 17, 2003.

         (c) Three Class II directors (with a term expiring 2006) were elected
             as follows:

                                                      For          Withheld
                                                   ----------     ----------
                Shirli M. Billings                 10,851,252       209,452
                Sheila Hartnett-Devlin             10,792,194       268,510
                Frederick R. Raring                10,880,885       179,819

             One Class III director (with a term expiring in 2004)

                Clarence D. McCormick              10,853,941       206,763

             Class I directors (with a term expiring in 2005) continuing in
             office are:
             Charles Biscieglia, Keith S. Campbell, and W. Cary Edwards

             Class III directors (with a term expiring in 2004) continuing in
             office are:
             Herman D. James and William J. Hughes

             The appointment of Deloitte & Touche LLP as our independent
             accountants for the year ending December 2003 was approved by
             a vote of 10,945,035 for the appointment and 58,242 against,
             with 57,427 abstentions.

                    Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Exhibit No.              Description

                  31.1            Certification of Chief Executive Officer
                                  Pursuant to Rule 13a-14(a).

                  31.2            Certification of Chief Financial Officer
                                  Pursuant to Rule 13a-14(a).

                                     SJI-34

                  32              Certification Pursuant to Rule 13a-14(b)
                                  and Section 906 of the Sarbanes-Oxley Act
                                  of 2002 (subsections (a) and (b) of Section
                                  1350, Chapter 63 of Title 18, United
                                  States Code).

         (b)      Form 8-K

                  Dated July 29, 2003     South Jersey Industries issued a press
                                          release providing an earnings report
                                          for the second quarter of 2003, ending
                                          June 30.
                                          Item 9, "Regulation FD Disclosure"
                                          Item 12, "Disclosure of Results of
                                          Operations and Financial Conditions"





                                  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 INDUSTRIES, INC.
                                  (Registrant)



Dated:  August 13, 2003             By:  /s/  Charles Biscieglia
                                         --------------------------------------
                                         Charles Biscieglia
                                         Chief Executive Officer



Dated:  August 13, 2003             By:  /s/  David A. Kindlick
                                         --------------------------------------
                                         David A. Kindlick
                                         Vice President, Treasurer &
                                         Chief Financial Officer


                                     SJI-35

CERTIFICATION                                                      Exhibit 31.1

I, Charles Biscieglia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJI-36

Date: August 13, 2003              /s/ Charles Biscieglia
                                  ---------------------------------------------
                                  Charles Biscieglia
                                  Chairman and Chief Executive Officer

                                     SJI-37

CERTIFICATION                                                      Exhibit 31.2

I, David A. Kindlick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJI-38

Date: August 13, 2003              /s/ David A. Kindlick
                                   --------------------------------------------
                                   David A. Kindlick
                                   Vice President, Chief Financial Officer and
                                   Treasurer

                                     SJI-39


CERTIFICATION                                                        Exhibit 32



           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)



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), each of the
undersigned officers of South Jersey Industries, Inc., a New Jersey Corporation
(the "Company"), does hereby certify, to such officer's knowledge, that:


The Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (the "Form
10-Q") of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 and information contained in the
Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                                     SJI-39

Dated:  August 13, 2003             By:  /s/  Charles Biscieglia
                                         -------------------------------------
                                        Charles Biscieglia
                                        Chairman and Chief Executive Officer


Dated:  August 13, 2003             By:  /s/  David A. Kindlick
                                         --------------------------------------
                                         David A. Kindlick
                                         Vice President, Treasurer &
                                         Chief Financial Officer


The foregoing certification is being furnished solely 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) and is not being filed as part of the Form
10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been
provided to South Jersey Industries, Inc. and will be retained by South Jersey
Industries, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

                                     SJI-40
{"company-data": {"conformed-name": "SOUTH JERSEY INDUSTRIES INC", "cik": "0000091928", "assigned-sic": "4924", "irs-number": "221901645", "state-of-incorporation": "NJ", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-06364", "film-number": "03844571"}, "business-address": {"street1": "1 SOUTH JERSEY PLAZA", "street2": "ROUTE 54", "city": "FOLSOM", "state": "NJ", "zip": "08037", "phone": "609-561-9000"}, "mail-address": {"street1": "1 SOUTH JERSEY PLAZA", "street2": "ROUTE 54", "city": "FOLSOM", "state": "NJ", "zip": "08037"}, "former-company": [{"former-conformed-name": "SOUTH JERSEY GAS CO", "date-changed": "19700507"}, {"former-conformed-name": "ATLANTIC CITY GAS CO", "date-changed": "19680301"}]}
================================================================================

                       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, 2003
                                        -----------------------

                                       OR

[  ]     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 1-6364

                          SOUTH JERSEY INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

        New Jersey                                        22-1901645
 (State of incorporation)                      (IRS employeridentification 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)

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 [ ]

As of August 1, 2003, there were 12,570,161 shares of the registrant's common
stock outstanding.

===============================================================================

                         PART I -- FINANCIAL INFORMATION

              Item 1. Financial Statements-- See Pages 3 through 20

                                     SJI-2

         SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

            (In Thousands Except for Per Share Data)

                                                             Three Months Ended
                                                                   June 30,
                                                             ------------------
                                                               2003       2002
                                                             --------   --------
Operating Revenues:
  Utility                                                    $ 68,164   $ 62,777
  Nonutility                                                   38,051     21,423
                                                             --------   --------
      Total Operating Revenues                                106,215     84,200
                                                             --------   --------
Operating Expenses:
  Cost of Gas Sold - Utility                                   41,965     38,875
  Cost of Sales - Nonutility                                   34,682     19,345
  Operations                                                   12,425     11,278
  Maintenance                                                   1,482      1,673
  Depreciation                                                  5,932      5,582
  Energy and Other Taxes                                        2,207      2,120
                                                              --------  --------
      Total Operating Expenses                                 98,693     78,873

Operating Income                                                7,522      5,327

Other Income and Expense:
  Equity in Affiliated Companies                                  192        203
  Other                                                            20        682
                                                              --------  --------

      Total Other Income and Expense                              212        885

Interest Charges                                                3,721      4,392

Preferred Dividend Requirements of Subsidiary                     764        764
                                                              --------  --------
Income Before Income Taxes                                      3,249      1,056

Income Taxes                                                    1,293        335
                                                              --------  --------

Income from Continuing Operations                               1,956        721

Discontinued Operations - Net                                    (154)     (118)
Cumulative Effect of a Change in Accounting Principle - Net        -         -
                                                              --------  --------
      Net Income Applicable to Common Stock                   $ 1,802      $ 603
                                                              ========  ========
Basic Earnings Per Common Share:
  Continuing Operations                                        $ 0.16    $4 0.06
  Discontinued Operations - Net                                 (0.01)    (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      -          -
                                                              --------  --------
      Basic Earnings Per Common Share                          $ 0.15     $ 0.05
                                                              ========  ========
Average Shares of Common Stock Outstanding - Basic             12,387     11,990

Diluted Earnings Per Common Share:
  Continuing Operations                                        $ 0.16     $ 0.06
  Discontinued Operations - Net                                 (0.01)    (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      -        -
                                                              --------  --------
      Diluted Earnings Per Common Share                        $ 0.15     $ 0.05
                                                              ========  ========
Average Shares of Common Stock Outstanding - Diluted           12,489     12,073

Dividends Declared per Common Share                           $ 0.385    $ 0.375
                                                              ========  ========

The accompanying footnotes are an integral part of the financial statements.

                                     SJI-3

         SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

            (In Thousands Except for Per Share Data)
Six Months Ended
                                                                      June 30,
                                                               ----------------------
                                                                  2003       2002
                                                               ----------  ----------
Operating Revenues:
  Utility                                                      $ 284,304    204,957
  Nonutility                                                     101,737     56,274
                                                               ----------  ---------

      Total Operating Revenues                                   386,041    261,231
                                                               ----------  ---------
Operating Expenses:
  Cost of Gas Sold - Utility                                     197,032    126,318
  Cost of Sales - Nonutility                                      90,899     48,693
  Operations                                                      24,666     21,671
  Maintenance                                                      2,940      3,090
  Depreciation                                                    11,767     11,081
  Energy and Other Taxes                                           7,321      5,962
                                                               ----------  ---------
      Total Operating Expenses                                   334,625    216,815
                                                               ----------  ---------
Operating Income                                                  51,416     44,416

Other Income and Expense:
  Equity in Affiliated Companies                                     379        366
  Other                                                              (96)       609
                                                               ----------  ---------
      Total Other Income and Expense                                 283        975

Interest Charges                                                   7,705      9,039

Preferred Dividend Requirements of Subsidiary                      1,529      1,529
                                                               ----------  ---------
Income Before Income Taxes                                        42,465     34,823

Income Taxes                                                      17,672     14,384
                                                               ----------  ---------
Income from Continuing Operations                                 24,793     20,439

Discontinued Operations - Net                                       (302)      (150)
Cumulative Effect of a Change in Accounting Principle - Net         (426)         -
                                                               ----------  ---------
      Net Income Applicable to Common Stock                     $ 24,065   $ 20,289
                                                               ==========  =========
Basic Earnings Per Common Share:
  Continuing Operations                                           $ 2.01     $ 1.71
  Discontinued Operations - Net                                    (0.03)     (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      (0.03)        -
                                                               ----------  ---------
      Basic Earnings Per Common Share                             $ 1.95     $ 1.70
                                                               ==========  =========
Average Shares of Common Stock Outstanding - Basic                12,316     11,952

Diluted Earnings Per Common Share:
  Continuing Operations                                           $ 2.00     $ 1.70
  Discontinued Operations - Net                                    (0.03)     (0.01)
  Cumulative Effect of a Change in Accounting Principle - Net      (0.03)        -
                                                               ----------  ---------
      Diluted Earnings Per Common Share                           $ 1.94     $ 1.69
                                                               ==========  =========
Average Shares of Common Stock Outstanding - Diluted              12,408     12,011

Dividends Declared per Common Share                              $ 0.770    $ 0.750
                                                               ==========  =========
The accompanying footnotes are an integral part of the financial statements.
SJI-4

                    SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Thousands)
(Unaudited)
                                                                                 June 30,                 December 31,
                                                                       ----------------------------       ------------
                                                                          2003              2002             2002
                                                                       ------------      ----------       -----------
Property, Plant and Equipment:
  Utility Plant, at original cost                                       $ 867,801        $ 822,053        $ 846,865
    Accumulated Depreciation                                             (245,923)        (229,078)        (236,813)
  Nonutility Property and Equipment, at cost                               63,352           42,452           57,950
    Accumulated Depreciation                                               (1,550)          (1,100)          (1,428)
                                                                        -----------      -----------      -----------
        Property, Plant and Equipment - Net                               683,680          634,327          666,574
                                                                        -----------      -----------      -----------
Investments:
  Available-for-Sale Securities                                             3,712            3,330            3,462
  Restricted                                                                3,421            7,026            2,080
  Investment in Affiliates                                                  2,034            1,775            1,849
                                                                        -----------      -----------      -----------

        Total Investments                                                   9,167           12,131            7,391
                                                                        -----------      -----------      -----------
Current Assets:
  Cash and Cash Equivalents                                                 4,635            6,599            4,291
  Accounts Receivable                                                     101,265           61,811           94,105
  Unbilled Revenues                                                         7,489            9,849           33,537
  Provision for Uncollectibles                                             (3,366)          (2,671)          (3,170)
  Natural Gas in Storage, average cost                                     48,832           40,214           41,490
  Materials and Supplies, average cost                                      3,580            3,755            4,156
  Energy Trading and Related Assets                                        20,621           21,968           29,089
  Prepaid Taxes                                                            10,974           11,621            2,440
  Derivatives                                                                 803                -
  Other Prepayments and Current Assets                                      6,068            5,849            6,761
                                                                        -----------       ----------       ----------
        Total Current Assets                                              200,901          158,995          212,699
                                                                        -----------       ----------       ----------
Regulatory and Other Non-Current Assets:
  Deferred Fuel Costs - Net                                                11,941           39,683           31,594
  Other Regulatory Assets                                                  71,912           76,369           73,710
  Energy Trading and Related Assets                                         4,157            5,070            2,767
  Derivatives                                                                  37                -                -
  Unamortized Debt Discount and Expense                                     6,388            6,671            7,086
  Other                                                                    14,607            4,897            9,939
                                                                        -----------       ----------       ----------
        Total Regulatory and Other Non-Current Assets                     109,042          132,690          125,096
                                                                        -----------       ----------       ----------
              Total Assets                                            $ 1,002,790        $ 938,143      $ 1,011,760
                                                                      =============      ===========    =============
The accompanying footnotes are an integral part of the financial statements.
SJI-5

                                   SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                   (In Thousands)
(Unaudited)
                                                                               June 30,                December 31,
                                                                        --------------------------      ----------
                                                                           2003            2002            2002
                                                                        ----------      ----------      ----------
Capitalization and Liabilities

Common Equity:
  Common Stock                                                           $ 15,515         $ 15,014         $ 15,258
  Premium on Common Stock                                                 156,709          144,557          150,434
  Accumulated Other Comprehensive Loss                                     (6,153)          (1,632)          (5,902)
  Retained Earnings                                                        92,558           78,532           78,002
                                                                        ----------      -----------      -----------
        Total Common Equity                                               258,629          236,471          237,792
                                                                        ----------      -----------      -----------
Preferred Stock and Securities of Subsidiary:
   Redeemable Cumulative Preferred Stock:
     South Jersey Gas Company, Par Value $100 per share
       Authorized - 41,966 shares, Outstanding 16,904 shares 8% Series      1,690            1,690            1,690
   South Jersey Gas Company-Guaranteed Mandatorily Redeemable
     Preferred Securities of Subsidiary Trust:
       Par Value $25 per share, 1,400,000 shares
       Authorized and Outstanding                                          35,000           35,000           35,000
                                                                        ----------      -----------       -----------
        Total Preferred Stock and Securities of Subsidiary                 36,690           36,690           36,690
                                                                        -----------     -----------       -----------
Long-Term Debt                                                            230,631          256,514          238,016
                                                                        -----------     -----------       -----------
        Total Capitalization                                              525,950          529,675          512,498
                                                                        -----------     -----------       -----------
Current Liabilities:
  Notes Payable                                                           125,200          107,750          166,500
  Current Maturities of Long-Term Debt                                      8,423            9,733           10,696
  Accounts Payable                                                         80,509           43,042           76,657
  Customer Deposits                                                         7,143            6,484            6,924
  Environmental Remediation Costs                                           5,076           11,293            5,104
  Taxes Accrued                                                            13,518            4,415              892
  Energy Trading and Related Liabilities                                   11,003           14,899           15,565
  Derivatives                                                                 235              243              142
  Deferred Income Taxes - Net                                              19,431           27,117           24,818
  Interest Accrued and Other Current Liabilities                           16,415           14,918            9,334
                                                                        -----------     -----------       -----------
 Total Current Liabilities                                                286,953          239,894          316,632
                                                                        -----------     -----------       -----------
Deferred Credits and Other Non-Current Liabilities:
  Deferred Income Taxes - Net                                             103,355           90,967           97,890
  Investment Tax Credits                                                    3,645            3,992            3,819
  Pension and Other Postretirement Benefits                                18,183           16,347           15,828
  Environmental Remediation Costs                                          47,051           41,423           47,051
  Energy Trading and Related Liabilities                                    1,908            3,938            2,095
  Derivatives                                                               2,965              618            2,431
  Other                                                                    12,780           11,289           13,516
                                                                        -----------     -----------       -----------
        Total Deferred Credits
          and Other Non-Current Liabilities                               189,887          168,574          182,630
                                                                        -----------     -----------       -----------
Commitments and Contingencies  (Note 9)

              Total Capitalization and Liabilities                    $ 1,002,790        $ 938,143      $ 1,011,760
                                                                      ============      ===========     =============
The accompanying footnotes are an integral part of the financial statements.
SJI-6

                             SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                             (In Thousands)
Six Months Ended
                                                                                     June 30,
                                                                          --------------------------------
                                                                              2003              2002
                                                                          --------------    --------------
Cash Flows from Operating Activities:
   Net Income Applicable to Common Stock                                       $ 24,065          $ 20,289
   Adjustments to Reconcile Net Income to Cash Flows
    Provided by Operating Activities:
     Depreciation and Amortization                                               12,942            12,269
     Unrealized Gain on Energy Trading and Related Contracts                       (776)             (782)
     Provision for Losses on Accounts Receivable                                    936               860
     Revenues and Fuel Costs Deferred - Net                                      19,653              (616)
     Deferred and Non-Current Income Taxes and Credits - Net                        846             6,925
     Environmental Remediation Costs - Net                                        3,067             5,789
   Changes in:
     Accounts Receivable                                                         18,148            28,825
     Inventories                                                                 (6,766)           19,627
     Prepayments and Other Current Assets                                           693            (2,233)
     Prepaid and Accrued Taxes - Net                                              4,092            (5,299)
     Accounts Payable and Other Accrued Liabilities                              11,152            (3,924)
     Other - Net                                                                 (3,173)           (3,055)
                                                                          --------------    --------------

          Net Cash Provided by Operating Activities                              84,879            78,675
                                                                          --------------    --------------

Cash Flows from Investing Activities:
   Investment in Affiliate                                                         (183)             (406)
   Affiliate Repayment of Loan                                                      395               350
   Purchase of Available-For-Sale Securities                                          -              (229)
   (Purchase of) Proceeds from Sale of Restricted Investments                    (1,341)           15,936
   Capital Expenditures, Cost of Removal and Salvage                            (29,366)          (40,126)
                                                                          --------------    --------------

          Net Cash Used in Investing Activities                                 (30,495)          (24,475)
                                                                          --------------    --------------

Cash Flows from Financing Activities:
   Net Repayments of Lines of Credit                                            (41,300)          (44,610)
   Proceeds from Issuance of Long-Term Debt                                       6,000            10,000
   Principal Repayments of Long-Term Debt                                       (15,658)          (12,733)
   Dividends on Common Stock                                                     (9,509)           (8,975)
   Proceeds from Sale of Common Stock                                             6,497             4,782
   Payments for Issuance of Long-Term Debt                                          (70)              (30)
                                                                          --------------    --------------

          Net Cash Used in Financing Activities                                 (54,040)          (51,566)
                                                                          --------------    --------------

Net Increase in Cash and Cash Equivalents                                           344             2,634
Cash and Cash Equivalents at Beginning of Period                                  4,291             3,965
                                                                          --------------    --------------

Cash and Cash Equivalents at End of Period                                      $ 4,635           $ 6,599
                                                                          ==============    ==============
The accompanying footnotes are an integral part of the financial statements.
SJI-7

        Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1.  Summary of Significant Accounting Policies:

         Consolidation - The condensed consolidated financial statements include
the accounts of South Jersey Industries, Inc. (SJI) and its subsidiaries. We
eliminated all significant intercompany accounts and transactions. SJI
reclassified some previously reported amounts to conform with current year
classifications. In our opinion, the condensed consolidated financial statements
reflect all adjustments needed to fairly present SJI's financial position and
operating results at the dates and for the periods presented. Our businesses are
subject to seasonal fluctuations and, accordingly, this interim financial
information should not be the basis for estimating the full year's operating
results. These financial statements should be read in conjunction with SJI's
2002 Form 10K and annual report.

         Equity Investments - We classify equity investments purchased as
long-term investments as Available-for-Sale Securities on our condensed
consolidated balance sheets and carry them at their estimated fair value with
any changes in unrealized gains or losses included in Other Comprehensive
Income. SJI, either directly or through its wholly owned subsidiaries, currently
holds a 50% non-controlling interest in two affiliated companies and accounts
for these investments under the equity method. We include the operations of
these affiliated companies in the statements of condensed consolidated income
under the caption, Equity in Affiliated Companies.

              Estimates and Assumptions - We prepare our financial statements to
conform with generally accepted accounting principles. Management makes
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual results could differ from
those estimates.

         Energy Trading Activities & Derivative Instruments - South Jersey
Resources Group, LLC (SJRG) manages its portfolio of purchases and sales, as

                                     SJI-8

well as natural gas in storage, using a variety of instruments that include
forward contracts, swap agreements, option contracts and futures contracts.
Because SJRG's transactions will not necessarily settle physically, SJRG
accounted for these contracts at fair value under Emerging Issues Task Force
(EITF) Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities" or FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. Under this method of
accounting, SJRG measures the difference between the contract price and the fair
value of the contracts and records these as Energy Trading and Related Assets or
Energy Trading and Related Liabilities on our condensed consolidated balance
sheets. For the three months ended June 30, 2003 and 2002, we recorded net
unrealized pre-tax losses of $(.8) million and $(.9) million, respectively. For
the six months ended June 30, 2003 and 2002, we recorded net unrealized pre-tax
gains of $.8 million and $.8 million, respectively. These unrealized gains and
losses on energy trading and related contracts determined under the
mark-to-market method are included in Operating Revenues - Nonutility.

         Beginning with the third quarter of 2002, SJI began presenting revenues
and expenses related to SJRG's physical power contracts and energy-related
derivative contracts on a net basis in our condensed consolidated statements of
income consistent with EITF Issue No. 02-03, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities." Consequently, we reclassified Operating
Revenues - Nonutility and Cost of Sales - Nonutility for the three and six
months ended June 30, 2002 to conform with this presentation. Because of the
difficulty in obtaining certain information, we determined this presentation by
netting the energy contract related revenue and expense transactions of SJRG. As
a result, we based certain nonutility costs of sales on the transfer prices
between SJRG and South Jersey Energy Company (SJE). These transfer prices are
generally at market. There is no effect on operating income or net income from
the above changes in presentation.

         On October 25, 2002, the EITF rescinded its consensus in Issue No.
98-10 effective for transactions entered into after that date, with a cumulative
effect adjustment for previously existing transactions being recognized in the
quarter beginning January 1, 2003. As a result of the recision, SJI only
marks-to-market those energy-related contracts that meet the definition of a
derivative in Statement No. 133. Energy-related contracts that do not meet the
definition of a derivative are accounted for using the accrual basis of
accounting. The effect of this change in accounting resulted in a net charge of
$426,338 shown as a Cumulative Effect of a Change in Accounting Principle - Net.
Furthermore, management has designated any contract entered into after December
31, 2002 to hedge physical gas in storage as cash flow hedges and accounts for
them accordingly. We include these balances on the condensed consolidated
balance sheets under the caption Derivatives. As of June 30, 2003, we calculated
these hedges to be highly effective; therefore, we record the offset, net of
taxes, in Accumulated Other Comprehensive Loss.

         In November 2001, we entered into two interest rate swap contracts. The
first swap effectively provides us with a fixed interest rate of 4.08% on Marina
Energy LLC's (Marina) tax-exempt Series A variable rate bonds for a 10-year
period. The second swap effectively fixed the interest rate of Marina's taxable
Series B variable rate bonds at 4.55% for a 6-year period. The notional amount
of this second swap decreases by $3.0 million per year beginning in December
2005.

         In January 2002, Marina issued an additional $10.0 million of taxable
Series B variable rate bonds. In April 2002, we entered into an interest rate
swap contract that effectively fixed the interest rate on these bonds at 4.62%
for a 4-year period. The notional amount of this swap decreases to $8.0 million
in December 2003, then to $3.9 million in December 2004, and terminates in
December 2005.

         In May 2003, SJG entered into an interest rate swap contract that
effectively fixed the interest rate at 2.24% through May 20, 2004 on $20.0
million of SJG's debt outstanding under its bank lines.

         We entered into interest rate swap agreements to hedge the exposure to
increasing rates with respect to our variable rate debt. The differential to be
paid or received as a result of these swap agreements is accrued as interest
rates change and is recognized as an adjustment to interest expense. We account
for these interest rate swaps as cash flow hedges. As of June 30, 2003 and 2002,

                                     SJI-9

the market value of these swaps was $(2.9) and $(0.9) million, respectively,
which represents the amount we would have to pay the counterparty to terminate
these contracts as of those dates. We include these balances on the condensed
consolidated balance sheets under the caption Derivatives. As of June 30, 2003
and 2002, we calculated the swaps to be highly effective; therefore, we record
the offset to the hedge, net of taxes, in Accumulated Other Comprehensive Loss.

         We determined the fair value of derivative instruments by reference to
quoted market prices of listed contracts, published quotations or quotations
from independent parties.

         New Accounting Pronouncements - In January 2003, SJI adopted FASB
Statement No. 143, "Accounting for Asset Retirement Obligations," which
establishes accounting and reporting standards for legal obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. SJG has certain easements and right-of-way agreements that
qualify as legal obligations under Statement No. 143. However, it is our intent
to maintain these agreements in perpetuity; therefore, no change in SJG's
current accounting practices is required at this time.

         SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When we retire
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, SJG had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in utility plant accumulated depreciation. The
adoption of this statement did not materially affect SJI's financial condition
or results of operations.

         In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," which was effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. Effective April 1, 2003, SJI adopted the policy
of accounting for this compensation using the fair value based method on a
prospective basis. This method calls for the expensing of the difference between
the estimated fair value of a stock option and the amount, if any, that the
employee must pay for the option. The provisions of this statement currently
have no impact on SJI's financial statements.

         In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJI will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJI's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.

                                     SJI-10

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

                                    Years     June 30    June 30     December 31
                                   Remaining    2003       2002          2002
------------------------------------------------------------------------------
Environmental Remedation Costs:
   Expended - Net                      7    $  3,375     $ 7,016    $     6,470
   Liability for Future Expenditures   -      48,211      48,790         48,211
Income Taxes - Flowthrough
  Depreciation                        8.3      8,108       9,086          8,597
Postretirement Benefit Costs          9.5      3,591       3,969          3,780
Gross Receipts and Franchise Taxes    3.6      1,589       2,032          1,811
Other                                  -       7,038       5,476          4,841
                                            ------------------------------------
     Total Other Regulatory Assets          $ 71,912    $ 76,369    $    73,710
                                            ====================================

         Each item separately identified is being recovered through utility rate
charges without a return on investment over the period indicated. The majority
of the assets reflected above under the caption "Other" are currently subject to
filings with the New Jersey Board of Public Utilities (BPU) requesting recovery.
Management believes that all such deferred costs are probable of recovery from
ratepayers through future utility rates.

         In addition, SJG has one significant regulatory liability for
overcollected taxes totaling $3.8 million and $2.3 million, including interest,
as of June 30, 2003 and 2002, respectively. We include these amounts in the
caption "Other" under the heading Deferred Credits and Other Non-Current
Liabilities and they are subject to being returned to ratepayers in future rate
proceedings.

Note 2.  Divestitures and Affiliations:

         Divestitures - In 1996, Energy & Minerals, Inc. (EMI), an SJI
subsidiary, sold the common stock of The Morie Company, Inc. (Morie), its sand
mining and processing subsidiary.

         In 1997, R&T Group, Inc., SJI's construction subsidiary, sold all its
operating assets, except some real estate.

         SJI conducts tests annually to estimate the environmental remediation
costs for properties owned by South Jersey Fuel, Inc. (SJF), an EMI subsidiary,
from its previously operated fuel oil business. SJI reports the environmental
remediation activity related to these properties as discontinued operations.
This reporting is consistent with previous years.

         SJG operated two retail stores which sold natural gas appliances. The
stores were intended to provide gas customers with access to and choice among
natural gas appliances. In 2001, SJG formally discontinued this merchandising
segment of its operations as those appliances are readily available from other
retailers.

                                     SJI-11

         Summarized operating results of the discontinued operations for the
three and six months ending June 30 were (in thousands):

                                        Three Months Ended      Six Months Ended
                                               June 30,             June 30,
                                          2003       2002       2003        2002
                                       -----------------------------------------
Loss before Income Taxes:
     Sand Mining                        $ (219)    $ (175)    $ (429)    $ (206)
     Construction                           (8)        (6)       (16)       (12)
     Fuel Oil                              (10)       (16)       (21)       (31)
Income Taxes                                83         79        164         99
                                        ----------------------------------------
Loss from Discontinued Operations - Net $ (154)    $ (118)    $ (302)    $ (150)
                                        ========================================
Earnings Per Common Share from
     Discontinued Operations - Net      $ (0.01)   $ (0.01)   $(0.03)   $(0.01)
                                        ========================================

Losses from sand mining are mainly comprised of environmental remediation and
product liability litigation associated with Morie's prior activities.

         Affiliations - In January 1999, SJI and Conectiv Solutions, LLC formed
Millennium Account Services, LLC to provide meter reading services in southern
New Jersey.

         In June 1999, SJE and Energy East Solutions, Inc. (EES) formed South
Jersey Energy Solutions, LLC (SJES) to market retail electricity and energy
management services. SJES began supplying retail electric during 2000, and
ceased active operations in May 2002. In January 2003, SJES became a wholly
owned subsidiary of SJE when EES redeemed its 50% interest in SJES for the book
value of its investment of $54,686.

         In April 2000, SJE and GZA GeoEnvironmental, Inc. formed AirLogics,
LLC to market a jointly developed air monitoring system designed to assist
companies involved in environmental cleanup activities.

         In October 2000, SJI formed Marina, a wholly owned subsidiary, to
develop, construct and operate a $56.6 million thermal energy plant. In December
2000, Marina entered into a 20-year contract with Marina District Development
Corporation to supply heat, hot water and cooling to The Borgata Resort. The
plant began commercial operations in July 2003.

Note 3.  Common Stock:

         SJI has 20,000,000 shares of authorized Common Stock. The following
shares were issued and outstanding:

                                     SJI-12

                                                  2003               2002
                                               ----------------------------
Beginning Balance, January 1                   12,206,474        11,860,990
New Issues During Year:
     Dividend Reinvestment Plan                   173,240           148,033
     Employees' Stock Ownership Plan                  832             1,731
     Stock Option, Stock Appreciation Rights
         and Restricted Stock Award Plan           32,005               590
                                               ----------------------------
Ending Balance, June 30                        12,412,551        12,011,344
                                               ============================

         We credited the par value ($1.25 per share) of stock issued in 2003 and
2002 to Common Stock. We credited the net excess over par value of approximately
$6.3 million and $4.6 million, respectively, to Premium on Common Stock.

         Earnings Per Common Share - We present basic EPS based on the
weighted-average number of common shares outstanding. EPS are presented in
accordance with FASB Statement No. 128, "Earnings Per Share," which establishes
standards for computing and presenting basic and diluted EPS. The incremental
shares required for inclusion in the denominator for the diluted EPS calculation
were 101,782 and 82,634 shares for the three months ended, and 91,941 and 58,654
shares for the six months ended June 30, 2003 and 2002, respectively. These
shares relate to restricted stock and stock options and were calculated using
the treasury stock method.

         Stock Option, Stock Appreciation Rights and Restricted Stock Award Plan
- Under this plan, no more than 306,000 shares in the aggregate may be issued to
SJI's officers and other key employees. No options or stock appreciation rights
may be granted under the Plan after November 22, 2006. At June 30, 2003 and
2002, SJI had no options outstanding. No options were granted in 2003 or 2002.
Prior to 2003, SJI valued stock options to employees using the intrinsic value
method. Effective in 2003, SJI adopted the policy of accounting for this
compensation using the fair value based method on a prospective basis. No stock
appreciation rights were issued under the Plan. In 1999, we amended the Plan to
include restricted stock awards. In 2003 and 2002, we granted 30,810 and 23,839
restricted shares, respectively. These restricted shares vest over a 3-year
period and are subject to SJI achieving certain performance targets.

         Dividend Reinvestment Plan (DRP) and Employees' Stock Ownership Plan
(ESOP) - Newly issued shares of common stock offered through the DRP are issued
directly by SJI. All shares offered through the ESOP are also issued directly by
SJI. As of June 30, 2003, SJI reserved 992,467 and 14,734 shares of authorized,
but unissued, common stock for future issuance to the DRP and ESOP,
respectively.

Note 4.  Financial Instruments:

         Restricted Investments - In accordance with the terms of Marina's bond
agreements, we are required to invest unused proceeds in high-quality, highly
liquid investments pending approved construction expenditures. As of June 30,
2003 and 2002, these residual proceeds totaled $.7 and $6.9 million,
respectively.

                                     SJI-13

         Margin Account - SJRG maintains a margin account with a national
investment firm to support its energy trading activities. As of June 30, 2003
and 2002, the account reflected a $2.7 million and $68.0 thousand balance due to
changes in the market value of outstanding contracts.

Note 5.           Segments of Business:

         Information about SJI's operations in different industry segments for
the three and six months ended June 30 is presented below (in thousands):
Three Months Ended         Six Months Ended
                                                   June 30,                  June 30,
                                        ---------------------------------------------------
                                               2003         2002         2003         2002
Operating Revenues:
     Gas Utility Operations             $    75,608  $    65,006  $   315,544  $   219,189
     Wholesale Gas Operations                 1,632          525        5,998        3,499
     Retail Gas and Other Operations         35,865       20,645       94,596       53,056
     On-Site Energy Production                  981           64        2,000           71
                                        ---------------------------------------------------
         Subtotal                           114,086       86,240      418,138      275,815
     Intersegment Sales                      (7,871)      (2,040)     (32,097)     (14,584)
                                        ---------------------------------------------------
         Total Operating Revenues          $106,215     $ 84,200  $   386,041  $   261,231
                                        ===================================================

Operating Income:
     Gas Utility Operations             $     5,919  $     4,183  $    44,226  $    38,635
     Wholesale Gas Operations                 1,368          593        3,271        3,341
     Retail Gas and Other Operations            149          784        3,869        2,583
     On-Site Energy Production                  271           14          480           21
     General Corporate                         (185)        (247)        (430)        (164)
                                        ---------------------------------------------------
         Total Operating Income         $     7,522  $     5,327  $    51,416  $    44,416
                                        ===================================================

Depreciation and Amortization:
     Gas Utility Operations             $     6,445  $     6,117  $    12,816  $    12,204
     Wholesale Gas Operations                     3            3            6            6
     Retail Gas and Other Operations             26           22           49           42
     On-Site Energy Production                   34            -           57            -
     Discontinued Operations                      7           10           14           17
                                           ------------------------------------------------
       Total Depreciation and Amortization $  6,515  $     6,152  $    12,942  $    12,269
                                           ================================================

Property Additions:
     Gas Utility Operations             $    11,956  $    11,797  $    23,660  $    21,367
     Wholesale Gas Operations                     -            -            -           -
     Retail Gas and Other Operations            109           52          156           55
     On-Site Energy Production                1,611       10,775        5,286       18,298
     Discontinued Operations                      -            -            -           -
                                        ---------------------------------------------------
         Total Property Additions       $    13,676  $    22,624  $    29,102  $    39,720
                                        ===================================================
SJI-14

Identifiable Assets:
Gas Utility Operations                                       $   851,598  $   831,024
     Wholesale Gas Operations                                          64,059       37,396
     Retail Gas and Other Operations                                   31,359       24,982
     On-Site Energy Production                                         68,697       48,733
     Discontinued Operations                                            2,313        2,359
                                                                ---------------------------
         Subtotal                                                   1,018,026      944,494
     Corporate Assets                                                  29,959       27,276
     Intersegment Assets                                              (45,195)     (33,627)
                                                                ---------------------------
         Total Identifiable Assets                              $   1,002,790  $   938,143
                                                                ===========================
Gas Utility Operations consists primarily of natural gas distribution
to residential, commercial and industrial customers. Wholesale Gas Operations
include SJRG's activities. Retail Gas and Other Operations include natural gas
and electricity acquisition and transportation service companies. On-Site Energy
Production consists of Marina's construction and related financing activities.

         SJI's interest expense relates primarily to SJG's borrowing and
financing activities. Interest income is essentially derived from borrowings
between the subsidiaries and is eliminated during consolidation.

Note 6.           Comprehensive Income:

         The components of comprehensive income for the three and six months
ended June 30 are as follows (in thousands):
Three Months Ended           Six Months Ended
                                                                        June 30,                   June 30,
                                                                   2003         2002          2003         2002
                                                            -----------------------------------------------------
Net Income Applicable to Common Stock                       $     1,802    $     603   $    24,065    $    20,289
Other Comprehensive Income (Loss):
     Change in Fair Value of Investments - Net *                    193            -          153             -
     Change in Fair Value of Energy Trading
         and Related Assets / Liabilities - Net *                 1,643          865         (186)           865
     Change in Fair Value of Interest Rate
         Swaps - Net *                                             (323)        (941)        (218)          (810)
                                                            -----------------------------------------------------
Total Other Comprehensive Income (Loss)                           1,513          (76)        (251)            55
                                                            -----------------------------------------------------
Comprehensive Income                                        $     3,315    $     527   $   23,814     $   20,344
                                                            =====================================================
* Determined using an effective tax rate of 40.85%.
SJI-15

Note 7.  Regulatory Actions:

         In January 1997, the BPU granted SJG a 9.62% rate of return on rate
base, which included an 11.25% return on common equity. Additionally, our
threshold for sharing pre-tax margins generated by interruptible and off-system
sales and transportation increased. Currently, SJG keeps 100% of pre-tax margins
up to the threshold level of $7.8 million. The next $750,000 is credited to
customers through the Basic Gas Supply Service ("BGSS") clause. Thereafter, SJG
keeps 20% of the pre-tax margins as it has historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC). The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through automatic rate changes under certain conditions and under
certain limitations, resulting in the reduction of over/under-recoveries. LGAC
related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

                                     SJI-16

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas cost
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.

Note 8.  Retained Earnings:

         Restrictions exist under various loan agreements regarding the amount
of cash dividends or other distributions that SJG may pay on its common stock.
As of June 30, 2003, SJG's restrictions do not affect the amount that may be
distributed from SJI's retained earnings.

Note 9.  Commitments and Contingencies:

         Construction and Environmental - SJI's estimated net cost of
construction and environmental remediation programs for 2003 totals $57.8
million. Commitments were made regarding some of these programs.

         Pending Litigation - SJI is subject to claims arising in the ordinary
course of business and other legal proceedings. We accrue liabilities related to
these claims when we can determine the amount or range of amounts of likely
settlement costs for those claims. Among other actions, SJI has been named in
certain product liability claims related to our former sand mining subsidiary.
Management does not currently anticipate the disposition of any known claims to
have a material adverse effect on SJI's financial position, results of
operations or liquidity.

                                     SJI-17

         Parental Guarantees - In 2002, the FASB released Interpretation No. 45
(FIN 45) "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires
companies to disclose the nature of its guarantees or indemnification agreements
for interim and year-end financial statements ending after December 15, 2002. As
of June 30, 2003, SJI had issued $113.1 million of parental guarantees on behalf
of its subsidiaries. Of this total, $76.5 million expire within one year, $83.8
million expire within two years and $29.3 million presently have no expiration
date. The vast majority of these guarantees were issued as guarantees of payment
to third parties with whom our subsidiaries have commodity supply contracts. As
of June 30, 2003, these guarantees support $25.5 million of the Accounts Payable
recorded on our condensed consolidated balance sheet. As part of our risk
management policy, we also require parental guarantees from trading
counterparties as applicable. These arrangements are typical in our industry.
SJI has also issued two parental guarantees totaling $7.3 million related to
Marina's construction activity.

         Standby Letters of Credit - SJI provided a $17 million standby letter
of credit to Marina District Development Corporation in support of Marina's
contractual obligations to construct the thermal energy plant and to supply
heat, hot water and cooling to The Borgata Resort. This letter of credit was
reduced to $6.4 million as of June 30, 2003.

         As of June 30, 2003, SJI also provided $46 million of standby letters
of credit by commercial banks supporting the variable rate demand bonds issued
through the New Jersey Economic Development Authority were used to finance
Marina's thermal plant project.

         Environmental Remediation Costs - SJI incurred and recorded costs for
environmental clean up of sites where SJG or its predecessors operated gas
manufacturing plants. SJG stopped manufacturing gas in the 1950s. SJI and some
of its nonutility subsidiaries also recorded costs for environmental clean up of
sites where SJF previously operated a fuel oil business and Morie maintained
equipment, fueling stations and storage.

         SJI successfully entered into settlements with all of its historic
comprehensive general liability carriers regarding the environmental remediation
expenditures at the SJG sites. Also, SJG purchased a Cleanup Cost Cap Insurance
Policy limiting the amount of remediation expenditures that SJG will be required
to make at 11 of its sites. This Policy will be in force until 2024 at 10 sites
and until 2029 at one site. The minimum future cost estimate discussed below is
not reduced by projected insurance recoveries from the Cleanup Cost Cap
Insurance Policy.

         Since the early 1980s, SJI accrued environmental remediation costs of
$139.1 million, of which $87.0 million has been spent as of June 30, 2003. With
the assistance of a consulting firm, we estimate that future costs to clean up
SJG's sites will range from $48.2 million to $143.9 million. We recorded the
lower end of this range as a liability. It is reflected on the 2003 condensed
consolidated balance sheet under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. Recorded amounts include estimated
costs based on projected investigation and remediation work plans using existing
technologies. Actual costs could differ from the estimates due to the long-term
nature of the projects, changing technology, government regulations and
site-specific requirements. The major portion of accrued environmental costs
relate to the clean up of SJG's former gas manufacturing sites.

                                     SJI-18

         SJG has two regulatory assets associated with environmental costs. The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of Statement No.
71. The BPU allows SJG to recover expenditures through the RAC.

         The other asset titled Environmental Remediation Cost: Liability for
Future Expenditures relates to estimated future expenditures determined under
the guidance of FASB Statement No. 5, "Accounting for Contingencies." We
recorded this amount, which relates to former manufactured gas plant sites, as a
deferred debit with the corresponding amount reflected on the condensed
consolidated balance sheets under the captions Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. The deferred debit is a regulatory
asset under Statement No. 71. The BPU's intent, evidenced by current practice,
is to allow SJG to recover the deferred costs over 7-year periods after they are
spent.

         As of June 30, 2003, we reflected SJG's unamortized remediation costs
of $3.4 million on the condensed consolidated balance sheet under the caption
Regulatory Assets. Since implementing the RAC in 1992, SJG has recovered $38.7
million through rates.

         With Morie's sale, EMI assumed responsibility for environmental
liabilities estimated between $2.7 million and $8.8 million. The information
available on these sites is sufficient only to establish a range of probable
liability and no point within the range is more likely than any other.
Therefore, EMI continues to accrue the lower end of the range. Changes in the
accrual are included in the statements of condensed consolidated income under
the caption Loss from Discontinued Operations - Net.

         SJI and SJF estimated their potential exposure for the future
remediation of four sites where fuel oil operations existed years ago. Estimates
for SJI's site range between $0.1 million and $0.3 million, while SJF's
estimated liability ranges from $1.1 million to $4.9 million for its three
sites. We recorded the lower ends of these ranges on the condensed consolidated
balance sheet under Current Liabilities and Deferred Credits and Other
Non-Current Liabilities as of June 30, 2003.

Note 10.          Subsequent Event:

         On July 16, 2003, SJG made settlement on $85.5 million of debt under
its Medium Term Note Program established in 2002. A remainder of $64.5 million
is authorized to be issued under this program through July 31, 2005. The debt
issued has maturities of 10, 11, 13, 14 and 30 years, with a weighted-average
maturity of 19 years and a weighted-average interest rate of 4.95%. Proceeds
were used to refinance short-term borrowings under commercial bank lines.

                                     SJI-19

           Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

 Overview

         South Jersey Industries, Inc. (SJI) is an energy services holding
company that provides a variety of products and services through the following
wholly owned subsidiaries:

         1) South Jersey Gas Company (SJG) is a regulated natural gas utility.
SJG distributed natural gas in the seven southernmost counties of New Jersey to
298,877 customers at June 30, 2003 compared with 291,691 customers at June 30,
2002. SJG also:

     o   sells natural gas and pipeline transportation capacity
         off-system sales) on a wholesale basis to various customers
         on the interstate pipeline system;

     o   transports natural gas purchased directly from producers or
         suppliers for its own sales and for some of its customers; and

     o   services appliances via the sale of appliance warranty programs,
         as well as on a time and materials basis.

          2) South Jersey Energy Company (SJE) acquires and markets natural gas
to retail end users and provides total energy management services to commercial
and industrial customers. SJE has one subsidiary, SJ EnerTrade (EnerTrade), that
formerly provided services for natural gas sales to the casino industry in
Atlantic City, N.J. and is now inactive. SJE also markets an air quality
monitoring system through AirLogics, LLC. SJE and GZA GeoEnvironmental, Inc., an
environmental consulting firm, each have a 50% equity interest in AirLogics.

         3) South Jersey Resources Group, LLC (SJRG) markets wholesale natural
gas storage, commodity and transportation in the mid-Atlantic and southern
states. SJRG also conducts price-risk management activities.

         4) Marina Energy LLC (Marina) develops and operates energy-related
projects in southern New Jersey. Marina's largest project, the development of a
facility to provide cooling, heating and hot water to The Borgata Resort in
Atlantic City, began commercial operations in July 2003.

         SJI also has a joint venture investment with Conectiv Solutions, LLC in
Millennium Account Services, LLC (Millennium). Millennium provides meter reading
services to SJG and Conectiv Power Delivery in southern New Jersey.

         Estimates and Assumptions - As described in the footnotes to our
condensed consolidated financial statements, management must make estimates and
assumptions that affect the amounts reported in the financial statements and
related disclosures. Actual results could differ from those estimates. Three

                                     SJI-20

types of transactions presented in our condensed consolidated financial
statements require a significant amount of judgment and estimation. These relate
to regulatory assets, energy trading activities and environmental remediation
costs.

         The New Jersey Board of Public Utilities (BPU) has reviewed and
approved, through specific orders, most of the items shown as regulatory assets.
Other items represent costs that were not yet approved by the BPU for recovery,
but are the subject of current or future filings. In recording these costs as
regulatory assets, management believes the costs are probable of recovery under
existing rate-making concepts that are embodied in current rate orders received
by SJG. However, ultimate recovery is subject to BPU approval.

         Beginning January 1, 2001, SJI recognizes assets or liabilities for the
energy-related contracts entered into by its non-regulated subsidiary, SJRG,
when the contracts are executed. We record contracts at their fair value in
accordance with FASB Statement No. 133. We adjust the fair value of the
contracts each reporting period for changes in the market. We derive the fair
value for most of the energy-related contracts from markets where the contracts
are actively traded and quoted. For other contracts, SJI uses published market
surveys and in certain cases, independent parties to obtain quotes concerning
the contracts' current value. Market quotes tend to be more plentiful for
contracts maturing in two years or less. Very few of our contracts extend beyond
two years.

         An outside consulting firm assists us in estimating future costs for
environmental remediation activities. We estimate future costs based on
projected investigation and work plans using existing technologies. Developing a
single reliable estimation point is not feasible because of the amount of
uncertainty involved in the nature of projected remediation efforts and the long
period over which remediation efforts will continue. Therefore, we estimate the
range of future costs at $52.1 million to $157.9 million. In preparing financial
statements, SJI records liabilities for future costs using the lower end of the
range. We update estimates each year to take into account past efforts, changes
in work plans and remediation technologies.

         Revenue Recognition - SJG, SJE and SJRG bill customers monthly for gas
delivered and recognize those revenues during the month. For SJG and SJE retail
customers we do not bill at the end of each month; we make an accrual to
recognize revenues for gas delivered from the date of the last meter reading to
the end of the month. We bill SJG customers at rates approved by the BPU. SJE
and SJRG customers are billed at rates negotiated between the parties.

         We defer and recognize revenues related to SJG's appliance warranty
contracts over the full 12-month term of the contract as earned.

         The BPU allows SJG to recover the excess cost of gas sold over the cost
included in rates through the Basic Gas Supply Service (BGSS) price structure
(formerly known as the Levelized Gas Adjustment Clause). SJG defers
over/under-recoveries of gas costs and includes them in subsequent adjustments
to the BGSS rate or other similar rate recovery mechanism. These adjustments
result in over/under-recoveries of gas costs being included in rates during
future periods. As a result of these deferrals, utility revenue recognition does
not directly translate to profitability. While we realize profits on gas sales
during the month of providing the utility service, significant shifts in revenue

                                     SJI-21

recognition may result from the various recovery clauses approved by the BPU
(See Regulatory Matters) without shifting profits between periods, as these
clauses provide for recovery of costs on a dollar-for-dollar basis.

         New Accounting Pronouncements - In January 2003, SJI adopted Statement
No. 143, "Accounting for Asset Retirement Obligations," which establishes
accounting and reporting standards for legal obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. SJG has certain easements and right-of-way agreements that qualify as
legal obligations under Statement No. 143. However, SJG intends to maintain
these agreements in perpetuity; therefore, no change in its current accounting
practices is required at this time.

          SJG recovers certain asset retirement costs through rates charged to
customers as an approved component of depreciation expense. When SJG retires
depreciable properties, we charge the original cost thereof, plus cost of
removal less salvage, to accumulated depreciation. As of June 30, 2003, SJG had
accrued amounts in excess of actual removal costs incurred totaling $43.5
million which is included in utility plant accumulated depreciation. We do not
expect the adoption of this statement to materially affect SJI's financial
condition or results of operations.

          In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," which is effective for
SJI's 2002 annual financial statements and subsequent interim financial
reporting. This statement provides alternate methods of transitioning for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it requires prominent disclosures about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The provisions of this statement currently have
no impact on SJI's financial statements.

        In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  The Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. Management has evaluated the
impact of the adoption of FIN 46 and has determined that SJG's Capital Trust,
which was established for the sole purpose of issuing $35 million of mandatorily
redeemable preferred securities, will no longer be consolidated into the
financial statements of SJI effective July 1, 2003. The impact of this
deconsolidation will cause SJI to report the investment in SJG's Capital Trust
as a separate $1.1 million investment in an unconsolidated entity, the original
equity investment amount in the SJG Capital Trust. SJI will also report the
$36.1 million subordinate debenture to the SJG Capital Trust as debt on its
balance sheet rather than the $35 million of mandatorily redeemable preferred
securities that it had previously reported. The adoption of FIN 46 is not
expected to have a material impact on SJI's net income or retained earnings for
the periods reported.

         In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
effective for certain contracts entered into or modified and for hedging
relationships designated after June 30, 2003. The amendments set forth in
Statement No. 149 require that certain contracts with comparable characteristics
be accounted for similarly. We expect no impact on our financial statements from
the provisions of this statement.

         In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement No. 150 requires that certain types of financial instruments be
reported as liabilities by their issuers. With the adoption of FIN 46, we expect
Statement No. 150 to have no impact on our financial statements.

          Forward-Looking Statements - This report contains certain
forward-looking statements concerning projected financial and operating
performance, future plans and courses of action and future economic conditions.
All statements in this report other than statements of historical fact are
forward-looking statements. These forward-looking statements are made based upon
management's expectations and beliefs concerning future events impacting the
company and involve a number of risks and uncertainties. We caution that

                                     SJI-22

forward-looking statements are not guarantees and actual results could differ
materially from those expressed or implied in the forward-looking statements.
Also, in making forward-looking statements, we assume no duty to update these
statements should expectations change or actual results and events differ from
current expectations.

         A number of factors could cause our actual results to differ materially
from those anticipated including, but 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; regulatory and court decisions; competition
in our utility and nonutility activities; the availability and cost of capital;
our ability to maintain existing joint ventures to take advantage of marketing
opportunities; 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.

         Mandatorily Redeemable Preferred Securities - SJG's statutory trust
subsidiary, SJG Capital Trust, currently has $35 million of 8.35% SJG-Guaranteed
Mandatorily Redeemable Preferred Securities outstanding. SJG may redeem these
securities at a price equal to 100% of the principal amount at any time. The
securities currently trade on the New York Stock Exchange under the symbol
SJI.T. As noted above, these securities will be reflected as liabilities
effective July 1, 2003.

         Customer Choice Legislation - All residential natural gas customers in
New Jersey can choose their gas supplier under the terms of the Electric
Discount and Energy Competition Act of 1999. As of June 30, 2003, 95,410 SJG
residential customers chose a natural gas commodity supplier other than the
utility. This number increased from 63,682 at June 30, 2002 as marketers were
able to offer natural gas at prices competitive with those available under
regulated utility tariffs. Customers purchasing natural gas from providers other
than SJG are charged for gas costs by the marketer, not SJG. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in SJG's gas
costs. While customer choice can reduce utility revenues, it does not negatively
affect SJG's net income or financial condition. The BPU continues to allow for
full recovery of natural gas costs through the Basic Gas Supply Service as well
as other costs of service including deferred costs, through tariffs. SJI has
benefited from customer choice legislation as SJE has successfully competed for
and profited from its gas commodity customers.

         Temperature Adjustment Clause -

         SJG's Board of Public Utilities approved Temperature Adjustment Clause
(TAC) had the following impacts on 2003 and 2002 second quarter and six months
net earnings:

                                                     2003              2002
                                                ------------       ------------
         TAC Adjustment (Decrease) Increase to
           Net Income (in thousands)

              Quarter Ended June 30             $    (1,022)      $        247
              Six Months Ended June 30          $    (2,377)      $      3,249

                                     SJI-23

         The clause is designed to mitigate the effect of variations in heating
season temperatures from historical norms for both SJG and its customers. While
the revenue and income impacts of TAC adjustments are recorded as incurred, cash
inflows or outflows directly attributable to TAC adjustments generally do not
begin until the next TAC year. Each TAC year begins October 1.

          Operating Revenues - Utility - Revenues increased $5.4 million and
$79.3 million in the second quarter and for the six months ended June 30, 2003,
respectively, compared with the prior year periods. These increases were
primarily due to three factors. First, weather in the second quarter and for the
six months ended June 30, 2003 was 41.9% and 30.3% colder than the respective
prior year periods. Second, off-system sales revenues increased due to higher
prices for natural gas sold in 2003 than in the prior year. Third, SJG's total
customers increased from 291,691 as of June 30, 2002 to 298,877 as of June 30,
2003. Partially offsetting the effect of these factors was a 50% increase in the
number of residential customers purchasing their gas from a source other than
SJG. The decline in customers who purchased their natural gas from SJG directly
impacted utility revenues. However, since gas costs are passed on directly to
customers without any profit margin added by SJG, the increased customer usage
of gas marketers did not impact SJG's profitability.

         As a result of SJG's Temperature Adjustment Clause, revenues from
utility ratepayers are closely tied to 20-year normal temperatures calculated
under the clause and not actual temperatures. While the clause significantly
reduces fluctuations in revenues related to temperature, as a general rule,
revenues continue to be positively impacted by colder weather and negatively
impacted by warmer weather. Weather in the second quarter of 2003 was 41.9%
colder than in 2002 and 28.9 % colder than the 20-year TAC average. During the
six months ended June 30, 2003, weather was 30.3% colder than in 2002 and 10.1%
colder than the 20-year TAC average.

         The following is a comparison of operating revenue and throughput for
the three and six month periods ended June 30, 2003 vs. the same periods ended
June 30, 2002.
Three Months Ended         Six Months Ended
                                                       June 30,                  June 30,
                                                  2003         2002         2003         2002
                                           ---------------------------------------------------
Operating Revenues (Thousands):
Firm
     Residential                           $    25,699  $    25,133  $   115,007  $   101,232
     Commercial                                  7,287        6,111       34,717       28,655
     Industrial                                    973          838        3,340        2,547
     Cogeneration & Electric Generation          1,969        2,963        3,291        3,579
     Firm Transportation                        13,142        8,394       41,202       22,658
                                           ---------------------------------------------------

         Total Firm Operating Revenues          49,070       43,439      197,557      158,671
                                           ---------------------------------------------------

Interruptible                                      558          307        1,049          546
Interruptible Transportation                       300          327          495          802
Off-System                                      22,985       18,908      111,715       54,661
Capacity Release & Storage                       1,510        1,136        2,813        2,830
Other                                            1,124          890        1,854        1,680
Intercompany Sales                              (7,383)      (2,230)     (31,179)     (14,233)
                                           ---------------------------------------------------

         Total Operating Revenues          $    68,164  $    62,777     $284,304     $209,957
                                           ===================================================

Throughput (MMcf):
Firm
     Residential                                 2,449        2,229       10,504        9,371
     Commercial                                    793          684        3,522        3,018
     Industrial                                     43           24          148          115
     Cogeneration & Electric Generation            240          635          348          722
     Firm Transportation                         6,427        5,311       17,490       12,794
                                           ---------------------------------------------------

         Total Firm Throughput                   9,952        8,883       32,012       26,020
                                           ---------------------------------------------------

Interruptible                                       96           55          132          103
Interruptible Transportation                       547          683          958        1,640
Off-System                                       3,744         4,940      15,474       16,243
Capacity Release & Storage                      10,402       10,498       16,395       17,144
                                           ---------------------------------------------------

         Total Throughput                       27,741       25,059       64,971       61,150
                                           ===================================================
SJI-24

          Total gas throughput increased 10.7% % to 27.7 billion cubic feet
(Bcf) in the second quarter and 6.2% to 65.0 Bcf for the six months ended June
30, 2003 compared with the respective prior year periods. The higher throughput
was primarily due to colder temperatures experienced in 2003. The increase in
firm transportation throughput reflected the increasing number of households
purchasing their gas from suppliers other than SJG.

         Operating Revenues - Nonutility - Nonutility operating revenues
increased by $16.6 million and $45.5 million for the second quarter and first
six months of 2003, respectively, compared to the same periods of 2002. Most of
the increase was due to the significant customer growth experienced by SJE,
evidenced by the addition of over 32,500 residential and 2,300 commercial
natural gas customers over the last twelve months. Higher natural gas prices
and significantly colder weather primarily in the first quarter also
contributed to this increase.

         Cost of Gas Sold - Utility - Gas purchased for resale increased $3.1
million and $70.7 million for the second quarter and for the six months ended
June 30, 2003, respectively, compared with the same periods in 2002 due
principally to an increase in firm gas sales volume and higher gas costs for
off-system sales. Colder weather was the main cause of the increase in firm gas
sales volume; however, this was partially offset by the migration of firm gas
sales customers to transportation service. SJG's gas cost during the second
quarter of 2003 averaged $7.05 per decatherm (dt) compared with $3.79/dt in
2002. During the six months ended June 30, 2003, gas costs averaged $6.64/dt
compared with $4.01/dt in 2002. Unlike gas costs associated with off-system
sales, changes in the unit cost of gas sold to utility ratepayers do not
directly affect cost of gas sold. We defer fluctuations in gas costs to
ratepayers not reflected in current rates in future periods under a BPU-
approved Basic Gas Supply Service price structure, formerly known as the
Levelized Gas Adjustment Clause. Gas supply sources include contract and

                                     SJI-25

open-market purchases. SJG secures and maintains its own gas supplies to serve
its sales customers. We do not anticipate any difficulty renewing or replacing
expiring contracts under substantially similar terms and conditions.

         Cost of Sales - Nonutility - Cost of sales - nonutility increased $15.3
million and $42.2 million for the second quarter and six months ended June 30,
2003 compared to the same periods of 2002 due mainly to SJE's customer growth,
colder temperatures and higher gas prices as described in the Operating Revenues
- Nonutility section.

         Operations - A summary of net changes in operations (in thousands):

                                            Three Months Ended  Six Months Ended
                                                  June 30,            June 30,
                                               2003 vs. 2002      2003 vs. 2002
                                           ------------------------------------
Utility:
         Other Production Expense             $         9         $        32
         Transmission                                  13                  44
         Distribution                                  73                 294
         Customer Accounts and Services               (59)               (186)
         Sales                                         87                  85
         Administration and General                   224                 949
         Nonutility                                   800               1,777
                                              ---------------------------------

                  Total Operations            $     1,147         $     2,995
                                              =================================

         Distribution expenses increased for both the three and six months ended
June 30, 2003 compared with the respective periods in 2002. The increase during
the six month period was primarily due to severe weather conditions experienced
during the first quarter of 2003 that resulted in a significant increase in
overtime hours. The weather created operating issues that ranged from snow
removal, to water intrusion in gas lines in oceanfront communities, to higher
shut-off for non-payment activity.

         Customer Accounts and Services expenses includes bad debt expense from
customer account write-offs. The collectibility of delinquent customer accounts
is generally determined during the winter season following the one where the
customer's account became delinquent - as temperatures drop, many customers with
delinquent balances will begin making payments in order to have their heat
restored. As the 2001-2002 winter season was one of the warmest winters on
record, many of our customers with delinquent balances from the prior winter did
not make payments to have their heat restored as would normally be expected. As
such, our bad debt expense was unusually high during the first half of 2002.
However, as the 2002-2003 winter season was colder-than-normal, customers with
delinquent balances from the year before did make payments as expected to have
their heat restored. This resulted in a much lower bad debt expense in the first
half of 2003, as compared with 2002.

         Administrative and General expenses increased in both the three and six
months ended June 30, 2003 compared with the same periods in 2002 primarily
because of increasing healthcare, pension and insurance costs.

                                     SJI-26

         Nonutility expenses in 2003 rose primarily due to higher customer
acquisition costs resulting from substantial growth in SJE's customer base and
activity associated with Marina's energy projects.

         Other Operating Expenses - A summary of principal changes in other
consolidated operating expenses (in thousands):

                                  Three Months Ended           Six Months Ended
                                       June 30,                    June 30,
                                     2003 vs. 2002               2003 vs. 2002
                                    --------------               -------------

Maintenance                           $    (191)                   $    (150)
Depreciation                                350                          686
Energy and Other Taxes                       87                        1,359

         Depreciation was higher due to SJG's increased investment in property,
plant and equipment. The increase in Energy and Other Taxes relate primarily to
increases in volumes of gas sold and transported by SJG as reflected under the
caption, "Operating Revenues - Utility".

         Interest Charges - Interest charges were lower in the second quarter
and first six months of 2003 compared with the same periods of 2002 due
primarily to reductions in short-term rates on line of credit borrowings and the
refunding of higher priced, fixed rate, long-term debt with lower cost, floating
rate, and short-term debt. These refundings were refinanced in July 2003 with
long-term debt issuances under our Medium Term Note program at significantly
lower interest rates compared to the previous long-term interest rates (See Note
10 - Subsequent Event).

         Discontinued Operations - Loss from discontinued operations increased
in 2003 due mainly to product liability litigation associated with previously
disposed of businesses.

         Cumulative Effect of a Change in Accounting Principle - Net - On
October 25, 2002, the EITF rescinded its consensus in Issue No. 98-10 effective
for transactions entered into after that date, with a cumulative effect
adjustment for previously existing transactions to be recognized in the quarter
beginning January 1, 2003. As a result of the rescission, SJI only
marks-to-market those energy-related contracts that meet the definition of a
derivative in Statement No. 133. Energy-related contracts that do not meet the
definition of a derivative are accounted for using the accrual basis of
accounting. The effect of this change in accounting resulted in a net charge of
$426,338 shown as a Cumulative Effect of a Change in Accounting Principle - Net.
Furthermore, management has designated any contract entered into after December
31, 2002 to hedge physical gas in storage as a cash flow hedge and accounts for
them accordingly. As of June 30, 2003, we calculated these hedges to be highly
effective; therefore, we record the offset, net of taxes, in Accumulated Other
Comprehensive Loss.

         Net Income Applicable to Common Stock - Net income (in thousands) and
earnings per common share reflect the following changes:

                                     SJI-27

                                           Three Months Ended   Six Months Ended
                                                  June 30,            June 30,
                                               2003 vs. 2002      2003 vs. 2002
                                             -----------------------------------
Income from Continuing Operations               $  1,235           $   4,354
Loss from Discontinued Operations - Net              (36)               (152)
Cumulative Effect of Accounting Change - Net           -                (426)
                                               ---------------------------------
  Net Income Increase                           $  1,199           $   3,776
                                               =================================

Earnings per Common Share:
  Continuing Operations                         $   0.10           $    0.30
  Discontinued Operations - Net                     0.00               (0.02)
  Cumulative Effect of Accounting Change - Net      0.00               (0.03)
                                                --------------------------------
    Earnings per Share Increase                 $   0.10           $    0.25
                                                ================================

         Regulatory Matters - In January 1997, the BPU granted SJG a 9.62% rate
of return on rate base, which included an 11.25% return on common equity.
Additionally, our threshold for sharing pre-tax margins generated by
interruptible and off-system sales and transportation increased. Currently, SJG
keeps 100% of pre-tax margins up to the threshold level of $7.8 million. The
next $750,000 is credited to customers through the Basic Gas Supply Service
("BGSS") clause. Thereafter, SJG keeps 20% of the pre-tax margins as it has
historically.

         Effective January 10, 2000, the BPU approved full unbundling of SJG's
system. This allows all natural gas consumers to select their natural gas
commodity supplier. As of June 30, 2003, 95,410 of SJG's residential customers
were purchasing their gas commodity from someone other than SJG. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs through the BGSS. Other costs of service,
including deferred costs, are recovered through base rates.

         In November 2001, SJG filed for a $2.7 million rate increase to recover
the cash related to a 3-year net deficiency in the Temperature Adjustment Clause
(TAC). Additionally, in September 2002, SJG filed for an $8.6 million rate
increase to recover the cash related to a TAC deficiency resulting from
warmer-than-normal weather for the 2001-2002 winter. As a result of the
colder-than-normal 2002-2003 winter, the cumulative TAC deficiency has decreased
to $5.7 million as of June 30, 2003.

         Also in November 2001, SJG filed for a $17.6 million reduction to the
Levelized Gas Adjustment Clause (LGAC) The LGAC was the predecessor clause to
the BGSS. The BPU approved the LGAC reduction effective December 1, 2001 and
concurrently approved recovery of SJG's October 31, 2001 underrecovered gas cost
balance. As a result, SJG began recovering $48.9 million over three years plus
interest accrued since April 1, 2001. SJG is also recovering interest for the
3-year amortization period at a rate of 5.75%. As of June 30, 2003, the
remaining deferred underrecovered balance totaled $21.4 million.

                                     SJI-28

         During 2002, the BPU convened a gas policy group to address BGSS, which
is the gas supply service being provided by the natural gas utility. On December
18, 2002, the BPU approved the proposed BGSS price structure. The BGSS approved
price structure replaced the Levelized Gas Adjustment Clause (LGAC) pricing
structure that was in place prior to March 2003. The LGAC was structured to
reset gas charges to consumers once per year. The BGSS permits multiple resets
each year, if certain conditions are met. With the implementation of BGSS in
March 2003, customers are able to make more informed decisions about choosing an
alternate supplier by having a utility price structure that more currently
reflects market conditions. Further, BGSS provides SJG with more pricing
flexibility, through self-implementing rate changes under certain conditions and
under certain limitations, resulting in the reduction of over/under-recoveries.
LGAC related mechanisms, such as deferred accounting treatment, the sharing of
pre-tax margins generated by interruptible and off-system sales and
transportation, and the allowance for full recovery of natural gas costs, remain
in place under BGSS.

         In August 2002, SJG filed for a Societal Benefits Clause (SBC) rate
increase. The SBC recovers costs related to BPU mandated programs, including
environmental remediation costs that are recovered through SJG's Remediation
Adjustment Clause (RAC); energy efficiency and renewable energy program costs
that are recovered through SJG's New Jersey Clean Energy Programs; consumer
education program costs; and low income program costs. If approved, the rate
increase filed would provide for an annual recovery level of $13.7 million,
representing an annual increase of approximately $7.0 million over the $6.7
million recovery currently included in rates.

         Also in August 2002, SJG filed a petition with the BPU to transfer its
appliance service business from the regulated utility into a newly created
unregulated company. As filed, the newly created company would have the
flexibility to be more responsive to competition and customer needs by expanding
and modifying its service offerings in an unregulated environment.

         In September 2002, SJG filed with the BPU to maintain its current BGSS
rate through October 2003. However, due to price increases in the wholesale
market, in February 2003 SJG filed an amendment to the September 2002 filing. In
April 2003, the BPU approved a $16.6 million increase to SJG's annual gas cost
revenues.

         In July 2003, SJG made its annual BGSS filing, as amended, with the
BPU. Due to further price increases in the wholesale market, SJG filed for a
$24.0 million increase to its annual gas cost revenues.

         Filings and petitions described above are still pending unless
otherwise indicated.

         Liquidity and Capital Resources - Liquidity needs at SJI 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; working capital needs of our energy trading and
marketing activities; the timing of construction and remediation expenditures
and related permanent financings; mandated tax payment dates; and both
discretionary and required repayments of long-term debt.

                                     SJI-29

         Lines of credit available to SJI totaled $182.0 million at June 30,
2003, of which $125.2 million was used. These lines are available through seven
commercial banks on an uncommitted basis. The banks and SJI review and renew the
lines annually. $157 million of these lines were exclusively for SJG's use. SJI
has long-standing relationships with all of these banks and we believe, based
upon ongoing dialogue, that there will continue to be sufficient credit
available to meet our business' future liquidity needs. However, SJI has begun
the process of obtaining up to $140 million of committed bank facilities to
enhance our liquidity position. We anticipate having committed facilities in
place during the third quarter.

         SJI 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, to finance its long-term needs. These needs
are primarily capital expenditures for property, plant and equipment. Since
1998, SJG has financed these needs via a Medium Term Note (MTN) program, secured
in similar fashion to the First Mortgage Bonds. SJG's registration of a new $150
million MTN program with the Securities and Exchange Commission became effective
in December 2002. This program replaces a previous $100 million, 3-year MTN
program that was fully used in 2001. In July 2003, SJG issued $85.5 million of
long-term debt under the program. Consequently, $64.5 million of the MTN program
remains available for future debt issuances. Proceeds of the July issues were
used to refinance short-term debt outstanding under commercial bank lines.
Current maturities on long-term debt over the next five years are as follows,
$8.4 million per year in 2003 through 2006 and $4.7 million in 2007.

         Since September 2001, Marina issued $20 million of tax-exempt and $25
million of taxable variable rate demand bonds through the New Jersey Economic
Development Authority. The tax-exempt and taxable bonds mature in 2031 and 2021,
respectively. Investors in the bonds receive liquidity and credit support via a
letter of credit provided by a syndicate of commercial banks. We used the
proceeds of this bond issuance to fund project development and construction
costs for the thermal energy plant constructed by Marina to serve The Borgata
Resort which opened in July 2003.

         SJI has raised equity capital over the past three years through its
Dividend Reinvestment Plan (DRP). Participants in SJI's DRP receive newly issued
shares. We offer a 2% discount on DRP investments because it is the most
cost-effective way for us to raise equity capital in the quantities we are
seeking. Through the DRP, SJI raised $5.65 million of equity capital by issuing
173,240 shares for the six months ended June 30, 2003 and $4.9 million of equity
capital by issuing 148,033 shares for the six months ended June 30, 2002.

Capital Expenditures, Commitments and Contingencies

         Capital Expenditures - SJI has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities and equipment and
for environmental remediation costs. We estimate the net costs for 2003, 2004
and 2005 at approximately $58.2 million, $64.0 million and $55.7 million,
respectively.

         Commitments and Contingencies - SJG has certain commitments for both
pipeline capacity and gas supply for which it pays fees regardless of usage.

                                     SJI-30

Those commitments as of June 30, 2003 average $46.2 million annually and total
$277.1 million over the contracts' lives. Approximately 15% of the financial
commitment under these contracts expires during the next five years. We expect
to renew each of these contracts under renewal provisions provided in each
contract. SJG recovers all prudently incurred fees through rates via the BGSS.

             Item 3. Quantitative and Qualitative Disclosures About
                           Market Risks of the Company

Commodity Market Risks

         Certain regulated and unregulated SJI subsidiaries are involved in
buying, selling, transporting and storing natural gas for their own accounts as
well as managing these activities for others. These subsidiaries 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,
swaps, futures and options agreements. To manage these transactions, SJI has a
well-defined risk management policy approved by our board of directors that
includes volumetric and monetary limits. Management reviews reports detailing
trading activity daily. Generally, we enter into derivative activities described
above for risk management, not trading, purposes.

         SJG and SJE transact commodities on a physical basis only and do not
enter into financial derivative positions directly. SJRG manages risk for these
entities as well as for its own portfolio by entering into the types of
transactions noted above. 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
financial impact to SJRG of changes in value of a particular transaction is
substantially offset by an opposite change in the related hedge transaction. As
of June 30, 2003, SJRG had $15.5 million of accounts receivable under sales
contracts. Of that total, 85% were with companies rated investment-grade, or
were guaranteed by an investment-grade-rated parent or were with companies where
we have a collateral arrangement.

         SJRG and SJE entered into certain contracts to purchase, sell, and
transport natural gas. For the quarters ended June 30, 2003 and 2002, we
recorded net unrealized pre-tax losses on these energy trading and related
contracts of $(.8) million and $(.9) million, respectively. For the six months
ended June 30, 2003 and 2002, we recorded net unrealized pre-tax gains on these
energy and related contracts of $.8 million and $.8 million, respectively. These
losses and gains were derived primarily from contracts entered into during 2003
and 2002 and it is included as a component of Revenues - Nonutility. SJRG's and
SJE's contracts are typically less than 12 months long. The fair value of these
contracts determined under the mark-to-market method as of June 30, 2003 is as
follows (in thousands):

Assets
                                     Maturity      Maturity
    Source of Fair Value             < 1 Year      1-3 Years           Total
    --------------------           -----------    -----------      -----------
Prices Actively Quoted     NYMEX   $    14,633    $     3,541      $    18,174
Other External Sources     Basis         5,988            616            6,604
                                   -----------    -----------      -----------
Total                              $    20,621    $     4,157      $    24,778
                                   ===========    ===========      ===========

                                     SJI-31

Liabilities
                                      Maturity      Maturity
    Source of Fair Value              < 1 Year      1-3 Years          Total
    --------------------            ----------    -----------      -----------
Prices Actively Quoted     NYMEX    $    7,715    $     1,348      $     9,063
Other External Sources     Basis         3,288            560            3,848
                                    ----------    -----------      -----------
Total                               $   11,003    $     1,908      $    12,911
                                    ==========    ===========      ===========

         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.

         A reconciliation of SJI's estimated net fair value of energy trading
and related contracts follows (in thousands):

   Net Energy Trading and Related Assets, January 1, 2003            $  14,196
   Contracts Settled During the Six Months Ended June 30, 2003, Net     (2,113)
   Other Changes in Fair Value from Continuing and
      New Contracts,  Net                                                 (216)
                                                                     ----------

   Net Energy Trading and Related Assets, June 30, 2003              $  11,867
                                                                     ==========

Interest Rate Risk

         Our exposure to interest rate risk relates primarily to short-term,
variable rate borrowings. Our short-term, variable rate debt outstanding at June
30, 2003 was $125.2 million and averaged $110.4 million for the first six months
of 2003. A hypothetical 100 basis point (1%) increase in interest rates on our
average variable rate debt outstanding would result in a $651,000 increase in
our interest expense, net of tax, on an annual basis. We chose the 100 basis
point increase 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: 2002 -- 74 b.p. decrease; 2001 -- 383 b.p. decrease; 2000 -- 83 b.p.
increase; 1999 -- 81 b.p. increase; and 1998 -- 38 b.p. decrease. For June 2003,
our average interest rate on variable rate debt was 2.05%.

         To reduce exposure to an interest rate increase on our variable rate
debt, SJG entered into an interest rate swap agreement that became effective in
June 2003 which fixed the rate on $20.0 million of variable rate debt through
May 2004 at 2.24%.. SJG primarily issues long-term debt at fixed rates and,
consequently, interest expense is not significantly impacted by changes in
market interest rates. SJG prepaid, at par, $3.0 million of 8.6% debenture notes
in February 2003. In May 2003, SJG also redeemed an additional $5.1 million of
10.25% first mortgage bonds prior to scheduled maturity. SJG paid a premium of
$110,000 to redeem that issue. The only long-term debt outstanding other than
that issued by the utility consists of the New Jersey Economic Development
Authority bonds used to finance the construction of Marina's thermal plant. They
were issued at floating rates that reset weekly. Subsequent to issuance, we

                                     SJI-32

entered into interest rate swap contracts that effectively fixed the rate on $20
million of tax-exempt debt at 4.08% through 2011 and $19 million of taxable debt
at 4.59% through 2007. The amount of the swap on the taxable debt reduces
annually commencing December 2003.

                         Item 4. Controls and Procedures

         SJI management, including the Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

                                     SJI-33

                          PART II -- OTHER INFORMATION

                            Item l. Legal Proceedings

         Information required by this Item is incorporated by reference to Part
I, Item 1, Note 9, beginning on page 17.

             Item 4. Submission of Matters to a Vote of Security Holders

         (a) Our annual meeting of shareholders was held on April 17, 2003.

         (c) Three Class II directors (with a term expiring 2006) were elected
             as follows:

                                                      For          Withheld
                                                   ----------     ----------
                Shirli M. Billings                 10,851,252       209,452
                Sheila Hartnett-Devlin             10,792,194       268,510
                Frederick R. Raring                10,880,885       179,819

             One Class III director (with a term expiring in 2004)

                Clarence D. McCormick              10,853,941       206,763

             Class I directors (with a term expiring in 2005) continuing in
             office are:
             Charles Biscieglia, Keith S. Campbell, and W. Cary Edwards

             Class III directors (with a term expiring in 2004) continuing in
             office are:
             Herman D. James and William J. Hughes

             The appointment of Deloitte & Touche LLP as our independent
             accountants for the year ending December 2003 was approved by
             a vote of 10,945,035 for the appointment and 58,242 against,
             with 57,427 abstentions.

                    Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Exhibit No.              Description

                  31.1            Certification of Chief Executive Officer
                                  Pursuant to Rule 13a-14(a).

                  31.2            Certification of Chief Financial Officer
                                  Pursuant to Rule 13a-14(a).

                                     SJI-34

                  32              Certification Pursuant to Rule 13a-14(b)
                                  and Section 906 of the Sarbanes-Oxley Act
                                  of 2002 (subsections (a) and (b) of Section
                                  1350, Chapter 63 of Title 18, United
                                  States Code).

         (b)      Form 8-K

                  Dated July 29, 2003     South Jersey Industries issued a press
                                          release providing an earnings report
                                          for the second quarter of 2003, ending
                                          June 30.
                                          Item 9, "Regulation FD Disclosure"
                                          Item 12, "Disclosure of Results of
                                          Operations and Financial Conditions"

                                  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 INDUSTRIES, INC.
                                  (Registrant)

Dated:  August 13, 2003             By:  /s/  Charles Biscieglia
                                         --------------------------------------
                                         Charles Biscieglia
                                         Chief Executive Officer

Dated:  August 13, 2003             By:  /s/  David A. Kindlick
                                         --------------------------------------
                                         David A. Kindlick
                                         Vice President, Treasurer &
                                         Chief Financial Officer

                                     SJI-35

CERTIFICATION                                                      Exhibit 31.1

I, Charles Biscieglia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJI-36

Date: August 13, 2003              /s/ Charles Biscieglia
                                  ---------------------------------------------
                                  Charles Biscieglia
                                  Chairman and Chief Executive Officer

                                     SJI-37

CERTIFICATION                                                      Exhibit 31.2

I, David A. Kindlick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Jersey
Industries, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     SJI-38

Date: August 13, 2003              /s/ David A. Kindlick
                                   --------------------------------------------
                                   David A. Kindlick
                                   Vice President, Chief Financial Officer and
                                   Treasurer

                                     SJI-39

CERTIFICATION                                                        Exhibit 32

           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)

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), each of the
undersigned officers of South Jersey Industries, Inc., a New Jersey Corporation
(the "Company"), does hereby certify, to such officer's knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (the "Form
10-Q") of the Company fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 and information contained in the
Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                                     SJI-39

Dated:  August 13, 2003             By:  /s/  Charles Biscieglia
                                         -------------------------------------
                                        Charles Biscieglia
                                        Chairman and Chief Executive Officer

Dated:  August 13, 2003             By:  /s/  David A. Kindlick
                                         --------------------------------------
                                         David A. Kindlick
                                         Vice President, Treasurer &
                                         Chief Financial Officer

The foregoing certification is being furnished solely 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) and is not being filed as part of the Form
10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been
provided to South Jersey Industries, Inc. and will be retained by South Jersey
Industries, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.

                                     SJI-40